M/s. SHREEJI JEWELLERY LTD., MUMBAI V. ITO 8(3)-1, MUMBAI

ITA 2894/MUM/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54848 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 04-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 29-04-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Assessee Lawyers: SANJAY C SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SMT.ASHA VIJAYARAGHAVAN, JM ITA NO.2894/MUM/2008 : ASST.YEAR 2004-2005 M/S.SHREEJI JEWELLERY LIMITED GEMS & JEWELLERY COMPLEX-III G-36 SEEPZ, ANDHERI (EAST) MUMBAI. PAN : AAECS1821N. VS. THE INCOME TAX OFFICER WARD 8(3)(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJAY C.SHAH RESPONDENT BY : SHRI G.P.TRIVEDI DATE OF HEARING : 04.08.2011 DATE OF PRONOUNCEMENT :10.08.2011 O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASS ESSEE ARISES OUT OF TH E ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 09.02.2008 IN RELATION TO THE ASSESSMENT YEAR 2004-2005. 2. THE ASSESSEE HAS RAI SED FOLLOWING ADDITIONAL GROUND, APART FROM THE TWO GROUNDS TAKEN IN THE ME MORANDUM OF APPEAL. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND LEARNED ASSESSING OFFICER ERRED IN NOT GRAN TING DEDUCTION U/S. 57 OF THE ACT ON THE INTEREST INCOME ASSESSED UND ER THE HEAD INCOME FROM OTHER SOURCES. APPELLANT SUBMITS THAT RELATABLE EXPENDITURE FOR EARNING INCOME FROM OTHER SOURCES OUGHT TO HAVE BEEN A LLOWED AS DEDUCTION U/S.57 OF THE ACT AND CONSEQUENTLY DEDUC TION U/S.10A OF THE ACT MAY BE ENHANCED. 3. THE LEARNED DEPARTMENTAL REPRESENTATI VE DID NOT RAISE ANY OBJECTION TO THE ADMISSION OF ADDITIONAL GROUND. WE, THEREF ORE, ADMIT THE SAME FOR DISPOSAL ON MERITS. ITA NO.2894/MUM/2008 M/S.SHREEJI JEWELLERY LIMITED. 2 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSES SEE NETTED INTEREST INCOME OF RS.17,99,913 FROM BANK WITH THE INTEREST EXPENDITURE IN ITS PROFIT AND LOSS ACCOUNT. ON BEING CALLED UPON TO EXPL AIN AS TO WHY SUCH INTEREST INCOME SHOULD NOT BE TAKEN AS INCOME FROM OTHER SOURCES, THE ASSESSEE STATED THAT SUCH INTEREST WAS EARNED FROM BANK DEPOSIT FOR OBTAINING LOAN FOR BUSINESS PURPOSES AND HENCE SUCH AMOUNT WAS ELIGIBLE FOR EX EMPTION U/S.10A. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES ARGUMENT BY RELY ING ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN PANDIAN CHEMICALS LTD. VS. CIT [(2003) 262 ITR 278 (SC)]. HE, THEREFORE, ASSESSED THE INTE REST INCOME UNDER THE HEAD `INCOME FROM OTHER SOURCES AND DID NOT ALLOW DEDUCTION U/S.80-IA ON TH IS AMOUNT. THE LEARNED CIT(A) DID NOT APPROVE THE ARGUMENTS TAKEN ON BEHALF OF THE ASSESSEE AND UPHE LD THE ASSESSMENT ORDER. HE FURTHER DID NOT ACCEPT THE ASSESSEE S ALTERNATIVE PRAYER ABOUT NETTING OF INTEREST ON THE GROUND THAT THE INTEREST INCOME WAS TAXABLE UNDER THE HEAD `INCOME FROM OTHER SOURCES AND AS SUCH INTEREST EXPENDITURE COULD BE ALLOWED ONLY AGAINST INCOME FROM OTHER SOURCES WHEN IT IS LAID DOWN WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING SUCH INCOME. HE, THEREFOR E, HELD THAT THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE WAS BUSINESS E XPENDITURE AND DID NOT HAVE ANY RELATION WITH THE INTEREST INCOME EARNED BY IT. FI RST GROUND OF THE ASSESSEES APPEAL IS AGAINST TREATING THE INTEREST INCOME AS FALLING UNDER THE HEAD `INCOME FROM OTHER SOURCES AND SECOND GROUND IS AGAINST NOT ALLOWING DEDUCTION ON SUCH INCOME U/S 10A OF THE ACT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS PLACED ON RECORD A COPY OF THE ORDER PASSED BY THE TRIBUNAL IN ITS OW N CASE FOR ASSESSMENT YEAR 2002-2003 IN ITA NO.6532/MUM/2005 DATED 27.10.2008 BY WHIC H IT HAS BEEN HELD THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S.10A IN RE SPECT OF INTEREST INCOME AND TO THAT EXTENT THE FINDING OF LEARNED CIT(A) TAKE N IN THAT YEAR WAS APPROVED. AS REGARDS ITA NO.2894/MUM/2008 M/S.SHREEJI JEWELLERY LIMITED. 3 THE DIRECTION TO ALLOW INTEREST PAYMENT ON BORROWINGS USED TO MAKE THE FDRS AS DEDUCTION FROM THE INTER EST INCOME, THE TRIBUNAL HAS HELD THAT THE DEDUCTION IS TO BE ALLOWED IN RESPECT OF EXPENDITURE INCU RRED BY THE ASSESSEE U/S.57 FOR EARNING THE INCOME. ON A SPECIFIC QUERY THE LEARNED A.R. ADMITTED THAT THE APPEAL OF THE IMMEDIATELY PRECEDING YEAR I.E. A.Y. 2003- 2004 HAS ALSO BEEN DISPOSED OFF BY THE BENCH AFTER THE PASSING OF ORDER IN ASSE SSMENT YEAR 2002-2003. HE HOWEVER FAILED TO PLACE ON RECORD COPY OF THE ORDER FOR ASSESSMENT YEAR 2003-2004. IT WAS HOWEVER SUBMITTED OUT OF HIS MEMORY THAT SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN ASSESSMENT YEAR 2003-2004 AS WELL. 6. IN VIEW OF THE FACT THAT THE TRIBUNAL IN ASSESSEES OWN CASE CASES HAS HELD THAT DEDUCTION CANNOT BE ALLOWE D U/S.10A IN RESPECT OF INTEREST INCOME EARNED BY THE ASSESSEE, WE HOLD THAT THE ACTION OF THE LEARNED CIT(A) IN THE IMPUGNED ORDER IN THIS REGARD IS UNIMPEACHABLE. AS RE GARDS THE ADDITIONAL GR OUND RAISED BY THE ASSESSEE, WE AGREE IN PRINCIPLE THAT AS PER SECTIO N 57 EXPENDITURE INCURRED FOR EARNING INCOME HAS TO BE ALLOWED AS DEDUC TION. HOWEVER NECESSARY MATERIAL IS NOT AVAILABLE ON RECORD FROM WHICH IT CAN BE DECIDED AS TO HOW MUCH INTEREST EXPENDITURE WAS INCURRED FOR EARNING THE INTEREST INCOME. IN SUCH CIRCUMSTANCES WE RESTORE THE MATTER TO THE FILE OF A.O. FO R ALLOWING DEDUCTION ON ACCOUNT OF INTEREST EXPENDITURE IN TERMS OF SECTION 57, IF ANY PERMISSIBLE AS PER LAW. 7. IN THE RESULT, THE APPEAL IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN TH E OPEN COURT ON THIS 10 TH DAY OF AUGUST, 2011. SD/- SD/- (ASHA VIJAYARAGHAVAN) (R.S.SYAL) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI : 10 TH AUGUST, 2011. DEVDAS* ITA NO.2894/MUM/2008 M/S.SHREEJI JEWELLERY LIMITED. 4 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XXIX, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.