Addl. CIT, Noida Range, V. Laxmi Narain Khetan,

ITA 2914/DEL/2005

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5772 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 1997-1998
• Appeal Filed On: 17-06-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: S KRISHANA
• Keywords: Business income
• Section: 80HHC

Judgement Text

ITA NO. 2914/DEL/05 A.Y. 1997-98 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH I: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 2914/DEL/2005 A.Y. : 1997-98 ADDL. COMMISSIONER OF INCOME TAX, VS. SRI LAXMI NARAIN KHETAN, NOIDA RANGE, NOIDA, 2 ND FLOOR, PROP. M/S VRINDAVAN CARPET, G- BLOCK, SHOPPING COMPLEX, A-9, SECTOR-30, SECTOR-20, NOIDA 201301 (UP) NOIDA-201 301 [PAN : APRPK 7398F] (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. S. KRISHANA, ADV. DEPARTMENT BY : MS. MONA MOHANTY, DR O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A) DATED 02.02.2005 AND PERTAINS TO ASSESSM ENT YEAR 1997- 98. 2. THE GROUNDS RAISED READ AS UNDER:- I) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLD ING THAT THE INTEREST INCOME OF RS. 8,97,730/-, EARNED ON BA NK DEPOSITS, IS THE BUSINESS INCOME OF THE ASSESSEE. T HE LD. CIT(A) HAS ERRED IN HERSELF BY FOLLOWING HER DECISI ON DATED 2.2.2005 IN THE ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2001-02 AS THAT DECISION HAS NOT BEEN ACCEPTED AND SECOND APPEAL IS BEING FILED AGAINST IT. RELIANCE IS ITA NO. 2914/DEL/05 A.Y. 1997-98 2 PLACED ON THE RATIO OF JUDGEMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. MENON IMPEX (2003) 180 CTR (MAD) 40 WHEREIN THE HONBLE COURT HAS CONCLUDED TH AT INTEREST ON BANK DEPOSITS WHICH WAS MADE FOR THE PURPOSE OF OBTAINING LETTER OF CREDIT WHICH WAS IN TURN USED FOR THE PURPOSE OF BUSINESS OF THE INDUSTRIAL UNDERTAKING HAD NO DIRECT NEXUS WITH THE INDUSTRIAL UNDERTAKINGS, AND, THEREFORE, SUCH INTEREST INCOME WAS NOT DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. THIS FURTHER FINDS SUPPORT IN THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TUTICO RIN ALKALIES CHEMICALS AND FERTILIZERS LIMITED VS. CIT 227 ITR 172. II) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOL DING THAT THE ASSESSEE IS ENTITLED FOR NETTING BETWEEN INTERE ST INCOME EARNED ON BANK DEPOSITS AND INTEREST PAID T O BANK ON CREDITS AVAILED. THE FINDING IS NOT ACCEPT ABLE IN VIEW OF THE FACT THE DECISION TREATING THE INTEREST INCOME FROM BANK AS BUSINESS INCOME HAS NOT BEEN ACCEPTED AND IS BEING ASSAILED AS PER GROUND NO. 1 ABOVE. 3. THIS APPEAL HAD EARLIER TRAVELLED TO THE TRIBUNA L AND THE TRIBUNAL HAS PASSED A COMMON ORDER IN ITA NO. 2913 AND 2914/DEL/2005 FOR THE ASSESSMENT YEAR 2001-02 AND 1 997-98. TRIBUNALS ORDER FOR THE ASSESSMENT YEAR 2001-02 WA S SUBJECT MATTER OF HONBLE JURISDICTIONAL HIGH COURT DECISIO N IN ITA NO. 46 OF 2009 VIDE ORDER DATED 13.5.2009. PURSUANT TO TH E HIGH COURT DECISION THE TRIBUNAL HAD CONSIDERED THE ISSUE AND ELABORATELY THE TRIBUNAL HAD REFERRED TO THE DECISION OF THE HONBL E BOMBAY HIGH COURT IN CIT VS. PUNEET COMMERCIAL LTD. 245 ITR 550 WHEREIN, IT WAS HELD THAT SECTION 80HHC(3) OF THE IT ACT, 1961 IS APPLICABLE TO THE ASSESSEE WHO IS 100% EXPORTER AND THE BUSINES S S INCOME IS TO BE DEEMED TO BE PROFIT DERIVED FROM EXPORT OF GOODS AND THUS, THE ITA NO. 2914/DEL/05 A.Y. 1997-98 3 ENTIRE PROFITS ARE ENTITLED TO DEDUCTION U/S 80HHC INCLUDING INTEREST INCOME. THE TRIBUNAL HAS CONCLUDED AS UNDE R:- 20. IT HAS BEEN SEEN THAT HONBLE BOMBAY HIGH COUR T AND HONBLE DELHI HIGH COURT HAVE TAKEN DIFFERENT VIEW ON THIS ISSUE AND THERE IS NO JURISDICTIONAL H IGH COURT DECISION ON THIS ISSUE. LD. COUNSEL OF THE ASSESSEE AS REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KULLU VALLEY TRANSPORT COMPANY PVT. LTD. (SUPRA), CIT VS. VEGETABLE PRODUCTS LTD. (SUPRA) AND CIT VS. NAGA HILLS TEA CO. LTD (SUPRA) . THE SUM AND RATIO OF T HESE DECISION IS THAT WHILE INTERPRETING TAXING STATUTE IF THERE ARE TWO REASONABLE INTERPRETATIONS, THEN THE INTERPRETATION WHICH IS FAVOURABLE TO THE ASSESSEE IS REQUIRED TO BE ACCEPTED. SO, THE LAW IN THIS REGAR D IS WELL SETTLED, THE INTERPRETATION WHICH HAS BEEN PU T BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PUNIT COMMERCIAL LTD. (SUPRA) HAS TO BE FOLLOWED BEING FAVOURABLE TO THE ASSESSEE. WE DECIDE THE ISSUE ACCORDINGLY. 22. SO FAR AS IT RELATES TO NETTING, IT IS OBSERVE D THAT NETTING UNDER SECTION 80HHC HAS EVEN BEEN UPHELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SHREE RAM HONDA POWER EQUIPMENTS LTD. (SUPRA) WHEREIN THEIR LORDSHIPS HAVE APPROVED THE DECISION OF SPECIAL BENCH IN THE CASE OF LALSON ENTERPRISES (SUPRA) FOR THE PROPOSITION THAT NETTING WAS PERMISSIBLE. SO ON THAT ACCOUNT ALSO WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHEREIN HE HAS DIRECTED THE ASSESSING OFFICER TO ALLOW THE NETTING . 3.1 THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 1 997-98 WAS ALSO THE SUBJECT MATTER APPEAL BEFORE THE HONBLE H IGH COURT. THE HONBLE HIGH COURT VIDE ORDER DATED 4.11.2009 HAD H ELD AS UNDER:- ITA NO. 2914/DEL/05 A.Y. 1997-98 4 SINCE WE FIND THAT EXCEPT DIFFERENT ASSESSMENT YEA R, SUBJECT MATTER OF THIS APPEAL IS COVERED BY THE JUD GEMENT DELIVERED BY THE BENCH COMPRISING ONE OF US (AMIAV A LALA, J) AND HONBLE MR. JUSTICE D.K. ARORA ON 13 TH MAY, 2009, WE ARE OF THE VIEW THAT SIMILAR ORDER CAN BE PASSED HEREIN. ACCORDINGLY, THE APPEAL IS TO BE TREATED DI SPOSED OF WITHOUT ANY ORDER AS TO COST. THE ORDER WHICH HAS BEEN PASSED ON 13 TH MAY, 2009 IN INCOME TAX APPEAL NO. 46 OF 2009, SRI LAKSHMI NARAIN KHETAN VS. COMMISSIO NER OF INCOME TAX (APPEALS) GHAZIABAD AND OTHERS WILL HAVE BINDING EFFECT ON THIS MATTER PRINCIPALLY. 3.2 PURSUANT TO THIS ORDER OF THE HONBLE HIGH CO URT THE MATTER WAS FIXED FOR HEARING. SINCE THE FACTS FOR A SSESSMENT YEAR 2001-02 AND ASSESSMENT YEAR 1997-98 ARE IDENTICAL, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT TRIBUNALS ORDER CON SEQUENT TO THE HONBLE HIGH COURT DECISION FOR ASSESSMENT YEAR 200 1-02, SHOULD BE FOLLOWED, AS THE HONBLE HIGH COURTS DIRECTION A RE SIMILAR. 3.3 WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT THE FACTS FOR A.Y. 1997-98 AND A.Y. 2001-02 ARE IDENTICAL. HENCE, TRIBUNAL ORDER FOR A.Y. 2 001-02 CITED ABOVE PURSUANT TO THE HIGH COURT DIRECTIONS IS ALSO APPLI CABLE. FOLLOWING THE SAME, WE HOLD THAT INTEREST INCOME OF THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC, FOLLOWI NG THE DECISION OF THE HONBLE BOMBAY HIGH COURT DECISION IN THE CA SE OF CIT VS. PUNEET COMMERCIAL LTD. AS REGARDS THE ISSUE OF NETT ING, FOLLOWING THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. SHREE RAM HONDA POWER EQUIPMENTS LTD, WHEREIN THE SPECIAL BENCH DECISION IN THE CASE OF LALSONS ENTERPRISES WAS UPH ELD FOR THE ITA NO. 2914/DEL/05 A.Y. 1997-98 5 PROPOSITION THAT NETTING WAS ALSO PERMISSIBLE. SO ON THAT ACCOUNT ALSO WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF T HE LD. CIT(A). 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.03.2010 UPON CONCLUSION OF THE HEARING. SD/- SD/- (C.L. SETHI) [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 11/03/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES