ITO, New Delhi V. M/s. Saara Sales (P) Ltd., New Delhi

ITA 3/DEL/2013

• Counselvise Citation: 320114 RSA 2013
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 22-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 01-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Keywords: Business income; Business expenditure
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI J.S. REDDY ITA NO. 3/DEL/2013 ASSTT. YR: 2008-09 INCOME-TAX OFFICER, VS. M/S SAARA SALES (P) LTD. , WARD 7(1), NEW DELHI. 13, KIRTI NAGAR, NEW DELH I. PAN: AAICS 3883 P ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SMT. RENUKA JAIN GUPTA SR. DR RESPONDENT BY : SHRI K. SAMPATH ADV. & SHRI V. RAJA KUMAR ADV. O R D E R PER R.P. TOLANI, J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER D ATED 23-10-2012 RELATING TO A.Y. 2008-09. SOLE EFFECTIVE GROUND RAI SED IS AS UNDER: THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DIRECT ING A.O. TO TREAT THE RECEIPT OF RS. 16,96,394/- BEING INTEREST REIMBURSEMENT AS INCOME FROM BUSINESS INSTEAD OF INCOME FROM OTHER SOURCES. 2. FACTS OF THE CASE, IN BRIEF ARE: THE ASSESSEES RETURN OF INCOME WAS ACCEPTED BY THE ASSESSING OFFICER WHICH INCLUDED A SUM OF RS. 17,07,029/- BEING INTEREST SUBSIDY, AS BUSINESS RECEIPT AND ACC ORDINGLY THE PROFITS U/S 115JB AND DEDUCTION U/S 80-IC WAS CALCULATED. SUBSE QUENTLY, ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID AMOUNT OF RS. 17,07,029/- WAS IN THE 2 NATURE OF OTHER INCOME AND WAS NOT ELIGIBLE FOR D EDUCTION U/S 80-IC AND IT CONSTITUTED A MISTAKE APPARENT FROM RECORD, WHICH W AS ACCORDINGLY CORRECTED BY HIM. 3. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL WHERE CIT(A) HELD THE INTEREST RECEIVED FROM SIDBI AMOUNTING TO RS. 16,96 ,394/- WAS BUSINESS INCOME AND WAS THUS ELIGIBLE FOR DEDUCTION U/S 80-I C. THE BALANCE WAS, HOWEVER, WAS HELD AS INCOME FROM OTHER SOURCES BY F OLLOWING OBSERVATIONS: 6. FROM THE FACTS BEFORE ME, IT IS CLEAR THAT THE APPELLANT COMPANY RECEIVED THIS INTEREST AMOUNT FROM SIDBI ON ACCOUNT OF A PARTICULAR SCHEME WHICH RELATED TO BUSINESS OF THE APPELLANT COMPANY. THE ASSESSING OFFICER HAS ALSO N OT DISPUTED THAT THIS AMOUNT WAS NOT RELATED TO THE BUSINESS AC TIVITIES OF THE APPELLANT COMPANY. FROM THE DETAILS OF THE SCHEME, IT IS ALSO OBSERVED THAT THIS REIMBURSEMENT/ SUBSIDY WERE GIVE N TO THE APPELLANT COMPANY BASED ON CERTAIN BUSINESS ACTIVIT IES AND ONLY AFTER DUE CONSIDERATION SIDBI, WOULD HAVE PROC ESSED AND REIMBURSED THIS AMOUNT TO THE APPELLANT COMPANY. TH E ASSESSING OFFICER HAS ALSO NOT GIVEN ANY REASON AS TO WHY HE HAS NOT CONSIDERED THIS AMOUNT AS BUSINESS INCOME AND H AS CHOSEN TO TREAT IT AS INCOME FROM OTHER SOURCES. 7. AFTER CAREFULLY CONSIDERING THE DETAILS SUBMITTED B Y THE A.R. OF THE APPELLANT, THE NATURE OF INTEREST INCOM E BASED ON THE SCHEME OF SIDBI AND ALLOWANCE OF THE TOTAL INTEREST COMPONENT AS BUSINESS INCOME, I AM OF THE OPINION, THAT THERE IS NO REASON WHY THIS AMOUNT OF RS. 16,96,394/- SHOULD NOT BE TR EATED ALSO AS BUSINESS INCOME OF THE APPELLANT COMPANY. HOWEVE R, WITH REGARD TO THE BALANCE AMOUNT, I DO NOT FIND ANY REA SON TO INTERFERE WITH THE FINDINGS OF THE ASSESSING OFFICE R. ACCORDINGLY, THE A.O. IS DIRECTED TO TREAT THIS AMOUNT OF RS. 16 ,96,394/- AS BUSINESS INCOME AND TO THAT EXTENT THIS GROUND OF T HE APPELLANT IS TREATED AS ALLOWED. HOWEVER, THE BALANCE AMOUNT SHOULD BE TREATED AS INCOME FROM OTHER SOURCES. 3 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 4. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER AND CONTENDS THAT THE SUBSIDY WAS RECEIVED BY THE ASSESSEE NOT BY WAY OF ANY BUSINESS ACTIVITY BUT BECAUSE OF SIDBI SCHEME OF REDUCTION OF INTEREST. T HEREFORE, IT DID NOT CONSTITUTE BUSINESS INCOME AND ASSESSING OFFICER HA S RIGHTLY TREATED IT AS INCOME FROM OTHER SOURCES, NOT ELIGIBLE FOR DEDUCTI ON U/S 80-IC. 5. LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, CONTENDS THAT ASSESSING OFFICER HAS NOT DISPUTED THE CRUCIAL FACT THAT THE SIDBI LOAN WAS OBTAINED BY THE ASSESSEE FOR BUSINESS PURPOSES AND THE LOAN WAS DEPLOYED FOR THE BUSINESS PURPOSE. THE EARLIER RATE OF INTE REST @ 10.50% CHARGED BY SIDBI HAS BEEN DEBITED TO THE P&L A/C AND AFTER COM PLETION OF THE SCHEME OF SUBSIDY, AS ENVISAGED BY SIDBI AND APPROVED BY G OVERNMENT, THE ASSESSEE WAS REFUNDED AN AMOUNT OF 5% OUT OF INTERE ST. HAD THE ASSESSEE DEBITED THE INTEREST IN EARLIER YEARS IN ANTICIPATI ON OF THE SUBSIDY ITS BUSINESS PROFIT WOULD HAVE INCREASED WHICH WOULD HAVE BEEN E LIGIBLE FOR DEDUCTION U/S 80-IC. SINCE THE REDUCTION IN LIABILITY WHICH I S IN THE NATURE OF BUSINESS LIABILITY, CRYSTALLIZED DURING THIS YEAR, THE RECEI PT BECOMES BUSINESS IN NATURE. BASED ON THIS ANALOGY CIT(A) BY DETAILED OBSERVATIO NS HAS HELD THAT THE RECEIPT IS BUSINESS IN NATURE. ORDER OF CIT(A) IS R ELIED UPON. 4 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. IT HAS NOT BEEN DISPUTED THAT THE SIDBI LOAN WAS OBTAINED BY THE ASSESSEE FOR BUSINESS PURPOSE AND W AS UTILIZED SO. THE EARLIER INTEREST PAID TO SIDBI HAS BEEN ALLOWED AS BUSINESS EXPENDITURE. ANY REDUCTION ON ACCOUNT OF FULFILLMENT OF TERMS OF A S CHEME FORMULATED IN THIS BEHALF WOULD CONSTITUTE A RECEIPT WHICH IS IN THE N ATURE OF BUSINESS INCOME. WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) WHICH IS UPHELD. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 18-10-2013. SD/- SD/- ( J.S. REDDY ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18-10-2013. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 5