M/s. Karp Mfg. Co., Surat V. The Income tax Officer,Ward-7(2), Surat

ITA 3148/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6518 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 25-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 11.5.2011 DRAFTED ON: 13. 5.2011 1. ITA NO.3148/AHD/2009 FOR A.Y. 2005-06 2. ITA NO.3353/AHD/2009 FOR A.Y. 2005-06 1.M/S.KARP MFG.CO. F/P NO.23A, OPP.NATRAJ CINEMA LALDARWAJA, SURAT 2. THE ITO WARD-7(2), SURAT VS. 1. THE INCOME TAX OFFICER WARD-7(2) SURAT 2. M/S.KARP MFG.CO.(FIRM) SURAT PAN/GIR NO. : AAFFK 5003 Q ( APPELLANTS ) .. ( RESPONDENTS ) ASSESSEE BY: SHRI HARDIK VORA REVENUE BY : SHRI S.A. BOHRA, SR. D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE ARE CROSS APPEALS FILED BY THE RIVAL SIDES ARISING FROM THE ORDER OF THE CIT(APPEALS)-IV SURAT DATED 10.09. 2009 PASSED FOR ASSESSMENT YEAR 2005-06. [A] ASSESSEES APPEAL, ITA NO.3148/AHD/2009 FOR A.Y.20 05-06 2. THE EFFECTIVE GROUND READS AS UNDER: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN PARTLY CONFIRMING THE ACTION OF ASSESSING OFFICER IN NOT GRANTING DEDUCTI ON OF ITA NO.3148/AHD/09 (BY ASSESSEE) & ITA NO.3353/AHD/09 (BY REVENUE) M/S.KARP MFG.CO. VS. ITO ASST.YEAR 2005-06 - 2 - RS.2,02,386/- OUT OF RS.11,47,586/- U/S.10B OF THE ACT ON ACCOUNT OF INTEREST INCOME. 2.1. AT THE OUTSET, LD.AR OF THE ASSESSEE MR. HARD IK VORA HAS FAIRLY PLACED ON RECORD A DECISION OF ITAT D BEN CH AHMEDABAD PRONOUNCED IN THE CASE OF ITO VS. GUJARAT PAGUTHAN ENERGY BEARING ITA NO.1953/AHD/2007 FOR AY 2004-05 AND ITA NO.3458/AHD/2007 & CO NO.317/AHD/2007 FOR AY 2003 -04 DATED 12/11/2010, WHEREIN IT WAS HELD AS UNDER:- 10. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUS ED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW ONCE I NTEREST INCOME IS HELD TO BE ASSESSABLE UNDER THE HEAD INC OME FROM OTHER SOURCES THEN IT CANNOT BE AS SUCH TREATED AS INCOME FROM BUSINESS AND, THEREFORE, IT WILL NOT BE AVAIL ABLE FOR DEDUCTION UNDER SECTION 80IA. SIMILAR VIEW WAS ALS O TAKEN BY HON.PUNJAB & HARYANA HIGH COURT IN (2007) NAHAR EXP ORTS LTD. VS. CIT 288 ITR 494 (P&H). HOWEVER, ONCE INT EREST INCOME IS ASSESSED U/S.56 THE EXPENDITURE ADMISSIBL E U/S.57(III) BEING EXPENDITURE INCURRED WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF EARNING INTEREST INCOME EXCEPT C APITAL EXPENDITURE CAN BE ALLOWED AS DEDUCTION. 3. ONCE A VIEW HAS ALREADY BEEN TAKEN BY THE RESPEC TED CO- ORDINATE BENCH, THEREFORE, JUDICIAL PROPRIETY REQUI RES ONE BENCH OF THE TRIBUNAL TO FOLLOW ANOTHER BENCH. HENCE, WE FI ND NO FORCE IN THIS GROUND AND DISMISS THIS GROUND. 4. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ITA NO.3148/AHD/09 (BY ASSESSEE) & ITA NO.3353/AHD/09 (BY REVENUE) M/S.KARP MFG.CO. VS. ITO ASST.YEAR 2005-06 - 3 - [B] REVENUES APPEAL, ITA NO.3353/AHD/2009 FOR A.Y. 200 5-06 4. THE ONLY GROUND READS AS UNDER: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE DISALLO WANCE ON ACCOUNT OF INTEREST INCOME U/S.10B OF THE I.T. ACT OF RS.9,45,200/- MADE BY THE AO WITHOUT CONSIDERING T HE FACTS BROUGHT IN, IN ITS ENTIRETY. 4.1. WHILE DECIDING THE ISSUE INVOLVED LD.CIT(A) HA S GRANTED PART RELIEF AS PER THE FOLLOWING OBSERVATION: I HAVE CAREFULLY CONSIDERED THE REASONS GIVEN BY A SSESSING OFFICER & ALSO THE SUBMISSIONS OF THE APPELLANT. A FTER CAREFULLY ANALYZING THE FACTS OF THE CASE IT IS SEE N THAT SO FAR AS INTEREST INCOME ON FDR IS CONCERNED, I FIND MERIT I N THE CONTENTION OF APPELLANT THAT AS FDR IS PLACED OUT O F LOAN BORROWED FROM THE BANK, THE EXPENDITURE INCURRED ON LOAN IS REQUIRED TO BE REDUCED FROM THE INTEREST ON FDR AS SAID AMOUNT IS EXPENDED FOR EARNING THE INTEREST INCOME. AS INTEREST PAID IS MORE THAN INTEREST ON FDR, DEDUCTI ON U/S.10B CANNOT BE CURTAILED ON THIS GROUND IN VIEW OF THE P RINCIPLE OF NETTING. I ALSO FIND THAT RATIO OF HONOURABLE GUJA RAT HIGH COURT DECISION IN THE CASE OF JASHVIDHYABEN C.MEHTA V. CIT 172 ITR 680 & WHICH IS DISCUSSED BY HONOURABLE SUPR EME COURT IN CASE OF CIT V. DR. V.P. GOPINATHAN 248 I TR 449 IS APPLICABLE TO THE FACTS OF INSTANT CASE AND THUS, A CTION OF ASSESSING OFFICER IN DISALLOWING DEDUCTION U/S.10B ON THE INTEREST INCOME ON FDR OF RS.9,45,200/- IS NOT SUST AINABLE. HOWEVER, AS REGARDS INTEREST INCOME ON DEPOSIT WITH ELECTRICITY COMPANY, I FIND THAT APPELLANT HAS FAIL ED TO PROVE ANY SUCH NEXUS & THUS, ACTION OF ASSESSING OFFICER IN DISALLOWING DEDUCTION U/S.10B ON SAID INTEREST INCO ME OF RS.2,02,386/- IS CONFIRMED. ACCORDINGLY, OUT OF TO TAL DISALLOWANCE OF RS.11,47,586/- MADE BY ASSESSING OF FICER, ITA NO.3148/AHD/09 (BY ASSESSEE) & ITA NO.3353/AHD/09 (BY REVENUE) M/S.KARP MFG.CO. VS. ITO ASST.YEAR 2005-06 - 4 - DISALLOWANCE TO THE EXTENT OF RS.9,45,200/- IS HERE BY DELETED & THE BALANCE AMOUNT OF RS.2,02,386/- IS CONFIRMED. 4.2. ON THE BASIS OF OBSERVATION OF LD.CIT(A) SINCE THE ASSESSEE HAS NOT PROVED THE NEXUS IN RESPECT OF PART OF INTE REST, THEREFORE, THE VIEW TAKEN BY THE LD.CIT(A) APPEARS TO BE A JUSTIFI ED VIEW, HENCE, HEREBY CONFIRMED. 5. FURTHER, WE HAVE ALREADY FOLLOWED THE DECISION O F THE RESPECTED CO-ORDINATE BENCH, THEREFORE, REVENUES G ROUND IS ALSO DISMISSED. 6. IN THE RESULT, ASSESSEES APPEAL AS WELL AS REVE NUES APPEAL BOTH ARE DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 27/ 5 /2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 27/ 05 /2011 T.C. NAIR, SR. PS ITA NO.3148/AHD/09 (BY ASSESSEE) & ITA NO.3353/AHD/09 (BY REVENUE) M/S.KARP MFG.CO. VS. ITO ASST.YEAR 2005-06 - 5 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-IV, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..12.5.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13.05.2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S27.5.2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27.5.2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER