ROYAL ANTI-BIOTICS & INVESTMENTS P.LTD, MUMBAI V. ASST CIT CIR 4(3), MUMBAI

ITA 316/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2471 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 13-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Business income; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NOS.316 & 317/M/2015 ASSESSMENT YEARS: 1993-94 & 1998-99 M/S. ROYAL ANTI-BIOTICS & INVESTMENTS PVT. LTD., 150, KEWAL INDL. ESTATE, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI 400 013 PAN: AAACR3244E VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4(3)(1), R.N.649, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VISHWAS MEHENDALE, A.R. REVENUE BY : SHRI B.S. BIST, D.R. DATE OF HEARING : 13.10.2016 DATE OF PRONOUNCEMENT : 21.10.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE CAPTIONED APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS BOTH DATED 27.10.2014 OF THE CO MMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEARS 1993-94 & 1998-99. SINCE THE FACTS AND ISSUES INVO LVED THEREIN ARE IDENTICAL IN NATURE, HENCE BOTH THE APPEALS HAVE BEEN HEARD T OGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. FIRST WE TAKE UP THE ASSESSEES APPEAL FOR A.Y. 1993-94 BEARING ITA NO.316/M/2015 AS LEAD CASE . ITA NO.316/M/2015 (A.Y. 1993-94) 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HON. CIT-A ERRED IN CONFIRMING DISALLOWANCE OF APPELLANTS' CLAIM FOR NE TTING OFF THE INTEREST EXPENDITURE AGAINST THE INTEREST INCOME. ITA NOS.316 & 317/M/2015 M/S. ROYAL ANTI-BIOTICS & INVESTMENTS PVT. LTD. 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, HON. CIT-A ERRED IN HOLDING THAT THERE WAS NO NEXUS BETWEEN TH E BORROWED FUNDS AND THE FUNDS LENT BY THE APPELLANTS DURING THE YEAR IN SPITE OF THE FACT THAT FOR AY-199798, HON. CIT-A HAD ACCEPTED APPELLANTS' SIMILAR CLAIM ON THE BASIS OF AO'S REMAND REPORT, WHICH HAD VERIFIED THE ACCOUNTS FOR THREE ASSESSMENT YEARS PRECEDING THE SAID YEAR. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, HON. CIT-A ERRED IN NOT ALLOWING APPELLANTS' CLAIM FOR ENHANCE MENT OF DEDUCTION U/S 80 HHA & 80 I OF THE ACT, AS CONSEQUENCE OF THE RELIEF CLAIMED IN THE PRECEDING GROUNDS OF APPEAL. 4. APPELLANTS CRAVE LEAVE TO ADD, ALTER, AMEND, MOD IFY OR WITHDRAW THE GROUNDS OF APPEAL. 3. IN BRIEF, THE ASSESSEE HAD CLAIMED THE IMPUGNED RECEIPTS AS INCOME FROM BUSINESS WHEREAS THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) HAS HELD THAT THEY WERE INCOME FROM OTHER SOURCES. 4. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSES SEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 5. THE SHORT ISSUE RAISED BEFORE THE TRIBUNAL WAS A S TO WHETHER THE IMPUGNED RECEIPTS WERE INCOME FROM BUSINESS OR INCO ME FROM OTHER SOURCES? IF THE SAID RECEIPTS WERE INCOME FROM BUSINESS, THE N THEY WERE LIABLE TO BE NETTED AGAINST THE EXPENSES RELATING TO BUSINESS. ON THE OTHER HAND, IF THE SAID RECEIPTS WERE FOUND TO BE INCOME FROM OTHER SOURCES , THEN THE SAME COULD NOT BE NETTED AGAINST THE EXPENSES RELATING TO BUSINESS . 6. THE TRIBUNAL, AFTER CONSIDERING THE RIVAL SUBMIS SIONS, VIDE ORDER DATED 16.09.05 PASSED IN ITA NOS.2125 & 2126/M/2002 RELEV ANT TO THE ASSESSMENT YEARS IN QUESTION I.E. A.Y. 1993-94 AND 1998-99 RES PECTIVELY RESTORED THE ISSUE TO THE FILE OF THE LD. CIT(A) WITH A DIRECTION TO R ECORD A CATEGORICAL FINDING AS TO THE NATURE OF RECEIPTS AND FURTHER DIRECTED THAT IF THE LD. CIT(A) WOULD COME TO THE CONCLUSION THAT THE IMPUGNED RECEIPTS WERE I N THE NATURE OF INCOME FROM BUSINESS, THEN HE WOULD ALLOW THE BENEFIT OF NETTIN G OF THE IMPUGNED RECEIPTS ITA NOS.316 & 317/M/2015 M/S. ROYAL ANTI-BIOTICS & INVESTMENTS PVT. LTD. 3 AGAINST THE BUSINESS EXPENSES IN TERMS OF THE DECIS ION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF LAL SONS ENTERPRISES V S. CIT 89 ITD 25 (SB). THE RELEVANT FINDINGS OF THE TRIBUNAL FOR THE SAKE OF CONVENIENCE ARE REPRODUCED AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE IS SUE NEEDS TO BE RESTORED TO THE FILE OF THE LEARNED CIT(A) IN ORDER TO ENABLE H IM TO RECORD A CATEGORICAL FINDING AS TO THE NATURE OF RECEIPTS, AND IN PARTICULAR, AS TO WHETHER THE IMPUGNED RECEIPTS ARE IN THE NATURE OF INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES. HE WILL KEEP IN MIND THE DECIS IONS OF THE TRIBUNAL IN DCIT V. MIRA INDUSTRIES 87 ITD 475 AND IN NIRMA IND USTRIES LTD. VS. ACIT, 95 ITD 199 (ITAT AHD.) (SB) AS ALSO OTHER CASES WHI CH THE PARTIES MAY CITE BEFORE HIM. IF HE COMES TO THE CONCLUSION THAT THE IMPUGNED RECEIPTS ARE IN THE NATURE OF INCOME FROM BUSINESS, HE WILL ALLOW THE BENEFIT OF NETTING THE IMPUGNED RECEIPTS AGAINST THE BUSINESS EXPENSES IN TERMS OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL I N LALSONS ENTERPRISES (SUPRA). 8. IN VIEW OF THE FOREGOING, THE ORDERS PASSED BY T HE LEARNED CIT(A)FOR BOTH THE ASSESSMENT YEARS ARE SET ASIDE A ND THE MATTER IS RESTORED TO HIS FILE WITH DIRECTION TO DECIDE THE I SSUE AFRESH IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTU NITY OF HEARING TO BOTH THE PARTIES. HE WILL KEEP IN MIND THE OBSERVA TIONS MADE BY US ABOVE. 9. BOTH THE APPEALS ARE TREATED AS ALLOWED FOR STAT ISTICAL PURPOSES. 7. ON THE ABOVE DIRECTIONS OF THE TRIBUNAL, THE LD. CI T(A) HAS AGAIN PASSED THE IMPUGNED ORDER DATED 27.10.14. THE OPER ATING PART OF THE ORDER OF THE LD. CIT(A) IS REPRODUCED AS UNDER: 5. I HAVE CONSIDERED THE FACTS OF THE CASE AND ALSO GONE THROUGH THE APPELLANT'S SUBMISSION AS WELL AS REMAND REPORT SUBMITTED BY THE AO. THIS APPEAL ARISES OUT OF APPELLATE ORDER BEARING N O.CIT(A)- IV/CIR.4/61/2000-01 DATED 13.2.2002 PASSED BY MY PR EDECESSOR. THE HONBLE TAT VIDE ORDER IN ITA NO.2125/M/2000 DATED 16.9.2005 HAS SET ASIDE THE ORDER OF CIT(A) DATED 13.2.2002 TO TH E FILE OF CIT(A) TO RECORD CATEGORICAL FINDING AS TO THE NATURE OF RECE IPTS AS TO WHETHER THE IMPUGNED RECEIPTS AUTHORISED REPRESENTATIVE IN THE NATURE OF INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES A ND DIRECTED THE CIT(A) TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WIT H LAW AFTER GIVING OPPORTUNITY OF HEARING. ACCORDINGLY, THE CASE WAS FIXED FOR HEARING AND REH EARD AND FACTUAL REMAND REPORT FROM THE AO WAS CALLED FOR. T HE AO HAS STATED THAT IN THE ASSESSMENT ORDER FOR AY 1993-94, THE INTERES T INCOME WAS TREATED ITA NOS.316 & 317/M/2015 M/S. ROYAL ANTI-BIOTICS & INVESTMENTS PVT. LTD. 4 AS OTHER INCOME UNDER THE HEAD INCOME FROM OTHER SO URCES. AS PER THE COMPUTATION OF TOTAL INCOME, IT IS EVIDENT THAT INT EREST RECEIVED ON LOANS OF RS.2,97,341/- HAVE BEEN CONSIDERED SEPARATELY UN DER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE VIDE LETTER DATED 22.11.2013 HAS FILED COPY OF AUDITED BALANCE SHEET ALONG WITH SCHEDULES BEFORE THE AO DURING THE COURSE OF REMAND PROCEEDINGS AND NO BANK STATEMENTS WERE FILED BEFORE THE AO STATING THAT THE SAME WAS NOT AVAILABLE WITH ASSESS EE. THE AO IN THE REMAND REPORT HAS STATED THAT IN ABSENCE OF BANK STATEMENT S, IT COULD NOT BE ESTABLISHED THAT THE ASSESSEE HAS ADVANCED LOANS OU T OF ITS BORROWED FUNDS. THE AO HAS ALSO REPORTED IN THE REMAND REPOR T THAT NEXUS COULD NOT BE ESTABLISHED BY THE ASSESSEE THAT IT HAS SPENT/PA ID INTEREST FOR EARNING INTEREST INCOME. FROM THE CHART FILED BY THE ASSESSEE THERE WAS BORROWAL OF FUNDS AS WELL AS ADVANCE OF FUNDS. THE ASSESSEE HAS ALSO EAR NED INTEREST INCOME AND HAS ALSO PAID INTEREST INCOME. FROM THE DETAILS FILED B Y THE ASSESSEE, NEXUS COULD NOT BE ESTABLISHED BY THE ASSESSEE THAT IT HAS ADVANCED LOANS OUT OF THE BORROWED FUNDS. THEREFORE, THE NEXUS COULD NOT BE ESTABLISHE D THAT THE INTEREST PAID IS FOR EARNING INTEREST INCOME. ACCORDINGLY, THE AO REPORT ED THAT THE NETTING OF INTEREST PAID AGAINST INTEREST RECEIVED CANNOT BE ALLOWABLE. ON PERUSAL OF THE REMAND REPORT AND THE SUBMISSION OF THE APPELLANT, I FIND THAT THE AO HAS IN FACT NOT ACCEPTED THE DETAILS AN D CONTENTION OF THE APPELLANT REGARDING THE NEXUS BETWEEN THE INTEREST BEARING BO RROWINGS AND INTEREST BEARING ADVANCES AND THE INTEREST PAID AND RECEIVED BY THE ASSESSEE WITH SUFFICIENT DETAILS AND BANK STATEMENTS. IT IS THE ONUS OF THE APPELLAN T TO PROVE THAT THE INTEREST EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF EA RNING THE INTEREST INCOME WHICH, IN THIS CASE, THE APPELLANT HAS FAILED TO DI SCHARGE. IN VIEW OF THE ABOVE, I FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY MY PREDECESSOR FOR AY 1993 -94. 8. A PERUSAL OF THE ABOVE ORDER OF THE LD. CIT(A) R EVEALS THAT THE LD. CIT(A) HAS FAILED TO COMPLY WITH THE DIRECTIONS OF THE TRIBUNAL TO GIVE A CATEGORICAL FINDING REGARDING THE NATURE OF RECEIPT S AS TO WHETHER THE SAME WERE BUSINESS RECEIPTS OR INCOME FROM OTHER SOURCES . AFTER ARRIVING AT A CATEGORICAL FINDING THE LD. CIT(A) WAS SUPPOSED TO DECIDE THE NETTING OF THE RECEIPTS AGAINST BUSINESS EXPENSES. HOWEVER, THE L D. CIT(A) HAS NOT GIVEN ANY FINDING AS DIRECTED BY THE TRIBUNAL. THE MATTE R IS THEREFORE REQUIRED TO BE RESTORED TO THE FILE OF THE LD. CIT(A) DIRECTING TH E HIM TO COMPLY WITH THE DIRECTIONS OF THE TRIBUNAL GIVEN VIDE ORDER DATED 1 6.09.05 IN LETTER AND SPIRIT. AT THIS STAGE, THE LD. A.R. OF THE ASSESSEE HAS PLE ADED THAT IN CASE THE LD. CIT(A) COMES TO THE CONCLUSION THAT THE NATURE OF R ECEIPTS IS INCOME FROM OTHER SOURCES THEN HE MAY BE ALLOWED TO TAKE THE PL EA OF NETTING OF THE INTEREST INCOME AGAINST INTEREST EXPENDITURE. ACCORDING TO THE LD. A.R. THAT THERE WAS ITA NOS.316 & 317/M/2015 M/S. ROYAL ANTI-BIOTICS & INVESTMENTS PVT. LTD. 5 A NEXUS BETWEEN THE INTEREST INCOME EARNED AND INTE REST EXPENDITURE INCURRED BUT THE LOWER AUTHORITIES HAVE NOT PROPERLY APPRECI ATED THE EVIDENCES PRODUCED BY THE ASSESSEE. CONSIDERING THE ABOVE PLEA OF THE LD. A.R. AND IN THE INTEREST OF JUSTICE, WE DIRECT THAT AFTER GIVING A CATEGORIC AL FINDING ABOUT THE NATURE OF RECEIPTS, THE LD. CIT(A) WILL ALSO DECIDE THE ALTER NATE PLEA OF THE ASSESSEE REGARDING THE NETTING OF THE INTEREST INCOME AGAINS T INTEREST EXPENDITURE BY WAY OF A SPEAKING ORDER AFTER DULY CONSIDERING THE EVIDENCES AND SUBMISSIONS OF THE ASSESSEE IN THIS RESPECT. 9. THE FACTS AND ISSUES INVOLVED IN ITA NO.317/M/20 15 ARE EXACTLY IDENTICAL, HENCE IN VIEW OF OUR FINDINGS GIVEN ABOV E, BOTH THE APPEALS ARE RESTORED TO THE FILE OF THE LD. CIT(A) AS PER OUR D IRECTIONS GIVEN ABOVE. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21.10.2016. SD/- SD/- (ASHWANI TANEJA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21.10.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.