RAJ PETRO SPECIALITIES P.LTD, MUMBAI V. ACIT 10(2), MUMBAI

ITA 3427/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0410 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Additional evidence; Bad and doubtful debts
• Section: 143(3); 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3427 / MUM/20 12 ASSESSMENT YEAR: 2009 - 10 RAJ PETRO SPECIALITIES P. LTD. VS. ACIT 10(2) 124 G.D. AMBEDKAR MARG MUMBAI KALACHOWKI, COTTON GREEN (W) MUM BAI 400033 PAN NO. AACCS4923P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY MEHTA , AR REVENUE BY: SH RI PURUSHOTTAM KUMAR , DR DATE OF HEARING : 15/03/2017 DATE OF PRONOUNCEMENT: 1 3 /06/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2009 - 10. THE APPEAL IS DIRECTED AGAINST THE ORDER COMMISSIONER (APPEALS) 22, MUMBAI AND ARISES OUT OF ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: I. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN PASSING THE IMPUGNED ORDER WHICH IS ILLEGAL AND BAD IN LAW. II. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN NOT DIRECTING THE ASSESSING OFFICER TO ACCEPT THE COMPUTATION OF DEDUCTION U/S 80IB OF THE ACT AS PER THE RETUR N OF INCOME OF THE APPELLANT. ITA NO. 3427 /MUM/201 2 2 III. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN UPHOLDING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WHEREIN THE DEDUCTION U/S 80IB OF THE ACT WAS ALLOWED AFTER EXCLUDING THE FOLLOWING GROSS RECEIPTS OF INCO ME WHILE ARRIVING AT ELIGIBLE INCOME OF UNIT: PARTICULARS INTEREST INCOME RS. 1,69,82,358/ - MISC. INCOME (RECOVERY FROM SUNDRY DEBTORS ) RS. 7,66,242/ - HIRE CHARGES RS. 58,57,428/ - INSURANCE CLAIM RS. 6,99,284/ - IV. WITHOUT PREJUDICE, THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN NOT DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE ABOVE RECEIPTS ON NET BASIS (I.E. AFTER REDUCING THEREFROM CORRESPONDING EXPENSES INCURRED) AS AGAINST GROSS RECEIPTS WHILE COMPUTING GROSS TOTAL INCOME OF ELIGI BLE UNIT FOR GRANTING DEDUCTION U/S 80IB OF THE ACT. 3. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITS THAT THE ASSESSEE WOULD NOT LIKE TO PRESS THE 1 ST & 2 ND GROUND OF APPEAL . HENCE THE ABOVE GROUND S OF APPEAL ARE DISMISSED AS NOT PRESSED. THUS WE WOULD DEAL WITH ONLY THE 3 RD AND 4 TH GROUND OF APPEAL. 4. BRIEFLY STATED , THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB ON ITS SILVASSA UNIT. THE ASSESSING OFFICER (A.O.) ON PER USAL OF THE PROFIT & LOSS ACCOUNT OF THE SAID UNIT FOUND THAT THE ASSESSEE HAD INCLUDED OTHER INCOME AGGREGATING TO RS. 2,97,44,655/ - IN THE GROSS INCOME CONSIDERED FOR THE PURPOSE OF DEDUCTION U/S 80IB. THE DETAILS OF OTHER INCOME ARE AS UNDER: ITA NO. 3427 /MUM/201 2 3 INTER EST (GROSS) A) ON BANK DEPOSIT B) OTHERS RS. 16980626 1732 PROFIT ON SALE/DISPOSAL OF FIXED ASSETS (NET) 1282 MISC. INCOME 766242 INSURANCE CLAIM 699284 HIRE CHARGES 5857428 CLEARING & FORWARDING CHARGES (RECOVERED) 42008 SALES PROCESSING 5396047 29774655 4.1 THE A.O. RELIED ON THE DECISION IN THE CASE OF PANDIAN CHEMICALS LTD. V S. CIT 262 ITR 278 AND THE JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN CIT V S. SHAH ORIGINALS AND REDUCED THE INTEREST INCOME ON BANK DEPOSIT OF RS. 1,69,80,626/ - FROM THE GROSS TOTAL INCOME OF SILVASSA UNIT FOR THE PURPOSE OF CALCULATING DEDUCTION U/S 80IB OF THE ACT. 4.2 REGARDING MISCELLANEOUS INCOME OF RS. 7,66,242/ - , THE A.O. HAS OBSERVE D THA T T HERE IS NOTHING ON RECORD TO PROVE THAT SUCH DEBTORS WERE FROM THE UNIT WHOSE PROFITS ARE ELIGIBLE FOR DEDUCTION U/S 80IB AND WHETHER THE WRITE OFF OF BAD DEBTS PERTAIN ING TO SUCH DEBTORS IN THE EARLIER YEARS WAS A PART OF THE EXPENDITURE WHILE COMPUTIN G 80IB DEDUCTION. IN ABSENCE OF SUCH INFORMATION, THE A.O. CONSIDERED THE INCOME OF RS. 7,66,242/ - NOT TO BE PART OF THE PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING. 4.3 IN RESPECT OF HI RE CHARGES INCOME OF RS. 58,57,428/ - , THE A.O. HAS NOTED THAT THE ASSESSEE IS ADMITTING THAT THE INCOME IS FLOWING OUT OF THE RATE CHARGED TO THE VENDORS. THUS, THE RECEIPT OF INCOME FROM HIRING OF TANKERS HAS NO DIRECT NEXUS WITH THE PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING. 4.4 REGARDING INSURANCE CLAIM OF RS. 6,99,284/ - , THE A.O. HAS RELIED ON THE DECISION IN THE CASE OF KHEMKA CONTAINERS (2005) 275 ITR 559 ITA NO. 3427 /MUM/201 2 4 WHEREIN IT IS HELD THAT INSURANCE RECEIPT FOR LOSS OF STOCK IS NOT ELIGIBLE FOR DEDUCTION U/S 80I. THOUGH THE DECISION IS IN RESPECT OF DEDUCTION U/S 80I, I T IS EQUALLY APPLICABLE U/S 80IB. THE A.O. THUS HAS HELD THAT INSURANCE CLAIM RECEIVED BY THE ASSESSEE CANNOT BE HELD TO BE INCOME DERIVED FROM INDUSTRIAL UNDERTAKING SO AS TO QUALIFY FOR DEDUCTION U/S 80I B OF THE ACT. 4.5 THE A.O. HAS ALSO RELIED ON THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA 317 ITR 218 ( SC ) FOR THE MEANING OF THE CONNOTATION PROFITS DERIVED FROM. 5. AGGRIEVED BY THE ORDER OF THE A.O. , THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED CIT(A). REGARDING THE INTEREST INCOME OF RS. 1,69,82,358/ - THE LEARNED CIT(A) HAS RELIED ON THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN LIBERTY INDIA (SUPRA), WHEREIN IT IS HELD THAT THE WORD DERIVED FROM INTENDS TO COVER THE SOURCE NOT BEYOND THE FIRST DEGREE. THE INTEREST INCOME RECEIVED FROM BANK DEPOSITS IS NOT HAVING FIRST DEGREE RELATION TO THE PROFITS OF THE INDUSTRIAL UNDERTAKING AND HENCE THE A.O. IS JUSTIFIED IN NOT ALLOWING DEDUCTION U/S 80IB F OR INTEREST ON DEPOSITS. REGARDING THE CLAIM OF THE ASSESSEE THAT NETTING OF INTEREST SHOULD BE ALLOWED, THE LEARNED CIT(A) HAS HELD THAT THE SAME CAN BE ALLOWED ONLY WHEN INTEREST EXPENDITURE IS MADE WHOLLY AND EXCLUSIVELY FOR EARNING INTEREST INCOME U/S 57(III) OF THE ACT. IN THE PRESENT CASE, INTEREST EXPENDITURE IS A BUSINESS EXPENDITURE AS SAME HAS BEEN MADE FOR BUSINESS PURPOSE. IN OTHER WORDS, THE INTEREST EXPENDITURE IS INCURRED IRRESPECTIVE OF THE FACT THAT THERE IS INTEREST INCOME. MERELY BECAUSE BOTH ARE TERMED AS INTEREST DOES NOT MEAN THAT THEY ARE UNDER THE SAME HEAD OF INCOME. 5.1 REGARDING THE HIRE CHARGES INCOME OF RS. 58,57,428/ - , THE LEARNED CIT(A) HAS OBSERVED ON PERUSAL OF THE AGREEMENT WITH THE ITA NO. 3427 /MUM/201 2 5 VENDOR M/S. SUNNY LIQUID MOVERS PVT. LTD . DATED 1.02.2008 THAT NOWHERE IT IS MENTIONED THAT THESE TRUCKS WILL BE USED FOR THE ASSESSEES OWN TRANSPORTATION ONLY. THE LEARNED CIT(A) THUS AGREED WITH THE A.O. THAT HIRE CHARGES RECEIVED CANNOT BE TREATED AS PROFIT DERIVED FROM INDUSTRIAL UNDERTAKI NG. 5.2 REGARDING THE INSURANCE CLAIM OF RS. 6,99,284/ - , THE LEARNED CIT(A) HAS NOTED THAT THE ASSESSEE CLAIMED DEDUCTION U/S 80IB ON INSURANCE CLAIM RECEIVED WHICH IS STATED TO BE ON ACCOUNT OF TRANSIT LOSS OF FINISHED PRODUCT. THE LEARNED CIT(A) HAS REL IED ON THE DECISION IN THE CASE OF KHEMKA CONTAINERS (SUPRA) AND PANDIAN CHEMICALS (SUPRA) AND HELD THAT THE ASSESSEES CLAIM WAS NOT TENABLE AS NO DETAIL OR BREAK UP WAS AVAILABLE WITH THE ASSESSEE AND THUS IT WAS NOT POSSIBLE TO VERIFY THE CONTENTION. 5. 3 REGARDING THE RECOVERY FROM SUNDRY DEBTORS AMOUNTING TO RS. 7,66,242/ - , THE LEARNED CIT(A) HAS MENTIONED THAT THIS GROUND OF APPEAL WAS NOT PRESSED BEFORE HIM. THEREFORE, HE DISMISSED THE SAID GROUND. 6. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE FILES A PAPER BOOK CONTAINING (I) COMPUTATION OF INCOME, (II) COMPUTATION OF DEPRECIATION ALLOWABLE AS PER THE ACT, (III) BALANCE SHEET AND PROFIT & LOSS A/C FOR YEAR ENDED 31.03.2009 FOR UNIT SILVASSA, (IV) B ANK STATEMENTS SHOWING SOURCE OF MARGIN MONEY KEPT WITH THE BANK (ON SAMPLE BASIS) ON WHICH INTEREST IS EARNED BY THE APPELLANT, (V) DETAILS OF MISCELLANEOUS INCOME SHOWING IT PERTAINED TO WRITE OFFS OF SUNDRY CREDITORS AND DEBTORS, (VII) LETTER DATED 12. 03.2012 OF SUNNY LIQUID MOVERS P. LTD. CONFIRMING THAT THE VEHICLES HAD BEEN EXCLUSIVELY USED FOR TRANSPORTING GOODS FOR THE APPELLANT, (VII) CHART SHOWING THE AMOUNT CLAIMED FROM THE INSURER AND ACTUAL AMOUNT RECEIVED, (VIII) ITA NO. 3427 /MUM/201 2 6 WRITTEN SUBMISSIONS FILED BEF ORE THE CIT(A) ON 12.03.2012 AND 14.03.2012 . RELIANCE WAS PLACED BY HIM ON THE DECISION IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. VS. CIT (2012) 343 ITR 89 ( SC ), CIT V S. MEGHALAYA STE ELS LTD. (2016) 284 CTR (SC) 321 AND THE ORDER OF THE TRIBUNAL IN DCIT VS. M/S. VADINAR POWER CO. LTD . (ITA NO. 6861/MUM/2013) FOR THE A.Y. 2009 - 10. THE LEARNED COUNSEL OF THE ASSESSEE ALSO SUBMITS THAT THE ISSUE REGARDING (I) INTEREST INCOME, (II) MISCELLANEOUS INCOME (RECOVERY FROM DEBTORS), (III) HIRE CHARGES AND (I V) INSURANCE CLAIM BE RESTORED TO THE FILE OF THE A.O. FOR ADJUDICATION BY TAKING INTO ACCOUNT THE ADDITIONAL EVIDENCE NOW FILED BEFORE THE TRIBUNAL. 7. PER CONTRA , THE LEARNED DR RELIED ON THE ORDER PASSED BY THE LEARNED CIT(A). IT IS STATED BY HIM THA T SUFFICIENT OPPORTUNITY WAS GIVEN BY THE A.O. AND THE LEARNED CIT(A) TO THE ASSESSEE TO FILE THE DETAILS AND EXPLAIN ITS CASE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE BEGIN WITH THE DECISIONS RELIED ON BY THE LEARNED COUNSEL OF THE ASSESSEE. IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. (SUPRA) , IT IS HELD THAT FOR THE PURPOSE OF SECTION 80HHC OF THE INCOME - TAX ACT, 1961, IT IS NOT THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE ON SALE OF DEPB CREDIT, BUT THE S ALE VALUE LESS THE FACE VALUE OF THE DEPB THAT WILL REPRESENT PROFIT ON TRANSFER OF DEPB CREDIT BY THE ASSESSEE . ALSO IT IS HELD THEREIN THAT 90% OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY THE NET INTEREST OR NET RENT, WHICH HAD BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, WAS TO BE ITA NO. 3427 /MUM/201 2 7 DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80HHC FOR DETERMINI NG THE PROFITS OF THE BUSINESS. IN MEGHALAYA STEELS LTD. (SUPRA) , IT IS HELD THAT TRANSPORT SUBSIDY, INTEREST SUBSIDY, POWER SUBSIDY AND INSURANCE SUBSIDY ARE REVENUE RECEIPTS WHICH ARE REIMBURSED TO THE ASSESSEE FOR ELEMENTS OF COST RELATING TO MANUFACTURE AND SALE OF ITS PRODUCTS, THERE IS CERTAINLY A DIRECT N EXUS BETWEEN THE PROFITS AND GAINS OF THE INDUSTRIAL UNDERTAKING OR BUSINESS AND SUCH SUBSIDIES AND THEREFORE, THE AMOUNT RECEIVED BY THE ASSESSEE AS SUBSIDIES QUALIFY FOR DEDUCTION UNDER SS 80 - IB AND 80 - IC. IN M/S. VADINAR POWER CO. LTD. (SUPRA) , THE ISS UE BEFORE THE TRIBUNAL WAS WHETHER ON THE FACTS, AND CIRCUMSTANCES OF THE CASE AND IN LAW THE L D . CIT(A) ERRED IN ALLOWING THE CONTENTION OF THE ASSESSEE THAT ONLY THE NET INTEREST INCOME SHOULD BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES, WITHOUT A PPRECIATING THE FACTS THAT ASSESSEE HAS FAILED TO PRODUCE ANY DETAILS TO PROVE NEXUS BETWEEN THE SO CALLED INTEREST EXPENDITURE AND INTEREST INCOME. THE TRIBUNAL SET ASIDE THE ISSUE TO THE FILE OF THE A.O. TO MAKE A DE - NOVO ASSESSMENT. 8.1 WE FOLLOW THE R ATIO LAID DOWN IN THE ABOVE DECISIONS AND BEGIN WITH THE INTEREST INCOME OF RS. 1,69,82,358/ - . THE ONUS LIES ON THE ASSESSEE - COMPANY TO CORRELATE THE EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INCOME TO GET THE NECESSARY DEDUC TION PROVIDED ALL THE CONDITIONS AS STIPULATED IN SECTION 57 (III) OF THE ACT ARE COMPLIED WITH. IT IS NECESSARY THAT THE ASSESSEE - COMPANY SHOULD DEMONSTRATE BEFORE THE A.O. WITH EVIDENCE THAT INTEREST BEARING FUNDS WERE UTILISED FOR MAKING FDR ON WHICH IN TEREST INCOME IS EARNED TO GET THE DEDUCTION AS STIPULATED U/S 57(III) OF THE ACT. IN VIEW OF THE ABOVE, THE ORDER OF THE LEARNED CIT(A) ITA NO. 3427 /MUM/201 2 8 ON THE ABOVE IS SET ASIDE AND THE SAME IS RESTORED TO THE FILE OF THE A.O. FOR DE - NOVO DETERMINATION OF THE ISSUE IN TH E LIGHT OF THE ABOVE DISCUSSION AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ALSO THE ASSESSEE - COMPANY IS DIRECTED TO PRODUCE BEFORE THE A.O. EVIDENCE THAT THERE IS DIRECT NEXUS OF THE UTILISATION OF THE INTEREST BEARING BORROWED FUN DS FOR THE PURPOSE OF GETTING FDRS. 8.2 THE NEXT ITEM IS MISCELLANEOUS INCOME OF RS.7,66,242/ - . HAVING PERUSED THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE CONCERNED GROUND WAS NOT PRESSED BEFORE THE LEARNED CIT(A). ACCORDINGLY, WE DISMISS THE GROUND RELATING TO MISCELLANEOUS INCOME (RECOVERY FROM DEBTORS). 8.3 THE NEXT ITEM IS HIRE CHARGES INCOME OF RS.58,57,428/ - . WE FIND THAT THE ASSESSEE HAS FILED A CONFIRMATION DATED 12.03.2012 FROM M/S SUNNY LIQUID MOVERS PVT. LTD. BEFORE T HE LD. CIT(A). THE ASSESSEE COULD NOT FILE THE ABOVE DOCUMENT BEFORE THE AO. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE ABOVE ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE RELEVANT DETAILS BEFORE THE AO. 8.4 THE NEXT ITEM IS INSURANCE CLAIM OF RS.6,99,284/ - . WE FIND THAT THE ASSESSEE COULD NOT FILE PARTICULARS OF LOSS AND INSURANCE CLAIM RECEIVED BEFORE THE AO. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE ABOVE ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT AFTER GIVI NG REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE RELEVANT DETAILS BEFORE THE AO. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ITA NO. 3427 /MUM/201 2 9 ORDER PRONOUNCED IN THE OPEN C OURT ON 13 /06/2017. SD/ - SD/ - ( JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 13 /06/2017 RAHUL SHARMA , SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI