M/S Model Exims, Kanpur V. DCIT-1, Kanpur

ITA 355/LKW/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78617 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-06-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 20-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Question of law
• Section: 143(3); 80HHC; 80IB; 147; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NOS.355 & 356/LKW/2011 ASSESSMENT YEARS:2003 - 04 & 2004 - 05 M/S MODEL EXIMS, JAJMAU, KANPUR. PAN:AADFM6163H VS. DY.C.I.T. - 1, KANPUR. (APPELLANT) (RESPONDENT) ITA NO.259/LKW/2011 ASSESSMENT YEAR:2004 - 05 DY.C.I.T. - 1, KANPUR. VS. M/S MODEL EXIMS, JAJMAU, KANPUR. PAN:AADFM6163H (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI RAKESH GARG, ADVOCATE REVENUE BY SHRI MANOJ KUMAR GUPTA, CIT, D.R. DATE OF HEARING 18/06/2014 DATE OF PRONOUNCEMENT 0 4 /07/2014 O R D E R PER A. K. GARODIA, A.M. OUT OF THIS BUNCH OF THREE APPEALS, THERE IS ONE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2003 - 04 AND THE REMAINING TWO APPEALS ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE FOR ASSESSMENT YEAR 2004 - 05 AND THESE APPEALS ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF CIT(A) - I, KANPUR DATED 14/02/2011. FOR THE SAKE OF CONVENIENCE , ALL 2 THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER. 2. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2003 - 04 IN I.T.A. NO.355/LKW/2011. IN THIS APPEAL, THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS: 1. BECAUSE THE RE - ASSESSMENT FRAMED U/S 147/143(3) OF THE ACT IS CONTRARY TO FACTS, BAD IN LAW, WITHOUT JURISDICTION AND BE QUASHED. 2. BECAUSE THERE BEING NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, THE RE - ASSESSMENT PROCEEDINGS ARE VOID AB INITIO. 3. BECAUSE WITHOUT PREJUDICE THE CIT(A) HAS FAILED TO APPRECIATE THAT IT WAS NOT A CASE OF ESCAPEMENT OF INCOME, BUT AT BEST WOULD BE A CASE OF RECTIFICATION U/S. 1 54, ASSESSMENT TO BE AMENDED IN LIGHT OF THE DIRECT TAX LAWS AMENDMENT ACT 2005, AS SUCH, THE ACTION OF THE C1T(A) UPHOLDING THE REASSESSMENT IS CONTRARY TO THE PROVISIONS OF LAW. 4. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW AND HAS FAILED TO APPRE CIATE THAT WHEN THE ASSESSING OFFICER HAS AN EFFICACIOUS REMEDY OPEN TO IT IN THE FORM OF RECTIFICATION U/S 154 FOR CORRECTING THE COMPUTATIONAL ERROR, CONSEQUENTIALLY RECOURSE TO THE PROVISIONS OF SECTION 147 WAS NOT WARRANTED. THE ORDER OF THE CIT(A) AS WELL AS THE RE - ASSESSMENT ORDER BE ANNULLED. 5. BECAUSE THE C1T(A) HAS FAILED TO APPRECIATE THAT THE DEPB CREDITS WOULD BE TAXABLE AT THE TIME OF ACCRUAL AND NOT AT THE TIME OF SALE OR ITS UTILIZAZTION AS THE CASE MAY BE. 6. BECAUSE ON A PROPER CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE CASE, THE C1T(A) HAS ERRED IN LAW IN ARBITRARILY REJECTING THE CASE OF THE ASS E SSEE WITHOUT 3 APPRECIATING THE FACT THAT DEPB/DFRC PROFITS ARE TO BE TAXED AS PER THE NOTIFICATION TO BE ISSUED BY THE CENTRAL GOV ERNMENT AND THAT AS ON DATE NO SUCH NOTIFICATION REGARDING CALCULATION HAS BEEN ISSUED. THE ORDER OF THE CIT(A) IS ERRONEOUS AND SO IS THE ENTIRE REASSESSMENT. 3. AT THE VERY OUTSET, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT IN THE PRESENT CA SE , THE ASSESSMENT WAS REOPENED BY THE ASSESSING OFFICER ON THE BASIS OF AMENDMENT IN THE PROVISIONS OF SECTION 80HHC OF THE ACT AS AMENDED BY TAXATION LAWS AMENDMENT ACT 2005. HE FURTHER SUBMITTED THAT SUCH AMENDMENT BY TAXATION LAWS AMENDMENT ACT 2005 W ITH EFFECT FROM 01/04/98 WAS STRUCK DOWN BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS VS COMMISSIONER OF INCOME - TAX AS REPORTED IN [2012] 348 ITR 391 (GUJ) AND ALSO BY HON'BLE BOMBAY HIGH COURT DECISION RENDERED IN THE CASE OF VIJAYA SILK HOUSE (BANGALORE) LIMITED VS. UNION OF INDIA & ANR AS REPORTED IN [2013] 257 CTR 67. HE ALSO SUBMITTED THAT THE REASONS RECORDED BY THE ASSESSING OFFICER ARE AVAILABLE ON PAGE NO. 1 & 2 OF THE PAPER BOOK AND FROM THE SAME , IT CAN BE SEEN THAT THE REOPENIN G IS ON THE BASIS OF AMENDMENT IN THE PROVISIONS OF SECTION 80HHC AS AMENDED BY TAXATION LAWS AMENDMENT ACT 2005. HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN THE CASE OF RAHMAN EXPORTS PVT. LTD. VS. D Y. CIT IN I.T.A. NO.11/LKW/2013 DATED 22/03/2013. HE SUBMITTED THAT THE COPY OF THE TRIBUNAL DECISION IS AVAILABLE ON PAGE NO. 11 TO 18 OF THE PAPER BOOK. IN PARTICULAR , OUR ATTENTION WAS DRAWN TO PARA 10 OF THE TRIBUNAL ORDER AS AVAILABLE ON PAGE NO. 16 OF THE PAPER BOOK WHERE IT IS HELD BY THE TRIBUNAL UNDER SIMILAR FACTS THAT THE REOPENING IS NOT VALID. 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT AS PER THE REASONS RECORDED BY THE ASSESSING OFFICER, AS AVAILABLE ON PAGE N O . 1 & 2 OF THE PAPER BOOK , THE REOPENING IN THE PRESENT CASE IS BASED ON AMENDMENT IN SECTION 80HHC AS AMENDED BY TAXATION LAWS AMENDMENT ACT 2005. NOW WE REPRODUCE THE RELEVANT PARA BEING PARA NO. 10 FROM THE TRIBUNAL ORDER IN THE CASE OF RAHMAN EXPORTS PVT. LTD. (SUPRA) AS UNDER: 10. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE TAXATION LAWS AMENDMENT ACT, 2005 WITH EFFECT FROM 01/04/98 WAS STRUCK DOWN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS AND OTHERS VS. CIT & OTHERS [2012] 348 ITR 391 (GUJ) AS WELL AS HON'BLE BOMBAY HIGH COURT IN THE CASE OF 257 CTR 67. AS THE VERY BASIS OF REOPENING IS STRUCK DOWN, WE HAVE NO OTHER ALTERNATIVE BUT UPHOLD THE CONTE NTION OF THE ASSESSEE AND HOLD THAT THE REOPENING IS BAD IN LAW. GROUND NO. 1 OF THE ASSESSEE IS ALLOWED. 5.1 AS PER ABOVE PARA OF THE TRIBUNAL ORDER, IT IS SEEN THAT WHEN IT WAS FOUND THAT THE REOPENING IS ON THE BASIS OF AMENDMENT IN SECTION 80HHC AS AMENDED BY TAXATION LAWS AMENDMENT ACT 2005 , IT WAS NOTED BY THE TRIBUNAL THAT SUCH AMENDMENT WAS STRUCK DOWN BY HON'BLE GUJARAT H IGH COURT AND HON'BLE BOMBAY HIGH COURT AND THEREFORE , IT WAS HELD BY THE TRIBUNAL THAT SINCE THE VERY BASIS FOR REOPENING IS STRUCK DOWN, THERE IS NO OTHER ALTERNATIVE BUT TO HOLD THAT THE REOPENING IS BAD IN LAW. IN THE PRESENT CASE ALSO , WE HOLD BY RES PECTFULLY FOLLOWING THIS TRIBUNAL ORDER THAT THE REOPENING IS BAD IN LAW. ACCORDINGLY, GROUND NO. 1 IS ALLOWED. 5.2 SINCE WE HAVE HELD THAT THE REOPENING IS BAD IN LAW, OTHER GROUNDS DO NOT REQUIRE ANY ADJUDICATION. 6. IN THE RESULT, THE APPEAL OF THE A SSESSEE IS ALLOWED. 5 7. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2004 - 05. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. BECAUSE THE CIT(A) HAS FAILED TO APPRECIATE THAT THE ENTIRE ASSESSMENT FRAMED U/S 143(3) IS CONTRARY TO THE PROVISIONS OF LAW VOID ABINITO, WITHOUT JURISDICTION, IN AS MUCH AS THE NOTICE U/S 143(2) HAS BEEN ISSUED IN AN MECHANICAL MANNER BY THE ASSESSING OFFICER WITHOUT GOING INTO THE NECESSITY OR EXPEDIENCY OF ISSUING THE SAME. 2. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN DENYING DEDUCTION U/S 80HHC ON SUM OF RS.32,00,950/ - BEING RECEIPTS FROM SALE OF IMPORT LICENCE (DFRC). 3. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN DENYING DEDUCTION U/S 80IB OF THE ENTIRE AMOUNT OF RS.1, 61,65,231/ - IN RESPECT OF BANTHAR UNIT. 4. BECAUSE THE CIT (A) HAS ERRED ON FACTS AND IN LAW IN ARBITRARILY HOLDING THAT THE ASSESSEE APPELLANT IS NOT ENTITLED TO DEDUCTION U/S 80 - IB IN RESPECT OF BANTHAR UNIT. 5. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE DFRC AND DEPC CREDIT/RECEIPTS ARE TAXABLE ON RECEIPTS BASIS AND NOT ON ACCRUAL BASIS. 6. BECAUSE THE CIT(A) HAS FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAS ARBITRARILY HELD THAT THE DEDUCTION U/S.80HHC HAS TO BE COMPUTED AFTER DEDUCTING THE DEDUCTION GRANTED U/S.80IB, WHICH FINDING IS BAD IN LAW. 7. BECAUSE ON A PROPER INTERPRETATION OF THE PROVISIONS OF SECTION 80IB AND 80HHC, BOTH THE DEDUCTIONS ARE ALLOWABLE INDEPENDENT OF EACH OTHER AND AT THE SAME TIME ON THE AVAILABLE SURPLUS. 8. REGARDING GROUND NO. 1, NO ARGUMENT WAS RAISED BY THE ASSESSEE AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE 6 BECAUSE WE DOT FIND ANY INFIRMITY THEREIN . ACCORDINGLY, GROUND NO. 1 IS REJECTED. 9. REGARDING GROUND NO. 2, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT ON THIS ISSUE , THE MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION IN THE LIGHT OF THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF TOP MAN EXPORTS VS COMMISSIONER OF INCOME - TAX AS REPORTED IN [2012] 342 ITR 49 (SC) . 10. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENT CITED BY LEARNED A.R. OF THE ASSESSEE. WE FIND THAT IT WAS HELD BY THE AUTHORITIES BELOW THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80HHC ON THE SUM OF RS.32,00,950/ - RECEIVED FROM SAL E OF IMPORT LICENCE (DFRC). AS PER THE JUDGMENT OF APEX COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA), ONLY PROFIT ON SALE OF IMPORT LICENCE/DEPB HAS TO BE EXCLUDED FROM BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE U/S 80HHC OF THE ACT A ND THE ENTIRE SALE PROCEEDS CANNOT BE CONSIDERED AS PROFIT ON SALE OF IMPORT LICENCE. HENCE, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THIS MATTER TO THE FILE OF ASSESSING OFFICER FOR FRESH DECISION IN THE LIGHT OF TH IS JUDGMENT OF HON'BLE APEX COURT R ENDERED IN THE CASE OF TOPMAN EXPORTS (SUPRA) AFTER ALLOWING ADEQUATE OPPORTUNITY OF BEING HEARD TO ASSESSEE. GROUND NO. 2 IS ALLOWED FOR STATISTICAL PURPOSES. 12. REGARDING GROUND NO. 3,4 & 5, IT WAS FAIRLY CONCEDED BY THE LEARNED AR OF THE ASSESSEE THA T THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE 7 JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA VS COMMISSIONER OF INCOME - TAX AS REPORTED IN [2009] 317 ITR 217 (SC) . RESPECTFULLY FOLLOWING TH I JUDGMENT OF HON'BLE APEX COURT, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AND ACCORDINGLY GROUND NO. 3,4 & 5 ARE REJECTED. 13. REGARDING GROUND NO. 6 & 7, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AS PER THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF ASSOCIATED CAPSULES P. LTD. VS DEPUTY COMMISSIONER OF INCOME - TAX AS REPORTED IN [2011] 332 ITR 42 (BOM) AND ALSO BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF HINDUSTAN MINT & AGRO PRODUCTS LTD. 315 ITR (AT) 401 (SB) DELHI. 14. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENTS CITED BY LEARNED A.R. OF THE ASSESSEE. WE FIND THAT AS PER THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF ASSOCIATED CAPSULES P. LTD., IT WAS HELD THAT SECTION 80 - IA(9) DOES NOT AFFECT THE COMPUTABILITY OF DEDUCTION UNDER VARIOUS PROVIS IONS UNDER HEADING C OF CHAPTER VI - A, BUT IT AFFECTS THE ALLOWABILITY OF DEDUCTIONS COMPUTED UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTER VI - A, SO THAT THE AGGREGATE DEDUCTION UNDER SECTION 80 - IA AND OTHER PROVISIONS UNDER HEADING C OF CHAPTER VI - A DO NOT EXCEED 100 % OF THE PROFITS OF THE BUSINESS OF THE ASSESSEE . ACCORDINGLY, IN THE PRESENT CASE ALSO, THE ASSESSING OFFICER IS DIRECTED TO ENSURE THAT THE ALLOWABILITY OF DEDUCTION 8 UNDER HEADING C OF CHAPTER VI - A DOES NOT EXCEED 100% PROFIT OF THE BUS INESS BUT FOR DOING SO , THE DEDUCTION ALLOWABLE U/S 80IA SHOULD NOT BE REDUCED FROM BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE U/S 80HHC. ACCORDINGLY, THESE GROUNDS ARE ALLOWED. 16. IN THE RESULT, THIS APPEAL IS PARTLY ALLOWED. 17. NOW WE TAKE UP REVENUES APPEAL FOR ASSESSMENT YEAR 2004 - 05 IN I.T.A. NO.259/LKW/2011. IN ITS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - I , KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN SHIFTING THE DEDUCTION OF INTEREST OF RS.6,18,899/ - FROM JAJMAU UNIT TO BANTHAR UNIT WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THE L D. COMMISSIONER OF INCOME TAX (APPEALS) - I , KANPUR HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO TREAT THE GAINS OF RS.2,82,255/ - ON EEFC AND INTEREST OF FDR OF RS.1,58,867 / - AS 'BUSINESS INCOME' IN PLACE OF 'INCOME FROM OTHER SOURCES' WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. THAT THE ORDER OF THE LD. CIT (A) - I, KANPUR DATED 14.02.2011 NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFICER DATED 21.12.2006 BE RESTORED. 4. THAT THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF APPEAL MENTIONED ABOVE AND / OR TO ADD ANY FRESH GROUNDS AS AND WHEN IT IS REQUIRED TO DO SO. 18. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). 9 HOWEVER, REGARDING GROUND NO. 1 OF THE REVENUES APPEAL, IT WAS SUBMITTED THAT SINCE NO DEDUCTION IS ALLOWABLE TO THE ASSESSEE U /S 80 IB OF THE ACT, THE TRANSFER OF INTEREST EXPENDITURE FROM JAJMAU UNIT TO BANTHAR UNIT WILL NOT AFFECT THE ULTIMATE TAXABLE INCOME OF THE ASSESSEE. REGARDING GROUND NO. 2 OF THE REVENUES APPEAL, HE SUBMITTED THAT FOR THE FIRST PORTION BEING GAINS OF RS.2,82,255/ - ON EEFC, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HON'BLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF RAGHUNATH EXPORTS (P) LTD. VS COMM ISSIONER OF INCOME - TAX AS REPORTED IN [2011] 330 ITR 57 (CAL) . REGARDING THE SECOND ASPECT, I.E. INTEREST ON FDR OF RS.1,58,867/ - , HE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS J. J. EXPORTERS LTD. AS REPORTED IN [2010] 324 ITR 329 (CAL) . HE ALSO SUBMITTED THAT AGAINST THIS JUDGMENT OF HON'BLE CALCUTTA HIGH COURT, SLP WAS FILED BEFORE HON'BLE APEX COURT BUT T HE SAME WAS DISMISSED AS PER THE JUDGMENT REPORTED IN 322 ITR (ST.) 7. 19 . IN THE REJOINDER, LEARNED D.R. OF THE REVENUE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE ALLAHABAD COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS INDO GULF FERTILISER AND CHEMICALS CORPORATION LTD. AS REPORTED IN [2006] 280 ITR 621. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENTS CITED BY BOTH THE SIDES. REGARDING GROUND NO. 1, IN THE LIGHT OF THESE SUBMISSIONS OF LEARNED A.R. OF THE ASSESSEE THAT IN VIEW OF NON ALLOWABILITY OF ANY DEDUCTION U/S 80IB, IT WILL NOT AFFECT THE ULTIMATE TAXABLE INCOME OF THE ASSESSEE EVEN IF THE INTEREST EXPENDITURE IS CHARGED IN A NY ONE OR BOTH OF THE UNITS OUT OF JAJMAU AND BANTHAR UNIT, WE DECLINE 10 T O INTERFERE IN THE ORDER OF CIT(A) WITH REGARD TO ISSUE RAISED BY THE REVENUE AS PER GROUND NO. 1 OF ITS APPEAL. GROUND NO.1 IS REJECTED. 20.1 AS PER GROUND NO. 2, TWO ISSUES ARE INVOLVED. THE FIRST ISSUE IS AS TO WHETHER THE GAIN OF RS.2,82,255/ - ON EE FC IS TO BE ASSESSED AS BUSINESS INCOME OR TO BE ASSESSED AS INCOME FROM OTHER SOURCES. THE SECOND ISSUE IS AS TO WHETHER INTEREST ON FDRS OF RS.1,58,867/ - IS ASSESSABLE AS BUSINESS INCOME OR AS INCOME FROM OTHER SOURCES. 20.2 REGARDING THE FIRST ISSUE , RELIANCE HAS BEEN PLACED BY LEARNED A.R. OF THE ASSESSEE ON THE JUDGMENT OF HON'BLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF RAGHUNATH EXPORTS (P) LTD. VS COMMISSIONER OF INCOME - TAX (SUPRA). WE FIND THAT IN THAT CASE, THE ISSUE INVOLVED WAS WITH REGA RD TO SURPLUS OWING TO DIFFERENCE BETWEEN THE VALUE OF INDIAN CURRENCY AT THE TIME OF RAISING INVOICE AND THE VALUE OF INDIAN CURRENCY AT THE TIME OF REALIZATION AND UNDER THESE FACTS , IT WAS HELD THAT THE SAID SURPLUS WAS PART AND PARCEL OF EXPORT TURNOVE R AND TOTAL TURNOVER. IN THE PRESENT CASE, THE FACTS ARE DIFFERENT. IN THE PRESENT CASE, THE SURPLUS IS IN RESPECT OF MONEY LYING INTO EEFC ACCOUNT. HENCE, IN THE FACTS OF THE PRESENT CASE, IT CANNOT BE SAID THAT THE SURPLUS IS PART AND PARCEL OF EXPORT TURNOVER AND TOTAL TURNOVER. HENCE, THIS JUDGMENT OF HON'BLE CALCUTTA HIGH COURT IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. IN OUR CONSIDERED OPINION, WHEN A SURPLUS FUND IS LYING IN BANK ACCOUNT, ANY GAIN WHETHER BY WAY OF INTEREST OR BY WAY O F EXCHANGE FLUCTUATION IS ASSESSABLE AS INCOME FROM OTHER SOURCES AND IT CANNOT BE SAID TO BE INCOME FROM BUSINESS. HENCE, ON THIS ASPECT, WE REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 11 20.3 REGARDING THE SECOND ASPECT OF THE MATTER, BEING INTEREST ON FDR OF RS.1,58,867/ - , WE FIND THAT RELIANCE WAS PLACED BY LEARNED A.R. OF THE ASSESSEE ON THE JUDGMENT OF HON'BLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS J. J. E XPORTERS LTD. (SUPRA). IN THAT CASE, IT IS NOTED BY HON'BLE CALCUTTA HIGH COURT THAT IN RESPECT OF INTEREST, THE TRIBUNAL HELD THAT THE INTEREST EARNED BY THE ASSESSEE ON LOANS, INTEREST FROM BANK AND THE INCOME ON THE BOOKING OF CARS AND OTHER INCOME, TH E DETAILS OF WHICH WERE MENTIONED IN THE ACCOUNT WAS INTEREST EARNED BY THE ASSESSEE BY INVESTING THE SURPLUS FUNDS AND AROSE ON ACCOUNT OF BUSINESS CARRIED ON BY THE ASSESSEE AND THE BUSINESS WAS AUTHORIZED BY CLAUSE 18 OF THE OBJECTS CLAUSE OF THE MEMORA NDUM AND ARTICLES OF ASSOCIATION OF THE ASSESSEE. UNDER THESE FACTS, IT WAS HELD BY HON'BLE HIGH COURT THAT NO SUBSTANTIAL QUESTION OF LAW ARISE FROM THIS DECISION OF THE TRIBUNAL. W E FIND THAT IN THE PRESENT CASE, IT IS NOT THE CASE OF THE ASSESSEE THAT THE ASSESSEE IS IN THE BUSINESS OF EARNING INTEREST BY KEEPING FDR WITH BANKS AS IN THE CASE OF COMMISSIONER OF INCOME - TAX VS J. J. EXPORTERS LTD. (SUPRA). HENCE, THIS JUDGMENT OF HON'BLE CALCUTTA HIGH COURT IS NOT APPLICABLE. 20.4 AS AGAINST THIS, WE F IND THAT THIS ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SHRI RAM HONDA POWER EQUIP [2007] 289 ITR 475 (DEL) CONFRONTED TO THE LEARNED AR OF THE ASSESSEE IN COURSE OF HEARING . IN THIS CASE, IT WAS HELD BY HON'BLE DELHI HIGH COURT THAT EVEN IF THE FDR IS KEPT WITH THE BANK FOR THE PURPOSE OF BORROWING MONEY THEN ALSO SUCH INTEREST INCOME ON FDR IS ASSESSABLE AS INCOME FROM OTHER SOURCES. HENCE, RESPECTFULLY FOLLOWING THIS JUDGMENT OF HON'BLE DELHI HIGH COURT, WE HOLD THAT IN THE PRESENT CASE ALSO, THE INTEREST ON 12 FDR OF RS.1,58,867/ - IS ASSESSABLE AS INCOME FROM OTHER SOURCES. ACCORDINGLY GROUND NO. 2 IS ALLOWE D. 21. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. 22. IN THE COMBINED RESULT, THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2003 - 04 IS ALLOWED AND APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2004 - 05 AND APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2004 - 05 ARE PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 4 /07/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR