Dr. Ful Kant Jha, New Delhi V. DCIT, New Delhi

ITA 3573/DEL/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53079 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 17-10-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 04-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: S K ARORA
• Keywords: Business income; Retrospective amendment
• Section: 80HHC

Judgement Text

I.T.A. NO. 3573 /DEL/2008 1/5 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH F BEFORE SHRI K D RANJAN, ACCOUTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO. 3573 /DEL/2008 (ASSESSMENT YEAR 2004-05) DR. FUL KANT JHA, VS. DCIT, CIRCLE 24(1), Z-13, HAUZ KHAS, NEW DELHI NEW DELHI-110 016 (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAGPJ1888D APPELLANT BY: SHRI S K ARORA, ADV., RESPONDENT BY: SHRI H K LAL, SR. DR ORDER PER GEORGE MATHAN, JM: 1. THIS APPEAL BY THE ASSESSEE HAS BEEN PREFERRED A GAINST THE ORDER OF LD. CIT(A)-XXIII, NEW DELHI IN APPEAL NO.619/2006-07 DATED 22.09.2008 FOR THE ASSESSMENT YEAR 2004-05. SHRI S K ARORA, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI H K LAL, SR. DR REPRESENTED FOR THE REVENUE. 2. AT THE TIME OF HEARING, THE LD. A.R. FILED WRITT EN SUBMISSIONS. IT WAS THE SUBMISSION BY THE LD. A.R. THAT THERE WERE TWO ISSUES IN THE APPEAL. THE FIRST ONE BEING AGAINST THE ACTION OF THE LD. CIT(A) IN HOLDING THA T THE I.T.A. NO. 3573 /DEL/2008 2/5 NET INTEREST RECEIVED FROM THE FDRS PLEDGED WITH TH E BANKERS WAS NOT THE BUSINESS INCOME OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC. IT W AS THE SUBMISSION THAT THE 2 ND ISSUE WAS AGAINST THE ACTION OF CIT(A) IN REMANDING BACK THE WORKING OF DEPB ISSUE TO THE A.O. IT WAS THE SUBMISSION THAT THE L D. CIT(A) HAD FOLLOWED THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SRIRAM HO NDA POWER EQUIPMENTS REPORTED IN 289 ITR 475 TO HOLD TH AT THE INTEREST INCOME EARNED BY THE ASSESSEE FROM THE FDRS PLEDGED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE WAS NOT ENTITLED TO THE DEDUCTION U/S 80HH C. IT WAS THE SUBMISSION THAT IN VIEW OF THE DECISION OF MADRAS HIGH COURT IN THE CASE OF PANDIAN CHEMICALS REPORTED IN 233 ITR 497 WHICH HAS ALSO BEEN AFFIRME D BY THE HON'BLE SUPREME COURT IN 262 ITR 278, THE INTEREST EARNED BY THE ASSESSEE ON THE DEPOSITS IN THE BANK WAS LIABLE TO BE TREATED AS BUSINESS INCOME OF THE ASSESSEE. IN RESPECT OF DEPB ISSUE, IT WAS THE SUBMISSION THAT THE RETROSPECTIVE AMENDMENT, WAS UNCONSTITUTIONAL. 3. IN REPLY, THE LD. D.R. SUBMITTED THAT THE LD. CI T(A) HAD RIGHTLY APPLIED THE LAW IN SO FAR AS THE DECISION I N THE CASE OF PANDIAN CHEMICALS WAS IN RELATION TO THE PROVISIONS OF SECTION 80HH AND THE DECISION IN THE CASE I.T.A. NO. 3573 /DEL/2008 3/5 OF SHRIRAM HONDA POWER EQUIPMENTS WAS BY THE HONBLE JURISDICTIONAL HIGH COURT AND ALSO DIRECTLY ON THE ISSUE OF DEDUCTION U/S 80HHC. IN REGARD TO THE DEPB ISSUE, IT WAS THE SUBMISSION THAT THE ISSUE WA S SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH O F THIS TRIBUNAL IN THE CASE OF TOPMAN EXPORTS REPORTE D IN 318 ITR (AT) 87 (MUM.). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE HAVE ALSO PERUSED THE WRITTEN SUBMISSIONS AS FILED BY TH E ASSESSEE AS ALSO THE ORDER OF THE LD. CIT(A) WHICH IS THE SUBJECT MATTER OF THE APPEAL BEFORE US. IT IS NOTICED THAT THE DECISION OF HONBLE MADRAS HIGH COURT IN T HE CASE OF PANDIAN CHEMICALS REFERRED TO BY THE LD. A. R. AND WHICH HAS ALSO BEEN UPHELD BY THE HON'BLE SUPREME COURT IN 262 ITR 278, THE ISSUE WAS WHETHER THE INTEREST ON THE DEPOSITS WITH THE ELECTRICITY B OARD WAS TO BE REGARDED AS BUSINESS INCOME. THE HON'BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS REPORTED IN 262 ITR 278 HAS CATEGORICALLY HELD THAT THE PROFITS ON THE DEPOSITS MADE WITH THE ELECTRICITY B OARD CANNOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF AND CONSEQUENTLY THE DENIAL OF TREATING THE SAME AS BUSINESS INCOME ELIGIBLE FOR DEDUCTION U/S 80HH HAD BEEN HELD TO BE RIGHTLY DENI ED. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F I.T.A. NO. 3573 /DEL/2008 4/5 SRIRAM HONDA POWER EQUIPMENTS HAS ALSO AFTER CONSIDERING VARIOUS CASE LAWS AND AUTHORITIES ON TH IS ISSUE HAS COME TO THE SIMILAR CONCLUSION THAT THERE IS NO DIRECT NEXUS OF INCOME EARNED FROM THE FDRS TO THE BUSINESS ACTIVITIES ITSELF. IN THESE CIRCUMSTANCES , WE ARE OF THE VIEW THAT THE FINDINGS OF LD. CIT(A) IN HOLD ING THAT THE INTEREST INCOME EARNED BY THE ASSESSEE ON THE FDRS WITH THE BANK IS NOT ELIGIBLE FOR DEDUCTION U/ S 80HHC IS ON A RIGHT FOOTING AND IS UPHELD. HERE, W E WOULD ALSO LIKE TO APPRECIATE THE ACTION OF THE LD. CIT(A) IN SO FAR AS HE HAS BEEN REASONABLE IN SO FA R AS HE HAS DIRECTED THAT THE ASSESSEE WOULD BE ENTITLED TO THE BENEFIT OF DEDUCTION U/S 57 OF THE ACT AND THIS FIN DING IS NOT CHALLENGED BY THE REVENUE. THIS CLEARLY SHOWS THAT THE CIT(A) HAS APPLIED HIS MIND IN GREAT DETAIL TO THE PROVISIONS OF THE ACT AND IT IS NOT THAT HE HAS BLI NDLY DENIED THE ASSESSEE THE BENEFIT DUE TO IT. A PERUS AL OF THE PAPER BOOK AS FILED BY THE ASSESSEE ALSO CLEARL Y SHOWS THAT ON AN IDENTICAL ISSUE THE ASSESSEES SLP FOR THE ASSESSMENT YEAR 2000-01 IS PENDING BEFORE THE HON'BLE SUPREME COURT VIDE SPECIAL LEAVE TO APPEAL BEARING NUMBER 17841/2008 ARISING FROM THE ORDER OF THE HON'BLE HIGH COURT OF DELHI IN I.T.A. NO. 1212/2007 DATED 17.12.2007. IN THESE CIRCUMSTANCES , THE FINDINGS OF LD. CIT(A) ON THIS ISSUE STAND UPHE LD. I.T.A. NO. 3573 /DEL/2008 5/5 5. IN RESPECT OF THE ISSUE OF DEPB IT WAS FAIRLY AG REED BY BOTH THE SIDES THAT THE ISSUE IS SQUARELY COVERED B Y THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE C ASE OF TOPMAN EXPORTS. IN THESE CIRCUMSTANCES, THIS ISSUE IS RESTORED TO THE FILE OF THE A.O. FOR RE-ADJUDICATIO N IN LINE WITH THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF TOPMAN EXPORTS. IN THESE CIRCUMSTANCES , THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 22 ND JAN., 2010. SD./- SD./- (K D RANJAN) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:22 ND JAN., 2010 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI