Essen Multipack Ltd., RAJKOT-GUJARAT V. The Deputy Commissioner of Income Tax, Circle-1, RAJKOT-GUJARAT

ITA 363/RJT/2011

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0155 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 19-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M N MANVAR

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTA VA AM ITA NO.363/RJT/2011 / ASSESSMENT YEAR 2005-06 ESSEN MULTIPACK LTD. C/O.M.N.MANVAR & CO. CHARTERED ACCOUNTANT 504-STAR PLAZA, PHULCHHAB CHOWK, RAJKOT. PAN : AAACE4676P ( / APPELLANT V/S THE DY. C.I. T. CIRCLE-1, RAJKOT. / RESPONDENT / ASSESSEE BY SHRI M. N. MANVAR, C.A. # / REVENUE BY SHRI AVINASH KUMAR, D.R. & / DATE OF HEARING 28-09-2012 & / DATE OF PRONOUNCEMENT 30 - 10-2012 / / / / ORDER & && &. .. . . . . . , , , , # # # # / T. K. SHARMA, J. M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 18-07-2010 OF C OMMISSIONER OF INCOME-TAX (A), GANDHINAGAR, AHMEDABAD FOR THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN MANUFACTURING OF MULTI-LAYER CO-EX. FILM. THE A O FRAMED THE ASSESSMENT U/S.143(3) R.W.S.148 OF THE I.T. ACT, 1961 WHEREIN HE OBSERVED THAT DEDUCTION U/S.80IB OF THE I.T. ACT WAS REQUIRED TO BE ALLOWED BY EXCLUDING GROSS INTEREST INCOME BECAUSE NO NETTING OF INTEREST IS ALLOWABLE AS THE INTEREST PAID IS FOR THE PURPOSE OF BUSINESS WHEREAS THE INTEREST EARNED BY THE ASSESSEE IS INCOME FROM OTHER SOURCES. FOR THIS PROPOSITION, AO RELIED ON THE DECISION IN THE CASE OF MANDEEP ENGG. AND PACKAGING INDUSTRIES (P) LTD. (20 01) 77 ITD 307 (INDORE). ITA 363/RJT/2011 2 FURTHER RELIANCE WAS PLACE ON THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. VS. CIT 262 ITR 278 (SC) WHEREIN IT IS HELD THAT INTEREST EARNED DOES NOT HAVE DIRECT NEXUS WITH IN COME FROM INDUSTRIAL UNDERTAKING AND REQUIRED TO BE EXCLUDED WHILE ALLOW ING/CALCULATING THE DEDUCTION U/S.80IA/80IB. ACCORDINGLY, AO RECOMPUTED THE DEDU CTION U/S.80IB AFTER EXCLUDING THE GROSS INTEREST INCOME FROM THE ELIGIB LE PROFIT OF THE BUSINESS AS UNDER:- ELIGIBLE PROFIT OF THE BUSINESS: RS. 34,35,504/- LESS: INTEREST RECEIVED ON BANK FD AND OTHERS RS. 6,72,473/- PROFIT ELIGIBLE FOR DEDUCTION U/S.80IB RS. 27,63, 030/- DEDUCTION U/S.80IB @ 30% OF 2763030 = RS. 8, 28,909/- 3. TO SUM-UP IN THE ASSESSMENT ORDER, AO MENTIONED DEDUCTION ALLOWABLE U/S.80IB OF THE I.T. ACT IS RS.8,28,909/- AS AGAINS T WHICH, RS.10,30,651/- WAS ALLOWED. THIS EXCESS DEDUCTION U/S.80IB OF THE I.T . ACT OF RS.2,01,742/- IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) UPHELD THE ACTION OF AO. AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE ASSESSE E IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS:- 1. CIT(APPEALS), GANDHINAGAR, AHMEDABAD HAS ERRED I N LAW AND ON FACTS IN ASSESSING THE TOTAL INCOME AT RS.29,45,850 AS AGAINST ASSESSED INCOME OF RS.27,44,108 AS PER VIDE ORDER U /S.143(3) OF THE I.T. ACT, 1961 DTD:- 07.012.2007. 2. CIT(APPEALS), GANDHINAGAR, AHMEDABAD HAS ERRED I N LAW AND ON FACTS IN MAKING DISALLOWANCE OF RS.2,01,742 BEING T HE EXCESS DEDUCTION U/S.80IB ON ALLEGED GROUND THAT DEDUCTION U/S.80IB OF THE I.T. ACT, 1961 WAS REQUIRED TO BE ALLOWED BY EXCLUD ING GROSS INTEREST INCOME BECAUSE NO NETTING OF INTEREST IS A LLOWABLE AS THE ITA 363/RJT/2011 3 INTEREST PAID FOR THE PURPOSE OF BUSINESS WHEREAS T HE INTEREST EARNED BY THE ASSESSEE IS INCOME FROM OTHER SOURCES . 5. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF A SSESSEE SHRI M. N. MANVAR, CA APPEARED AND DREW OUR ATTENTION TO SCHEDULE-N OF BALANCE-SHEET, THE DETAILS OF INTEREST PAID AND INTEREST RECEIVED AND NET INTE REST SHOWN IN THE PROFIT AND LOSS ACCOUNT RS.15,06,061/- AS UNDER:- SCHEDULE N: INTEREST INTEREST PAID TO: -BANK ON CASH CREDIT 1053439 -OTHERS 1124821 -TDS 274 2178534 LESS: INTEREST RECEIVED FROM: -BANK ON FIXED DEPOSIT 70360 -OTHERS 602113 1506061 6. THE COUNSEL OF THE ASSESSEE FURTHER SUBMITTED TH AT INTEREST RECEIVED FROM BANK ACCOUNT ON FIXED DEPOSIT RS.70,360/- AND FROM OTHERS RS.6,02,113/- IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . TO EARN THIS INTEREST INCOME, THE ASSESSEE HAS INCURRED THE INTEREST EXPE NSES WHICH ARE INCLUDED IN INTEREST PAID TO BANK ON CASH CREDIT RS.10,53,439/- AND TO OTHERS RS.11,24,821/-. TO THIS EXTENT, THE ASSESSEE IS ENTITLED TO BENEFIT OF NETTING. AS AGAINST THIS, THE LD. D.R. POINTED OUT THAT INTEREST INCOME IS NOT DE RIVED FROM INDUSTRIAL UNDERTAKING, THEREFORE, ON THE SAME THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S.80IB OF THE I.T. ACT. WITH REGARD TO THE PLEA OF ASSESSEE TO ALLOWING THE BENEFIT OF NETTING, THE LD. D.R. POINTED OUT THAT B EFORE NONE OF THE AUTHORITIES BELOW THE ASSESSEE HAS PROVED THE NEXUS. THEREFORE, BENEFIT OF NETTING IS RIGHTLY DENIED. 7. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAS SHOWN THE INTEREST INCOME OF RS.6,02,1 13/-. THIS INTEREST INCOME IS ITA 363/RJT/2011 4 ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . THERE IS NO DOUBT THAT ON INTEREST INCOME THE ASSESSEE IS NOT ENTITLE D TO DEDUCTION U/S.80IB OF THE I.T. ACT. FROM THE PERUSAL OF THE PROFIT AND LOSS ACCOUNT, IT CAN ALSO BE SEEN THAT THE ASSESSEE HAS PAID INTEREST OF RS.10,53,439/- ON CASH CREDIT AND TO OTHERS RS.11,24,821/-. IN CASE THE INVESTMENT IN FIXED DE POSIT AND LOANS TO OTHERS FOR WHICH THE ASSESSEE HAS EARNED INTEREST INCOME OF RS .70,360/- AND RS.6,02,113/- IS GIVEN/ADVANCED FROM INTEREST BEARING FUNDS, THE ASSESSEE IS ENTITLED TO BENEFIT OF NETTING. OF COURSE, FOR THIS PURPOSE, THE ONUS IS ON THE ASSESSEE TO PROVE THE NEXUS. FROM THE PERUSAL OF ORDERS OF AUTHORITIES B ELOW, IT APPEARS THAT BEFORE BOTH THE AUTHORITIES BELOW THE ASSESSEE HAS IGNORED THIS CONSPICUOUS FACTS OF THE CASE THAT FDRS AND LOAN IS ADVANCED FROM CASH CREDI T ACCOUNT WITH BANK AND LOAN FROM OTHERS. HENCE TO THE EXTENT NEXUS IS PRO VED THE ASSESSEE IS ENTITLED TO BENEFIT OF NETTING. IN OTHER WORDS, IF THE ASSESSE E PROVES BEFORE THE AO THAT BORROWED MONEY WAS UTILIZED FOR MAKING INVESTMENT I N FDR AND GIVING LOAN TO OTHERS ON WHICH INTEREST IS RECEIVED, THE INTEREST PAID ON SUCH BORROWED SUM BE REDUCED FROM INTEREST RECEIVED. NOW BEFORE US, ASS ESSEE HAS FURNISHED THE DETAILS WHICH NEED VERIFICATION AT THE END OF AO. WE THEREFORE, SET-ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THE S AME TO THE FILE OF AO WITH THE DIRECTION THAT TO THE EXTENT THE ASSESSEE IS ABLE T O PROVE THE NEXUS, AO WILL ALLOW THE BENEFIT OF NETTING. A.O. SHALL ACCORDINGLY DECI DE THIS ISSUE AFRESH AFTER GIVING OPPORTUNITY TO THE ASSESSEE TO PROVE THE NEXUS. 8. IN THE RESULT, FOR THE STATISTICAL PURPOSES, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/- ( D. . K. SRIVASTAVA ) ( T. K. SHARMA ) # / ACCOUNTANT MEMBER # /JUDICIAL MEMBER -/ ORDER DATE 30-10-2012. /RAJKOT NVA/- ITA 363/RJT/2011 5 / / / / 0/ 0/ 0/ 0/ / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ESSEN MULTIPACK LTD. 2. / RESPONDENT-THE DY. COMMISSIONER OF INCOME-TAX, C IR-1, RAJKOT. 3. 5 / CONCERNED CIT 4. 5- / CIT (A), GANDHINAGAR, AHMEDABAD. 5. / , , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY. SENIOR PRIVATE SECRETARY, , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.