EMGEE CABLES & COMMUNICATIONS LTD., Jaipur V. DCIT, Jaipur

ITA 390/JPR/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9665 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 23-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SHARMA
• Assessee Lawyers: R A VERMA
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3); 32; 263

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 390/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 M/S EMGEE CABLES & COMMUNICATIONS LTD., JAIPUR CUKE VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-3, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACE3633Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 357/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-3, JAIPUR CUKE VS. M/S EMGEE CABLES & COMMUNICATIONS LTD., T-16, 3 RD FLOOR ALANKAR PLAZA, CENTRAL SPINE, VIDHYADHAR NAGAR, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACE3633Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 16/JP/2014 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 357/JP/2014) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 M/S EMGEE CABLES & COMMUNICATIONS LTD., JAIPUR CUKE VS. ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-3, JAIPUR. ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 2 LFKK;H YS[KK LA-@THVKBZVKJ LA- / PAN/GIR NO.: AAACE3633Q IZR;K{KSID / OBJECTOR IZR;FKHZ / RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI S.R. SHARMA & SHRI RAJNIKANT BHATRA (CA) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI R.A.VERMA (ADDL. CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 28/01/2017 MN?KKS'K .KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 31/03/2017 VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE AGAINST THE ORDER OF LD. CIT(A) CENTRAL, JAIPUR, DATED 28.0 2.2014 AND DATED 02.04.2014 RELEVANT FOR THE A.Y 2008-09 AND 2009-10 RESPECTIVELY INVOLVING COMMON GROUNDS OF APPEAL. ALL THESE APPE ALS ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. GROUNDS OF APPEAL IN ITA NO.390/JP/2014 FOR AY 2008 -09 (ASSESSEE) 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN NOT ACCEPTING THE PLEA OF THE APPELLANT THAT INTEREST INCOME OF RS. 5 115618/- EARNED BY THE APPELLANT DURING THE COURSE OF CARRYI NG ON BUSINESS IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS INSTEAD OF UNDER THE HEAD INCOME FROM OTHER SOURCE S AS HELD BY THE ASSESSING OFFICER. 2. THAT WITHOUT PREJUDICE TO THE GROUND NO. (1) ABO VE THE LD. CIT(A) IS FURTHER WRONG AND HAS ERRED IN LAW IN CON FIRMING ACTION OF THE ASSESSING OFFICER IS NOT ALLOWING SET OFF IN TEREST PAID ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 3 AGAINST INTEREST INCOME BY ALLEGEDLY HOLDING THAT T HERE IS NO NEXUS BETWEEN THESE TWO. GROUNDS OF APPEAL IN ITA NO. 357/JP/2014 FOR AY 200 9-10 (REVENUE) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN DIRECTING TO ALLOW THE SET-OFF OF UNABSORB ED DEPRECIATION OF A.Y. 2000-01 AND A.Y. 2001-02 FROM INCOME FROM OTHER SOURCES THOUGH THE SUB SECTION 2 OF SECTION 32 OF THE ACT, HAS BEEN AMENDED BY THE FINANCE ACT 2001, W.E.F 1.4.200 2 AND THIS COULD BE ALLOWED FROM A.Y. 2002-03 ONLY, NOT IN A.Y 2001-02 GROUNDS OF APPEAL IN CO. NO. 16/JP/2014 FOR AY 2009 -10 (ASSESSEE) 1. THAT THE CIT(A) IS WRONG AND HAS ERRED IN LAW IN NOT ACCEPTING PLEA OF THE APPELLANT THAT INTEREST INCOME RS. 4975 203/- EARNED BY THE APPELLANT DURING THE COURSE OF CARRYING ON B USINESS IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS IN STEAD OF UNDER THE HEAD INCOME FROM OTHER SOURCES AS HELD BY THE ASSESSING OFFICER. 2. THAT THE GROUND NO. 1 RAISED BY REVENUE IN ITS APPE AL DO NOT ARISE FROM THE ASSESSMENT ORDER OR FROM APPEAL ORDER HENC E NOT MAINTAINABLE. IN ANY CASE THE SAID GROUND OF APPEA L IS WRONG AND BAD IN LAW IN AS MUCH AS THE CARRIED FORWARD DE PRECATION OF EARLIER YEARS REMAINING UNABSORBED AS ON APRIL 1, 2 001 WOULD BE GOVERNED BY THE PROVISIONS OF FINANCE ACT, 2001 REP LACING SUB- SECTION (2) OF S. 32 BY A NEW SUB-SECTION (2) OF S. 32. 2. FIRSTLY, WE TAKE UP THE APPEAL OF THE REVENUE FO R AY 2009-10 IN ITA NO. 357/JP/14 AND ASSESSEES CROSS OBJECTION IN ITA NO. 16/JP/14. 3. IN ITS SOLITARY GROUND OF APPEAL, THE REVENUE HA S CHALLENGED THE ACTION OF LD. CIT(A) IN DIRECTING TO ALLOW SET OFF OF UNABSORBED DEPRECIATION PERTAINING TO A.Y. 2000-2001 AND A.Y 2 001-02 FROM INCOME ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 4 UNDER THE HEAD INCOME FROM OTHER SOURCES PERTAINI NG TO THE YEAR UNDER CONSIDERATION IN VIEW OF THE AMENDMENT EFFECT ED BY THE FINANCE ACT 2001 WHICH HAS BEEN STATED TO BE APPLICABLE FRO M A.Y. 2002-03 ONLY. 3.1 IT IS NOTED THAT THE PROVISION OF SECTION 32(2) OF THE ACT WHICH DEALS WITH THE SET OFF OF UNABSORBED DEPRECIATION H AS BEEN SUBJECT TO SEVERAL AMENDMENTS IN THE PAST AND THE LATEST AMEND MENT WHICH IS IN CONSIDERATION HAS BEEN BROUGHT IN BY THE FINANCE AC T 2001. IN THE INSTANT CASE, THE QUESTION THAT ARISES FOR CONSIDER ATION IS HOW SHOULD THE PROVISION OF SECTION 32(2) SHOULD BE APPLIED REGARD ING SET OFF OF UNABSORBED DEPRECIATION PERTAINING TO A.Y 2000-01 A ND AY 2001-2002 WHEN THE PRE-AMENDED LAW WAS APPLICABLE AND WHICH H AS NOW BEEN CLAIMED TO BE SET OFF AT THE POINT OF TIME I.E. IN A.Y 2009-10 WHEN POST AMENDMENT LAW WAS APPLICABLE. THE ASSESSING OFFICE R HAS RELIED ON THE DECISION OF SPECIAL BENCH OF ITAT IN CASE OF DCIT V S. TIMES GUARANTY LTD FOR 4 ITR (TRIB) 210 WHEREIN THE SPECIAL BENCH HAS HELD AS UNDER:- AMOUNT OF CURRENT DEPRECIATION FOR ASST. YRS. 1997 -98 TO 2001-02 WHICH CANNOT BE SO SET OFF AS PER (II) ABOVE SHALL BE CARRIED FORWARD FOR A MAXIMUM PERIOD OF EIGHT ASSESSMENT YEARS FROM THE A SSESSMENT YEAR IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHIC H IT WAS FIRST COMPUTED, TO BE SET OFF ONLY AGAINST THE INCOME UND ER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 5 3.2 SUBSEQUENTLY, THE MATTER CAME UP FOR CONSIDERAT ION BEFORE THE HONBLE GUJARAT HIGH COURT IN CASE OF GENERAL MOTORS INDIA PVT. LTD. 354 ITR 244 WHEREIN THE QUESTION FOR CONSIDERATION BEFORE THE H ONBLE HIGH COURT WAS WHETHER UNABSORBED DEPRECIATION PER TAINING TO THE A.Y 1997-98 COULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AFTER A PERIOD OF 8 YEARS OR WOULD IT BE GOVERNED BY THE PROVISION S OF SECTION 32(2) AS AMENDED BY THE FINANCE ACT 2001. THE RELEVANT FIND ING OF THE HONBLE HIGH COURT OF GUJARAT ARE CONTAINED AT PARA 35 TO 3 8 OF ITS ORDER WHICH READS AS UNDER:- 35. SECTION 32 (2) OF THE ACT WAS AMENDED BY FINA NCE ACT, 2001 AND THE PROVISION SO AMENDED READS AS UNDER:- WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFF ECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVIOUS YEAR, OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHA RGEABLE FOR THAT PREVIOUS YEAR, OWING TO THE PROFITS OR GAINS CHARGE ABLE BEING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF SECTION 72 AND SUB-SECTION (3) OF SECTION 73 , THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NO T BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF TH E ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AN D DEEMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLO WANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE ALLOWANCE OF THAT PR EVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS. 36. THE PURPOSE OF THIS AMENDMENT HAS BEEN CLARIFIE D BY CENTRAL BOARD OF DIRECT TAXES IN THE CIRCULAR NO. 14 OF 200 1. THE RELEVANT PORTION OF THE SAID CIRCULAR READS AS UNDER:- ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 6 MODIFICATION OF PROVISIONS RELATING TO DEPRECIATIO N 30.1 UNDER THE EXISTING PROVISIONS OF SECTION 32 OF THE INCOME-TAX ACT, CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATIO N IS ALLOWED FOR 8 YEARS. 30.2 WITH A VIEW TO ENABLE THE INDUSTRY TO CONSERV E SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY, SPECIALLY IN AN ERA WH ERE OBSOLESCENCE TAKES PLACE SO OFTEN, THE ACT HAS DISP ENSED WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OF F OF UNABSORBED DEPRECIATION. THE ACT HAS ALSO CLARIFIED THAT IN C OMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION U/S 32 SHALL BE MANDATORY . 30.3 UNDER THE EXISTING PROVISIONS, NO DEDUCTION FO R DEPRECIATION IS ALLOWED ON ANY MOTOR CAR MANUFACTURED OUTSIDE INDIA UNLESS IT IS USED (I) IN THE BUSINESS OF RUNNING IT ON HIRE FOR TOURISTS, OR (II) OUTSIDE IN THE ASSESSEES BUSINESS OR PROFESSION IN ANOTHER COUNTRY. 30.4 THE ACT HAS ALLOWED DEPRECIATION ALLOWANCE ON ALL IMPORTED MOTOR CARS ACQUIRED ON OR AFTER 1 ST APRIL, 2001. 30.5 THESE AMENDMENTS WILL TAKE EFFECT FROM THE 1 ST APRIL, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSM ENT YEAR 2002-03 AND SUBSEQUENT YEARS. 37. THE CBDT CIRCULAR CLARIFIES THE INTENT OF THE A MENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICIENT FU NDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT D ISPENSES WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD A ND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICAB LE FROM ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSE E ON 1 ST DAY OF APRIL, 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN AC CORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINAN CE ACT, 2001 AND NOT BY THE PROVISIONS OF SECTION 32(2) AS IT ST OOD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATU RE BEEN TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN A.Y. 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 7 THE AMENDMENT OF SECTION 32(2) OF THE ACT, A PURPOS IVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. WHILE C ONSTRUING TAXING STATUTES, RULE OF STRICT INTERPRETATION HAS TO BE APPLIED, GIVING FAIR AND REASONABLE CONSTRUCTION TO THE LANG UAGE OF THE SECTION WITHOUT LEANING TO THE SIDE OF ASSESSEE OR THE REVENUE. BUT IF THE LEGISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESSEE BECOMES ENTITLED FOR A BENEFIT WITHIN THE AMBIT OF THE SECTION BY THE CLEAR WORDS USED IN THE SECTION, THE BENEFIT AC CRUING TO THE ASSESSEE CANNOT BE DENIED. HOWEVER, CIRCULAR NO. 1 4 OF 2001 HAD CLARIFIED THAT UNDER SECTION 32(2), IN COMPUTING TH E PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YE AR, DEDUCTION OF DEPRECIATION U/S 32 SHALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 WO ULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE A.Y. 1997-98, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FORWAR D TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATIO N OR PART THEREOF COULD NOT BE SET OFF TILL THE A.Y. 2002-03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECI ATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOU NT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COMES FO R ABSORPTION FROM THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS L EFT EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT OF INC OME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURIN G THE YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS T O BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION IS ADDED TO THE CU RRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIA TION FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1 ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN ACC ORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE A CT, 2001. AND ONCE THE CIRCULAR NO. 14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED D EPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FR OM A.Y. 1997- 98 UPTO THE A.Y. 2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINAN CE ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AG AINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WH ATSOEVER. 3.3 ON PERUSAL OF THE ABOVE DECISION, IT IS NOTED T HAT THE MATTER WAS EXHAUSTIVELY EXAMINED BY THE HONBLE HIGH COURT AND IT WAS HELD THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO ASSESSEE O N 1 ST , APRIL, 2002 (A.Y 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32 (2) AS AMENDED BY THE FINANCE ACT 2001. IT WAS FURTHER HELD THAT AMENDED PROVISIONS OF SECTION 32(2) BY THE FIN ANCE ACT 2001 WOULD ALLOW UNABSORBED APPRECIATION AVAILABLE IN THE A.Y 1997-98, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FORWARD TO THE SU CCEEDING YEARS AND IF UNABSORBED APPRECIATION OR PART THEREOF COULD NO T BE SET OFF TILL A.Y. 2002-03, THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFIT GAINS OF SUBSEQUENTLY YEARS. FOLLOWING THE SAID DECISION OF THE HONBLE HIGH COURT, A SIMILAR VIEW HAS BEEN REITERA TED BY VARIOUS COORDINATE BENCHES AS REFERRED BY THE ASSESSEE IN I TS SUBMISSIONS BEFORE US. 3.4. IN VIEW OF SUBSEQUENT DECISION OF THE HONBLE GUJARAT HIGH COURT IN CASE OF GENERAL MOTORS (SUPRA), THE DECISION OF SPECIAL BENCH IN CASE ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 9 OF TIMES GUARANTY (SUPRA) IS NO MORE A BINDING PREC EDENT. A SIMILAR VIEW HAS BEEN TAKEN BY THE VARIOUS COORDINATE BENCH ES. FURTHER, NO CONTRARY JURISDICTIONAL OR OTHER AUTHORITY HAS BEEN QUOTED BEFORE THE BENCH. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLO WING THE DECISION OF THE HONBLE GUJARAT HIGH COURT, WE ARE UNABLE TO AG REE TO THE CONTENTION OF THE REVENUE. IN OUR VIEW, IT IS THE AMENDED SECTION 32(2) OF THE ACT THAT SHALL APPLY IN RELATION TO UNABSORB ED DEPRECIATION PERTAINING TO A.Y. 2000-01 AND A.Y 2001-02 AND THE RESTRICTION OF 8 YEARS WHICH WAS IN FORCE TILL THE LAW WAS AMENDED B Y THE FINANCE ACT 2001 DOES NOT APPLY. IN THE INSTANT CASE, IT IS NO T IN DISPUTE THAT THE UNABSORBED DEPRECIATION PERTAINING TO A.YS 2000-01 AND 2001-02 HAVE NOT BEEN SET OFF IN THE EARLIER YEARS AND THE SAME IS BEING CARRIED FORWARD TO THE YEAR UNDER CONSIDERATION FOR BEING S ET OFF. IN LIGHT OF ABOVE, GROUND TAKEN BY THE REVENUE IS DISMISSED. 3.5 IN GROUND NO. 2 OF THE ASSESSEES CROSS OBJECTI ON, IT CANNOT BE SAID THAT ISSUE RELATING TO SET OFF OF UNABSORBED D EPRECIATION DOESNT ARISE FROM THE ASSESSMENT ORDER. AT THE SAME TIME, AS FA R AS GOVERNING LAW RELATING TO SET OFF FOR THE YEAR UNDER CONSIDERATIO N IS CONCERNED, THE SAME IS ALLOWED AS WE HAVE HELD ABOVE THAT IT IS TH E AMENDED SECTION ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 10 32(2) AS AMENDED BY THE FINANCE ACT 2001 THAT WILL APPLY. IN THE RESULT, GROUND NO. 2 OF ASSESSESS CROSS OBJECTION IS PARTL Y ALLOWED. 4. NOW COMING TO THE GROUND NO. 1 OF THE ASSESSEE C ROSS OBJECTION, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD CI T(A) IN NOT ACCEPTING ITS PLEA THAT INTEREST INCOME RS. 4975203/- EARNED BY THE APPELLANT DURING THE COURSE OF CARRYING ON BUSINESS IS ASSESS ABLE UNDER THE HEAD INCOME FROM BUSINESS INSTEAD OF INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES HELD BY THE ASSESSING OFFICER. 4.1. THE LD. AR HAS SUBMITTED THAT IN THE YEAR UNDE R CONSIDERATION THE ASSESSEE COMPANY PAID TOTAL INTEREST OF RS. 2,31,04 ,322/- (RS. 1,83,93,641/- PAID TO BANK AND RS. 12,92,976/- TO O THERS) AND RECEIVED INTEREST OF RS. 49,75,203/- (RS. 42170/- ON FDR(S) AND RS. 49,33,033/-. THE INTEREST IS RECEIVED FROM PARTIES TO WHOM ADVAN CES WERE MADE BY COMPANY OUT OF FUNDS OF C.C LIMIT OF BANK AND THUS BUSINESS FUNDS WERE ADVANCED TO REDUCE BURDEN OF INTEREST PAYABLE TO BA NK AND SO THE INTEREST RECEIPTS ARE BUSINESS INCOME REQUIRED TO B E SET OFF FROM INTEREST EXPENSES OF BUSINESS. THE SAID FUNDS ADVANCED WERE NEITHER OUT OF SHARE CAPITAL OF COMPANY NOR OUT OF SURPLUS FUNDS O F COMPANY AND THEREFORE, SAME CANNOT BE CONSIDERED AS INCOME FROM OTHER SOURCES. ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 11 THESE ADVANCES WERE MADE IN EARLIER YEARS AS IS EVI DENCED FROM COPY OF ACCOUNTS SUBMITTED HEREWITH ALONG WITH BANK STATEME NT SHOWING SOURCE OF ADVANCE BEING FROM C.C A/C OF BANK AND THUS THEY ARE NOT SHORT TERM ADVANCES BUT ARE LONG TERM ADVANCES. IN ALL THE EA RLIER ASSESSMENT COMPLETED U/S 143(3) UPTO A.Y. 2006-07 & 2007-08 (O RDER OF CIT U/S 263 CANCELLED BY ITAT) THE INTEREST RECEIPTS FROM T HESE PARTIES HAVE BEEN TREATED AS BUSINESS INCOME AND THUS RULE OF CO NSISTENCY ALSO APPLIES AND NO DIFFERENT TREATMENT CAN BE ACCORDED IN THIS YEAR. IT IS EVIDENT FROM THE BALANCE SHEET OF ASSESSEE COMPANY PLACED IN PAPER BOOK SUBMITTED THAT ITS SHARE CAPITAL AND RESERVES AND SURPLUS ARE DEPLOYED IN FIXED ASSETS OF BUSINESS, INVENTORIES A ND TRADE DEBTORS AND THERE IS NO SURPLUS FUND WITH THE COMPANY AT ANY TI ME. THE COPY OF A/C OF EACH PARTY TO WHOM LOAN WAS ADVANCED ALONG WITH COPY OF BANK A/C (S) OF ASSESSEE COMPANY SHOWING THAT LOANS WERE ADV ANCED FROM FUNDS OF CC LIMIT OF BANK AND THUS BUSINESS FUNDS WERE AD VANCED ARE PLACED. IN TIRUPATI WOOLEN MILLS LTD. (1992) 193 ITR 252 (C AL.) IT WAS HELD THAT INTEREST EARNED FROM UTILIZATION OF COMMERCIAL ASSE T WOULD BE INCOME FROM BUSINESS. THE SUPREME COURT IN CIT VS. CALCUT TA NATIONAL BANK LTD. (1959) 37 ITR 171 HELD THAT BUSINESS IS A WO RD OF VERY WISE CONNOTATION WITH THE RESULT THAT INCOME OF INTEREST IN COURSE OF CARRYING ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 12 ON BUSINESS SHOULD ORDINARILY BE TREATED AS BUSINES S INCOME, EXCEPT WHERE THE INVESTMENT ARE INDEPENDENT OF BUSINESS MA DE OUT OF SURPLUS FUNDS IN LONG TERM DEPOSITS. THE LD. A.O HAS REFER RED A FEW JUDGMENTS IN ITS ORDER BUT THEY PERTAIN TO INVESTMENT OF SURP LUS FUNDS OR IDLE FUNDS IN BUSINESS OF SHORT TERM LOANS, INTEREST ON FIXED DEPOSITS ETC. WHERE INTEREST INCOME WAS HELD TO BE ASSESSABLE UNDER THE HEAD OTHER SOURCES. THE JUDGMENT IN CASE OF TUTICORIN ALKALI & CHEMICALS REFERRED BY A.O. IS ON INTEREST RECEIVED ON SHARE CAPITAL BE FORE COMMENCEMENT OF BUSINESS AND HENCE NOT APPLICABLE. THUS THE RECEIP T OF INTEREST IS RIGHTLY ASSESSABLE AS INCOME FROM BUSINESS AND NOT FROM INC OME FROM OTHER SOURCES. THE LD. CIT(A) HAS WRONGLY HELD THAT THE ASSESSEE COMPANY HAS FAILED TO ESTABLISH THAT THE LOANS WERE GIVEN F OR BUSINESS PURPOSES. AS SUBMITTED THE ASSESSEE COMPANY EARNED INTEREST INCOME FROM MAKING ADVANCES OUT OF ITS CURRENT BUSINESS FUNDS A VAILABLE IN BANK A/C(S) INCLUDING O.D. A/C(S) AS IS EVIDENT FROM DET AILS PLACED AT PAPER BOOK. THUS THE INTEREST RECEIPTS OF ASSESSEE AS BU SINESS RECEIPTS FOR SET OFF FROM INTEREST EXPENSES OF ASSESSEE COMPANY WHIC H BOTH ARE TO CONSIDERED UNDER THE HEAD BUSINESS AFTER NETTING AN D INTEREST RECEIPTS ALONE CANNOT BE SAID TO BE ASSESSABLE UNDER THE HEA D OTHER SOURCES. ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 13 THE LD. CIT(A) DISALLOWED THE CLAIM OF ASSESSEE IN VIEW OF HE HELD THAT INTEREST INCOME IS ASSESSABLE AS INCOME FROM O THER SOURCES AND SO CANNOT BE ALLOWED TO SET OFF WHICH IS NOT CORRECT I N LAW. 4.2. IN THIS REGARD, THE RELEVANT FINDING OF THE LD . CIT(A) IS CONTAINED AT PARA 5 AND 6 OF HIS ORDER WHICH IS REPRODUCED AS UN DER:- 5. NOW, SO FAR AS THE INTEREST INCOME AMOUNTING TO RS. 49,75,203/- IS CONCERNED, IT IS SEEN THAT THIS INCOME HAS BEEN REC EIVED FROM VARIOUS PARTIES TO WHOM ADVANCES WERE MADE BY THE APPELLANT COMPANY. THE CONTENTION OF THE APPELLANT IS THAT THESE ADVANCES WERE NEITHER OUT OF SHARE CAPITAL NOR OUT OF THE SURPLUS FUNDS OF THE C OMPANY. IT IS, HOWEVER, NOTED THAT THE APPELLANT HAS NOT FURNISHED ANY EVIDENCE TO SHOW THAT THESE ADVANCES WERE NOT FROM THE SURPLUS FUNDS. THE APPELLANT HAS ALSO FAILED TO ESTABLISH BUSINESS NEX US WITH THE PERSONS TO WHOM THE MONEY WAS ADVANCED. IT IS APPARENT FROM T HE BALANCE SHEET OF THE APPELLANT THAT ITS FUNDS HAVE BEEN APPLIED T OWARDS LOANS AND ADVANCES AS WELL. IT IS FURTHER NOTED THAT DECISIO N OF THE APEX COURT IN THE CASE OF CALCUTTA NATIONAL BANK LTD. (SUPRA0 REL IED UPON BY THE APPELLANT IS ON DIFFERENT FACTS INASMUCH AS IT PERT AINED TO AN ASSESSEE WHOSE BUSINESS WAS TO ADVANCE LOANS. IN THE INSTAN T CASE, THE APPELLANT IS NOT ENGAGED IN THE BUSINESS OF MONEY LENDING. T HE RATIO OF THE DECISION OF THE APEX COURT IS, THEREFORE, NOT APPLI CABLE IN THIS CASE. IT IS FURTHER NOTED THAT THE ADVANCES HAVE BEEN GIVEN TO VARIOUS PERSONS WITH WHOM THE APPELLANT HAS FAILED TO SHOW ANY BUSINESS TRANSACTION. HENCE, AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CAS E OF GODAVARI SUGAR MILLS (191 ITR 359), INTEREST RECEIVED ON LOANS AND ADVANCES WHERE THERE WAS NO EVIDENCE THAT THE LOANS WERE ADVANCED IN THE COURSE OF ASSESSEES BUSINESS HAS TO BE TAXED AS INCOME FROM OTHER SOURCES. IN THE PRESENT CASE, THE APPELLANT HAS FAILED TO ESTAB LISH THAT THE LOANS WERE GIVEN FOR BUSINESS PURPOSES. IT IS, HOWEVER, NOTED FROM THE DETAILS THAT THE INTEREST RECEIVED BY THE APPELLANT ALSO IN CLUDES AN AMOUNT OF RS. 42,170/- FROM DENA BANK CC A/C 563. SINCE, THI S AMOUNT HAS BEEN RECEIVED BY THE APPELLANT IS CONNECTED WITH ITS BUS INESS ACTIVITY, THIS AMOUNT IS TREATED AS BUSINESS INCOME. THE TREATMEN T OF THE REST OF THE ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 14 INTEREST RECEIVED BY THE APPELLANT AS INCOME FROM O THER SOURCES IS CONFIRMED. COMING TO THE ISSUE OF SET OFF OF INTEREST EXPENSE S AGAINST INTEREST INCOME, IT IS NOTED THAT THE APPELLANT HAS SHOWN TO TAL OUTGO OF RS. 2,31,04,322/- ON ACCOUNT OF INTEREST WHICH INCLUDES RS. 1,83,93,641/- PAID TO BANKS AND RS. 12,92,976/- TO OTHERS. THE IN TEREST PAID TO BANKS WAS CLEARLY FOR BUSINESS PURPOSES AND, HENCE, IT CA NNOT BE SET OFF AGAINST THE INTEREST INCOME UNDER THE HEAD INCOME F ROM OTHER SOURCES. THE BALANCE AMOUNT HAS BEEN PAID TO OTHER PERSONS. THE APPELLANT HAS FAILED TO SHOW ANY NEXUS BETWEEN THE INTEREST PAID TO OTHERS AND THE INTEREST EARNED BY IT. IN ORDER TO CLAIM SET OFF A GAINST INTEREST INCOME, THE APPELLANT HAS TO SHOW THAT THE AMOUNT WAS PAID WHOLLY AND EXCLUSIVELY TO EARN INTEREST INCOME, WHICH IT HAS F AILED TO DO. HENCE, THE SET OFF OF INTEREST EXPENSES CANNOT BE ALLOWED AGAI NST THE INTEREST INCOME U/S 57(III). 4.3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT(A) HAS STATED THAT THE ASSESSEE HAS FAILED TO ESTABLISH NECESSARY BUSINESS NEXUS WITH T HE PERSONS TO WHOM THE MONEY WAS ADVANCED. THE ASSESSEE HAS SUBMITTED THAT THE BUSINESS FUNDS OUT OF CC LIMIT OF BANK WERE ADVANCE D TO VARIOUS PARTIES TO REDUCE THE BURDEN INTEREST PAYABLE TO BANK AND S O THE INTEREST RECEIPTS ARE BUSINESS RECEIPTS REQUIRED TO BE SET O FF FROM INTEREST EXPENSES OF BUSINESS. IN OUR VIEW, WHAT IS RELEVAN T TO EXAMINE IS WHETHER ADVANCING OF FUNDS BY WAY OF INTEREST BEARI NG LOAN IS ONE OF THE ACTIVITIES WHICH HAS BEEN REGULARLY CARRIED BY THE ASSESSEE AS PART OF ITS BUSINESS ACTIVITIES OR NOT. AND WHERE SUCH ACTIVITI ES ARE NOT PART OF THE REGULAR BUSINESS ACTIVITIES CARRIED ON BY THE ASSES SEE, WHAT IS THE ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 15 BUSINESS EXPEDIENCY OF ADVANCING FUNDS TO THE THIRD PARTIES. THE NEXT QUESTION THAT ARISE FOR CONSIDERATION IS THE FUNDS THAT HAVE BEEN ADVANCED AND WHETHER THE SAME HAVE BEEN ADVANCED FR OM BORROWED FUNDS AS CLAIMED BY THE APPELLANT OR INTERNAL SURPL US FUNDS AS AVAILABLE WITH THE ASSESSEE AND HOW THE NECESSARY NEXUS IS ES TABLISHED BETWEEN THE TWO. THE LD AR HAS SUBMITTED THAT THESE ADVANCE S WERE MADE IN EARLIER YEARS AS IS EVIDENCED FROM COPY OF ACCOUNTS SUBMITTED HEREWITH ALONG WITH BANK STATEMENT SHOWING SOURCE OF ADVANCE BEING FROM C.C A/C OF BANK AND THUS THEY ARE NOT SHORT TERM ADVANC ES BUT ARE LONG TERM ADVANCES. THERE IS NO SUCH FINDING OF FACT BY THE LOWER AUTHORITIES IN THIS REGARD. IN OUR VIEW, THESE ARE THE MATTERS WHICH REQUIRED FURTHER EXAMINATION AND WE DEEM IT FIT TO SET ASIDE THE MAT TER TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH. IN THE RESULT, GROU ND NO. 1 OF THE ASSESSEES CROSS OBJECTION IS ALLOWED FOR STATISTIC AL PURPOSES. 5. IN THE RESULT, REVENUE APPEAL IS DISMISSED AND THE ASSESSEES CROSS OBJECTION IS PARTLY ALLOWED FOR STATISTICAL PURPOSE S. ITA NO. 390/JP/2014 6. IN THIS APPEAL, THE TWO GROUNDS OF APPEAL AND THE F ACTS PERTAINING THERETO ARE PARI MATERIA TO THE GROUND NO. 2 TAKEN BY THE ASSESSEE IN ITS ITA NO. 390/JP/2014, ITA N O. 357/JP/2014 & C.O. NO. 16/JP/2014 M/S EMGEE CABLES & COMMUNICATIONS LTD. VS. DCIT, JAIPUR 16 CROSS OBJECTION FOR A.Y 2009-10. OUR FINDINGS AND DIRECTIONS CONTAINED IN ASSESSEES CROSS OBJECTION FOR AY 2009-10 SHALL APPLY MUTATIS- MUTANDIS TO THIS APPEAL. IN THE RESULT, THE GROUND S TAKEN BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31/03/2017 . SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31 MARCH, 2017 * GANESH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S EMGEE CABLES LTD., JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- DCIT CENTRAL CIRCLE-3, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 390/JP/2014,ITA NO. 357/JP/2014 & CO 16/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR