M/s Vikas Cotton Fibers, V. The I T O 5(1),

ITA 429/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3001 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-04-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 15-09-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: R P MANDOVRA
• Keywords: Business income; Depreciation
• Section: 80IB

Judgement Text

PAGE 1 OF 10 - I.T.A.NOS.414, 415, 416 AND 429/IND /2008 VIKAS COTTON FIBERS, INDORE AND OTHERS IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AATPT3581-G I.T.A.NO.414/IND/2008 A.Y. : 2004-05 SHRI GIRISHKUMAR TAYAL, ACIT, PROP. M/S. PRADEEP COTEX INDUSTRIES, VS 5(1), INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : AAQPT4073N I.T.A.NO.415 & 416/IND/2008 A.Y. : 2004-05 & 2005-06 SHRI SHYAM SUNDER MOHANLAL TAYAL, ITO, PROP. M/S. KAL FIBRES, SENDHWA VS KHARGONE . APPELLANT RESPONDENT PAN NO. : AACFV5632R. I.T.A.NO.429/IND/2008 A.Y. : 2004-05 M/S.VIKAS COTTON FIBERS, PRINCE PALACE, 6, JANKI NAGAR ANNEX, INDORE. ITO, 5(1), INDORE. VS APPELLANT RESPONDENT PAGE 2 OF 10 - I.T.A.NOS.414, 415, 416 AND 429/IND /2008 VIKAS COTTON FIBERS, INDORE AND OTHERS APPELLANT BY : SHRI R.P.MANDOVRA, ADV. RESPONDENT BY : SMT.APARNA KARAN, SR.DR DATE OF HEARING : 12.04.2010 O R D E R PER V.K. GUPTA, A.M. THESE APPEALS BELONG TO THE SAME ASSESSEE AND INVOL VE COMMON ISSUES, HENCE, THESE WERE HEARD TOGETHER AND THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CON VENIENCE. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRST, WE SHALL TAKE UP ASSESSEES APPEAL IN I.T.A. NO. 414/IND/2008. 4. GROUND NO.1 READS AS UNDER :- 1) THAT ON THE FACTS, IN LAW AND IN THE CIRCUMSTAN CES OF THE CASE, THE AUTHORITIES BELOW HAVE ERRED IN MAKIN G THE FOLLOWING ADDITIONS BEING :- A) RS. 1,05,958/- ON ACCOUNT OF DISALLOWANCE OF VEHICL E RUNNING EXPENSES. B) RS. 1,17,226/- ON ACCOUNT OF ADDITION OF ALLEGED LO W HOUSE HOLD WITHDRAWALS. PAGE 3 OF 10 - I.T.A.NOS.414, 415, 416 AND 429/IND /2008 VIKAS COTTON FIBERS, INDORE AND OTHERS C) RS. 16,59,903/- ON ACCOUNT OF DISALLOWANCE OUT OF DEDUCTION U/S 80IB. 5. AS REGARD TO ISSUE RAISED IN GROUND NO.1(A), THE LE ARNED COUNSEL SUBMITTED THAT IN ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 2003-04, THE TRIBUNAL HAD RESTRICTED THE DISALLOWANCE TO 20%. HO WEVER, IN THE YEAR UNDER CONSIDERATION , THE EXPENDITURE BEING LESS, H ENCE, THE RATE OF DISALLOWANCE WOULD BE REDUCED TO 15 % . ON THIS PLE A OF THE ASSESSEE, THE BENCH ASKED THE LEARNED COUNSEL TO GIVE EVIDENCE TH AT PERSONAL EXPENSES HAD NOT BEEN CLAIMED IN THE YEAR UNDER CONSIDERATIO N, BECAUSE VERY LESSER AMOUNT OF EXPENDITURE COULD NOT RESULT INTO AN INFE RENCE OF LESSER PERSONAL EXPENSES. ON THIS, THE LEARNED COUNSEL LEF T THE ISSUE TO THE DISCRETION OF THE BENCH. ACCORDINGLY, FOLLOWING THE RATIO OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSME NT YEAR 2003-04, WE DIRECT THE A.O. TO MAKE THE DISALLOWANCE OUT OF VEH ICLE EXPENSES @ 20%. THUS, THIS PART OF THIS GROUND OF THE ASSESSEE STAN DS PARTLY ALLOWED. 6. IN GROUND NO. 1(B), THE ISSUE INVOLVED IS REGARDING LOW HOUSE HOLD WITHDRAWALS. 7. THE ASSESSEE HAS SHOWN THE HOUSE HOLD WITHDRAWALS A T RS. 67,200/-. THE A.O. ESTIMATED THE EXPENSES AT RS. 12 ,500/- PER MONTH AND ADDED A SUM OF RS. 1,17,226/-, AS THE A.O. CONSIDER ED HOUSE HOLD WITHDRAWALS OF RS. 32,774/- DEBITED IN THE CAPITAL ACCOUNT. BEFORE THE LD. PAGE 4 OF 10 - I.T.A.NOS.414, 415, 416 AND 429/IND /2008 VIKAS COTTON FIBERS, INDORE AND OTHERS CIT(A), THE ASSESSEE CLAIMED THAT THE ONLY HOUSE HO LD WITHDRAWALS WERE RS. 72,774/-. THE LD. CIT(A) HAD EXAMINED THE MONTH LY WITHDRAWALS AND FOUND THAT IN THE MONTH OF OCTOBER AND NOVEMBER, TH ERE WERE NO WITHDRAWALS. HENCE, AFTER CONSIDERING THE INTERESTS IN TOTALITY, HE CONFIRMED THE ACTION OF THE A.O. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LEARNED COUNSEL SUBMITTED THAT IN ASSESSMENT YE AR 2003- 04, THE TRIBUNAL HAD DELETED THE ADDITION OF RS. 1, 08,000/- MADE BY THE REVENUE AUTHORITIES AND IN THAT YEAR THE TOTAL HOUS E HOLD WITHDRAWALS WERE RS. 86,000/-. HENCE, THE ADDITION TO THE EXTEN T OF RS. 30,000/- COULD BE MADE. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED STRONG RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 9. ON DUE CONSIDERATION AND FACTS AND CIRCUMSTANCES AS WELL AS THE DECISION OF THE TRIBUNAL IN EARLIER YEARS, WE ARE O F THE VIEW THAT THE WITHDRAWALS SHOWN BY THE ASSESSEE ARE ON LOWER SIDE . HENCE, WE FIX THE HOUSE HOLD WITHDRAWALS AT RS. 1,30,000/- FOR THE FU LL YEAR. THUS, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 10. IN GROUND NO. 1(C) & 2, THE ASSESSEE IS CLAIMING EL IGIBILITY OF INTEREST RECEIVED FROM THE DEBTORS FOR REDUCTION U/ S 80IB AND NETTING OF INTEREST PAID WITH INTEREST RECEIPT AND CONSEQUENTL Y EXCLUDING NETTING INTEREST FROM THE ELIGIBLE PROFIT FOR COMPUTING U/S 80IB OF THE ACT. THE PAGE 5 OF 10 - I.T.A.NOS.414, 415, 416 AND 429/IND /2008 VIKAS COTTON FIBERS, INDORE AND OTHERS LEARNED COUNSEL SUBMITTED THAT AS FAR AS THE ASPECT S OF NETTING WAS CONCERNED, SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL, WHEREIN THE TRIBUNAL HELD AS UNDER :- IN APPELLANTS OWN APPEAL FOR THE ASSESSMENT YEAR 03-04 IN I.T.A.NO. 759/IND/2006 THE MATTER OF NETTING OF INT EREST FOR DEDUCTION U/S 80IB HAS BEEN DECIDED BY THE HON'BLE TRIBUNAL VIDE ORDER DATED 15.12.2009. IN THIS APPEL LATE ORDER THE HON'BLE TRIBUNAL UNDER PARA 31 READ WITH PARA 1 4 HAS HELD THAT AS REGARD A NETTING OF INTEREST IS CONCERNED, IT I S NOW A SETTLED JUDICIAL PROPOSITION THAT ONLY NET INTEREST INCOME HAS TO BE EXCLUDED FROM THE PROFITS OF AN ELIGIBLE INDU STRIAL UNDERTAKING. THE LD. DEPARTMENTAL REPRESENTATIVE, T HOUGH, HAS TRIED TO STATE THAT THERE WAS NO DIRECT NEXUS A S OBSERVED BY THE CIT(A). HOWEVER, FROM THE PERUSAL OF THE APP ELLATE ORDER, IN OUR VIEW, NO SUCH FINDING EMERGES. EVEN T HE A.O. HAS NOT DEALT WITH THIS ASPECT. FURTHER, THE DECISI ON RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE IN THE CASE IS ALSO ON A DIFFERENT ASPECT AND NOT ON THE ASPECT OF NETTING , HENCE, NOT RELEVANT. SINCE THE ASPECT OF NEXUS HAS NOT BEEN EX AMINED AT ANY STAGE, HENCE, WE RESTORE THIS ISSUE TO THE FILE OF A.O. TO PAGE 6 OF 10 - I.T.A.NOS.414, 415, 416 AND 429/IND /2008 VIKAS COTTON FIBERS, INDORE AND OTHERS EXAMINE THE SAME AND IF THE NEXUS BETWEEN THE INTE REST PAID AND INTEREST EARNED IS ESTABLISHED BY THE ASSESSEE, THEN, TO EXCLUDE ONLY NET INTEREST FROM THE ELIGIBLE PROFITS OF THE INDUSTRIAL UNDERTAKING. THUS, THIS PART OF THIS GRO UND IS ACCEPTED. 11. THE LEARNED COUNSEL, ACCORDINGLY, SUBMITTED THA T THE MATTER MAY BE RESTORED TO THE FILE OF A.O. ON SIMILAR LINE S. HE FURTHER CONTENDED THAT IN THIS YEAR, INTEREST WAS ALSO RECEIVED FROM CUSTOMERS FOR DELAYED PAYMENT OF INSTALMENTS. HENCE, THE SAME WAS IN THE NATURE OF BUSINESS INCOME AND, THEREFORE, THE ASSESSEE WAS ENTITLED FO R REDUCTION U/S 80IB THEREON. IN VIEW OF THE DECISION OF THE SPECIAL BEN CH OF THE TRIBUNAL IN THE CASE OF NIRMA INDUSTRIES LIMITED AS REPORTED IN 283 ITR 402 (A.T.) 12. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, PREFERRED TO RELY ON THE ORDER OF THE A.O. 13. AS REGARD TO ASPECT OF NEXUS AND EXCLUSION OF NET I NTEREST, WE RESTORE THIS ISSUE TO THE FILE OF A.O. IN ACCORDANC E WITH THE GUIDELINES GIVEN IN THE CASE OF THE ASSESSEE IN ASSESSMENT YEA R 2003-04 AND I.T.A.NO. 759/IND/2006. AS REGARD THE CONSIDERATION OF INTEREST RECEIVED FROM THE CUSTOMERS ON DELAYED PAYMENT, WE DIRECT TH E A.O. TO VERIFY THIS CLAIM OF THE ASSESSEE AND IF IT IS FOUND CORRECT, T HEN THE SAME SHOULD BE PAGE 7 OF 10 - I.T.A.NOS.414, 415, 416 AND 429/IND /2008 VIKAS COTTON FIBERS, INDORE AND OTHERS CONSIDERED AS ELIGIBLE FOR DEDUCTION U/S 80IB. IT I S NEEDLESS TO MENTION THAT THE A.O. SHALL GRANT AN ADEQUATE OPPORTUNITY O F HEARING TO THE ASSESSEE IN DOING SO. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. 15. NOW, WE SHALL TAKE UP THE APPEAL IN I.T.A.NO. 415/I ND/2008. 16. IN GROUND NO. 1(A) AND (2), THE ISSUE RAISED IS IDE NTICAL TO ISSUE RAISED IN GROUND NO. 1(C) AND 2 OF ASSESSEES APPEA L IN I.T.A.NO. 414/IND/2008. HENCE, WE RESTORE THE SAME TO THE FIL E OF A.O. TO BE DECIDED ON SIMILAR LINES. 17. IN GROUND NO. 1(B), THE ASSESSEE IS AGGRIEVED BY TH E DECISION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 90 00/- OUT OF TELEPHONE EXPENSES AND IN GROUND NO. 1(C) CONFIRMING THE DISA LLOWANCE OF RS. 12,000/- OUT OF VEHICLE RUNNING EXPENSES AND DEPREC IATION. THE A.O. HAS MADE THE DISALLOWANCE @ 18% AND 20% APPROXIMATELY O UT OF THESE EXPENSES, WHICH HAS BEEN CONFIRMED BY THE CIT(A). I N VIEW OF OUR DECISION IN CONNECTED APPEAL, WE FIND NO MERIT IN T HIS GROUND OF THE ASSESSEE, HENCE, CONFIRM THE ACTION OF THE REVENUE S APPEAL. THUS, THIS PART OF THE ASSESSEES GROUND OF THE ASSESSEE STAND S DISMISSED. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 19. NOW, WE SHALL TAKE UP THE APPEAL IN I.T.A.NO. 416/I ND/2008. PAGE 8 OF 10 - I.T.A.NOS.414, 415, 416 AND 429/IND /2008 VIKAS COTTON FIBERS, INDORE AND OTHERS 20. GROUNDS RAISED IN THIS APPEAL READ AS UNDER :- 1. THAT ON THE FACTS, IN LAW AND IN THE CIRCUMSTANCES OF THE CASE, THE AUTHORITIES BELOW HAVE ERRED IN MAKING AD DITIONS OF RS. 48,341/- ON ACCOUNT OF DISALLOWANCE OUT OF DEDU CTION U/S 80IB. THE ADDITION AS MADE BY THE ASSESSING OFFICER AND TO THE EXTENT SUSTAINED BY THE CIT(A) ARE ARBITRARY & UNWARRANTED ON FACTS AND IN LAW. 2. THAT THE LD. CIT(A) HAS ERRED ON FACTS & IN LAW THA T NETTING OF INTEREST I.E. EXPENDITURE AND RECEIPTS CANNOT BE CONSIDERED IN ARRIVING AT PROFIT FOR THE PURPOSE OF DEDUCTION U/S 80IB. HE FURTHER ERRED IN HOLDING THAT THE ENTIRE INTERES T RECEIPTS FALL UNDER THE HEAD INCOME FROM OTHER SOURCES AND THAT NO DEDUCTION OF INTEREST EXPENDITURE CONCERNING INTERE ST RECEIPT IS ALLOWABLE UNDER THIS HEAD AND THE WHOLE INTEREST EXPENDITURE IS FOR THE PURPOSE OF BUSINESS. THE LD. CIT(A) HAS MISDIRECTED HIMSELF ON FACTS AND LAW IN DECIDIN G THE ISSUE RAISED BEFORE HIM. THE OBSERVATION & FINDING IN THE APPELLATE ORDER IS CONTRARY TO THE FACTS AND IN LAW . 3. IT IS PRAYED THAT THE ABOVE ADDITIONS AS MADE BY TH E ASSESSING OFFICER AND TO THE EXTENT SUSTAINED BY TH E CIT(A) KINDLY BE DELETED. PAGE 9 OF 10 - I.T.A.NOS.414, 415, 416 AND 429/IND /2008 VIKAS COTTON FIBERS, INDORE AND OTHERS 21. IN GROUND NO. 1(A) AND (2), THE ISSUE RAISED IS IDE NTICAL TO ISSUE RAISED IN GROUND NO. 1(C) AND 2 OF ASSESSEES APPEA L IN I.T.A.NO. 414/IND/2008 AND 1(A) AND 2 OF I.T.A.NO. 415/IND/20 08. HENCE, WE RESTORE THE SAME TO THE FILE OF A.O. TO BE DECIDED IN SIMILAR MANNER. 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS AL LOWED FOR STATISTICAL PURPOSES. 23. NOW WE SHALL TAKE UP THE APPEAL IN I.T.A.NO. 429/IN D/2008. 24. IN GROUND NO. 1(1), THE ISSUE INVOLVED IS REGARDING DISALLOWANCE OF RS. 43,943/- OUT OF VEHICLE RUNNING EXPENSES AND DEPRECIATION. THE A.O. HAS DISALLOWED @ 20% ON ACCOUNT OF PERSONAL US E, WHICH HAS BEEN RESTRICTED BY THE CIT(A) TO 15 %. THE ASSESSEE HAS PLEADED BEFORE US THAT OUT OF TELEPHONE EXPENSES, THE DISALLOWANCE HAS BEE N MADE @ 10%. HENCE, THE SAME SHOULD BE FOLLOWED. HOWEVER, NO EVI DENCE IS ON RECORD TO JUSTIFY THIS PARITY. HENCE, WE DO NOT FIND ANY M ERIT IN THIS CONTENTION OF THE ASSESSEE. ACCORDINGLY, THIS GROUND OF THE ASSES SEE IS DISMISSED. 25. IN GROUND NO.1(B) & 2, THE ISSUE INVOLVED IS REGAR DING COMPUTATION OF DEDUCTION U/S 80IB, WHICH IS IDENTIC AL TO THE ISSUE RAISED IN GROUND NO.1(C) AND 2 OF I.T.A.NO. 414/IND/2008 A ND 1(A) OF I.T.A.NO. 415/IND/2008. 26. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. PAGE 10 OF 10 - I.T.A.NOS.414, 415, 416 AND 429/IN D/2008 VIKAS COTTON FIBERS, INDORE AND OTHERS 27. TO SUM UP, THE APPEALS IN I.T.A.NO. 414 & 415/IND/2 008 ARE PARTLY ALLOWED, AND APPEALS IN I.T.A.NO. 416 & 429/ IND/2008 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 16 TH APRIL, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16 TH APRIL, 2010. CPU*