Addl. CIT, Noida V. Sri Laxmi Narain Khetan, Prop., Noida

ITA 4700/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5561 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-02-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 14-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IPS BINDRA
• Assessee Lawyers: S KRISHNAN
• Keywords: Business income
• Section: 80HHC

Judgement Text

ITA NO. 4700/DEL/09 A.Y. 2004-05 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 4700/DEL/2009 A.Y. : 2004-05 ADDL. COMMISSIONER OF INCOME TAX, VS. SRI LAXMI NARAIN KHETAN, NOIDA RANGE, NOIDA, 2 ND FLOOR, PORP. M/S VRINDAVAN CARPET, G- BLOCK, SHOPPING COMPLEX, A-41&42, SECTOR-2, SECTOR-20, NOIDA 201301 (UP) NOIDA-201301 [PAN : AFRPK 1398F] (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. S. KRISHNAN, ADV. DEPARTMENT BY : SHRI IPS BINDRA. SR. DR O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDERS OF THE LD. CIT(A) DATED 16.9.2009 AND PERTAINS TO ASSE SSMENT YEAR 2004-05. 2. THE GROUNDS RAISED READ AS UNDER:- I) WHETHER ON FACTS AND IN LAW LD. CIT(A) WAS JUSTI FIED IN HOLDING THAT THERE IS NEXUS BETWEEN THE FDRS AND EX PORT BUSINESS OF THE APPELLANT AND, THEREFORE, INTEREST EARNED THEREON IS FROM UTILIZATION OF BUSINESS FUNDS AND W OULD THIS BEAR THE SAME NATURE AND CHARACTER OF BUSINESS . FURTHER CIT(A) HAS ALSO ERRED IN LAW BY HOLDING TH AT THE INTEREST INCOME IS ASSESSABLE AS BUSINESS INCOME. ITA NO. 4700/DEL/09 A.Y. 2004-05 2 II) WHETHER ON FACTS AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT 90% OF NET AMOUNT OF INTEREST RECEIPTS OF RS. 35,39,346/- WAS TO BE REDUCED, FOLLOWING EXPLANATIO N (BAA) TO SECTION 80HHC WHILE QUALIFYING AND ALLOWI NG RELIEF U/S 80HHC IN RESPECT OF EXPORT PROFITS. 3. IN THIS CASE THE AO OBSERVED THAT THE ASSESSE H AS SHOWN INTEREST EARNED ON BANK FDR/KDR AT RS. 35,39,346.8 2. ASSESSEE IN THE COMPUTATION HAS REDUCE THE INTEREST EXPENSE S FROM A GROSS INTEREST OF RS. 72,98,066/- AND SHOWN THE NET AMOUN T OF RS. 35,39346/-. AO WAS OF THE OPINION THAT THE ASSESSE ES CONTENTION IS THAT ONLY NET INTEREST AND NOT GROSS INTEREST IS TO BE REDUCED WAS NOT ACCEPTABLE. AO WAS ALSO OF THE OPINION THAT SINCE THE INTEREST INCOME IS NOT DERIVED FROM ITS ACTIVITY OF EXPORT, THE ASSESSEE COMPANY CANNOT CLAIM DEDUCTION UNDER SECTION 80HHC. 4. UPON ASSESSEES APPEAL LD. CIT(A) REFERRED THE O RDER OF THE CIT(A) OF PREVIOUS YEAR AND THE TRIBUNAL DECISION IN THE ASSESSEES OWN CASE IN ITA NO. 2913/DEL/2005 DATED 16.7.2009. HE HELD THAT THERE IS NEXUS BETWEEN THE FDR AND EXPORT BUS INESS OF THE ASSESSEE AND THEREFORE THE INTEREST EARNED THEREON IS FROM UTILIZATION OF BUSINESS FUND AND WOULD THIS BEAR T HE SAME NATURE AND CHARACTER AS OF BUSINESS. HENCE, LD. CIT(A) CO NCLUDED THAT INTEREST INCOME WAS ASSESSABLE AS BUSINESS INCOME O N THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 6. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE REFERRED TO THE DECISIO N OF THE TRIBUNAL ITA NO. 4700/DEL/09 A.Y. 2004-05 3 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02. IN THE AFORESAID TRIBUNAL ORDER VIDE ORDER DATED 16.7.200 9, THE TRIBUNAL HAD ELABORATELY DEALT WITH THE ISSUE. THE TRIBUN AL HAD REFERRED TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CI T VS. PUNEET COMMERCIAL LTD. 245 ITR 550 WHEREIN, IT WAS HELD TH AT SECTION 80HHC(3) OF THE IT ACT, 1961 IS APPLICABLE TO THE A SSESSEE WHO IS 100% EXPORTER AND THE BUSINESS S INCOME IS TO BE D EEMED TO BE PROFIT DERIVED FROM EXPORT OF GOODS AND THUS, THE E NTIRE PROFITS ARE ENTITLED TO DEDUCTION U/S 80HHC INCLUDING INTEREST INCOME. THE TRIBUNAL HAS CONCLUDED AS UNDER:- 20. IT HAS BEEN SEEN THAT HONBLE BOMBAY HIGH COUR T AND HONBLE DELHI HIGH COURT HAVE TAKEN DIFFERENT VIEW ON THIS ISSUE AND THERE IS NO JURISDICTIONAL H IGH COURT DECISION ON THIS ISSUE. LD. COUNSEL OF THE ASSESSEE AS REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KULLU VALLEY TRANSPORT COMPANY PVT. LTD. (SUPRA), CIT VS. VEGETABLE PRODUCTS LTD. (SUPRA) AND CIT VS. NAGA HILLS TEA CO. LTD (SUPRA) . THE SUM AND RATIO OF T HESE DECISION IS THAT WHILE INTERPRETING TAXING STATUTE IF THERE ARE TWO REASONABLE INTERPRETATIONS, THEN THE INTERPRETATION WHICH IS FAVOURABLE TO THE ASSESSEE IS REQUIRED TO BE ACCEPTED. SO, THE LAW IN THIS REGAR D IS WELL SETTLED, THE INTERPRETATION WHICH HAS BEEN PU T BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PUNIT COMMERCIAL LTD. (SUPRA) HAS TO BE FOLLOWED BEING FAVOURABLE TO THE ASSESSEE. WE DECIDE THE ISSUE ACCORDINGLY. 22. SO FAR AS IT RELATES TO NETTING, IT IS OBSERVE D THAT NETTING UNDER SECTION 80HHC HAS EVEN BEEN UPHELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SHREE RAM HONDA POWER EQUIPMENTS LTD. (SUPRA) WHEREIN THEIR LORDSHIPS HAVE APPROVED THE DECISION ITA NO. 4700/DEL/09 A.Y. 2004-05 4 OF SPECIAL BENCH IN THE CASE OF LALSON ENTERPRISES (SUPRA) FOR THE PROPOSITION THAT NETTING WAS PERMISSIBLE. SO ON THAT ACCOUNT ALSO WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHEREIN HE HAS DIRECTED THE ASSESSING OFFICER TO ALLOW THE NETTING . 7. SINCE IN THE ASSESSEES OWN CASE THE TRIBUNAL HAD DECIDED THE ISSUE IN THE AFORESAID MANNER ADHERING TO THE DOCTR INE OF STARE DECISES, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 15/02/2010 UPON CONCLUSION OF THE HEARING. SD/- SD/- (C.L. SETHI) [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 15/02/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES