ACIT CIR 6(1), MUMBAI V. ASSOCIATED ALLUMINIUM INDUS. P. LTD, MUMBAI

ITA 4726/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1781 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 12-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI T.R. SOOD, AM AND SHRI V.DURGA RAO, JM I.T.A.NO. 4726/MUM/2009 ASSESSMENT YEAR : 2006-07 THE ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 6(1), MUMBAI VS. M/S. ASSOCIATED ALLUMINIUM INDIA PVT. LTD., B-1, TULSI VIHAR, DR. A.B. ROAD, WORLI, MUMBAI 400 018. PAN: AAACA 4473 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MOHD USMAN RESPONDENT BY : SHRI SAMEER DALAL O R D E R PER T.R. SOOD, AM: IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWIN G GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER U/S.80IB AMOUNTING TO RS. 97,61,867/- REPRE SENTING INTEREST ON L/C DISCOUNTING AMOUNTING TO RS. 16,99, 277/- AND INTEREST ON DELAYED PAYMENT AMOUNTING TO RS. 80,62, 590/-. IN THIS CONNECTION RELIANCE IS PLACED UPON HONBLE SUPREME COURTS DECISION IN THE CASE OF M/S. PANDIAN CHEMICALS LTD. (262 ITR 278). 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSE SSEE HAD CLAIMED DEDUCTION U/S.80-IB OF THE ACT. HE FURTHER NOTICED THAT OTHER INCOME DECLARED BY THE ASSESSEE INCLUDED INTEREST ON DELAYED PAYMENT FROM CUSTOMERS AMOUNTING TO RS. 80,62,590/- (RS. 35,48,625/- FROM UNIT-II + RS. 45, 13,965/- FROM UNIT III). IN ADDITION TO THIS, FURTHER SUM OF RS. 16,00,277/- WA S SHOWN AS INTEREST ON L/C DISCOUNTING. THE ASSESSING OFFICER AFTER DISCUSSING THE DECISION OF THE HONBLE SUPREME CURT IN THE CASE OF STERLING FOODS V,. CIT (237 ITR 579) AND THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. PANDIAN CHE MICALS LTD.(262 ITR 278) HELD THAT THIS INTEREST CANNOT BE SAID TO HAVE BEEN DERI VED FROM INDUSTRIAL UNDERTAKINGS AND ACCORDINGLY HE DENIED DEDUCTION U/S.80IB. ITA NO.4726/M/09 M/S. ASSOCIATED ALLUMINIUM INDS. P.LTD. 2 3. ON APPEAL, THE DEDUCTION WAS ALLOWED BY THE LEAR NED CIT(A) ON THE BASIS OF EARLIER YEARS ORDER. 4. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIV E STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. HE FURTHER RELI ED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (2009) 317 ITR 218. 5. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT AS FAR INTEREST FROM CUSTOMER ON DELAYED PAYMENT IS CONCER NED, SUCH RECEIPTS WERE HELD TO BE PART OF THE BUSINESS PROFITS BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO. 5065/MUM/2007 AN D HE FILED A COPY OF THE DECISION BEFORE US. HE ALSO SUBMITTED THAT SIMILAR LY EVEN INTEREST ON L/C DISCOUNTING WAS ALSO HELD TO BE PART OF THE BUSINES S PROFIT AND ACCORDINGLY, DEDUCTION U/S.80IB WAS HELD TO BE ALLOWABLE. HE ALS O RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ADVA NCE DETERGENTS LTD. (33 DTR PAGE 185 (COPY OF THE DECISION WAS FILED). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT AS FAR AS INTEREST FROM CUSTOMERS IS CONCERNED, THE SAME IS P ART OF THE SALE RECEIPTS AS HELD BY THE TRIBUNAL IN EARLIER YEARS. THOUGH IN THE ME ANTIME THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) HAS BEEN PRONOUNCED BY THE SUPREME COURT, HOWEVER THE HONBLE DELHI HIG H COURT AFTER CONSIDERING THE DECISION OF THE SUPREME COURT WAS OF THE OPINION TH AT INTEREST RECEIVED BY THE ASSESSEE ON OVERDUE PAYMENTS FROM THE CUSTOMERS IS TO BE CONSIDERED AS PROFITS AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKING ELIGI BLE FOR DEDUCTION U/S.80IA. THEREFORE, FOLLOWING THIS DECISION, WE HOLD THAT AS FAR AS INTEREST ON DELAYED PAYMENTS FROM CUSTOMERS IS CONCERNED, THE SAME IS P ART OF THE BUSINESS PROFITS AND THUS ELIGIBLE FOR DEDUCTION U/S.80IB OF THE ACT . TO THIS EXTENT, WE CONFIRM THE ORDER OF THE LEARNED CIT(A). ITA NO.4726/M/09 M/S. ASSOCIATED ALLUMINIUM INDS. P.LTD. 3 7. AS FAR AS THE INTEREST ON L/C DISCOUNTING IS CON CERNED, WE ARE OF THE VIEW THAT NORMALLY WHEN L/C BILLS ARE DISCOUNTED THE ASS ESSEE IS REQUIRED TO PAY THE INTEREST AND IT IS AN ITEM OF EXPENDITURE. HOWEVER, IT WAS POINTED OUT BEFORE US THAT THE ACCOUNT HAS COME INTO CREDIT BECAUSE THE A SSESSEE HAS TOOK HIGHER INTEREST WHICH LATER ON WAS REDUCED AND THEREFORE S OME INCOME WAS GENERATED. SINCE THIS ALSO PERTAINS TO THE PRINCIPLE IN THE C ASE OF DELAYED PAYMENT FROM CUSTOMERS WOULD BE APPLICABLE. HOWEVER, THE FACTS HAVE NOT BEEN DISCUSSED BY THE LOWER AUTHORITIES. THEREFORE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) IN RESPECT OF THIS TIME AND REMIT THE MATTER BACK TO T HE FILE OF THE AO TO VERIFY THE INTEREST ON L/C DISCOUNTING AND THEN DECIDE THE ISS UE IN ACCORDANCE WITH LAW. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF MAY, 2010. SD. SD. (V. DURGA RAO) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 28 TH MAY, 2010. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT, CITY -VI, MUMBAI 4. THE CIT(A)-VI, MUMBAI 5. THE DR G BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI