DCIT, New Delhi V. M/s Emmtex Synthetics Ltd., New Delhi

ITA 547/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4291 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 01-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.547 /DEL/2011 ASSESSMENT YEAR : 2004-05 DCIT, EMMTEX SYNTHETICS LTD., CIRCLE-11 (1), 9/54, STREET NO.2, NEW DELHI. V. SHALIMAR BAGH INDL.AREA, NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACE AAACE AAACE AAACE- -- -3695 3695 3695 3695- -- -G GG G APPELLANT BY : MS. MONA MOHANTY, SR. DR. RESPONDENT BY : NONE ORDER PER A.K. GARODIA, AM: THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER OF LD CIT(A) V, NEW DELHI DATED 15.11.2010 FOR ASSESSMENT YEAR 2000 4-05. 2. GROUNDS RAISED BY THE REVENUE READ AS UNDER:- 1. THE ORDER OF LD CIT(A) IS WRONG, PERVERSE, ILLEGAL A ND AGAINST THE PROVISIONS OF LAW, LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED ION DELETING THE ADDITION OF `.20,64,352/- ON ACCOUNT OF INTEREST AND BROKERAGE. PAGE 2 OF 6 ITA NO547/DEL/11 3. NONE APPEARED ON BEHALF OF THE ASSESSEE IN SPITE OF NOTICE AND HENCE WE PROCEED TO DECIDE THIS APPEAL OF THE REVENU E EX PARTE QUA THE ASSESSEE. 4. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT SHOWN AS IN COME ON ACCOUNT OF INTEREST ON FIXED DEPOSIT, INTEREST AND BRO KERAGE AMOUNTING TO `. 20,64,352/-. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY IT SHOULD NOT BE BROUGHT TO TAX. THE ASSESSEE SUBMIT TED BEFORE THE ASSESSING OFFICER THAT THE INTEREST EXPENDITURE SHOWN IN THE PROFIT & LOSS ACCOUNT IS NET OF INTEREST INCURRED OF `. 43,95, 706.50 AND INTEREST EARNED AMOUNTING TO `..23,81,386.50. IT IS A LSO SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THE AMOUNT O F COMMISSION EARNED WAS SHOWN BY THE ASSESSEE BY WAY OF CREDI T TO RAW MATERIAL PURCHASE ACCOUNT AND IN THIS MANNER, THE ASSESSEE HAS SHOWN RAW MATERIAL PURCHASED AT NET OF COMMISSION EARNE D. THE ASSESSING OFFICER WAS NOT SATISFIED AND HE HELD THAT FD IN TEREST, INTEREST AND BROKERAGE AMOUNTING TO `.8,17,233/-, `. 11,41,489/- AND `.51,630/- RESPECTIVELY TOTALING `.20,64,352/- ACCRU ED AND WAS RECEIVABLE BY THE ASSESSEE DURING THIS YEAR BUT NOT OFFE RED TO TAX. HE MADE ADDITION OF THIS AMOUNT. BEING AGGRIEVED THE ASSE SSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT (A) WHO HAS DELET ED THIS ADDITION AND NOW THE REVENUE IS IN APPEAL BEFORE US. 5. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF LD DR OF THE R EVENUE AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES B ELOW. THIS ISSUE HAS BEEN DECIDED BY LD CIT(A) AS PER PARA NO.3.2. & 3 .3. OF HIS ORDER WHICH ARE REPRODUCED HEREIN BELOW- PAGE 3 OF 6 ITA NO547/DEL/11 3.2. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER A ND THE SUBMISSION MADE BY THE LD AR. IT IS AN ADMITTED FACT TH AT THE ASSESSEE FOLLOWS THE MERCANTILE METHOD OF ACCOUNTING. TH E ASSESSEE HAS ACCOUNTED ITS INTEREST INCOME IN THE BOOKS OF ACCOUNT BY CREDITING THE SAME TO INTEREST EXPENSES ACCO UNT INSTEAD OF CREDITING THE SAME IN A SEPARATE ACCOUNT CA LLED AS INTEREST INCOME. THE ASSESSEE HAS SHOWN NET FIGURE OF INTEREST INCURRED AND INTEREST EARNED IN THEIR P&L A/C . THE INTEREST EARNED HAS DIRECT NEXUS WITH INTEREST INCURRED BY THE ASSESSEE AS SUBMITTED BY THE AR OF THE ASSESSEE IN SUBMISSION DATED 9.3.2010. THE ASSESSEE COMPANY EARNED INTEREST ON FD MAD E, WHICH WERE KEPT UNDER LIEN WITH PUNJAB NATIONAL BAN K FOR OPENING LETTER OF CREDIT IN FAVOUR OF SUPPLIERS OF IM PORTED PLANT & MACHINERY AND INTEREST CHARGED FROM OVER DUE SUNDRY DEBTORS. THE ASSESSEE COMPANY HAS CREDITED INTEREST EARNED ON FD W ITH PNB AND INTEREST RECOVERED FROM OVERDUE DEBTOR TO I NTEREST ACCOUNT. IN EFFECT THEREFORE THE ASSESSEE HAS SHOWN INTER EST EARNED BY WAY OF REDUCING ITS INTEREST EXPENSES. HAD T HE INTEREST EARNED SHOWN SEPARATELY IN THE INCOME SIDE OF P&L A/C, THE INTEREST EXPENSE ON THE EXPENSE SIDE WOULD HAVE BEE N MORE BY AN EQUIVALENT AMOUNT WHICH WILL HAVE NO EFFECT O N THE PROFIT & LOSS SHOWN IN THE P&L A/C. 3.3. IN RESPECT OF THE BROKERAGE INCOME OF `.51,630/ -, THE ASSESSEE HAS REDUCED THE EXPENSES OF RAW MATERIAL PURCHASED BY IT TO THE EXTENT OF COMMISSION EARNED SINCE COMMISSI ON IS EARNED FROM THE SUPPLIER OF RAW MATERIAL. THE ASSESSEE HAS ACCOUNTED ITS COMMISSION EARNED IN THE BOOKS OF ACCOUNT BY CREDITING THE SAME TO RAW MATERIAL ACCOUNT INSTEAD O F CREDITING THE SAME IN A SEPARATE ACCOUNT CALLED AS COMMISSION EARN ED. PAGE 4 OF 6 ITA NO547/DEL/11 HAD THE COMMISSION EARNED SHOWN SEPARATELY IN THE INCOM E SIDE OF PROFIT & LOSS ACCOUNT, THE RAW MATERIAL PURCHASE AC COUNT ON THE EXPENSES SIDE WOULD INCREASE BY AN EQUIVALENT AMOUN T WHICH WILL HAVE NO EFFECT ON THE PROFIT SHOWN IN TH E P&L A/C. 7. IN THESE PARAS, A CLEAR FINDING HAS BEEN GIVEN BY T HE LD CIT(A) THAT THE ASSESSEE HAS SHOWN INTEREST EARNED BY WAY OF REDU CING IT FROM INTEREST EXPENSES. IF THE INTEREST INCOME WOULD HA VE BEEN SHOWN BY THE ASSESSEE SEPARATELY AS INCOME IN THE P&L ACCOUNT, INTEREST EXPENSE ON THE EXPENSES SIDE WOULD HAVE BEEN MORE BY AN EQUIVALENT AMOUNT WHICH WILL HAVE NO EFFECT ON THE PROFITS SHOWN IN THE P&L A/C. SIMILARLY, REGARDING BROKERAGE INCOME OF `.51,630/- ALSO, A CLEAR FINDING HAS BEEN GIVEN BY LD CIT(A) THAT THE ASSESSEE HA S REDUCED THE EXPENSES OF RAW MATERIAL PURCHASED BY IT TO THE EXTENT OF COMMISSION EARNED SINCE COMMISSION IS EARNED FROM THE SUPPLIERS OF R AW MATERIAL. THESE FINDINGS OF THE LD CIT(A) COULD NOT BE CONTROV ERTED BY THE LD DR OF THE REVENUE. THE SAME CONTENTIONS WERE RAISED BEFOR E THE ASSESSING OFFICER ALSO AS HAS BEEN NOTED BY THE IN PARA NO .2 OF THE ASSESSMENT ORDER. UNDER THESE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A) BECAUSE IT IS NOT A CASE OF NOT CREDITING THE INTEREST AND BROKERAGE INCOME IN THE P &L A/C. IN FACT, BOTH THESE INCOMES WERE DULY REPORTED IN THE PROFIT D ECLARED BY THE ASSESSEE ALTHOUGH THE MANNER OF DECLARING THE SAME IS DIF FERENT. INSTEAD OF SHOWING THESE INCOMES AS INCOME IN THE P&L A/C, THE ASSESSEE HAS REDUCED THESE INCOMES EITHER FROM INTEREST EXP ENSES OR FROM THE EXPENSES ON ACCOUNT OF PURCHASE OF RAW MATERI AL BUT THE FACT REMAINS THAT INCOME HAS BEEN INCLUDED IN THE PROFIT A S PER P&L A/C DECLARED BY THE ASSESSEE. HENCE, WE DECLINE TO INTERFE RE IN THE ORDER OF LD CIT(A). PAGE 5 OF 6 ITA NO547/DEL/11 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY 13 TH APRIL, 2011. SD/- SD/- (I.P. BANSAL) (A.K. GAR ODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 13.4.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING DATE OF DICTATION DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. DATE OF ORDER SENT TO THE CONCERNED BENCH PAGE 6 OF 6 ITA NO547/DEL/11