DCIT CC 1, MUMBAI V. SIDDS JEWELS. P.LTD, MUMBAI

ITA 6082/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79189 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 17-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 05-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KISHAN VYAS
• Assessee Lawyers: ANANT N PAI
• Keywords: Business income; Benefit of exemption
• Section: 153A; 10B

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.6082/MUM/2012, ' ' ' ' # # # # / ASSESSMENT YEAR-2009-10 ACIT, CC-1, R. NO. 902, 9 TH FLOOR, OLD C.G.O BLDG, ANNEXE, M.K.ROAD, MUMBAI-400020 VS M/S SIDDS JEWELS PVT. LTD. 306, PRASAD CHAMBERS, OPERA HOUSE, MUMBAI. PAN: AAHCS1891H ( $% / APPELLANT) ( &'$% / RESPONDENT) ( ) / REVENUE BY : SHRI KISHAN VYAS '*+ '*+ '*+ '*+ ) ) ) ) / ASSESSEE BY : SHRI ANANT N. PAI ' ' ' ' ( (( ( +, +, +, +, / DATE OF HEARING : 17-06-2014 -.# ( +, / DATE OF PRONOUNCEMENT : 17-06-2014 ' ' ' ' , 1961 ( (( ( 254 )1( +/+ +/+ +/+ +/+ 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DATED 02.07.2012 OF THE CIT(A )-36,MUMBAI,ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING INTEREST INCOME OF RS.53,08,154/- ON FIXED DEPOSITS FOR CONSIDERATION OF THE SAME FOR BENEFIT OF EXEMPTION U/S. 10B WITHOUT CONSIDERING T HE FACT THAT INTEREST EARNED IN FIXED DEPOSITS FOR THE PURPOSE OF AVAILING CREDIT FACILITY FROM TH E BANK DOES HAVE ANY IMMEDIATE NEXUS WITH THE EXPORT BUSINESS AS HELD BY THE HONBLE DELHI HIGH C OURT IN THE CASE OF CIT, DELHI-XI, NEW DELHI VS. M/S. COSMOS INTERNATIONAL IN ITA NO. 643/ 2008 DT. 27.11.2008. 2. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND AND / O R TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. 3. THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROUNDS STATED ABOVE, THE ORDER OF THE CIT(A)-36, MUMBAI MAY BE SET ASIDE AND THAT OF THE ASSESSING O FFICER RESTORED. BRIEF HISTORY AND FACTS OF THE CASE: 2. ASSESSEE-COMPANY IS PART OF POOJA EXPORT GROUP. SEA RCH/SURVEY OPERATIONS U/S. 133A/132(1) OF THE ACT WAS CARRIED OUT IN THE POOJA GROUP OF CASES ON 28.07.2009.CONSEQUENT TO ABOVE ACTION A NOTICE U/S. 153A WAS ISSUED TO THE ASSESSEE ON 14.1 2.2009. IN RESPONSE TO THE NOTICE,ASSESSEE FILED RETURN OF INCOME ON 19.01.2010,DECLARING TOTAL INCO ME OF THE ASSESSEE AT RS. NIL. 3. DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT ASS ESSEE-COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GOLD JEWELLERY STUDDED WITH DIAMONDS,THAT IT HAD SHOWN EXPORT SALES OF RS.1,50,44,41,986/-, THAT THE NET PROFIT F ROM THE BUSINESS WAS SHOWN AT RS. 15.40 CRORES AND IT HAD CLAIMED DEDUCTION OF RS. 14.61 CRORES U/ S. 10A OF THE ACT.HE FURTHER FOUND THAT THE ASSESSEE HAD RECEIVED INTEREST AMOUNTING TO RS.53.0 8 LAKHS. HE HELD THAT INTEREST RECEIVED BY THE ASSESSEE WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT AS BUSINESS INCOME,THAT THE SAID AMOUNT WAS NOT ELIGIBLE FOR CO MPUTING OF EXEMPTION U/S 10A OF THE ACT. 2 ITA NO. 6082/MUM/2012 M/S SIDDS JEWELS PVT. LTD. FINALLY RS. 53,13,316/- WERE EXCLUDED FROM THE COMP UTATION OF DEDUCTION U/S. 10A OF THE ACT. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA).BEFORE HIM IT WAS SUBMITTED THAT ASSESSEE HAD PLACED CERTAIN FIXED DE POSITS AGAINST THE GUARANTEES ISSUED BY THE BANK TO VARIOUS STATUTORY AUTHORITIES LIKE CUSTOMS, SALE S TAX DEPARTMENT AND OCTROI DEPARTMENT, THAT ASSESSEE USED TO PURCHASE GOLD FROM THE STATE BANK OF INDIA, THAT IT WOULD PLACED FIXED DEPOSITS WITH THE BANK AS SECURITY, THAT AS PER THE PRE-COND ITION LAID DOWN BY THE BANK ASSESSEE HAD TO MAKE SUCH DEPOSITS,THAT IT HAD CREDITED VARIOUS FDR S IN FORM OF BUSINESS DEPOSITS AND HAD RECEIVED INTEREST THEREON,THAT THE INVESTMENT OF MO NEY IN TERMS OF DEPOSIT WAS INTERCONNECTED WITH CARRYING ON BUSINESS, IT WAS NOT A DISTINCT AN D SEPARATE ACTIVITY, THAT THE DEPOSITS FROM CARRYING ON BUSINESS, THAT SAME WERE ATTRIBUTABLE A ND INCIDENTAL TO THE BUSINESS OF THE ASSESSEE, THAT INTEREST INCOME HAD TO BE TAXED UNDER THE HEAD BUSINESS INCOME. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ORDER OF THE AO, HE HELD THAT THERE WAS NO DISPUTE THAT INTEREST WAS RECEIVED FROM THE DEPO SITS KEPT WITH THE BANK FOR THE PURPOSE OF GRANTING BANK GUARANTEE TO VARIOUS GOVERNMENT AGENC IES, THAT THE ASSESSEE HAD TO MAKE DEPOSIT IN BANK AS A CONDITION FOR OBTAINING BANK GUARANTEE TO BE FILED BEFORE VARIOUS GOVERNMENT AGENCIES, THAT THE INTEREST INCOME HAD A DIRECT NEXUS TOTALLY CONNECTED TO THE BUSINESS OF THE ASSESSEE, THAT THE INTEREST EARNED BY THE ASSESSEE DURING THE YEAR WAS PART OF ITS BUSINESS INCOME.HE REFERRED TO THE CASES OF DEEPAK P.GADRE DELIVERED BY THE PUNE B ENCH OF THE TRIBUNAL (ITA NO. 255/ PN /2007-DT.31.01.11)AND SAJJAN INDIA PRIVATE LTD. (IT A NO.3245/MUM/2007-AY 2004-05 DT. 19.03. 2010).FINALLY,HE DIRECTED THE AO TO CONSIDER THE IN TEREST INCOME OF RS. 53.08 LAKHS AS BUSINESS INCOME AND TO CONSIDER THE SAME FOR BENEFIT OF EXEM PTION U/S. 10B OF THE ACT. 5. BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR) ARGUED T HAT INTEREST EARNED IN FIXED DEPOSITS DID NOT HAVE ANY IMMEDIATE NEXUS WITH THE EXPORT BUSINE SS OF THE ASSESSEE, THAT FAA HAD SIMPLY ENDORSED THE SUBMISSIONS OF THE ASSESSEE, THAT HE H AD NOT MADE ANY FACTUAL VERIFICATION OF THE CLAIMS MADE BY THE ASSESSEE-COMPANY.AUTHORISED REPR ESENTATIVE (AR) SUPPORTED THE ORDER OF THE FAA.HE REFERRED TO THE ORDERS OF MEDUSIND SOLUTIONS INDIA (P.) LTD.(29TAXMANN.COM 222) AND TRICOM INDIA LTD.(36 SOT 302).ON A QUERY BY THE BEN CH,AR ADMITTED THAT ASSESSEE HAD NOT FILED ANY DETAILED BEFORE THE FAA ABOUT THE FDRS, THAT HE WAS NOT IN A POSITION TO PROVE THAT FDRS WERE ACTUALLY RELATED WITH THE SURETIES GIVEN TO TH E GOVERNMENT AGENCIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT WHILE DECIDING THE APPEAL,FAA HAS JUST REPRODUCED THE SUB MISSIONS MADE BY THE ASSESSEE. HE DID NOT HAVE ANY MATERIAL BEFORE HIM TO ARRIVE AT THE CONCL USION THAT INVESTMENT IN FDS HAD SOME LINK WITH THE SECURITIES OF GOVERNMENT AGENCIES.ASSESSEE HAD NOT PROVIDED ANY DETAILS IN THIS REGARD I.E. HOW MUCH INVESTMENT IN FDS WAS MADE AS PER THE INSTRUCTIONS OF THE GOVERNMENT AGENCY. IN ABSENCE OF THIS BASIC VITAL FACT,APPEAL FILED BY TH E ASSESSEE SHOULD NOT HAVE BEEN ALLOWED.AFTER CONSIDERING THE AVERMENTS MADE BY THE AR,BEFORE US, WE ARE OF THE OPINION THAT MATTER NEEDS FURTHER VERIFICATION.THEREFORE, IN THE INTEREST OF JUSTICE, WE REMIT BACK THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.ASSESSEE-COMPANY SHOULD PRODUCE ALL THE RE LEVANT DOCUMENTS/EVIDENCES BEFORE THE AO TO ESTABLISH THAT THE FDRS HAD DIRECT RELATION WITH THE BUSINESS CARRIED OUT BY IT, SO THAT AO COULD TAKE A DECISION AS PER LAW. EFFECTIVE GROUND OF APPEAL FILED BY THE AO IS ALLOW ED IN PART. AS A RESULT,APPEAL F ILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 1+2 '*+ 1+2 '*+ 1+2 '*+ 1+2 '*+ 3 4 ( / 3 4 ( / 3 4 ( / 3 4 ( / 0+2 0+2 0+2 0+2 5 ( + 67 5 ( + 67 5 ( + 67 5 ( + 67. .. . ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH ,JUNE,2014 3 ITA NO. 6082/MUM/2012 M/S SIDDS JEWELS PVT. LTD. 0 ( -.# 8 9' 17 TWU , 201 4 . ( / : SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 9' /DATE:17.06 . 2014. SK 0 0 0 0 ( (( ( &+; &+; &+; &+; < ;#+ < ;#+ < ;#+ < ;#+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ = > , 4. THE CONCERNED CIT / = > 5. DR E BENCH, ITAT, MUMBAI / ;?/ &+' , . . . 6. GUARD FILE/ / 1 ';+ ';+ ';+ ';+ &+ &+&+ &+ //TRUE COPY// 0' / BY ORDER, @ / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI