SHREEJI JEWELLERY LTD., MUMBAI V. DCIT.8(3), MUMBAI

ITA 6204/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7799 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 20-01-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 17-10-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Assessee Lawyers: I P RATHI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI RAJENDRA SINGH ,(AM) ITA NO.6204/MUM/2008 ASSESSMENT YEAR : 2003-04 SHREEJI JEWELLERY LIMITED GEMS & JEWELLERY COMPLEX-III G-36 SEEPZ ANDHERI-(E) MUMBAI . ..( APPELLANT ) P.A. NO. (AAECS 1821 N) VS. DY. COMMISSIONER OF INCOME TAX -8(3) MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI I.P. RATHI RESPONDENT BY : SHR I NAVEEN GUPTA O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 11.08.2008 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR 2003-04. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF JE WELLERY. THE RETURN WAS FILED DECLARING AN INCOME OF RS.52,92,100/- AFTER CLAIMING DEDUCTION U/S.10A RS.7,68,46,971/-. HOWEVER, THE ASSESSME NT WAS ITA NO.6204/MUM/08 A.Y: 03-04 2 COMPLETED ON A TOTAL INCOME OF RS.90,78,170/- INCLUDING THE PART DISALLOWANCE OF DEDUCTION U/S. 10A, VIDE ORDER DATED 1 7.12.2007 PASSED U/S.143(3) R.W.S.147 OF THE INCOME TAX ACT, 1961(T HE ACT). ON APPEAL THE LD. CIT(A) WHILE UPHOLDING THE VIEW OF T HE AO IN RESPECT OF DISALLOWANCE OF DEDUCTION U/S.10A, DISMISSED THE ASSESSEES A PPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. 4. THE REVISED GROUNDS TAKEN BY THE ASSESSEE READ AS UNDER : 1. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE GROSS INTEREST INCOME OF RS.20,91,753/- AS INCO ME FROM OTHER SOURCES AS AGAINST BUSINESS INCOME. AND HAS FURTHER ERRED IN CONFIRMING THE GROSS INTEREST INCO ME OF RS.20,91,753/- AS INCOME FROM OTHER SOURCES WITHOUT ALLOWING THE NETTING OF INTEREST PAID FOR EARNING S UCH INCOME. 2. THAT THE LD. ASSESSING OFFICER HAS ERRED IN CHARGING THE INTEREST U/S. 234D ON THE AMOUNT OF RE FUND GRANTED UNDER INTIMATION U/S.143(1) FOR THE ASSESSM ENT YEAR 2003-04, WHEREAS THE SECTION 234D ITSELF WAS APPLICABLE W.E.F. ASSESSMENT YEAR 2004-05 AND ONWAR DS. 3. THAT THE LD. ASSESSING OFFICER HAS ERRED BY TAXING TWICE THE AMOUNT OF INTEREST RS.20,91,753/-, AS THE SAME WAS DECLARED AS PART OF BUSINESS INCOME BY THE APPELLANT AND SECOND TIME BY TAXING THE SAME, TREAT ING AS INCOME FROM OTHER SOURCES WITHOUT REDUCING THE THIS AMOUNT FROM THE BUSINESS INCOME. 5. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT WITH REGARD TO NOT ALLOWING OF NETTING OFF O F INTEREST THE AO OBSERVED IN PARA-4 OF THE ASSESSMENT ORDER THAT THE DEPA RTMENT HAS ITA NO.6204/MUM/08 A.Y: 03-04 3 FILED APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER O F THE LD. CIT(A) DIRECTING THE AO TO VERIFY THE CLAIM AND ALLOW IT FO R THE ASSESSMENT YEAR 2001-02. HE FURTHER SUBMITS THAT THE TRIBUNAL I N ASSESSEES OWN CASE IN M/S. SHREEJI JEWELLERY LTD. VS. JT./ADDL. CIT AND VICE-VERSA IN ITA NO.5197 AND 6257/MUM/04 FOR ASSESSMENT YEAR 2001-02 VIDE ORDER DATED 7.10.2008 HAS HELD THAT THE ALTERNATIVE CLAIM OF NETTING UP OF THE INTEREST INCOME THAT THE COST OF THE OPENING OF INCOME SHOULD BE ALLOWED FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN LALSONS ENTERPRISES (82 TTJ (DEL)(SB) 1048). THE REFORE, IN VIEW OF THE SAID DECISION, THE NETTING OFF OF INTEREST BE AL LOWED TO THE ASSESSEE. HE ALSO PLACED ON RECORD THE COPY OF THE SAID ORDE R OF THE TRIBUNAL . 6. WITH REGARD TO THE LEVY OF INTEREST U/S.234D OF TH E ACT HE SUBMITS THAT IN VIEW OF DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN EKTA PROMOTERS P. LTD., THE SAME IS NOT CHARGEABLE FOR THE ASSESSMENT YEAR 2003-04. 7. WITH REGARD TO TAXING TWICE THE AMOUNT OF INTERE ST INCOME OF RS.20,91,753/- THE LD. COUNSEL FOR THE ASSESSEE WHILE ADM ITTING THAT THIS ISSUE WAS NOT RAISED BEFORE THE LD. CIT(A), SUBMITS THAT THE INTEREST WAS DECLARED AS PART OF BUSINESS INCOME. THE AO WHILE TAKING NET PROFIT AS PER P&L ACCOUNT HAS INCLUDED THE SAME IN TH E FIGURE OF ITA NO.6204/MUM/08 A.Y: 03-04 4 RS.8,40,83,045/- AND AGAIN TAKEN THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES, THEREFORE, THE AO MAY BE DIRECTED TO ALLOW DUE RELIEF TO THE ASSESSEE. 8. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND LD. CIT(A). 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE INTEREST INCOME HAS BEEN ASSESSED BY THE A SSESSING OFFICER UNDER THE HEAD INCOME FROM OTHER SOURCES. HOWEVE R, THE AO WHILE COMPUTING THE DEDUCTION U/S.10A HAS NOT ALLOW ED NETTING OFF OF INTEREST BY OBSERVING THAT THE APPEAL FOR THE ASSESSMENT YEAR 2001- 02 IS PENDING BEFORE THE TRIBUNAL . SINCE THE TRIBUN AL HAS DECIDED THE SAID ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF LALSONS ENTE RPRISES VS. DCIT (82 TTJ (DEL)(SB) 1048); (2004) 89 ITD 25(DEL )(SB), THEREFORE, RESPECTFULLY FOLLOWING THE SAME WE ARE OF THE VIEW THA T THE ASSESSEE IS ENTITLED TO NETTING OFF OF INTEREST. THE AO IS DIRECT ED TO ALLOW THE SAME AFTER VERIFICATION AND AFTER GIVING REASONABLE OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY THE GROUND TAKEN BY T HE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.6204/MUM/08 A.Y: 03-04 5 10. WITH REGARD TO LEVY OF INTEREST U/S. 234D WE FIND MERIT THAT THE ISSUE OF LEVY OF INTEREST U/S.234D OF THE ACT IS COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUN AL IN EKTA PROMOTERS P. LTD. SUPRA, WHEREIN IT HAS BEEN HELD (P AGE-33) : IN VIEW OF THE ABOVE DISCUSSION OUR ANSWER TO QUESTION REFERRED TO US IS THAT INTEREST UNDER SECTION 234D IS CHARGEABLE FROM THE ASSESSMENT YEAR 2004-05 AND IT COULD NOT BE CHARGED FOR EARLIER YEARS EVEN THOUGH REGULAR ASSESSMENT FOR THESE YEARS ARE FRAMED AFTER JUNE 1, 2003, OR THE REFUND WAS GRANTED FOR THOSE YEARS AFTER THE SAID DATE. APPLYING THE RATIO OF THE ABOVE DECISION TO THE FACTS O F THE PRESENT CASE WE FIND THAT THE ASSESSMENT ORDER WAS PASSED AFTER JUN E 1, 2003 FOR THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 200 3-04, THE INTEREST U/S.234D IS NOT CHARGEABLE AS THE SAME IS CHARG EABLE FROM THE ASSESSMENT YEAR 2004-05 AND ACCORDINGLY THE GROUND TAKEN BY THE ASSESSEE IS ALLOWED. 11. WITH REGARD TO INCLUSION OF INTEREST INCOME OF RS.20 ,91,753/- TWICE IN THE ASSESSMENT ORDER I.E., FIRSTLY BY TAKING NET PROFIT AS PER PROFIT AND LOSS ACCOUNT RS.8,40,83,045/- UNDER THE HEAD INCOME FROM BUSINESS/PROFESSION AND SECONDLY THE SAME INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, WE FIND THAT THIS ISSUE HAS NOT BEEN RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) . HOWEVER, IN TH E INTEREST OF JUSTICE WE, AFTER ADMITTING THE SAME AND IN THE ABSENCE OF ANY ITA NO.6204/MUM/08 A.Y: 03-04 6 SUPPORTING MATERIAL, CONSIDER IT FAIR AND REASONABLE TH AT IT SHOULD GO BACK TO THE FILE OF THE AO AND ACCORDINGLY WE RESTORE T HE ISSUE TO THE FILE OF THE AO WHO SHALL EXAMINE THE SAME AFRESH AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE, PARTLY A LLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03.02.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 3.2.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. ITA NO.6204/MUM/08 A.Y: 03-04 7 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 20.1.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 20.1.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 3.2.2010 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 4.2.2010 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER