JEWEL ART, MUMBAI V. ITO 20(1)(3), MUMBAI

ITA 642/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3116 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: J
• Next Hearing Date: 12-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2013
• Court: TRIBUNAL
• Department Lawyers: CAPT PRADEEP ARYA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER I.T.A. NO. 642/M/2013 (AY: 2008 - 2009 ) M/S. JEWEL ART, UNIT NO.G - 19 AND 22, GEMS AND JEWELLERY COMPLEX, SEEPZ, ANDHERI (E), MUMBAI 400 096. / VS. ITO 20(1)(3), PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012. ./ PAN : AACFJ2646R ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY MEHTA / RESPONDENT BY : SHRI CAPT. PRADEEP ARYA, DR / DATE OF HEARING : 22.09.2015 / DATE OF PRONOUNCEMENT : 30 .09.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 23.1.2013 IS AGAINST THE ORDER OF THE CIT (A) - 31, MUMBAI DATED 7.12.2012 FOR THE ASSESSMENT YEAR 2008 - 2009. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. A) THE LD CIT (A) HAS ERRED IN TREATING THE INTEREST INCOME OF RS. 25,35,358/ - AS INCOME FROM OTHER SOURCES U/S 56(ID) OF THE ACT. B) THE LD CIT (A) HAS ERRED IN REDUCING THE PROFIT U/S 10A FROM RS. 25,60,91,013/ - TO RS. 25,35,58,063/ - . C) THE LD CIT (A) HAS ERRED IN NOT APPRECIATING THE FACTS OF T HE CASE AND NOT APPLYING THE CORRECT RATIO OF THE DECISIONS CITED BEFORE HER. D) THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF EXEMPTION UNDER SECTION 10A IN RESPECT OF INTEREST OF RS. 25,35,358/ - EARNED ON FDS KEPT WITH THE BANK BY WAY OF MARGIN FOR THE PURPOSE OF THE APPELLANTS BUSINESS. E) THE LD CIT (A) WAS NOT JUSTIFIED IN TREATING THE INTEREST RECEIVED OF RS. 25,35,358/ - IN COURSE OF CARRYING OF ITS BUSINESS CANNOT BE CONSIDERED AS INCOME FROM OTHER SOURCES AND HAS TO BE SET OFF AGAINST INTE REST PAID. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN EXPORTER OF DIAMOND JEWELLERY AND REPORTED THE EARNING OF INTEREST INCOME OUT THE FIXED DEPOSITS KEPT WITH THE BANKS BY WAY OF MARGIN MONEY FOR THE PURPOSE OF ASSESSEES BUSINESS. 2 THE DISPUTE AROSE ON THE TREATMENT OF THE SAID INTEREST INCOME. ASSESSEE CONSIDERED THE SAME AS A BUSINESS RECEIPT. ASSESSEE CLAIMED EXEMPTION U/S 10A OF THE ACT IN RESPECT OF THE SAID INTEREST RECEIPTS. PER CONTRA, REVENUE AUTHORITIES TRE ATED THE SAME AS INCOME FROM OTHER SOURCES AND DENIED THE BENEFIT OF DEDUCTION U/S 10A OF THE ACT. AGGRIEVED WITH THE SAME, ASSESSEE IS IN APPEAL BEFORE US. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT MADE FDS WITH THE BANK OUT HIS EXCESS FUNDS OR FOR A LONGER PERIOD WITH AN INTENTION TO EARN INTEREST INCOME. FURTHER, ELABORATING THE SAME, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FDS MADE WERE OUT OF THE WORKING CAPITAL AND OUT OF THE BUSINE SS FUNDS. IT IS THE BUSINESS REQUIREMENT OF THE ASSESSEE THAT THE FDS ARE TO BE MADE WITH THE DIRECTIONS OF THE BANK. REFERRING TO VARIOUS DOCUMENTS PLACED IN THE PAPER BOOK, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE CORRESPONDENCE PLACED AT PAGE 28 ONWARD AND READ OUT THE RELEVANT INSTANCES OF THE BANK INSISTING THE ASSESSEE TO PREPARE TERM DEPOSITS IN THE BANK. FURTHER, BR INGING OUR ATTENTION TO VARIOUS DECISIONS OF THE TRIBUNAL , WHEREIN ONE OF US (AM) TO THE ORDER IN THE CASE OF ACIT VS . M/S. PRESTRESS WIRE INDUSTRIES IN ITA NO. 8418/M/2010 (AY 2007 - 2008) AND ITA NO. 6312/M/2011 (AY 2008 - 2009) AND OTHERS DATED 31.1.201 4, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SAID DECISION IS RELEVANT FOR THE PROPOSITION THAT, UNDER THE IDENTICAL FACTUAL MATRIX, THE RECEIPTS WERE TREATED AS BUSINESS RECEIPTS AND DECLARED AS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. IN THIS REGARD, HE BROUGHT OUR ATTENTION TO THE RELEVANT PARAS 14 TO 16 OF THE SAID TRIBUNALS ORDER (SUPRA). FURTHER, BRINGING OUR ATTENTION TO OTHER DECISIONS OF THE TRIBUNAL, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THEY RELATE TO PRIOR TO THE AMENDMENT TO SECTION 10A(4) OF THE ACT. HE ALSO RELIED ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. KARNAL COOPERATIVE SU GAR MILLS LTD 243 ITR 2 (SC) AND THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INDO SWISS JEWELLS LTD 284 ITR 389 (BOM) AND ALSO ON VARIOUS PRECEDENTS OF THE HONBLE SUPREME COURT AS WELL AS VARIOUS HIGH COURTS, COPIES OF WHICH ARE PLACED IN VOLUMINOUS PAPER BOOK, AND SUBMITTED THAT THE SAID JUDGMENTS WERE RELIED UPON BY THE TRIBUNAL IN ADJUDICATING THE ISSUE IN FAVOUR OF THE ASSESS EE IN THE SAID CASE DATED 31.1.2014 (SUPRA). 3 5. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE ON THE FACTS OF THIS CASE. FOR THE SAKE OF COMPLETENESS OF THIS CASE, WE EXTRACT THE SAID PARAS 14 TO 16 OF THE SAID TRIBUNALS ORDER IN THE CASE OF M/S. PRESTRESS WIRE INDUSTRIES AND THE SAME READ AS UNDER: 14. REGARDING THE ISSUE OF INTEREST RECEIVED FROM FIXED DEPOSITS KEPT AS MARGIN MONEY FOR BANK GUARANTEES, LD COUNSE L FOR THE ASSESSEE MENTIONED THAT THE TEMPORARY DEPLOYMENT OF FUNDS SHOULD BE ASSESSED AS BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES AS TREATED BY THE ASSESSING OFFICER. IN THIS REGARD, LD COUNSEL RELIED ON THE FOLLOWING DECISIONS. I) CIT VS. VIDYUT STEEL LTD. 219 ITR 30 (AP) II) CIT VS. KOSHIKA TELECOM LTD 287 ITR 479 (DEL) III) CIT VS. KARNAL COOPERATIVE SUGAR MILLS LTD 243 ITR 2 (SC) IV) CIT VS. INDO SWISS JEWELLS LTD 284 ITR 389 (BOM) 15. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDER OF THE AO . 16. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS CITATIONS QUOTED BY THE LD COUNSEL ALONG WITH THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE CITED JUDGMENTS OF THE HIGHER JUDICIARY, WE FIND THAT THEY ARE RELEVANT FOR THE PROPOSITION THAT THE THERE IS NO QUESTION OF ISOLATING THE INTEREST RECEIVED ON MARGIN MONEY PAID FOR OBTAINING BANK GUARANTEE AND ASSESSING IT AS SEPARATE INCOME UNDER SECTION 56. THEREFORE, AGREE WITH THE VIEW OF THE TRIBUNAL THAT TH E INCOME DERIVED ON THE MARGIN MONEY FOR OBTAINING BANK GUARANTEE CANNOT BE SEPARATELY ASSESSED UNDER SECTION 56. CONSIDERING THE BINDING JUDGMENTS GIVEN BY THE HONBLE HIGH COURTS AS WELL AS THE HONBLE SUPREME COURT, WE ARE OF THE OPINION THAT THE INTER EST DERIVED ON MARGIN MONEY FOR THE PURPOSE OF OBTAINING BANK GUARANTEE SHOULD BE ASSESSED AS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES. ACCORDINGLY, WE DECIDE THIS PART OF THE GROUND IN FAVOUR OF THE ASSESSEE. 6. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE, WE ARE OF THE OPINION THAT THE SAID INTEREST RECEIPTS CONSTITUTE BUSINESS RECEIPTS AND ARE ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED . 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 3 0 T H SEPTEMBER, 2015. S D / - S D / - (SANDEEP GOSAIN) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 3 0 .9 .2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 4 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI