Dinesh Enterprises, JODHPUR V. ACIT, JODHPUR

ITA 662/JODH/2006

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7994 (ITAT-JODHPUR)
• Duration Of Justice: 5 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-12-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 20-12-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R KONKANI
• Assessee Lawyers: U C JAIN
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 662/JU/2006 ASSESSMENT YEAR : 2003-04 M/S DINESH ENTERPRISES, VS. THE ACIT, CIRCLE-1, JODHPUR JODHPUR PAN NO. AAAFD5645G & ITA NO. 117/JU/2007 ASSESSMENT YEAR : 2004-05 M/S DINESH ENTERPRISES, VS. THE ACIT, CIRCLE-1, JODHPUR JODHPUR PAN NO. AAAFD5645G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI U.C.JAIN RESPONDENT BY : SHRI G.R. KONKANI DATE OF HEARING : 17.12.2012 DATE OF PRONOUNCEMENT : 19.12.2012 ORDER PER N.K.SAINI, A.M. BOTH THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST THE SEPARATE ORDERS DATED 11.11.2005 AND 22.12.2006 FOR THE ASSE SSMENT YEARS 2003-04 AND 2004-05 RESPECTIVELY OF CIT(A), JODHPUR. 2 2. SINCE THE ISSUES INVOLVED ARE COMMON IN THESE AP PEALS WHICH WERE HEARD TOGETHER SO THESE ARE BEING DISPOSED OFF BY T HIS CONSOLIDATED ORDER OF THE SAKE OF CONVENIENCE. 3. FIRST WE WILL TAKE ITA NO. 662/JU/2006. FOLLOWI NG GROUNDS HAS BEEN RAISED IN THIS APPEAL:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE ID. CIT(A) GROSSLY ERRED IN UPHOLDING THE ALLOWABLE DE DUCTION AT RS. 18,53,690/- U/S 80 HHC AS AGAINST THE CLAIM OF RS. 48,36,716/- THEREBY SUSTAINING AN DISALLOWANCES OF RS. 29,83,02 6/-. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE ID. CIT(A) GROSSLY ERRED IN TREATING THE AMOUNT OF INTE REST RECEIVED AT RS. 11,80,589/- AS INCOME FROM OTHER SOURCES AND REDUCING THE SAME WHILE COMPUTING DEDUCTION U/S 80 HHC WITHOUT C ONSIDERING THE INTEREST PAID TO BANK AND OTHERS AT RS. 20,00,1 29/-. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND LOOKING TO NATURE AND VOLUME OF TRADE THE LD CIT(A) ERRED I N SUSTAINING DISALLOWANCE OF RS. 93,453/- BEING 20% OF THE CLAIM . 4. THAT THE PETITIONER MAY KINDLY BE PERMITTED TO R AISE ANY ADDITIONAL AND / OR ALTERNATIVE GROUND AT OR BEFORE THE HARING OF THE APPEAL. 5. THE PETITION PRAYS FOR JUSTICE AND RELIEF. 4. GROUND NOS. 4 & 5 ARE GENERAL IN NATURE, SO DO NOT REQUIRE ANY COMMENTS ON OUR PART. GROUND NO.3 WAS NOT PRESSED AS SUCH THE SAME IS DISMISSED AS NOT PRESSED. 3 5. GROUND NO.1 & 2 RELATE TO THE DEDUCTION U/S 80HH C OF THE ACT ON ACCOUNT OF DEPB AND INTEREST RESPECTIVELY. 6. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THA T THE ASSESSEE CLAIMED DEDUCTION U/S 80HHC FOR A SUM OF RS. 48,36,716/-. THE ASSESSEE RECEIVED TOTAL SUM OF RS. 29,72,366/- UNDER THE FOLLOWING HE ADS:- 1. RATE DIFFERENCE IN FOREIGN EXCHANGE RS. 1,09 ,578/- 2. PREMIUM ON SALE OF DEPB RS. 28,62,788/- RS. 29,72,366/- THE ASSESSING OFFICER DID NOT ALLOW DEDUCTION U/S 80HHC ON THE DEPB. THE ASSESSING OFFICER ALSO DID NOT ALLOW DEDUCTION ON THE INTEREST RECEIVED AT RS. 11,80,589/-, WHICH WAS TREATED AS INCOME FRO M OTHER SOURCES. THIS ACTION OF THE ASSESSING OFFICER WAS CONFIRMED BY TH E LD CIT(A) AND NOW THE ASSESSEE HAS PREFERRED THE APPEAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE RELATING TO DEDUCTION ON ACCOUNT OF DEPB AS WELL AS ON ACCOUNT OF INTEREST ARE COVERED BY THE EARLIER ORDER OF HE TRIBUNAL DATED 6.11.2012 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03. COPY OF THE SAID ORDER DATED 6.11.2012 IN ITA NO. 145/JU/2011 FOR THE ASSESSMENT YEAR 2002-03 WAS FURNISHED. 8. THE LD DR COULD NOT CONTROVERT THE AFORESAID CON TENTION OF THE LD COUNSEL FOR THE ASSESSEE, HOWEVER, RELIED THE ORDER S OF THE AUTHORITIES BELOW. 4 9. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND THE MATERIAL AVAILABLE ON RECORD, IT IS NOTICED THAT BOTH THE IS SUES AGITATED BY THE ASSESSEE IN GROUNDS 1 & 2 MENTIONED IN THE FORMER PART OF THIS ORDER HAVE BEEN ADJUDICATED BY THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 IN ITA NO. 145/JU/2011 AND THE RELEVANT FINDINGS RELATED TO DEPB ISSUE ARE GIVEN IN PARA 10 , WHILE THE FINDINGS RELATED TO THE INTEREST ISSUE ARE GIVEN IN PARA 14 OF THE IMPUGNED ORDER OF CIT(A) WHICH READ AS UNDER:- 10 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CARE FULLY PERUSED THE ENTIRE MATERIAL ON RECORD IN THE LIGHT OF ORAL AS WELL AS WRITTEN SUBMISSIONS, WE ARE SATISFIED THAT THE ISSUE IN QUESTION STANDS FULLY COVERED BY THE ABOVE DECISION OF THE HON'BLE SUPREME COURT RENDERED IN THE CASE OF TOPMA N EXPORTS [SUPRA] WHEREIN IT HAS BEEN HELD THAT WHEN DEPB IS SOLD BY A PERSON, HIS PROFIT ON TRANSFER OF DEPB WOULD BE THE SALE VALUE OF DEPB LESS ITS FACE VALUE WHICH REPRESENTS THE CO ST OF THE DEPB AND NOT THE ENTIRE SUM RECEIVED BY HIM ON SUCH TRANSFER; DEPB IS CHARGEABLE AS INCOME UNDER CLAUSE (IIIB) OF SECTION 28 IN THE YEAR IN WHICH SUCH PERSON APPLIES FOR DEPB C REDIT AGAINST THE EXPORTS WHEREAS THE PROFIT ON TRANSFER OF DEPB BY THAT PERSON IS CHARGEABLE AS INCOME UNDER CLAUSE (I IID) OF SECTION 28 OF THE ACT IN THE HANDS IN THE YEAR IN W HICH HE MAKES THE TRANSFER. ACCORDINGLY, BY RESPECTFULLY FOLLOWI NG THE ABOVE HON'BLE SUPREME COURT DECISION, WE HAVE TO ALLOW TH IS GROUND OF APPEAL. 14. WE HAVE UNDERSTOOD THE ISSUE AND HAVE FOUND THAT TH E FDRS WERE DEPOSITED FOR THE PURPOSE OF BUSINESS AND THE INTEREST FROM DEBTORS IS ALSO FROM THE BUSINESS ASS ET AND THEREFORE, IT IS ASSESSABLE UNDER THE HEAD BUSINES S INCOME AND 5 NOT FROM OTHER SOURCE OF INCOME. THE LD. CIT(A) H AS HELD THAT THE INTEREST INCOME ON FDR AND FROM DEBTORS WITHOUT DEDUCTING THE INTEREST PAYABLE TO THE BANK ARE REQUIRED TO BE DEDUCTED FROM BUSINESS PROFIT WHILE WORKING OUT DEDUCTION U/ S 80HHC OF THE ACT AND IS ASSESSABLE UNDER THE HEAD INCOME FR OM OTHER SOURCES. THE DECISION RENDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SHAHI EXPORT HOUSE REP ORTED IN [2010] 46 DTR [DE] 34 WHEREIN IT HAS BEEN HELD THAT IN SO FAR AS EARNING OF INTEREST ON FIXED DEPOSIT IS CONCERNE D, THE DETERMINATIVE TEST IS AS TO WHETHER SUCH INTEREST H AS IMMEDIATE NEXUS WITH THE EXPORT BUSINESS. IT HAS BEEN FURTHE R HELD THAT FURNISHING OF BANK GUARANTEES HAS AS DIRECT NEXUS W ITH THE EXPORT ACTIVITIES OF THE ASSESSEE AND THUS INTEREST HAS TO BE TREATED AS HAVING IMMEDIATE NEXUS WITH THE EXPORT B USINESS. THEREFORE, NETTING HAS TO BE ALLOWED. THE LD. COUN SEL FOR THE DEPARTMENT HAS NOT PLACED BEFORE US OR REFERRED TO US ANY CONTRARY DECISION EITHER OF THE HON'BLE JURISDICTIO NAL HIGH COURT OR OF THE HON'BLE SUPREME COURT. WE ALSO FIND THAT THE HON'BLE DELHI HIGH COURT, WHILE DECIDING THIS ISSU E THREAD BARE AND AFTER DISCUSSING THE CASE OF PANDIAN CHEMI CALS LTD VS. CIT [2003] 183 CTR [HON'BLE SUPREME COURT] 99 A ND OTHER RELEVANT DECISION INCLUDING THAT OF THE HON'BLE MAD RAS HIGH COURT IN THE CASE OF SOUTH INDIA SHIPPING CORPORATI ON LTD VS. CIT [2000] 240 ITR 24 [MAD] IN WHICH IT HAS BEEN HE LD THAT INTEREST ON FDRS KEPT WITH BANK AS SECURITY FOR OPE NING LETTER OF CREDIT, WHICH HAD DIRECT NEXUS WITH ASSESSEES E XPORT BUSINESS HAD TO BE NETTED FOR COMPUTING BUSINESS PR OFITS FOR THE PURPOSES OF DEDUCTION U/S 80HHC OF THE ACT. THERE FORE, WE ARE OF THE CONSIDERED OPINION THAT THE A.O. IS NOT JUSTIFIED IN MAKING ADDITION AND THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION WITHOUT ANY BASIS. THEREFO RE, BY RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE DIREC T THE A.O. TO ALLOW THE INTEREST ON FDR HAVING DIRECT NEXUS WITH ASSESSEES 6 EXPORT BUSINESS HAD TO BE NETTED FOR COMPUTING BUSI NESS PROFIT FOR THE PURPOSE OF DEDUCTION U/S 80HHC OF THE ACT. HENCE GROUNDS NOS. 4 AND 5 OF THIS APPEAL ARE ALLOWED. 10. SINCE THE FACTS FOR THE YEAR UNDER CONSIDERATIO N ARE IDENTICAL TO THE FACTS INVOLVED IN THE ASSESSMENT YEAR 2002-03, SO R ESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 6.11.2012, THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE. 11. IN ITA NO. 117/JU/2007, FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. THAT ON THE FACTS AND INCOME THE CIRCUMSTANCES OF T HE CASE, THE LD CIT(A) GROSSLY ERRED IN UPHOLDING THE ALLOWANCE OF DEDUCTION AT RS. NIL U/S 80HHC AS AGAI NST CLAIM OF RS. 256138/- THEREBY SUSTAINING AN DISALLOWANCE OF RS. 256138/-. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF HE CASE AND LOOKING TO NATURE AND VOLUME OF TRADE THE LD CI T(A) ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 93,315/ - BEING 20% OF THE CLAIM. 3. THAT THE PETITIONER MAY KINDLY BE PERMITTED TO R AISE ANY ADDITIONAL AND / OR ALTERNATIVES GROUND AT OR BEFOR E THE HEARING OF THE APPEAL. 4. THE PETITIONER PRAYS FOR JUSTICE AND RELIEF. 12. GROUND NOS. 3 & 4 ARE GENERAL IN NATURE SO, DO NOT REQUIRE ANY COMMENTS ON OUR PART WHILE GROUND NO.2 WAS NOT PRES SED, AS SUCH, IT IS DISMISSED AS NOT PRESSED. 7 13. VIDE GROUND NO.1 OF THE APPEAL, THE GRIEVANCE O F THE ASSESSEE RELATES TO THE DEDUCTION U/S 80HHC OF THE ACT ON ACCOUNT OF DEPB INCOME. THIS ISSUE IS SIMILAR AS WAS INVOLVED IN THE ASSESSMENT YEAR 2003-04, THEREFORE, OUR FINDINGS RELATING TO THIS ISSUE GIVEN IN ITA NO .662/JU/2006 FOR ASSESSMENT YEAR 2003-04 IN THE FORMER PART OF THIS ORDER SHALL APPLY MUTATIS-MUTANDIS. 14. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLO WED. (ORDER PRONOUNCED IN THE OPEN COURT ON 19.12.2012) SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 19 TH DECEMBER, 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR