The ACIT, Circle-7, Surat V. M/s. Karp Mfg. Co., Surat

ITA 674/AHD/2012

• Counselvise Citation: 67420514 RSA 2012
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 20-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: SAPNESH SHETH
• Section: 143(3); 10B

Judgement Text

1 ITA NO. 674 OF 2012 ASST. YEAR.2007-08 I N THE INCOME TAX APPELLATE TRIBUNALD BENCH,AHMEDA BAD (BEFORE SRI A.K. GARODIA, A.M. AND SRI KUL BHARAT J.M.) I.T.A. NO. 674/AHD/2012 (ASSESSMENT YEAR: 2007-08 ) THE A CIT, CIRCLE -7 SURAT (APPELLANT) VS. M/S KARP MFG CO. SURAT (RESPONDENT) ON BEHALF OF THE APPELLANT SRI B.L. YADAV, SR. D.R ON BEHALF OF THE RESPONDENT SRI SAPNESH SHETH A.R. DATE OF HEARING : 17-05-20 12 DATE OF PRONOUNCEMENT : 22-06-2012 ( )/ ORDER PER: SRI KUL BHARAT, JUDICIAL MEMBER: THE PRESENT APPEAL BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) V, SURAT DATE D 21-11-2011 IN APPEAL NO. CAS-V/152/2010-11. 2 ITA NO. 674 OF 2012 ASST. YEAR.2007-08 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT HAS ERRED IN RESTRICTING THE DISALL OWANCE OF RS. 1,02,000/- OUT OF THE TOTAL DISALLOWANCE OF INTERES T INCOME OF RS. 23,76,570/- CLAIMED U/S. 10B EARNED ON F.D. INTERES T OF RS. 22,74,750/- AND INTEREST ON DEPOSIT WITH ELECTRICIT Y BOARD OF RS. 1,02,000/- WITHOUT APPRECIATING THE EVIDENCES IN IT S ENTIRETY. 2. THE LD. CIT OUGHT TO HAVE CONFIRMED THE D ISALLOWANCE OF RS. 22,74,750/- ON ACCOUNT OF FIXED DEPOSIT INTERES T WHICH IS NOT DIRECTLY RELATED TO THE EXPORT OF ARTICLES OR T HINGS AND NOT DERIVED THROUGH FOREIGN EXCHANGE WHICH IS THE MAIN CRITERIA FOR CLAIM OF DEDUCTION U/S 10B AS WAS THE CASE WITH INT EREST OF RS. 1,02,000/- RECEIVED ON DEPOSIT WITH ELECTRICITY BOA RD WHICH DISALLOWANCE WAS CONFIRMED IN APPEAL. 3. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 3 .THE FACTS IN BRIEF ARE THAT THE CASE OF THE ASSE SSEE FOR THE ASSESSMENT YEAR 2007-08 WAS PICKED UP FOR SCRUTINY. THE ASSESS MENT WAS FRAMED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINA FTER REFERRED TO AS THE ACT) VIDE ORDER DATED 10-12-2010. WHILE FINALIZIN G THE ASSESSMENT THE ASSESSING OFFICER DISALLOWED THE DEDUCTION UNDER SE CTION 10(B) OF THE ACT IN RESPECT OF INTEREST RECEIVED FROM STATE BANK OF INDORE AND ELECTRICITY BOARD TOTALING A SUM OF RS. 23,76,530/- THE ASSESSE E AGAINST THE AFORESAID DISALLOWANCE PREFERRED AN APPEAL BEFORE THE LD. CIT (APPEALS) WHO PARTLY 3 ITA NO. 674 OF 2012 ASST. YEAR.2007-08 ALLOWED THE APPEAL OF THE ASSESSEE THEREBY ALLOWED CLAIM OF DEDUCTION U/S 10B ON THE INTEREST INCOME FROM STATE BANK OF INDOR E. AGAINST THE ORDER OF LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 4. SINCE BOTH THE GROUNDS ARE INTER-RELATED SAME A RE BEING DISPOSED OF TOGETHER. LD DEPARTMENTAL REPRESENTATIVE STRONGLY S UPPORTED THE ORDER PASSED BY ASSESSING OFFICER. ON THE OTHER HAND LD. A. R. SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE CO-ORDINATE BENCH ITA NO. 3353/AHD/2009 FOR THE A.Y. 2005-06. 5. WE HAVE HEARD RIVAL SUBMISSIONS PERUSED THE MATE RIAL AVAILABLE ON RECORD AND THE JUDGMENT CITED BY THE PARTIES. WE F IND THAT THIS ISSUE HAS BEEN DECIDED IN THE ASSESSEES OWN CASE IN ITA NO. 3353/A/2009, THE ASSESSMENT YEAR 2005-06 WHEREIN THE HONBLE CO-ORDI NATE BENCH HAS DECIDED THE ISSUE AS UNDER:- 4 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE DISALLO WANCE ON ACCOUNT OF INTEREST INCOME U/S. 10B OF THE I.T. ACT OF RS. 9,45,200/- MADE THE AO WITHOUT CONSIDERING THE FACT BROUGHT IN, IN IS ENTIRETY. 4.1 WHILE DECIDING THE ISSUE INVOLVED LD. CIT(A) HA S GRANTED PART RELIEF AS PER THE FOLLOWING OBSERVATION: I HAVE CAREFULLY CONSIDERED THE REASONS GIVEN BY A SSESSING OFFICER & ALSO THE SUBMISSIONS OF THE APPELLANT. A FTER CAREFULLY ANALYZING THE FACTS OF THE CASE IT IS SEEN THAT SO FAR AS INTEREST INCOME ON FDR IS CONCERNED, I FIND MERIT IN THE CON TENTION OF APPELLANT THAT AS FDR IS PLACED OUT OF LOAN BORROWE D FROM THE BANK, THE EXPENDITURE INCURRED ON LOAN IS REQUIRED TO BE REDUCED FROM THE INTEREST ON FDR AS SAID AMOUNT IS EXPENDED 4 ITA NO. 674 OF 2012 ASST. YEAR.2007-08 FOR EARNING THE INTEREST INCOME. AS INTEREST PAID IS MORE THAN INTEREST ON FDR, DEDUCTION U/S10B CANNOT B CURTAILE D ON THIS GROUND IN VIEW OF THE PRINCIPLE OF NETTING. I ALSO FIND THAT RATIO OF HONOURABLE GUJARAT HIGH COURT DECISION IN THE CA SE OF JASHVIDHYABEN C. MEHTA V. CIT-172 ITR 680 & WHICH I S DISCUSSED BY HONOURABLE SUPREME COURT IN CASE OF CI T V. DR. V.P. GOPINATHAN- 248 ITR 449 IS APPLICABLE TO THE F ACTS OF INSTANT CASE AND THUS, ACTION OF ASSESSING OFFICER IN DISALLOWING DEDUCTION U/S. 10B ON THE INTEREST INCOME ON FDR OF RS. 9,45,200/- IS NOT SUSTAINABLE. HOWEVER, AS REGARDS INTEREST INCOME ON DEPOSIT WITH ELECTRICITY COMPANY, I FIND THAT APPELLANT HAS FAILED TO PROVE ANY SUCH NEXUS & THUS , ACTION OF ASSESSING OFFICER IN DISALLOWING DEDUCTION U/S. 10B ON SAID INTEREST INCOME OF RS.2,02,386/- IS CONFIRMED. ACC ORDINGLY, OUT OF TOTAL DISALLOWANCE OF RS. 11,47,586/- MADE BY TH E ASSESSING OFFICER, DISALLOWANCE TO THE EXTENT OF RS. 9,45,200 /- IS HEREBY DELETED & THE BALANCE AMOUNT OF RS. 2,02,386/- IS C ONFIRMED. 4. ON THE BASIS OF OBSERVATION OF LD. CIT(A) SINCE THE ASSESSEE HAS NOT PROVED THE NEXUS IN RESPECT OF PART OF INTE REST, THEREFORE, THE VIEW TAKEN BY THE LD. CIT(A) APPEARS TO BE A JUSTIFIED VIEW, HENCE, HEREBY CONFIRMED. 5. FURTHER, WE HAVE ALREADY FOLLOWED THE DECISION O F THE RESPECTED CO-ORDINATE BENCH, THEREFORE, REVENUES G ROUND IS ALSO DISMISSED. 6. IN THIS VIEW OF THE MATTER FOLLOWING DECISION OF THE HONBLE CO- ORDINATE BENCH IN ASSESSEES OWN CASE IN RESPECT OF THE ASSESSMENT YEAR 2005-06 IN ITA NO. 3353/AHD/2009 THIS GROUND OF REV ENUES APPEAL IS DISMISSED. 7. THE APPEAL OF REVENUE IS DISMISSED. SD/- SD/- ( A.K. GARODIA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL ME MBER A.KUMAR 5 ITA NO. 674 OF 2012 ASST. YEAR.2007-08 COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDED 3. THE CIT(APPEALS)-II, BARODA 4. THE CIT CONCERNED. 5. THE DR, ITAT, AHEMEDABAD 6. GUARD FILE BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 18/06/2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 19/06/2012 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..