THE DCIT CIR 18(1), MUMBAI V. M/S. CREATIVE GARMENTS, MUMBAI

ITA 7256/MUM/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1559 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 05-12-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SUDARIYA
• Assessee Lawyers: MADHUSUDAN SARAF
• Keywords: Business income; Set aside
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER. I.T.A. NO. 7256/MUM/2007 ASSESSMENT YEAR : 2002-03. DY. COMMISSIONER OF M /S CREATIVE GARMENTS, INCOME TAX, CIRCLRE-18(1), VS. 401, SUN INDL. ESTATE, MUMBAI. SUN MILL COMPOUND, LOWER PAREL, MUMBAI-400013. PAN : AAAFC0691F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEEPAK SUDARIYA. RESPONDENT BY : SHRI MADHUSUDAN SARAF. O R D E R PER J. SUDHAKAR REDDY : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-XVIII DATED 28-9-2007 ON THE FOLLOWING GROUNDS : (I) THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND F ACTS OF THE CASE. (II) THE CIT(A) ERRED IN DIRECTING THE AO TO TREAT THE INTEREST INCOME OF RS.3,01,517/- AS BUSINESS RECEIPT TO ALLOW DEDUC TION U/S 80HHC AFTER DEDUCTING 90% OF THE SAME UNDER EXPLANA TION (BAA) OF SECTION 80HHC WITHOUT APPRECIATING THE FAC T THAT THE INTEREST EARNED BY THE ASSESSEE HAS NO DIRECT NEXUS WITH THE EXPORT OF BUSINESS. (III) THE CIT(A) ERRED IN DIRECTING THE A.O. TO TRE AT THE FOREIGN EXCHANGE FLUCTUATION GAIN OF RS.5,29,590/- AS PART OF EXPORT TURN OVER AND ALLOW DEDUCTION U/S 80HHC WITHOUT APPRECIA TING THE FACT THAT THE GAIN DUE TO FLUCTUATION IN FOREIGN EX CHANGE IS NOT DERIVED FROM EXPORT AND HENCE CANNOT BE TAKEN AS PA RT OF EXPORT TURN OVER. (IV) THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE CIT(A)S DECISION IN FAVOUR OF THE ASSESSEE ON THE ISSUE OF FOREIGN 2 EXCHANGE FLUCTUATION GAIN WAS NOT ACCEPTED AND THE APPEAL HAS BEEN FILED BEFORE THE HONBLE ITAT. (V) FOR THESE AND OTHER REASONS THAT MAY BE URGED A T THE TIME OF HEARING IT IS REQUESTED THAT THE ORDER OF THE CIT( A) MAY BE SET ASIDE AND THAT OF THE A.O. RESTORED. 2. WE HAVE HEARD MR. DEEPAK SUDARIYA, LEARNED DR A ND MR. MADHUSUDAN SARAF, LEARNED COUNSEL FOR THE ASSESSEE. 3. ON A CAREFUL CONSIDERATION OF THE FACTS, WE FIN D THAT THE FIRST ISSUE IS WITH REGARD TO COMPUTATION OF RELIEF U/S 80HHC ON INTEREST INCOME EARNED BY THE ASSESSEE. WE FIND THAT IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS FROM 2000-01 TO 2004-05 THE ISSUE HAS COME UP BEFORE THE TRIBUNAL AND IT HAS BE EN HELD THAT THE INTEREST INCOME HAS BEEN EARNED BY THE FIRM FROM TH E DEPOSITS MADE WITH THE BANKS AS MARGIN MONEY FOR AVAILING EXPORT CREDIT FACILITIES AND THAT THE SAME IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AND AS THERE IS A NEXUS BETWEEN THE INTEREST EARNED AND INTEREST EXPENDITURE EARNED, ONLY NET INTEREST HAS TO BE ELI MINATED IN TERMS OF CLAUSE (BAA) TO EXPLANATION TO SECTION 80HHC. THE F IRST APPELLATE AUTHORITY FOLLOWED THE ABOVE DECISIONS AND ALLOWED GROUND OF THE ASSESSEE. WE SEE NO INFIRMITY IN THE SAME 4. IN THE RESULT, THIS GROUND OF THE REVENUE IS DI SMISSED. 5. COMING TO THE SECOND ISSUE, I.E. THE TREATMENT OF FOREIGN EXCHANGE FLUCTUATION GAIN, THE ISSUE IS NOW STANDS COVERED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF ACIT VS. SHRI PRAKASH N. SHAH I (2008) 306 ITR (AT) 1 (MUM.) (SB). WE FIND THAT THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE EAR LIER ASSESSMENT YEARS HAS SET ASIDE THE MATTER TO THE FILE OF THE A O FOR FRESH ADJUDICATION ON THE LINES DECIDED BY THE SPECIAL BENCH IN THE CA SE OF PRAKASH N. SHAH (SUPRA). RESPECTFULLY FOLLOWING THE SAME, WE S ET ASIDE THIS ISSUE 3 TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THUS THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, REVENUES APPEAL IS ALLOWED IN P ART. ORDER PRONOUNCED ON THIS 20 TH DAY OF NOVEMBER, 2009. SD/- SD/- (D.K. AGARWAL) (J. SUDHAKAR REDD Y) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 20 TH NOVEMBER, 2009 WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, J-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES