M/s. Paras Motors Mfg.Co., Daman V. The ACIT., Vapi Circle, Vapi

ITA 875/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60536 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 20-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: HEMANT BAHEDIA
• Keywords: Business income

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , ! '#, $% $ & BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. ./ I.T.A. NO.875/AHD/2012 A.Y. 2009-10 2. ./ I.T.A. NO.1079/AHD/2012 A.Y.2009-10 1.M/S.PARAS MOTOR MFG.CO. PLOT NO.13/8 DAMAN INDUSTRIAL ESTATE SOMNATH, DAMAN, UT 2.ACIT, VAPI CIRCLE, VAPI ! ! ! ! / VS. 1. THE ACIT VAPI CIRCLE, VAPI 2. M/S.PARAS MOTOR MFG.CO. DAMAN, UT ) $% ./*+ ./ PAN/GIR NO. : AADFP 2489 B ( ), / // / APPELLANT ) .. ( -.), / RESPONDENT ) ), / $ / APPELLANT BY : SHRI HEMANT BAHEDIA, C.A. -.), 0 / $ / RESPONDENT BY : SHRI B.L. YADAV, SR.D.R. !1 0 % / / / / DATE OF HEARING : 18.6.12 234 0 % / DATE OF PRONOUNCEMENT : 22.6.12 $5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE ARE CROSS-APPEALS FILED BY BOTH THE SIDES A RISING FROM THE ORDER OF THE LEARNED CIT(APPEALS)-VALSAD DATED 06.0 2.2012. [A] ASSESSEES APPEAL (ITA NO.875/AHD/2012) 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS; REPRO DUCED BELOW:- THE LEARNED ACIT HAS ERRED IN CONSIDERING FOLLOW ING INCOMES AS INCOME NOT ELIGIBLE FOR DEDUCTION U/S.80IB. ITA NO.875/AHD/2012 (BY ASSESSEE AND ITA NO.1079/AHD/2012 (BY REVENUE) PARAS MOTOR MFG.CO. VS. ACIT ASST.YEAR 2009-10 - 2 - DISALLOWANCE BY TREATING THE INCOME FROM INTERST IN COME FO RS.99,24,615/- AS INCOME NOT ELIGIBLE FOR DEDUCTION U/S.80IB. 2.1. IN RESPECT OF THE ISSUE AS RAISED HEREINABOVE, THE RELEVANT FACTS AS EMERGED FORM THE CORRESPONDING ASSESSMENT ORDER PAS SED U/S.143(3) OF THE I.T.ACT DATED 23.08.2011 ARE THAT THE ASSESSEE- FIRM IS IN THE BUSINESS OF MANUFACTURING OF ELECTRIC MOTORS. ON PERUSAL OF PROFIT & LOSS ACCOUNT, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS INCLUDED INTEREST INCOME IN THE PROFIT FOR THE PURP OSE OF COMPUTATION OF DEDUCTION U/S.80IB OF THE I.T.ACT. THE ASSESSING O FFICER HAS DISALLOWED THE CLAIM IN THE LIGHT OF THE FOLLOWING OBSERVATION S:- REGARDING EXCLUSION OF SUCH INCOME, THE ASSESSEE H AS SUBMITTED THAT: SIR, INTEREST INCOME OF RS.99,24,615/- ARISES FROM BANK FDRS AND LC MARGIN MONEY FOR PROCURING RAW MATERIAL FROM ABR OAD IN NORMAL COURSE OF OUR BUSINESS. THEREFORE, INTEREST INCOME EARNED ON THAT FDR IS ELIGIBLE OR BUSINESS INCOME U/S.80IB . THE EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE. THE INTEREST INCOME IS NOT HAVING ANY DIRECT AND IMMEDIATE NEXUS WITH THE ACTIVITY OF INDUSTRIAL UNDERTAKING AND THEREFORE IT IS NOT THE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING THOUGH MAY BE ATTRIBUTABLE TO THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. THE ASSESSEE COULD NOT SHOW AT THE TIME OF ASSESSMENT PROCEEDINGS THAT THE FDRS WERE MADE OUT OF BORROWED FUNDS AND NOT FROM THE SU RPLUS FUNDS. 2.2. BEING AGGRIEVED, THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHO HAS DISMISSED THE CLAIM AS PER THE FO LLOWING CRYPTIC DECISION. ITA NO.875/AHD/2012 (BY ASSESSEE AND ITA NO.1079/AHD/2012 (BY REVENUE) PARAS MOTOR MFG.CO. VS. ACIT ASST.YEAR 2009-10 - 3 - 6.3. DECISION :- I HAVE CONSIDERED THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER AS WELL AS THE CONTENTION R AISED BY THE AR OF THE APPELLANT IN THE WRITTEN SUBMISSION. THE AR OF THE APPELLANT TAKEN THE SAME ARGUMENTS AS TAKEN BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEV ER, IN VIEW OF THE DECISION OF THE HONBLE ITAT, AHMEDABAD, IN THE CASE OF INDUCTOTHERM (INDIA) PVT.LTD. ITA NO.3850, 3851 AND 3852 AND MIRA INDUSTRIES 87 ITD 475 AND THE DECISION OF HON BLE PUNJAB HARYANA HIGH COURT , I HELD THAT THE INTEREST IS NOT AN INCOME DERIVED FROM MANUFACTURING ACTIVITY. THUS, THIS GR OUND OF APPEAL IS DISMISSED. 3. WE HAVE HEARD BOTH THE SIDES. FACTS OF THE CASE HAVE REVEALED THAT THE APPELLANT HAD DERIVED INTEREST INCOME ON FIXED DEPOSITS KEPT AS MARGIN MONEY WITH THE BANK AGAINST THE OPENING OF L ETTER OF CREDIT WITH THE SAID BANK FOR THE PURPOSE OF IMPORTING RAW-MATE RIAL SILICON SHEETS FROM OUTSIDE COUNTRY. LD.AR MR.HEMANT BAHEDIA HAS ARGUED THAT THE IMPORT OF RAW-MATERIAL WAS THEREFORE NECESSARY FOR THE MANUFACTURING ACTIVITY CARRIED OUT BY THE ASSESSEE. WHEN THE FAC ILITY OF L/C FOR WHICH A FIXED DEPOSIT WAS MANDATORY, THEREFORE THE EARNING OF INTEREST ON THOSE FIXED DEPOSITS HAD A DIRECT NEXUS WITH THE MANUFACT URING ACTIVITY OF THE ASSESSEE. THE ASSESSEE HAS CONSIDERED THE INTEREST INCOME AS BUSINESS INCOME AND NOT THE INCOME FROM OTHER SOURCES. WE H AVE ALSO NOTED THAT THE SAID CLAIM OF THE ASSESSEE THAT THE IMPUGNED IN TEREST INCOME HAPPENED TO BE BUSINESS INCOME WAS NOT CHALLENGED O R DISTURBED BY THE ASSESSING OFFICER WHILE COMPUTING THE TAXABLE INCOM E OF THE ASSESSEE. THE ASSESSEE HAS PLACED ON RECORD A CERTIFICATE OF HDFC BANK DATED 10.3.2008 TO DEMONSTRATE THAT THE ASSESSEE HAS FURN ISHED A COLLATERAL SECURITY IN THE SHAPE OF FDR WITH HDFC BANK WORTH O F RS.705 LACS ITA NO.875/AHD/2012 (BY ASSESSEE AND ITA NO.1079/AHD/2012 (BY REVENUE) PARAS MOTOR MFG.CO. VS. ACIT ASST.YEAR 2009-10 - 4 - PLEDGED WITH THE BANK FOR THE PURPOSE OF MARGIN O N L/CS. IN RESPECT OF THIS ISSUE RELIANCE HAS BEEN PLACED ON DCIT VS. SUD HIR GENSET LTD. (2009) 17 DTR (TRI.) 496 (DELHI), WHEREIN THE ASSES SEE HAD DERIVED INTEREST ON THE FIXED DEPOSIT KEPT AS A MARGIN MONE Y WITH THE BANK AND THEREFORE IT WAS HELD AS BUSINESS INCOME AND IT WAS ALSO HELD THAT THE ASSESSEE IS ENTITLED TO THE INCLUSION OF THE SAID I NCOME FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S.80IB OF THE I.T.ACT. I N THAT JUDGEMENT, RELIANCE HAS ALSO BEEN PLACED CIT VS. ELTEK SGS (P) LTD. (2008) 300 ITR 6 (DEL). AN ANOTHER PRESIDENT VIZ.CIT VS. EASTERN TAR (P) LTD. (2008) 301 ITR 427 (JHAR.) HAS ALSO BEEN CITED, WHEREIN IT WAS HELD THAT INTEREST ON INVESTMENT ACCOUNT OF IDBI AND FD WITH THE BANK HAD A CLOSE NEXUS WITH THE INDUSTRIAL UNDERTAKING, THEREFORE INTEREST ON SUCH DEPOSIT WAS HELD AS QUALIFIED FOR RELIEF U/S.80IB OF THE I.T.AC T. RELIANCE WAS PALCED ON CAMBAY ELECTRIC SUPPLY CO. VS. CIT 113 ITR 84 A ND CIT VS. UNITED CARBON LTD. (1991) 190 ITR 622(BOM). RESPECTFULLY FOLLOWING FEW JUDGEMENTS CITED HEREINABOVE, WE ARE OF THE CONSIDE RED VIEW THAT THE ASSESSEE LIKEWISE IS ENTITLED FOR THE BENEFIT OF DE DUCTION U/S.80IB OF THE I.T.ACT ON SUCH INTEREST INCOME WHICH HAD A DIRECT NEXUS WITH THE BUSINESS/INDUSTRIAL ACTIVITY OF THE ASSESSEE. RESU LTANTLY, THIS GROUND OF THE ASSESSEE IS ALLOWED AND APPEAL IS ALLOWED. [B] REVENUES APPEAL (ITA NO.1079/AHD/2012) 4. THE ONLY GROUND RAISED IS REPRODUCED BELOW:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE INCOME FROM SCRAP SALES OF RS.1,08,33,933/- IS ELIGIBLE FOR DEDUCTION U/S.80IB. ITA NO.875/AHD/2012 (BY ASSESSEE AND ITA NO.1079/AHD/2012 (BY REVENUE) PARAS MOTOR MFG.CO. VS. ACIT ASST.YEAR 2009-10 - 5 - 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE HAVE BEEN INFORMED THAT THIS ISSUE HAD BEEN RAKED-UP IN THE P AST AND NOW FULLY SETTLED IN FAVOUR OF THE ASSESSEE BY FEW DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE LISTED BELOW:- SL.NO(S) DECISION IN THE CASE OF IN ITA NO(S) 1. ACIT VS. PRAS MOTOR MFG.CO. 3706 & 3585/AHD/2007 AYS 2003-04 & 2005-06, ITAT D BENCH AHMEDABAD ORDER DATED 27/8/2010 2. ACIT VS. PARAS MOTORS MFG.CO. 1618/AHD/2009 AY 2006-07, ITAT D BENCH AHMEDABAD ORDER DATED 17/12/2009 3. ACIT VS. M/S.PARAS MOTOR MFG.CO. 2236/AHD/2010 AY 2007-08, ITAT D BENCH AHMEDABAD ORDER DATED 7/1/2011 6. SINCE A CONSISTENT VIEW HAS BEEN TAKEN IN RESPEC T OF QUESTION OF HOLDING SALE OF SCRAP GENERATED AS A BY-PRODUCT DURING INDUSTRIAL MANUFACTURING ACTIVITY FOR THE PURPOSE OF ELIGIBI LITY OF DEDUCTION U/S.80IB, THEREFORE FOR THE YEAR UNDER CONSIDERATIO N AS WELL ON IDENTICAL FACTS, WE HERBY AFFIRM THE FINDINGS OF LD .CIT(A) AND DISMISS THIS GROUND OF THE REVENUE. ITA NO.875/AHD/2012 (BY ASSESSEE AND ITA NO.1079/AHD/2012 (BY REVENUE) PARAS MOTOR MFG.CO. VS. ACIT ASST.YEAR 2009-10 - 6 - 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED, WHE REAS REVENUES APPEAL IS DISMISSED. SD/- SD/- ( ! '# ) ( ) $% ( ANIL CHATURVEDI ) ( MUKU L KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 22/ 6 /2012 6..!, .!../ T.C. NAIR, SR. PS $5 0 -7 8$74 $5 0 -7 8$74 $5 0 -7 8$74 $5 0 -7 8$74/ COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-VALSAD 5. 7<= -! , , / DR, ITAT, AHMEDABAD 6. = >1 / GUARD FILE. $5! $5! $5! $5! / BY ORDER, .7 - //TRUE COPY// ? ?? ?/ // / * * * * ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION18.6.12 (DICTATION-PAD PAGES 10 ATTACHED) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20.6.12 OTHER MEMBER 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 D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S22.6.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 22.6.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER .