AIREN METALS PVT. LTD., Jaipur V. ACIT, Jaipur

ITA 961/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99319 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Keywords: Business income
• Section: 143(3); 234B; 80IB

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NOS. 961/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2008-09 . M/S. AIREN METALS PVT. LTD., G-750, ROAD NO. 9F-2, VKI AREA, JAIPUR. CUKE VS. THE ACIT, CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AABCA 5583 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT /KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11.09.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 17/09/2015. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THIS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A)-I, JAIPUR DATED 20.09.2013 FOR THE A.YS. 2008-09. THE GROUND S RAISED IN THE APPEALS ARE AS UNDER :- 1) THE IMPUGNED ADDITIONS AND DISALLOWANCES MADE IN THE ORDER U/S 143(3) DATED 27.10.2010 ARE BAD IN LAW AND ON FACTS OF THE CASE, FOR WANT OF JURISDICTION AND VARIOUS OTHER REASONS AND HENCE TH E SAME KINDLY BE DELETED. 2 ITA NO. 961/JP/2013 A.Y. 2008-09 M/S. AIREN METALS PVT. LTD. VS. ACIT JAPUR. 2) THE LD. CIT (A) ERRED IN LAW AS WELL AS ON THE F ACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF THE DEDUCTION CLAIME D U/S 80IB ON INTEREST RECEIVED ON FDR AMOUNTING TO RS. 16,97,627/- BY TRE ATING THE SAID INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS AND PROFESSION, WHICH IS CONTRARY TO THE PROVISION OF LAW AS WELL AS THE FACTS. HENCE THE INTEREST INCOME BE DIRECTED TO BE ASSESSED AS INCOME FROM BUSINESS AND THE DEDUCTION U/S 80IB BE ALLOWED, AS CLAIMED. 3) THE AO ERRED IN LAW AS WELL AS ON THE FACTS OF T HE CASE IN CHARGING INTEREST U/S 234A, 234B & 234C OF THE ACT. THE APPELLANT TOT ALLY DENIES IT LIABILITY OF CHARGING OF ANY SUCH INTEREST. THE INTEREST, SO CHARGED, BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, MAY KINDLY BE D ELETED IN FULL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING OF ALUMINUM AND COPPER STRIPS. D URING THE A.Y. 2008-09 THE ASSESSEE HAS FILED ITS RETURN DECLARING TOTAL INCOM E OF RS. 3,00,38,160/- ON 30.09.2008 ALONG WITH AUDIT REPORT IN FORM NO. 3CB & 3 CD. TH E CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ACCORDINGLY NOTICES UNDER SEC TION 143(2)/142(1) WERE ISSUED FROM TIME TO TIME. LASTLY THE CASE WAS FIXED FOR HEARING ON 25.10.2010. THE ASSESSEE PRODUCED BOOKS OF ACCOUNTS, BILLS AND VOUCHERS ETC. WHICH WERE TEST CHECKED. 3. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DECLARED GROSS PROFIT @ 4.48% ON TURNOVER OF RS. 182.68 CRORES. AFTER CONSI DERING THE SUBMISSIONS OF THE ASSESSEE, THE AO DISALLOWED THE DEDUCTION UNDER SEC TION 80IB ON THE INTEREST EARNED ON FDR AMOUNTING TO RS. 16,97,627/-. THE AO HELD THAT SINCE THE INTEREST INCOME WAS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING, THE ASSESS EE WAS NOT ENTITLED FOR DEDUCTION OF THIS AMOUNT. THE AO ISSUED NOTICE TO THE ASSESSEE A SKING TO SHOW CAUSE AS TO WHY THIS AMOUNT SHOULD NOT BE ADDED TO THE TOTAL INCOME OF T HE ASSESSEE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT (A) WHO HAD DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING A S UNDER :- 3 ITA NO. 961/JP/2013 A.Y. 2008-09 M/S. AIREN METALS PVT. LTD. VS. ACIT JAPUR. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE S UBMISSIONS MADE. I AM UNABLE TO AGREE WITH THE CONTENTION OF THE A/R ON T HE GROUND THAT INTEREST RECEIVED FROM BANK ON ACCOUNT OF FDRS WAS NOT A BU SINESS INCOME OF THE APPELLANT. THE SAME WAS AN INDEPENDENT SOURCE OF IN COME WHICH HAD RIGHTLY BEEN TAXED AS INCOME FROM OTHER SOURCES IN VIEW OF THE SUPREME COURT DECISION IN THE CASE OF CIT VS. STERLING FOOD S (237 ITR 579), DECISION IN THE CASE OF PANDIAN CHEMICALS VS. CIT ( 262 ITR 278), DECISION OF TUTI COURIN ALKALIES AND FERTILIZERS LTD. VS. CI T (227 ITR 172). HENCE THE ADDITION MADE BY THE AO IS, THEREFORE, CONFIRME D. 5. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 6. DURING THE COURSE OF ARGUMENT, THE LD. A/R SUBM ITTED THAT ALL THE INTEREST INCOME EARNED ON THE FDRS IS A BUSINESS INCOME. IT WAS SUBMITTED BY THE LD. A/R THAT THE INVESTMENT IN THE SUBJECTED FDRS OF RS. 172,30, 000/- WERE MADE FROM THE CC ACCOUNT. FURTHER IT WAS SUBMITTED, THE PAID UP CA PITAL ALONG WITH RESERVES WERE ALREADY STOOD UTILIZED FOR THE PURPOSE OF ASSETS AS THE COMPANY IS VERY OLD. THE ASSESSEE WAS REQUIRED TO PURCHASE THE RAW MATERIAL AGAINST THE L.C (LETTER OF CREDIT) OR AGAINST THE ADVANCE PAYMENT TO THE SUPPLIERS OF RAW MATERIAL. FOR THE PURPOSES OF ISSUING THE L/C, AS PER THE NORMS, THE ASSESSEE IS REQUIRED TO PLACE THE FDRS OF SUITABLE AMOUNT/MARGIN MONEY AS SECURITY WITH THE ISSUING BA NKER. IT WAS SUBMITTED THAT, THE FDRS WERE DEPOSITED WITH THE BANK AS A BUSINESS EX IGENCIES AND ON ACCOUNT OF THE COMPULSION. THE LD. A/R HAS FURTHER SUBMITTED THAT THE ASSESSEE IS NOT HAVING ANY SURPLUS MONEY AND IN FACT IS UTILIZING THE CASH CREDIT LIMI T FOR THE PURPOSES OF MAKING THE FDRS. 4 ITA NO. 961/JP/2013 A.Y. 2008-09 M/S. AIREN METALS PVT. LTD. VS. ACIT JAPUR. IT IS ALSO CONTENDED BY THE LD. A/R THAT THE ASSES SEE IS ALSO PAYING THE INTEREST ON THE UTILIZATION OF CASH CREDIT LIMIT AND FOR ISSUANCE O F LETTER OF CREDIT IN FAVOUR OF THE SUPPLIERS. THE INTEREST PAID BY THE ASSESSEE ON TH E UTILIZATION OF THE L/C AND CC LIMIT , HAS BEEN CLAIMED BY THE ASSESSEE AS A BUSINESS EXPE NDITURE. IT WAS SUBMITTED BY THE LD. A/R THAT THESE ARGUMENT S OF THE ASSESSEE WERE NOT CONSIDERED BY THE AO AND THEREFORE, THE AO MADE THE DISALLOWANCE OF DEDUCTION U/S 80IB OF RS. 16,97,627/-. 5. LASTLY, THE LD. A/R OF THE ASSESSEE POINTED OUT THAT VIDE ORDER DATED 12.11.2010 IN ITA NO. 870/JP/2009 FOR THE A.Y. 2006-07 PASSED BY THE TRIBUNAL, WHEREIN IN THE SIMILAR CIRCUMSTANCES THE HONBLE TRIBUNAL DIRECTED THE AO TO EXAMINE THE CASE OF THE ASSESSEE. THE RELEVANT DIRECTION ISSUED BY THE TRIB UNAL IS REPRODUCED HEREIN BELOW :- 5. THIS ISSUE HAS BEEN SETTLED BY THE HONBLE APE X COURT IN THE CASE OF LIBERTY INDIA VS. CIT, 317 ITR 218 (SC) WHEREBY IT HAS BEEN HELD THAT INTEREST COMPONENT CANNOT BE TREATED AS DERIVED FRO M INDUSTRIAL UNDERTAKING. THEREFORE, DEDUCTION UNDER SECTION 80I B ETC. IS NOT ALLOWABLE. HOWEVER, WE FIND THAT NETTING OF INTERES T I.E. INTEREST EXPENDITURE AND INTEREST INCOME HAS TO BE TAKEN INT O CONSIDERATION WHILE ARRIVING AT THE CONCLUSION THAT WHETHER INTEREST EA RNED IS INCOME FROM OTHER SOURCES OR IS LIABLE TO BE SET OFF AGAINST EA CH OTHER. IT WAS SUBMITTED BY LD. A/R THAT FOR MAKING FDR IN THE BAN K FOR THE PURPOSE OF OVER DRAFT FACILITY THE ASSESSEE BORROWED FUNDS FRO M THE PRIVATE PARTIES. THE ASSESSEE HAD INCURRED EXPENDITURE ON ACCOUNT OF LOANS TAKEN FROM VARIOUS PARTIES MORE THEN THE INTEREST EARNED ON FD RS. THERE IS A DIRECT NEXUS BETWEEN EARNING AND EXPENDITURE OF INCOME. TH EREFORE, NETTING OF INTEREST HAS TO BE ALLOWED FIRST. THESE SUBMISSIONS OF THE ASSESSEE HAS NOT BEEN CONSIDERED BY THE AO WHILE DENYING DEDUCTION U NDER SECTION 80IB. 5 ITA NO. 961/JP/2013 A.Y. 2008-09 M/S. AIREN METALS PVT. LTD. VS. ACIT JAPUR. THERE IS ALSO NO DISPUTE THAT NETTING OF INTEREST H AS TO BE ALLOWED IF THERE IS INEXTRICABLE LINK AS HELD BY THE SPECIAL BENCH O F THE TRIBUNAL IN CASE OF LAL SONS., 89 IOTD 25 (SB). ACCORDINGLY, WE SET ASI DE THIS ISSUE TO THE FILE OF AO TO ALLOW NETTING OF INTEREST IF THERE IS A DI RECT NEXUS AND THEN CONSIDER THE INTEREST INCOME FOR THE PURPOSE OF DIS ALLOWING DEDUCTION UNDER SECTION 80IB IF INTEREST INCOME EXCEEDS FROM THE INTEREST EXPENDITURE. WE ORDER ACCORDINGLY. 7. IT WAS ALSO CONTENDED BY THE LD. A/R OF THE ASSE SSEE THAT AFTER PASSING OF THE ORDER BY THIS TRIBUNAL, THE LD. AO HAS ALLOWED THE DEDUCTION VIDE ORDER DATED 28.07.2011 IN THE FOLLOWING MANNER : IN THE INSTANT CASE ASSESSEE HAD PAID INTEREST TO THE BANK FROM THE LOAN TAKEN FROM IT, WHILE THE INTEREST RECEIVED AS BECAUSE THE COMPANY HAD TO MAKE FDRS WITH THE BA NK BECAUSE OF THE LOAN ADVANCED TO IT. THEREFORE THERE WAS A CLEAR NE XUS B ETWEEN THE RECEIVING OF INTEREST AND PAYING OF INTEREST. ON PE RUSAL OF TABLE OF INTEREST GIVEN BY THE ASSESSEE IT IS SEEN THAT DURING THE YE AR COMPANY HAD RECEIVED INTEREST OF RS. 1,16,822/- WHILE IT HAD PAID INTERE ST OF RS. 2,01,780/-. THEREFORE, THE COMPANY HAD BORNE EXCESS INTEREST O F RS. 84,957.91 LOOKING TO THE SUBMISSIONS GIVEN BY THE ASSESSEE AND THE DI RECTIONS OF THE HONBLE ITAT THE INTEREST INCOME BEING IN THE NEGATIVE AFTE R NETTING IN THE CASE OF THE ASSESSEE, THEREFORE DEDUCTION U/S 80IB IS COMPUTED AFTER CONSIDERING THE INTEREST INCOME.. 8. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER POI NTED OUT THE ASSESSMENT ORDER FOR THE A.Y. 2009-10 WHEREBY THE AO HAS ALLOWED TH E DEDUCTION CONSIDERING THE INTEREST INCOME AS BUSINESS INCOME, AS CLAIMED BY THE APPELLANT HEREIN, SUBMITTING THAT NO VARIATION WAS MADE IN THE CLAIM OF DEDUCTIO N BY THE AO. 6 ITA NO. 961/JP/2013 A.Y. 2008-09 M/S. AIREN METALS PVT. LTD. VS. ACIT JAPUR. 9. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HERE IS NO CHANGE IN BUSINESS ACTIVITIES OF THE ASSESSEE AND THE INTEREST ACCRUED FROM THE FDRS, WAS CONTINUED TO BE LESS THAN THE INTEREST PAID TO THE BANKS FOR AVAILI NG THE CASH CREDIT LIMIT AND LETTER OF CREDIT. IN FACT, IT WAS ALSO POINTED OUT FROM THE P APER BOOK THAT THEE IS A CLEAR CUT NEXUS BETWEEN THE INTEREST RECEIVED AND THE INTERES T PAID. 10. ON THE OTHER HAND, THE LD. D/R SUPPORTED THE OR DER OF LD. CIT (A). 11. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE AO DENIED THE CLAIM OF DEDUCTION U/S 80IB TAKING THE V IEW THAT INCOME EARNED BY WAY OF INTEREST FROM FDRS CANNOT BE TREATED AS INCOME FROM INDUSTRIAL UNDERTAKING. THUS HE TREATED THE INTEREST INCOME AS INCOME FROM OTHER SO URCES . WE HAVE PERUSED THE RECORD, IT IS CLEAR THAT ALMOST ALL THE FDRS WERE I SSUED IN FAVOUR OF THE ASSESSEE BY THE BANK PRIOR TO THE ASSESSMENT YEAR 2008-09 AS IT WAS NECESSARY AND COMPULSORY FOR GETTING THE CC LIMIT AND L/C IN FAVOUR OF THE SUPPL IERS. MOREOVER, THERE IS NO CHANGE IN BUSINESS AND THE CC LIMIT ON THE FDRS CONTINUES TO BE UTILIZED FOR THE SAME PURPOSES IN THE ASSESSMENT YEAR UNDER CONSIDERATION. EVEN THIS ISSUE WAS RAISED FOR THE ASSESSMENT YEAR 2006-07, HOWEVER, THE AO HAD ALLOWE D THE DEDUCTION AFTER CONCLUDING THAT THERE WAS NEXUS BETWEEN THE INTEREST EARNED AND INTEREST PAID. IN THE ASSESSMENT YEAR 2008-09 I.E. SUBJECT MATTER OF THE PRESENT APPEAL, THE ASSESSEE HAS EARNED INTEREST OF RS. 16,97,627/- AND HAS PAID THE INTEREST OF RS. 26,10,761/-. THUS THERE WAS NO NET INTEREST RECEIVED BY THE ASSESSEE. IN VIEW OF THE ABOVE SAID DISCUSSION AND IN VIEW OF THE FACT THAT THERE IS NO CHANGE IN THE CIRCUMSTANCES FOR THE AY 2008-09 VIS-A-VIS PRECEDING YEARS I.E. 2006-07 & 2007-08, W E THEREFORE, EXTEND THE BENEFIT WHICH HAS BEEN EXTENDED TO THE ASSESSEE BY THE AO F OR THE A.Y. 2006-07 FOR THE 7 ITA NO. 961/JP/2013 A.Y. 2008-09 M/S. AIREN METALS PVT. LTD. VS. ACIT JAPUR. PRESENT ASSESSMENT YEAR ALSO. ACCORDINGLY GROUND N O. 1 & 2 ARE ALLOWED. HENCE WE HAVE NO HESITATION TO SET ASIDE THE ORDERS PASSED B Y THE LD. CIT (A) AND THE AO FOR THE A.Y. 2008-09. 8. GROUND NO. 3 IS CONSEQUENTIAL IN NATURE. THE AO IS DIRECTED TO ALLOW RELIEF ACCORDINGLY. 9. IN THE RESULT, ASSESSEES APPEALS IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/09/2015. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 17 /09/2015 DAS/ VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S. AIREN METALS PVT. LTD. JAIPUR 2. IZR;FKHZ @ THE RESPONDENT- THE ACIT CIRCLE-4, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.961/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR 8 ITA NO. 961/JP/2013 A.Y. 2008-09 M/S. AIREN METALS PVT. LTD. VS. ACIT JAPUR.