M/s. Medieval Glass India P.Ltd., Jalandhar V. The Additional Commissioner of Income Tax, Phagwara

MA 109/ASR/2013

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1371 (ITAT-AMRITSAR)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 24-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S R CHHABRA
• Section: 80HHC; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER M.A. NO.109(SR)/2013 (ARISING OUT OF I.T.A. NO.109(ASR)/2013) ASSESSMENT YEAR:2007-08 PAN :AABC1403F M/S. MEDIEVAL GLASS INDIA PVT. LTD. VS. ADDL. COMMR . OF INCOME TAX, 335 KM MILESTONE, NH NO.1, PHAGWARA RANGE, VILL. DISTT. JALANDHAR. PHAGWARA. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.S.R.CHHABRA, ADVOCATE RESPONDENT BY:SH. MAHAVIR SINGH, DR DATE OF HEARING: 10/01/2014 DATE OF PRONOUNCEMENT:30/01/2014 ORDER PER BENCH ; THIS MISCELLANEOUS APPLICATION OF THE ASSESSEE ARI SES FROM THE ORDER OF THE TRIBUNAL DATED 11.09.2013 PASSED IN ITA NO.1 09(ASR)/2013 FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS FILED THE WRITTEN SUBMISSIONS IN THE MISC. APPLICATION, WHICH FOR THE SAKE OF CONVEN IENCE ARE REPRODUCED AS UNDER: MA NO.109(ASR)/2013 2 1. THE ABOVE QUOTED APPEAL WAS HEARD BY THE HONBLE BE NCH ON 27.08.2013. 2. THE HONBLE ITATS ORDER DATED 11.09.2013 WAS RE CEIVED BY THE ASSESSEE ON 24.09.2013. COPY ENCLOSED. 3. ON A PERUSAL OF THE ORDER, IT IS SEEN THAT CERTA IN MISTAKES, WHICH ARE APPARENT FROM THE FACTS AND THE ARGUMENTS PLACE D BEFORE THE ITAT, HAVE CREPT IN THE ORDER, WHICH ARE PRAYED TO BE RECTIFIED. 4. (A) AS REGARDS RELIEF U/S 10B, WITH REGARD TO TH E SCRAP SALES OF RS.2,01,643/- (GROUND NO.1(A)(II), YOU HONOUR HAS D ISCUSSED THE SAME IN PARA 7 TO 7.2 ON PAGES 7-8 OF THE ORDER AND HAS DISMISSED THE ASSESSEES ARGUMENTS ON THE BASIS OF JURISDICTIONAL HIGH COURTS ORDER IN THE CASE OF M/ S. BICYCLE WHEELS (INDIA) REPORTED IN 335 ITR 384 (P&H). (B) THE ABOVE DECISION OF THE JURISDICTIONAL HIGH COURT, RELIED UPON BY THE AO AND THE CIT(A), WAS ALSO RELIED UPON BY THE ASSESSEE ITSELF. ACCORDING TO THIS JUDGMENT, THE SC RAP SALES HAVE TO BE INCLUDED IN THE TOTAL TURNOVER BY TREATING I T AS DOMESTIC SALES WHILE WORKING OUT RELIEF U/S 10B, WHICH HAS B EEN UPHELD BY YOUR KIND HONOURS AS WELL. (C) THE POINT ARGUED BEFORE YOUR KIND HONOUR ON 27 .08.2013 WAS THAT THERE WAS NO DISPUTE REGARDING INCLUSION O F SCRAP SALES IN THE TOTAL TURNOVER AND THE ONLY DISPUTE W AS AS TO HOW MUCH IS TO BE ADDED TO THE ASSESSEES INCOME IN VIE W OF THE ABOVE QUOTED JUDGMENT WHICH WAS MISINTERPRETED BY T HE LOWER AUTHORITIES. (D) ACCORDING TO THIS JUDGMENT I.E. 335 ITR 384 (P &H) , THE RELIEF ADMISSIBLE TO THE ASSESSEE U/S 10B WOULD BE AS FOLLOWS: TOTAL PROFIT X EXPORT TURNOVER (EXCLUDING SCRAP TU RNOVER) TOTAL TURNOVER (INCLUDING SCRAP TURNOVER) I.E. 2941330 X 52777997 = 2930135 52979640 THUS, RELIEF U/S 10B ADMISSIBLE TO THE A WOULD BE RS.29,30,135/- CLAIMED BY THE ASSESSEE. THEREFORE, THE ADDITION WOULD BE OF RS.11195/- AND NOT OF THE ENTIRE SALE V ALUE OF RS.2,01,643/- AS MADE BY THE AO AND UPHELD BY THE C IT(A) JALANDHAR. MA NO.109(ASR)/2013 3 IN VIEW OF THE ABOVE, THE MISTAKE BEING APPARENT F ROM RECORD, NEEDS TO BE RECTIFIED BY THE HONBLE BENCH. 5. (A) AS REGARDS RELIEF U/S 10B WITH REGARD TO INT EREST ON FDRS AMOUNTING TO RS.1,70,644/- (GROUND NO.1(A)(I), YOUR HONOUR HAS DISCUSSED THE SAME IN PARA 4 TO 6 ON PAGES 2-7 OF T HE ORDER AND HAS DISMISSED THE ASSESSEES ARGUMENTS IN VIEW OF 2 62 ITR 278 (SC) M/S. PANDIAN CHEMICALS AND 268 ITR 220 (P&H) R ANI PALIWALS CASES. (B) DURING THE COURSE OF HEARING, THE ASSESSEE DID NOT PLEAD THAT INTEREST INCOME SHOULD BE CONSIDERED AS DERIVED FRO M THE UNDERTAKING BUT ON THE OTHER HAND STRESSED THE POIN T THAT ONLY NET INTEREST I.E. INTEREST RECEIVED, MINUS THE EX PENDITURE HAVING NEXUS WITH INTEREST RECEIVED, BOTH CREDITED AND DEBITED TO THE P&L A/C, SHOULD BE CONSIDERED, FOR THE PURPO SE OF SECTION 10B AND NOT THE GROSS INTEREST WITHOUT TAKI NG INTO ACCOUNT THE EXPENDITURE HAVING NEXUS WITH THE RECE IPT. FOR THIS PURPOSE, THE ASSESSEE RELIED UPON THE DECISIONS OF THE HONBLE SUPREME COURT I.E. 1) (2012) 345 ITR 557 (SC) VIKAS KALRA (ORDER DATE D 08.02.2012) 2) (2012) 343 ITR 89 (SC) ACG ASSOCIATED CAPSULES (P) LTD ( ORDER DATED 8.2.2012) PAGE 31-33 OF PB). AND OTHER DECISIONS TAKEN NOTE OF BY THE BENCH IN PARA 4 OF ITS ORDER. THE POSITION IN REGARDS TO THE JUDGMENTS REL IED UPON BY THE ITAT AND THE JUDGMENTS RELIED UPON BY THE ASSES SEE IS EXPLAINED BELOW: (A) AS REGARDS RELIEF U/S 10B WITH REGARD TO INTER EST ON FDRS AMOUNTING TO RS.1,70,644/- (GROUND NO.1(A) (I), YOU R HONOUR HAS DISCUSSED THE SAME IN PARA 4 TO 6 ON PAGES 2-7 OF THE ORDER AND HAS DISMISSED THE ASSESSEES ARGUMENTS IN VIEW OF 262 ITR 278 (SC) M/S. PANDIAN CHEMICALS AND 268 ITR 220 (P& H) RANI PALIWALS CASES. B) DURING THE COURSE OF HEARING, THE ASSESSEE DID NOT PLEAD THAT INTEREST INCOME SHOULD BE CONSIDERED AS DERIVE D FROM THE UNDERTAKING BUT ON THE OTHER HAND STRESSED THE POIN T THAT ONLY NET INTEREST I.E. INTEREST RECEIVED, MINUS THE EX PENDITURE MA NO.109(ASR)/2013 4 HAVING NEXUS WITH INTEREST RECEIVED, BOTH CREDITED AND DEBITED TO THE P&L A/C, SHOULD BE CONSIDERED, FOR THE PURPO SE OF SECTION 10B AND NOT THE GROSS INTEREST WITHOUT TAKI NG INTO ACCOUNT THE EXPENDITURE HAVING NEXUS WITH THE RECEI PT. FOR THIS PURPOSE, THE ASSESSEE RELIED UPON THE DECISIONS OF THE HONBLE SUPREME COURT I.E. (1) [2012] 345 ITR 557 (SC) VIKAS KALRA (ORDER DTD. 08.02.2012) (2) [2012] 343 ITR 89 (SC0 ACG ASSOCIATED CAPSULES (P) LTD. ( ORDER DATED 8.2.2012 (PAGE 31-33 PB) AND OTH ER DECISIONS TAKEN NOTE OF BY THE BENCH IN PARA 4 OF I TS ORDER. THE POSITION IN REGARDS TO THE JUDGMENTS REL IED UPON BY THE ITAT AND THE JUDGMENTS RELIED UPON BY T HE ASSESSEE IS EXPLAINED BELOW:- (A) IN [2004] 268 ITR 220 (P&H) JUDGMENT DATED 7.10 .2003 IN RANI PALIWALS CASE, WHICH IS A 2 PAGE JUDGMENT , IT IS ADMITTED THAT THE HIGH COURT HAS HELD THAT GROSS IN TEREST HAS TO BE TAKEN INTO ACCOUNT AND NOT NET INTEREST F OR DEDUCTION U/S 80 HHC I.E. AGAINST THE PLEADINGS BY THE ASSESSEE. (B) IN A LATER DECISION REPORTED IN (2010) 326 ITR 56 (BOM.) DATED 09.03.2010 IN ASIAN STAR CO. LTD; THE BOMBAY HIGH COURT HAS TAKEN EXACTLY SIMILAR VIEW AS TAKEN BY THE HONBLE P & H HIGH COURT ( PARA 25 PAGE 73) REPRODU CED FOR YOUR KIND HONOURS PERUSAL AS BELOW: THE SAME VIEW HAS BEEN TAKEN BY A DIVISION BENCH O F THE P & H HIGH COURT IN RANI PALIWAL V. CIT (2004) 268 ITR 220 (P&H). IN THAT CASE, THE TOTAL INTEREST REC EIVED BY THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR WAS RS.6.33 LAKHS WHILE THE TOTAL INTEREST PAID WAS RS .4.12 LAKHS. THE A.O. WAS OF THE VIEW THAT NINETY PERCE NT OF THE RECEIPTS ON ACCOUNT OF INTEREST IN THE AMOUNT O F RS.6.33 LAKHS WAS LIABLE TO BE DEDUCTED FROM THE P ROFITS OF THE BUSINESS FOR THE PURPOSE OF DEDUCTION U/S 80 HHC. THE CIT(A), HOWEVER, TOOK THE VIEW THAT THE INTERES T WOULD HAVE TO BE NETTED. THE INCOME TAX APPELLATE MA NO.109(ASR)/2013 5 TRIBUNAL, ON APPEALS CONFIRMED THE VIEW OF THE A.O. BY HOLDING THAT NINETY PERCENT OF THE INTEREST THAT W AS DEDUCTIBLE FOR THE CLAIM U/S 80HHC WAS FROM THE GRO SS INTEREST RECEIVED BY THE ASSESSEE AND THAT THE AMOU NT OF THE INTEREST PAID BY THE ASSESSEE COULD NOT BE DEDU CTED THEREFROM. THE DIVISION BENCH HELD THAT A PLAIN RE ADING OF CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC MA KES THIS ASPECT QUITE CLEAR AND THE TRIBUNAL WAS RIGHT IN DISALLOWING THE CLAIM OF THE ASSESSEE. A SUBSEQUENT DECISION OF THE PUNJAB AND HARYANA HIGH COURT IN C IT VS. LIBERTY FOOTWEAR COMPANY (2006) 287 ITR 339 AL SO ADOPTS THE SAME POSITION. (C) IN THE LATEST DECISION DATED 8.2.2012 REPORTED IN (2012) 343 ITR 89 (SC), THE APEX COURT DEALT WITH BOMBAY HIGH COURTS DECISION IN THE CASE OF ACG ASSOCIATED CAPSULES (P) LTD. AND ALSO DELHI HIGH CO URTS DECISION IN THE CASE OF BHARAT RASAYAN LTD. THE HEA D NOTES OF THIS APEX COURTS DECISION ARE ALREADY AVA ILABLE ON PAGES 31-33 OF THE PAPER BOOK. THE FOLLOWING TWO ISSUES WERE DECIDED BY THE APEX COURT: I) ONE ISSUE WAS WHETHER THE ENTIRE SALE PRICE OF DEPB SHOULD BE TAKEN INTO ACCOUNT, AS HELD BY TH E BOMBAY HIGH COURT, OR NET AMOUNT I.E. SALE VALUE MI NUS FACE VALUE AND NOT THE GROSS AMOUNT SHOULD BE TAKEN INTO ACCOUNT. II) SECOND ISSUE WAS WHETHER GROSS INTEREST/RENT SHOULD BE TAKEN INTO ACCOUNT OR ONLY NET AFTER EXCL UDING THE EXPENDITURE HAVING NEXUS WITH SIMILAR RECEIPT. THE APEX COURT DECIDED BOTH THE ISSUES IN THE ASSESSEES FAVOUR BY HOLDING THAT ONLY NET AND NOT GROSS RECEIPT SHOULD BE TAKEN INTO ACCOUNT. BY THIS JUDGM ENT, THE APEX COURT OVERRULED BOMBAY HIGH COURTS JUDGMENT REPORTED IN 326 ITR 56 (BOM) ASIAN STAR CO . LTD WHICH HAD HELD THE SAME VIEW AS P & H HIGH COUR T IN PARA 25, ALREADY REPRODUCED ABOVE. MA NO.109(ASR)/2013 6 FROM THIS, IT WOULD BE VERY CLEAR THAT THE JUDGME NT OF P & H HIGH COURT IN RANI PALIWALS CASE (2004) 2 68 ITR 220 (P&H) WOULD STAND OVERRULED IMPLIEDLY. D) EVEN OTHERWISE, ONCE THE SUPREME COURTS JUDGMENT ON AN ISSUE IS AVAILABLE, THEN THE SAME W AS TO BE FOLLOWED EVEN IF JURISDICTIONAL HIGH COURTS ORD ER HOLDS A DIFFERENT VIEW. FULL COPY OF THE APEX COURT S JUDGMENT REPORTED IN 343 ITR 89 (SC) IS ENCLOSED FO R YOUR KIND HONOURS PERUSAL. IT WOULD NOT BE OUT OF PLACE TO MENTION THAT DELHI HIGH COURT IN ITS DECISION REPORTED IN (2007) 289 ITR 47 5 (DELHI) SHRI RAM HONDA POWER EQUIPMENT DATED 12.01.2007 ALSO HELD THE VIEW THAT ONLY NET AND NO T GROSS INTEREST ETC. HAS TO BE TAKEN INTO ACCOUNT DISSENTI NG FROM THE P & H HIGH COURTS DECISION IN RANI PALIWALS CASE. IT WOULD BE IMPORTANT TO NOTE THAT THIS DECISION O F THE DELHI HIGH COURT I.E. 289 ITR 475 (DEL) HAS BEEN APPROVED BY THE APEX COURT IN THE JUDGMENT REFERRED ABOVE I.E. 343 ITR 89 (SC) (E) AS REGARD APEX COURTS JUDGMENT IN VIKAS KALRA S CASE (345 ITR 557) REPRODUCED IN YOUR KIND HONOURS ORDER, THE ISSUE WAS, AS YOUR HONOUR HAS OBSERVED, WHETHER ENTIRE SALE PRICE OF DEPB SHOULD BE TAKEN I NTO ACCOUNT OR ONLY NET I.E. AFTER REDUCING THE FACE VA LUE OF DEPB. THE APEX COURT IN THE LAST PARAGRAPH, HELD T HAT THIS ISSUE HAS ALREADY BEEN DECIDED ON THE SAME DAT E IN THE CASE OF M/S. ACG ASSOCIATED CAPSULES (P) LTD ET C. THAT ONLY NET AND NOT GROSS HAS TO BE TAKEN INTO A CCOUNT. F) AS REGARDS APEX COURTS JUDGMENT IN 262 ITR 278 (SC), RELIED UPON BY THE BENCH, IT IS SUBMITTED THA T THE SUPREME COURT HAS DECIDED THE ISSUE WHETHER INTERES T ON FDR WOULD BE CONSIDERED AS DERIVED FROM THE UNDERTAKING AND IT WAS HELD NO. THE ISSUE OF NET TING, AS DECIDED BY THE APEX COURT NOW IN 343 ITR 89 (SC ), MA NO.109(ASR)/2013 7 WAS NOT BEFORE THE APEX COURT IN THIS JUDGMENT AND THERE FOR, THIS JUDGMENT IS NOT APPLICABLE AT ALL ON THE ISSUE IN OUR CASE. IN THE CASE OF THE ASSESSEE, IT HAD BEEN STATED TH AT FDRS WERE MADE OUT OF CASH CREDIT ACCOUNT AND SINCE INTE REST RATE ON CASH CREDIT ACCOUNT IS MORE THAN INTEREST GIVEN BY THE BANK ON FDR, THE NET RECEIPT WOULD BE EITHER N IL OR NEGATIVE AND THE PRINCIPLE OF NETTING WOULD APPL Y. SINCE YOUR HONOURS HAVE, BY OVERSIGHT, NOT ATTENDE D TO THE APEX COURTS JUDGMENT IN 343 ITR 89 (SC), IT IS CLEAR THAT THE SAME HAS NOT BEEN TAKEN NOTE OF, WHICH ULTIMATELY RESULTED IN A MISTAKE APPARENT FROM THE RECORD AND THE SAME MAY KINDLY BE RECTIFIED. 2. THE LD. COUNSEL FOR THE ASSESSEE, SH. S.R.CHHABR A, ADVOCATE ARGUED ON THE SIMILAR LINES, AS SUBMITTED IN THE MISC. APP LICATION AND PRAYED TO RECTIFY THE MISTAKE APPARENT FROM RECORD. 3. THE LD. DR, ON THE OTHER HAND, ARGUED THAT THE M ISC. APPLICATION FILED BY THE ASSESSEE IS, IN FACT, IS TO GET THE ORDER O F THE TRIBUNAL REVIEWED PASSED IN ITA NO.109(ASR)/2013 DATED 11.09.2013 AN D THE MISC. APPLICATION FILED BY THE ASSESSEE WILL TENTAMOUNT TO REVIEW OF ITAT ORDER WHICH IS WITHIN THE AMBIT OF SECTION 254(2) OF THE ACT AND THEREFORE, LD. DR PRAYED TO REJECT THE MISC. APPLICATION OF THE ASSES SEE. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. ON HEARING THE PARTIES AND ON PERUSAL OF OU R OWN ORDER, WE ARE OF MA NO.109(ASR)/2013 8 THE VIEW THAT THE MISC. APPLICATION FILED BY THE AS SESSEE IS OUTSIDE THE SCOPE OF SECTION 254(2) OF THE ACT WHICH WILL TANTAMOUNT TO REVIEW OF OUR OWN ORDER, WHICH IS NOT PERMITTED. THERE IS NO MISTAKE IN OUR ORDER, WHICH IS APPARENT FROM RECORD. ACCORDINGLY, THE MISC. APPLIC ATION FILED BY THE ASSESSEE IS DISMISSED. 5. IN THE RESULT, THE MISCELLANEOUS APPLICATION FIL ED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH JANUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30TH JANUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. MEDIEVAL GLASS INDIA (P) LTD. VIL L. BACKOWAL, TEHSIL PHILLAUR, DISTT. JALANDHAR. 2. THE ADDL. CIT, PHAGWARA RANGE, JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR