M/s Vardhman Holdings Ltd., Ludhiana V. JCIT, Ludhiana

MA 2/CHANDI/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3047 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-08-2022
• Assessment Year: 2004-2005
• Appeal Filed On: 26-01-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Set aside
• Section: 80HHC; 80HH; 254(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B’, CHANDIGARH BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER Miscellaneous Application No. 2 /Chd/2020 (In ITA No. 527/Chd/2009) नधा रण वष / Assessment Year : 2004-05 M/s Vardhman Holdings Ltd. Ludhiana बनाम The JCIT Ludhiana थायी लेखा सं./PAN NO: AABCV8088P अपीलाथ /Appellant यथ /Respondent नधा रती क ओर से/Assessee by : Shri Pankaj Gupta, Advocate Shri Rishit Dhingra, CA राज व क ओर से/ Revenue by : Shri Akashdeep, JCIT, Sr. DR स ु नवाई क तार%ख/Date of Hearing : 26/08/2022 उदघोषणा क तार%ख/Date of Pronouncement : 30/08/2022 आदेश/Order Per Vikram Singh Yadav, Accountant Member: This Misc. Application has been filed by the assessee against the order of the Coordinate Bench passed in ITA No. 527/Chd/2009 dt. 31/05/2019 pertaining to A.Y. 2004-05 regarding one of the grounds of appeal raised by the assessee against the order of Ld. CIT(A) directing to reduce 90% of interest received from customers and suppliers from profits of business for the purposes of deduction under section 80HHC of the Act. 2. It was submitted by the ld AR that the Coordinate Bench vide para 44 of its order has allowed the netting off the interest received with interest expenditure by following earlier year order passed in assessee’s own case and restored the issue to the file of the AO. 2.1 It was submitted that before the Coordinate Bench, the assessee had placed on record judgment of Hon’ble Punjab & Haryana High Court in the case of Phatela Cotgin Industries (P) Ltd. Vs. CIT, 303 ITR 411 and pleaded that no part of the interest should be excluded for the purposes of deduction under section 80HHC of the Act. 2 2.2 It was submitted that the assessee had alternatively submitted before the the Coordinate Bench that netting of interest paid and received may be allowed in view of the judgment of the Hon’ble Supreme Court in the case of ACG Associated Capsules(P) Ltd. Vs. CIT, Mumbai, (2012) 343 ITR 89. 2.3 It was accordingly submitted that the Coordinate Bench inadvertently allowed the relief to the assessee by setting aside the matter to the file of the AO based upon alternate submission / case laws whereas relief could have been allowed to the assessee in view of the judgment of Hon’ble Punjab & Haryana High Court and there would have been no requirement for setting aside the matter to the file of the AO. 2.4 It was accordingly submitted that the apparent mistake has occurred in the order so passed by the Coordinate Bench and same be modified and relief may be allowed so that 90% of interest from customer/supplier is not reduced while calculating the deduction under section 80HHC of the Act. 3. Per contra, the Ld. Senior DR strongly objected to the Misc. Application so filed by the assessee. It was submitted that the decision of the Hon’ble Punjab & Haryana High Court in the case of Phatela Cotgin Industries (P) Ltd. Vs. CIT (supra) is in the context of Section 80HH and 80I whereas the issue under consideration relates to deduction under section 80HHC of the Act. It was further submitted that the Bench had followed its earlier decision in assessee’s own case for A.Y 203-04 and in the earlier year’s order, the Bench had followed the decision of the Hon’ble Apex Court in case of ACG Associated Capsules(P) Ltd. Vs. CIT (supra) and the matter has been decided in favour of the assessee and the directions has been given by the Bench setting aside the matter to the file of the AO. It was accordingly submitted that there is no mistake apparent on record in the order so passed by the Bench and the present Misc. Application so filed by the asssessee be dismissed. 4. We have heard the rival contention and perused the material available on the record. Firstly, it would be relevant to refer to the findings of the Coordinate Bench while disposing off the ground of appeal so taken by the assessee. In this regard, the relevant findings are contained at para 41 to 45 of the order so passed by the Coordinate Bench dt. 31/05/2019 which read as under: 3 “41. The Ld. Counsel for the assessee pointed that identical issue had been decided in favour of the assessee in the preceding year by the ITAT in ITA No. 88 & 118/Chd/2009. Our attention was drawn to the findings of the ITAT in para 62 of the order. Referring to the same, the Ld. Counsel for the assesee contended that the ITAT in the said case had restored the issue to the A.O. to determine the net interest earned by the assessee and directed exclusion of the same as against the gross interest reduced by the Revenue authorities. 42. The Ld. D.R fairly conceded that identical issue had been decided in the case of the assessee as pointed out by the Ld. Counsel for the assessee above. 43. We have heard the contentions of both the parties. We have also gone through the order of the ITAT in the case of the assessee for the preceding year at para 62 which reads as under: “ 62. We have heard the rival contentions. The Hon’ble apex court in the case of ACG Capsules(supra) has laid down the law that only net interest earned, excluding interest paid in relation to the same, is to be considered for the purpose of exclusion from the profits for calculating deduction u/s 80HHC of the Act. Following the same, we restore this issue to the AO to determine the net interest earned, as per the ratio laid down in the case of ACG Capsules(supra) and thereafter decide the issue in accordance with law. This ground of appeal No. 5(iv) is therefore allowed for statistical purposes.” 44. Admittedly identical issue has been decided in the case of the assessee itself in the preceding Assessment Year i.e. Assessment Year 2003-04. The said decision will therefore squarely apply to the present case also, following which we restore the issue to the AO and direct him to adjudicate the same in accordance with the directions given by the ITAT in ITA No. 88 & 118/Chd/2009 dt. 26-11-18. 45. The ground of appeal No. 10 is, therefore, allowed for statistical purposes.” 5. Further, it would also be relevant to refer to the Coordinate Bench decision passed in ITA No. 88 & 118/Chd/2009 pertains to A.Y. 2003-04 dt. 26/11/2018 wherein the relevant findings are contained at para 58 to 62 which read as under: “58. Ground No. 5(iv) raised by the assessee reads as under: “5 (iv) That the Ld. CIT(A) has erred in law and on the facts while reducing profits of business eligible for deduction u/s 80HHC by 90% of interest received from suppliers and customers amounting to Rs. 3,45,75,013/-. 59. This ground is against the action of the CIT(A) in reducing the profits of the business eligible for deduction u/s 80HHC by 90% of interest received from suppliers and customers amounting to Rs. 3,45,75,013/-. The AO had reduced 100% of the said interest. The CIT(A) held that the interest from customers/suppliers was in the nature of business income but 90% of the same should be deducted from the profits of the business for computing deduction u/s 80HHC of the Act. 60. Before us, the Ld. Counsel for assessee contended that the interest from customers and suppliers being in the nature of business income there is no reason for deducting 90% of the same from the profits of the company for the purpose of calculating deduction u/s 80HHC of the Act. Reliance was placed on the decision of the Hon’ble Punjab & Haryana High Court in the case of Phatela Cotgin Industries P. Ltd. Vs. CIT (2007) 303 ITR 411 (P&H) for the proposition that the interest from customers was eligible for deduction u/s 80HHC/80IA of the Act. It was further contended that in any case, the interest income to 4 be reduced should be that after netting the interest expenses incurred and in this regard reliance was placed on the decision of the High Court in the case of M/s ACG Associated Capsules Pvt. Ltd.(supra) and the decision of the ITAT Chandigarh Bench in the case of ACIT Vs. Mahavir Spinning Mills Ltd. in ITA No. 212/2015 for assessment year 2001-02 dated 05/01/2016. It was also pointed out that in the case of sister concern of the assessee i.e; M/s Vardhman Textiles (supra) the I.T.A.T in a recent decision had held that 90% of such interest earned from customers and suppliers need not be reduced for the purpose of calculating deduction u/s 80HHC of the Act. Our attention was drawn to the relevant findings at pages 11 to 13 of the order. 61. Ld. DR relied on the order of the authorities below. 62. We have heard the rival contentions. The Hon’ble Apex Court in the case of ACG Capsules (supra) has laid down the law that only net interest earned, excluding interest paid in relation to the same, is to be considered for the purpose of exclusion from the profits for calculating deduction u/s 80HHC of the Act. Following the same, we restore this issue to the AO to determine the net interest earned, as per the ratio laid down in the case of ACG Capsule(supra) and thereafter decide the issue in accordance with law. This ground of appeal No. 5(iv) is therefore allowed for statistical purposes.” 6. We therefore find that the Coordinate Bench while disposing off the assessee’s ground of appeal not just considered its earlier decision in assessee’s own case for A.Y. 2003-04 but also in effect, followed the decision of the Hon’ble Supreme Court in case of ACG Associated Capsules(P) Ltd. Vs. CIT (supra) which has laid down the legal proposition that only net interest earned excluding interest paid in relation to the same is to be considered for the purpose of exclusion from the profit for calculating deduction under section 80HHC of the Act. It is also relevant to note that in the decision so passed by the Coordinate Bench for A.Y. 2003-04, which has been followed for the impugned assessment year, the assessee had also raised a similar contention drawing support from the earlier decision of Hon’ble Punjab & Haryana High Court in the case of Phatela Cotgin Industries (P) Ltd. Vs. CIT (supra). Taking the same into consideration and at the same time, following the dicta of the later decision of the Hon’ble Supreme Court in the case of ACG Associated Capsules(P) Ltd. Vs. CIT (supra) which will prevail over the Hon’ble High Court decision, the matter has been set aside to the file of the AO. We therefore do not find any mistake in the order so passed by the Coordinate Bench which has not just followed the principle of consistency by following its earlier year order but also following the decision of the Hon’ble Supreme Court which has been specifically brought to the notice of the Bench by assessee itself. 7. Even for the year under consideration, the assessee has referred to the decision of the Hon’ble Supreme Court in case of ACG Associated Capsules(P) Ltd. Vs. CIT (supra) during the course of hearing before the Coordinate Bench as evident 5 from Para 41 of the impugned order so passed by the Coordinate Bench. Whether the same has been pleaded by way of main contention or as an alternate contention is not borne out of the impugned order. In any case, where the Hon’ble Supreme Court has laid down a legal proposition and the same has been brought to the notice of the Bench, the Bench has to necessarily apply the said legal proposition to the facts of the case and to give effect to the same, where the matter has been set-aside to the file of the AO, there is no cause of action in terms of section 254(2) of the Act. 8. In any case once the specific directions have been given by the Coordinate Bench while setting aside the matter to the file of the AO, the Tribunal cannot sit in judgment against his own direction and passed fresh direction and that too, within the limited scope of Section 254(2) of the Act. 9. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, we do not find any merit in the Misc. Application so filed by the assessee and the same is dismissed. Order pronounced in open Court on 30/08/2022. Sd/- Sd/- (SUDHANSHU SRIVASTAVA) (VIKRAM SINGH YADAV) याय क सद य/Judicial Member लेखा सद य/Accountant Member Dated: 30/08/2022 AG आदेश क त,ल-प अ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय ु /त/ CIT 4. आयकर आय ु /त (अपील)/ The CIT(A) 5. -वभागीय त न2ध, आयकर अपील%य आ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File