DCIT 16(3), V. R. MUNJAL; & CO.,

MA 400/MUM/2010

• Counselvise Citation: [2010] 123 COUNSELVISE.COM (IT) 4968 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2003-2004
• Appeal Filed On: 21-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Keywords: Business income
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'K' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER MA NO. 400/MUM/2010 (ARISING OUT OF ITA NO. 6932/MUM/2006) (ASSESSMENT YEAR: 2003-04) DCIT 16 (3) M/S. R. MUNJAL & CO. 206, 2ND FLOOR, MATRU MANDIR 201 PRASAD CHAMBERS, S WADESHI TARDEO ROAD, MUMBAI 400007 VS. MILLS COMPOUND, OPERA HOUSE MUMBAI 400004 PAN - AAAFR 8205 1 APPELLANT RESPONDENT APPELLANT BY: SHRI D. SONGATE RESPONDENT BY: SHRI VIJAY MEHTA O R D E R PER B. RAMAKOTAIAH, A.M. THIS MISCELLANEOUS APPLICATION FILED BY THE REVENUE IS AGAINST THE ORDER OF THE ITAT IN ITA NO. 6932/MUM/2006 DATED 16.02.20 10. THE MA IS FILED STATING THAT THE DIRECTION OF THE ITAT IN ALLOWING NETTING OF INTEREST INCOME AGAINST INTEREST PAID FOR THE PURPOSE OF CALCULATIN G DEDUCTION UNDER SECTION 80HHC FOLLOWING THE SPECIAL BENCH DECISION IN THE C ASE OF LALSONS ENTERPRISES 89 ITD 25 WAS NOT CORRECT AS THE SAME W AS REVERSED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT-3 VS. ASIAN STAR CO. LTD. IN ITA NO. 200 OF 2009. 2. THE LEARNED D.R. REITERATED THE SUBMISSIONS MADE IN THE MISCELLANEOUS APPLICATION. 3. THE LEARNED COUNSEL, HOWEVER, SUBMITTED THAT THE RE VENUES GROUND IN APPEAL WAS WITH REFERENCE TO THE ISSUE WHETHER INTE REST FROM FIXED DEPOSIT IS TO BE ASSESSED UNDER INCOME FROM OTHER SOURCES OR A S BUSINESS INCOME AND REFERRED TO THE ORDER OF THE CIT(A) WHEREIN THE CIT (A) HAS HELD THAT INTEREST FROM FIXED DEPOSIT IS TO BE TREATED AS BUSINESS INC OME BUT CONSEQUENT TO THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF CIT VS. V. MA NO. 400/MUM/2010 M/S. R. MUNJAL & CO. 2 CHINNAPANDI 282 ITR 328 DIRECTED THE A.O. TO EXCLUD E 90% OF THE GROSS INTEREST WHILE WORKING OUT THE DEDUCTION AS PER EXP LANATION (BAA) TO SECTION 80HHC. IT WAS HIS SUBMISSION THAT REVENUE COULD NOT HAVE BEEN AGGRIEVED ON NETTING ISSUE AS THE CIT(A) HAS DIRECTED THAT GR OSS INTEREST IS TO BE EXCLUDED. IT WAS FURTHER SUBMITTED THAT THE ASSESSE E WAS AGGRIEVED AND RAISED ONLY ONE GROUND WITH REFERENCE TO THE DIRECT ION OF THE CIT(A) ABOUT EXCLUDING 90% OF THE GROSS RECEIPT AND CLAIMED NETT ING IN ASSESSEES APPEAL IN ITA NO. 6940/MUM/2006. HE SAID THAT THE MA IS NO T MAINTAINABLE AS THE ISSUE IS NOT IN REVENUES APPEAL AS CLAIMED IN THE MA. 4. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE FACT S OF THE CASE THE A.O. HAS TREATED THE INTEREST INCOME OF ` 5,93,155/- AS INCOME FROM OTHER SOURCE WHEREAS THE ASSESSEE HAS CLAIMED A TOTAL OF ` 12,27,577/- INTEREST AND CLAIMED THE NET DEBIT OF ` 6,34,421/- IN THE P & L ACCOUNT. THE ISSUE BEFORE THE A.O. WAS WITH REFERENCE TO WHETHER THE I NTEREST ON FIXED DEPOSIT IS BUSINESS INCOME OR NOT. THE CIT(A), FOLLOWING THE J UDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INDO SWISS JEWELS LTD. 248 ITR 389 HELD THAT INTEREST ON FIXED DEPOSIT CAN BE REGA RDED AS INCOME FROM BUSINESS. TO THAT EXTENT THE FINDING OF THE A.O. WA S REVERSED. HOWEVER, FOLLOWING THE DECISION OF THE HON'BLE MADRAS HIGH C OURT IN THE CASE OF CIT VS. V. CHINNAPANDI 282 ITR 389, THE A.O. WAS DIRECT ED TO EXCLUDE 90% OF THE GROSS INTEREST UNDER EXPLANATION (BAA) TO SECTI ON 80HHC. EVENTHOUGH THE REVENUE HAS CONTENDED THAT THE CIT(A) ERRED IN DIRECTING THE A.O. TO ALLOW NETTING OF INTEREST ON FIXED DEPOSIT, IN FACT TO THAT EXTENT THE GROUND WAS MISLEADING AS THE CIT(A) HAS NOT ALLOWED ANY NE TTING OF INTEREST INCOME. THIS ASPECT WAS CONSIDERED AT THE TIME OF DECIDING THE ISSUE AND VIDE PARA 6 THE FOLLOWING WAS THE ORDER OF THE ITAT: - 6. AFTER CONSIDERING THE ARGUMENTS AND EXAMINING T HE RECORD WE ARE OF THE VIEW THAT THE DIRECTION OF THE CIT(A) IN CONSID ERING THE INTEREST INCOME RECEIVED ON FIXED DEPOSIT FOR THE PURPOSE OF EXPORT CREDIT LIMIT IS CORRECTLY HELD TO BE INCOME FROM BUSINESS. ACCORDINGLY, THE R EVENUES GROUND IS DISMISSED. WITH REFERENCE TO THE ASSESSEES APPEAL, THIS ISSUE IS ALSO DECIDED BY THE HON'BLE SPECIAL BENCH IN THE CASE O F LALSONS ENTERPRISES AS REPORTED IN 89 ITD 25 WHEREIN FOR THE PURPOSE OF CONSIDERATION OF INTEREST INCOME NETTING OF INTEREST IS TO BE CONSID ERED, IF THERE IS NEXUS. IN THE PRESENT CASE THERE IS NEXUS WITH THE EARNING OF INTEREST TO THE MA NO. 400/MUM/2010 M/S. R. MUNJAL & CO. 3 PAYMENT OF INTEREST AS THE LOAN WAS OBTAINED FOR TH E PURPOSE OF EXPORT AND OUT OF THE LIMITS SANCTIONED DEPOSIT WAS MADE. ACCORDINGLY WE MODIFY THE DIRECTION OF THE CIT(A) AND DIRECT THE A .O. TO CONSIDER NET OF INTEREST INCOME, IF ANY, ONLY TO BE CONSIDERED FOR EXCLUSION UNDER EXPLANATION (BAA) OF SECTION 80HHC. ACCORDINGLY THE ASSESSEES GROUND IS ALLOWED. 5. AS CAN BE SEEN FROM THE ABOVE THE GROUND IS CONSIDE RED TO THE EXTENT OF DECIDING WHETHER THE FIXED DEPOSIT INCOME IS TO BE CONSIDERED AS INCOME FROM BUSINESS OR NOT. ACCORDINGLY REVENUES GROUND IS DISMISSED. THE ISSUE OF NETTING WAS CONSIDERED IN ASSESSEES APPEAL IN I TA NO. 6940/MUM/2006. IT WAS THE ONLY GROUND RAISED BY THE ASSESSEE AND O N THE STRENGTH OF THE GROUND THE CIT(A)S DIRECTION IS MODIFIED AND GROUN D WAS ALLOWED. SINCE THE ISSUE WAS ALLOWED IN ASSESSEES APPEAL, THERE IS NO QUESTION OF CONSIDERING THE MISCELLANEOUS APPLICATION IN REVENUES APPEAL I N ITA NO. 6932/MUM/2006. TO THAT EXTENT REVENUE MA IS NOT COR RECT AS THE ISSUE DOES NOT ARISE. ACCORDINGLY THE SAME IS REJECTED. 6. IN THE RESULT, MA OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 17 TH SEPTEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XVII, MUMBAI 4. THE CIT XVI, MUMBAI CITY 5. THE DR, K BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.