Income Tax Appellate Tribunal - Delhi
Mmtc Ltd., New Delhi vs Acit, New Delhi on 12 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'E' : NEW DELHI)
BEFORE HON'BLE PRESIDENT, SHRI G.D. AGRAWAL
and
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.1415/Del./2011
(ASSESSMENT YEAR : 1996-97)
ITA No.217/Del./2005
(ASSESSMENT YEAR : 2000-01)
ITA No.4504/Del./2005
(ASSESSMENT YEAR : 2002-03)
M/s. MMTC Limited, vs. DCIT, Circle 5 (1),
Scope Complex, Core 1, New Delhi.
7, Institutional Area, Lodhi Road,
New Delhi - 110 003.
(PAN : AAACM1433E)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Ajay Vohra, Senior Advocate
Shri Rohit Jain, Advocate
Ms. Deepashree Rao, CA
Shri Vibhu Gupta, CA
REVENUE BY : Ms. Shefali Swroop, CIT DR
Date of Hearing : 04.04.2018
Date of Order : 12.04.2018
ORDER
PER KULDIP SINGH, JUDICIAL MEMBER :
Since common questions of facts and law have been raised in the aforesaid appeals, the same are being disposed of by way of consolidated order to avoid repetition of discussion. 2 ITA No.1415/Del./2011
ITA No.217 /Del./2005 ITA No.4504/Del./2005
2. The appellant, M/s. MMTC Limited (hereinafter referred to as 'the assessee company') by filing the present appeals, sought to set aside the impugned orders dated 05.11.2004, 24.10.2005 & 21.01.2011 passed by Ld. CIT(Appeals)-VIII, New Delhi qua the assessment years 2000-01, 2002-03 & 1996-97 respectively on the grounds inter alia that :-
"ITA No.1415/Del./2011 (AY : 1996-97)
1. That the order dated 21-01-2011 passed by the learned CIT (Appeals) is bad in law and wrong on facts.
2. That the learned CIT (Appeals) erred on facts and in the circumstances of the case and in law in upholding the action of the AO in restricting the deduction admissible u/s 80HHC of the Act to the business income instead of allowing the same out of "Gross Total Income" as legally required u/s. 80AB read with sections 80A and 80B(5) of the Act.
3. That the learned CIT (Appeals) erred on facts and in the circumstances of the case and in law in placing reliance upon the order of IT AT in appellant's own case for AY 2001-02 without appreciating the fact that the ITA T had not considered, amongst others, the judgments of the Apex court in the cases of Mysodet Limited vs. CIT; CIT vs. Williamsons Financial Services Limited and that of Allahabad High Court in the case of CIT vs. Arif Industries Limited as well as order of Special Bench of IT AT in the case of Topman Exports vs. ITO.
4. That the learned CIT(Appeals) erred on facts and in the circumstances of the case and in law in not appreciating the fact that under section 80A read with section 80AB, 'deductions allowable u/ss. 80C to 80U have to be restricted to the 'nature of income' (profit from export business) and not to the 'type of income'('profit and gains from business or profession') thereby denying the deductions of export profits out of 'Gross Total Income' and restricting the same to business income."3 ITA No.1415/Del./2011
ITA No.217 /Del./2005 ITA No.4504/Del./2005 "ITA No.217/Del./2005 (AY : 2000-01)
1. That on the facts and in the circumstances of the case and in law the order dated 5.11.2004 passed by the learned CIT (A) is bad in law and void ab initio.
2. That on the facts and circumstances of the case, the Ld. CIT (A) erred in law in wrongly linking the appellants claim of treating interest income as business income instead of 'Income from other Sources', to the appellant's claim under section 80HHC of the Act, whereas both the issues were to be dealt with separately.
3. That on the facts and circumstances of the case, the Ld. CIT (A) erred in law in not holding the appellant's ground of appeal No 3(a) before him that interest income of Rs.45,30,17,622/- earned by the appellant was 'Business Income' and not 'Income from other Sources' .
4(a) Without prejudice to G round no. 3 above, the learned CIT(A) erred on facts and in law in holding that interest income on deposits with banks; on tax refund from Income Tax Deptt.:
on advances to staff and on investments cannot be said to be derived from assessee's business.
4(b) That on the facts and circumstances of the case, the Ld. CIT (A) erred in law in holding that interest income on credit sales though may be attributable to assessee's business, but not derived from export business thereby justifying/upholding A.O. action in treating the same as "Income from other Sources".
5. That on the facts and circumstances of the case, the Ld. CIT (A) erred in law in upholding the action of the AO of attributing Rs.4,67,79,437/- as expenditure towards earning of Tax free income of Rs.8,07,18,455/- from units of US 64 issued by Unit Trust of India thereby upholding the disallowance of Rs, 4,67,79,437/- U/s 14A of the Act.
5.1 Without prejudice to the ground no 5 above that no expenses were incurred by the appellant towards earning of Tax -
free income from Tax Free Bonds / Units of UTI, the estimation of the expenditure attributable to earning such income is highly excessive and unreasonable.
5.2 That on the facts and circumstances of the case the order passed by the Ld. CIT (A) is perverse since the same is passed without considering the past history of the case as decided by the appellate authorities in earlier assessment years. 4 ITA No.1415/Del./2011
ITA No.217 /Del./2005 ITA No.4504/Del./2005
6. That on the facts and circumstances of the case, the Ld. CIT (A) erred in law in upholding the action of the AO in restricting the deduction u/s 80HHC as worked out by the Assessing Officer against 'Income from Business' as against 'Gross Total Income'.
7. That on the facts and circumstances of the case, the Ld, CIT (A) erred in law in applying the provisions of Section 80 AB to the 'Head of Income', that is, business income instead of the 'Nature of Income', that is, income derived from exports (covered u/s 80HHC) and thereby upholding the rejection of claim of deduction u/s 80HHC admissible to the appellant.
8. That on the facts and circumstances of the case, the Ld. CIT (A) erred in law in applying the provisions of Section 80AB for upholding the rejection of claim of deduction u/s 80HHC by the Assessing Officer, whereas no such finding was given by the Assessing Officer nor such a ground of Appeal was filed before the LD CIT (A).
9. That on the facts and circumstances of the case, the Ld, CIT (A) erred in law in upholding the action of the Assessing Officer in not netting of the interest expense against interest income, which is intimately linked to each other, while working out indirect expenses for the purpose of calculating deduction admissible u/s 80HHC of the Act."
"ITA No.4504/Del./2005 (AY : 2002-03)
1. That on the facts and in the circumstances of the case and in law the order dated 24.10.2005 passed by the learned CIT(A) is bad in law and void ab initio.
2. That on the facts and circumstances of the case, the Ld. CIT(A) erred in law in not adjudicating the appellant's ground of appeal No.2 before him to decide as to whether the interest income of Rs.410256576 earned by the appellant was "Business income" or "Income from other Sources".
3. That on the facts and circumstances of the case, the Ld. CIT(A) erred in law in wrongly linking the appellants claim of treating interest income as business income instead of "Income from other Sources", to the appellant's claim under section 80HHC or the Act, whereas both the issues were to be dealt with separately.
4. That on the facts and circumstances of the case, the Ld. CIT(A) erred in law in upholding the action of the AO of attributing Rs.18328254/- as expenditure towards earning of Tax free income of Rs.5.28 crores from unit of US 64 issued by Unit Trust of India as 5 ITA No.1415/Del./2011 ITA No.217 /Del./2005 ITA No.4504/Del./2005 well as Tax free Bonds thereby upholding the disallowance of Rs.18328254/- u/s 14A of the Act.
4.1 Without prejudice to the ground no.4 above that no expenses were incurred by the appellant towards earning of Tax-free income from units of UTI, the estimation of the expenditure attributable to earning such income is highly excessive and unreasonable. 4.2 That on the facts and circumstances of the case the order passed by the Ld. CIT(A) is perverse since the same is passed without considering the past history of the case as decided by the appellate authorities in assessment years 1992-93 to 1995-96.
5. That on the facts and circumstances of the case, the Ld. CIT(A) erred in law in upholding the action of the AO in restricting the deduction u/s 80HHC as worked out by the Assessing Office against "Income from Business" as against "Gross Total Income".
6. That on the facts and circumstances of the case, the Ld. CIT(A) erred in law in applying the provisions of Section 80AB to the 'Head of Income', that is, business income instead of the 'Nature of Income', that is income derived from exports (covered u/s SO HHC) and thereby upholding the rejection of claim of deduction u/s SO HHC admissible to the appellant.
7. That on the facts and circumstances of the case, the Ld. CIT(A) erred in law in applying the judgement of Supreme Court in the case of IPCA Laboratries Ltd. vs DCIT ( 266 ITR 521) to the case of appellant since it had exported only trading goods governed by Sec.80 HHC (3) (b)of the Act.
8. That on the facts and circumstances of the case, the Ld. CIT(A) erred in law in upholding the action of the Assessing Officer in not netting of the interest expense against interest income, which is intimately linked to each other, while working out indirect expenses for the purpose of calculating deduction admissible u/s 80HHC of the Act.
9. That on the facts and circumstances of the case, the Ld. CIT(A) erred in law in not rejecting the action of the Assessing Officer of initiating penalty proceedings u/s 271(1)(c) of the Act even without recording the satisfaction of the same in the assessment order."
2. Briefly stated the facts necessary for adjudication of the controversy pertaining to deduction admissible under section 6 ITA No.1415/Del./2011 ITA No.217 /Del./2005 ITA No.4504/Del./2005 80HHC of the Income-tax Act, 1961 (for short 'the Act') in all the appeals are : The Assessing Officer has restricted the deduction claimed by the assessee company u/s 80HHC of the Act to the extent of "business income" instead of gross total income, which the assessee company claimed to be against the provision of law and scheme of the Act.
3. Assessee carried the matter by way of filing appeals challenging the assessment orders passed in AYs 1996-97, 2000-01 and 20002-03 before the CIT (A) who has rejected the contention of the assessee company and confirmed the orders passed by the AO qua deduction u/s 80HHC. Feeling aggrieved, the assessee company has come up before the Tribunal by way of filing the present appeals.
4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
GROUNDS AS TO SECTION 80 HHC GROUNDS NO.1, 2, 3 & 4 IN AY 1996-97 GROUNDS NO.6, 7 & 8 IN AY 2000-01 GROUNDS NO.5, 6 & 7 IN AY 2002-03
5. Undisputedly, the identical issue pertaining to deduction claimed by the assessee company u/s 80HHC was cropped up in 7 ITA No.1415/Del./2011 ITA No.217 /Del./2005 ITA No.4504/Del./2005 assessee company's own case for AY 2001-02, wherein relief claimed for by the assessee company was denied by the AO, CIT (A) and then by the Tribunal vide order in ITA No.5113/Del/2004, available at pages 26 to 41 of the paper book, relevant para 17 at page 35 of the paper book; the coordinate Bench of the Tribunal, after examining the provisions contained u/s 80AB and 80HHC, upheld the order passed by the ld. CIT (A); that the assessee company is entitled for deduction u/s 80HHC of the Act to the extent of business income only and not out of gross total income. It is also not in dispute that ld. CIT (A) vide impugned order passed in AYs 1996-97, 2000-01 & 2002-03 followed the decision rendered by the coordinate Bench of the Tribunal in assessee's own case for AY 2001-02.
6. Ld. AR for the assessee company challenged the assessment order passed by the AO and confirmed by ld. CIT (A) on two grounds : (i) that the AO has no jurisdiction to pass this order u/s 254 but his role was limited to give effect to the order passed by the Tribunal; and (ii) that the language of section 80HHC is categoric enough that overall ceiling for deduction is the gross total income and not the business income as has been held by AO as well as ld. CIT (A). The ld. AR for the assessee company further 8 ITA No.1415/Del./2011 ITA No.217 /Del./2005 ITA No.4504/Del./2005 contended that the order passed by the Tribunal in assessee's own case for AY 2001-02 (supra) is distinguishable and relied upon the decision rendered by Hon'ble High Court of Bombay in case cited as V.M. Salgaocar & Brother (P.) Ltd. vs. ACIT - 281 CTR 191, available at pages 20 to 25 of the case laws paper book. Another decision rendered by the Hon'ble High Court of Bombay in case of CIT vs. J.B. Boda in ITA No.3224 of 2009 order dated 18.10.2010 and All India Lakshmi Commercial Bank Officers' Union vs. Union of India - (1984) 150 ITR 1 (Delhi).
7. However, on the other hand, the ld. DR for the Revenue to repel the arguments addressed by the ld. AR for the assessee company contended that the order passed by the Tribunal in AY 2001-02 in assessee's own case is based upon the decision rendered by Hon'ble Supreme Court.
8. Undisputedly, the decision rendered by the Tribunal in assessee's own case for AY 2001-02 (supra) is pending appeal before Hon'ble jurisdictional High Court in which following substantial question of law on the issue in controversy has been framed :-
"(1) Whether the Income Tax Appellate Tribunal was right in denying benefit of Section 80HHC of the Income Tax Act, 1961 on Rs.26,62,73,212/- as per the computation made by the Assessing Officer, on the ground that the total income of the 9 ITA No.1415/Del./2011 ITA No.217 /Del./2005 ITA No.4504/Del./2005 assessee under the head income from business/profession was in minus/loss?"
9. No doubt, the ld. AR for the assessee company has come up with plethora of decisions in its favour but, following the judicial protocol, we are of the considered view that when the issue in controversy is directly and substantially pending before Hon'ble jurisdictional High Court in assessee's own case, the issue before the Tribunal is required to be decided only after decision of the Hon'ble High Court. So, it would be in the fitness of the things that the impugned order passed by the ld. CIT (A) in all the aforesaid appeals is set aside to the file of AO to be decided afresh after the decision of the Hon'ble High Court in ITA No.127/2009 lying admitted in the Hon'ble High Court after providing an opportunity of being heard to the assessee to avoid multiplication of litigation. Hence, Ground Nos.1, 2, 3 & 4 in AY 1996-97, Ground Nos.6, 7 & 8 in AY 2000-01 and Ground Nos.5, 6 & 7 in AY 2002-03 are allowed for statistical purposes. GROUND NO.1 IN ITA NO.217/DEL/2005 (AY 2000-01) ITA NO.4504/DEL/2005 (AY 2002-03)
10. Ground No.1 in ITA NO.217/Del/2005 (AY 2000-01) and ITA No.4504/Del/2005 (AY 2002-03) is general in nature, hence need no specific adjudication.
10 ITA No.1415/Del./2011
ITA No.217 /Del./2005 ITA No.4504/Del./2005 GROUND NO.2, 3, 4(a) & 4(b) IN ITA NO.217/DEL/2005 (AY 2000-01) GROUNDS NO.2 & 3 IN ITA NO.4504/DEL/2005 (AY 2002-03)
11. Undisputedly, the assessee company has earned interest income from various sources for AYs 2000-01 and 2002-03 as under :-
ITA NO.217/DEL/2005 (AY 2000-01)
(a) Interest earned from bank Rs.19,62,04,660
(b) Interest on income tax refund Rs.1,21,03,381
(c) Interest on investments Rs.3,80,09,588
(d) Interest from credit sales and Rs.20,66,99,992 staff advances Total Rs.45,30,17,622/-
ITA NO.4504/DEL/2005 (AY 2002-03)
(a) Interest earned from bank Rs.27,13,39,067/-
(b) Interest from credit sales and Rs.13,89,17,509/-
staff advances
Total Rs.41,02,56,576/-
12. Assessee company claimed the aforesaid interest income earned from various sources as business income but the AO treated the same as income from other sources and taxed the same. The ld. CIT (A) confirmed the findings returned by AO. 11 ITA No.1415/Del./2011
ITA No.217 /Del./2005 ITA No.4504/Del./2005
13. So far as question of treating the interest income earned by the assessee company from advances/loans given to its staff is concerned, this issue is also directly and substantially pending adjudication before the Hon'ble jurisdictional High Court in assessee's own case for AY 2001-02 in ITA 127/2009 in which following substantial question of law has been framed :-
"(2) Whether the interest received by the appellant assessee from staff on loans, is assessable under the head "income from business" or as "income from other sources"?"
So, we are inclined to relegate this issue to the file of AO to decide in accordance with the decision to be delivered by Hon'ble High Court in ITA 127/2009, to avoid multiplication of litigation.
14. The coordinate Bench of the Tribunal in assessee's own case for AY 2001-02 bearing ITA No.3289/Del/2010, available at pages 39 to 58 of the case law paper book, allowed issue of claiming interest as business income by partly deciding the issue in favour of the assessee except the interest earned by the assessee from transfer of assets / investment, which has been ordered to be treated as income from other sources by returning following findings :-
"16. We have perused the contentions raised by both the sides in the light of the records placed before us. The issue as to under which head the interest income must be treated, has been dealt with at length by Ld.CIT(A) for assessment year 2003-04.12 ITA No.1415/Del./2011
ITA No.217 /Del./2005 ITA No.4504/Del./2005 16.1 It is observed that assessee has been earning such interest income consistently from its business activity from assessment year 1988-89 onwards and the revenue has been accepting this stand of assessee for assessment years 1988- 89 to 1997-98 and then from 2005-06 to 2006-07. It is only for the interregnum assessment years being 2000-01 to 2004-05, that the Department had changed its stand and treated the interest income as income from other sources. The chart relating to the treatment of interest income in these assessment years has been reproduced by Ld. CIT(A) in his order dated 28/04/2010 for assessment year 2003-04 (at internal page 22 and relevant page 388 of paper book volume 2).
16.2 The issue is that, assessee deployed funds which have been received as advance from customers security deposit from customers, any repayment of loans/advances that has been received from employees, any transfer of assets/Investments received any credit/loan from bank/financial institutions etc. It is observed from the order passed by Ld. CIT (A) for assessment year 2003-04 that (at page page 376 to 379, of the paper book volume 2) Ld.CIT(A) has examined in detail the nature. Of interest earned by the assessee being inextricably linked to the, business activity carried on by the assessee. Insofar as the interest received from deployment of .such funds like advance received from customer, security deposits; received from customers credit/loan from bank/financial institutions etc, it is clear that these would be characterised as business income.
16.3 In respect of repayment of loans/advances given to the employees it is observed that the assessee had preferred an appeal before Hon'ble Delhi High Court against the order of this Tribunal in ITA No. 5113/del/2004 for the relevant assessment year. Hon'ble Delhi High Court in ITA No.127/2009 vide order dated 07/02/2012 (placed at page 346 to 347 of paper book volume 2) has been pleased to admit the question of law framed as under:
"2. Whether the interest received by. the appellant assessee from staff on loans, is assessable under the head "income from business" or as "income from other sources"?13 ITA No.1415/Del./2011
ITA No.217 /Del./2005 ITA No.4504/Del./2005 16.4 In respect of any funds that must have been interest received by the assessee from transfer of assets / investments the assessee has not brought on record to demonstrate the nexus between such interest earned with the business activity carried on by the assessee.
16.5 We accordingly set aside this issue back to the assessing officer to segregate the interest earned under each category. The assessing officer shall allow the interest earned from the funds deployed as advance received from customers, security deposits from customers, credit/loan from bank/financial institutions etc. as business income.
16.6 In respect of the interest earned from repayment of loans / advances given to employees, the assessing officer shall follow the decision of Hon'ble High Court in ITA No.127/2012. Assessee is directed to tender the final order passed by Hon'ble High Court.
16.7 In respect of any interest that must have been earned by transfer of assets/investments the same may be disallowed and may be treated as income from other sources.
17. In view of the discussions above this ground raised by the assessee stands statistically allowed."
15. Following the decision rendered by the coordinate Bench of the Tribunal in assessee's own case, Grounds No.2 to 4B in ITA No.217/Del/2005 (AY 2000-01) are partly determined in favour of the assessee company and Grounds No.2 & 3 in ITA No.4504/Del/2005 (AY 2002-03) are determined in favour of the assessee company. Consequently, the issue is set aside to the file of AO to allow the interest earned by the assessee in the light of the 14 ITA No.1415/Del./2011 ITA No.217 /Del./2005 ITA No.4504/Del./2005 observations given by the coordinate Bench of the Tribunal in paras 16.5 & 16.6 in the order passed in the assessee's own case for AY 2001-02 (supra).
GROUNDS NO.5, 5.1 & 5.2 IN ITA NO.217/DEL/2005 (AY 2000-01) GROUNDS NO.4, 4.1 & 4.2 IN ITA NO.4504/DEL/2005 (AY 2002-03)
16. Assessee company claimed exempt dividend income u/s 10 of the Act of Rs.8,07,18,485/- (Rs.4,27,11,867/- dividend from UTI + Rs.3,80,06,888/- interest from bonds) and Rs.5,28,00,000/- from units of UTI in AYs 2000-01 & 2002-03 respectively during the year under assessments. However, AO disallowed an amount of Rs.4,67,79,437/- and Rs.1,83,28,254/- in AYs 2000-01 & 2002- 03 respectively by determining the same as expenses on account of proportionate interest relating to earning exempt income. Ld. CIT (A) confirmed the assessment order.
17. Ld. AR for the assessee company challenging the impugned order passed by the ld. CIT (A) contended that the major investment in UTI and bonds were made in the year 1990-91 out of its own funds and as such, no disallowance can be made u/s 14A of the Act and relied upon the decision rendered by the coordinate Bench of the Tribunal in assessee's own case for AYs 2006-07 & 15 ITA No.1415/Del./2011 ITA No.217 /Del./2005 ITA No.4504/Del./2005 2007-08 in ITA No.4265/Del/2010 and AY 2008-09 in ITA No.725/Del/2014, which were followed by the Tribunal in assessee's own case in AY 2001-02 in ITA No.3289/Del/2010.
18. Since the issue in controversy has already been decided by the coordinate Bench of the Tribunal in assessee's own case, this issue is ordered to be set aside to the file of the AO to decide afresh in the light of the fact that the assessee company has made investment in UTI and bonds in the year 1990-91 from its own funds and has not incurred any interest thereon to earn the exempt income in accordance with the decision rendered by the Hon'ble jurisdictional High Court as well as in the light of the decision rendered by the coordinate Bench of the Tribunal in assessee's own case for AY 2008-09 in ITA No.725/Del/2014 order dated 25.05.2017. Moreover, the issue in controversy pertaining to AYs 2006-07, 2007-08 and 2001-02 is already pending adjudication with the AO having been set aside by the Tribunal vide order dated 30.01.2015, available at pages 69 to 86 of the case law paper book, by making following observations :-
"9. Brief facts apropos ground Nos. 2 to 2.3 raised by assessee and Ground Nos. 2 and 2.1 raised by Department are that assessee had received tax free interest from UTI Rs. 3,56,45,467/-. The AO applied the provision of section 14A read with Rule 8D of IT Rules, 1962 and determined the disallowance u/s 14A 16 ITA No.1415/Del./2011 ITA No.217 /Del./2005 ITA No.4504/Del./2005 at Rs.2,86,93,520/-. Ld. CIT(A) after considering the assessee's submissions, confirmed the disallowance at Rs. 10198458/-, inter alia, observing that since this disallowance was made strictly in accordance with the provisions of Rule 8D (2) (iii) of the Income Tax Rules, 1962, no interference in this behalf is called for. The Department is also aggrieved with this finding of Ld. CIT(A) and has taken following ground of appeal.
10. We have considered the submissions of both the parties and have perused the record of the case. Admittedly for the asstt. Year under consideration Rule 8D was not applicable and the AO was required to make the disallowance u/s 14A after recording his satisfaction regarding expenditure being incurred for the earning of exempt income on reasonable basis as per the decision of Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. 347 ITR 272. Ld. CIT DR pointed out that as regards the deletion of addition on the ground of interest disallowance, Ld. CIT(A) has accepted the submissions of assessee regarding investments in the tax free securities out of own/surplus fund without any remand report being called for from the AO. Ld. Counsel referred to the decision of the Tribunal in assessee's own case for asstt. year 1993-94 to submit that Tribunal has considered this issue with reference to section 80M and, therefore, no disallowance is called for in regard to interest expenditure. Be that as it may, AO as well as Ld. CIT(A), both have confirmed the disallowance applying Rule 8D. Therefore, the order of Ld. CIT(A) cannot be sustained. The issue, therefore, is restored back to the file of the AO for deciding the issue denovo in accordance with the decision of Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. vs. CIT (supra) and also after taking into consideration the decision in its own case for asstt. Year 1993-94."
19. In view of the matter, AO is directed to decide the issue accordingly and as such, Grounds No.5 to 5.2 in ITA 17 ITA No.1415/Del./2011 ITA No.217 /Del./2005 ITA No.4504/Del./2005 No.217/Del/2005 (AY 2000-01) and Grounds No.4 to 4.2 in ITA No.4504/Del/2005 (AY 2002-03) are determined in favour of the assessee for statistical purposes.
GROUND NO.9 IN ITA NO.217/DEL/2005 (AY 2000-01) GROUND NO.8 IN ITA NO.4504/DEL/2005 (AY 2002-03)
20. AO has not allowed the netting of interest expenses against interest income earned by the assessee during the years under assessment for the purpose of claiming deduction u/s 80HHC of the Act. Ld. CIT (A) also confirmed the findings returned by the AO.
21. Undisputedly, the assessee is a trader exporter and has claimed deduction u/s 80HHC by substracting direct costs and indirect costs from the export turnover. Ld. AR for the assessee company contended that for computing deduction and while computing indirect costs, net interest paid less interest income is to be taken into account. However, the Revenue has considered gross interest paid. Ld. AR for the assessee company relied upon the decision of Hon'ble Supreme Court in ACG Associated Capsules (P.) Ltd. vs. CIT - 343 ITR 89 (SC) wherein Hon'ble Apex Court has held as under :-
18 ITA No.1415/Del./2011
ITA No.217 /Del./2005 ITA No.4504/Del./2005 "Held accordingly, that ninety per cent. Of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profits of business of the assessee as computed under the head "Profits and gains of business or profession", was to be deducted under clause (1) of Explanation (baa) to section 80HHC for determining the profits of the business."
22. So, following the decision rendered by the Hon'ble Supreme Court in ACG Associated Capsules (P.) Ltd. (supra) and order passed by the coordinate Bench of the Tribunal in assessee's own case for AY 2001-02 in ITA No.5113/Del/2014, AO is directed to recompute the netting of interest expenses against interest income for the purpose of claiming deduction u/s 80HHC in accordance with the aforesaid decision rendered by the Hon'ble Supreme Court and the coordinate Bench of the Tribunal (supra). Consequently, grounds no.8 & 9 are determined in favour of the assessee company.
GROUND NO.9 IN ITA NO.4504/DEL/2005 (AY 2002-03)
23. Ground No.9 qua levy of penalty u/s 271(1)(c) is premature, hence does not require any adjudication.
ADDITIONAL GROUND IN ITA NO.217/DEL/2005 (AY 2000-01) ITA NO.4504/DEL/2005 (AY 2002-03)
24. Assessee company in both the aforesaid appeals by moving an application under Rule 11 of Income Tax (Appellate Tribunal) 19 ITA No.1415/Del./2011 ITA No.217 /Del./2005 ITA No.4504/Del./2005 Rules, 1963 sought to raise identical additional ground of appeal as under :-
"That the assessing officer erred on facts and in law in not allowing credit for corporate taxes paid by MMTC Transnational Pte. Ltd. (MTPL), Singapore, to the extent of dividends received by appellant from MTPL in India."
on the grounds inter alia that aforesaid additional ground could not be raised in both the appeals on account of omission which was neither willful nor deliberate; that the additional ground sought to be raised is necessary to decide the issue in controversy.
25. Undisputedly, the identical additional ground raised by the assessee company in AYs 200101, 2006-07 & 2007-08 was admitted by the Tribunal and issue was set aside to the file of the AO which is still pending adjudication.
26. Keeping in view the settled principles of law that the additional ground if necessary to decide the complete adjudication of the controversy at hand once for all, can be raised at any stage by the applicant, we are of the considered view that since additional ground raised by the assessee company goes to the root of the case to determine the taxable income and tax due, the same is allowed and following the decision rendered by the coordinate Bench of the Tribunal in AYs 2001-02, 2006-07 and 2007-08, this 20 ITA No.1415/Del./2011 ITA No.217 /Del./2005 ITA No.4504/Del./2005 issue is remanded back to the AO to decide afresh after providing an opportunity of being heard to the assessee.
27. In view of what has been discussed above, all the aforesaid three appeals bearing ITA No.1415/Del./2011, ITA No.217/Del./2005 and ITA No.4504/Del./2005 are allowed for statistical purposes.
Order pronounced in open court on this 12th day of April, 2018.
Sd/- sd/-
(G.D. AGRAWAL) (KULDIP SINGH)
PRESIDENT JUDICIAL MEMBER
Dated the 12th day of April, 2018
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-VIII, New Delhi.
5.CIT(ITAT), New Delhi. AR, ITAT
NEW DELHI.