Karnataka High Court
M/S Green Agro Pack (P) Ltd vs The Commr Of Income Tax on 13 April, 2010
Bench: K.L.Manjunath, B.V.Nagarathna
' {.B,Y_. SRI'I{.v.ARAvIND, ADVOCA'I'E 1
IN Txe-IE E-IIGH COURT OF KARNATAKA AT BANGALORE
OATEO TI--sI1S TH E 13'?" DAY OF APRIL. 2010
}3R}ESEN'I'
THE HONBLE MR. JUSTICE KL. MANJUNA'IjE_":
AND I I .___
THE HONBLE MRS. JUSTICE
I.'I'.A.No.31 12 1260;"; " J
BE'IW{*IEZN:
M /S GREEN AGRO PACK [P] LTD,
NO2821. HAL II STAGE 2
6'"! CROSS, 18?" MAIN,
BANGALORE 560 008,
REPRESENTED BY ITS O_IREC'I'().I::., _
SATHI PRABHAKAR V *
«««« ...APPE2LLAN'l"
_ = {BY SI><Ifi'jI<..:I5 SR. ADVOCATE
- V FOR 'SE6' .A"IUI;~I:'A.I;LIR, ADVOCATE }
1. THE;j(:(;>MMISSI'c3N'I¥:'R OF' INCOIVIE~'I'AX.
" - C.R_.'«EI;ICII,O1INc3, QUE-.E-NS ROAD.
' Bf\NGA1'-C}RE';,_.
2. THE 'O'If.'f€:OI.?I.IvIIS~SIOI\IER OF
E--1\F(;€}'I\/EE--"I'AX._ EIRCI.E4{3}_
I<O.§aAMA.:xIO'A.I;A.
BAI\."(}Ai-,ORE.
... RESPON{)EN'I'3
A' I'?HI§$ I.'E'.A. IS I~"II,}33I) U/S 260%. OF E.T.AC'I'. EQESE ARISING OUT
A "A cI:"«1OR:>I~:R OATEO 12.08.2005 PASSED IN 1.T.A. No.77S/SANS/2002
F'*C>R THE ASSESSIvIEN1"YEAR 1998439, PRAYENG 'E'HA'E' THIS §~ION'BLE
%
COURT MAY BE I-0'I,EASE3I) TO [1] FC.)Rl\/lUI.,A'i'E 'I'H{C Sl.lBS'l'AN'i'lAL
QUI3S'l'l(t)N O14' LAW S'I'A'l'l¥3li) I'~§I€Rl3IN; AND E£'l'Cf.'.
THIS I.'I'.A COMING ON §7()R HEARiNG THIS DAY. NAGARATHNA
J . DELIVERED THE FOLI.OW'lNG: 7
J U D G M E N T
T he Assessee has preferred this appeal the order, dated 12.08.2005 fi'passed_:
778/ Bang/ 2002 by raising several law. When the appeal came acllrlzittedlg'-.;tl11.g'folfowmlg'0 substantial questions of law were"'framec"§_.by thls~Court by an order dated 29.05.2006: ll 0 1') \7\fl*1eth'e_r o7r1lthe«..tfacts. and ClI'CllI'I1StE1l'1C€S of this ease the 'ti'i«b1)u.1.aol. eo.1*1*eet in withdrawing the cléiini of Ciedutitioil under See.l0~B of the Income 0 " Tax Aet?__V" 0 ' Laili'; on the facts and e.ireumst.anees of this i11te_1'est received on PD can be brought ftlllifllél' the head 'Income from other sources"? jii) H 'vWhetl'1e1' on the facts and ei1'cumstanees of this H ease, the tribunal was right in treating the interest as an income from other sotlrces'?
Z.-.3
2. The reievarit facts of the case are that the appeliant Assessee wliieh a eompaiiy and a 100% Export. Oriented Unit. is engaged in export of processed gherkins haviéiig its factory near Davanagere. For the assessment it filed its return of income Claiming eggemptioii"uri_dei'=.S'ee'ti_on". 10B of the Income Tax Act 1961 amid' thee by the Assessing Officer by 'iritirriatiioin. Subsequently, notice under Secti_Qrt' »v1_5:1_oi' the Aet yias issued to the appellant so as to 'tiimaigefi,r.3etiVficatio1'1 of intimation dated 21.iO.1999.'_:ii1.__i"aet,m the nature of the source 0f,#i11(t()'Ariié'» _V i.e§,'the«..A'i11terest income earned by fixed deposits arid as to .Vwhijetheri"t;he said income was a business 111001136 of the }'..ssesSee"-baseci 011 an audit objection. The 7(')f'fic:e1" dieiwiicit: accept, the eor1t.ent.io1i of the Ass-ess.ee«i't,hattileassessment order could not be rectified and V that the: ir_i't(i:rest. earned 011 the fixed deposit; was closely i""'v.e'o;.ix1e{:t,ed"V-'with the busizaess of the assess:-2e and was bus'iriess' income and aoeordirigiy heid that it has to be
-.tr'eateci income from other sour~ee thereby raised a cieinand A 3»:
of Rs.39.586/--. Being agg1*ieved by the said order, the filed an appeal before the Comrnissioner (;'i7.l'i1.eorne Tax [Appeals] which was however dismissed, against the Assessee filed an appeal before the».
Tribunal. The Tribunal also corifirmed authorities below and being the "
present. appeal has been filed.
3. We have heard the...l.€l&_11tI1el.d on behalf of the appellant and3_'t.he1i.'lee'arn'edl.C\oui"isellI'or"the respondent and perused the nraterial ion 1"ecor"d{ ~
41. It of the appellant. that: the interest. o_btained" g_:1,1t:Vo'f '[l'}C'.l;l){€Cl deposit: was on account: of 3-beirig obtaining letter of credit: or for baroik. gag 19ar1tiee "21ri~dV.w21s for business purposes and out of the 'v.p"lat:siness-.__cornpullsiciris and that the said interest. was not on of surplus fund being deposited in fixed deposit a..s'--to'-e-arn interest on the said deposit: and the authorities 'lIt?:1:'V;r"li§-"--l"&'.1,ll£?{:l to appreciate these aspects of the matter and £5 treated the said ineonie as income trom other sou1'ees. He has also relied upon two decisions of this Court to contend that when on account. of certain business conipuisions the amount has to be kept in a fixed deposit which ear1'1sji1<1.t'e.rest, then the same has to be treated as business i11e.oine.a1"idi itiot income from other sources.
5. Per contra, learned eoL1i<1seif"fordizthe" Rev:-:ritj:,:e supporting the order of the '£'1'ih_u~Ijiai A"«at1t:h.oritiesw.i' has submitted that no substantialuV:questio1'1.dof--.1aw,:§arises in this appeal and therefore dismissed.
6. counsel on both the sides and on pe1*L1sa'1,odi'the_niat:eri'aI on record, it is not in dispute that the«appiei}a1'it'i's-Va____iAOO0/o Export' Oriented Unit which is ei'1g{ag;e'c} ._il'1.._€':xp.Qi'E._ of processed gherkins and during the eoi,11"seAof-"5it.s btipSiI:1§'€SS it would have to make certain deposits $e._for.Vtl1e of obtairiing letter of credit or For bank «:.'«guajfasi1t.eeAwhen the products which processed by it have Vexpo1'ted. in terms of the said ietter of credit or bank 2» /-
6
gua1"ai1tee, certain deposits are made and such deposits are to be treated as margin E1lT]C)I.1I1tS and any interest. Vwiiieh is earned out of the said deposits has to be ti1'eated__:;§s'b:1Vs_ine~ss'_ income and not as income earned from other .so'uroesf'-.I{r1_ti1is""
context, it would be apposite to refer-._to étvm' decisions" of..&t'l'i.i_s Court rendered in I.T.A.No.42't'§_/?¢QO2'"in Hajee J affar Shariff v. The IncoyI_ne'»v'i'_ax_» 0fficerV,Mdi,sposed of on 12.11.2007, wherein it when money is invested in fixed deposit tovtgetiitigthe-ffgenefitztot letter of credit and not to invest'the'sa,rr1e .to___ea_rn-."a:51y interest. then the said interest anjoiint' has to be treated as the income earned from other scmrees. x A innHt.he"'ease of Satishchandra and Co. v. 'v46f.:vIg1come Tax, reported in Vo1.234 ITR ' V"--w'i.998 has been held that merely because the ...i_1'1?;ssessee has shown any income by way of'1'nterest. it would "=r1oi: bec_:ome income from other sources as it has to be seen 5,» "K 3, * expoit business'; ~- ,,x"
to whether the said interest was earned out of business compulsion and a business income. When in the said case, the Assessee has made deposit in a bank a_s a condition for obtaining bank guarantee to be given before§"t.he.f_'E.2§ci~se'_ Authorities as required under the Excise Rtiles;«.the'"'i.nte1'e.st"'V income which arose out of such tI'E1I?14SE1€j:'t'.iC)--:f] was held:"it.Q"i'3i)_e closely connected with the business of the andf hence business income. if the___incorne is"«asses§sab1e as business income then theib.rne,reficcirccuinstance that the Assessee has showntithast'inconieifiiom other sources or that it was assessed' eAL1n_de17'fV tToe"»h"ead income from other sources wouid not the. g1*<iu.nC1,_to._d"e.ny'the Assessee the set" off of the carried fo1*=wa1'd losses... said decision is also relevant keeping iJ3_lT1l'l1.d _the..'fac'ts of the present case where the Asscsse.e':'«bei_ijg.__an Expoii' Oriented Unit had deposited the said *fun»ds L-1SV'I'11£3_I'flgi.I1 money for the purpose of carrying on its J-ye
8. "i'heref()'rc the substamiai questions of iaw 1'ai_se(i in this appeal have to be answered in favour of the Ass-cS:3ée.Vé1n(i against", the Revenue. Accordingly the appeal is ai'lC\ve.d.'= ' 1 V' bvr