Income Tax Appellate Tribunal - Chandigarh
Dcit, C-1, Ludhiana vs M/S Vardhman Textiles Limited, ... on 28 May, 2020
आयकर अपील य अ धकरण, च डीगढ़ यायपीठ "बी", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B , CHANDIGARH
ी संजय गग , याय क सद य एवं ीमती अ नपण
ू ा गु&ता, लेखा सद य
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.484 /Chd/2019
नधा रण वष / Assessment Year : 2008-09
Vardhman Textiles Limited, बनाम The A.C.I.T.,
Chandigarh Road, Ludhiana. Circle-1,
Ludhiana.
थायी लेखा सं./PAN NO: AABCM4692E
अपीलाथ /Appellant यथ /Respondent
&
आयकर अपील सं./ ITA No.611 /Chd/2019
नधा रण वष / Assessment Year : 2008-09
The D.C.I.T., बनाम Vardhman Textiles Limited,
Circle-1, Chandigarh Road, Ludhiana.
Ludhiana.
थायी लेखा सं./PAN NO: AABCM4692E
अपीलाथ /Appellant यथ /Respondent
आयकर अपील सं./ ITA No.485/Chd/2019
नधा रण वष / Assessment Year : 2009-10
Vardhman Textiles Limited, बनाम The J.C.I.T.,
Chandigarh Road, Ludhiana. Circle-1,
Ludhiana.
थायी लेखा सं./PAN NO: AABCM4692E
अपीलाथ /Appellant यथ /Respondent
&
2 ITA Nos.484 to 486/Chd/2019
&
ITA Nos.611 to 613/Chd/2019
A.Ys. 2008-09, 2009-10 & 2013-14
आयकर अपील सं./ ITA No.612 /Chd/2019
नधा रण वष / Assessment Year : 2009-10
The D.C.I.T., बनाम Vardhman Textiles Limited,
Circle-1, Chandigarh Road, Ludhiana.
Ludhiana.
थायी लेखा सं./PAN NO: AABCM4692E
अपीलाथ /Appellant यथ /Respondent
आयकर अपील सं./ ITA No.486 /Chd/2019
नधा रण वष / Assessment Year : 2013-14
Vardhman Textiles Limited, बनाम The A.C.I.T.,
Chandigarh Road, Ludhiana. Circle-1,
Ludhiana.
थायी लेखा सं./PAN NO: AABCM4692E
अपीलाथ /Appellant यथ /Respondent
&
आयकर अपील सं./ ITA No.613 /Chd/2019
नधा रण वष / Assessment Year : 2013-14
The D.C.I.T., बनाम Vardhman Textiles Limited,
Circle-1, Chandigarh Road, Ludhiana.
Ludhiana.
थायी लेखा सं./PAN NO: AABCM4692E
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by: S/Shri Subhash Aggarwal, Adv.
& Rishit Dhingra, CA.
राज व क ओर से/ Revenue by: Smt.C.Chanderkanta, CIT DR
सन
ु वाई क तार$ख/Date of Hearing : 02.03.2020
उदघोषणा क तार$ख/Date of Pronouncement:. 28.05.2020
आदे श/ORDER
3 ITA Nos.484 to 486/Chd/2019
&
ITA Nos.611 to 613/Chd/2019
A.Ys. 2008-09, 2009-10 & 2013-14
Per Annapurna Gupta, Accountant Member:
Al l th e a b ove cr os s a pp e a ls re l a te to sa me a ss e s see a n d ha v e bee n pr e fe r re d a ga i ns t s e p a r a te or de r s of t he C om mis si on e r of I nc ome Ta x( Ap p e a l s-I , Lud hi a n a [ ( in s ho rt re fe rre d to as 'C I T(A )' ] d a te d 8 . 2. 2 01 9 , 11 . 2. 2 0 19 and
1. 2 .2 0 1 9 r e l a ti ng to a ss e ss me n t ye a r s 2 00 8 -0 9 , 2 00 9 -1 0 a n d 20 1 3 -1 4 r e s pe ct iv e l y, p a sse d u/s 2 5 0 (6 ) ) o f the In come Ta x Act , 19 6 1 ( h e re i na fte r re fe r re d to a s 'Act '.
2. B oth th e p a r ties con ce de d t ha t the re we re c om mon is sue s i nv olve d in a l l the a p pe a l s a r is in g f r om i d en ti ca l se t of fa c ts. A ll t he cr os s a pp e a ls w e re , the re fo re , tak e n u p toge t he r f or he a ri ng .
We s ha l l f ir s t t a ke u p th e cr oss a p p e a l pe r ta i ning to a sse ssme nt ye a r 2 0 0 8-0 9 i. e . i n I TA N o .4 8 4 /C hd / 2 01 9 & I TA N o.6 1 1 /C hd /2 0 1 9 a n d f i r st d e al w it h th e a p pea l of t he a sse sse e in ITA N o .4 84 /C hd /20 19 .
ITA N o. 48 4 /C hd /20 19 ( A.Y .2 00 8- 09 -As se ss e e 's Ap p e a l) :
3. Th e e ff e c ti ve gr ou nd s of a p pe a l ra i se d b y the a sse ssee re a d a s u nde r :
2. That the Ld.CIT(A) erred in law and on facts in upholding the applicability of section 14A of the Income Tax Act, 1961 read with Rule 8D and making disallowance thereunder ignoring the contentions/submissions of the assessee.4 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14
3. That the Ld.CIT(A) has erred in law and on facts in upholding the action of AO for treating interest received amounting to Rs.9,89,04,000/- as 'Income from Other Sources' instead of 'Income from Business and Profession'.
5. That the Ld. CIT(A) has erred in law and on facts in confirming the action of the AO in reducing Rental income of Rs. 45,75,267/-, Interest from Other of Rs.42,40,928/- and Miscellaneous receipts of Rs.32,18,153/- from the profits of the units eligible for deduction u/s 80IC/80IB of the Income Tax Act, 1961.
6. That the Ld. CIT(A) has erred in law and on facts in upholding the action of the AO in allocating head office expenses to units claiming deduction u/s 80IB/80IC of the Act.
7. That the Ld.CIT(A) has erred in law and on facts in upholding the action of AO for treating line/bay charges amounting to Rs. 4,00,72,000/- as capital expenditure instead of revenue expenditure."
4. G r oun d N o. 2 r e la te s t o the i ssue of d is a ll ow a n ce of e xpe n se s ma d e pe r ta i n in g to t hose i nc ur r e d f or the pu r p ose of e a r n in g e xe mp t i nc ome , a s p er t he p r ovi si on s of se cti on 14 A of t he Ac t r.w .r . 8 D of th e I nc ome Ta x R ul e s .
5. B r i e f f a cts re la tin g to th e is su e a re t ha t d ur i ng t he imp ug ne d ye a r the a s se s se e ha d e a r ne d sub s ta ntia l e xe mpt in come a moun ti ng to Rs. 1 ,3 9 ,15 ,7 3 4 /- fr o m h ol di n g of in ve s tme n ts , f or w h ic h vol un ta r y a n d su o mot o d is a ll ow a n ce of Rs .1 la c w a s ma d e in th e comp u ta ti on of in come f i le d a lon gw i th r e tur n of i n co me . N ot s a ti sf ie d w i th the sa me t he Ass e ss i ng O f fi ce r ( AO ) in vok e d t he p r ovi s ion s of se c ti on con ta i ne d i n Rule 8 D f or ma k in g d i sa l lo wa n ce u/s 1 4A of the Act . A cc or di n gly , t he A O comp ut e d th e d is a l low an ce 5 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 un de r R ule 8 D( 2 ) (i i )& ( ii i ) at Rs .1 , 64 , 1 4, 8 5 5/- and Rs. 45 , 9 4, 3 2 5/- r e spe cti ve ly .
6. Th e Ld . C I T( A) , f oll ow i ng th e de c is ion of the fi rst a pp e l l a te a u thor ity in t he c a se of the a sse sse e f or a sse ssme nt ye a r 2 0 1 3-1 4 , di r e c ted th e A O t o re compu te t he di sa l l ow a nc e a f ter e x cl ud i ng i n te re s t e x pe nd i ture of s p e ci fi c pu r po se b or ro win gs, n e tt in g t he i nte re st i nc ome out of in te re st e xpe nd i tur e be fore c omp uti n g the di s a ll ow an ce a n d con si de r in g only tho se in ve stme nts w h ic h ha d yi e l de d e xe mp t i nc ome fo r th e p ur p ose of comp u ti ng th e i nte re st in come . H e f ur the r d ire cte d th at th e d i sa l l ow a nc e in any ca se s hou ld not e xce e d the e xe mp t i n come .
7. B e f ore us t he conte nti on r a i se d b y th e Ld . C oun se l f or the a sse s see w a s tha t i de nt ic a l issu e h a d bee n de a lt w it h b y the I TA T i n pr e ce d i ng ye a r s i .e . a ss e ss me n t ye a rs 20 0 6 -0 7 a nd 2 0 0 7- 08 a nd i n su cc e e d i ng ye a r s i .e . a sse ssme nt ye a r 20 1 1 -1 2 a n d 2 0 12 -1 3 wh e re in the d i sa l lo wa n ce h a d be e n re str i cte d to Rs.2 l a cs to Rs. 6 l a cs . O u r a tte nti on w a s dr a w n to t he d is a ll ow a n ce up he l d by th e I TA T i n t he sa i d ye a r s a s un de r :
As st. Ye a r Exe mp t I n come Di sa l l ow a nc e 2 0 06 -0 7 Rs. 1. 5 9 c ro re s Rs. 2 l a cs 2 0 07 -0 8 Rs. 2. 1 9 c ro re s Rs. 2. 5 0 l a cs 6 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 2 0 11 -1 2 Rs. 12 . 5 9 cr or e s Rs. 5 l a cs 2 0 12 -1 3 Rs. 14 . 8 7 cr or e s Rs. 6 l a cs
8. Re fe rr i ng to the a b ove t he Ld . C oun se l f or the a sse ssee pl e a de d th a t c ons id e r i ng the sa m e s in ce the e xe mpt i n come e a r ne d in the imp ugn e d ye a r amoun te d t o Rs. 1 .3 9 cr or e s, dr a w i ng p a r it y f r om th e o rd e r s of th e I TA T a s a b ove , t he di sa l l ow a nc e in th e pre se n t ca se b e re st r ic te d to Rs. 2 la c s.
Th e Ld .C o un se l for th e a sse ssee f ur th e r p oin te d ou t tha t the re we re n o cha n ge in f a ct s an d c ir cu msta nce s fr om t he pr e ce d i ng ye a r i.e. a sse ss me n t ye a r 2 00 7 -0 8 w he n the di sa l l ow a nc e h a d b e e n r e str i cte d b y t he I TA T to R s .2 .5 l a cs si nc e a s i n th a t ye a r , i n the imp u gn e d ye a r a l so the a ss e ssee ha d s uf fi ci e n t ow n f un d s f or th e pu r po se of m a k in g t he imp ug ne d i nv e s tme n t. O u r a tt e n tio n w a s d r a w n to t he to ta l in ve s tme n t ma d e b y t he a sse ssee i n the sa i d tw o ye ar s a s re p ro du ce d i n it s syn op si s a s un de r :
Investments 31.3.08 31.3.07
Subsidiaries/Associates = 95.16 Crs 84.63 Crs
Investments generating = 0.25 Crs 0.25 Crs
taxable income
In section 25 companies = 0.85 Crs 0.85 Crs
Investments which = 0.89 Crs 0.89 Crs
yield dividend
TOTAL Investments = 97.15 Crs 86.62 Crs
a nd t o t he p osses si on of a v a il a b le s ur p lu s a s un d er : 7 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 Own Funds 31.3.08 31.3.07 Share capital = 57.77 cr. 57.77 cr.
Reserves = 1114.37 cr. 1034.26 cr.
Dep.Reserves = 1074.27 cr. 930.75 cr.
2246.41 cr. 2022.78 cr.
9. Th e Ld . C oun se l f or th e a ss e s see t he re a fte r d r e w ou r a tte n ti on to t he f a ct t ha t th e e xe mp t d i vi d e n d in co me h a d be e n e a rne d on th e fol l ow in g in ve stme nt s:
VM T Sp i nn i ng C o mp a n y = Rs. 1, 3 6 ,6 2 ,0 5 4 /-
I D BI Li mi te d = Rs. 2 ,5 3 ,6 8 0 /-
To ta l: = Rs. 1, 3 9 ,1 5 ,7 3 4 /-
10 . Th e L d .C ou ns e l f or the a ss e ssee con te n de d th a t a l most the e nti re d iv id e n d i n come had b ee n e a r ne d fr om VMT Sp i nn in g C om p a ny Li mi te d w hi c h w a s su bs id i a r y/a ss oci a te con ce r n of the as se sse e a nd in ve stme nt i n w hi ch h a d b e e n ma de in p r e ce d ing y e a r s on l y. He , t he re fore , c onten de d tha t the a s se sse e comp a n y was not re q ui re d to ma k e a ny e xpe n d itu re f or th e p u r pose o f e a r ni n g th e e xe mp t i n come si nc e it w a s i nve st me nt in a sub si di a r y c omp a n y on l y f or wh i ch no a dmi n is tr a ti ve e ff or ts wa s r e q u ire d f or mon e ta r y e i the r f or ma ki n g the i n ve s tme nt or e a r ni n g the d i vi d e nd in come . H e , the r e fo re , p le a de d th a t th e d is a ll ow a n ce be re str i cte d to Rs .2 la c s.
11 . Th e Ld . D R, on the ot he r ha nd, co nte nde d th at t he Ld. C I T( A) w a s j us t a n d fa i r h a vi ng g iv e n a l l po ssib l e re l ie f to the a sse ssee a s a l l ow a bl e u nde r la w b y e xcl ud i ng i nte re st 8 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 pa i d on li ne s ta k e n f or spe c if ic pu r po se s , a l low i n g t he ne t tin g o f i n te re s t a n d fu r the r d ir e cti ng th a t on ly th ose in ve s tme n ts whi ch ha v e e a rne d e xe mp t i nc ome be con si de re d fo r the pu r p ose of d i sa l l ow a nc e . Th e Ld . DR ve he me ntl y su ppor te d the or de r of the Ld . C I T( A) . 12 . W e ha ve he a r d the r i va l c onte nt ion s a nd ha v e a ls o go ne thr ou gh th e or de r of the I TA T i n t he ca se o f t he a ss e s see f or a sse ssme nt ye a rs 2 0 0 6-0 7 , 2 00 7-0 8 , 20 1 1 -1 2 a nd 20 1 2 -1 3 to wh i ch o ur a tte n ti on w a s d r aw n . O n goi n g thr ou gh t he or de r f or a sse ssme n t ye a r s 2 0 06- 07 a n d 2 0 0 7-0 8 w e fi nd tha t th e I TA T h a d d ir e c te d the d isa l lo wa n ce of Rs .2 l a cs a n d Rs. 2. 5 l a cs r e sp ect iv e l y i n the s a i d y e a r s f or th e pur p ose of ca l cul a ti n g the dis a ll ow a n ce u /s 1 4A a nd on f ur t he r n oti ng tha t th e Ho n'b le Hi gh C o ur t in t he ca se of the a s se sse e itse lf for a sse ssme nt ye a r 2 0 0 0-0 1 ha d con fi r me d th e d isa l low a n ce of Rs .1 la c a ga i ns t di vi d e n d i n come e a r ne d b y the asse ssee for R s. 2. 1 6 cr or e s . C ons ide ri ng t he ove r a ll f a cts an d ci rc ums ta nc e s of th e ca se the I TA T ha d con f i r me d t he di sa l l ow a nc e o f Rs. 2 l a cs a nd R s. 2. 5 l a cs i n a sse ssme nt ye a r s 2 00 6 -0 7 and 2 0 07 -0 8 r e sp e ct ive l y. In a sse ssme nt ye a r s 2 0 11 -1 2 a n d 2 0 1 2 -13 , o n goi ng th r oug h th e or de r of the I TA T, w e fi nd tha t t he I TA T i n th e s a id ye a r s h a d ta k en note of the fa c t th a t the a s se sse e ha d su ff i cie n t ow n fu nd s for the p u r pose of ma k i ng th e i nve stme nts a nd a cco rd i ng ly 9 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 fol l ow in g th e de ci si on o f th e H on 'b l e Ape x C ou rt in th e c ase of C I T L TU Vs. R e l i a nce I n d us tr ie s Ltd . ( 2 0 10 ) 41 0 I TR 4 6 6 he l d tha t n o d i sa l l ow a nc e of i nte r e st i s w a r r a nte d u /s 14 A of the A ct. A cco rd i ng ly , the d i sa l lo wa n ce c a lc ul ate d a s p e r Rul e 8 D (2 ) (i i ) was de le te d by th e I TA T. As fo r t he di sa l l ow a nc e of a d mi ni str a ti ve e xp e nse s t he I TA T n ote d tha t the s ub sta n ti a l a mou nt of i n te r es t ha d b e e n e a rn e d by the a sse sse e fr om it s s ub si d i a r y c omp a ni e s w h e re not muc h of a dmi n is tr a ti ve r e s our ce s we re us e d . A ccor d i ng ly, th e I TA T he l d th a t the d isa ll ow a n ce of a dmi ni str a ti ve e xpen se s co uld not b e d on e s olel y i n th e r a ti o o f q ua n tum of in ve s tme n ts sho wn . Th e I TA T, t he re fore , con si d e r i ng the p a st h is tor y of the a ss e s see a n d ov e r a ll fa c ts a nd c ir c umst a nc e s of th e c a se up he ld the d i sal l ow a nc e of Rs.5 la cs a s ju sti f ia b l e . The re le va n t fi nd i ng o f th e I TA T i n a ss e ss me n t ye a r 2 01 1 -1 2 i n I TA N o. 78 7 /C h d /2 0 1 5 d a te d 1 4. 3 .2 0 1 9 a t p a r a s 8 to 1 0 of the or de r is a s und e r:
" 8 . W e h av e c o n si d e r e d th e r iv a l s u b mi s s io n s .
T h e i ss u e r e l a ti n g to t h e p r e su m p t io n th e o r y i n th e l i g h t of th e d e c i s i o n of th e H o n ' b l e S u p r e me C o u r t i n ' M ax o p p In v e s t me n t L td V s. C I T . ' , 4 0 2 IT R 6 4 0 ( S C ) ( s u p r a ) h a s b e e n d i s c u s se d b y th e T r i b u n al in th e l a te s t d e c i si o n of th e T r i b u n al i n t h e c a se of ' A C IT V s . J a n a k G l o b a l R e so u r c e s P v t L t d ' ( su p r a ) , wh e r e i n , th e T r ib u n a l af te r c o n s i d e r i n g th e r a ti o l a id d o wn b y th e H o n ' b l e S u p r e me C o u r t in th e c a s e o f ' H e r o C yc l e s P v t. L td . V s. C IT ' , 3 7 9 IT R 3 4 7 ( S C ) , an d o t h e r d e c i si o n s a s we l l a s i n th e c a s e of ' A v o n C y c l e s L td . V s. C IT ' of th e H o n ' b l e H i g h C o u r t ( s u p r a ) h a s d e c i d e d t h e i s su e i n f a v o u r 10 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 of th e a s s e s se e . A t th i s s ta g e , L d . C o u n s e l f o r th e a s se s se e h a s s u b mi t t e d t h a t n o w th e i s su e i s sq u a r e l y c o v e r e d b y th e l a te s t d e c is io n o f th e H o n ' b l e S u p r e me C o u r t i n t h e c a se of i n th e c a se of ' C IT ( L T U) V s. R e l i a n c e In d u s t r i e s L td . ' [ 2 0 1 0 ] 4 1 0 IT R 4 6 6 ( S C) , wh e r e i n , th e H o n ' b l e S u pr e me C o u r t h a s r e i te r a t e d th e p r o p o si ti o n th a t if th e r e a r e i n te r e s t f u n d s a v a il a b l e wi t h th e a s se s se e , wh i c h ar e su f f i c i e n t to me e t th e i n v e s t me n t, i t c an b e p r e s u m e d t h a t th e i n v e s t me n t s a r e m ad e f r om th e i n te r e s t f re e f u n d s a v a il a b l e wi th th e a s se s se e . In v ie w o f th i s , th i s q u e s ti o n i s n o w se t tl e d b y t h e d e c i s i o n o f th e H o n ' b l e S u p r e me C o u r t a n d th e i s su e ac c o r d i n g l y i s d e c id e d in f a vo u r of th e a s se s se e so f a r a s th e i s su e of d i s al l o wa n c e o f i n te r e s t e x p e n d i tu r e is c o n c e r n e d .
9. H o we v e r , so f a r a s th e i ss u e of d i s a l l o wa n c e of a d mi n i s t r a t i v e e x p e n d i t u r e i s c o n c e r n e d , th e L d . C o u n se l f o r th e a s se s s e e h a s i n v i t e d o u r a t te n ti o n to th e e a r l i e r o r d e r of th e T r i b u n a l to s t a t e t h a t in th e a p p e al f or th e a s s e ss m e n t y e a r 2 0 0 6 - 0 7 , th e a s se s se e h a s e a r n e d d iv id e n d i n c o me of R s . 1 . 5 9 crores and the Tribunal r e s tr i c te d the d i s al l o wa n c e of ad mi n i s tr a ti v e e x p e n d i t u r e to R s. 2 l a c s a n d f u r th e r in th e a ss e s s me n t y e a r 2 0 0 7 - 0 8 , th e a s se s se e h a d e a r n e d d i v i d e n d in c o me o f R s . 2 1 9 c r o r e s a n d th e T r i b u n a l r e s tr i c t e d th e d i s al l o wa n c e t o R s. 2 . 5 l ac s. In th e y e a r u n d e r c o n si d e r a t io n , t h e L d . C o u n se l f o r th e a sse s s e e h a s su b m i t te d th a t o u t of th e to t al d iv i d e d o f R s. 1 2 . 5 9 c r o r e s, th e a s se s se e h a s e a r n e d a d i v i d e d of R s . 7 . 9 1 c o r e s f r o m i t s su b s id i a r ie s. H e , i n th i s r e s pe c t h a s su b m i tt e d th a t f o r ma k in g i n v e s tm e n t s i n o wn s u b s i d i a r i e s, n o t mu c h of a d mi n i s t r a ti v e r e s o u r c e s a r e u s e d , h e n c e , th e d is al l o wa n c e o n a d m in i s t r a t i v e e x p e n d i t u r e c a n n o t b e d i s al l o we d so l e l y i n t h e r a ti o o f th e q u an tu m o f th e i n v e s t m e n ts s h o wn . H e , h o we v e r , h as f a ir l y a d m i t te d th a t t h e a s s e s se e h a s a l so r e c e i v e d d iv id e n d of R s. 4 . 6 c o r e s f ro m t h e i n v e s t me n t in o th e r c o mp a n i e s . T h e L d . c o un se l h a s f u r th e r su b m i t t e d th a t th e a s se s s e e h as su o mo t t o d i s al l o we d a su m o f R s . 2 l a c s f o r th e y e a r u n d e r c o n si d e r a t io n on account of a d mi n i s t r a ti v e e x p e n s e s u / s 1 4 A of th e I. T . Ac t.
11 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 1 0 . C o n si d e r i n g th e over all f a c ts and c ir c u m s t an c e s of th e c a se an d su b m i s s i o n s of b o th th e p a r t ie s a n d a l so c o n si d e r i n g th e q u an tu m o f i n v e s t m e n t ma d e , th e a mo u n t of d iv id e d e a r n e d b y th e as se s s e e f r om i t s o wn su b s id i a r y a s we l l f r o m o u ts id e / o t h e r c o mp a n i e s, i n o u r v i e w, a to t a l d i s al l o wa n c e o f R s. 5 l a c s wi l l b e j u s ti f i e d i n th i s c a s e o n ac c o u n t o f a d m in i s t r a t iv e e x p e n se s . H o we v e r , s i n c e t h e a s s e s se e i ts e l f h as su o m o tu m a d e d i s a l l o wa n c e of R s . 2 l a c s, th e a s se ss e e wi l l b e g i v e n th e b e n e f i t of th e s a me . "
13 . C on si d e r i ng the a b ov e a n d f ur ther n oti ng t he f act tha t in th e i mpu gn e d ye a r a ls o the ass e s see ha s de mon str a te d the a va i la bi l it y of su ff ic ie nt own f un d s f or th e p ur p ose of ma ki n g i nv e st me nt a s b e in g R s.2 2 4 6 .4 1 cr or e s of ow n fu nd s a va i la b l e a s a g a in st tota l in ve stme nt of Rs .9 7 .5 1 cr or e s , we hol d t ha t th e sa i d f a cts a n d c ir c umst a nc e s of th e asse ss ee wa r r a n t n o d i sa l lo wa n ce of i nte r e st i n t he p re se nt ca se, fol l ow in g the de cis io n of the I TA T i n th e c a se of the a sse ssee for a s se s sme n t ye a r 2 0 11 -1 2 a s re p r od uce d a b ove . S imi l a r ly in th e ca se of a d mi ni str a ti ve e xpe nse s we h a ve n ote d tha t a lmos t e n ti r e amou nt of di vi d e n d in co me h a s b ee n e ar ne d fr om s ub si d ia r y comp a n y of th e a s se s se e in wh i ch in ve s tme n t w a s ma d e i n th e p r e ce d in g ye a r s onl y. As note d by the I TA T i n t he ca se of the a ss e ssee f or a ss e ssme n t ye a r 20 1 1 -1 2 si nc e the i nve s tme n t i n s ub si d i a ri e s d o n ot r e q u ire much a d mi ni str a ti v e i nd u lge nce , th e d i sa l l ow a nce c ann ot b e ca l cul a te d as p r e sc r ibe d by Rul e 8D in the r a t io of in ve s tme n ts ma de a nd c ons ide rin g th e p a st hi sto ry of t he 12 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 a sse sse e whe re in a g a in st e xe mp t i n come e a r ne d of R s. 1. 5 9 cr or e s a nd Rs .2 .1 9 cr or e s i n a s se s sme n t ye a r s 2 0 0 6-0 7 a n d 20 0 7 -0 8, di sa l l ow a nc e of Rs .2 la c s a nd Rs. 2 l a cs re spe c ti ve l y ha s b ee n up he l d by the I TA T. W e di r e c t the di sa l l ow a nc e o f R s. 2. 2 5 la cs in t h e pr e se n t c a se w he re i n t he fa ct s i nd i ca te tha t th e a s se s se e h a s e a rne d d i vi de n d i n come of Rs. 1 .3 9 c r or e s. W e , the re fo re , dir e ct the A O to res tr ic t t he di sa l l ow a nc e in a ll u /s 1 4A i n t h e pre se n t ca s e to R s. 2. 2 5 la c s. Th is gr ou nd of appeal ra i se d by th e asse ssee i s, the re fo re , a l lowe d i n a b ove te r ms.
14 . G r oun d N o. 3 r a i s e d b y th e a sse ssee re l a te s to th e i ss ue of tr e a tme nt of inte re st e a r ne d by th e a sse ssee amou nti n g to Rs. 9, 8 9 ,0 4 ,0 0 0 /- a s i nc ome f r om oth e r sou r ce s in st e a d of in come f r om bu si ne ss a n d pr ofes si on. The Ld . C oun se l f or the a s se s se e po in te d out t ha t th e in te re st e a r ne d by t he a sse sse e fr om bank and ot he rs a moun te d in a ll of Rs. 9, 8 9 ,0 4 ,0 0 0 /- w a s tre a te d by the AO a s ta x ab le u nde r the he a d 'i nc ome fr om o the r sou r ce s ' a s a ga i ns t t he cl a i m of the a sse s see of t he sa i d i nte re s t a s 'i nc ome fr om bu si ne ss a nd pr of e s si on' . N o ne tti ng of in te re st e x pe nse s w as a l so a ll ow e d a ga i ns t the sa me .
15 . B e f ore us a t th e outs e t it se l f th e Ld . DR p oi nte d out tha t i d e nt ic a l i ssu e sto od a d j udi ca te d i n the c ase of t he 13 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 a sse sse e b y the I TA T in a sse ssme nt ye a r 2 0 0 6 -07 i n I TA N o.1 4 2 9 /C hd /2 0 1 0 a nd in a sse ss me nt y e a r 2 0 0 7 -0 8 i n I TA N o.2 7 0 /C hd /2 0 1 1 vi d e or d e r d a te d 1 8 .1 2 . 20 1 8 w h e re i n t he I TA T ha d d i s mi s se d a s se s se e 's p le a of tr e a ti ng it as i n come fr om bu si ne ss a n d p ro fe ssi on b ut co ns id e r i ng the p le a of t he a sse sse e t ha t the n e tti n g of i nte res t e x pe nd i ture be a l l owe d , ha d d ir e cte d the AO to a ll ow th e s a me w he re a d i re ct ne xus be twee n t he i nt er e st i nc ome e a r ne d a n d i nte re st exp e nd i ture in cu rr e d w a s t he r e . O ur a tte n tio n wa s d r a w n to p a r as 4 to 6 of th e or de r d e a lin g w i th th e s a id i ssu e i n a s se s sme n t ye ar 20 0 6 -0 7 a s un d er :
"4. Ground No.1: Vide ground No.1, the assessee has agitated the action of the CIT (A) in treating the interest income amounting to Rs. 1,65,17,422/-as 'income f rom other sources' instead of 'income f rom business or prof ession' as was claimed by the assessee.
5. The f acts relating to the above issue are that the Assessing off icer had treated in terest f rom customers and suppliers amounting to Rs. 355.28lacs and f urther interest f rom bank &others amounting to Rs. 165.17 lacs as 'income f rom other sources' as against the claim of the business income. T he Ld. CIT (A) held that since income on the delayed payment from customers and suppliers was intrinsically linked with the business ac tivity of the assessee, hence, the same was to be treated as business income of the assessee, whereas, theinterest received f rom bank &others was directed tobe treated as 'income f rom other sources'.
6. We have heard the rival submissions on this issue. We do not f ind any inf irmity in the order of 14 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 the CIT (A) so f ar as the treatment of the interest from customers and suppliers as 'business income' and interest f rom bank and other sources as 'income f rom o ther sources' is concerned. Ho wever, a contention has beenraised by the Ld. Counsel f or the assessee that wh ere there is a direct nexusbetween the in terest income earned and the interest expenditure incurred in this respect, the assessee should be allo wed netting of the same bef ore computing the same under the head 'income f rom other sources'. We f ind merit in the above contention of the assessee and we order accordingly."
16 . I n v ie w of the a bove , s in ce the i ss ue of in te re st i n come to be ta xa b l e un de r th e he ad 'oth e r sou rc es ' s ta nd s a dj ud i ca t e d by the I TA T a ga i n s t t he a ss e ssee th e sa id de ci si on w i l l sq ua r e l y a p p ly i n the pre se n t ca se a l so a n d fol l ow in g the d ir e c tio ns of t he I TA T i n th e sa i d ye a r , we up hol d t he p le a of th e a ss e ss ee to ne t ti ng of i nte re st e xpe n d itu re a g a in st th e s a id income d i re cti n g th e AO to a ll ow n e tti n g of sub j e c t to t he re b e i ng di re c t ne xus b e twe en the in te re st in come e a r ne d a s d ir e cte d b y the I TA T i n t he ca se of the a sse ss ee in a s se ssme nt ye a rs 2 0 0 6-0 7 a nd 2 0 0 7- 08 a b ove . G r ound N o. 3 r a i se d b y th e a s se s se e i s a l low e d i n a bo ve te r ms .
17 . G r oun d N o. 5( w hi c h c or r e ctl y sh oul d ha v e b e en me nt ion e d a s g r oun d N o.4 i n c hr on ol ogi ca l or de r ) r e la te s to the is sue of d i sal low a n ce of de d uc tio n u /s 8 0 I C /8 0 I B of t he Act on t he f oll owi ng i nc ome s e a rne d b y t he a sse s see :
Re nta l I n come = Rs .4 5 ,7 5 ,2 6 7 /-
15 ITA Nos.484 to 486/Chd/2019
&
ITA Nos.611 to 613/Chd/2019
A.Ys. 2008-09, 2009-10 & 2013-14
I n te re st fr om oth e r = Rs .4 2 ,4 0 ,9 2 8 /-
Mi sc e l la n e ou s Rec e i p t = Rs .3 2 ,1 8 ,1 5 3 /-
Th e s a id di sa l l ow a nc e w a s ma d e for the r e a s on th at t he imp ug ne d i n com e s we re f ou nd to be not der iv e d f ro m in d ust ri a l un d e rta k i ngs , wh i ch i s a ne ce s sa r y pr e re q ui si te for th e p ur p os e of cl a imi n g d e d uct ion u /s 8 0I B /8 0I C of t he Act .
18 . W i th r e s pe ct t o r e n t re ce ip t, th e con te nti on of t he Ld. C ou ns e l f or the a sse ssee w a s th a t i t ha d r e ce iv e d re n tal in come f r om a c c om mod a ti on re nte d to i ts e mpl oye e s . The pl e a d i ng s of the Ld .C o un se l for th e a sse ssee i n th is r e ga r d wa s t ha t w h il e th e Re ve n ue a u th or iti e s ha d e xclu d e d the e nt ire re n t re ce ip ts , the e x pe nses i nc ur r e d f or ma i n ta in i ng thos e a cco mmod a t ion s fo r th e e mp loy e e s s hou ld ha v e be e n re d uce d the re f r om a n d on ly th e ba l a nc e re nta l i n come oug ht to h a ve be e n d is al low e d.
19 . As for th e mi sce ll a ne ou s re ce ipts it w a s p oi n ted out tha t th e sa me re la te d to the f ol l owin g:
a) D a ma ge s a g a in st ca n ce ll a ti on = Rs. 31 , 1 0, 7 4 4/-
of or d e r s f r om c ust ome r s
b) C om mi ss ion fr o m shi p p in g = Rs. 7 ,0 7 5 /-
co mpa n i e s
c) O th e r re ce i p ts = Rs. 1 , 00 , 3 56 /-
16 ITA Nos.484 to 486/Chd/2019
&
ITA Nos.611 to 613/Chd/2019
A.Ys. 2008-09, 2009-10 & 2013-14
20 . Th e Ld .C oun se l for t he a sse s see co nte nde d tha t th ere
ca n not b e d i sp ute a b out the fa c t tha t the da ma g es r e ce i ve d a ga i nst ca n ce ll ati on of or d e r s fro m cu sto me r s h a d d i r e ct ne x us w ith t he ind us tr i a l un de r ta k in g o f t he a sse s see and de du cti on u/s 8 0 I C /8 0 I B of th e A ct wa s a l low a b l e i n this re ga r d . He r e l ie d u p on th e d e c is io n of t he I TA T i n the c a se of P r .C I T, D e l hi Vs . B h a r a t Sa n ch a r N ig a m Lt d. in I TA N o.4 7 6 /2 01 6 d a t e d 1 . 8 .2 0 1 6 wher e in the Ld . C oun se l for the a sse sse e poi n te d o ut tha t d e d uc ti on u/s 80 I A w a s a l lo we d on l iq u id a te d d a ma ge s. As f or t he c om mis si on f ro m shi p p in g co mpa n i e s, the Ld. C ou ns e l f or the a ss e ssee con te n de d th a t the I TA T i n th e c a se of the a ss e ssee f or a sse ssme nt ye ar s 2 0 0 6 -0 7 a nd 2 00 7 -0 8 h ad a l lo we d de du cti on u /s 8 0 I B /80 I C of t he A ct on co m mi ss i on e ar ne d fr om oce a n fr e i gh t. O ur a tte n ti on w a s d r a wn t o p a r as 7 to 10 of th e or de r de a l i ng w i th i de ntic a l i ssu e a s un de r :
"7. Ground No.2 : Vide ground No.2, the assessee has agitated the action of the CIT (A) indirecting the Assessing of f icer to reduce the eligible prof its of theundertaking for the purpose of deduction u/s 10B, 80 IB and 80 IC of the Income-tax Act, 1961 (in short 'the Act') in respect of other income received.
8. The Ld. Counsel f or the assessee has given details of other income which is mentioned in the ground No.2 itself. A perusal of the af oresaid details will reveal that the assessee claimed rent, Misc. receipts, DEPB, commission and interest income as 'other income' and has claimed deductions in respect of the same u/s 10B, 80 IB and 80 IC etc., as applicable in respect of the respective unit. T he Ld. 17 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 Counsel f or the assessee has fairly agreed that except the brokerage f rom ocean f reight, the other items do not constitu te income derived f rom undertaking. So far as the brokerage of ocean f reight is concerned, the Ld. Counsel f or the assessee has submitted that the same is noth ing but ref und / rebate ou t of the freight expenditure incurred by the assessee which has resulted in increase in income of the assessee.
9. The Ld. DR also could not rebut the af oresaid argumen ts of the assessee
10. In view of this, out of the items mentioned in ground No.2, the Assessing of f icer is directed to consider the rebate on ocean f reight as income of the undertaking of the assessee. Ho wever, the f indings of the lower authorities in respec t of the remaining items is aff irmed."
21 . I t w a s , the re fore , p le a de d tha t the is sue stoo d c ove re d in fa vo ur of th e a sse ssee by th e or de r of th e I TA T i n a sse ssme nt ye a r 2 0 0 6-0 7 a s a bo ve .
A s for th e d is a ll ow a n ce of d e du cti on u/s 8 0 I B /8 0 I C of the Act o n i nte re st f r om oth e r s a mo u nt in g to Rs .4 2 ,4 0 , 92 8 /-, the Ld. C ou ns e l for the a s se ssee con te n de d th a t ma j or a moun t of in te re st i n cl ude d i n the a b ove , a mou nt in g to Rs. 26 , 8 4, 4 2 8/- , h a d b ee n re ce i ve d fr om Ele ctr i ci ty B oa r d on se c ur i ty de p os it a nd b e i ng p u r el y of b u si ne ss n a tu r e , t he sa me w a s e l ig ib le for d e d uc tio n u/s 8 0 I B /8 0 I C of th e Act . 22 . Th e Ld . D R, on th e othe r h a nd , re l ie d u p on the ord e r of the a uth or i tie s b e low c onte n di ng th a t i n t he ab se n ce of ne x us w it h t he ind u str i a l un d e r ta k i ng, t he d is a llow a n ce of 18 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 de du cti on u/s 8 0I B /8 0I C of the Ac t of the Ac t on the a b ove in come s ha d b e en r i gh ty up he ld by t he Ld .C I T(A ). 23 . W e ha ve he a r d the con te nti on s o f bot h the p a r ti e s. I t is se tt le d l a w th a t th e de d uct ion u/s 8 0 I B /8 0 I C of th e Ac t i s e l igi b le on th e in come s wh i ch h a ve f ir st d e g re e ne xus w i th the i nd us tr i a l un de r ta k in gs of th e a s se sse e . Th e re i s no di sp u te a b ou t thi s p r op os iti on a t a l l. I n thi s b a c kd r op , con si de r in g th a t the re n ta l in come ha d be e n re ce ive d b y t he a sse sse e f ro m l e t tin g ou t a cco m mo da t ion t o it s e mp lo yee s, the re is c le a rl y no n e x us of the s a id in come w i th t he in d ust ri a l un d e rta k i ng of t he a sse ssee a n d th e cl a i m of de du cti on u/s 8 0 I B /8 0 I C o f th e A ct, the re f ore , w e h ol d ha s be e n r igh tl y d i sa l l ow e d b y the Ld . C I T( A) . B ut a t the sa me time , we a re in a gr e e me n t w i th th e c ont e nt io n of t he Ld. C ou ns e l fo r t h e a s se s se e th a t it i s n ot the e nti r e g r oss re nta l re ce i p ts w hi ch a r e to be d is a l low e d out of th e to ta l pr of i ts cl a ime d b y the a s se sse e a s de d uct a ble u/s 8 0 I B /8 0 I C of th e Ac t, b ut o n th e pr of i t e le me n t i n the sai d i n come wh i ch i s e mb e dd e d i n the p r ofits e a r ne d b y the a sse ssee me a ni n g the re b y tha t t he e xpe n se s , i f a ny , i nc urr e d by t he a sse sse e f or e a rni n g the re nt a l inc ome ou ght t o be re d uce d fr om th e re nta l i nco me a nd it i s on ly th e b a l a nc e wh i ch sho ul d be d e n ie d de d uc ti on u/s 8 0 I B /8 0 I C of th e Ac t. 19
ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 Acc or d in gl y, we d ir e c t the A O t o r e d uce e x pe nses, i f a n y, in cu rr e d b y t he a ss e s see f or the p ur p ose of e a rni ng r e n ta l in come a nd d i s a l low on l y th e b a la n ce r e nta l i n come de du cti on u /s 80 I B /80 I C of t he Ac t. As f or t he mis ce l l a ne ous re ce i p ts, the d a ma ge s a g a in st c a nce l la t ion of or de r s fr om c us t ome r s re ce ive d b y th e a ss e s see , w e a gree wi th t he Ld .C o un se l f or the a s ses se e , a s d ire ct ne xus w i th the i n d ust ri a l un de r ta k in gs o f th e a sse s see a nd w e ho ld , i s e l igi b le f or de d ucti on u/s 8 0 I B /8 0 I C of t he Ac t. Si mi la r l y, the c ommi ssi on f r om sh ip p i ng c omp a ni e s, w e ha v e no te d , ha s b e e n he ld b y th e I TA T in th e ca s e of the a sse ssee it se l f in th e p r e ce di ng ye a r i.e. a s se s sme n t ye a r 2 00 6 -0 7 as e l igi b le f or de du cti on u /s 8 0 I B /8 0 I C of the Act . Acc or d in gl y, fol l ow in g the s aid de ci si on we h old the c ommi s si on f ro m shi p p in g co mpa n i e s to be e l ig ib l e f or de du cti on u/s 80 I B /80 I C of t he Ac t. F or othe r re ce i p ts n o a r gu me n ts h a ve be e n f or w a rde d by the a s se sse e a nd , the ref or e , t he di sa l l ow a nc e o f de d uct ion u /s 80 I B /80 I C of the Ac t of t he Act on t he sa me a mo un tin g to R s. 1 ,0 0 ,3 5 6 /- i s up h e l d . As for the i nte re s t re ce i ve d fr om b a nk a nd ot he r, we d o not fi n d a ny me r i t in t he cl a i m o f the a sse sse e tha t ha vi n g b e e n e a r ne d on s e cu r it y d e po si ts ma d e w i th El e c tr i ci ty Boa r d th ey we re pu re l y in the n a tu re o f busi n e ss i n come a n d h e n ce e l igi b le f or de ducti on u /s8 0 I B /8 0 I C of the A ct. Th e sa i d 20 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 in come a s d e sc r ib e d by th e Ld. C ou ns e l f or th e a sse ssee d oes not ha v e any f ir s t d e gre e nexu s w i th th e i n du str i a l un de r ta k in gs o f th e a s se sse e a nd , th e re fore , we h ol d tha t the sa me i s n ot e l i gi ble f or de d uc ti on u /s 8 0I B /8 0I C of t he Act .
24 . I n v ie w of the a b ov e , we h ol d th a t th e a sse sse e i s e l igi b le to de duct ion u/s 8 0I B /8 0 I C of th e Act on t he da ma g e s a ga i n st ca n ce ll a ti on , com mi ss io n fr o m sh i pp i ng wh i le it is he ld n ot e l i gi bl e for d e d u cti on on th e o the r re ce i p ts , in te re st r e ce i pt s fr om ba nk a nd oth e r s a nd r e n ta l in come , w h ic h w e d i re ct the AO to r e s tr ic t th e d isal low a n ce to th e ne t re n ta l i n come e xc lu d in g t he e xpe nse s incu r r e d f or e a r ni n g the s ame . G ro un d o f a p p e a l N o. 5 r a ise d b y t he a sse sse e is p a r tly in a bo ve te r ms .
25 . G r oun d of a p p e a l N o .6 r a i se d b y t h e a ss e ssee re l a te s to the is sue of a ll oc a ti on of h e a d off i ce e xpe n se s to u ni ts cl a imi n g d e d u cti on u /s 80 I B /80 I C of t he A ct. 26 . B r i e f ly s ta te d t he AO ha d a l loc a te d he a d of fi ce e xpe n se s on the b a si s of tur n o ve r f or t he pu rp os e of ca l cul a ti n g th e p ro fi ts of th e u n its e li gi b le f or d e duc ti on u /s 80 I B /80 I C of the Ac t. The Ld. C I T( A) d ir e cte d the AO to a ll oca t e he a d offi ce e xpe n se s ne t of he a d o ff ice in come f or the s a id p ur p ose f ol low i n g the d e c i si on of t he I TA T i n 21 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 a sse sse e 's ow n c a se fo r a sse ssme n t y e a r s 2 006 -0 7 a n d 20 0 7 -0 8 in I TA N o. 1 42 9 /C h d /2 0 1 0 and I TA N o.2 7 0 /C hd /2 0 1 1 .
27 . B e f ore us t he Ld .C oun se l for the a sse sse e w a s un a b le to gi ve a ny r e a son f or n ot f oll ow i ng the d e ci si on of th e I TA T in the p re ce di n g ye a r a s do ne by the CI T( A) . H e w a s un a ble to p oi nt out a ny d i sti n gui sh i ng fa c ts i n th e p r e se nt ca s e . I n vi e w of the sa me , s i nce the Ld . C I T( A) ha s fo ll ow e d th e o rd e r of t he I TA T i n th e c a se of t he a sse ssee for a s se ssme nt ye a r s 20 0 6 -0 7 and 20 0 7 -0 8 on i de nt ic a l i ss ue and no di st in gu is hi ng fa c ts h a ve bee n b rou ght to our n oti ce b y the Ld. C ou ns e l fo r th e a s se sse e , we se e n o re a son to i nt e r fe re i n the or de r of the Ld . C I T( A) . G r oun d of a p pe a l N o. 6 r a i se d by the a s se s se e i s di smi sse d.
28 . G r oun d of a p p e a l N o .7 r a i se d b y t h e a ss e ssee re l a te s to the t re a tme n t of li n e /b a y ch a r ge s a moun ti ng to Rs. 4, 0 0 ,7 2 ,0 0 0 /- a s c a pi ta l e xpe nd it ur e ; 29 . B r i e f ly sta te d , th e fa c ts re la tin g to the i ss ue a re tha t the a sse ssee h a d p a i d li n e /b a y ch a r ge s in it s un i t An a nt Sp i nn in g Mil l s a nd Va r d hma n Y a r ns , bo th l oca te d i n Ma d hya Pr a d e s h Ele ct ri city B oa rd a mou n ti ng to Rs. 4 ,0 0 ,7 2 , 00 0 /-. Th e a sse ss ee had c l a i me d the s a id e xp e n di tu re a s r e v e nue 22 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 con te n d in g be fore the AO tha t th e sa i d e xp e n di tu re h a d b e en in cu rr e d f or a u gme n ti ng t he bu si ne ss a cti vi ties of t he a sse sse e c omp a ny and the own e r sh ip of the a ss e ts so cr e a te d ve s te d w it h th e S ta te E le ctr i ci ty B oa rd a n d t he a moun t w a s n ot re fu nd a b le a t a ny sta ge . The e xp la na ti on of the a sse s see d i d n ot f i nd f a vou r w i th th e A O w h o tr e a te d t he sa me a s c a p it a l e xpe nd i tu re a nd a l l ow e d de p a rt me n t on the sa me .
30 . Th e Ld . C I T( A) u p he l d t he or de r of th e AO . 31 . B e f ore u s the Ld . C oun se l f or the a s se s see p oi n ted out tha t th i s i s sue s tood a dj ud i ca t e d i n f a vou r of th e a ss e ssee in i ts ow n ca se b y t he I TA T i n a sse ssme nt ye a rs 20 1 1 -1 2 a nd 2 0 1 2- 13 in I TA N o . 7 87 /C h d /20 1 5 and I TA N o.4 8 3 /C hd /2 0 1 6 d a te d 14 . 3 .20 1 9. O ur a tt e ntio n was dr a w n t o t he r e le va n t f i nd i ngs of th e I TA T i n p a r a s 3 3 a n d 34 of th e or de r as u nd e r :
" 3 3 . G r o u n d N o . 1 4 : V i d e g r o u n d N o . 1 4 , th e a s se s se e h a s a g i ta te d th e a c t i o n th e C IT ( A ) in tr e a t i n g th e l i n e / b a y c h a r g e s a s c a p i ta l r e c e i p t i n s te a d o f R e v en u e r e c e i p t.
3 4 . T h e L d . C o u n se l f or th e a s se s se e h a s i n v i te d o u r a tt e n ti o n to t h e d e c i s i o n of th e T r i b u n a l i n th e o wn c a se of th e a sse s se e f o r a s s e s s m e n t y e a r 2 0 0 7 - 0 8 i n IT A N o . 1 4 3 0 / C h d / 2 0 1 0 o r d e r d a te d 3 1 . 3 . 2 0 1 0, wh e r e i n , th e T r i b u n a l af te r d i sc u ss in g th e d e t a i l s u p h e l d th e o r d e r o f th e C IT ( A ) i n th a t y e a r tr e a t i n g t h e af o re s a i d e x p e n d i tu r e as 23 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 R e v e n u e e x p e n d i tu r e . N o c o n tr a r y d e c i s i o n h a s b e e n c i t e d b e f o re u s. In v i e w of t h i s , th e i s su e i s a c c o r d i n g l y d e c i d e d i n f a v o u r of th e a ss e s se e a n d th e A s se s s i n g o f f i c e r i s d i r e c t t o tr e a t th e af or e sa id e x p e n d i tu r e a s R e v e n u e e x pe n d i tu r e . "
Th e Ld . C oun se l for the a s se s se e , th e re f ore , c onten de d tha t th e is sue stood cov e re d in f avo ur o f the a s se sse e 32 . Th e Ld . DR th o ugh f a ir l y c on c e de d to th e ab ov e, how e ve r , re l ie d up on th e or de r s of th e a uth or i tie s b e l ow . 33 . In vie w of the a bov e si nce ide nti ca l is sue a lr e a d y sta n d s d e ci de d in fa vour of the a ss e ssee b y the I TA T i n a sse ssme nt yea r 2 0 1 1-1 2 and 20 1 2 -1 3 and no di st in gu is hi ng fa c ts h a ve bee n b rou ght to our n oti ce b y the Ld. D R, the s a id de ci si on w i ll a pp l y in the p re se n t c a se Ass e ss i ng O f fi ce r, f ol lo wi n g w hi c h w e hol d th a t th e l i ne /b a y cha rg e s to be re ve nue in na t ure . G r ou nd of a pp e a l NO . 7 ra i se d b y the a sse sse e is a c cor d i ng ly, a ll ow e d . 34 . I n e ffe c t the a p pe a l o f the a s se sse e is p a r tl y a ll owe d .
W e now sh a l l tak e up the de pa r tme nt a l a p pe a l i n ITA N o. 61 1 /C hd /20 19 .
ITA N o. 61 1 /C hd /20 19 ( A.Y .2 00 8- 09 -R e ve nu e 's A p p e a l) : 35 . G r oun d N o. 1 r a i se d b y the Re ve nue re a d s a s un de r : 24
ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 Q.I. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing interest from customers & suppliers amounting to Rs.3,19,43,971/- to be treated as business income as against A.O. treating the same as income from other sources?"
36 . Th e i s sue r a i se d i n the a b ove gr ou nd r e l a te s t o t he tr e a tme n t of i nter e st re ce ive d f rom cus to me r s a nd s up p li e r s a nd b u si ne ss i ncome of th e a sse ss ee .
37 . At th e ou tse t i tse lf , it w a s p oi n ted ou t th a t t he AO h a d tr e a te d t he sa i d in co me a s 'in c ome f ro m oth e r sou r ce s ', wh i le t he Ld . C I T( A) a l l ow e d the asse ssee 's cl a im of t re a ti ng the sa i d i nc ome a s 'b u si ne ss in come ' f or th e r e a son th a t t he in come on d e la ye d p a yme n t fr om cus to me r s a nd su p p li ers wa s i n tr in si ca l l y l i nk e d w i th the b us in e s s of the asse ssee . B e f ore u s a t t he ou tse t i tse lf it w a s po in te d out b y t he Ld. C ou ns e l fo r th e a s se sse e tha t th e is sue s stoo d cov e re d b y the or de r of th e I TA T i n t he ow n ca se of th e a sse s see f or a sse ssme nt yea r s 2 00 6 -0 7 a nd 2 0 0 7 -08 in I TA N o.1 4 2 9 /C hd /2 0 1 0 a nd I TA N o. 2 70 /C h d /2 0 1 1 d a te d 18 . 12 . 2 01 8 w he re in the I TA T ha d fou nd n o i n fi r mit y i n t he or de r of t he CI T( A) tr e a t in g the in te re s t re ce i ve d on a c cou nt of d e l a ye d p a yme nt s fr om c u s tome r s and su pp l ie r s as bu si ne ss in come . N o di s tin gu is hi ng fa cts ha v e bee n b r ou ght to o ur n oti ce b y th e Ld. D R. 25 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 I n vie w of the same the i ssue stan d s c ove re d b y th e or de r of the I TA T i n the p r e ce di n g ye a r s i n f a vou r of the a ss e ssee a nd th e o rd e r of the Ld .C I T(A ) o n t hi s i ss ue i s, the re f ore, up he ld . G r oun d o f a p pe a l N o. 1 r a i se d b y t he Re ve n ue i s a ccor d i ng ly d i sm i sse d.
38 . G r oun d of a p p e a l N o.2 r a i se d b y th e Re ve n ue r e ad s a s un de r :
Q.2. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing deduction u/s 80IB and 80IC on interest from customers & employee, misc. receipts comprising Brokerage from ocean freights, forex gains, insurance claim & rebate discount ?"
39 . Th e Re v e n ue in th e a b ove gr oun d ha s a gi ta te d t he a cti on of the Ld . C I T( A) in a l l ow in g d e d uc ti on u/s 8 0 I B a n d 80 I C on th e int e re s t f ro m c u stome rs and e mp lo yee s, mis ce l l a ne ous re ce i pt s c omp ri si n g b r ok e r a ge f rom oc e a n fr e i gh t, f ore i gn exch a n ge ga i n s, i ns ur a n ce c la i m a nd r e b a te di sc oun t.
At th e o uts e t i ts e l f, the Ld .C o u n se l f or the a sse ssee dre w our a t te n tio n to th e de ta i ls of i ns ur a n ce cl a im r e ce ive d a t Pa p e r B ook pa ge N o. 1 a s un d e r :
Arisht Spinning Mills Detail of Insurance Claim received Date Description of Claim Loss Suffered Claim Received 7/25/2007 Loss due to fire in Carding 134,107 49,265 10/16/2007 Loss due to fire in H. Plant 586,706 285,612 10/16/2007 Claim for mobile set 1,800 1,800 12/27/2007 Marine Claim due to loss of yarn 105,920 105,920 828,533 442,597 26 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 Auro Textiles Date Description of Claim Loss Suffered Claim Received 9/25/2007 Claim for Mobile Set 3,200 900 3,200 900 Auro Spinn in g Mills Date Description of Claim Loss Claim Received Suffered 8/27/2007 FIRE CLAIM OF BLOW ROOM MPM 8 IN HALL 5 163,715 136,281 8/27/2007 FIRE CLAIM OF BLOW ROOM (UNIMIX) IN HALL 4 372,770 362,432 10/26/2007 LOSS OF MOBILE BILL NOKIA 5,600 5,572 11/14/2007 TRANSIT CLAIM OF RIETER CARD COVER SHEET 8,192 7,447 3/31/2008 TRANSIT CLAIM OF AMSLER ATTACHMENTS (CSY) 4,966,956 4,966,956 5,517,233 5,478,688 40 . Re fe rr i ng to th e s a me h e p oi nte d out t ha t t he e nt ire cl a im r e l a te d to th e lo ss i n i ts b us in e s s un its/ bu si ne ss a cti vi ti e s a n d , th e re f ore , t he e nt ir e c la i m w a s el ig ib l e for de du cti on u/s 80I B /I C o f the Act. H e f ur the r poi nt e d out tha t th e i ss ue of a l l ow a nc e of i n sur a n ce cl a i m a l so ha d b e e n de a lt w i th by the I TA T in f a vou r of th e a ss e ssee in a sse sse e 's ow n ca se f or a sse ssme nt years 2 011 /1 2 and 20 1 2 -1 3 i n I TA N os. 7 8 7 & 8 9 4 /C hd /2 0 15 a nd I TA N os. 4 8 3 & 51 8 /C h d /2 0 1 6 d a te d 14 . 3 .2 0 1 9.
As f or th e cl a i m of de du cti on u /s 8 0 I B /8 0 I C on i nte re st fr om cus to me r s and Mi sc . r e ce i pt s comp r is in g of br ok e r a ge , oce a n fr e igh t , fore x g a in ,Ld . C oun s e l f or the a sse sse e p oi nte d out t ha t th e s e issu e s a ls o stoo d e ci de d by the I TA T i n f a vo u r o f th e a sse s see in a sse sse s ow n ca s e f or A. Y 2 0 0 6 -07 & 2 0 0 7- 08 i n I TA N o.3 5 /2 01 1 & 2 8 6/2 0 1 1 da t e d 1 8 -1 2 -18 .
27 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 41 . W e h a ve g one t hr ou gh t he or d e r s of th e I TA T t o wh i ch our a tte n ti on w as d r a w n a n d h a ve n ote d th a t the I TA T h a d a ll ow e d the a ss ess ee 's c la i m of d e d uc ti on u/s 8 0I B / 8 0 I C i n ca se of fore i gn e x ch a nge ga i n, co m mis si on b r ok e r a g e f ro m oce a n fre i gh t an d i nte re st re cei ve d f r om c us tome r s and sup p l ie rs a nd tha t re la t in g to i ns ur a n ce cl a i m i n p r e ce d i ng ye a r s hol d i ng a t pa r a 27 of the ord e r i n I TA N o. 3 5 /20 1 1 a s un de r :
27. Ground No.2 : Ground No.2 raised by the Revenue is in three parts. The Revenue in the Ist part has agitated the action of the CIT(A) in directing the Assessing officer to treat the interest received from the customers and suppliers to be income derived from industrial undertaking and eligible for exemption u/s 10B and deduction u/s 80IB and 80IC of the Act. Since we have already held that the interest income received on delayed payment is in fact part of the sale consideration / receivable from the customers and we have also held that the same to be treated as business income and since the aforesaid receipts are relating to the sale receipts of the assessee of the produced manufactured, hence, we do not find any infirmity in the order of the CIT(A) in this respect.
In the second part of ground No.2, the Revenue has agitated the action of the CIT(A) in directing the Assessing officer to allow deduction u/s 80IB and 80IC and exemption u/s 10B on profit after excluding loses debited in the accounts in respect of which insurance claims were received. The Ld. Counsel for the assessee in this respect has invited our attention to the paper book page 2 wherein the details of the items has been given on which insurance claim was received. However, after perusal of the same, it is not clear as to which of the items constituted capital assets and which of the items constituted trading asset of the assessee. We therefore, restore this issue to the file of the assessee to bifurcate the items between capital assets and trading assets and to allow the claim in respect of insurance claim received on trading assets only.
28. The third part of ground No.2 is against the action of the CIT(A) in directing the Assessing officer not to reduce foreign exchange fluctuation gain from eligible profits of units eligible for deduction u/s 80IB and 80IC and exemption u/s 10B of the Act.
29. The Ld. Counsel for the assessee has submitted that the foreign exchange fluctuation gain is in respect of export receipts / receivable of the assessee and any gain in respect of receivable on account of foreign exchange fluctuation in fact contributes to the profits of the assessee from the sale/ export of the products. We find force in the aforesaid 28 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 contention. We do not find any infirmity in the order of the CIT(A) in this respect also.
We h a ve a l so g one t hr ou gh th e or d e r of th e I TA T i n I TA N o.7 8 7 /2 01 5 a t p a r a 2 3 a s un de r:
" 2 3 . G r o u n d N o . 9 . V i d e th i s g r o u n d th e as s e s s e e h a s ag i t a te d th e ac ti o n o f th e l o we r a u t h o r i ti e s i n tr e a t i n g t h e i n c o m e f r o m t h e p r o f i ts o f th e u n i ts e l i g i b l e f o r d e d u c ti o n u / s 8 0 I B / 8 0 I C o f th e A c t.
S o f ar as th e c l a i m o f d e d u c t i o n i n r e s p e c t o f th e i n s u r an c e c l ai m , w h i c h a d m i t te d l y w a s o n ac c o u n t o f l o s s o f tr ad i n g as s e ts i s c o n c e r n e d , i t h as b e e n h e l d t i m e an d ag a i n th a t i f th e l o s s th e r e i n i s i n d e m n i f i e d b y w a y o f c o m p e n s a ti o n r e c e i v e d f r o m i n s u r an c e c o m p an y t h a t c an b e s a i d to b e n o t a s e p ar a te i n c o m e , r a t h e r , th e s a m e w i l l h a v e e f f e c t f o r r e d u c i n g l o s s / e x p e n d i tu r e . H e n c e , i f th e as s e s s e e h as b o o k e d th e af o r e s ai d l o s s , i n r e l a t i o n to w h i c h i n s u r an c e c l a im h as b e e n r e c e i v e d , a s e x p e n d i tu r e , th e n th e am o u n t r e c e i v e d b y th e as s e s s e e f r o m i n s u r an c e c o m p an y wi l l b e e l i g i b l e f o r d e d u c t i o n u / s 8 0 I B / 8 0 IC o f th e A c t. T h i s i s s u e i s ac c o r d i n g l y r e s to r e d to th e f i l e o f th e A s s e s s i n g o f f i c e r f o r v e r i f i c a t i o n o f th e f ac ts .
S o f ar as th e i s s u e r e l a t i n g to th e g ai n s o n th e f o r e i g n e x c h a n g e r a te f l u c tu a t i o n i s c o n c e r n e d , th e L d . C o u n s e l f o r th e a s s e s s e e h as s u b m i tt e d th a t g ai n o n f o r e i g n e x c h an g e r a te f l u c tu a t i o n h a s b e e n r e c e i v e d o n ac c o u n t o f p r o c e e d s o f e x p o r ts r e c e i v a b l e an d th a t t h e s a m e w a s a p ar t o f th e s al e c o n s i d e r a t i o n . T h e L d . c o u n s e l h as f u r th e r s u b m i tte d th a t t h i s i s s u e i s s q u ar e l y c o v e r e d i n f av o u r o f th e as s e s s e e i n th e o wn c as e o f th e as s e s s e e f o r as s e s s m e n t y e ar s 2 0 0 6 - 0 7 an d 2 0 0 7 - 0 8 v i d e c o m m o n o r d e r o f th e T r i b u n al d a te d 18.12.2018 (supra)."
C ons id e ri n g th e a b ove we a gree w ith th e Ld .C o u n se l fo r t he a sse sse e t ha t the i ss ue of cl a im of de d uct ion u /s 8 0 I B /8 0 I C of the A ct on i nt e re s t i nc ome rece ive d fr om cus tome r s a n d mis c. r e c e i p ts i n th e n a tur e of oce a n f re ig ht,f or e x ga in a lr e a d y s ta n d de ci d e d in fa v our of th e a s se s se e b y th e I TA T 29 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 in p r e ce d i ng ye ar s i n the ca se of th e a sse ssee i tse lf . We the re fo re se e n o r e a son to i n ter f e re i n the or d e r o f the LD. C I T( A) w it h r e s pe ct t o a ll ow a n ce of th e a f ore sa i d cl a i ms. As for c la i m of d e d uc tio n u /s 8 0 I B /8 0 I C of t he Act on in su ra n ce cl a im r e ce i ve d , the i ss ue i s re s tore d back to t he AO w i th th e d i rec tio n to a d j ud i ca te i t in a c cor d a nc e wi th the di r e c tio n of th e I TA T i n th e cas e o f th e a sse ssee on the id e n ti ca l is sue in A. Y 2 0 1 1- 12 dealt w ith in I TA no. 7 87 /c hd /2 01 5 .
Th i s gr ou nd of appeal is p a rtl y a l l ow e d f or sta t is tic a l pu r po se s .
42 . G r oun d N o. 3 r a i se d b y the Re ve nue re a d s a s un de r :
" 3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in treating the reimbursement of interest under TUF scheme of the Ministry of Textiles, Government of India, as capital receipt instead of revenue receipt without giving an opportunity to assessing officer to examine the claim of assessee?"
43 . Th e i s sue r a i se d i n the a b ove gr ou nd r e l a te s t o t he tr e a tme n t of th e re imb u r se me nt of i nte re st r e ce i ve d b y the a sse sse e u nd e r the TU F S ch e me of th e Mi n is tr y o f Te xti l e l s, Gov e r n me nt o f In d i a , w hi ch th e a ss e ssee h a d cl a ime d to b e ca p it a l i n na t ur e a s op p ose d to th e A O tre a ti n g th e s a me a s re ve n ue in na tu re a n d s ub je cti n g it t o ta x a nd whi ch cl a i m of th e a s se sse e wa s up he ld b y t he Ld .C I T(A ) . 30 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 O ur a t te n tio n wa s d r a wn to the f in d in gs of t he Ld. C I T( A ) a t pa r a s 23 to 2 5 o f t he o rd e r p oi ntin g ou t th e r e f rom tha t t he Ld. C I T( A) a fte r e x a min in g th e ob je cts of the TU F S ch e me fr om th e r e sol uti on of t he Min i str y of Te xt il e s (N o. 2 8 /1 /9 9 C I T d a te d 3 1 .3 . 1 99 9 ) ha d f oun d tha t t he pu r po se of thi s su bs id y was u p gr a d a ti on of pl a n t and ma ch in e r y a n d th us the ca p i ta l a p p a ra t us of the a ss e ssee comp a ny . Th e r e af te r re fe r r i ng to th e de c is io n of th e H on 'ble Jur is d ic ti ona l H i gh C ou rt i n the c a se of CI T Vs . S ha m La l B a ns a l w he re i n ide nti ca l is sue of tr e a tme n t o f sub si dy w a s e xa mi ne d by the H on 'b le H ig h C our t a n d f oun d to b e ca p i ta l in na t ur e a n d fur the r re ly in g on th e de c is io n of th e H on 'ble Hi gh C o ur t of C a l cu tta in t he cas e of CI T Vs . G l os te r Jute Mil l s Ltd . ( 20 1 8 ) 96 Ta x ma n n .c o m 3 03 w h e r e i n a l so the sub s id y w a s tre at e d to be a ca p i ta l r e ce ip t, the Ld . C I T( A) , it wa s p oi n te d out, he ld th a t t he i n te re s t re ce ive d un de r TU F Sch e me was a c a p it a l re ce i p t. The Ld. C ou ns e l for t he a sse sse e f ut he r poi n te d ou t th a t t hi s i ss ue ha d bee n se tt le d by th e I TA T a ls o i n f a vou r of th e a sse ssee in its ow n c a se f or a sse ssme nt ye a rs 2 0 0 2 -03 to 2 0 0 5 -06 i n I TA N o s .1 4 7 9 to 14 8 2 /C hd /2 0 18 d a te d 2 9. 5 .2 0 1 9 tr e a ti ng the i nte re st re ce i ve d a s c a p it a l i n na t ure . Our a t te n tio n w a s d r a wn to pa r a s 1 0 to 1 3 of the or d e r conta i ni ng th e f i nd i ng s of t he I TA T in t hi s r e ga r d a s u nd e r:
31 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 " 1 0 . W e h ave h eard bo th the p ar tie s and h ave al so gon e th rou gh th e ord er of th e L d. C IT (A ) . T h e is su e bef ore u s rel a te s to th e n a tu re of in te re st su bs id y rec eive d u n de r th e T UF S ch eme o f th e Gover n men t of Ind i a. T he f ac tu al f in d ing s of th e C IT (A ) th a t th e pu r po se of th e i n te re st su b sid y wa s u pgr ad a ti o n of plan t & mac h in er y an d t h us th e c ap i tal a p p ar atu s of the a sse ssee c o mp a n y, h a s no t b een c on tro ver ted b y th e Reve n ue . T he L d. C IT ( A) , we f in d , h as rel ie d u po n th e d ec is io n of th e H on 'bl e Ju ri sd ic tio n al H igh Co ur t in th e c a se of C IT Vs. S h am L al B an sal , IT A No. 4 7 2 /20 1 0 (P& H ) an d th e d ec is io n of th e H on 'bl e H igh C ou r t of C al c u tta i n the c ase of C IT Vs. Gl o s ter Ju te M il l s L td .( 2 0 1 8) 96 T axman . co m 3 0 3 f o r h ol d in g th e in tere st su bs id y to be c a p i ta l in n a tu re. W e h ave gon e th ro ugh th e d ec is io n of the H on 'bl e Ju r i sd ic tio n al H igh C ou r t in the c ase of C IT Vs. S h a m L al B an s al( su pr a) ,c o p y of wh ic h ord er wa s pl ac ed bef ore us, and we ag ree wi th th e L d. C IT (A ) th at i n th e sa id c a se al so, th e i ssu e rel a ted to n a tu re of su b si d y rec e ive d un d e r T UF S c he me of th e M in i str y of T ex til e s. T h e H on 'bl e H igh C ou r t , h e ld th a t f o r th e pu r po se of d e te r min in g th e n a tu re of th e su b s id y , th e p ur po se f or wh ich th e su b sid y wa s g i ven wa s to be d e te r min ed and re lie d u pon th e d ec is io n of th e H on 'bl e Su pre me C ou r t in th e c a se of S ahn i S teel & Pre s s W or k s L td . V s. C IT ( 1 9 97 ) 9 4 T ax man 3 68 an d C IT Vs. Po n n i S u g ar s & Ch emic al s L td . ( 2 0 0 8 ) 1 7 4 T axm an 8 7 f o r th e af o resa id pro po si tio n.
T h ereaf ter th e H o n 'bl e H igh co ur t n o te d th a t th e pu r po se of th e T UF Sc h eme wa s to in d u ce th e en tre pren eu r to u nd er ta ke inv e stmen t in mo de rn iz in g the pl an t and mac h in er y and wa s d ef in i te l y n o t f or th e pu r po se of d ay to d a y bu sin e ss of th e a sse ssee . Ac co rd i n gl y th e Ho n' bl e H igh Cou r t h el d t ha t the n a tu re of th e su b sid y wa s c ap i tal .
1 1 . In the c a se of G l oster J u te M il l s( su pr a) ,c o p y of ord er of wh ic h wa s al so pl ac ed bef o re u s, th e H on 'bl e H igh C o u r t ex am ine d th e f ea ture s of th e T UF Sc h eme an d f ou n d th e pu r po se was to in du c e the en tre pren e u r to u nd er ta k e in ve s tm en t i n mo de rn iz in g th e pl an t and mac h in er y an d a sse t s an d, th eref ore wa s c l e arl y a c a p i tal r ece ip t. 32 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14
12. The af o r e s ai d two d ec is ions r e l ied upon b y the C IT (A ), we f ind th er ef o r e , h ave al r e ad y d e al t wi th th e n atu r e o f the s u bs i d y r ec e ive d un d e r TU FS S c he m e an d af ter an al yz i ng the te r ms o f the sc he me an d f in d ing th at the p ur po se of the s c he m e was to ind uc e m od e r n iz ati o n o f pl an t an d m ac hn i e r y us ed in te x ti l e ind us tr y , he ld th e s am e to be c ap i t al i n n atu r e f ollo wi n g the pr o p os i ti o n l ai d d o wn b y th e apex c our t f or d e ter m in i ng th e n atur e o f subs i d y i n th e c as e of S awh n e y s tee ls (su p r a) and Po nn i S u g ar s (su pr a) . T he Ld . D R h as be en un ab le to b r i ng to o ur no tic e an y c on tr ar y d e c is ion ei th er o f the H o n' ble J ur isd ic tio n al H ig h C our t or th e H on' b le A p ex C our t on th is is sue no r w as the d e c is io n s r e l ied upo n b y the L d. C IT (A ) d is ti n g u is hed be f or e us .
13. In v ie w of the s am e, we h ave no he si t ati o n in upho ld i ng the o r d e r of the C IT (A ) th at c ons id er in g the o b jec tiv e o f the T U F S c he me an d ju d ic i al d e c is io ns o f th e H on ' b le J ur isd ic ti on al H ig h C o ur t an d H o n' b le H ig h C our t o f C alc u t t a , the in te r es t r e c e iv ed u nd er T U F S c hem e is c ap i t al in n atu r e. G r ou n d s o f ap pe al r ais e d b y th e R ev enue ar e , ther ef or e , d is m is se d . "
44. The Ld. DR fairly conceded that the issue stood decided in earlier years in favour of the assessee as pointed out by the Ld.Counsel for the assessee though he vehemently relied upon the order of the AO.
45. We have heard the rival contentions. Si n c e admittedly the issue of treatment of interest received under TUF Scheme has already been adjudicated by th e I T A T i n a s s e s s e e ' s o wn c a s e i n t h e p r e c e d i n g y e a r s r i gh t f r o m a s s e s s m e n t y e a r s 2 0 0 2 - 0 3 t o 2 0 0 5 - 0 6 i n I T A Nos.1479 to 1482/Chd/2018 (supra) treating the same as capital receipt and no distinguishing facts have b e e n b r o u g h t t o o u r n o t i c e , w e h a v e n o h e s i t a t io n i n 33 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 up hol d i ng th e or de r of th e CIT( A) tr e a ti n g th e i nte re st sub s id y a s ca p i ta l in n a tu r e . G roun d o f a p pe a l N o. 3 r a i se d by th e Re ve n ue is, t he re fore , di smis se d .
46 . G r oun d of a p p e a l N o.4 r a i se d b y th e Re ve n ue r e ad s a s un de r :
4. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in treating the sale tax subsidy of Rs. 9,60,79,071/- as capital receipts without comparing the scheme of Gujrat Government with that of Punjab Government scheme made by Hon'ble Punjab 85 Haryana High Court in the case of M/s Abhishek Industries Ltd., 286 ITR1?"
47 . Th e i s sue r a i se d i n the a b ove gr ou nd r e l a te s t o t he tr e a tme n t of sa le s ta x s ub si d y r e ce i ve d b y the a ss e ssee moun ti ng to R s. 9, 6 0 ,7 9 ,0 7 1 /- w h i ch t he D e pa r tme nt cl a ims to b e re ve n ue in na t ur e , w h ile th e Ld. C I T( A ) ha s on t he othe r h a nd , u p he ld the cl a im of t he a s se s se e trea ti n g it a s ca p it a l i n na tu r e.
A t th e outse t it se l f , the Ld .C o un se l f or the a sse ssee p oi nte d out th a t id e nti ca l is su e ha d a ris e n in the ca se of t he a sse sse e for a ssess me n t y e a r s 201 1 -1 2 a n d 2 0 12 -1 3 w h e re i n the ma tte r h a d tra v e l le d up to the I TA T, w h ic h h a d d e c i de d the is sue i n f a vou r of th e a s se sse e tre a t in g the s ale s tax sub s id y a s c a p it a l r e ce i pt in the ir or de r p a sse d in I TA N os. 7 87 & 89 4 / C h d/2 0 1 5 for a s s e ss me n t ye a r 20 1 1 -12 a n d in I TA N o s. 48 3 & 5 1 8 /C h d /2 0 1 6 f or a ss e ss me n t ye a r 2 0 1 2- 34 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 13 b oth d a te d 14 . 3 .2 0 1 9. C op y of t he or d e r w a s p l a ce d be fore us. O ur atte nt ion w a s d r aw n to the re le van t f in d in gs of th e I TA T a t p a r a 32 of th e or de r a n d a t p a r a s 35 a nd 3 6 of the or de r a s un de r :
" 3 2 . G r o u n d N o s . 1 2 & 1 3 : V i d e g r o un d N o s. 1 2 & 1 3 , th e a sse s se e h a s a g i ta te d t h e a c t io n o f th e C IT ( A ) i n tr e a ti n g th e s al e s t a x s u b s i d y as R e v e n u e r ec e ip t i n s t e a d of c a p i t a l r e c e i p t a s c l a i me d b y t h e a s se s se e . T h is i s su e i s n o w we l l se t tl e d b y t h e d e c i s i o n o f th e H o n ' b l e S u p r e me C o u r t i n 'C IT - I V s. M / s C h ap h a l k a r B r o th e r s , P u n e a n d O th e r s ' i n C i v i l A p p e a l N o s. 6 5 1 3 - 6 5 1 4 of 2 0 1 2 o r d er d a te d 7 . 1 2 . 2 0 1 7 , wh e r e i n , i t h a s b e e n h e l d th a t th e s a l e s ta x s u b s i d y i s a g o v e r n me n t i n c e n ti v e to set up n e w in d u s tr i a l u n i t s i n s p e c if i e d a r e a s an d t o b e i s tr e a te d a s c a p i t a l r e c e i p t. F u r th e r , th e L d . c o u n s e l f or th e a s se s s e e h a s a l s o i n v i t e d o u r a t te n ti o n to th e d e c i s io n of th e T r i b u n al d a te d 1 8 . 1 2 . 2 0 1 8 , ( su p r a) wh e r e in af te r c o n si d e r i n g th e r e l e v a n t d e c i s i o n s i t h a s b e e n so h e l d t h a t th e s a l e s ta x s u b si d y i s a c a p i ta l r e c e i p t. T h i s i s su e i s a c c o r d i n g l y d e c i d e d i n f a v o u r of th e a s s e s se e . "
" 3 5 . T h e a s se s se e a p a r t f r o m a bo v e g r o u n d h a s a l s o r a i se d a d d i t io n a l g r o u n d wh i c h r e a d s a s under:-
"T h a t th e a u th o r i ti e s be l o w h a v e e r r e d in tr e a ti n g S a l e s T a x S u b s i d y of R s. 1 , 6 7 , 9 8 4 / -
under M ad h y a Pradesh In d u s tr i a l Pr o mo t i o n a l A ss i s ta n c e S c h e me - 2 0 0 4 a s R e v e n u e re c e i p t i n s te a d of c ap i ta l r e c e i p t. "
3 6 . T h i s i s su e i s r e l a ti n g to sa l e s t a x su b s i d y r e c e i v e d f r o m M . P. g o v e r n m e n t. T h i s i s su e i s i d e n t i c a l to th a t h a s b e e n ta k e n i n g r o u n d N o . 1 2 of th e a p p e a l . A c c o r d i n g l y , th e s a l e s ta x su b s i d y i n r e s p e c t o f M. P . U n i t i s a l so o r d e r e d to b e tr e a t e d a s c a p i ta l r e c e i p t. "
35ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 48 . Th e Ld .C o un se l f or th e a s se sse e p oi n te d ou t th at t he I TA T ha d h e l d th e sa le s ta x su b si dy i n r e s pe ct of th e s ch e me of th e Ma d hy a P r a d e s h G ove r nme nt a s b e i n g ca p i ta l i n na tu r e f ol lo wi n g t he d e ci s ion o f the H on 'ble Ap e x Cou r t i n the ca se of C I T V s . M /s C h a p ha l k e r B r othe r s P une & O th e rs in C i vi l Ap pe a l N os .6 5 1 3 & 65 14 of 2 0 12 d a te d 7 .1 2 .2 0 1 7 wh e re in it h a d be e n he ld th a t th e sa le s ta x sub si dy is a Gov e r n me nt i nce n ti ve to se t up ne w i nd u str ia l un i t in sp e ci f ie d a re a a nd i t i s to b e t re a te d a s ca p i ta l re ce i p t.
Th e Ld. DR f a i r ly c onc e de d to th e a b ove thou gh he con te n de d tha t t he Ld . C I T( A) ou g ht to h a ve e xami ne d t he sch e me of the G uj a r a t G ove rnme n t u nd e r wh ich su bs id y ha v e bee n re ce iv e d in the p res e nt ca se and th e re a fte r a dj ud i ca t e d the issu e .
49 . W e h a ve he a r d th e co nte nti on s of b oth t he pa r tie s. W e ha v e a l so gon e th r oug h the or d e rs of the I TA T in t h e c a se of the a sse s see i n a sse ssme nt ye a rs 2 0 1 1-1 2 a n d 2 0 12 -1 3 to wh i ch o ur a tte n ti on w a s d r a w n a n d we ha ve noted that t he I TA T in th e sa i d y e a r s ha s t re a te d sa le s ta x su bs id y to be ca p it a l i n na tu r e ta k in g no te of th e ra t io l a id d ow n b y t he Hon 'b l e Ape x C our t i n the ca se of in the ca se of M/s C ha p h a lk e r B r oth e r s Pu ne & O th e r s (s up r a ) w he re i n any sub s id y r e ce ive d a s a n i n ce n ti ve for s e tti ng u p a n in du str i a l 36ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 un it wa s tr e a te d to b e a ca p i ta l re ce i pt . Th e I TA T h e l d t hat the s a le s ta x su bs id y w a s a l so a n i d e n tic a l i nc e n ti ve for se tt in g up in d us tr ia l un it s a nd , t he re fore , w a s ca p i ta l i n na tu r e . S in ce t hi s i ssu e ha s a lre a dy be e n a d j udi ca te d as a bo ve a nd in th e ca se of th e a sse ssee i tse lf in the suc ce e d in g a s se ssme nt ye a r s a nd Ld. D R h a s not b r ou gh t to our n oti ce a n y dis tin gu is hi n g f a ct s, th e is sue s ta nds c ove re d by t he de c i si on of the I TA T a s a b ov e in fa v our of t he a sse sse e . G r ound of a p pe a l N o.4 r a i se d b y the Re ve nue is a ls o d i smi ss e d .
50 . G r oun d of a p p e a l N o.5 r a i se d b y th e Re ve n ue r e ad s a s un de r :
5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing relief to the assessee by holding that MAT credit to be carried forward to subsequent years should be calculated after including of Surcharge and Cess?"
51 . Th e i s sue r a i se d i n the a b ove gr ou nd r e l a te s t o t he in cl us ion of sur c ha r ge a nd ce ss f or the p ur p os e of de te r mi ni n g th e q ua n tu m of MA T cr e d i t to be c a r rie d for w a r d for se t of f in sub se qu e nt ye a r s . Th e AO had e xcl u de d su r ch a rge a nd ce s s fr om the q u a ntu m o f Ma t c r e d it to be c a r r ie d f orw a r d f or s e t of f i n s ub se q ue n t ye ars wh i ch the Ld . C I T( A) h el d w a s i n cor re c t s in ce he n ote d th at t he I TA T ha d h e l d i n th e c a se of VM T Sp i nn i ng C omp a ny Ltd . f or 37 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 a sse ssme nt ye a r 2 0 07 -0 8 i n I TA N o. 11 4 7 /C hd /2 0 1 4 d a te d
8. 1 2. 2 0 16 th a t t he s ur c ha r ge a nd c e s s w e re to b e in cl u de d in MA T cr e di t. H e a cc or di n gl y d i re cte d the AO to c alc ul a te a nd c a r ry f or wa rd MA T c r e d it i n te r ms of th e a f ores a id or de r of th e I TA T. 52 . B e f ore us the Ld . D R wa s u na b l e to br i n g to our n oti ce a ny con tr a r y ju d gme n t o f e i the r th e Ho n'b l e Hi gh C o ur t or the Ho n'b le A pe x C ou r t i n th i s r e g a rd . I n vi e w of th e a b ove, si nc e the is sue a l r e a d y s ta nd s d e ci de d b y the I TA T i n t he ca se of VM T Sp i n n i ng C omp a ny Lt d . (s up r a ) h old i ng th a t t he Ma t cr e di t s ha l l i ncl u de su r ch a rg e a n d ce ss, Th e i ssue i n the pre se n t gr ound s ta nd s c ove re d by the de ci sion of t he I TA T, w hi ch w e h ol d tha t the Ld .C I T(A ) ha s r ig ht l y f ol lo we d a nd a ll ow e d th e a ss e ssee 's cl a i m. G r oun d o f a p pe a l N O .5 ra i se d b y the Re ve nue is , the re f ore , d i smi ss e d . 53 . I n e ffe ct , the a pp e a l of the Re ve nu e i s p a r tly a l low e d for sta ti st ic a l p ur p ose s.
W e n ow sh a l l ta k e u p t he cr os s a p p e a l s a s ses se e 's a pp e a l in ITA No .4 85 /C hd /2 01 9 & ITA N o .6 1 2/C h d /2 0 19 re l a ti ng to a sse ssm e nt ye a r 20 09 -1 0.
ITA N o. 48 5 /C hd /20 19 ( A.Y .2 00 9- 10 -As se ss e e 's Ap p e a l) : 38 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14
54 . G r oun d N o. 2 r a i se d by the a sse ssee in I TA N o.4 8 5 /20 1 9 r e a ds a s u nd e r :
"2. That the Ld.CIT(A) erred in law and on facts in upholding the applicability of section 14A of the Income Tax Act, 1961 read with Rule 8D and making disallowance thereunder ignoring the contentions/submissions of the assessee.
55 . I t w a s c ommon gr ou nd b e twee n th e p a rt ie s tha t the a bo ve gr ou nd wa s i de nt ic a l to g ro un d N o. 2 ra is e d b y t he a sse sse e in it s a pp e a l f or A .Y 2 0 0 8 -0 9 in I TA N o.4 8 4 /C hd /2 0 1 9 ,dealt w i th us a b ov e .O u r de ci si on re nde re d the re i n a t pa r a 12 -1 3 a b ov e w i l l a p pl y muta t is muta n d is to th i s g ro un d N o.2 r a i se d by the a s se s se e. Acc or d in gl y d is a l low a n ce of i n te re s t ma d e as per Rule 8D ( 2 )( i i) of th e I n come Ta x Rul e s , 1 9 62 , is d i rect e d t o be de le te d . F ur the r t he d is a ll ow a n ce of a d min i str a ti ve e x pe nse s as per Ru le 8D (2 ) (i i i) of the R ul e s, is d i rect e d to be re str i cte d to Rs. 5 la c s i n a l l con s i d e r in g the p a s t hi st or y of the i de n tic a l d i sa l low a n ce uph e l d by the ITA T and a pp l yi ng i t to th e fa ct s o f the p r e se nt ca se whe re in the a sse sse e h a s e a rn e d e xe mp t i nc ome to t he t une of Rs. 1 1. 1 8 cr s. G r oun d of a p p e a l N o. 2 r a i sed by th e a sse sse e is a l lowe d in t he a b ove te rms.
56 . G r oun d N o. 3 r a i se d by the a sse ssee in I TA N o.4 8 5 /2 01 9 r e a ds a s u nd e r:
39 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 "3. That the Ld.CIT(A) has erred in law and on facts in upholding the action of AO for treating interest received amounting to Rs.21,26,96,516/- as 'Income from Other Sources' instead of 'Income from Business and Profession'."
57 . I t w a s common is su e be twee n th e p a r tie s t ha t t he a bo ve g ro un d i s id e n ti ca l to g ro un d N o.3 r a i sed b y t he a sse sse e in it s a pp e a l f or A .Y 2 0 0 8 -0 9 in I TA N o.4 8 4 /C hd /2 0 1 9 ,d e a l t wi th by us a b ove .O ur de ci si on re nde re d the re i n a t p a r a 1 6 o f ou r or d e r a b ove w i ll a p p ly muta ti s mut a nd i s to th i s g r oun d N o. 3 r a i se d by the a sse sse e . A cc ordi n gl y th e ple a of th e a s se sse e o f t r e a ti ng the i mpu gn e d i nte re s t i nc ome a s a ss e ss a ble un de r th e he a d B usi n e ss I n co me i s r e je cte d bu t at the sa me ti me its p le a of ne t tin g the sa i d inc ome is a c ce p te d a n d th e AO is d i r e cte d to a ll ow ne tti ng sub j e c t to the re be i n g d ire ct ne xus b e twe e n the i nte re s t i n come a nd e xp e n dit ur e in cu r re d . G ro un d of a pp e a l N o. 3 r a i se d by t he a s se s see i s a l lo we d i n th e a b ove te r ms.
58 . G r oun d N o. 5 r a i se d by the a sse ssee in I TA N o.4 8 4 /2 01 9 r e a ds a s u nd e r:
"5. That the Ld. CIT(A) has erred in law and on facts in confirming the action of the AO in reducing Rental income of Rs.58,87,394/-, Interest from Others of Rs.1192962/- and Miscellaneous receipts of Rs.1,26,569/- from the profits of the units eligible for deduction u/s 80IC of the Income Tax Act, 1961."40
ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 59 . I t w a s c ommon gr ou nd b e twee n th e p a rt ie s tha t the is sue r a ise d i n th e a b ove gr ou nd i s id e n ti ca l to groun d N o. 5 ra i se d b y the a sse s se e in it s a p pe a l f or A. Y 2 0 08-0 9 in I TA N o.4 8 4 /C hd /2 0 1 9 , d e a l t w i th us a bo ve . O ur de ci si on re nde re d the re i n a t p a r a 2 3 -2 4 of our o rde r a b ove w il l a p p ly muta ti s mu ta nd i s to gr ou nd N o.5 ra i se d b y t he a s se s se e . Gr ou nd of a p p e a l N o. 5 r a i se d b y the a s se s se e is p art ly a ll ow e d in t he a bove te r ms.
60 . G r oun d N o. 6 r a i se d by the a sse ssee in I TA N o.4 8 4 /2 01 9 r e a ds a s u nd e r:
"6. That the Ld. CIT(A) has erred in law and on facts in upholding the action of the AO in allocating head office expenses to units claiming deduction u/s 80IB/80IC of the Act."
61 . I t w a s c ommon gr ou nd b e twee n th e p a rt ie s tha t the is sue r a ise d i n th e a b ove gr ou nd i s id e n ti ca l to groun d N o. 6 ra i se d b y the a sse s se e in it s a p pe a l f or A. Y 2 0 08-0 9 in I TA N o.4 8 4 /C hd /2 0 1 9 , d e a l t w i th us a bo ve . O ur de ci si on re nde re d the re in a t p a ra 2 7 w il l a p p l y muta t is m u tan di s to gr oun d N o. 6 ra is e d by th e a sse sse e in I TA N o.4 8 5 /C hd /2 0 1 9 . G ro un d of a p p e a l N o.6 r a i se d b y t he a sse sse e is a cc or d in gl y di smi ss e d 62 . G r oun d N o.7 r a i se d by the a ss e s see in I TA N o.4 8 4 /2 01 9 r e a ds a s u nd e r:
41ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 "7. That the Ld.CIT(A) has erred in law and on facts in upholding the action of AO for treating line/bay charges amounting to Rs. 66,61,050/- as capital expenditure instead of revenue expenditure."
63 . I t w a s c ommo n gr oun d b e tw ee n the p a rt ie s th a t t he a bo ve g ro un d i s id e n ti ca l to g ro un d N o.7 r a i sed b y t he a sse sse e in it s a pp e a l f or A .Y 2 0 0 8 -0 9 in I TA N o.4 8 4 /C hd /2 0 1 9 , d e a l t w i th us a bo ve . O ur de ci si on re nde re d the re in a t p a ra 3 3 w il l a p p l y muta t is m u tan di s to gr oun d N o. 6 ra is e d by th e a sse sse e in I TA N o.4 8 5 /C hd /2 0 1 9 . G ro un d of a p p e a l N o.7 r a i se d b y t he a sse sse e is a l l owe d i n the a b ove te r ms. 64 . I n e f fe ct the a pp e a l of the a sse ssee i s p a r tl y a llow e d. ITA N o. 61 2 /C hd /20 19 ( A.Y .2 00 9- 10 -R e ve nu e 's A p p e a l) : 65 . G r oun d N o. 1 r a i se d b y the Re ve n ue i n I TA N o. 6 1 2/ 2 0 1 9 re a d s a s u nde r:
1. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing interest from customers & suppliers amounting to Rs.4,00,63,000/- to be treated as business income as against A.O. treating the same as income from other sources?"
66 . I t w a s c ommon gr ou nd b e twee n th e p a rt ie s tha t the is sue r a ise d i n th e a b ove gr ou nd i s id e n ti ca l to groun d N o. 1 ra i se d b y the Re ve n ue i n i ts a p pe a l for A. Y 2 0 0 8-09 i n I TA N o.6 1 1 /C hd /2 0 1 9 ,d e a l t wi th by us a b ove .O ur de ci si on 42 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 re nde re d the re in a t p a ra 3 7 w il l a p p l y muta t is m u tan di s to gr oun d N o.1 r a i se d by the Re ve n ue in I TA N o.6 1 2 /C hd /2 0 1 9 . G ro un d of a p p e a l N o.1 r a i se d b y t he Re ve nue is a c cord i ng ly d is mi sse d.
67 . G r oun d N o. 2 r a is e d by th e Re ve n ue in I TA N o.6 1 2 /2 01 9 r e a ds a s u nd e r:
2. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing deduction u/s 80IB and 80IC on interest from customers & employee, misc.
receipts comprising Brokerage from ocean freights and insurance claim?"
68 . I t w a s c ommon gr ou nd b e twee n th e p a rt ie s tha t the a bo ve g ro un d i s id e n ti ca l to g ro un d N o.2 r a i sed b y t he Re ve nue in I TA N o. 6 1 1/C h d / 20 1 9 ,d e a lt w i th by us a bo ve . O ur de c is ion r e n de re d th er e in a t p a r a 4 1 w i ll a p p ly muta ti s mut a nd i s to gr oun d N o .2 ra i s e d b y the Re ve n ue in I TA N o .6 1 2 /C hd /2 01 9 . Gr ou nd o f a p pe a l N o.2 r a ise d b y t he Re ve nue is a cc or di n gl y p a r tl y a l l ow e d fo r sta t is tic a l pu r po se s .
69 . G r oun d N o. 3 r a i se d b y the Re ve n ue i n I TA N o .6 1 2/ 2 0 1 9 re a d s a s u nde r:
3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in treating the reimbursement of interest under TUF scheme of the Ministry of Textiles, Government of India, as capital receipt instead 43 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 of revenue receipt without giving an opportunity to assessing officer to examine the claim of assessee?"
70 . I t w a s c ommon gr ou nd b e twee n th e p a rt ie s tha t the is sue r a ise d i n th e a b ove gr ou nd i s id e n ti ca l to groun d N o. 3 ra i se d b y the R eve nue i n I TA N o .6 1 1 /C h d /2 0 1 9, d e a l t w i th by us a b ove .O u r d e ci si on r e n de re d the re in a t p a ra 4 5 w il l a pp l y mu ta ti s mu ta nd i s to gr ou nd N o. 3 r a is e d by the Re ve nue i n I TA N o. 6 12 /C h d /20 1 9 . G r oun d of a pp e a l N o. 3 ra i se d b y the Re ve nue is a c cor d i ng ly d is mi sse d. 71 . G r oun d N o. 4 r a i se d b y the Re ve n ue i n I TA N o .6 1 2/ 2 0 1 9 re a d s a s u nde r:
4. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in treating the sale tax subsidy of Rs.11,58,16,9337-
as capital receipts without comparing the schemeof Gujrat Government with that of Punjab Government scheme made by Hon'ble Punjab 85 Haryana High Court in the case of M/s Abhishek Industries Ltd., 286 ITR1?"
72 . I t w a s c ommon gr ou nd b e twee n th e p a rt ie s tha t the is sue r a ise d i n th e a b ove gr ou nd i s id e n ti ca l to groun d N o. 4 ra i se d b y the R eve nue i n I TA N o .6 1 1 /C h d /2 0 1 9, d e a l t w i th by us a b ove .O u r d e ci si on r e n de re d the re in a t p a ra 4 9 w il l a pp l y mu ta ti s mu ta nd i s to gr ou nd N o. 4 r a is e d by the Re ve nue i n I TA N o. 6 12 /C h d /20 1 9 . G r oun d of a pp e a l N o. 4 ra i se d b y the Re ve nue is a cc or d ingl yd is mi sse d. 44 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 73 . G r oun d N o. 5 r a i se d b y the Re ve n ue i n I TA N o .6 1 2/ 2 0 1 9 re a d s a s u nde r:
5. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing relief to the assessee by holding that MAT credit to be carried forward to subsequent years should be calculated after including of Surcharge and Cess?"
74 . I t w a s c ommon gr ou nd b e twee n th e p a rt ie s tha t the is sue r a ise d i n th e a b ove gr ou nd i s id e n ti ca l to groun d N o. 5 ra i se d b y the R eve nue i n I TA N o .6 1 1 /C h d /2 0 1 9, d e a l t w i th by us a b ove .O u r d e ci si on r e n de re d the re in a t p a ra 5 2 w il l a pp l y mu ta ti s mu ta nd i s to gr ou nd N o. 5 r a is e d by the Re ve nue i n I TA N o. 6 12 /C h d /20 1 9 . G r oun d of a pp e a l N o. 5 ra i se d b y the Re ve nue is d i smi ss ed .
75 . Th e appeal of t he Re ve n ue is p a r tly a l lo we d f or sta ti st ic a l p ur p ose s.
ITA N o. 48 6 /C hd /20 19 ( A.Y .2 01 3- 14 -As se ss e e 's Ap p e a l) : 76 . G r oun d N o.2 r a i se d by the a ss e s see in I TA N o.4 8 6 /2 01 9 r e a ds a s u nd e r:
"2. That the Ld.CIT(A) erred in law and on facts in upholding the applicability of section 14A of the Income Tax Act, 1961 read with Rule 8D and making disallowance there under ignoring the contentions/submissions of the assessee."
77 . I t w a s common g ro un d b e tw ee n the p a r ties th a t t he a bo ve gr ou nd wa s i d e nt ic a l to g ro un d N o. 2 ra is e d by t he 45 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 a sse sse e in it s a pp e a l fo r A .Y 2 0 0 8 -0 9 in I TA N o.4 8 4 /C hd /2 0 1 9 , d e a l t w i th u s a b ove . Ou r d e c is io n re nd e re d the re in a t p a r a 1 2 -1 3 a b ov e wi l l a p p ly muta ti s mut a nd i s to th i s g r oun d N o. 2 r a i se d by the a sse sse e . A ccor di ng ly d is a l low a n ce of i nte re s t ma d e a s pe r Rul e 8D ( 2 )( i i) o f the I nc ome Ta x Ru le s , 1 9 62 , is d i r e cte d to be de le te d . F urth e r the d i sa l low a nc e of a d min is tr a ti ve e xpe n se s a s pe r Rul e 8 D( 2 )( i ii ) of the Ru le s, i s di rec te d t o be re str i cte d to Rs . 5 . 50 l a cs in a l l c ons id e ri n g th e p a st hi stor y of th e i de nti ca l d i sa l l ow a nc e u p he l d b y the I TA T a nd a p p l yin g it to th e f a ct s of t he p re se nt ca se whe re in t he a sse sse e h a s e a rn e d e xe mp t i nc ome to t he t une of Rs. 1 3. 1 5 cr s. G r oun d of a p p e a l N o. 2 r a i sed by th e a sse sse e is a l lowe d in t he a b ove te rms.
78 . G r oun d N o. 3 r a i se d by the a sse ssee in I TA N o.4 8 6 /2 01 9 r e a ds a s u nd e r:
"3. That the Ld.CIT(A) has erred in law and on facts in upholding the action of AO for treating interest received amounting to Rs. 19,40,80,702/- as 'Income from Other Sources' instead of 'Income from Business and Profession'."
79 . I t w a s common is su e be twee n th e p a r tie s t ha t t he a bo ve g ro un d i s id e n ti ca l to g ro un d N o.3 r a i sed b y t he 46 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 a sse sse e in it s a pp e a l fo r A .Y 2 0 0 8 -0 9 in I TA N o.4 8 4 /C hd /2 0 1 9 ,d e a l t wi th by us a b ove .O ur de ci si on re nde re d the re i n a t p a r a 1 6 o f ou r or d e r a b ove w i ll a p p ly muta ti s mut a nd i s to th i s g r oun d N o. 3 r a i se d by the a sse sse e . A cc ordi n gl y th e ple a of th e a s se sse e o f t r e a ti ng the i mpu gn e d i nte re s t i nc ome a s a ss e ss a ble un de r th e he a d B usi n e ss I n co me i s r e je cte d bu t at the sa me ti me its p le a of ne t tin g the sa i d inc ome is a c ce p te d a n d th e AO is d i r e cte d to a ll ow ne tti ng sub j e c t to the re be i n g d ire ct ne xus b e twe e n the i nte re s t i nc ome a nd e xp e n dit ur e in cu r re d . G ro un d of a pp e a l N o. 3 r a i se d by t he a s se s see i s a l lo we d i n th e a b ove te r ms.
80 . G r oun d N o.4 r a i se d by the a ss e s see in I TA N o.4 8 6 /2 01 9 r e a ds a s u nd e r:
"4. That the Ld. CIT(A) has erred in law and on facts in confirming the action of the AO in reducing Rental income of Rs.1,56,47,787/- and Miscellaneous receipts of Rs.61,52,573/- from the profits of the units eligible for deduction u/s 80IC/80IA of the Income Tax Act, 1961."
81 . I t w a s c ommon gr ou nd b e twee n th e pa rt ie s that the is sue r a ise d i n th e a b ove gr ou nd i s id e n ti ca l to groun d N o. 5 ra i se d b y the a sse s se e in it s a p pe a l f or A. Y 2 0 08-0 9 in I TA N o.4 8 4 /C hd /2 0 1 9 , d e a l t w i th us a b ove . O ur de ci si on re nde re d the re i n a t p a r a 2 3 -2 4 of our o rde r a b ove w il l a p p ly muta ti s mu ta nd i s to gr ou nd N o.4 ra i se d b y t he a s se s se e . 47
ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 Gr ou nd of a p pea l N o.4 r a i se d by the a sse ssee is p a rt ly a ll ow e d a c cor d ingl y.
82 . G r oun d N o.5 r a i se d by the a ss e s see in I TA N o.4 8 6 /2 01 9 r e a ds a s u nd e r:
"5. That the Ld.CIT(A) has erred in law and on facts in upholding the action of AO for treating line/bay charges amounting to Rs.2,89,25,454/- as capital expenditure instead of revenue expenditure."
83 . I t w a s co mmon gr ou nd b e tw e e n t he p a r ties tha t t he a bo ve g ro un d i s id e n ti ca l to g ro un d N o.7 r a i sed b y t he a sse sse e in it s a pp e a l fo r A .Y 2 0 0 8 -0 9 in I TA N o.4 8 4 /C hd /2 0 1 9 , d e a l t w i th us a b ove . O ur de ci si on re nde re d the re in a t p a ra 3 3 w il l a p p l y muta t is m u tan di s to gr oun d N o.5 r a is e d by t he a s se sse e . G r ou nd of a pp e a l N o.5 ra i se d b y the a s se sse e is a l l owe d in th e a b ove te r ms. 84 . Gr ou nd N os .6 r a i se d by th e a sse ssee in I TA N o.4 8 6 /2 01 9 r e a d a s un d e r :
"6. That the authorities below here erred in treating interest reimbursement of Rs.1,76,12,549/- related to TUFS under Madhya Pradesh Scheme - 2012 as revenue receipt instead of capital receipt.
85 . At th e ou tse t i t w a s p oi nte d out b y th e Ld . DR th a t th ere is no gr ie va n ce of t he a sse ssee on t he imp u gne d issu e s in ce the Ld . C I T( A) h a s tr e a te d the i nte re st re ce i ve d un d e r TU F S Sch e me a s c a pi tal re ce ip t a t pa r a 3 8- 43 of hi s or d er . 48 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 Th e Ld . C oun se l f or th e a sse s see w a s u na b l e to c on tr ove rt the a b ove .
I n v ie w o f th e sa me the gr oun d of a p p e a l N o. 6 i s d i smi sse d a s i n fr u ctu ous .
Gr ou nd of a p p e a l N o. 7 r e a ds a s und e r :
7. That the authorities below here erred in treating sales tax subsidy of Rs.2,82,71,552/- under Madhya Pradesh Industrial Promotion Assistance Scheme - 2004 as revenue receipt instead of capital receipt."
I t w a s co mmon gr oun d b e twe e n th e p a r tie s th a t th e ab ove gr oun d w a s cove re d b y the de cis i on in the de p a r tme n ta l a pp e a l in I TA N o . 61 1 /C h d /2 0 1 9 b e in g ide n ti ca l to g ro und N os 4 r a is e d b y th e Re ve n ue i n ITA N o .6 1 1 /C hd / 2 01 9 ,d e a lt wi th b y us a b ove. O ur d e ci si on ren de re d the re i n at p a r a 49 of ou r or de r a bo ve , w il l a p pl y mu ta ti s m u ta nd i s to a dd i ti ona l gr ou nd N o s. 7 r a i se d by the a sse ssee in I TA N o.4 8 6 /C hd /2 0 1 9 . G ro un d o f a pp e a l N os . 7 r a i se d b y the a sse sse e is a c cord i ngl y a l low e d.
86 . Th e a p p e a l o f the a sse s see i s a cc or di n gly p art ly a ll ow e d a s a bo ve .
ITA N o. 61 3 /C hd /20 19 ( A.Y .2 01 3- 14 -R e ve nu e 's A p p e a l) : 49 ITA Nos.484 to 486/Chd/2019
& ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14
87 . G r oun d N o. 1 r a i se d b y the Re ve n ue i n I TA N o. 6 1 3/ 2 0 1 9 re a d s a s u nde r:
"1. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing interest from customers & suppliers amounting to Rs.5,23,34,571/- and interest earned from employee against housing loan granted to them to be treated as business income as against A.O. treating the same as income from other sources?"
88 . I t w a s c ommon gr ou nd b e twee n th e pa rt ie s that the is sue r a ise d i n th e a b ove gr ou nd i s id e n ti ca l to groun d N o. 1 ra i se d b y the Re ve n ue i n i ts a p pe a l for A. Y 2 0 0 8-09 i n I TA N o.6 1 1 /C hd /2 0 1 9 ,d e a l t wi th by us a b ove .O ur de ci si on re nde re d the re in a t p a ra 3 7 w il l a p p l y muta t is m u tan di s to gr oun d N o.1 r a i se d by the Re ve n ue in I TA N o.6 1 2 /C hd /2 0 1 9 . G ro un d of a p p e a l N o.1 r a i se d b y t he Re ve nue is a c cord i ng ly d is mi sse d.
89 . G r oun d N o. 2 r a i se d b y the Re ve n ue i n I TA N o .6 1 3/ 2 0 1 9 re a d s a s u nde r:
"2. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing deduction u/s 80IA and 80IC on interest from customers & employee, misc. receipts comprising Brokerage from ocean freights, forex gains and insurance claim?"
90 . I t w a s common g ro un d b e tw ee n the p a r ties th a t t he a bo ve g ro un d i s id e n ti ca l to g ro un d N o.2 r a i sed b y t he Re ve nue in I TA N o. 6 1 1/C h d / 20 1 9 ,d e a lt w i th by us 50 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 a bo ve . O ur de ci sion r e n de re d t he re in a t p a r a - 4 1 w il l a p p ly muta ti s mut a nd i s to gr oun d N o .2 ra i s e d b y the Re ve n ue in I TA N o .6 1 2 /C hd /2 01 9 . Gr ou nd o f a p pe a l N o.2 r a ise d b y t he Re ve nue is p a r tl y a l low e d fo r st a tisti ca l p u rp os e s . 91 . G r oun d N o. 3 r a i se d b y the Re ve n ue i n I TA N o .6 1 3/ 2 0 1 9 re a d s a s u nde r:
"3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in treating the reimbursement of interest under TUF scheme of the Ministry of Textiles, Government of India, as capital receipt instead of revenue receipt without giving an opportunity to assessing officer to examine the claim of assessee?"
92 . I t w a s c ommon gr ou nd b e twee n th e pa rt ie s that the is sue r a ise d i n th e a b ove gr ou nd i s id e n ti ca l to groun d N o. 3 ra i se d b y the R eve nue i n I TA N o .6 1 1 /C h d /2 0 1 9, d e a l t w i th by us a b ove .O u r de ci si on r e n de re d the re in a t p a ra 4 5 w il l a pp l y mu ta ti s mu ta nd i s to gr ou nd N o. 3 r a is e d by the Re ve nue i n I TA N o. 6 12 /C h d /20 1 9 . G r oun d of a pp e a l N o. 3 ra i se d b y the Re ve nue is a c cor d i ng ly d is mi sse d. I n e f fe ct the a p p e a l of the R e ve nue is p a r tl y a ll ow e d for sta ti st ic a l p ur os es.
93 . I n e f fe ct, the a pp e a ls of th e a sses see in I TA No .4 8 4 to 48 6 /C h d /2 0 1 9 a r e p a r tly a l l owed a nd the a p pea l s of t he 51 ITA Nos.484 to 486/Chd/2019 & ITA Nos.611 to 613/Chd/2019 A.Ys. 2008-09, 2009-10 & 2013-14 Re ve nue in I TA N os. 61 1 to 6 13 a r e p a rt ly a llo we d for sta ti st ic a l p ur p ose s.
O r de r p r o n o u n ce d o n 2 8 t h M a y 2 0 2 0 .
Sd/- Sd/-
संजय गग अ नपण
ू ा ग&ु ता
(SANJAY GARG) (ANNAPURNA GUPTA)
याय क सद य/Judicial Member लेखा सद य/Accountant Member
*दनांक /Dated: 28th May, 2020
*रती*
आदे श 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 न0ध, आयकर अपील$य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar