Rohit Gupta, Jammu vs Assessee

Sh.Rohit Gupta Prop. Vs. Income Tax Officer, M/s. Sarseshwar Overseas, Ward 2(2), Jammu. C/o Suraj Hotel, Jammu. (Appellant) (Respondent)

Appellant by:Sh.R.K.Gupta, CA Respondent by:Smt. Neeraj, DR

Date of hearing:11/02/2015 Date of pronouncement:12/02/2015

ORDER

PER B.P.JAIN,AM:

These two appeals of the assessee arise from two different orders of

CIT(A), Jammu, each dated 20.08.2013 for the assessment years 2009-10 &

2010-2011 respectively.

2. In ITA No.620(Asr)/2013 for the assessment 2009-10, the assessee

has raised the following grounds of appeal:

"1. That the worthy CIT(A) is not justified in confirming the action of the ld. AO for not allowing deduction u/s 80-IB(4) of the 2 ITA no.620 & 621(Asr)/2013

Income-tax Act, 1961 in respect of interest amounting to Rs.3,22,913/- earned on margin money given for opening letter of credit for import of machinery by treating it as not derived from the activity of industrial undertaking.

2. The appellant craves, leaves to alter and add to substitute any ground of appeal before or at the time of hearing."

3. In ITA No.621(Asr)/2013 for the assessment 2010-11, the assessee

has raised the following grounds of appeal:

"1. That the worthy CIT(A) is not justified in confirming the action of the ld. AO for not allowing deduction u/s 80-IB(4) of the Income-tax Act, 1961 in respect of interest amounting to Rs.5,27,930/- earned on margin money given for opening letter of credit for import of machinery by treating it as not derived from the activity of industrial undertaking.

2. The appellant craves, leaves to alter and add to substitute any ground of appeal before or at the time of hearing."

4. The assessee has raised the additional ground of appeal in both the

appeals as under:

ITA No.620(Asr)/2013

"1. That on the facts & circumstances of the case and in law the interest amounting to Rs.3,22,913/- earned on margin money deposited to open a letter of credit for the import of machinery from abroad is incidental to the acquisition of asset for setting up this machinery and hence a capital receipt not liable to tax under the provisions of the Income Tax Act, 1961."

ITA No.621(Asr)/2013 "1. That on the facts & circumstances of the case and in law the interest amounting to Rs.5,27,930/- earned on margin money deposited to open a letter of credit for the import of machinery from abroad is incidental to the acquisition of asset for setting 3 ITA no.620 & 621(Asr)/2013

up this machinery and hence a capital receipt not liable to tax under the provisions of the Income Tax Act, 1961."

5. First of all, we take up additional ground of appeal raised in ITA

No.620(Asr)/2013 and our decision hereinbelow shall be identically

applicable to the additional ground in ITA No.621(Asr)/2013, since the facts

in this appeal are identical to the facts in ITA No.621(Asr)/2013 except the

amount of interest at Rs.5,27,930/- in ITA No.621(Asr)/2013 instead of

Rs.3,22,913/- in the present appeal.

6. The Ld. counsel for the assessee, Mr. R.K.Gupta, CA argued and

submitted that in order to install plant and machinery, the assessee has

opened a letter of credit with the bank to import machinery from abroad. The

assessee was under obligation to keep margin with the bank in order to open

this letter of credit to import the plant & machinery. On this margin money

the assessee has earned an interest income of Rs.322913/-. The Ld. counsel

for the assessee further submitted that it is a fact that in the return of income,

the impugned receipt was not claimed as capital receipt and was included in

the profits of the eligible undertaking. It was stated that the issue of

taxability of interest earned on margin money under the provisions of the

Act, is purely a legal issue and is raised by the assessee as apprised of the

correct position of law. The omission to raise this issue earlier is neither

willful nor deliberate. It was prayed that under the facts and circumstances 4 ITA no.620 & 621(Asr)/2013

of the case and in law this additional ground of appeal may please be

admitted by placing reliance on the decision of the Hon'ble Supreme Court

in the case of National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383.

The Ld. counsel submitted that the Hon'ble Supreme Court, has held that

where the Tribunal is only required to consider the question of law, arising

from the facts, which are on record, the question should be allowed to be

raised, when it is necessary, to correctly assess the tax liability. The facts of

the case are squarely covered by the decision of the Hon'ble Supreme Court,

in the case of National Thermal Power Co. Ltd. vs. CIT (supra). The fact

that interest amounting to Rs.322913/- has been earned in Margin Money for

opening letter of credit for import of machinery is already available on

record and the additional ground is being raised on being advised of the

correct position of law as held in the case of CIT vs. Karnal Co-operative

Sugar Mills Ltd. (2000) 243 ITR 2(SC) that any income earned on such

deposit is incidental to acquisition of assets and has to be Capitalised and

cannot be assessed as income from other sources. The Hon'ble Supreme

Court, applied CIT vs. Bokaro Steel Ltd. (1999) 236 ITR 315 (SC). It has

also been consistently held that the legal issue can be raised for the first time

before the Tribunal, even though, not raised before the lower authorities. In

view of the above facts, the ld. counsel prayed that additional ground of 5 ITA no.620 & 621(Asr)/2013

appeal may be admitted on the similar lines being similar facts as in ITA

No.620(Asr)/2013 for the assessment year 2009-10

7. The Ld. DR, on the other hand, opposed the admission of additional

ground.

8. We have heard the rival contentions and perused the facts of the case.

The issue in the additional ground is a legal issue and goes deep into root of

the matter and therefore, is admitted in view of the decision of the Hon'ble

Supreme Court, in the case of National Thermal Power Co. Ltd. vs. CIT

(supra).

9. As mentioned hereinabove, the additional ground in ITA

No.621(Asr)/2013 for the assessment year 2010-11 is also admitted on the

similar lines being similar facts as in ITA No.620(Asr)/2013 for the

assessment year 2009-10.

10. The Ld. counsel for the assessee, Mr. R.K. Gupta argued that in both

the appeals, the issue is identical and further argued that the impugned

receipt of the interest income was not claimed as capital receipt but was

included in the profits of the eligible undertaking and the issue is covered by

the decision of the Hon'ble Supreme Court, in the case of CIT vs. Karnal

Co-operative Sugar Mills Ltd. (supra), where the Hon'ble Supreme Court,

has applied the decision in the case of CIT vs. Bokaro Steel Ltd. (supra). The 6 ITA no.620 & 621(Asr)/2013

impugned receipt should be treated as a capital receipt in view of the

decision cited hereinabove and the decision of the ld. CIT(A) be reversed.

11. The Ld. DR, on the other hand, relied upon the orders of the

authorities below.

12. We have heard the rival contentions and perused the facts of the case.

The assessee has raised the additional ground of appeal which has since been

admitted by us hereinabove. In the additional ground, the assessee has

claimed the impugned receipt of interest income as a capital receipt in view

of the decision of the Hon'ble Supreme Court, in the case of CIT vs. Karnal

Co-operative Sugar Mills Ltd.(supra). Since this issue was never taken up

before the ld. CIT(A), therefore, it will be in the interest of justice to send

the matter back to the file of the ld. CIT(A), who will decide the issue

denovo by taking into consideration the decision in the case of CIT vs.

Karnal Co-operative Sugar Mills Ltd. (supra) viz a viz the decisions relied

upon by the AO or by the ld. CIT(A) or any other decision by affording

adequate opportunity of being heard to the assessee. Accordingly, the

ground of appeal and the addition ground raised by the assessee are allowed

for statistical purposes.

13. Since the issue in ITA No.621(Asr)/2013 is identical to the issue in

ITA No.620(Asr)/2013 decided by us, hereinabove and accordingly our 7 ITA no.620 & 621(Asr)/2013

decision in ITA No.620(Asr)/2013 is identically applicable in ITA

No.621(Asr)/2013. Accordingly, the appeal in ITA No.621(Asr)/2013 is

also allowed for statistical purposes.

14. In the result, both the appeals of the assessee in ITA No.620 &

621(Asr)/2013 are allowed for statistical purposes.

Order pronounced in the open court on 12th February, 2015.

Sd/- Sd/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 12th February, 2015 /SKR/ Copy of the order forwarded to: 1. The Assessee:Sh.Rohit Gupta, Jammu. 2. The ITO Ward 2(2), Jammu. 3. The CIT(A), Jammu 4. The CIT, Jammu 5. The SR DR, ITAT, Amritsar. True copy By order

(Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.