TMI Blog2009 (11) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... 05. Besides this, the assessee is also permitted to raise the dispute regarding claim of deduction under the same section with regard to interest on short-term deposits of Rs. 13,64,85,671 in assessment year 1999-2000 and Rs. 3,76,31,144 in assessment year 2004-05 and also with regard to service charges on SDF loans sanctioned by Government of India being Rs. 1,92,76,081 in assessment year 1999-2000 and Rs. 85,09,703 in assessment year 2004-05. COD did not grant permission to the assessee for the other issues raised by it and, hence, those issues are not to be considered by us. 3. Now, we note down the brief facts of the case for assessment year 1999-2000. It is noted by the Assessing Officer in the assessment order that the assessee has included certain incomes, which are not income from long- term finance in calculating the amount of special reserve under section 36(1)( viii ). In this regard, the Assessing Officer has noted the amount of Rs. 82.60 lakhs being dividend on investments and the Assessing Officer was of the view that this is not an income from long-term finance within the meaning of section 36(1)( viii ) of the Income-tax Act, 1961. Regarding interest income of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -term finance and no other activity is being carried out by the assessee, the entire profit of the assessee is entitled for deduction under section 36(1)( viii ). It is also submitted that as per the details available on page No. 24 of the paper book, it can be seen that receipt of interest is on investment in short-term deposits which have a period of few days to a maximum of six months in most of the cases. It is also submitted that the source of the said deposit is the repayment of long-term loans as well as interest received by the assessee along with such repayment and till such time, when the loans are given again to the co-operatives, amount available during the interim period is kept in short-term deposits with banks, which yield interest income. It is submitted that since the source is the business of long-term financing and, hence, this interest income is also eligible for deduction under section 36(1)( viii ). It is also submitted that this short-term deposits are made by the assessee for prudent fund management to mitigate the interest expenditure on borrowings. It is pointed out that almost 70 per cent of the finance is from loan received from Central Government, borro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT [1992] 193 ITR 321 (SC), ( d ) DIT (Exemptions) v. Escorts Cardiac Diseases Hospital Society [2008] 300 ITR 75 (Delhi), ( e ) CIT v. Dalmia Promoters Developers (P.) Ltd. [2006] 281 ITR 346 (Delhi). 9. As against this, ld. DR of the revenue supported the orders of the authorities below. Reliance was placed by him on the recent judgment of Hon ble Apex Court rendered in the case of Liberty India v. CIT [2009] 317 ITR 218 regarding the scope of the words "Income derived from". Regarding the issue of consistency, it was submitted that in income-tax proceedings, res judicata is not applicable. It is also submitted that as per page No. 125 of the paper book also, the investment made by the assessee is towards share capital only. Regarding the alternative claim for netting of interest income by way of apportionment of expenditure, it was submitted that there is no approval of COD to raise this issue. 10. In the rejoinder, it was submitted by the ld. AR of the assessee that rule of consistency has to be applied. It is pointed out that the calculation of deduction claimed by the assessee under section 36(1)( viii ) is appearing on pages 7 and 8 of the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. Regarding interest from banks on short-term deposit, it is the claim of the assessee that since the source of fund with the assessee is long-term funding from Government of India loan, bonds and term loans and in the course of providing funds, these funds were surplus with the assessee for a short period and in order to mitigate interest expenditure, these funds were given to banks on short-term deposits and, hence, this interest income is also profit from business of providing long-term finance. Regarding service charges on SDF loans, it is the submission that since SDF loans are long-term, this income is also profit derived from business of providing long-term finance. We are not in agreement with ld. AR of the assessee with regard to all these three items because we feel that this aspect is now covered against the assessee by the judgment of Hon ble Apex Court rendered in the case of Liberty India ( supra ). In this case, Hon ble Apex Court was considering the dispute as to whether duty drawback receipts of DEPB benefits form part of the net profits of eligible industrial undertakings for the purpose of deduction under section 80-I/80-IA/80-IB of the Income-tax Act, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion that investment in shares is for earning dividend income and the dividend cannot be said to be profit derived from providing of long-term finance. Nothing was shown to us that investment in shares were made as a means of providing long-term finance and that it is not an investment decision of the assessee. Regarding bank interest, it is admitted position that these FDS/Deposits were for short period and even if it is for a long period, it is deposit with bank and not providing of long-term finance to banks and, hence, not eligible for deduction under section 36(1)( viii ). Regarding service charges on SDF loans, we find that admittedly, there is no finance given by the assessee as the entire financing in SDF Loans is by the Government and not by the assessee and the assessee is getting only some service charges for rendering certain services in that connection. Hence, this receipt can be said to be attributable to the business of proving long-term finance but cannot be said to be derived from the business of providing long-term finance. 14. Regarding the contention of ld. AR of the assessee that in earlier years and in subsequent years, deduction was allowed to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has not expired only because the department cannot reopen some earlier assessment years for which the time-limit has expired. In such a case, it will always be a situation, that on same issue, department has wrongly allowed some benefits to the assessee which was not allowable as per law and since the department had noticed the mistake late and cannot reopen the cases of some of the earlier years, it cannot be said that the department cannot rectify the mistake in subsequent years also because the department has made a mistake in earlier years which cannot be rectified by the department because of expiry of limitation period. Under this factual position, we feel that this claim of the assessee also deserves to be rejected in view of these peculiar facts of the present case. The judgments cited by ld. AR of the assessee in this regard are not relevant in view of these peculiar facts of the present case. 15. One more contention was raised by the assessee with regard to the judgment of Hon ble Apex Court in connection with section 80-I/80-IA/80-IB. It has been submitted that the judgments of Hon ble Apex Court are not applicable. It was submitted that the judgment of Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispute regarding the quantum of exclusion made by the Assessing Officer from profit of business for the purpose of computing deduction allowable to the assessee under section 36(1)( viii ). In this regard, we are not in agreement with ld. DR of the revenue that COD has not granted permission to the assessee to raise this aspect of the matter. When COD has permitted the assessee to contest the issue regarding allowability of deduction under section 36(1)( viii ), the alternative claim of the assessee is part of the broader permission granted by COD and, hence, we are of the view that the assessee is entitled to raise this dispute also. 17. Now, we examine this alternative contention of the assessee that entire receipt on account of bank interest cannot be reduced from business profit for the purpose of calculating deduction under section 36(1)( viii ) allowable to assessee. The claim of the assessee is that even if it is held that bank interest on temporary deposits is not eligible for deduction under section 36(1)( viii ), then also, only the net interest income after deducting corresponding interest expenditure should be reduced from business profit. We are in agreement with l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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