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2015 (8) TMI 417 - ITAT MUMBAI

2015 (8) TMI 417 - ITAT MUMBAI - TMI - Penalty u/s. 271(1)(c) - interest receipt consequent to the denial of deduction u/s. 10B claimed by the assessee - Held that:- In the facts of the present case, the interest income stands earned on deposits placed with the bank/s for fixed term/s (FDRs) and inter-corporate deposits (ICDs). The A.O. has further given a categorical finding of the interest income, which is even otherwise apparent, i.e., from the manner in which it is being derived, as having n .....

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rally entitled to deduction there-under on the interest income. We find little merit in the assessee’s said contention in view of the undisputed facts of the case, i.e., of the interest income in the undisputed facts of the case arising out of bank FDRs and ICDs. In fact, the A.O.’s finding that the same has no nexus with the assessee’s business, remains unchallenged. Rather, the assessee’s plea in the appellate proceedings was for the netting of the interest income in-as-much as the assessee ha .....

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essment order for A.Y. 1998-99, the immediately preceding year. In fact, the A.O., and only rightly, has gone further to state that the interest income could not be regarded as derived from the assessee’s business

That is to say, that the interest income does not form part of the assessee’s business, the same could not in any case be said to be derived there-from, a condition precedent for the income of the assessee’s export business from being eligible for deduction u/s. 10B. Penalty .....

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(A) for short) dated 29.03.2006 (for assessment years (A.Ys.) 1997-98 and 1998-99) and 30.03.2006 (for A.Y. 1999- 2000), partly allowing the assessee s appeals contesting the levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 ( the Act hereinafter) by the Assessing Officer (A.O.) for the said years. 2. The only issue arising in these appeals is the maintainability or otherwise in law of the penalty levied u/s.271(1)(c) of the Act as confirmed or deleted by the ld. CIT(A) in the facts and .....

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case 4.1 The assessee contends to have claimed benefit u/s.10B on the interest income following the decisions in the case of CIT vs. Paramount Premises (P.) Ltd. [1991] 190 ITR 259 (Bom) and CIT vs. Nagpur Engineering Co. Ltd. [2000] 245 ITR 806 (Bom). In fact, as would be evident per the said decisions, the Hon ble High Court has only upheld the view as taken by the Tribunal. The fact that the hon ble apex court per its subsequent decision in the case of Liberty India (supra) has ruled otherwi .....

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hat there is no basis for the assessee being allowed the benefit of sec.10-B on its interest income. The said income, as clearly brought out by the Assessing Officer (A.O.) in the assessment order for A.Y. 1997-98, the first of the three years under reference, has nothing to do with the assessee s business activity, assessing the same as income from other sources. Likewise for A.Y. 1998-99, where the A.O. has again given a categorical finding that the interest income has no nexus with the assess .....

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therefore, confirmed its assessment as business income. The said decision, based on a finding of fact, would thus be of no assistance to the assessee. 5. We have heard the parties, and perused the material on record. 5.1 Section 10B(1), which provides for the exemption of income from tax, as it stood at the relevant time, i.e., prior to its substitution by Finance Act, 2000 w.e.f. 01.04.2001, reads as under: Special provisions in respect of newly established hundred per cent export-oriented und .....

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d Sons [1993] 203 ITR 881 (SC) clarified that the interest income partakes the same character as the receipt for the payment of which it was otherwise entitled. In the facts of that case, the contract amounts due to the assessee, a contractor, were not paid in time on account of disputes between the parties, and the interest was awarded for the delay. The apex court adverted to the settled law that the interest income is assessable as income from other sources only where it cannot be brought wit .....

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ng of the interest income, which is even otherwise apparent, i.e., from the manner in which it is being derived, as having no direct relationship with the assessee s business activity, supporting his case through reliance on a series of decisions, listed in his orders for A.Ys. 1997-98 and 1998-99, some of which we enlist as under: 1) Orissa State Warehousing Corp. vs. CIT [1999] 237 ITR 589 (SC); 2) Cambay Electric Supply Indl. Co. Ltd. vs. CIT [1978] 113 ITR 84 (SC). 3) CIT vs. Raja Bahadur Ka .....

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y the A.O. has not been disturbed; rather, not even contested by the assessee at any stage. The ld. Authorized Representative (AR), on this being pointed out during hearing, i.e., that the interest income stands specifically assessed u/s.56, i.e., as income from other sources, for A.Y. 1997-98, would submit that it stands assessed as business income for the subsequent two years. Further, the tribunal vide its order for A.Y. 2000-01 (PB pgs. 101A to 101T) held that in light of the fact that the a .....

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eedings was for the netting of the interest income in-as-much as the assessee had also paid interest. While the interest income stands specifically assessed as income from other sources for A.Y. 1997-98, there is no head-wise classification of the income for A.Y. 1998-99, which though cannot be read to imply or mean that the said income stands assessed as business income, particularly considering the clear finding/s in the matter and the undisputed facts of the case. For A.Y. 1999-2000, again, t .....

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(supra); ii) Sterling Foods vs. CIT [1985] 150 ITR 292 (Kar) [affirmed in 237 ITR 579 (SC); iii) Cement Distributors Ltd. (supra); iv) North East Gases (Pvt.) Ltd. (supra); v) Fenner (India) Ltd. vs. CIT [1999] 239 ITR 480 (Mad); and vi) A. M. Moosa, Bharat Sea Foods vs. CIT [1997] 224 ITR 735 That is to say, that the interest income does not form part of the assessee s business, the same could not in any case be said to be derived there-from, a condition precedent for the income of the assesse .....

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n record to suggest otherwise, i.e., of the interest bearing deposits as occassioned by the assessee s business requirements, of a clear nexus with business, much less an intimate relationship, denoting one of first degree, as contemplated by law, which thus is with the said deposits. 5.4 As regards the reference to the decision by the tribunal for A.Y. 2000-01, the ld. AR omitted to refer to the last part of the relevant para (para 16 of the tribunal s order/at PB pg. 101R), which clarifies the .....

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ecisions by the Hon'ble jurisdictional High Court relied upon, in our clear view, the same would be of no assistance to the assessee. As unequivocally clarified in Paramount Premises (P.) Ltd. (supra), the decision upholding the assessment of interest as business income is based squarely on the factual finding by the tribunal to the effect that the interest income sprang from the business activity of the assessee-respondent, and did not arise out of the any independent activity. There is cle .....

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sis, being, as apparent, with the deposits per se. The decision in the case of Nagpur Engineering Co. Ltd. (supra) is only by following the decision in Paramount Premises (P.) Ltd. (supra). It is well settled that what is binding and has precedent value, is the ratio decendi of a decision. The said decision, rendered following the decision in Paramount Premises (P.) Ltd. (supra), thus, cannot be said to lay down any proposition independent and apart from that stated in Paramount Premises (P.) Lt .....

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as explained as far back as in Raja Bahadur Kamakhya Narayan Singh (supra), so that the primary condition of derived from , as against incidental or attributable to, as is again well settled, stands satisfied in the facts and circumstances of the case, as found by the tribunal. That is, its decision again rests on the edifice of the factual findings by the tribunal, the final fact finding authority. The said decisions, thus, on the contrary, support the Revenues case. The finding by the tribuna .....

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isting is again not exhaustive, so that the apex court does not thereby lay down any new law. Rather, the decisions by the hon'ble jurisdictional high court relied upon by the assessee are not inconsistent with the decision in Liberty India (supra) and, in fact, in consonance with the decision by the Hon ble Apex Court in Govinda Choudhary and Sons (supra). Further, the assessee also has nowhere contested any of the several decisions relied upon by the Revenue, including by the hon ble apex .....

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f the foregoing, find no merit in the assessee s case. It, to our mind, has not adduced any explanation, much less substantiated it, except for a bald assertion (i.e., of the said interest income as being a part of the assessee s business income). The reliance on the decisions by the hon ble jurisdictional high court, which we have found to be in fact supportive of the Revenue s case, with the law in the matter being, in fact, well settled, is only a false plea or a ruse. Reliance on the decisio .....

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ITR 277 (SC); Guljag Industries v. CTO [2007] 293 ITR 584 (SC); K.P. Madhusudhanan vs. CIT [2001] 251 ITR 99 (SC); B.A. Balasubramaniam and Bros v. CIT [1999] 236 ITR 977 (SC); Addl. CIT vs. Jeevan Lal Shah [1994] 205 ITR 244 (SC); CIT vs. K. R. Sadayappan [1990] 185 ITR 49 (SC); and CIT vs. Mussadilal Ram Bharose [1987] 165 ITR 14 (SC), besides by the hon ble high courts as well, viz: CIT vs. Mohd. Mohtram Farooqui [2003] 259 ITR 132 (Raj); CIT vs. Sree Krishna Trading Co. [2002] 253 ITR 645 (K .....

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before us by the ld. AR, so that the same is dismissed as not pressed. This decides the assessee s appeals for all the years. Revenue s Appeals 7. The Revenue appeals relate to the receipts on which deduction u/s.10B has since been allowed by the tribunal, as to UNISYS, vide its combined order for the years under reference dated 02.03.2012 (PB pgs. 1-43), i.e., after recalling its earlier order dated 07.04.2005 disallowing the same (PB pgs. 44-101). The only plea adopted by the Revenue is that .....

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