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M/s. Shree Ganesh Jewellery House Ltd Versus The CIT, Kolkata-3, Kolkata

2016 (10) TMI 541 - ITAT KOLKATA

Revision u/s 263 - CIT(A) held the order of the AO as erroneous & prejudicial to the interest of Revenue on the ground that the AO failed to examine the issue of interest income whether it is eligible for exemption u/s 10AA - Held that:- From the facts, we find that the AO while allowing the exemption u/s 10AA of the Act objected that the certain expenses and interest income on FD claimed by the assessee have been wrongly apportioned to the different units of the assessee. - From the above o .....

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the impugned order passed by ld. CIT u/s 263 of the Act looks to the issue from different angle and therefore holding the order of the AO erroneous and prejudicial to the interest of Revenue. If that is allowed then there can be several dimensions to view the issue which has been overlooked by the AO at the time of assessment. Accordingly, the impugned order passed by AO after application of mind cannot be regarded as erroneous in so far prejudicial to the interest of revenue because the Ld. CI .....

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he Respondent : Shri G. Mallikarjuna, CIT, DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal has been filed by the assessee relating to assessment year (AY) 2010-11is against passed by Commissioner of Income Tax-3, Kolkata under the provision of Section 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide M. No. CIT-3/Kol/263/2014-15/6520-22 dated 26.03.2015. Assessment was framed by DCIT, Central Circle-VIII, Kolkata u/s 143(3) of the Act vide his order dated 22.0 .....

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ered Accountants and for which the delay has been occurred. Ld. DR has not raised any if the delay of condonation is considered. Hence, we condone the day and to proceed hearing of the appeal 3. Solitary issue in this appeal is that the ld. CIT erred in holding the order of the AO as erroneous and prejudicial to the interest of revenue. 4. Facts in brief in the present case are that the assessee is a Limited Company and engaged in manufacturing and exporting of gold and other jewellery items. Du .....

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, during the year claimed deduction u/s 10AA of the Act from its business income in respect of the factories located in Special Economic Zone (SEZ for short) area. Thereafter, ld.CIT passed impugned order u/s. 263 of the Act opined that the order passed by the AO u/s. 143(3) of the Act is erroneous in so far prejudicial to the interest of revenue by observing that the assessee during the year under consideration has earned interest income from its two [Unit-I & Unit -II] located in SEZ Manik .....

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o the assessee. In response to such notice, the assessee submitted that the assessee is engaged in the business of import of gold and export of jewelleries from its SEZ units. In the course of business, the assessee has to open Letter of Credit for the import of the gold for that they have made fixed deposits and pledged with the bank as margin money. At the same time, assessee borrowed money from the bank against the bill purchase of bills for the goods exported. Therefore, the borrowed money w .....

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und was used in making FD in order to avail the Letter of Credit facility. The amount deposited in FD is nothing but investment in business. The Letter of Credit can be taken from bank on personal guarantee of a director, on pledging/hypothecation of stocks, mortgaging the fixed assets of the company with the bank. Therefore, the assessee made FDR s with the intention of earning interest income. The interest income do not any link with the business of manufacturing and exporting of jewellery ite .....

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erged with the order of the ld. CIT(A) ,CC-I, Kolkata vide order dated 12-09- 2014. Therefore, the same order cannot be revised u/s. 263 of the Act. The copy of the ld. CIT(A) order is placed on page 15 to 28 of the paper book. On the other hand, ld. DR submitted that the issue whether the interest income was eligible for the exemption u/s 10AA of the Act was not there before the ld. CIT(A). The issue before the ld. CIT(A) was with regard to the allocation of expenses between the units entitled .....

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ussion, we find that the ld. CIT held the order of the AO as erroneous & prejudicial to the interest of Revenue on the ground that the AO failed to examine the issue of interest income whether it is eligible for exemption u/s 10 AA of the Act. The ld. AR before us pleaded that the order of the AO has been merged with the order of the ld. CIT(A). Therefore the impugned order passed by Ld. CIT u/s 263 of the Act is not sustainable. Now the issue before us arises whether the order of AO has bee .....

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se of Goetze (India) Ltd. vs. CIT (2006) 284 ITR 323(SC). The relevant extract of assessee submission before the AO is reproduced below : 7. In the written submission regarding the apportionment expenses, the assessee has also claimed that interest income from fixed deposit is also to be apportioned among different units as the FD was pledged as lien for obtaining loan. The relevant observation of the AO in his assessment order is reproduced below: 7.2 The mere fact that the deposit made was for .....

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hat the AO was wrong in reducing the claim of deduction u/s 10AA of the I Tax Act, 1961, on the basis of allocation of expenses and income deemed fit by him. The expenses and income used to be allocated in the same ratio among the eligible units. The said allocation and consequent calculation of deduction u/s 10AA is not in accordance with the fact of the case and also not according to the provisions of law. Hence, the disallowance of deduction u/s. 10AA of the Act amounting to ₹ 11,37,26, .....

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10 the amount of loan outstanding and also the amount of investment in fixed deposits made against the margin to avail credit facility. In this factual background, it cannot be argued that the amount of secured/unsecured loan or investment in fixed deposits as shown in a particular balance sheet is not on actual basis but on adhoc basis. Similarly, it cannot be said that the interest expenditure debited or the interest income credited to a particular profit and loss account was not on actual bas .....

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r allocation of the interest income on FD & interest expenses. This observation of the Assessing Officer, in our considered view, shows that the AO has admitted that the interest income on FD has direct link with the business and accordingly the same is eligible for deduction u/s 10AA of the Act. In the instant case, the impugned order passed by ld. CIT u/s 263 of the Act looks to the issue from different angle and therefore holding the order of the AO erroneous and prejudicial to the intere .....

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PD Gupta Vs. DCIT 60 taxmann.com 306. 1) CIT v. Shalimar Housing & Finance Ltd. (2010) 320 ITR 157 (MP), the head note Revision-Merger with appellate order-Issues dealt with by CIT(A)-Tribunal has adverted to the factual position in a detailed manner and found that the issues that have been taken up by the CIT while exercising jurisdiction under s. 263 have already been dealt with by the CIT(A) in the appeal against the assessment order-Thus, the order cannot be regarded as prejudicial to th .....

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