TMI Blog2019 (11) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... er giving due opportunity of being heard to the assessee. The assessee is also hereby directed to appear before the AO and not disregard the statutory notices failing which the AO is at liberty to pass appropriate order as per law. - Decided in favour of assessee for statistical purpose. - ITA No.2799/Del/2013 - - - Dated:- 30-10-2019 - Sh. R. K. Panda, Accountant Member And Sh. Kuldip Singh, Judicial Member For the Appellant : Sh. Rajeev Saxena, Advocate, Ms. Sumangla Saxena, Advocate For the Respondent : Sh. N. K. Bansal, Sr. DR ORDER PER R.K PANDA, AM: This appeal filed by the assessee is directed against the order dated 28.02.2013 of CIT(A)-26, New Delhi relating to A.Y. 2007-08. 2. Facts of the case, in brief, are that the assessee is a partnership firm and filed its return of income on 12.09.2007 declaring total income of ₹ 12,75,420/- after claiming deduction of ₹ 1,14,78,818/- u/s.10A @ 90% of the total business profit of ₹ 1,27,54,242/-. The case was selected for scrutiny and the order u/s.143(3) was passed on 23.12.2009 determining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AR of the appellant has also failed to prove that the amount of loan on which the interest was paid was converted in to the FDRs on which interest amounting to ₹ 38,39,642/- was received. On perusal of material on record, find from the balance sheet that the appellant had shown an amount of ₹ 9,40,70,000/- under EBRD scheme and an amount of ₹ 55,12,500/- under PCFC scheme maintained with Central Bank of India. Besides, it had also shown secured loan of ₹ 1,57,00,000/- which are in the nature of the demand loan. The EBRD scheme pertains to re-discount of export bills. PCFC means packing credit in foreign currency. Under scheme the loans are vital for exporters as they use this fund to procure raw-material and because these loans are relatively cheap and exporters save on cost and is thus competitive. PCFC loans are offered by the banks to the exporters of diamond jewellery. Further, there are two types of loans under PCFC provided by the banks to the exporters, one pre-shipment credit facility and the other post-shipment credit facility. Thus, these amounts had no inextricable link or intrinsical connection with the FDRs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income Tax (Appeals) is bad in law as well as on facts as the same is not in adherence with the specific direction of the Hon ble Income Tax Appellate Tribunal wherein netting off the interest was allowed and specific directions regarding re-computation were given to the AO. 4. That both the lower authorities have failed to appreciate that income under the head Income From Other Sources would be taxed only what is excess after netting off the same against interest paid, as both - loans received for the purpose of business as well as interest earned on the deposits/ for the business, are inextricably linked to each other. 5. We have considered the rival arguments made by both the sides and perused the orders of the authorities below. The Ld. Counsel for the assessee at the time of hearing filed the following written synopsis that the same is self explanatory :- Assessee is a 100% Exporter of Jewellery. It used to import gold bars and after making Jewellery, the same was exported. The details relating to the claim by exporter for deduction u/s 10A of the Income Tax Act is provided at page 15. There is no dispute on the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of the assessee as noticed by the Hon ble ITAT in AY 2003-04. It is submitted that the Hon ble Delhi High Court in the case of Vodafone South Ltd. v. CIT ITA No. 334/2014 (PB 85 to 98), have also examined this issue and held at Para 20 PB 95-96, with regard to deduction u/s 57(iii) of the Act and summarized their view briefly stated as under: (i) For the purpose of deduction in terms of section 57(iii), the test is not whether the transaction for which expenditure was laid out was a prudent one which resulted in ultimate gain to the assessee but whether it was properly entered into as a part of assessee s legitimate commercial undertaking, in order indirectly to facilitate the carrying on of its business. (ii) The expenditure may not have been incurred under any legal obligation, yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. In other words, if it is such expenditure as a prudent businessman would incur for the purpose of business. (iii) Once it is established that there was nexus between the expenditure and the purpose of the business no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below and the paper book filed on behalf of the assessee. We have also gone through the various decisions cited before us. We find the AO in absence of any response from the assessee repeated the original assessment order wherein the interest earned on FD amounting to ₹ 38,39,642/- was treated as income from other sources and thereby the benefit of exemption u/s.10A and the benefit of netting was not allowed. We find the Ld. CIT(A) upheld the action of the AO the reasons of which have already been reproduced in the preceding paragraph. From the various details furnished by the assessee in the paper book we find the order for A.Y.2002-03, 2004-05 and 2005-06 were set aside to the file of the AO by the Tribunal. We further find the AO himself has allowed the benefit of netting off of interest and allowed the deduction u/s. 10A for A.Y.2009-10 and 2010-11, copies of which are placed at page 79 to 84 of the paper book. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the AO with a direction to give one final opportunity to the assessee to substantiate that the FD s are inextricably linked wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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