M/S ELIZA POWER INDUSTRIES,UNA vs. ITO, UNA

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ITA 1121/CHANDI/2017Status: DisposedITAT Chandigarh25 February 2019AY 2012-136 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that interest received from partners can be netted against interest paid to partners and remanded the matter for verification. For additions under Section 68, the Tribunal restored the issue to the Assessing Officer for fresh examination, while denying Section 80IC deduction on capital introduced.

What were the facts?

The assessee appealed against the CIT(A)'s order concerning additions made under Section 68 and denial of deduction under Section 80IC. The appeal involved issues of unexplained cash credits, capital introduction by partners, and interest income.

What were the issues?

Whether interest income is eligible for deduction under Section 80IC and whether additions made under Section 68 as unexplained cash credits were justified, considering the nature of the transactions.

Which sections of the Income-tax Act were involved?

Section 80IC,Section 68,Section 250(6)

AI-generated summary — verify with the full judgment below

आदेश/Order

The present appeal has been preferred by the assessee against the order dated 23.3.2017 of the Commissioner of Income Tax (Appeals), Palampur [hereinafter referred to as ‘CIT(A)’].

2.

The assessee in this appeal has taken following grounds of appeal:-

1.

That on the facts, circumstances of the case and in law, the Worthy CIT(A) through his order dated 03.04.2017 has erred in passing that order in contravention of the provisions of S. 250(6) of the Income Tax Act, 1961. 2. That on the facts, circumstances of the case and in law, the Worthy CIT(A) has erred in confirming the action of Ld. AO wherein he had erred in not allowiung deduction u/s 80IC on interest income of Rs. 1,36,856/- even when such income is derived from the fixed deposits held as security with various government authority pertaining to business activity.

3.

That on the facts, circumstances of the case and in law, the Worthy CIT(A) has erred in confirming the action of Ld. AO wherein he had erred in making addition of Rs. 15,75,000/- to

ITA No. 843-Chd-2018- Sh. G.P.Singh, HUF, Ludhiana 2

the appellant's income on account of alleged unexplained cash credit which were amounts of capital introduced by partners of the appellant firm. 4. That on the facts, circumstances of the case and in law, the Worthy CIT(A) has erred in confirming the action of Ld. AO of not allowing deduction u/s 80IC on addition of Rs. 15,75,000/- (agitated through ground 3 above) made u/s 68 on account of capital introduced by partners. 5. That on the facts, circumstances of the case and in law, the Worthy CIT(A) has erred in confirming the action of Ld. AO wherein he had erred in making addition of Rs. 8,11,241/- to the appellant's income on account of alleged unexplained cash credit from Sh. Paramjit Singh.

6.

That on the facts, circumstances of the case and in law, the Worthy CIT(A) has erred in confirming the action of Ld. AO of not allowing deduction u/s 801C on addition of Rs. 8,11,241/- (agitated through ground 5 above) made u/s 68 on account of alleged unexplained cash credit from Sh. Paramjit Singh.

7.

That on the facts, circumstances of the case and in law, the Worthy C1T(A) has erred in confirming the action of Ld. AO of estimating the interest income of Rs. 20,000/- from deposit of Rs. 2,00,000/- given to sales tax authorities even when no such income was received during the year. He has also erred in not allowing deduction u/s 80IC on the said enhanced income.

8.

That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same.

Ground No.1 : Ground No.1 is general in nature and does not require 3.

any specific adjudication.

Ground No. 2 : Vide ground No.2, the assessee has agitated the 4.

action of the lower authorities in denying deduction u/s 80IC of the

Income-tax Act, 1961 (in short 'the Act') on interest income of Rs.

1,36,856/-.

ITA No. 843-Chd-2018- Sh. G.P.Singh, HUF, Ludhiana 3

5.

At the outset, the Ld. Counsel for the assessee has submitted that the

assessee inadvertently mentioned in the return of income the said receipt as

‘interest from FDRs’ whereas, the same was received as interest from

partners of the assessee firm. He has further submitted that the assessee

during the year also paid some interest to the other partners on their

capital. He, therefore, has submitted that in the computation of income,

the assessee may be allowed netting of the interest paid with interest

received from partners. However, the Ld. Counsel fairly agreed that the

assessee is not eligible to claim deduction u/s 80IC of the Act on the

aforesaid amount.

6.

The Ld. DR has also agreed that the matter may be examined afresh

by the Ld. CIT(A) in this respect.

7.

I have considered the rival submissions. It is held that if there is a

receipt of interest from the partners as well as payment of interest to the

same partners, the assessee is entitled to netting of the same. Therefore,

the matter is remanded to the file of the Assessing officer to verify this

fact and allow the relief to the assessee accordingly. However, the

assessee is not entitled to deduction u/s 80IC of the Act on the aforesaid

interest income.

Ground Nos. 3 & 4: Vide ground No.3 and 4 the assessee has 8.

agitated the addition of Rs. 15.75 lacs made into the income of the

assessee as unexplained cash credits u/s 68 of the Act and further the

action of the lower authorities in denying deduction u/s 80IC of the Act on

the said amount.

ITA No. 843-Chd-2018- Sh. G.P.Singh, HUF, Ludhiana 4

9.

The Ld. Counsel for the assessee has submitted that the said amount

of Rs. 15.75 lacs were in fact capital introduced by Shri Raj Kumar into

the firm. He has further relied upon the various documents to submit that

in fact the said amount was transferred from his proprietorship concern

M/s MBH Traders. He has also submitted that even certain amount was

credited to the account of M/s MBH Traders from other proprietorship

concern of the assessee. He, therefore, has submitted that the assessee has

explained the source of deposits.

10.

On the other hand, the Ld. DR submitted that though the assessee

has tried to show that the amount has been credited from proprietorship

concern, however, the creditworthiness of the proprietorship concern has

not been proved.

11.

Considering the overall facts and circumstances of the case, I am of

the view that the matter needs examination and verification at the hands of

the Assessing officer. The assessee will demonstrate before the Assessing

officer the source and creditworthiness of the creditor including the source

of the deposits in the proprietorship concern. The Assessing officer will

examine the same and decide the issue afresh in accordance with law.

Since it is a case of capital introduction, I do not think that the assessee is

entitled to any deduction u/s 80IC of the Act on this account. Therefore,

the issue raised vide ground No.3 is restored to the file of the Assessing

officer, whereas, the issue raised vide ground No.4 is decided against the

assessee.

ITA No. 843-Chd-2018- Sh. G.P.Singh, HUF, Ludhiana 5

12.

Ground No.5. Vide this ground, the assessee has agitated the

addition of Rs. 8.11 lacs made into the income of the assessee by lower

authorities as unexplained cash credit u/s 68 of the Act. The Ld. Counsel

for the assessee has submitted that this amount has been added under the

head unexplained loans. He has further submitted that in fact the creditor

Sh. Paramjit Singh was the partner of the of the firm, however, he retired

from the partnership of the firm during the year under consideration. As

per the dissolution deed, his capital was treated loan to the firm. That

there was otherwise no introduction of any cash or capital during the year.

That the amount of capital was introduced by Parmajit Singh as capital of

the partner during the earlier years.

13.

The Ld. DR, on the other hand, has submitted that these pleas have

not been taken into account by the lower authorities. That the matter needs

examination at the end of the CIT(A).

14.

After considering the rival submissions, I am of the view, that since

these aspects has not been examined by the Assessing officer and I have

also restored the other issues to the file of the Assessing officer, hence,

this issue is also restored to the file of the Assessing officer to examine

the above contentions of the assessee and decide the issue in accordance

with law.

15.

Ground No. 6: So far as the ground No.6 is cornered, the assessee

has claimed deduction u/s 80IC of the Act on the aforesaid amount of Rs.

8.11 lacs as unexplained loans from Sh. Paramjit Singh. The Ld. counsel

has been fair enough to admit that this amount does not qualify for

ITA No. 843-Chd-2018- Sh. G.P.Singh, HUF, Ludhiana 6

deduction u/s 80IC of the Act. Ground No. 6 of the appeal is, therefore, dismissed.

16.

Ground No.7: This ground is not pressed by the Ld. Counsel for the assessee, therefore, the same is dismissed as ‘not pressed’.

17.

Ground No.8 : This ground is general is nature and does not require any specific adjudication.

In view of the findings given above, the appeal of the assessee is partly allowed for statistical purposes. Order dictated and pronounced in the Open Court immediately on completion of hearing.

Sd/-

(संजय गग� / SANJAY GARG) �या�यक सद�य/ Judicial Member Dated : 27.02.2019 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

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