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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL
Date of Hearing – 08.05.2019 Date of Order – 15.05.2019
O R D E R PER SAKTIJIT DEY. J.M.
The aforesaid appeal has been filed by the Revenue challenging the order dated 5th February 2018, passed by the learned Commissioner (Appeals)–50, Mumbai, for the assessment year 2011– 12, 2012–13 and 2013–14. However, in the present appeal, we are concerned with the assessment year 2011–12 only.
2 Ossian Exports 2. Brief facts are, the assessee, a partnership firm, is engaged in the business of trading in polished diamond, gold and gold jewellery. For the assessment year under dispute, the assessee had filed its return of income on 29th September 2011 declaring nil income after claiming deduction under section 10AA of the Income Tax Act, 1961 (for short "the Act"). Assessment in case of the assessee was originally completed under section 143(3) of the Act vide order dated 27th November 2013, after disallowing assessee’s claim of deduction under section 10AA of the Act. Subsequently, a search and seizure operation under section 132 of the Act was carried out on the assessee and in pursuance to such search and seizure operation, proceedings under section 153A of the Act was initiated. In the assessment order passed under section 143(3) r/w section 153A of the Act, the Assessing Officer again disallowed assessee’s claim under section 10AA of the Act. The assessee challenged the disallowance of deduction claimed under section 10AA of the Act both in the original assessment as well as in the assessment completed under section 153A of the Act by filing separate appeals before learned Commissioner (Appeals). When the appeal against the assessment order passed under section 143(3) r/w section 153A of the Act came up for consideration before learned Commissioner (Appeals), he found that the dispute relating to disallowance of assessee’s claim of deduction under section 10AA of the Act was also subject matter of appeal arising out of original
3 Ossian Exports assessment order. He further noticed that the said dispute arising out of original assessment order ultimately came up for consideration before the Tribunal and the Tribunal while deciding the cross appeals filed by the assessee and the Revenue in & 2024/Mum./ 2015, dated 31st January 2017, had allowed assessee’s claim of deduction under section 10AA of the Act. Since, the material facts relating to assessee’s claim of deduction under section 10AA of the Act was identical to the dispute arising out of original assessment proceedings, learned Commissioner (Appeals) following the decision of the Tribunal referred to above, directed the Assessing Officer to allow assessee’s claim of deduction under section 10AA of the Act. While doing so, learned Commissioner (Appeals) held that the interest income of ` 1,23,10,695, earned on fixed deposit kept with the banks towards margin money should be treated as income under the head business and separate addition made under the head income from other sources should be deleted.
The learned Departmental Representative, though, agreed that the issue has been decided in favour of the assessee by the Tribunal in assessment year 2011–12, however, he submitted that while deciding similar issue in assessment year 2013-14, the Tribunal has restored the matter to the Assessing Officer as regards the issue whether the 4 Ossian Exports interest income earned by the assessee is to be treated as business income or from other sources.
The learned Authorised Representative submitted, the issue is squarely covered by the decision of the Tribunal in assessment year 2011–12 (supra).
We have considered rival submissions and perused the material on record. As could be seen from the factual matrix relating to the disputed issue, in the return of income filed for the impugned assessment year the assessee had claimed deduction under section 10AA of the Act for an amount of ` 3,61,19,032. While completing the original assessment under section 143(3) of the Act, the Assessing Officer disallowed assessee’s claim of deduction under section 10AA of the Act. Further, he held that the interest income earned on the fixed deposit amounting to ` 1,23,10,695, has to be treated as income from other sources. In the assessment order passed under section 143(3) r/w section 153A of the Act, the Assessing Officer has simply incorporated the total income computed in the original assessment order. Notably, while deciding assessee’s appeal arising out of the original assessment order, learned Commissioner (Appeals), though, allowed assessee’s claim of deduction under section 10AA of the Act, however, he agreed with the Assessing Officer that the interest income
5 Ossian Exports earned on the fixed deposit has to be assessed under the head income from other sources. Against the aforesaid order of learned Commissioner (Appeals) both, the Revenue and the assessee preferred appeals before the Tribunal. The Tribunal while deciding the cross appeals in the order cited supra, upheld the decision of learned Commissioner (Appeals) in allowing assessee’s claim under section 10AA of the Act. Insofar as the issue whether the interest income earned on fixed deposit has to be treated as business income or income from other source, the Tribunal held that since the fixed deposits were kept in the bank by way of margin money made for the purpose of assessee’s business of import and export of trading in diamond, such income will constitute business receipt, hence, eligible for deduction under section 10A of the Act. Thus, from the aforesaid order of the Tribunal, it is clear that whether the fixed deposits were kept towards margin money deposit, hence, are in connection with the assessee’s business has been settled by the Tribunal. Therefore, the aforesaid decision of the Tribunal squarely applies to the facts of the present appeal. The decision of the Tribunal with regard to the nature of income in assessment year 2013–14 would not apply to the facts of the present appeal, since, the Tribunal has recorded a factual finding that neither the Assessing Officer nor the learned Commissioner (Appeals) have examined whether the interest income on fixed deposits were connected with the business of the assessee which is 6 Ossian Exports not the fact in the present appeal. In view of the aforesaid, we do not find any infirmity in the order of the learned Commissioner (Appeals) as he has followed the decision of the Tribunal for the assessment year 2011–12, which is factually identical to the present appeal. Accordingly, we uphold the order of the learned Commissioner (Appeals) by dismissing the grounds raised.
In the result, Revenue’s appeal is dismissed. Order pronounced in the open Court on 15.05.2019