M/S. VIKLELE ASSOCIATES,PUNE vs. INCOME TAX OFFICER, PUNE

आदेश / ORDER

PER SUSHMA CHOWLA, JM

The appeal filed by the assessee is against the order of Commissioner of Income Tax (Appeals)-3, Pune dated 17.10.2016 relating to assessment year 2009-

2 ITA No.752/PUN/2017 A.Y.2009-10

10 against order passed under section 143(3) of the Income Tax Act, 1961 ( in short

‘the Act’).

“1. On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in disposing of the appeal ex-parte as the notices for hearing of the appeal were not received due to change of address of the appellant. There was no intention to avoid the hearing of the appeal. The ex-parte order be set aside for doing the same afresh in order to give justice to the assessee. 2. On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified to bring under the purview of the taxation the exempt income on Rs.2,46,405/- under section 10A of the Act being interest of fixed deposits thereby confirming the action of the A.O. The exemption be allowed the appellant. 3. On the facts and circumstances of the case and in law the appeal of the assessee is delayed as the same was not filed within the limitation of 60 days provided under the Act. The delay is mainly due to the fact that the appellant remained unaware of the appeal order due to change of address. The delay is not intentional. The application for condonation of delay will be filed supported by sworn-affidavit separately. It is therefore, prayed to condone the delay and admit the appeal for adjudication. 4. The appellant craves to leave, add/amend or alter any of the above grounds of appeal.”

has filed an application for condonation of delay pointing out that it had shifted its

place of business and the communication was being made at the old address. The

appeal was filed after a delay which was not intentional or due to negligence. A

perusal of the appeal memo reflects that the assessee has filed the present appeal

after delay of 105 days. As the notice of hearing was sent to old address of

assessee, the same were returned back by postal authority. The entire

correspondence used to take place for delivery at the old address and then it would

get diverted at new address. The assessee remained unaware of the appeal due to

change of address. The new address of the assessee mentioned in the affidavit is

401, Kamalaksha Apartments, Behind Riddi Siddhi Apartment, Maratha Mandir

3 ITA No.752/PUN/2017 A.Y.2009-10

Road, Bavdhan, Pune-411 052. In view of the reasons mentioned in the affidavit, there is merit in the plea of assessee and delay in filing appeal late before the

Tribunal is condoned.

appeal i.e. taxability of interest income earned on fixed deposits under section 10A

of the Act stands covered by full Bench decision of Karnataka High Court in the

case of CIT Vs. Hewlett Packard Global Soft Ltd., (2017) 100 CCH 0063 KarHC.

year under consideration, assessee filed return of income declaring total income of

Rs.2,46,410/-. The assessee was engaged in exporting computer software and was

eligible for deduction under section 10A of the Act. In the original return of income

assessee had offered to tax interest of Rs.2,46,450/- on fixed deposits under the

head ‘income from other sources’. Later on, by way of revised return of income, it

withdrew the said item and claimed entire income of Rs.28,71,956/- as liable for

deduction under section 10A of the Act. The Assessing Officer was of the view that

the assessee was not entitled to claim deduction under section 10A of the Act on the

interest earned on fixed deposits. The assessee was show caused by the Assessing

Officer to explain as to why the amount should not be taxed being credited to FDR

on account of interest. In reply, the assessee furnished certificate from Punjab

National Bank wherein it was certified that the over draft facility was sanctioned to

the assessee against security of fixed deposits with the bank. In the second letter,

the bank stated that the assessee has kept short term deposit with them during the

period April 2008- March 2009 and it had charged lien against the overdraft loan

given to assessee. The Assessing Officer noted that there was no need at all for any overdraft or cash credit in the bank as there was surplus balances in the said

account except amount diverted to the fixed deposit account. Hence, the Assessing

Officer held that interest earned on the fixed deposits was liable to be included under

4 ITA No.752/PUN/2017 A.Y.2009-10

the head ‘income from other sources’ and assessee was not eligible to get deduction

under section 10A of the Act.

failed to give any explanation in this regard. Now, the assessee is in appeal against

the order of CIT(A).

passed by CIT(A) without giving proper opportunity of hearing to the assessee. The

second ground of appeal raised by assessee is against non allowance of deduction

under section 10A of the Act on the interest income earned on fixed deposits. The

assessee before us has stressed that the issue on merit stands covered in favour of

assessee by the ratio laid down by the Full Court of Hon'ble Karnataka High Court in

the case of CIT Vs. Hewlett Packard Global Soft Ltd (supra.). The Hon'ble High Court held that Incidental activity of parking of Surplus Funds with Banks or

advancing of staff loans by such special category of assesses covered under

section 10-A or 10-B was integral part of their export business activity. The Hon'ble

High Court further held that Business decision taken in view of commercial

expediency and interest income earned incidentally could not be de-linked from its

profits and gains derived by Undertaking engaged in export of Articles as envisaged

u/s 10-A or 10-B and could not be taxed separately u/s 56. The Hon'ble High Court

also held that therefore all Profits and Gains of the Undertaking including the

incidental income by way of interest on Bank Deposits or Staff loans would be

entitled to 100% exemption or deduction u/s 10-A and 10-B of the Act. Such interest

income arises in the ordinary course of export business of the Undertaking even

though not as a direct result of export but from the Bank Deposits etc., and was

therefore eligible for 100% deduction.

5 ITA No.752/PUN/2017 A.Y.2009-10

Order pronounced on this 15th day of May, 2018.

Sd/- (SUSHMA CHOWLA) �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 15th May, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (A)-3, Pune. 4. The Pr. CIT-2, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, 5. पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.