ACIT, CIR-2(2), KOLKATA, KOLKATA vs. M/S SUMAN JEWELLERY (DELHI) P. LTD., KOLKATA

The appeal filed by the revenue is against the order of Ld. CIT(A)-3, Kolkata dated 06.04.2016 for AY 2011-12.

This appeal of revenue is time barred by 17 days and condonation petition has been filed. After considering the condonation petition it seems that there is reasonable cause for filing this appeal belatedly by 17 days and since the Ld. AR has got no objection to condone the delay, we condone the delay and admit the appeal for hearing.

The sole ground of appeal of revenue is against the order of Ld. CIT(A) in deleting the addition on account of interest received on FD/KDR. Briefly stated facts are that the assessee was engaged in the business of manufacturing and export of gold ornaments from an SEZ unit and the assessee has been claiming exemption u/s. 10AA of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) for the last successive years. During the course of assessment proceedings, the AO from the material on record found that the assessee had earned interest to the tune of Rs.53,62,327/- on fixed deposit during the year under consideration and credited the P&L Account with the said income and the said income was considered for computing the exemption u/s. 10AA of the Act. According to Suman Jewellery (Delhi) P. Ltd., AY- 2011-12 AO, since the said income earned from the FD was in the nature of other sources income, having no direct nexus with the business activity of the assessee carried out from SEZ, the said component of income does not come under the scope of exemption under section 10AA of the Act as claimed by the assessee. As such, the above income of interest on fixed deposit was added back to the total income of the assessee. On appeal, the Ld. CIT(A) deleted the addition. Aggrieved, revenue is in appeal before us.

We have heard rival submissions and gone through the facts and circumstances of the case. We note that the sole ground of appeal of revenue is against the deletion of addition on account of interest received on FD/KDR. We note that during the assessment year, the assessee was engaged in the business of manufacturing and export of gold ornaments from an SEZ unit and the assessee had claimed exemption u/s. 10AA of the Act for the last successive years. During the course of assessment proceedings, the AO from the material on record found that the assessee had earned interest to the tune of Rs.53,62,327/- on fixed deposit and credited the P&L Account with the said income and the said income was considered for computing the exemption u/s. 10AA of the Act. According to AO, since the said income earned from the FD was in the nature of other sources income, having no direct nexus with the business activity of the assessee carried out from SEZ, the said component of income does not come under the scope of exemption under section 10AA of the Act as claimed by the assessee. Accordingly, the above income of interest on fixed deposit was added back to the total income of the assessee. On appeal, the Ld. CIT(A) deleted the addition by observing as under: