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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI RAJENDRA & SHRI SANJAY GARG
Per Sanjay Garg, Judicial Member:
The above titled appeals have been preferred by the assessee against the orders of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] dated 06.11.2012 & 07.11.2012 for A.Y. 2008-09 & A.Y. 2009-10 respectively. Since the facts and issues involved in both the appeals are identical, hence the same are taken together for disposal by this common order. The facts for the sake of convenience have been taken from the appeal No.430/M/2013 for A.Y. 2008-09.
The assessee has taken the following grounds of appeal:
1. That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts of the case, by confirming the interest income as income from other
2. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) has further erred in law and on facts of the case, by not allowing the set- off of interest paid u/s 57 (iii) against the interest income which has direct nexus with the earning of interest income.
3. Your appellant craves leave to add, alter, amend or furnish fresh and detailed grounds of appeals.”
The brief facts of the case are that the assessee has been carrying on the business of manufacturing of jewellery for the purpose of export of the same and the assessee had to keep margin money with the banks for having credit facilities required for the purpose of export. On the said margin money, the assessee earned interest and claimed the same as deduction under section 10AA. At the same time, the assessee paid a total bank interest of Rs.4,39,87,507/- on the loans obtained. The assessee, thus, claimed that either the interest earned should be treated as derived from the export business of the assessee or in the alternative the same should be netted against the interest paid.
At the outset, the Ld. A.R. of the assessee has stated that the issue is squarely covered by the decision of the Tribunal in the case of “Gemplus Jewellery (I) Ltd. vs. DCIT” dated 27.08.2015. The Tribunal under the similar circumstances has directed the Assessing Officer (hereinafter referred to as the AO) to consider the netting of the expenses in view of the decision of the Hon’ble Supreme Court in the case of “ACG Associated Capsules vs. CIT”. The relevant findings of the Tribunal for the sake of convenience are reproduced as under: “2.2.Before us, the AR contended that the assessee was importing gold, that it had to keep margin money with the bank, that it was availing credit facility, that it had asked only for netting of interest. She referred to pg-12 of the appeal paper filed before the FAA and relied upon the cases of Motorola (265 CTR 94) and Jewelmark India Pvt. Ltd.(ITA/ 5036/Mum/2012 AY.2007-08, dated 21.03.2014)The DR stated that the assessee had failed to prove the direct nexus of the interest received with the business carried out by it.
3 & 431/M/2013 M/s. Neysa Jewellery Ltd., (Ultimate Successor of M/s. Shreeji Jewellery Designs) 2.3.We have heard the rival submissions and perused the material on record. We find that identical issue of netting off of interest had arisen in the case of Jewelmark India Pvt. Ltd.(supra) and the Tribunal had decided the issue as under:
"4.We have heard Ld. AR as well as Ld. DR and considered the relevant matter on record. The first item of disallowance is regarding bank interest Rs.1,02,022/. The Ld. AR of the assessee submitted that the interest earned had a direct nexus with the busmess of the assessee as the fixed deposit were kept under lien with bank for sanction of loans .alternatively the ld.AR of the assessee has submitted that only net receipt was to be disallowed keeping in view the decision of Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. Vs. CIT. We note that the CIT(A) has accepted the alternative plea of the assessee while deciding the issue on para 2.3 as under: "I have examined the issue. As far as interest income is concerned, I find that this issue now stands covered in favour of revenue by decision of the Madras High Court in the case of Cornet International 304 ITR 322, wherein the court has held that interest income has no direct nexus with the industrial undertaking and hence, was not eligible for deduction u/s 10A. The Madras High Court has followed its own judgment in the case of Menon Impex Pvt. Ltd. 259 ITR 403. This issue is also covered by the decision of the Mumbai Tribunal in the case of Tricom India Ltd. 36 SOT 302. However; with regard to the claim of setting off expenses against the said income, the AO is directed to follow the ratio of decision of the Supreme Court in the case of ACG Associated Capsules P. Ltd. cited supra, and allow interest income having direct nexus with the interest income".
5. It is clear from the finding of CIT(A) that the AO was directed to consider the netting of expenses in view of the decisions of Hon'ble Supreme Court in the case of ACG Associated Capsules vs. CIT (supra), hence no grievance is left against the order of the CIT(A)."
Respectfully, following the above, we decide first ground of appeal in favour of the assessee.”
Respectfully following the above decision, we direct the netting of the interest accordingly. This appeal of the assessee is therefore treated as allowed.
Now coming to the assessee’s appeal for A.Y. 2009-10 (A.Y. 2009-10) 7. The assessee in this appeal has agitated the confirmation of addition of Rs.15 lakhs paid to M/s. Motilal Oswal Investment Advisors Pvt. Ltd. towards
4 & 431/M/2013 M/s. Neysa Jewellery Ltd., (Ultimate Successor of M/s. Shreeji Jewellery Designs) professional charges. The assessee company came into existence by conversion of firm into a company. In this process, the assessee company incurred expenses for rising capital. The AO therefore treated the amount of Rs.15 lakhs shown as paid to M/s. Motilal Oswal Investment Advisors Pvt. Ltd. as consultant fees treating the same as capital expenditure.
The Ld. CIT(A) confirmed the disallowance observing that the assessee has failed to prove with any evidence regarding the genuineness of the payment and further that the assessee has also failed to prove the services rendered by M/s. Motilal Oswal Investment Advisors Pvt. Ltd. and even no IP had come during the year. Aggrieved by the order of the Ld. CIT(A), the assessee has come in appeal before us.
We find that the assessee has not brought our attention to any evidence on the file regarding the genuineness of payment, the evidence of any services provided by the said consultant to the assessee. In view of this, we do not find any infirmity in the order of the Ld. CIT(A) in confirming the disallowance. This appeal of the assessee is accordingly dismissed.
In the result, the appeal of the assessee i.e. for A.Y. 2008-09 is allowed and the appeal i.e. ITA No.431/M/2013 for A.Y. 2009-10 is dismissed.
Order pronounced in the open court on 30.12.2015. आदेश क� घोषणा खुले �यायालय म� �दनांकः 30.12.2015 को क� गई ।