DEPUTY COMMISSIONER OF INCOME TAX CIRCLE- 1, BATHINDA vs. SHRI GURDAS GARG, BATHINDA

per the record of the department during original assessment proceedings and this issue was also there in the relied upon case of ‘M/s G.H. Crop Sciences Pvt. Ltd. and ‘M/s Apex Fibre India Ltd.’ as cited supra. The same ground was there in that case also and which is borne out from para 8 of the order of Hon’ble ITAT and the finding has been given in para 10 of the order, and thus, this ground of appeal is not borne out from the records. Hence the appeal of the department be dismissed.”

treatment of“high sea sale” of imported goods whichis agitated by the assessee and

other is treatment of interest in the head of income which isagitated by the revenue.

The ld. AR fully relied on the order of ITAT Amritsar Bench. The relevant

paragraphs are reproduced as below:- ITAT-Amritsar Bench in the case of DCIT, Circle-1, Bathinda

vs. M/s G.H.Corp Science Pvt Ltd, ITA No. 56 & 84/Asr/2020 date of pronouncement 23.02,2023

“15.3 It is evident from the Assessment Order that during the course of assessment proceeding, it was stated before the AO that the goods imported by it are backed up with LC [letter of credit] and that FDR made by it was not surplus FDR but as per bank’s term, it uses to make FDR as cash margin against these LCs opened against the import of goods and that the income arising out from these FDRs is its operative income and business income.

I.T.A. Nos.506/Asr/2019 15 & Others

[Para Page 3 of the Assessment order]. 15.4 In view of the above factual discussion, and judicial precedent, we hold that the goods imported by the assessee are backed up with LC [letter of credit] and that FDR made by it was not surplus FDR but as per bank’s term and hence, the interest from these fixed deposits which were inextricably linked to the business of the assessee would taxed as business income and not as income from other sources. Accordingly, the department ground no. 7 and 8 that interest earned on FDRs kept in bank as margin money for obtaining LOC and bank security for high Sea Business Transaction to be income from other sources as against business income are rejected. 15.5 So far as the interest from parties is concerned, the same cannot be said to be also linked to the business of the assessee. Even otherwise, since there wascurrent year loss in the business of edible oil, the loss is liable to be adjusted against the business income derived from this year and for this reason, the Ld AR has no objection to our view that the interest from the parties would be charged to tax under the head Income from other sources.” 9.1 The ld. AR respectfully relied on the order of Hon’ble High Court of

Delhithe relevant paragraphs are reproduced as below: High Court of Delhi in the case of Commissioner of Income-tax v. Shahi Export House, [2010] 195Taxman163 (Delhi)

“11. We are, therefore, of the opinion that CIT (Appeals) as well as Income-tax Appellate Tribunal has rightly applied the principle laid down in Shri Ram Honda Power Equip's case (supra). It may be useful to mention that in Shri Ram Honda Power Equip's case (supra) this court specifically affirmed the judgment of Special Bench of the Tribunal in Lalsons Enterprises v. CIT [2004] 89 ITD 25 (Delhi) and particularly

I.T.A. Nos.506/Asr/2019 16 & Others

the following observations which were extracted by this Court as under:— "if the interest received is found to have a nexus with the business, still it remains to be excluded from the profits of the business by virtue of Explanation (baa )(1), but the claim is that the quantum of such interest income to be excluded must be determined in accordance with the computation provisions relating to business by allowing expenditure by way of interest which bears a nexus with the interest receipt. The computation provisions included section 37(1) under which any expenditure incurred or laid wholly and exclusively for the purpose of the business is to be allowed as a deduction. Therefore, any expenditure incurred which has a connection or nexus with interest receipt has to be allowed as a deduction and only the balance can be excluded from the business profits." 12. Once this position is accepted, as per the formulation of principle laid down in Shri Ram Honda Power Equip's case (supra) itself, netting has to be allowed by the adjustment of aforesaid interest received against the interest paid by the assessee to the bank on the credit facilities availed as is clear from the conclusion No. 8 in the judgment. 13. We, accordingly, concur with the aforesaid view of the ITAT and thus, answer the question in favour of the assessee and against the revenue, as a result this appeal is dismissed.” 10. We heard the rival submission and considered the documents available on the

record. First we adjudicate the issue related to treatment of “high sea sale” which is considered by revenue as speculative transaction as there is no end delivery. The revenue relied on the order of the Davenport & Co. Pvt. Ltd. Vs. CIT (1975) 100 ITR 715 (SC). The Hon’ble Supreme Court had considered the order in the case ofNirmal Trading Co.v.Commissioner of Income-tax, [1979] 2

Taxman 420 (SC)

I.T.A. Nos.506/Asr/2019 17 & Others

“3. It appears the assesseeentered into several transactions of sale and purchase with different parties, and the transactions were settled by handing over delivery orders. There is no evidence that actual delivery of the goods was ever effected either to the assessee or to subsequent purchasers from him. All that passed were the delivery orders and payment by cheque. The High Court has taken the view that, in the absence of actual delivery, the transactions attracted Explanation 2 to section 24(1) and must be regarded as "speculative transactions". It seems to us that the High Court is right in having regard to the law laid down by this Court in Davenport & Co. Pvt. Ltd. v. CIT [1975] 100 ITR 715. It is urged on behalf of the assessee that the case falls under Raghunath Prasad Poddar v. CIT [1973] 90 ITR 140. But that decision has been overruled by this Court in Davenport & Co. Pvt. Ltd., ( supra), and in any event no question of invoking that decision arises because in the present case there has never been any suggestion that actual delivery of goods was ultimately effected. The case of the assessee throughout has been that handing over the delivery orders was sufficient as constituting actual delivery of the goods.” It is clear that the issue is only confined related to speculative transaction is

delivery of the goods. When the delivery of the goods is executed, there is no

treatment of the speculative transaction. The assessee placed a written submission

and mentioned the details document that the said goods are duly taken delivery by

the assessee during the purchase from sellers. There is no such any paper

transaction or the transfer of the goods before taken the delivery. The ld. AR

submitted the chart with documentary evidence which isdepicting that the ‘edible

oil’ purchased from Singapore / Malasysia with

I.T.A. Nos.506/Asr/2019 18 & Others

a. invoice, bill of lading, purchase and other necessary documents which are annexedAPB A1 to A8, b. copy of purchased account along with “high sea sale” accounts as per books of account. APB page A9 to A11 c. copy of invoice showing import made by the assessee from outside party as per purchase account and “high sea sale” made on imported edible oil as per sale account along with evidence of custom clearance to whom the “high sea sale” has been made APB page 1 to 290. 11. We respectfully followed the order of the Hon’ble Apex Court and Hon’ble

High Court it is clear view that when the goods are not taken by the delivery the

entire issue is treated as speculative transaction. But in assessee’s case the entire

transaction is going through by proper delivery of the goods during purchase and

the documents are provided for evidence of delivery of goods related to high sea

sale. We find that the observation of the ld. CIT(A) is not accepted and liable to be

dismissed.

11.1 In discussion related to interest which was treated as business income by the

assessee and adjusted in the profit and loss account. The revenue has relied on the order of the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift and credit society ltd, (supra) and in case of Bhagwati Synthetics (supra) both

are factually not similar with the assessee’s issues. We respectfully relied on the order of Hon’ble Apex Court in the case of Shahi Export House,(supra)

Where the interest was taken as expenses. Not as an income from other sources.

The investment in fixed deposit of the assessee were duly utilized for formation of

letter of credit in relation to the foreign transaction. In the export and import, the

I.T.A. Nos.506/Asr/2019 19 & Others

investments are utilised in short term investment and there is no such any fix time

of investment related to generation of the interest out of the said investment. We

also relied on the order of the ITAT, Amritsar Bench. Accordingly, the order

passed by the ld. CIT(A) is notrequired for any intervention related interest issue.

Accordingly, ground taken for the issue of interest by the revenue is dismissed.

11.2 The ld. AR further placed that the revenue appeal was adjudicated there is

no need to separate adjudication for determination of the transaction of “high sea

sale” related to imported goods. Accordingly, the ground of the assessee was

withdrawn.

of the assessee are also dismissed as withdrawn.

Order pronounced in the open court on 24.05.2023

Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member

AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By Order