INDIA EXPORTS, MUMBAI v. ACIT RG 17(2), MUMBAI

ITA 3880/MUM/2009 | 1999-2000
Pronouncement Date: 29-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 388019914 RSA 2009
Assessee PAN AAAFI0080J
Bench Mumbai
Appeal Number ITA 3880/MUM/2009
Duration Of Justice 7 month(s) 13 day(s)
Appellant INDIA EXPORTS, MUMBAI
Respondent ACIT RG 17(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted I
Tribunal Order Date 29-01-2010
Assessment Year 1999-2000
Appeal Filed On 15-06-2009
Judgment Text
INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I BEFORE SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMBER AND SHRI V.DURGA RAO JUDICIAL MEMBER ITA NOS.3880 3882 3883 & 3884(MUM)/2009 (ASSESSMENT YEARS: 1999-99 2000-01 2001-02 & 2002 -03) M/S.INDIA EXPORTS 458/7 RAMAIYA NIWAS (MATRU ASHISH) BHADAJ ROAD KINGS CIRCLE MUMBA-400 019 PAN AAAFI 0080 J APPELLANT VS. ASST COMMISSIONER OF INCOME-TAX RANGE 17(2) MUMBAI. RESPONDENT APPELLANT BY : SHRI I.P.RATHI. RESPONDENT BY : SHRI AJAYKUMAR SRIVASTAVA. O R D E R PER V.DURGA RAO JM: THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED A GAINST THE ORDER OF THE CIT(APPEALS)-XVII MUMBAI DATED 2 6-3-2009. AS COMMON POINTS ARE INVOLVED ALL THESE APPEALS WE RE HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED ORDER . 2. ITA NO.3880(MUM)2009 (ASSESSMENT YEAR 1999-2000 ): THE ASSESSEE HAS RAISED AS MANY AS NINE GROUNDS OF APPEAL. GROUND NO.9 IS GENERAL IN NATURE AND DOES NOT REQUI RE ADJUDICATION. AT THE TIME OF HEARING LEARNED COUN SEL FOR ITA NOS.3880 3882 TO 3884/MUM/09 PAGE 2 OF 12 ASSESSEE DID NOT PRESS GROUND NOS.1 AND 2 RELATING TO REOPENING OF ASSESSMENT U/S 147 OF THE INCOME-TAX ACT 1961 [ HEREINAFTER REFERRED TO AS THE ACT]. 2(I) GROUND NO.4 IS WITH REGARD TO THE FINDING OF T HE AO THAT THE ENTIRE AMOUNT RECEIVED ON TRANSFER OF DEPB WAS IN THE NATURE OF PROFITS ON TRANSFER OF DEPB AND STOOD COV ERED WITHIN THE MEANING OF SECTION 28(IIID) WAS ALSO NOT PRESSE D. HENCE GROUND NOS.1 2 AND 4 ARE DISMISSED AS NOT PRESSED. 2(II) THE ASSESSEE HAS RAISED GROUND NOS.3 5 6 AND 7 AS UNDER: 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS ) HAS ERRED IN CONFIRMING THE TAXABILITY OF ANY PROF IT ON TRANSFER OF DEPT..AS SPECIFIED U/S 28(IIID) WHEREA S THE NEWLY INSERTED CLAUSE (IIID) OF SECTION 28 IS NOT C OVERED WITHIN THE DEFINITION OF INCOME U/S 2(24). 5. FURTHER WITHOUT PREJUDICE TO THE ABOVE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ENTIRE SALE PROCEEDS OF DEPB ENTITLEMENTS AS INCOME U/S 28(IIID) AS AGAINST ACT UAL PROFIT ON TRANSFER OF DEPB ENTITLEMENT AFTER REDUCI NG THE ENTITLEMENT VALUE OF DEPB FROM THE SALE PROCEED S OF SUCH DEPT. AND HAS FURTHER ERRED IN GIVING EFFEC T OF THE SAME WHILE CALCULATING THE PROFITS OF THE BUSIN ESS UNDER EXPLANATION BAA TO SECTION 80HHC. 6. FURTHER WITHOUT PREJUDICE TO THE ABOVE THE ASSESSING OFFICER HAS ERRED IN CONSIDERING EVEN THE SALES TAX COLLECTED ON SALE OF DEPB AMOUNTING TO RS.1 56 199 AS PROFIT ON TRANSFER OF DEPT U/S 28(II ID). ITA NOS.3880 3882 TO 3884/MUM/09 PAGE 3 OF 12 7. FURTHER WITHOUT PREJUDICE TO THE ABOVE THE FAC E VALUE OF DEPB ENTITLEMENTS ACCRUED ON EXPORT PERFORMANCE SHOULD HAVE BEEN CONSIDERED AS EXPORT INCENTIVES U/S 28(IIIA) OR (IIIB) OR (IIIC) OR BUSI NESS INCOME U/S 28(I) OR 28(IV) WHILE CALCULATING THE DEDUCTION U/ S 80HHC. OR THE SAME SHOULD HAVE BEEN REDUCED FROM THE COST OF GOODS EXPORTED AS THE SAME ARE IN THE NATURE OF COST RE-COUPMENT. 2(III) WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. BOTH SIDES ARE IN AGREEMENT THAT THE FAC TS AND CIRCUMSTANCES OF THIS APPEAL ARE MUTATIS MUTANDIS SIMILAR TO THOSE DECIDED BY THE SPECIAL BENCH (MUMBAI) OF THE TRIBUNAL IN THE CASE OF M/S TOPMAN EXPORTS (ITA NO.5769/MUM/2006) AND M/S.KALPATARU COLOURS & CHEMICALS (ITA 5651/MUM/200 6) [2009-TIOL-531-ITAT-MUM-SB]. THE SPECIAL BENCH VI DE ITS ORDER DATED 11-8-2009 HAS RESTORED THE MATTER TO T HE FILE OF THE AO FOR CONSIDERING THE FACE VALUE OF DEPB AS COVERE D UNDER SECTION 28(IIIB) OF THE ACT AND PROFIT ON TRANSFER OF DEPB I.E. EXCESS OF SALE PRICE OVER THE FACE VALUE OF DEPB AS FALLING UNDER SECTION 28(IIID) OF THE ACT. IT HAS FURTHER BEEN H ELD THAT THERE IS NO SCOPE FOR ALLOWING SEPARATE DEDUCTION FOR INDIVI DUAL EXPENSES CONNECTED WITH THE SALE OF DEPB DUE TO THE SCHEME O F SECTION 80HHC OF THE ACT. WE THEREFORE SET ASIDE THE IMP UGNED ORDER ON THIS ISSUE AND DIRECT THE AO TO RE-COMPUTE THE D EDUCTION UNDER SEC.80HHC OF THE ACT IN ACCORDANCE WITH THE V IEW TAKEN BY THE SPECIAL BENCH IN THE AFORE MENTIONED CASE. NEED LESS TO SAY ITA NOS.3880 3882 TO 3884/MUM/09 PAGE 4 OF 12 THE ASSESSEE WILL BE GIVEN REASONABLE OPPORTUNITY O F BEING HEARD BY THE AO IN THE FRESH PROCEEDINGS. 2(IV) GROUND NO.8 RELATES TO INTEREST CHARGED U/S 2 34B OF THE IT ACT. LEARNED COUNSEL FOR ASSESSEE SUBMITTE D THAT THE AO MAY BE DIRECTED TO FOLLOW THE CBDT CIRCULAR NO.2 OF 2006 DATED 17-1-2006. LEARNED DEPARTMENTAL REPRESENTATIVE FAI RLY CONCEDED THAT HE HAS NO OBJECTION TO FOLLOW THE CBD T CIRCULAR. WE THEREFORE DIRECT THE AO TO CONSIDER GROUND NO. 8 IN THE LIGHT OF CBDT CIRCULAR IN ACCORDANCE WITH LAW AFTER GIVIN G OPPORTUNITY TO ASSESSEE. 2(V) IN THE RESULT THE APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 3. ITA 3882(MUM/2009 (AY: 2000-01) : THE ASSESSEE HAS RAISED AS MANY AS SEVEN GROUNDS OF APPEAL. GROU ND NO.7 IS GENERAL IN NATURE AND DOES NOT REQUIRE ADJUDICATION . 3(I) AT THE TIME OF HEARING LEARNED COUNSEL FOR AS SESSEE DID NOT PRESS GROUND NOS.1 2 4. HENCE THE SAME A RE DISMISSED AS NOT PRESSED. 3(II) GROUND NO.3 5 AND 6 ARE IDENTICAL TO GROUND NOS.3 5 AND 7 RAISED IN ITA 3880/MUM/2009. FOR THE REASONS GIVEN BY US IN PARAGRAPH 2(III) WE SET ASIDE THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE AND DIRECT THE AO TO RE-COMPUTE THE DEDU CTION UNDER SEC.80HHC OF THE ACT IN ACCORDANCE WITH THE VIEW TA KEN BY THE SPECIAL BENCH IN THE AFORE MENTIONED CASE. NEEDLESS TO SAY THE ITA NOS.3880 3882 TO 3884/MUM/09 PAGE 5 OF 12 ASSESSEE WILL BE GIVEN REASONABLE OPPORTUNITY OF BE ING HEARD BY THE AO IN THE FRESH PROCEEDINGS. 3(III) IN THE RESULT THE APPEAL IS TREATED AS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. 4. ITA NO.3883(MUM)/2009 (A.Y 2001-02): THE ASSESSEE HAS RAISED AS MANY AS EIGHT GROUNDS OF APP EAL. GROUND NO.8 IS GENERAL IN NATURE AND DOES NOT REQUIRE ADJU DICATION. 4(I) GROUND NOS.1 AND 2 RELATE TO REOPENING OF ASSE SSMENT U/S 147 OF THE ACT. THE ASSESSEE FILED RETURN OF IN COME ON 31-1-2005 DECLARING INCOME OF RS.60 74 790/- AFTER CLAIMING DEDUCTION OF RS.2 43 22 161/- U/S 80HHC OF THE ACT. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 27-2-2004 DE TERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.62 29 681/-. AGAINST THE ASSESSMENT ORDER ASSESSEE PREFERRED APPEAL BEFORE THE CIT(APPEALS) AND SUBMITTED THE CLAIM FOR NETTING OF INTEREST. THE CIT(APPEALS) REJECTED THE CLAIM OF THE ASSESSEE. O N FURTHER APPEAL THE TRIBUNAL VIDE ORDER DATED 30-5-2006 RE STORED THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO DE CIDE THE SAME AFRESH AFTER AFFORDING REASONABLE OPPORTUNITY TO TH E ASSESSEE. 4(II) THE AO ISSUED NOTICE U/S 148 ON 28-3-2007 ON THE GROUND THAT THE ASSESSEE HAD INCORRECTLY CLAIMED DE DUCTION U/S 80HHC ON DEPB CREDITS RESULTING IN UNDER-ASSESSMENT OF INCOME AS PER THE AMENDMENT OF TAXATION LAWS 2005. THE A O SERVED ON THE ASSESSEE NOTICES U/S 143(2) AND 142(1) OF THE A CT. THE AO HELD THAT IN VIEW OF THE TAXATION LAWS AMENDMENT 2 005 AND IN ITA NOS.3880 3882 TO 3884/MUM/09 PAGE 6 OF 12 VIEW OF THE FACT THAT ASSESSEE HAS EXPORT TURNOVER EXCEEDING RS.10 CRORES THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION AND ACCORDINGLY RE-WORKED DEDUCTION U/S 80HHC OF THE AC T. BEING AGGRIEVED ASSESSEE WENT IN APPEAL BEFORE THE CIT(A PPEALS) CHALLENGING THE REOPENING OF ASSESSMENT U/S 147 OF THE ACT. THE CIT(APPEALS) HELD THAT THE AO HAD PRIMA FACIE REASO N TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AS DEPB SALE REC EIPTS WERE NOT TAXED. THE CIT(APPEALS) FURTHER HELD THAT IN V IEW OF THE AMENDMENT INCOME FROM THESE SALES WAS TAXABLE AND THEREFORE THE AO WAS DUTY BOUND TO REOPEN THE ASSESSMENT. BE ING AGGRIEVED ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNA L. 4(III) LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE RE- OPENING OF ASSESSMENT U/S 147 IS BAD IN LAW AS IT W AS DONE AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE HAD DECLARED ALL THE FACTS BEFORE THE AO. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 2 7-2-2004. LEARNED COUNSEL FOR ASSESSEE STRONGLY RELIED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SESA GOA PVT. LTD. VS. JCIT (2007)(294 ITR 101). IN ADDITION THE LEARNED COUNS EL FOR ASSESSEE ALSO RELIED ON THE FOLLOWING DECISIONS: 1) IPCA LABORATORIES LTD. VS. DCIT (251 ITR 416) 2) PARIKH PETROL CHEMICALS AGENCIES P. LTD. VS. ACIT (266 ITR 196) 3) CAPRIHANS INDIA LTD. VS. DCIT (266 ITR 566) 4) HINDUSTAN LEVER LTD. VS. ACIT (268 ITR 339) 5) DESAI BROTHERS LTD. VS. DCIT D(272 ITR 335) ITA NOS.3880 3882 TO 3884/MUM/09 PAGE 7 OF 12 6) MRPL VS. ACIT (282 ITR 516) 7) DEVIDAYAL ROLLING MILLS VS. ACIT (285 ITR 514) 8) CARTINI INDIA VS. ACIT (291 ITR 355) 4(IV) ON THE OTHER HAND LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE AUTHORIT IES BELOW AND SUBMITTED THAT THE AO HAD REASON TO BELIEVE THAT TH ERE IS ESCAPEMENT OF INCOME AND THE ASSESSMENT WAS REOPENE D AS PER THE AMENDED PROVISIONS OF LAW. AS PER THE CHANGE I N LAW IT IS THE DUTY OF THE AO TO REOPEN THE ASSESSMENT WHERE T HE ASSESSEE HAS CLAIMED EXCESS DEDUCTION INCORRECTLY LEADING TO UNDER- ASSESSMENT. 4(V) WE HAVE HEARD BOTH SIDES AND PERUSED MATERIAL ON RECORD. IF THE AO HAS REASON TO BELIEVE THAT INCOM E CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT THE AO CAN REOPEN TH E ASSESSMENT BY RESORTING TO THE PROVISIONS OF SECTIO N 147 OF THE ACT. IN THE CASE IN HAND SUBSEQUENT TO PASSING OF THE ASSESSMENT ORDER U/S 143(3) ON 27-2-2004 THE INCOME -TAX ACT WAS AMENDED BY TAXATION LAWS AMENDMENT ACT 2005. KEEPING IN VIEW THIS AMENDMENT THE AO HAS COME TO THE CONC LUSION THAT INCOME HAS ESCAPED ASSESSMENT AND AFTER DULY RECORD ING REASONS REOPENED THE ASSESSMENT U/S 147 OF THE ACT . IN OUR CONSIDERED OPINION REOPENING IS VALID IN LAW AS TH E SAME IS BASED ON CERTAIN MATERIALS THAT HAVE COME TO THE PO SSESSION OF THE AO SUBSEQUENT TO COMPLETION OF ASSESSMENT U/S 1 43(3) OF THE ACT AND THIS MATERIAL WHICH IS IN THE FORM OF A MENDMENT OF ACT HAS LED THE AO TO BELIEVE THAT INCOME HAS ESCAP ED ITA NOS.3880 3882 TO 3884/MUM/09 PAGE 8 OF 12 ASSESSMENT. THIS IS THE VIEW WHICH ANY REASONABLE PERSON WOULD TAKE AND IT CANNOT BE SAID THAT THERE IS CHANGE OF OPINION OR THAT THERE IS NO ESCAPEMENT OF INCOME. THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CASE SESA GOA PVT. LTD. (SUPRA RELIED ON BY LEARNED COUNSEL FOR ASSESSEE RE FER TO THE FACT WHERE SUBSEQUENT JUDGMENTS OF THE JURISDICTION AL HIGH COURT ARE THE BASIS FOR REOPENING OF ASSESSMENT. THE FAC TS IN HAND ARE DIFFERENT. HENCE THE CASE LAW VIZ. SESA GOA PVT. LTD. (SUPRA) RELIED ON BY THE LEARNED COUNSEL FOR ASSESSEE HAS N O APPLICATION TO THE FACTS OF THE PRESENT CASE. THE OTHER CASE LA WS RELIED ON BY LEARNED COUNSEL FOR ASSESSEE ARE DISTINGUISHABLE ON FACTS AND HAVE NO APPLICATION TO THE PRESENT CASE. IN VIEW OF OUR ABOVE DISCUSSION WE ARE OF THE CONSIDERED OPINION THAT T HIS GROUND IS DEVOID OF ANY MERITS AND REQUIRES TO BE REJECTED. A CCORDINGLY THIS GROUND OF APPEAL IS REJECTED. 5. GROUND NOS. 3 4 AND 5 ARE IDENTICAL TO GROUND NOS.3 4 AND 5 OF ITA NO.3880/MUM/2009. FOR THE REASONS GIVE N BY US IN PARAGRAPH 2(III) OF THIS ORDER WE SET ASIDE THE OR DER OF THE CIT(APPEALS) ON THIS ISSUE AND DIRECT THE AO TO RE- COMPUTE THE DEDUCTION UNDER SEC.80HHC OF THE ACT IN ACCORDANCE WITH THE VIEW TAKEN BY THE SPECIAL BENCH IN THE AFOREMENTION ED CASE. NEEDLESS TO SAY THE ASSESSEE WILL BE GIVEN REASONAB LE OPPORTUNITY OF BEING HEARD BY THE AO IN THE FRESH P ROCEEDINGS. 6. GROUND NO.6 RELATES TO TREATMENT OF INTEREST INC OME AS INCOME FROM OTHER SOURCES. THE AO TREATED INTEREST INCOME EARNED ON BANK FDS AS INCOME FROM OTHER SOURCES. O N APPEAL ITA NOS.3880 3882 TO 3884/MUM/09 PAGE 9 OF 12 THE CIT(APPEALS) UPHELD THE ORDER OF THE AO. BEING AGGRIEVED ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIA L ON RECORD. IT IS NOT CLEAR FROM THE ORDERS OF THE AUT HORITIES BELOW THE NATURE OF BANK DEPOSITS KEPT BY THE ASSESSEE. IT IS VERY MUCH NECESSARY TO FIND OUT THE NATURE OF BANK DEPOS ITS TO DECIDE THE ISSUE INVOLVED IN THIS APPEAL. THEREFORE WE R EMIT THE ISSUE BACK TO THE FILE OF THE AO TO DECIDE THE NATURE OF BANK DEPOSITS. IF THE BANK DEPOSITS WERE KEPT FOR THE PURPOSE OF B USINESS THE AO IS DIRECTED TO ALLOW NETTING OF INTEREST IN ACCO RDANCE WITH DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF LALSONS ENTERPRISES VS. DCIT (89 ITR 25). IF THE AO COMES TO THE CONCLUSION THAT BANK DEPOSITS WERE NOT KEPT FOR THE PURPOSE OF BUSINESS HE IS DIRECTED TO DISALLOW THE CLAIM BY F OLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF M/S TOPMAN EXPORTS (ITA NO.5769/MUM/2006) AND M/S.KALPATARU COLOURS & CHEMICALS (ITA 5651/MUM/2006) [2009-TIOL- 531- ITAT-MUM-SB]. IT IS ORDERED ACCORDINGLY. 7. GROUND NO.7 IS INTER-CONNECTED WITH GROUND NO.6. IT IS CONTENDED THAT IF INTEREST INCOME IS TREATED AS INC OME FROM OTHER SOURCES 10% OF THE INCOME MAY BE ALLOWED AS INDIRE CT COST FOR EARNING SUCH INTEREST. THIS GROUND OF APPEAL IS D ISMISSED IN VIEW OF DIRECTION GIVEN WITH REGARD TO GROUND NO.6. IF THE AO COMES TO CONCLUSION THAT THE INTEREST INCOME FROM F DRS IS INCOME FROM OTHER SOURCES THE ALTERNATIVE GROUND R AISED BY THE ASSESSEE MAY BE CONSIDERED AS PER LAW. ITA NOS.3880 3882 TO 3884/MUM/09 PAGE 10 OF 12 8. IN THE RESULT THE APPEAL IS TREATED AS PARTLY A LLOWED. 9. ITA NO.3884(MUM)/2009 (A.Y 2002-03) : THE ASSESSEE HAS RAISED AS MANY AS EIGHT GROUNDS OF APP EAL. GROUND NO.8 IS GENERAL IN NATURE AND DOES NOT REQUIRE ADJU DICATION. 9(I) GROUND NO.1 RELATES TO REOPENING OF ASSESSMEN T U/S 147 OF THE ACT. AT THE TIME OF HEARING LEARNED C OUNSEL FOR ASSESSEE DID NOT PRESS THIS GROUND. ACCORDINGLY GR OUND NO.1 IS DISMISSED FOR NON PROSECUTION. 9(II) SO FAR AS THE GROUND NOS.2 3 4 WHICH ARE ID ENTICAL TO GROUND NOS.3 5 AND 7 IN ITA NO.3880/MUM/2009 FOR THE REASONS GIVEN BY US IN PARAGRAPH 2(III).1 OF THIS O RDER WE SET ASIDE THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE A ND DIRECT THE AO TO RE-COMPUTE THE DEDUCTION UNDER SEC.80HHC OF T HE ACT IN ACCORDANCE WITH THE VIEW TAKEN BY THE SPECIAL BENCH IN THE AFOREMENTIONED CASE. NEEDLESS TO SAY THE ASSESSEE W ILL BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD BY THE AO IN THE FRESH PROCEEDINGS. 9(III) GROUND NO.5 RELATES TO TREATMENT OF INTEREST INCOME AS INCOME FROM OTHER SOURCES. THE AO TREATED INTER EST INCOME ON FDS AS INCOME FROM OTHER SOURCES. ON APPEAL T HE CIT(APPEALS) UPHELD THE ORDER OF THE AO. BEING AGGR IEVED ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIA L ON RECORD. IT IS NOT CLEAR FROM THE ORDERS OF THE AUT HORITIES BELOW THE NATURE OF BANK DEPOSITS KEPT BY THE ASSESSEE. IT IS VERY ITA NOS.3880 3882 TO 3884/MUM/09 PAGE 11 OF 12 MUCH NECESSARY TO FIND OUT THE NATURE OF BANK DEPOS ITS TO DECIDE THE ISSUE INVOLVED IN THIS APPEAL. THEREFORE WE R EMIT THE ISSUE BACK TO THE FILE OF THE AO TO DECIDE THE NATURE OF BANK DEPOSITS. IF THE BANK DEPOSITS WERE KEPT FOR THE PURPOSE OF B USINESS THE AO IS DIRECTED TO ALLOW NETTING OF INTEREST IN ACCO RDANCE WITH DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF LALSONS ENTERPRISES VS. DCIT (89 ITR 25). IF THE AO COMES TO THE CONCLUSION THAT BANK DEPOSITS WERE NOT KEPT FOR THE PURPOSE OF BUSINESS HE IS DIRECTED TO DISALLOW THE CLAIM BY F OLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF M/S TOPMAN EXPORTS (ITA NO.5769/MUM/2006) AND M/S.KALPATARU COLOURS & CHEMICALS (ITA 5651/MUM/2006) [2009-TIOL- 531- ITAT-MUM-SB]. IT IS ORDERED ACCORDINGLY. 9(IV) GROUND NO.6 IS INTER-CONNECTED WITH GROUND NO .5 WHEREIN IT IS CONTENDED THAT EVEN IF INTEREST INCOM E IS BEING TREATED AS INCOME FROM OTHER SOURCES PAYMENT OF IN TEREST SHOULD BE ALLOWED TO BE ADJUSTED AS ADMISSIBLE EXPE NSES U/S.57(III) OF THE ACT. GROUND NO.7 IS INTER-CONNE CTED WITH GROUND NO.6 WHEREIN IS CONTENDED THAT IF INTERES T INCOME IS TREATED AS INCOME FROM OTHER SOURCES 10% OF THE IN COME MAY BE ALLOWED AS INDIRECT COST FOR EARNING SUCH INTERE ST. GROUND NOS.6 & 7 ARE DISMISSED IN VIEW OF DIRECTION GIVEN TO THE AO WITH REGARD TO GROUND NO.6. IF THE AO COMES TO CONCLUSI ON THAT THE INTEREST INCOME FROM FDRS IS INCOME FROM OTHER SOUR CES THE ALTERNATIVE GROUND RAISED BY THE ASSESSEE MAY BE CO NSIDERED AS PER LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. ITA NOS.3880 3882 TO 3884/MUM/09 PAGE 12 OF 12 10. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 29TH JANU ARY 2010. SD/- SD/- (J.SUDHAKAR REDDY) (V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI : D A T E D: 29TH JANUARY 2010. EKS* TRUE COPY COPY TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. CIT- CONCERNED 4. CIT(A)- CONCERNED 5. DEPARTMENTAL REPRESENTATIVE I BENCH BY ORDER ASST REGISTRAR ITAT MUMBAI