DCIT vs. Cybertech Systems & Software P. Ltd (ITAT Mumbai)

DATE: August 7, 2015 (Date of pronouncement)
DATE: August 13, 2015 (Date of publication)
AY: 1997-98, 1998-99, 1999-00
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S. 271(1)(c): Claim that interest income is eligible for s. 10B exemption, though upheld by the ITAT for an earlier year, is so implausible that it attracts penalty for concealment/ furnishing inaccurate particulars of income

The assessee claimed benefit u/s.10B on the interest income following the decisions in the case of CIT vs. Paramount Premises (P.) Ltd. [1991] 190 ITR 259 (Bom) and CIT vs. Nagpur Engineering Co. Ltd. [2000] 245 ITR 806 (Bom). The claim was rejected by following the subsequent judgement of the apex court in Liberty India. The AO levied penalty u/s 271(1)(c). This was deleted by the CIT(A). On appeal by the department HELD allowing the appeal:

(i) As regards the decisions by the Hon’ble jurisdictional High Court relied upon, in our clear view, the same would be of no assistance to the assessee. As unequivocally clarified in Paramount Premises (P.) Ltd. (supra), the decision upholding the assessment of interest as business income is based squarely on the factual finding by the tribunal to the effect that the interest income sprang from the business activity of the assessee-respondent, and did not arise out of the any independent activity. There is clearly little scope for the application of the said decision in the facts of the present case, given the clear finding of no connection between the assessee’s business activity and the deposits yielding interest income. In fact, even assessment as business income, as observed during hearing, would not by itself suffice in-as-much as it would require a further satisfaction of the condition of section 10B, i.e., of it being derived from such business, toward which we find no contention, much less basis, being, as apparent, with the deposits per se. The decision in the case of Nagpur Engineering Co. Ltd. (supra) is only by following the decision in Paramount Premises (P.) Ltd. (supra). It is well settled that what is binding and has precedent value, is the ratio decendi of a decision. The said decision, rendered following the decision in Paramount Premises (P.) Ltd. (supra), thus, cannot be said to lay down any proposition independent and apart from that stated in Paramount Premises (P.) Ltd. (supra), and which we find as no different from that stated by the Hon’ble Apex Court in Govinda Choudhary and Sons (supra). That is, that it all depends on the facts of the case. The Hon’ble High Court, therefore, presumably and inferably, in the latter decision, i.e., Nagpur Engineering Co. Ltd. (supra), again found a direct nexus between the assessee’s business and the interest income, leading it to being assessed as business income and, further, of the said nexus as being of first degree, as explained as far back as in Raja Bahadur Kamakhya Narayan Singh (supra), so that 8 ITA Nos. 3655 to 3657/M/06 & 2358 to 2360/ M/06 (A.Y s.1997-98, 1998-99 & 1999-2000 ) Cybertech Systems & Software P. Ltd. the primary condition of ‘derived from’, as against incidental or attributable to, as is again well settled, stands satisfied in the facts and circumstances of the case, as found by the tribunal. That is, its decision again rests on the edifice of the factual findings by the tribunal, the final fact finding authority. The said decisions, thus, on the contrary, support the Revenues’ case. The finding by the tribunal in the instant case, as apparent, is of it being a fit case for the impugned claim being disallowed in view of the decision in Liberty India (supra), so that there was no relation of first degree between the assessee’s business, which it found as qualifying for deduction u/s.10B, and the interest bearing deposit/s. The decision in the case of Liberty India (supra), it needs to be appreciated, is only in line and tandem with the earlier decisions, cited supra, by the hon’ble apex court, which listing is again not exhaustive, so that the apex court does not thereby lay down any new law. Rather, the decisions by the hon’ble jurisdictional high court relied upon by the assessee are not inconsistent with the decision in Liberty India (supra) and, in fact, in consonance with the decision by the Hon’ble Apex Court in Govinda Choudhary and Sons (supra). Further, the assessee also has nowhere contested any of the several decisions relied upon by the Revenue, including by the hon’ble apex court and the jurisdictional high court cited supra, many of which are prior to the dates of the filing of the returns in the instant case, so that they represented the wellsettled/ established law of the land; there being in fact a complete unanimity between the different high courts on the subject, i.e., both with the regard to the nature of the receipt by way of interest, as explained in Govinda Choudhary and Sons (supra), as well as qua the scope of the words ‘derived from’.

(ii) We, in view of the foregoing, find no merit in the assessee’s case. It, to our mind, has not adduced any explanation, much less substantiated it, except for a bald assertion (i.e., of the said interest income as being a part of the assessee’s business income). The reliance on the decisions by the hon’ble jurisdictional high court, which we have found to be in fact supportive of the Revenue’s case, with the law in the matter being, in fact, well settled, is only a false plea or a ruse. Reliance on the decision by the tribunal for a subsequent year (AY 2000-01) is, under the circumstances, again, completely misplaced. A plausible explanation towards its’ claim/s saves penalty u/s. 271(1)(c), in view of, again, the settled law in the matter which though is completely missing in the present case.

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