High Court Of Punjab & Haryana
CIT vs. Rana Polycot Ltd.
Assessment Year : 1997-98
Section : 10B
Adarsh Kumar Goel And Ajay Kumar Mittal, JJ.
IT Appeal No. 400 Of 2005
February 25, 2011
JUDGMENT
Ajay Kumar Mittal, J. – This appeal has been preferred by the Revenue under section 260A of the Income-tax Act, 1961 (in short “the Act”), against the order dated March 31, 2005, passed by the Income-tax Appellate Tribunal, Chandigarh Bench “B” (hereinafter referred to as “the Tribunal”) in I. T. A. No. 867/Chandi/2000, for the assessment year 1997-98, claiming the following substantial questions of law :
“(a)Â Whether, in the facts and in the circumstances of the case, the hon’ble Income-tax Appellate Tribunal has erred in holding that the assessee has validly withdrawn its exemption under section 10B, earlier claimed in the original return by validly filing a revised return under section 139(5) on March 31, 1998, in spite of the specific provisions of sub-section (7) of section 10B applicable for the relevant period ?
(b)Â Whether, in the facts and in the circumstances of the case, the hon’ble Income-tax Appellate Tribunal has erred in law in holding further that the assessee has rightly claimed the impugned interest as income from business source by ignoring the decision of the apex court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172 (SC) ?”
2. Briefly stated, the facts necessary for adjudication as narrated in the appeal are that the assessee filed original return on November 30, 1997, for the assessment year 1997-98. The assessee had earned interest income of Rs. 33,99,620 on deposits made in banks and other companies for pre-operative period and post-operative period. It claimed exemption under section 10B of the Act being 100 per cent. export oriented unit. The assessee filed a revised return under section 139(5) of the Act on March 31, 1998, by declaring the income at Rs. 7,07,433 after withdrawing the exemption claimed under section 10B of the Act as per the provisions of section 115JA of the Act. The case of the assessee was taken up for scrutiny by issuing notice under section 143(2) on June 30, 1998, and its assessment was completed on October 25, 1999, at a total income of Rs. 33,87,620. The Assessing Officer held the interest income as taxable under the head “Other sources” and the income earned on surplus funds after commencement of business also as “Income from other sources” and accordingly taxed the entire interest income of Rs. 33,99,620 as “Income from other sources”. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) (in short “the CIT(A)”) who, vide order dated October 5, 2001, deleted the addition holding that the assessee was entitled to file a revised return under section 139(5) of the Act and to withdraw exemption as claimed under section 10B of the Act in the original return. Against the order of the Commissioner of Income-tax (Appeals), the Revenue filed an appeal before the Tribunal who, vide order dated March 31, 2005, dismissed the appeal. This gave rise to the Revenue to approach this court by way of the present appeal.
3. We have heard learned counsel for the parties.
4. At the outset, learned counsel for the Revenue conceded that in so far as question (b) is concerned, no argument was raised before the Tribunal and, therefore, this question does not arise for consideration in this appeal. Accordingly, question (b) is declined.
5. The only point for consideration in this appeal is, whether the assessee was justified in filing the revised return under section 139(5) of the Act.
6. Learned counsel for the Revenue relied upon the judgments of the Madras High Court in CIT v. Southern Petro Chemical Industries Corpn. Ltd. (No. 2) [1998] 233 ITR 400 and that of the Madhya Pradesh High Court in Deepnarain Nagu & Co. v. CIT [1986] 157 ITR 37/21 Taxman 222 to contend that the assessee was not entitled to file the revised return unless there existed wrong statement or some omission in the original return.
7. On the other hand, learned counsel for the assessee has placed reliance upon the decisions of this court in Beco Engineering Co. Ltd. v. CIT [1984] 148 ITR 478/18 Taxman 44 and CIT v. Friends Corpn. [1989] 180 ITR 334/47 Taxman 55 (Punj. & Har.) and submitted that the assessee was entitled to file the revised return under section 139(5) of the Act and withdraw its claim under section 10B of the Act.
8. We have given our thoughtful consideration to the respective submissions of the learned counsel for the parties and do not find any merit in the submission made by the learned counsel for the Revenue.
9. This court in Beco Engineering Co. Ltd.’s case (supra) where the assessee had filed a revised return withdrawing its claim for depreciation, as filed in the original return, has held as under (page 481) :
“It is well settled that in case an assessee files revised returns, they are to be taken into consideration for the purpose of making an assessment. The original returns cannot be adverted to for that purpose. In this view, we are fortified by the observations of the Allahabad High Court in Niranjan Lal Ram Chandra v. CIT [1982] 134 ITR 352 (All), wherein it was observed that once a revised return has been filed under section 139(5), the original return is substituted by the revised return as a result of the amendments made in the original return by the revised return.”
10. The Madras High Court in Southern Petro Chemical Industries Corporation Ltd.’s (supra) after noticing the judgments of this court in Beco Engineering Co. Ltd.’s case (supra) and Friends Corporation’s cases (supra) had followed its earlier decision in Dasaprakash Bottling Co. v. CIT [1980] 122 ITR 9/3 Taxman 268 (Mad) and taken a contrary view as held by this court. We are bound by the judgment of this court in Beco Engineering Co. Ltd. case (supra) and Friends Corporation’s cases (supra) and are unable to subscribe to the view taken by the Madras High Court.
11. Further, the Commissioner of Income-tax (Appeals), while allowing the claim of the assessee in paragraph 3.3 of its order had recorded as under :
“3.3 The submissions made by the appellant have been given careful consideration. The issue for consideration is whether the assessee was entitled to file a revised return and to withdraw the claim for exemption under section 10B of the Income-tax Act, which had been claimed in the original return. There is no dispute that the original return under section 139(1) had been filed in time, therefore, the assessee was competent to file a revised return under section 139(5) of the Income-tax Act. In the original return, the appellant had claimed exemption under section 10B of the Income-tax Act. Later on the appellant realised that the market conditions were not conducive for export and he would not be able to fulfil the export obligations for eight years, therefore, a revised return was filed in which the claim for exemption under section 10B was withdrawn and the assessee offered to be assessed under section 115JA and the tax was also paid accordingly. Sub-section 2(ia) of section 10B makes it mandatory that export of the assessee should not be less than 75 per cent. of total sales during the previous year relevant to eight assessment years beginning from the date of commercial production. Since there was a slump in the economy due to market conditions, the appellant probably felt that it would be impossible to maintain export sales to the extent of 75 per cent. of total sales in the following years. Therefore, prudency demanded that the assessee should not claim the exemption under section 10B of the Income-tax Act. The explanation offered by the appellant sounds to be convincing. Since the appellant had filed the original return in time and the claim under section 10B had been made for the first time, he was free to withdraw the claim before any assessment was made. The addition has been made by the Assessing Officer on the ground that the appellant was not competent to file the revised return and had no right or option to withdraw the claim under section 10B of the Income-tax Act. Since the appellant was competent to file the revised return, the whole case of the Assessing Officer collapses on this ground alone. The Assessing Officer has observed in the order that, as required under section 10B(5), the assessee had given written undertaking that it should be considered as a 100 per cent. export oriented unit under section 10B for subsequent years. It is seen that the assessee has not given any such undertaking. In the return, it has been mentioned that the assessee is 100 per cent. export oriented unit and its income is exempt under section 10B of the Income-tax Act. Subsequently, the return was revised under section 139(5) of the Income-tax Act withdrawing the claim for exemption under section 10B of the Income-tax Act, which was followed by a letter dated March 31, 1998, wherein it was undertaken that the assessee will not avail of any benefit under section 10B of the Income-tax Act even in the subsequent years. In the circumstances, the Assessing Officer has erred in holding that the interest earnest represents income from other sources. Since interest is a revenue receipt, therefore, it is held to be a business income and since the interest income has been included in the profit and loss account, the interest paid on borrowed funds is automatically set off against the interest income. In other words, the interest earned on deposits which has been held to be business income and which is reflected in the profit and loss account, gets set off against the interest paid which debited to the profit and loss account. Thus, this ground of appeal is allowed.”
12. The Tribunal had affirmed the aforesaid view of the Commissioner of Income-tax (Appeals).
13. Learned counsel for the Revenue has not been able to show that the approach of the Commissioner of Income-tax (Appeals) and the Tribunal was incorrect in any manner.
14. In view of the above, we find no merit in this appeal and the same is hereby dismissed.
[Citation : 347 ITR 466]
