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Assistant Commissioner of Income-tax, Circle-1 v/s Ercon Composites

    IT Appeal Nos. 418 & 426 of 2012

    Decided On, 21 October 2013

    At, Income Tax Appellate Tribunal Jodhpur

    By, THE HONOURABLE MR. HARI OM MARATHA
    By, JUDICIAL MEMBER & THE HONOURABLE MR. N.K. SAINI
    By, ACCOUNTANT MEMBER

    For the Appellant: N.A. Joshi, Advocate. For the Respondent:U.C. Jain, Rajendra Jain, Advocates.



Judgment Text

N.K. Saini, Accountant Member

1. These cross appeals by the department and the assessee are directed against the order dated 04/10/2012 of ld. CIT (A), Jodhpur. First we will deal with the departmental appeal in ITA No. 426/Jodh/2012. The following grounds have been raised in this appeal:-

"On the facts and circumstances of the case the CIT(A) has erred in deleting the addition:-

1. Ignoring the fact that the AO had rejected book results u/s 145(3) though it has not been mentioned in the assessment order and mere non-mentioning of provisions in the assessment order in not fatal to the assessment order itself.

2. Ignoring the defects in the books of account of Unit-I as pointed out by the AO on page 2 of the assessment order.

3. By not taking into account facts and figure favourable to the AOs finding submitted by the assessee vide assessee's submission dated 23/07/2012.

4. Wrongly appreciating facts in para 3.4 of his order as the AO had compared result of Unit-I with last year and addition is also made by applying G.P. @ 35.54% of Unit-I last year.

5. Wrongly appreciating facts in para No. 3.4.1 of his order in regard to amount of Rs. 248/- per kg. for EOU and Rs. 221/- for Non-EOU, being cost of material.

The appellant craves leave to add, amend or alter any or all the ground of appeal on or before the date the appeal is finally heard for disposal."

2. From the above grounds, it would be clear that only grievance of the department relates to the deletion of trading addition made by the Assessing Officer.

3. The facts related to this issue in brief are that the assessee filed return of income on 28/09/2009 declaring NIL income. The assessee was engaged in manufacturing of FRP/GRP section, Cable Trays, Fiber production etc. by running two units and the unit-II was an Export Oriented Units (EOU). The assessee was also engaged in wind power generation. During the assessment proceedings, the Assessing Officer noted that the assessee had shown less GP rate as compared to last year for its Non-EOU unit-I, whereas it had shown better GP rate for its EOU unit. The assessee explained before the Assessing Officer that the GP rate for the EOU unit was higher as it was exempted from VAT, CST, Excise Duty and Customs Duty. However, the Assessing Officer was not satisfied and concluded that the assessee was debiting maximum purchases and manufacturing expenses to EOU unit, so as to reduce the profit of other unit. Considering all those facts, the Assessing Officer applied the GP rate of 35.54% for Unit-I, which resulted in addition of Rs. 40,77,246/-.

4. Being aggrieved, the assessee carried the matter to the learned CIT(A) and submitted that the Unit-I purchased the raw-material, domestic as well as imported and paid Excise Duty, VAT, Import Duty on such purchases and manufactured the finished goods from those raw-materials, which was mainly fiber glass, resin and chemicals which almost comprised of 80% of the total consumption of the raw-materials. Whereas the Unit-II (EOU) purchased its raw-material on which Excise Duty, VAT, Custom Duty were exempted as those were used in the manufacturing of goods exported out of India. It was explained that the assessee maintained separate books of accounts such as purchase book, sales book, stock register, cash book, ledger, excise register etc. for both the concerns, there was no change in the method of accounting and trading results for all the earlier years had been accepted under section 143(3) of the I.T. Act, 1961 (hereinafter referred to as "Act", in short). It was contended that the Assessing Officer must have expressed the dissatisfaction about the correctness or completeness of the account and must have noted that such system was not regularly followed by the assessee, but the Assessing Officer had not pointed out any defect in the sales or purchases. It was further contended that the assessee maintained quantitative details, stock register and that during the year under consideration, the increase in the cost of raw-material adversely affected the GP rate. It was stated that the sales margins in the export market were comparatively higher than in the domestic market. The assessee submitted to the learned CIT(A) that main raw-material was purchased and consumed in terms of KGs whereas the finished products was sold in terms of number of units & meters and that the selling price was determined on the basis of raw-material consumed and its manufacturing specifications. The assessee had furnished comparative chart of sales, purchases and expenses incurred for both the units, which revealed that the sale value of unit-II (EOU) was only Rs. 2,70,95,286/- as against sales value of unit-I (Non- EOU) at Rs. 6,55,64,739/-. Thus, there was a wide difference between the two sales which was due to large variation in the capacity utilization of the two units, therefore, results of the two units were not comparable. It was further stated that due to higher margins in the export sales, the realization per KG of the raw-material consumed in unit-II (EOU) had been more than the realization per KG of raw-material consumed for unit-I, which was apparent from the information furnished. It was clarified that the raw-material consumed in unit-I was only Rs. 248/- per KG whereas in the case of EOU unit-II, it was Rs. 221/-, which resulted into higher GP rate of unit-II (EOU). It was also stated that the purchase price per KG of raw-material was lower in case of EOU unit due to exemption from Excise Duty, VAT, Customs Duty etc. It was also stated that the purchase price per KG of raw-material consumed for Non-EOU unit was at Rs. 230.95 and Rs. 221.70 in the years 2009-10 i.e. there was a reduction in the realization per KG as against this, the price of raw-material per KG had increase from Rs. 73.55 to Rs. 80.07 which resulted into lower GP rate for the A.Y. 2009-10 as compared to the A.Y. 2008-09. It was further stated that debiting maximum purchases and manufacturing expenses in EOU unit would not reduce the profit of other unit but increase the profit of other units. Learned CIT(A) sent the written submission of the assessee to the Assessing Officer for his remand report and the Assessing Officer stated that reply of the assessee was general in nature and did not give any specific reason for low GP.

5. Learned CIT(A) after considering the submissions of the assessee and the comments of the Assessing Officer, deleted the addition by observing in para 3.4 to 3.4.2 of the impugned order, which are reproduced verbatim as under:-

"3.4. I have considered the submission of the appellant and order of the Assessing Officer and I find that the Assessing Officer has not rejected the books of account nor mentioned any specific defects in the maintenance of the books of account. The Assessing Officer before applying the G.P. rate of preceding year of unit - I compared the results of both the concerns. In this regard, it is to be noted that both the units are different in the sense that one is non export oriented and other export oriented. So it is not good idea to compare results of both the concerns. As far as trading result is concerned, I find that in unit - I sales has been gone Rs. 901.15 (AY 2008-09) lacs to Rs.727.53 lacs (AY 09-10) whereas in unit II sales were Rs. 865.42 which has been down to Rs. 271 .09 (AY 09-10). So in that sense the Assessing Officer was not justified in comparing the results of both the concerns.

3.4.1. Further, I find that in the assessment order the Assessing Officer nowhere doubted the purchase and sales of the units. The appellant is maintaining quantity details and stock register. Further it is non disputed fact that the sales margins in the export market are comparatively higher than the domestic market. Further I find that in the case of EOU unit raw material used and consumed was 248/- per kg whereas in non EOU it was only 221/-. So the purchase per kg of raw material is also lower in case of EOU unit as exempted from various govt. taxes. Further, I find that the Assessing Officer has not given any instance of debiting the expenses / purchases more of one unit to other unit.

3.4.2. Further, I find that the Assessing Officer has applied the G.P. rate in unit - I of last preceding year. I find that the G.P. rate was 35.54% in comparison to 29.94% declared in the year under consideration. In this regard, I find that that the Assessing Officer has not pointed out any specific defects nor rejected the books of account of the unit-l. The Assessing Officer has not given any similar instance where the G.P. rate was declared more than that of declared by the appellant's unit-I. It is settled proposition of law that for rejecting the books of accounts, the Assessing Officer must refer to the inherent defect in the system and record a clear finding that the system of accounting followed by the assessee is such that correct profits cannot be deduced from the books of account maintained by the assessee, as has been held in the case of CIT v. Margadarsi Chit Fund (P.) Ltd.(155 ITR 442 AP.). In the instant case there is no finding that the books are such that from which correct profit cannot be deduced or assessee did not follow regular method of accounting.

So, in view of the above discussion and submission of the appellant, I hold that the Assessing Officer was not justified in applying the G,P. rate of preceding year i.e. 35.54% in unit - l. The Assessing Officer is directed to accept the G.P. rate shown by the appellant in year under consideration. The ground of appeal is allowed."

Now, the department is in appeal.

6. Learned D.R. strongly supported the order of the Assessing Officer and reiterated the observations made in the assessment order dated 23/12/2011.

7. In his rival submissions, learned counsel for the assessee strongly supported the impugned order passed by the learned CIT(A) and reiterated the submissions made before the authorities below. It was further stated that the Assessing Officer failed to record any single instance supporting his baseless presumption that the assessee is debiting maximum of purchases and manufacturing expenses to the EOU Unit. It was stated that the Assessing Officer did not point out any defect in the record maintained in regular course of business, therefore, the learned CIT(A) rightly deleted the addition made by the Assessing Officer. Reliance was placed on the following case laws:-

1. ITO v. Prakash Chand [2008] 25 SOT 19 (Jodh.)

2. Ganesh Foundary v. Asstt. CIT [2013] 78 TTJ 736 (Jodh.)

3. CIT v. Smt. Poonam Rani [2010] 326 ITR 223/192 Taxman 167 (Delhi)

4. Aluminium Industries (P.) Ltd. v. CIT [1995] 80 Taxman 184 (Gau.)

5. Karnataka Plastic Industries v. ITO (Sixth) [1982] 13 TTJ 317 (Gau.)

6. ETCO Engg. Co. v. ITO [1986] 19 ITD 52 (Hyd.)

8. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is an admitted fact that the Assessing Officer made the addition by estimating the GP rate of Non-EOU unit by comparing the same with the GP rate of EOU unit, but ignored this vital fact that the raw-material consumed in the case of EOU unit and Non- EOU unit was not the same. In the present case, the Assessing Officer presumed that maximum of purchases and manufacturing expenses were debited to the EOU unit so as to reduce the profit of other units. In our opinion, the presumption of the Assessing Officer is wrong because had it been the case then the GP rate of the other units would have been on higher side. In the instant case, it is an admitted fact that the Assessing Officer had not invoked the provisions of Section 145(3) of the Act and this fact has been admitted even in G. No.1 wherein it is stated that "Assessing Officer had rejected the book result under section 145(3) though it has not been mentioned in the assessment order. Therefore, the addition on estimate basis without rejecting the books of accounts was not justified.

9. For the aforesaid view, we are also fortified by the judgment of the Hon'ble Delhi High Court relied by the learned counsel for the assessee in the case of Smt. Poonam Rani (supra), wherein it has been held as under:-

"The AO has not pointed out any particular defect or discrepancy in the account books maintained by the assessee. The CIT(A) was satisfied that the assessee had furnished complete details, including quantitative details in respect of purchase of raw material, manufacture of copper wire and sale of the finished products. In these circumstances, it cannot be appreciated as to how the accounts, maintained by the assessee, could have been said to be incomplete or inaccurate. In fact, the AO had no material before him to treat the accounts of the assessee as defective or incomplete."

10. In view of the aforesaid discussion, we do not see any merit in this appeal of the department.

11. Now, we will deal with the appeal of the assessee in ITA No. 418 (Jodh.) 2012. The following grounds have been raised in this appeal:-

"1. That on the facts & in the circumstances of the case, the Ld. CIT(A) erred in sustaining disallowance u/s 14A amounting to Rs. 15,05,443/-.

2. That on the facts & circumstances of the case, the Ld. CIT(A) erred in treating the ground of appeal no.3 raised before him as partly allowed, even though as per direction given to Ld. AO in the light of decision of Hon'ble ITAT Jodhpur Bench in the case of M/s. Shrinath Gun & Chemicals in ITA No. 527/Ju/2009, the entire claim of depreciation amounting to Rs. 27,24,662/- is allowable as such the ground of appeal raised may kindly be directed to allowed in entirety.

3. That on the facts & circumstances of the case, the Ld. CIT(A) ought to have directed to allow deprecation on the amount which has been disallowed in the preceding years by recalculating the depreciation on WDV and thus erred in dismissing the ground of appeal No.4 raised before him.

4. That on the facts & in the circumstances of the case, the Ld. CIT(A) erred in upholding the finding of the Ld. AO that the interest earned on FDR by the assessee is not a business income and as such is not eligible for exemption u/s 10B and thereby erred in upholding the addition of Rs. 8,63,024/-

5. That the petitioner may kindly be permitted to raise any additional and/or alternative ground at or before the hearing of the appeal.

6. The petitioner prays for justice & relief."

12. Ground No.2 was not pressed as such the same is dismissed as not pressed. While grounds No. 5 & 6 are general in nature, so do not require any comment on our part.

13. Vide ground No.1, the grievance of the assessee relates to the sustenance of disallowance of Rs. 15,05,443/- made by the Assessing Officer under section 14A of the Act.

14. The facts related to this issue in brief are that the Assessing Officer during the course of assessment proceedings, noticed that the assessee had invested around Rs. 3,55,83,000/- in mutual funds during the year and the income from mutual funds did not form part of total income. He also observed that the balance of those investments in the year was at Rs. 1,33,87,853/- for unit-I and Rs. 2,41,27,813/- for unit-II. Thus, the total investment in tax free bonds came to Rs. 3,75,15,666/-. The Assessing Officer also observed that the assessee was paying huge interest, which was debited in profit & loss account, therefore, the provisions of section 14A of the Act were applicable. The assessee submitted to the Assessing Officer that the provisions of section 14A were not applicable because no part of interest was paid for investment made. It was further stated that interest paid on unsecured loans was given on the opening balance and the interest to the partners was paid as per the partnership deed, which was deducted from income of the firm and included in the income of the partners. The Assessing Officer, however, did not find merit in the submissions of the assessee and made the addition of Rs. 15,05,443/- by disallowing the interest.

15. Being aggrieved, the assessee carried the matter to the learned CIT(A) and submitted that the purpose of section 14A of the Act was not to enhance the tax liability, but to correct the tax liability and in this case, disallowance was made at Rs. 15,05,443/- as against dividend income of Rs. 4,84,180/-. It was stated that no money had been borrowed by the assessee directly or indirectly for making the investment in the mutual funds and no loan was raised during the year under consideration when the investment were made in the mutual fund. It was further stated that as per the definition of the interest mentioned in section 2 (28a) of the Act, the interest payable in any manner in respect of any money borrowed or debit incurred (including a deposit claimed or other similar right of obligation) and included any service fee or other charge in respect of the moneys borrowed or debit incurred or in respect of any credit facility which had been utilized. It was stated that the partners capital was not borrowed or debit incurred for a firm, hence, the interest on partner's capital was out of the purview of the interest. Therefore, the question of disallowance under section 14A of the Act did not arise.

16. Learned CIT(A) after considering the submissions of the assessee observed that the provisions of section 14A were applicable where the claim of the assessee was in respect of the expenditure incurred for the income which does not form part of total income. He further observed that the assessee had invested Rs. 3,55,83,000/- in mutual funds, income of which, did not form part of total income and that the assessee claimed interest paid on borrowings in the profit & loss account for which no satisfactory explanation had been provided. Learned CIT(A) affirmed the disallowance made by the Assessing Officer. Reliance was placed on the following case-laws:-

1. Pradeep Kar v. Asstt. CIT [2009] 319 ITR 416 (Kar.)

2. CIT v. Smt. Leena Ramachandran [2011] 339 ITR 296/199 Taxman 122 (Mag.)/10 taxmann.com 109 (Ker.)

Now, the assessee is in appeal.

17. Learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that before invoking the provisions of section 14A of the Act, it was required to be proved that the assessee had claimed expenses which related to the income, which did not form part of the total income and the onus was on the revenue to establish that any expenditure claimed by the assessee was in relation to income, which did not form part of the total income. It was stated that in this case, both the Assessing Officer and the learned CIT(A) failed to establish that the interest expenditure was incurred for earning the exempt income which did not form part of the total income. It was stated that the interest payment to the third parties was only Rs. 3,94,533/- and the borrowing on which such interest was paid was borrowed at the time of start of business, so, it could not be lead to inference that such interest expenses incurred for earning income which did not form part of the total income. It was further stated that the interest paid on the partner's capital account could not be presumed as expenditure incurred for earning income, which did not form part of the total income because as per the provisions of section 40(b) of the Act, the interest upto 12% p.a. was allowable as business expenditure and such allowable expenses ought to have been presumed as business expenditure unless proved to be contrary by the revenue. It was stated that neither the Assessing Officer nor learned CIT(A) recorded in any reason as to why and how the interest expenditure claimed by the assessee was not business expenditure and was incurred for the earning of dividend income on mutual fund investment. It was emphasized that the assessee was paying interest to the partners only on fixed capital and share of income from year to year was credited to current capital account which was Rs. 8,76,43,107/- as on 31/03/2009 and Rs. 8,51,36,613/- as on 31/03/2008 as compared to total investment in mutual fund for Rs. 3,57,36,861/- as on 31/03/2009 and Rs. 3,13,64,086/- as on 31/03/2008 as such there was more than sufficient non-interest bearing fund available with the assessee, therefore, it could not be presumed that the interest bearing fund was diverted for investment in mutual fund. Reliance was placed on the following case-laws:-

1. Asstt CIT v. Ashok Kumar Chhugani [2007] 16 SOT 36 (Jodh.) (URO)

2. Chhotulal Ajitsingh & Co. v. ITO [2006] 150 Taxman 26 (Jodh.) (Mag.)

3. CIT v. Glenmark Pharmaceutical Ltd. [2013] 213 Taxman 315/30 taxmann.com 167 (Bom)

4. CIT v. Reliance Utilities & Power Ltd. [2009] 313 ITR 340/178 Taxman 135 (Bom)

5. CIT v. Bharti Televenture Ltd. [2011] 331 ITR 502/200 Taxman 39 (Mag.)/11 taxmann.com 356 (Delhi)

6. Sunil Goel v. Asstt. CIT [2008] 118 TTJ 415 (Delhi)

7. Dy. CIT v. U.K. Paints (India) Ltd. [2010] 4 ITR (Trib.) 455 (Delhi)

8. CIT v. South India Corpn. (Agencies) Ltd. [2007] 290 ITR 217/164 Taxman 249 (Mad.)

9. CIT v. Tin Box Co. [2003] 260 ITR 637/[2004] 135 Taxman 145 (Delhi)

10. Bhagwan Kumar Tapariay v. Asstt. CIT [IT Appeal No. 188 (Jodh.) of 2012, dated 29-8-2013]

18. It was also stated that on similar facts, no disallowance under section 14A had been made in the earlier assessment years i.e. A.Ys. 2007-08 & 2008-09, copies of which are placed at page 147 to 151 & 90-92 of the assessee's paper book respectively.

19. In his rival submissions, learned D.R. strongly supported the orders of the authorities below and reiterated the observations made therein.

20. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee made an investment in tax free bonds and units to the extent of Rs. 3,75,15,666/- and earned tax free dividend income of Rs. 4,84,180/-. As per the provisions of Section 14A (1) of the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the Assessing Officer considered that the interest paid by the assessee was to be disallowed on proportionate basis under section 14A of the Act, but nothing is brought on record to prove the nexus between the interest bearing funds and the investment in bonds and mutual funds on which exempted dividend income was earned by the assessee. In the instant case, the assessee incurred interest expenses of Rs. 44,25,073/- out of which Rs. 40,30,540/- was related to the interest to the partner's fixed capital and remaining interest of Rs. 3,94,533/- was concerned with the interest to the parties. As regard to the interest paid to the partners, it is not in dispute that the said interest was paid under section 40(b) of the Act as per the terms of partnership deed and the partners capital was fixed. Nothing is brought on record that the fixed capital of the partners was utilized to make the investment in the units and bonds. On the contrary, the assessee stated that there was current capital account of the partners and the balance was at Rs. 8,76,43,107/- as on 31/03/2009 and Rs. 8,51,36,613/- as on 31/03/2008, which was utilized in making the investment in mutual fund for Rs. 3,57,36,861/- as on 31/03/2009 and Rs. 3,13,64,086/- as on 31/03/2008, therefore, the partners current capital account appears to be more than sufficient for making the investment in mutual funds. Moreover, the contention of the learned counsel for the assessee that the said partners current capital was non-interest bearing and used for investment in mutual fund, was not controverted at any stage. We therefore are of the view that the disallowance made by the Assessing Officer and sustained by the learned CIT(A) was not justified particularly when in the preceding years under similar circumstances no disallowance has been made while framing the assessment under section 143(3) of the Act on 12/12/2010 for the A.Y. 2008-09 and on 27/03/2009 for the A.Y. 2007-08, copies of which are placed at page Nos. 90-92 and 147-151 respectively of the assessee's paper book and the facts for the year under consideration are identical to the facts involved in the earlier years. We therefore considering the totality of the facts are of the view that the impugned disallowance made by the Assessing Officer and sustained by the learned CIT(A) was not justified. Accordingly, the same is deleted.

21. The next issue vide ground No.3 relates to the depreciation on WEG installed in the A.Y. 2008-09. As regard to this issue, the learned counsel for the assessee at the very outset stated that this issue is covered vide order dated 23/01/2013 in I.T.A.NO. 375/Jodh/2011 for the A.Y. 2008-09 in assessee's own case, copy of the said order was furnished, which is placed on record. Learned D.R. in his rival submissions, could not controvert the aforesaid contention of the learned counsel for the assessee.

22. After considering the submissions of both the partiers and the material on record, it is noticed that in the preceding year, depreciation was not allowed by the Assessing Officer and when the matter travelled up to the tribunal it was directed to allow the depreciation by holding that the assessee was eligible for depreciation under section 32 of the Act qua the wind mills. IN view of that, we direct the Assessing Officer to allow the depreciation on the return down value, which is worked out after giving effect to the aforesaid referred to order dated 23/01/2013 in I.T.A.NO. 375/Jodh/2011 for the A.Y. 2008-09 in assessee's own case. Accordingly, this ground of the assessee's appeal is allowed for statistical purpose only.

23. The last issue agitated by the assessee vide ground No.4 relates to the addition of Rs. 8,63,024/- on account of interest earned on FDR.

24. The facts related to this issue in brief are that the Assessing Officer during the course of assessment proceedings, noticed that while calculating the deduction under section 10B of the Act, the interest income from FDR amounting to Rs. 8,64,792/- was not deducted as it was not income earned on export. Accordingly, he did not allow the exemption under section 10B of the Act on the said amount and made the addition of Rs. 8,63,024/-.

25. Being aggrieved, the assessee carried the matter to the learned CIT(A) and submitted that the income earned on fixed deposit with the bank was the business income as the FDR had been made out of the business income surplus and some of the FDR had been made for the business purpose against the bank guarantee/excise bond for the purpose of export business.

26. Learned CIT(A) after considering the submissions of the assessee observed that the assessee failed to establish that FDR was out of its business income or was in relation to the income and that the interest income was from profit of export business. He therefore, confirmed the disallowance made by the Assessing Officer. Reliance was placed on the following case-laws:-

1. Asstt. CIT v. South India Produce Co. [2003] 262 ITR 20/130 Taxman 1 (Ker.)

2. Procon Systems (P.) Ltd. v. ITO [2008] 296 ITR 636 (Mad.).

3. Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278/129 Taxman 539 (SC)

Being aggrieved, assessee is in appeal.

27. Learned counsel for the asses reiterated the submissions made before the authorities below and further submitted that the FDRs were pledged as security for EOU

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undertaking as such the interest on such FDR was business income eligible for deduction under section 10B of the Act. Reliance was placed on the decision of Hon'ble Bombay High Court in the case of CIT v. Jagdish Prasad M. Joshi [2009] 318 ITR 420 and the order dated 12/09/2013 of the ITAT Jodhpur Bench, Jodhpur in the case of Asstt. CIT v. Devganga Enterprises [IT Appeal No. 492 (Jodh.) of 2010] (copy is placed on record). 28. In his rival submissions, learned D.R. supported the orders of the authorities below. 29. We have considered the submission of both the parties and perused the material vaiable on the record. In the present case, it seems that the assessee pledged the FDR as security for export oriented units (EOU) and earned the interest on those FDRs. In the instant case, the FDRs were pledged for commercial expediency of the assessee, therefore as per the ratio laid down by the Hon'ble Bombay High Court in the case of Jagdish Prasad M. Joshi (supra), it is to be considered as business income and eligible for deduction under section 10B of the Act. On a similar issue, this bench of the ITAT in the case of Devganga Enterprises (supra) held in para 3 as under:- "3. We have heard rival submissions. Both parties have reiterated their earlier stand. Apart from the above ld. A.R. has placed reliance on the decision of the Hon'ble High Court of Patna rendered in the case of Shyam Bihari v. CIT [2012] 345 ITR 283. The ld. D.R. has relied on the decision of Special Bench, Delhi in the case of Dy. CIT v. Allied Construction [2007] 106 TTJ (Del) (SB) 595dated 30/11/2006. He has tried to distinguish the facts of the Jaipur Bench 'A' decision in the case of M/s. S.P. Equipment and Securities v. ACIT in ITA No. 464/JP/2007 on which decision ld. CIT(A) has relied. After considering rival submissions we have found that the Hon'ble High Court of Patna in the above noted case has clearly held that in the case of a civil contractor who derived his income from contract work obtained from the government departments and for obtaining which deposit of money in FDRs and NSCs was a pre requisite condition, it has been held that interest earned by the assessee on the investment of amount in fixed deposits which was only to provide a bank guarantee to the contractee in order to acquire the contract work, could not be treated as income from other sources and has to be treated as business income only. The Hon'ble High Court has relied on the decision of Karnataka High Court in the case of CIT v. Chinna Nachimuthu Construction [2008] 297 ITR 70 (Kar.). Accordingly, by respectfully following the above judgments we cannot allow this appeal of the revenue. We also draw support for the judgment of the Hon'ble Apex Court in the case of CIT v. Govinda Choudhary & Sons [1993] 203 ITR 881 (SC)." So, by respectfully following the aforesaid order, this ground of the assessee's appeal is allowed. 30. In the result, appeal of the department is dismissed and that of assessee is partly allowed and partly allowed for statistical purposes.
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