M/s. MBD Printographics P.Ltd., Jalandhar V. Deputy Commissioner of Income tax, Jalandhar

CO 37/ASR/2009

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6102 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-12-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 16-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: GUNJEET S INGH ITP; PREM SINGH ADV G S SYAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR. BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER. I.T.A. NO.426(ASR)/2009. (ASSESSMENT YEAR: 2005-06) THE DEPUTY COMMISSIONER M/S.MBD PRINTOGRAPHICS P. LTD., OF INCOME TAX, JALANDHAR C.C.II, JALANDHAR. VS. (APPELLANT) (RESPONDENT) AND C.O. NO.37(ASR)/2009. (ARISING OUT OF ITA NO.426(ASR)/2009) ASSESSMENT YEAR: 2005-06. M/S.MBD PRINTOGRAPHICS P. LTD., THE DEPUTY COMMISSI ONER OF JALANDHAR. VS. INCOME TAX, CCII, JALANDHAR. (CROSS OBJECTOR) VS. (RESPONDENT) ASSESSEE BY: S/SHRI PREM SINGH, ADV. G.S. SYAL, C.A. & GUNJEET SINGH. ITP. DEPARTMENT BY: SHRI TARSEM LAL, D.R. ORDER PER H.L. KARWA, VICE PRESIDENT. THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A), JALANDHAR DATED 27-3-2009, RELATING TO THE ASSESSMENT YEAR 2005-06. 2 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN ITS APPEAL READS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FA CTS OF THE CASE IN HOLDING THAT THE INCOME FOR RS.11,53,922/- AND RS.1 ,17,180/- FROM SALE OF RADDI AND PRINTING GOT DONE FROM O UTSIDE RESPECTIVELY FORM PART OF ELIGIBLE PROFIT ON WHIC H DEDUCTION U/S.80IC IS ALLOWABLE TO THE ASSESSEE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE DERIVES INCOME FROM PRINTING, PUBLISHING AND SALE OF BOOKS. THE TOTAL TURNOVER SHOWN BY THE ASSESSEE IS RS.13,92,23,831/-, WHICH C OMPRISES OF THE FOLLOWING INCOME:- A) INTEREST RECEIVED : RS. 4,427.00 B) PRINTING INCOME : RS. 2,78,73,370.00 C) SALE OF BOOKS : RS. 9,85,88,875.00 D) SALE OF RADDI : RS. 11,53,922.00 E) SALE OF PAPER: RS. 2,578.00 RS. 12,76,23,172.00 3.1 FROM THE ABOVE, THE A.O. OBSERVED THAT TOTAL IN COME SHOWN BY THE ASSESSEE WAS AT RS.13,92,23,831/-, WHICH INCLUDED I NTEREST RECEIVED OF RS.4,427/-, SALE OF RADDI RS.11,53,922/-, SALE OF P APER RS.2,578/- AND STOCK DIFFERENTIALS AMOUNTING TO RS.1,16,00,660/-. THE A .O. TOOK THE VIEW THAT SALE OF RADDI AMOUNTING TO RS.11,53,922/- AND PRINT ING DONE FROM OUTSIDE AMOUNTING TO RS.1,17,180/- DID NOT QUALIFY FOR DEDU CTION UNDER SECTION 80-IC OF THE INCOME TAX ACT, 1961 (IN SHORT, THE A CT). 4. ON APPEAL, THE CIT(A) ALLOWED BOTH THE CLAIMS OF THE ASSESSEE, OBSERVING AS UNDER (AS REGARDS THE FIRST CLAIM OF T HE ASSESSEE):- 2.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT CAREFULLY. THE HONBLE SUPREME COURT IN THE CASE OF CAMBAY ELE CTRIC SUPPLY CO. 113 ITR 84 (SC) HAVE HELD THAT THE INCOME ELIGI BLE FOR DEDUCTION IN RESPECT OF THE INDUSTRIAL UNDERTAKING SHOULD HAV E A DIRECT NEXUS 3 WITH THE INDUSTRIAL UNDERTAKING TO BE CONSIDERED FO R SUCH DEDUCTION. IN THE CASE OF STERLING FOODS LTD. 237 ITR 579 (SC) , THE HONBLE SUPREME COURT HELD THAT THE INDUSTRIAL UNDERTAKING MUST BE THE DIRECT SOURCE OF THE PROFIT FOR ALLOWING DEDUCTION U/S.80H H OF THE I.T. ACT. IN THE CASE OF PHETELA COTGIN INDS (P) LTD VS. CIT 303 ITR 411 (P&H), THE HONBLE JURISDICTIONAL HIGH COURT HELD T HAT INTEREST RECEIVED ON DELAYED PAYMENT ON ACCOUNT OF SALE TO T HE CUSTOMERS OF THE MANUFACTURED GOODS COULD CLEARLY BE DETERMINED AS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING. THEY HAVE NOTED THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF PA NDIAN CHEMICALS LTD. 262 ITR 278 (SC) IN WHICH IT WAS HELD THAT THE WORDS DERIVED FROM IN SECTION 80HH OF THE I.T.ACT MUST BE UNDERS TOOD AS SOMETHING WHICH HAS A DIRECT OR IMMEDIATE NEXUS WIT H THE ASSESSEES INDUSTRIAL UNDERTAKING. 2.3 IN THE CASE OF SUNDARAM INDS. LTD. (SUPRA) THE HON BLE HIGH COURT HELD THAT DEDUCTION U/S.80HH IN RESPECT OF MI SC. INCOME DERIVED FROM SALE OF SCRAP WOULD BE ELIGIBLE FOR DE DUCTION U/S.80HH OF THE ACT. THEY FOLLOWED THE DECISION IN THE CASE OF FENNER (INDIA) LTD. 241 ITR 803 (MAD) IN WHICH SCRAP MATERIAL HAD THE SALEABLE VALUE AND WHICH WAS A BYE PRODUCT OF THE MANUFACTUR E OF OTHER RUBBER ARTICLES WAS INCOME WHICH HAD DIRECT NEXUS WITH THE INDUSTRIAL UNDERTAKING. IN THE CASE OF PRINTING AND PUBLISHIN G INDUSTRY, RADDI OR WASTE PAPER IS GENERATED DURING THE CUTTING AND SIZ ING THE PAPER AS WASTAGE. IT IS A DIRECT BYE PRODUCT OF THE MANUFAC TURING ACTIVITY OF THE ASSESSEE COMPANY AND CAN, THEREFORE, BE SAID TO BE DERIVED DIRECTLY FROM THE INDUSTRIAL UNDERTAKING. I AM, THEREFORE, O F THE VIEW THAT THE SALE OF RADDI IS INCOME WHICH IS DERIVED FROM THE I NDUSTRIAL UNDERTAKING AND IS ELIGIBLE FOR DEDUCTION U/S.80IC. THE AO IS DIRECTED TO ALLOW DEDUCTION U/S.80IC IN RESPECT OF INCOME FROM SALE OF RADDI. 4.1 AS REGARDS SECOND CLAIM, THE CIT(A) OBSERVED AS UND ER:- 2.6 AS REGARDS THE PRINTING DONE FROM OUTSIDE, IT IS SEEN THAT THE AO HAS NOT DISALLOWED DEDUCTION U/S.80IC TO THE APPELL ANT ON ITS ENTIRE INCOME, WHICH SHOWS THAT THE APPELLANT IS AN INDUST RIAL UNDERTAKING ENTITLED TO DEDUCTION U/S.80IC. THE AO HAS DISALLO WED DEDUCTION U/S.80IC IN RESPECT OF PRINTING WORK DONE OUTSIDE O N THE GROUND THAT TO THIS EXTENT, INCOME OF THE ASSESSEE WAS NOT DERIVE D FROM THE 4 INDUSTRIAL UNDERTAKING. IN MY OPINION, THIS DISALL OWANCE MADE BY THE AO IS NOT CALLED FOR. THIS IS CLEARLY NOT THE CASE WHERE THE APPELLANT IS NOT CARRYING ON ANY MANUFACTURING ACTIVITY AT AL L. THE APPELLANT HAS INCOME OF R.2.78 CRORES AS PRINTING INCOME AND SALE S OF RS.9.85 CRORES AS SALE OF BOOKS. THE APPELLANTS PROFIT AN D LOSS ACCOUNT SHOWS PURCHASE OF CONSUMABLES, SALE OF BOOKS. THE APPELL ANTS PROFIT AND LOSS ACCOUNT SHOWS PURCHASE OF CONSUMABLES, FUEL AN D OIL, WAGES AND OTHER MANUFACTURING EXPENSES TOTALING R.6.95 CORES WHICH INCLUDES PRINTING OUTSIDE OF RS.1.17 LACS. IN MY OPINION, J UST BECAUSE THE ASSESSEE HAS GOT A SMALL PORTION OF ITS PRINTING WO RK DONE FROM OUTSIDE, IT SHOULD NOT BE DISENTITLED TO DEDUCTION U/S.80IC IN RESPECT OF SUCH AMOUNT. THE DISALLOWANCE MADE BY THE APPELLAN T IN IS RESPECT OF, THEREFORE, DIRECTED TO BE DELETED. 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. SHRI TARSEM LAL, THE LEARNED D.R. HEAVILY RELIED UPON THE ORDER OF THE A.O. AND ON THE OTHER HAND, SHRI P REM SINGH, ADVOCATE, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SAL E THE SALE OF RADDI ACTUALLY IN THE REAL SENSE IS SALE OF SCRAP MARKET . RADDI IS A BY PRODUCT IN PRINTING AND PUBLISHING BUSINESS AND HAS A READY MA RKET. THERE IS USUALLY CERTAIN WASTAGE AT THE TIME OF PRINTING. THIS WASTA GE HAS SALEABLE VALUE AND CAN BE EASILY SOLD IN THE MARKET. IT WAS ALSO STATE D THAT THE SALE OF BY PRODUCT (RADDI) IS RS.11,53,922/- WHICH IS A VERY NOMINAL A MOUNT KEEPING IN MIND THE TURNOVER OF BUSINESS. KEEPING IN VIEW THE TURN OVER OF THE BUSINESS, WE FIND THAT IN THE CASE OF CIT VS. SUNDARAM INDUSTRIE S LTD. (2002) 253 ITR 396(MAD), WHEREIN IT HAS BEEN HELD THAT SCRAP WHICH WAS A BY-PRODUCT AND HAD A SALEABLE VALUE WHICH WHEN SOLD RESULTED IN IN COME TO THE ASSESSEE COMPANY HAD DIRECT NEXUS WITH INDUSTRIAL UNDERTAKIN GS. THEREFORE, KEEPING IN VIEW THE DECISION IN THE CASE OF CIT VS. SUNDARA M INDUSTRIES LTD. (SUPRA), WE HOLD THAT THE SALE OF RADDI REPRESENTED INCOME D ERIVED BY THE ASSESSEE (UNDERTAKING) AND, THEREFORE, THE ASSESSEE IS ENTIT LED TO DEDUCTION UNDER 5 SECTION 80-IC OF THE ACT. IN OUR VIEW, THE CIT(A) HAS CORRECTLY APPRECIATED THE FACTS OF THE CASE AND SETTLED LEGAL POSITION AN D, THEREFORE, WE DO NOT SEE ANY VALID GROUND FOR INTERFERING WITH THE ORDER OF THE CIT(A) ON THE ISSUE. ACCORDINGLY, WE DELETE THE ADDITION AND DISMISS THE FIRST PART OF THE GROUND OF APPEAL. 5.1 THE ASSESSEE CLAIMED DEDUCTION IN RESPECT OF AM OUNT OF RS.1,17,180/- BEING PRINTING GOT DONE FROM OUTSIDE. IT IS CLAIMED THAT THE ASSESSEE HAS GOT PRINTING DONE FROM OUTSIDE UNDER ITS SUPERVISION. W HILE DECIDING THIS ISSUE, THE LEARNED CIT(A) HAS CORRECTLY OBSERVED THAT THE ASSESSEE HAS GOT A SMALL PORTION OF ITS PRINTING WORK DONE FROM OUTSIDE, IT SHOULD NOT BE DISENTITLED TO DEDUCTION U/S.80-IC OF THE ACT IN RESPECT OF SUCH A MOUNT. WHILE HOLDING SO, WE ARE FORTIFIED BY THE DECISION OF THE HONBLE CAL CUTTA HIGH COURT IN THE CASE OF CIT(CENTRAL), CALCUTTA VS. W.H. HARTON AND CO. LTD.(1978) 113 ITR 708 (CAL), WHEREIN IT HAS BEEN HELD THAT A PUBLISHE R GOT ITS BOOKS PRINTED OUTSIDE FROM ANY PRINTER UNDER ITS SUPERVISION AND IT CAN BE SAID THAT THE ASSESSEE HAD TAKEN AN ACTIVE ROLE BY COORDINATING I TS ACTIVITIES AS WELL AS ACTIVITIES OF THE PRINTER IN A BUSINESS LIKE A MANN ER. CONSIDERING THE ENTIRE FACTS AND THE CIRCUMSTANCES OF THE CASE, WE UPHOLD THE ORDER OF THE CIT(A) IN HOLDING THAT THE PRINTING GOT DONE FROM OUTSIDE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IC OF THE ACT. 6. IN C.O. NO.37(ASR)/2009, THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, JALANDHAR HAS ERRED IN LAW BY FILING A B ELATED APPEAL U/S.253. 2. THAT IT IS WRONG TO HOLD THAT THE ORDER OF CIT(A ) WAS COMMUNICATED ON 17-8-2009. 6 3. THAT THE FACTS MENTIONED IN FORM NO.36 ARE PATEN TLY WRONG AND ARE CHALLENGED. 4. THAT THE OBSERVATIONS OF AUTHORITY BELOW ARE WRO NG AND BAD IN LAW. 5. ANY OTHER GROUND PRESSED AT THE TIME OF HEARING WITH PERMISSION. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE REGISTRY OF THIS BENCH HAS NOT RAISED ANY OBJECTION REGARDING A NY DELAY IN FILING THE APPEAL. THE OBJECTION RAISED BY THE ASSESSEE IS NO T TENABLE. EVEN OTHERWISE ALSO, THE ISSUE RAISED BY THE ASSESSEE IS OF ACADEMIC INTEREST AND, THEREFORE, REQUIRES NO FINDINGS. 8 IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CR OSS OBJECTION OF THE ASSESSEE ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 8 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 8 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE (2) THE ITO (3) THE CIT (4) THE CIT(A) (5) THE SR.D.R., ITAT, ASR. TRUE COPY BY ORDER ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR.