The ACIT, Vapi Circle, Vapi V. M/s. National Lamination Industries, Daman

ITA 1078/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9873 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 16-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO. 1078/AHD/2012 ASST. YEAR: 2009-10 ASSTT. COMMISSIONER OF INCOME-TAX, VAPI CIRCLE, VAPI. VS NATIONAL LAMINATION INDUSTRIES, C/23-24 SATYAM SHOPPING CENTRE, M.G. ROAD, GHATKOPAR EAST, MUMBAI.400077. APPELLANT RESPONDENT PAN AACFN 4402D APPELLANT BY SHRI SANJAY AGRAWAL, CIT, DR RESPONDENT BY SMT. URVASHI SODHAN, AR DATE OF HEARING: 8/01/2016 DATE OF PRONOUNCEMENT: 13/01/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), VALSAD DATED 21.02.2012 IN APPEAL NO.CIT(A) /VLS/130/11-12 FOR ASST. YEAR 2009-10. ASSESSMENT WAS FRAMED U/S 1 43(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) ON 19.08.20 11 BY ADDL. CIT, VAPI RANGE, VAPI. THE GROUND RAISED BY THE REVENUE ARE AS UNDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE INCOME FROM SC RAP SALES OF RS.6,28,68,049/- IS ELIGIBLE FOR DEDUCTION U/S 80IB . 2. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . ITA NO. 1078/AHD/2012 ASST. YEAR 2009-10 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TRANSFORMER PARTS/ CORE BEING LOCATED IN THE UNION TERRITORY OF DAMAN WHICH IS A BACKWARD AREA AS SPECIFIED IN THE VIII SCHEDULE TO THE I.T. ACT. THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2009 DECLARING TOTAL INCO ME OF RS.22,68,68,410/-. THE CASE WAS SELECTED FOR SCRUTI NY ASSESSMENT U/S CASS IN VIEW OF CLAUSE OF THE ACTION PLAN TARGE T FOR ASST. YEAR 2010-11. NOTICE WAS ISSUED ON 20.08.2010 U/S 143(2) OF THE ACT AND DULY SERVED ON 7.9.2010. IN RESPONSE TO THE NOTICE ASSESSEE FILED VARIOUS DETAILS. THE ASSESSING OFFICER OBSERVED IN HIS ORDER THAT THE MANUFACTURING ACTIVITY BEING UNDERTAKEN BY THE ASSE SSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT @ 25% OF ITS MANU FACTURING PROFITS. HOWEVER, THE ASSESSING OFFICER DID NOT AGREE TO THE CLAIM MADE BY THE ASSESSEE U/S 80IB OF THE ACT, ON INCOME EARNED FROM SALE OF SCRAP AT RS.6,28,68,049/- AND INTEREST INCOME OF RS .53,53,504/-. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SALE OF SCRAP WAS NOT GENERATED AS BY-PRODUCT DURING THE COURSE OF MANUFA CTURING PRODUCTS, RATHER IT HAS BEEN EARNED FROM SALE OF OL D UNUSABLE PRODUCTS/MATERIAL. INCOME OF THE ASSESSEE WAS ASSES SED AT RS.24,39,96,780/-. 3. THE ASSESSEE BEING AGGRIEVED, CARRIED THE MATTER IN APPEAL BEFORE CIT(A). THE CIT(A) AFTER CONSIDERING THE CON TENTIONS OF ASSESSING OFFICER IN THE ASSESSMENT ORDER AND THE S UBMISSIONS OF ASSESSEE ACCEPTED THE CLAIM OF ASSESSEE AND ALLOWED THE SAME BY OBSERVING AS UNDER :- ITA NO. 1078/AHD/2012 ASST. YEAR 2009-10 3 5.3 DECISION : I HAVE CAREFULLY CONSIDERED THE OBS ERVATION OF THE A.O. IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE A.R . OF THE APPELLANT. THIS ISSUE HAS BEEN DECIDED BY ME IN FAVOUR OF THE APPELLANT FOR THE A.Y. 2008-09 VIDE APPEAL NO.CIT(A)/VLS/102/09-10 DATED 1 7.03.10 FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF HARJIVANDAS JUTHABHAI ZAVERI & OTHERS 258 ITR 785 (GUJ). SINCE THE FACTS AND CIRCUMSTANCES ARE SAME IN THIS YEAR ALSO, THE RELIE F WAS GRANTED TO THE APPELLANT AND THE AO IS DIRECTED TO INCLUDE INCOME FROM SCRAP SALES FOR GIVING BENEFIT U/S 80IB OF THE ACT. THUS, THIS GROU ND IS ALLOWED. 3. AGGRIEVED, THE REVENUE IS NOW IN APPEAL BEFORE U S. 4. THE LD. DR SUPPORTED THE ORDER OF ASSESSING OFFI CER. ON THE OTHER HAND THE LD. AR SUPPORTED THE ORDER OF LD. CI T(A) AND SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE SEVERAL DECISIONS OF THE TRIBUNAL (COPIES OF ORDERS PLACED ON RECORD) AND EVEN BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JIKAR A. SAIYED IN TAX APPEAL NO.368 OF 2008 DA TED 21/12/2013. ACCORDINGLY SHE REQUESTED THAT THE ISSUE MAY BE DEC IDED IN FAVOUR OF ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. THE ISSUE BEFORE US IS TO EXAMI NE WHETHER THE ASSESSEE WHOSE MAIN MANUFACTURING ACTIVITIES HAVE B EEN ACCEPTED BY THE ASSESSING OFFICER BEING ELIGIBLE FOR DEDUCTI ON U/S 80IB OF THE ACT BUT WHETHER THE INCOME FROM SALE OF SCRAP OF SU CH MANUFACTURING UNIT IS ALSO ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT OR NOT. WE FIND THAT SIMILAR ISSUE HAS BEEN DEALT BY THE TRIBUNAL IN THE CASE OF ACIT VS. STANDARD OIL & GREASES IN ITA NO.1584/AHD/2011 FOR ASST. YEAR ITA NO. 1078/AHD/2012 ASST. YEAR 2009-10 4 2008-09 AND THE ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE VIDE ITS ORDER DATED 04/09/2015 BY OBSERVING AS UNDER :- 5. HEARD BOTH SIDES. RECORDS PERUSED. THE REVENUE S ONLY ARGUMENT IS IN TUNE WITH THE ASSESSING OFFICERS FINDINGS NARRA TED HEREINABOVE THAT THE IMPUGNED SCRAP SALES CANNOT BE HELD TO HAVE BEEN DE RIVED FROM ASSSESSEES MANUFACTURING ACTIVITY AS PER THE TRIBU NALS ORDER IN ITA 3096/AHD/2007 IN ITS OWN CASE PERTAINING TO THE PRE CEDING ASSESSMENT YEAR. THE ASSESSEE SUPPORTS THE CIT(A) ORDER UNDE R CHALLENGE. IT IS EVIDENT TO US FROM THE STATEMENT OF FACTS AT PAGE N O. 2 THAT THE CO-ORDINATE WHILST DECIDING THE VERY ISSUE AGAINST THE ASSESSEE HAD PLACED RELIANCE UPON THE DECISION OF D.P. AGRAWAL VS. CIT 272 ITR 1 18 (MP). THE HONBLE JURISDICTIONAL HIGH COURT IN HARJIVANDAS ZAVERI CAS E (SUPRA) HAS ADJUDICATED THIS VERY SUBSTANTIAL QUESTION IN ASSSESEES FAVOUR . THE SAME VIEW IS REITERATED IN A RECENT DECISION (2014) 42 TAXMANN. 403 (GUJ) CIT VS. JIKAR A SAIYED. BOTH VIEWS HOLD THAT INCOME ARISING FROM SALE OF SCRAP IS ELIGIBLE FOR SECTION 80IB DEDUCTION AS DERIVED FROM THE MANUFACTURING ACTIVITY IN QUESTION. WE FOLLOW THE HONBLE JURISD ICTIONAL HIGH COURT AGAINST THAT OF THE LEARNED CO-ORDINATE BENCH AND REJECT TH E REVENUES FIRST SUBSTANTIVE GROUND. 6. FURTHER WE FIND THAT THE ISSUE IN APPEAL HAS ALS O BEEN DEALT BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. J IKAR A. SAIYED (SUPRA) WHEREIN IT HAS BEEN OBSERVED AS UNDER :- 4.0. THE SHORT QUESTION WHICH IS POSED FOR CONSIDE RATION OF THIS COURT IS WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE APPELLATE TRIBUNAL IS RIGHT IN HOLDING THAT THE DEDUCTION UNDER SECTION 80IB IS ALLOWABLE FROM THE INCOME FROM SALE OF SCRAP ? IT IS ALSO REQUIRED TO BE NOTED AT THIS STAGE THAT WHILE PASSING THE IMPUGNED JUDGMENT AND ORDER, THE LEARNED ITAT HAS R ELIED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF HARJIVANDAS JUTHABHAI ZAVERI AND ANR (SUPRA). IN THE CASE OF HARJIVANDAS JUTHABHAI ZAVERI AND ANR (SUPRA) WHILE ANSWERING THE QUESTION WHETHER THE APPELLATE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN ALLOWING DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE ITEM S (I) JOB WORK RECEIPT, (II) SALE OF EMPTY SODA ASH BARDANA, (III) SALE OF EMPTY BARRELS AND (IV) SALE OF PLASTIC WASTE. THE DIVISIO N BENCH HAS OBSERVED AND HELD AS UNDER: ITA NO. 1078/AHD/2012 ASST. YEAR 2009-10 5 SO FAR AS QUESTION NO. 5 IS CONCERNED, LEARNED COU NSEL MR. SOPARKAR DREW OUR ATTENTION TO SECTION 80.I OF THE ACT AND SUBMITTED THAT THIS SECTION IS MEANT FOR DEDUCTION IN RESPECT OF PROFIT AND GAI NS FROM INDUSTRIAL UNDERTAKINGS. WITH REGARD TO THE QUESTION RAISED BY THE REVENUE THAT THE AMOUNT RECEIVED ON SALE OF JUTE BAGS, BARREL ETC. O UGHT TO HAVE BEEN DEDUCTED FROM THE COST OF THE MATERIAL, MR. SOPARKA R, LEARNED ADVOCATE FOR THE ASSESSEE SUBMITTED THAT IT WOULD NOT MAKE ANY D IFFERENCE IF THE AMOUNT RECEIVED BY THE SALE OF EMPTY BARREL OR BAR DAN (JUTE BAGS) IS DEDUCTED FROM THE COST OF THE RAW MATERIAL. HE SUBM ITTED THAT IF THE COST IS REDUCED BY DEDUCTING THE SUM SO RECEIVED, THE PROFI T WILL INCREASE AND ULTIMATELY, THE TOTAL WOULD BE THE SAME. HE SUBMITT ED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE TRIBUN AL HAS RIGHTLY COME TO THE CONCLUSION THAT THE ITEMS COVERED BY QUESTIO N NO. 5 ARE COVERED BY SECTION 80.I OF THE ACT INASMUCH THE AMOUNT RECEIVE D CAN BE SAID TO HAVE BEEN RECEIVED FROM THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE. HE SUBMITTED THAT NO QUESTION OF LAW IS RAISED, MORE P ARTICULARLY, WHEN A DIVISION BENCH OF THIS COURT IN INCOME TAX APPLICAT ION NO. 70 OF 1997 HAD CONSIDERED A SIMILAR QUESTION AND HELD THAT IT WAS , HOWEVER, FOUND THAT THE ITEMS OF KASAR AND SALE OF EMPTY SODA ASH BARDA NS, AS DIRECTLY CONNECTED WITH THE MANUFACTURING ACTIVITIES OF THE ASSESSEE AND SHOULD BE ALLOWED. IT IS REQUIRED TO BE NOTED THAT IF THE AS SESSEE WAS NOT ENGAGED IN INDUSTRIAL ACTIVITIES, THERE WAS NO QUESTION OF EMPTY BARRELS OR BARDANS. INSTEAD OF MANUFACTURING IF THE ASSESSEE WAS DOING TRADING ACTIVITIES I.E. DEALING IN RAW MATERIAL AND IF THE ASSESSEE HAD SOL D THE MATERIAL ON RETAIL BASIS AND EARNED AMOUNT BY SALE OF BARDANS, THEN OB VIOUSLY THIS SECTION WILL NOT APPLY. 5.0. THE DECISION OF THIS COURT IN THE CASE OF HARJIVANDAS JUTHABHAI ZAVERI AND ANR (SUPRA) HAS BEEN SUBSEQUENTLY CONSIDERED BY THE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SADHU FORGING LIMITED REPORTED IN (2011) 336 ITR 444 (DELHI) AND IT IS HELD THAT RECEIPT OF SALE OF SCRAP PART AND P ARCEL OF INDUSTRIAL ACTIVITY AND THEREFORE, DEDUCTION UNDER SECTION 80I B IS ALLOWABLE. IN THE SAID DECISION, THE DELHI HIGH COURT HAS HELD TH AT THE INDUSTRIAL UNDERTAKING SET UP BY THE ASSESSEE WAS FOR THE PURP OSE OF MANUFACTURE OF STEEL FORGING, TRANSMISSION GEARS AN D PART AND ACCESSORIES OF MOTOR VEHICLES AND THE SCRAP OF THES E ITEMS WAS STATED TO BE A BY PRODUCT OF MANUFACTURING PROCESS. THE ACTIVITY OF FORGING WAS MANUFACTURING WITHIN THE AMBIT OF SEC TION 80IB. IT WAS IMMATERIAL THAT THE ASSESSEE WAS DOING THE JOB OF F ORGING ALSO FOR CUSTOMERS AND WAS CHARGING THEM ON JOB WORK BASIS O R ON THE BASIS OF LABOUR CHARGES. IT WOULD STILL BE QUALIFIED AS C ARRYING ON ELIGIBLE BUSINESS UNDER SECTION 80IB. THE ACTIVITIES OF THE ASSESSEE WERE IN GIVING HEAT TREATMENT FOR WHICH IT HAD EARNED LABOU R CHARGES AND JOB ITA NO. 1078/AHD/2012 ASST. YEAR 2009-10 6 WORK CHARGES. IT COULD THUS BE SAID THAT THE ASSESS EE HAD DONE A PROCESS ON THE RAW MATERIAL WHICH WAS NOTHING BUT A PART AND PARCEL OF THE MANUFACTURING PROCESS OF THE INDUSTRIAL UNDE RTAKING. THESE RECEIPTS COULD NOT BE SAID TO BE INDEPENDENT INCOME OF THE MANUFACTURING ACTIVITIES OF THE UNDERTAKING OF THE ASSESSEE AND THUS COULD NOT BE EXCLUDED FROM THE PROFITS AND GAINS DE RIVED FROM THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80IB.THESE WERE GAINS DERIVED FROM THE INDU STRIAL UNDERTAKING AND SO ENTITLED FOR THE PURPOSE OF COMP UTING DEDUCTION UNDER SECTION 80IB. THERE COULD NOT BE ANY TWO OPIN IONS THAT MANUFACTURING ACTIVITY OF THE TYPE OF MATERIAL BEIN G UNDERTAKEN BY THE ASSESSEE WOULD ALSO GENERATE SCRAP IN THE PROCE SS OF MANUFACTURING. THE RECEIPTS FROM SALE OF SCRAP BEIN G PART AND PARCEL OF THE ACTIVITY AND BEING PROXIMATE THERETO WOULD A LSO BE WITHIN THE AMBIT OF GAINS DERIVED FROM THE INDUSTRIAL UNDERTAK ING FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80IB. 6.0. APPLYING THE RATIO / LAW LAID DOWN BY THIS COU RT IN THE CASE OF HARJIVANDAS JUTHABHAI ZAVERI AND ANR (SUPRA) AS WELL AS DELHI HIGH COURT IN THE CASE OF SADHU FORGING LTD (SUPRA), TO THE FACTS OF THE CASE ON HAND, IT CANNOT BE SAID THAT THE LEARNE D TRIBUNAL HAS COMMITTED ANY ERROR IN HOLDING THAT THE DEDUCTION U NDER SECTION 80IB OF THE ACT IS ALLOWABLE FOR THE INCOME FROM SA LE OF SCRAP. UNDER THE CIRCUMSTANCES, SUBSTANTIAL QUESTION OF LAW RAIS ED IS ANSWERED AGAINST THE REVENUE. HENCE, PRESENT APPEAL DESERVES TO BE DISMISSED AND IS ACCORDINGLY DISMISSED. 7. FROM GOING THROUGH THE ABOVE REFERRED JUDICIAL P RONOUNCEMENT WHEREIN IT HAS BEEN HELD THAT IF THE MAIN MANUFACTU RING ACTIVITY IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT THEN REC EIPT FROM SALE OF SCRAP GENERATED IN THE PROCESS OF MANUFACTURING AS WELL AS THE SCRAP FROM OTHER ITEMS AVAILABLE IN THE MANUFACTURING UNI T, THEN SUCH RECEIPTS FROM SALE OF SCRAP SHALL COME WITHIN THE A MBIT OF GAINS ELIGIBLE FOR DEDUCTION U/S 80 IB OF THE ACT. IN THE CASE OF ASSESSEE THE ISSUE IS SIMILAR AS THE ASSESSEES BUSINESS IS ELIG IBLE FOR DEDUCTION U/S 80IB AND IT HAS ALSO RECEIVED INCOME FROM SALE OF SCRAP AND, THEREFORE, IN VIEW OF OUR ABOVE DISCUSSION, WE FIND THAT THE ISSUE OF ITA NO. 1078/AHD/2012 ASST. YEAR 2009-10 7 ASSESSEE IS COVERED BY THE DECISION OF HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JIKAR A. SAIYED (SUPRA ). THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8. THE OTHER GROUND IS OF GENERAL NATURE, WHICH NEE DS NO ADJUDICATION. 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 13 JANUARY, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 13/01/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 1078/AHD/2012 ASST. YEAR 2009-10 8 1. DATE OF DICTATION: 8/01/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 11/01/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 13/01/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: