DCIT, CHENNAI V. SICGIL India Ltd., CHENNAI

ITA 1174/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96095 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 06-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2015
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Rectification of order

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . ! '# , $ % BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO.1174/MDS./2015 ( / ASSESSMENT YEAR :2010-11 ) DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(2), AAYAKAR BHAVAN, NEW BLOCK, 7 TH FLOOR, CHENNAI-34. VS. M/S.SICGIL INDIA LTD., DHUN BUILDING, 6 TH FLOOR, NO.84,(OLD NO.827), ANNA SALAI, CHENNAI 60 002. PAN AAACS 3767 M ( &' / APPELLANT ) ( ()&' / RESPONDENT ) / APPELLANT BY : DR.B.NISCHAL, JCIT,D.R / RESPONDENT BY : MR.S.SRIDHAR,ADVOCATE / DATE OF HEARING : 06.08.2015 ! /DATE OF PRONOUNCEMENT : 29.09.2015 * / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-15, CHENN AI DATED ITA NO. 1174/MDS/15 2 20.02.2015 IN ITA NO.444/13-14/A-15 PASSED UNDER SE C.143(3) READ WITH SECTION SEC. 250 OF THE ACT. 2. THE REVENUE HAS RAISED THREE ELABORATE GROUNDS IN ITS APPEAL; HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD. CIT ( A) HAS ERRED IN DIRECTING THE AO TO INCLUDE THE CYLINDER TRANSPORT CHARGE FOR THE PURPOSE OF COMPUTATION OF ALLOWABLE DEDUCTION U/S.8 0-IB OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G IN CO 2 GAS AND DRY ICE, FILED ITS RETURN OF INCOME FOR ASSESSM ENT YEAR 2010-11 ON 30.09.2010 ADMITTING ITS INCOME AS ` 2,07,83,020/-. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND THE A SSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON 20.03.2013 W HEREIN THE LD. ASSESSING OFFICER RESTRICTED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S.80-IB OF THE ACT FROM ` 1,94,63,923/- TO ` 2,53,10,364/- BY EXCLUDING THE TRANSPORT CHARGES OF CYLINDERS FROM T HE REVENUE. ITA NO. 1174/MDS/15 3 4. IT WAS OPINED BY THE LD. ASSESSING OFFICER THAT THE TRANSPORT CHARGES RECEIVED BY THE ASSESSEE DID NOT AMOUNT TO INCOME DERIVED FROM THE MANUFACTURING ACTIVITY OF CO 2 GAS AND DRYERS BY THE ASSESSEE. THE LD. ASSESSING OFFICER FURTHER OPINED THAT ONLY THE PROFITS AND GAINS DERIVED FROM THE BUSINESS OF MANU FACTURING ACTIVITY OF PRODUCING ANY ARTICLE OR THING QUALIFIES FOR DED UCTION U/S.80-IB OF THE ACT. SINCE ` 1,94,63,923/- WAS RECEIVED BY THE ASSESSEE TOWARDS CYLINDER TRANSPORT CHARGES, THE LD. ASSESSING OFFIC ER EXCLUDED THE SAME FOR COMPUTING THE DEDUCTION U/S.80-IB OF THE A CT. WHILE DOING SO, THE LD. ASSESSING OFFICER REJECTED THE ARGUMENT OF THE ASSESSEE THAT THE CYLINDER TRANSPORT CHARGES WAS TAKEN AS TU RNOVER FOR THE PURPOSE OF LEVY OF CENTRAL EXCISE DUTY, BECAUSE THE CENTRAL EXCISE DEPARTMENT WAS A DIFFERENT WING OF THE GOVERNMENT A ND THEIR TREATMENT OF THE CYLINDER TRANSPORT CHARGES AS TURN OVER HAS NO RELEVANCE UNDER THE INCOME TAX ACT. FURTHER THE LD. ASSESSING OFFICER REFUSED TO RELY ON THE CIRCULAR NO.9/2012 [ F.NO.275/11/2012- IT (B)] DATED 17.10.2012 BECAUSE THE ISSUE MENTION ED IN THE CIRCULAR WAS WITH RESPECT TO TAX DEDUCTED AT SOURCE ON GAS T RANSPORTATION ITA NO. 1174/MDS/15 4 CHARGES PAID BY THE PURCHASERS OF NATURAL GAS WHERE IN IT WAS CLARIFIED AS FOLLOWS:- 4. IT IS CLARIFIED THAT IN CASE THE OWNER/SELLER OF THE GAS SELLS AS WELL AS TRANSPORTS THE GAS TO THE PURCHASER TILL THE POINT OF DELIVERY, WHERE THE OWNERSHIP OF GAS TO THE PURCHASER IS SIMULTANEOUSLY TRANSFERRED, THE MANNER OF RAISING THE SALE BILL (WHETHER THE TRANSP ORTATION CHARGES ARE EMBEDDED IN THE COST OF GAS OR SHOWN SEPARATELY) DO ES NOT ALTER THE BASIC NATURE OF SUCH CONTRACT WHICH REMAINS ESSENTIALLY A CONTRACT FOR SALE AND NOT A WORKS CONTRACT AS ENVISAGED IN SECTION.194C OF THE ACT. HENCE, IN SUCH CIRCUMSTANCES, PROVISIONS OF CHAPTER XVII-B OF THE ACT ARE NOT APPLICABLE ON THE COMPONENT OF GAS TRANSPORTATION C HARGES PAID BY THE PURCHASER TO THE OWNER/SELLER OF THE GAS. THE USE O F DIFFERENT MODES OF TRANSPORTATION OF GAS BY OWNER/SELLER WILL NOT ALTE R THE POSITION. 5. ON APPEAL, THE LD. CIT (A) HELD THE ISSUE IN FA VOUR OF THE ASSESSEE AND DIRECTED THE LD. ASSESSING OFFICER TO INCLUDE THE CYLINDER TRANSPORT CHARGES FOR THE PURPOSE OF COMPU TATION OF DEDUCTION U/S.80-IB OF THE ACT BY OBSERVING AS FOLL OWS:- 5.2.1 THE FACTS OF THE PRESENT CASE WITH RESPECT TO CLAIM OF TRANSPORT CHARGES ARE IDENTICAL TO THE FACTS OF THE CASE PREV AILING IN THE A.Y 2005-06 DECIDED BY CIT(A)-V IN THE ORDER DATED 04.04.2011. THE AR OF THE APPELLANT ALSO RELIED UPON THE RATIO OF THE DECISIO N OF THE MADRAS HIGH COURT REPORTED IN 110 ITR 453 IN THE CASE OF CIT V. L.G.RAMAMURTHY & OTHERS IN SUPPORT OF ITS CLAIM THAT CONSISTENT VIEW SHOULD BE TAKEN IN AN ITA NO. 1174/MDS/15 5 IDENTICAL CIRCUMSTANCES. IN VIEW OF THE ABOVE FACT S AND LEGAL POSITION, I DIRECT THE ASSESSING OFFICER TO INCLUDE THE CYLINDE R SERVICE CHARGES OF RS.1,88,44,632/- FOR THE PURPOSE OF COMPUTATION OF ALLOWABLE DEDUCTION U/S.80-IB OF THE ACT. REGARDING THE NATURE OF CYLI NDER SERVICE CHARGES AND RENTAL INCOME, THE AR OF THE APPELLANT COULD NOT FU RNISH ANY SUBSTANTIAL EVIDENCE IN SUPPORT OF ITS CLAIM. I FIND THAT THE CYLINDER SERVICE CHARGES , TRANSPORT CHARGES (IN THE RECTIFICATION ORDER U/S.154 OF THE ACT TR ANSPORT CHARGE IS DELETED) AND HYDRAULIC TESTING CHARGES ARE NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING ELIGIBLE U/S.80-IB OF THE IT ACT FOLLOWING THE RATIO OF THE DECISION OF THE SUPREME COURT IN THE CASE OF CA MBAY ELECTRIC SUPPLY INDUSTRIES LTD VS. CIT 113 ITR 84, CIT VS. STERLING FOODS 237 ITR 579 AND PANDIAN CHEMICALS VS. CIT 262 ITR 278 AND DIREC T THE ASSESSING OFFICER TO EXCLUDE THE ABOVE ITEMS OF RECEIPTS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.80-IB OF THE ACT. IN O THER WORDS, THE APPELLANT GETS A RELIEF IN RESPECT OF RECEIPT OF CY LINDER TRANSPORT CHARGES ONLY. IN RESPECT OF BALANCE RECEIPTS AS DISCUSSED A BOVE, THE ASSESSING OFFICERS ACTION FOR DISALLOWANCE OF DEDUCTION U/S. 80-IB ARE CONFIRMED. 6. LD. D.R ARGUED IN SUPPORT OF THE ORDER OF THE LD. ASSESSING OFFICER WHILE AS THE LD. A.R. RELIED ON THE ORDER O F THE LD. CIT (A). 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE ORDER OF T HE LD. CIT (A) IT IS EVIDENT THAT HE HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY RELYING ON THE DECISION OF HIS PREDECESSOR IN THE A SSESSEES OWN CASE ITA NO. 1174/MDS/15 6 FOR THE ASSESSMENT YEAR 2005-06 BY THE ORDER DATED 04.04.2011. MOREOVER, ON EXAMINING THE FACTS OF THE CASE IT IS REVEALED THAT THE CENTRAL EXCISE DEPARTMENT HAS INCLUDED THE CYLINDER TRANSPORT CHARGES AS A PART OF THE SALE CONSIDERATION FOR THE SALE OF LIQUID CARBON DIOXIDE; ACCORDINGLY, THEY HAVE LEVIED CENTR AL EXCISE DUTY ON THE SAME. WHEN ONE WING OF THE CENTRAL GOVERNMENT CONSIDERS THE TRANSPORT CHARGES ON TRANSPORT OF CO 2 GAS AS A PART OF SALE CONSIDERATION AND LEVIES EXCISE DUTY ON THE SAME, W E WONDER AS TO WHY THE OTHER WING OF THE CENTRAL GOVERNMENT REFUSE S TO TREAT THE SAME AS SALE CONSIDERATION FOR THE PURPOSE OF GRANT ING BENEFIT U/S.80-IB OF THE ACT WHEN THE ACT DOES NOT SPECIFIC ALLY PROHIBIT FROM GRANTING SUCH BENEFITS. THE ONLY GROUSE OF THE REV ENUE IS THAT TRANSPORT CHARGES ON SALE OF LIQUID CARBON DIOXIDE GAD DOES NOT HAVE DIRECT NEXUS WITH THE ASSESSEES INDUSTRIAL UNDERTA KING AND THEREFORE, THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF 80-I B OF THE ACT. WE DO NOT SUBSCRIBE TO THE VIEW OF THE REVENUE. WHEN THE EXPENDITURE INCURRED TOWARDS TRANSPORT CHARGES FOR PROCURING RA W MATERIALS IS TREATED TO HAVE DIRECT NEXUS WITH THE ASSESSEES IN DUSTRIAL UNDERTAKING AND ALLOWED AS DEDUCTION, THE DELIVERY CHARGES OF THE ITA NO. 1174/MDS/15 7 FINISHED PRODUCT I.E., LIQUID CARBON DIOXIDE SHOULD ALSO HAVE TO BE TREATED IN THE SIMILAR MANNER AS HAVING DIRECT NEXU S WITH THE ASSESSEES INDUSTRIAL UNDERTAKING AND AN INTEGRAL P ART OF THE TURNOVER WHEN THE ACT DOES NOT PREVENT FROM SUCH INFERENCE. THEREFORE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDE R OF THE LD. CIT (A). 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER PRONOUNCED ON 29 TH SEPTEMBER, 2015 AT CHENNAI. SD/- SD/- ( . ! '# ) (V. DURGA RAO) ( . ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 29 TH SEPTEMBER, 2015. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE