The Addl. Vapi Range, Vapi V. M/s. Hamilton Housewares vt..Ltd., SILVASSA

ITA 1264/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2179 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 11-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R MEENA
• Assessee Lawyers: A GOPALAKRISHNAN
• Keywords: Business income
• Section: 143(3); 80HHC; 80IB

Judgement Text

ACIT, VAPI CIRCLE, VAPI VS. HAMILTON HOUSEWARES PVT. LTD./I.T.A. NO.1264/AHD/2015/SRT/A.Y.:2011-12 PAGE 1 OF 6 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./I.T.A NO.1264/AHD/2015/SRT /ASSESSMENT YEAR : 2011-12 THE ASSISTANT COMMISSIONER OF INCOME TAX, VAPI CIRCLE, VAPI. VS. HAMILTON HOUSEWARES PVT. LTD., 288/1, NEAR DADRA GRAM PANCHAYAT, DEMNI ROAD, DADRA, SILVASSA. [PAN: AABCD 1683 Q] APPELLANT /RESPONDENT /ASSESSEE BY SHRI A.GOPALAKRISHNAN CA /REVENUE BY SHRI S.R.MEENA SR.DR / DATE OF HEARING: 08 .0 8 .2018 /PRONOUNCEMENT ON 18 .0 9 . 2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VALSAD (IN SHORT THE CIT (A)) DATED 20.03.2015 PERTAINING TO ASSESSMENT YEAR 2011-12, WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, VAPI RANGE, VAPI(IN SHORT THE AO) DATED 04.02.2014 UNDER SECTION 143(3) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). ACIT, VAPI CIRCLE, VAPI VS. HAMILTON HOUSEWARES PVT. LTD./I.T.A. NO.1264/AHD/2015/SRT/A.Y.:2011-12 PAGE 2 OF 6 2. GROUND NO.1 STATES THE CIT(A) ERRED IN DELETING EXCLUSION OF FOREIGN EXCHANGE GAIN OF RS.1,38,851/- FROM THE PROFITS ELIGIBLE DEDUCTION U/S.80IC OF THE ACT IGNORING THE FACT THAT THEY BELONG TO THE CATEGORY OF ANCILLIARY PROFITS OF SUCH UNDERTAKING AND ARE NOT PROFITS DERIVED FROM ELIGIBLE BUSINESS. 3. THE AO NOTED THAT ASSESSEE HAS INCLUDED THE FOREIGN EXCHANGE GAIN OF RS.1,38,851/- SHOWN IN HARIDWAR UNIT-1 AS INCOME IN THE PROFIT ELIGIBLE FOR DEDUCTION U/S.80IC OF THE ACT. THE AO PLACING RELIANCE ON THE DECISION IN THE CASE OF CIT VS. STERLING FOODS [1999] 237 ITR 579 (SC) HELD THAT FOREIGN EXCHANGE GAIN BUSINESS IS NOT TO FROM THE PROFITS ELIGIBLE FOR DEDUCTION U/S.80IB OF THE ACT. SINCE THE PROVISIONS OF SECTION 80HHC AND 80IB ARE AKIN TO 80IC, HENCE THE ABOVE DECISION IS SQUARELY APPLICABLE. THEREFORE, THE AO EXCLUDED THE FOREIGN EXCHANGE GAIN OF THE RS.1,38,8518/- FROM THE ELIGIBLE PROFIT FOR DEDUCTION U/S.80IC OF THE ACT. IN APPEAL, THE CIT(A) NOTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN APPELLANTS OWN CASE FOR A.Y. 2007-08 AND 2008-09. SIMILARLY, THE CIT(A) HAS PLACED RELIANCE IN THE CASE OF CIT VS. PRIYANKA GEMS 367 ITR 575 (GUJ) IN WHICH IT HAS BEEN ACIT, VAPI CIRCLE, VAPI VS. HAMILTON HOUSEWARES PVT. LTD./I.T.A. NO.1264/AHD/2015/SRT/A.Y.:2011-12 PAGE 3 OF 6 HELD THAT FOREIGN EXCHANGE GAIN HAS TO BE CONSIDERED AS ELIGIBLE DEDUCTION U/S.80HHC OF THE ACT. 4. BEING AGGRIEVED, THE REVENUE FILED APPEAL BEFORE THIS TRIBUNAL. THE LD.SENIOR DEPARTMENTAL REPRESENTATIVE (SR.DR) RELIED ON THE ORDER OF THE AO, WHEREAS THE LD.COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF THE TRIBUNAL IN THE APPELLANTS OWN CASE IN ACIT VS. HAMILTON HOUSEWARE PVT. LTD. IN ITA NO.988/AHD/2010 FOR THE A.Y 2005-06, 2006-07 DATED 09.06.2015 WHEREIN PARA 7 IT WAS HELD THAT FOREIGN EXCHANGE FLUCTUATION GAINS BEARS THE CHARACTER OF INCOME DERIVED FROM EXPORTS SALES TO BE TREATED AS PART AND PARCEL OF EXPORT PROFITS ONLY. NO DISTINGUISHABLE OF FACTS OR LAW IS BEING POINTED OUT AT THE REVENUES BEHEST, SO AS TO ADOPT DIFFERENT APPROACH IN THE IMPUGNED ASSESSMENT YEAR. IN VIEW OF THESE FACTS, THIS GROUND OF REVENUE IS THEREFORE DISMISSED. 6. GROUND NO.2 STATES THAT CIT(A) ERRED IN DELETING THE SCRAP SALES OF RS.65,52,841/- FROM THE PROFITS ELIGIBLE FOR DEDUCTION ACIT, VAPI CIRCLE, VAPI VS. HAMILTON HOUSEWARES PVT. LTD./I.T.A. NO.1264/AHD/2015/SRT/A.Y.:2011-12 PAGE 4 OF 6 U/S.80IC OF THE ACT IGNORING THE FACT THAT SCRAP IS NOT GENERATED AS BYPRODUCT DURING THE COURSE OF MANUFACTURING PROCESS. 7. THE ASSESSEE HAS INCLUDED SCRAP INCOME OF RS.65,52,841/- FOR THE PURPOSE OF CLAIMING DEDUCTION U/S.80IC. HOWEVER, THE AO WAS OF THE VIEW THAT THE SCRAP IS NOT GENERATED AS A BYPRODUCT DURING THE COURSE OF MANUFACTURING PROCESS RATHER IT IS A SALE OF ALL UNUSABLE PRODUCT WHICH DEFINITELY DOES NOT FORM PART OF MANUFACTURING INCOME. ACCORDINGLY, BY REFERRING SOME DECISION, THE AO EXCLUDED THE SCRAP INCOME FROM THE ELIGIBLE PROFIT FOR DEDUCTION U/S.80IC. IN APPEAL, THE CIT(A) OBSERVED THAT THE AR OF THE APPELLANT SUBMITTED THAT THE JURISDICTIONAL HON'BLE GUJARAT HIGH COURT HAS ALLOWED THIS DEDUCTION U/S.80IB OF THE ACT IN THE CASE OF DCIT VS H.J.JHAVERI 258 ITR 785. FURTHER, IT WAS ALSO SUBMITTED THAT CIT(A) HAS ALSO ALLOWED THIS ISSUE IN APPELLANTS OWN CASE FOR THE A.Y. 2006-07 TO 2010-11. SINCE THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE APPELLANT BY THE CIT(A) AND TRIBUNAL, THEREFORE THE CIT(A) DIRECTED THE AO TO ALLOW DEDUCTION OF THIS INCOME ON ACCOUNT OF SALE OF SCRAP OF RS.65,52,841/- U/S.80IC OF THE ACT. ACIT, VAPI CIRCLE, VAPI VS. HAMILTON HOUSEWARES PVT. LTD./I.T.A. NO.1264/AHD/2015/SRT/A.Y.:2011-12 PAGE 5 OF 6 8. BEING AGGRIEVED, THE REVENUE IN APPEAL BEFORE THE TRIBUNAL. THE LD.DR RELIED ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF TRIBUNAL IN APPELLANTS OWN CASE IN ITA NO.988 DATED 09.06.2015 AND ITA NO.2070/AHD/2013 FOR A.Y. 200-11 DATED 05.09.2016. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE APPELLANT BY THE DECISION IN APPELLANTS OWN CASE BY TRIBUNAL VIDE ORDER DATED 09.06.2015 AND 05.09.2016. IN ITA NO.2070/AHD/2013 THE TRIBUNAL OBSERVED AS UNDER : 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL. THE TRIBUNAL IN ASSESSEES OWN CASE HAS CONSIDERED A SIMILAR ISSUE AT PARA 8 OF PAGE 5 OF ITS ORDER AND THE SAME READ AS UNDER:- 8. THE REVENUES FOURTH GROUND ASSAILS THE LD. CIT(A) ORDER GRANTING RELIEF TO THE ASSESSEE WITH REGARD TO EXCLUSION OF SCRAP INCOME OF RS.13,25,610/- FROM THE PROFIT ELIGIBLE FOR DEDUCTION U/S.80IB OF THE ACT WITHOUT CONSIDERING THE RATIO LAID DOWN BY THE HON'BLE M.P.HIGH COURT IN THE CASE OF D.P. AGRAWAL VS. CIT 272 ITR 118 (MP) WHEREIN IT HAS BEEN HELD BY THE HON'BLE COURT THAT SCRAP INCOME WILL NOT BE ELIGIBLE FOR DEDUCTION U/S.80IB OF THE ACT. 9. THE ASSESSING OFFICER NOTICED THE IMPUGNED SCRAP SALES INCOME OF RS.13,25,610/- AND HELD IT AS NOT TO HAVE BEEN DERIVED FROM NORMAL BUSINESS OPERATION. THE CIT(A) TREATS THE SCRAP IN QUESTION TO HAVE BEEN GENERATED FROM ITS MANUFACTURING PROCESS HAVING DIRECT RELATION TO THE SOURCE OF BUSINESS INCOME. THE HONBLE JURISDICTIONAL HIGH COURT IN DCIT VS. HARJIVANDAS J. ZAVERI 258 ITR 785 DEALS WITH A CASE OF SALE OF EMPTY BOTTLES/PLASTIC WASTE IN CASE OF AN ASSESSEE INVOLVED IN MANUFACTURING ACTIVITY AND HOLDS THAT THE SAME ARE DIRECTLY CONNECTED WITH THE SAID ACTIVITY. THEIR LORDSHIPS ASSUMED A HYPOTHETICAL SITUATION THAT IN CASE THERE IS NO INDUSTRIAL/MANUFACTURING ACTIVITY, THERE WOULD NOT BE ANY SCRAP GENERATED. THE REVENUE HAS NOT BEEN ABLE TO DISTINGUISH ACIT, VAPI CIRCLE, VAPI VS. HAMILTON HOUSEWARES PVT. LTD./I.T.A. NO.1264/AHD/2015/SRT/A.Y.:2011-12 PAGE 6 OF 6 OPERATION OF THE SAME. WE ALSO FOLLOW SUIT AND HOLD THAT THE CIT(A) HAS RIGHTLY INCLUDED SCRAP INCOME OF RS.43,25,610/- AS PROFIT ELIGIBLE FOR SECTION 80IB DEDUCTIONS THE REVENUES CORRESPONDING GROUND IS REJECTED. 10. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDINATE BENCH (SUPRA) IN ASSESSEES OWN CASE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSED. 10. IN THE LIGHT OF THE ABOVE FACTS AND RESPECTFULLY, FOLLOWING THE DECISION OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF LD.CIT(A), ACCORDINGLY APPEAL OF THE REVENUE IS THEREFORE DISMISSED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 12. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18-09-2018. SD/- SD/- ( . . /C.M. GARG) ( . . / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / SURAT, DATED : 18 TH SEP , 2018/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT