DCIT, CHENNAI V. Arjun Chemicals Private Ltd., Chengalput

ITA 1270/CHNY/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7781 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: S RAMAMURTHY
• Section: 80IB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO. : 1268, 1269 & 1270/MDS/2014 / ASSESSMENT YEAR : 2007-08, 2008-09 & 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(1), CHENNAI 34. V. M/S. ARJUN CHEMICALS PVT. LTD., II FLOOR, 149 VELACHERY-TAMBARAM HIGH ROAD, PALLIKARANAI, CHENNAI - 600 100. PAN : AAACA5195M ( /APPELLANT) ( !' /RESPONDENT) # /APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT !' # /RESPONDENT BY : SHRI S. RAMAMURTHY, ADVOCATE # /DATE OF HEARING : 23.01.2017 # /DATE OF PRONOUNCEMENT : 23.02.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : ALL THE APPEALS OF THE REVENUE ARE DIRECTED AGAINS T THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) 1, CHENNAI AND PERTAINS TO THE ASSESSMENT YEAR 2007-08 , 2008-09 AND 2009-10. SINCE COMMON ISSUE ARISES FOR CONSIDERAT ION IN ALL THE APPEALS, WE HEARD THE SAME TOGETHER AND DISPOSING O FF THE SAME BY THIS 2 I.T.A. NO. 1268, 1269 & 1270/MDS/2014 COMMON ORDER. THE ONLY ISSUE ARISES FOR CONSIDERA TION IS DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IB OF THE I NCOME TAX ACT, 1961 (IN SHORT THE ACT) IN RESPECT OF EXCISE DUTY REFU ND. 2. SHRI SHIVA SRINIVAS, THE LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB OF THE ACT IN RESPECT OF THE EXCISE DUTY REFUND. ACCORDIN G TO THE LD. DEPARTMENTAL REPRESENTATIVE EXCISE DUTY REFUND WAS ON THE BASIS OF THE SCHEME OF THE GOVERNMENT. THEREFORE, IT IS NOT DER IVED FROM INDUSTRIAL UNDERTAKING. REFERRING TO THE JUDGMENT OF THE APEX COURT IN LIBERTY INDIA V CIT, 183 TAXMAN 349, THE LD. D.R., SUBMITTED THAT REMISSION OF DUTY, DRAW BACK AND DEPB WAS ON ACCOUNT OF STATUTORY POLI CY UNDER CUSTOMS ACT AND THE SCHEME FRAMED BY THE GOVERNMENT OF INDI A. THEREFORE, IT WOULD NOT FALL WITHIN THE EXPRESSION OF PROFIT DERI VED FROM INDUSTRIAL UNDERTAKING. HENCE, THE CIT (APPEALS) IS NOT JUSTI FIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 3. WE HEARD SHRI S. RAMAMURTHY, THE LD. COUNSEL FOR THE ASSESSEE ALSO. 4. THE APEX COURT IN CIT V MEGHALAYA STEELS LTD 201 6-TIOL-25-SC- IT AFTER CONSIDERING ITS EARLIER JUDGMENT IN LIBERT Y INDIA LTD.( SUPRA) FOUND 3 I.T.A. NO. 1268, 1269 & 1270/MDS/2014 THAT THE EXPRESSION DERIVED FROM AS BEING SOMETHI NG DIRECTLY FROM AS OPPOSED TO ATTRIBUTABLE TO WHICH COULD BE SAID TO INCLUDE SOMETHING WHICH IS INDIRECT AS WELL. REFERRING TO LIBERTY IN DIA, THE APEX COURT FOUND THAT EXPORT INCENTIVE WHICH IS VERY FAR REMOVED FRO M REIMBURSEMENT OF ELEMENT OF COST. DEPB DRAWBACK SCHEME IS NOT RELAT ED TO THE BUSINESS OF AN INDUSTRIAL UNDERTAKING FOR MANUFACTURING OR S ELLING ITS PRODUCT. THE OBJECT BEYOND DEPB ENTITLEMENT IS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY PAYMENT ON THE IMPORT CONTENT OF THE EXPORT PR ODUCT WHICH IS PROVIDED FOR BY CREDIT TO CUSTOMS DUTY AGAINST THE EXPORT PRODUCT. REFERRING TO THE JUDGMENT OF CALCUTTA HIGH COURT IN MERINO PLY & CHEMICALS LTD V CIT, 209 ITR 508 [1994], THE APEX C OURT FOUND THAT THE CALCUTTA JUDGMENT, THE LEGAL PROVISIONS OF THE INCO ME TAX ACT HAS BEEN CORRECTLY APPRECIATED. IN FACT, THE OBSERVATION MA DE BY THE CALCUTTA HIGH COURT WAS REPRODUCED BY THE APEX COURT. THE CALCUT TA HIGH COURT IN FACT FOUND THAT TRANSPORT SUBSIDIARY IS INSEPARABLY CONNECTED WITH THE BUSINESS CARRIED ON BY THE ASSESSEE. THE ASSESSEE HAS INVOLVED IN THE MANUFACTURE OF PLYWOOD. THE ASSESSEE PUT UP THE UN IT IN THE BACKWARD AREA WHICH IS ENTITLED FOR BENEFIT OF THE SCHEME. THE TRANSPORT EXPENDITURE IS INCIDENTAL EXPENDITURE OF THE BUSINE SS AND IT IS AN EXPENDITURE WHICH RECOUPS THE SUBSIDIARY AND THAT T HE PURPOSE OF RECOUPMENT IS TO MAKE UP POSSIBLE PROFIT DEFICIT FO R OPERATING IN THE BACKWARD AREA. THEREFORE, THE CALCUTTA HIGH COURT FOUND THAT THE 4 I.T.A. NO. 1268, 1269 & 1270/MDS/2014 SUBSIDIARIES WERE INSEPARABLY CONNECTED WITH PROFIT OF THE BUSINESS. THE APEX COURT FURTHER FOUND THAT SUBSIDIARIES ARE GOOD TO REIMBURSE THE COST OF GOODS OF A PARTICULAR BUSINESS WOULD ALSO HAVE T O BE INCLUDED UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS AND NOT U NDER THE HEAD INCOME FROM OTHER SOURCES. IN VIEW OF THIS JUDGMENT OF TH E APEX COURT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT (APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. HENC E, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND THE SAME IS CONFIRMED. 4. IN THE RESULT THE APPEALS OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED ON 23 RD FEBRUARY, 2017 AT CHENNAI. SD/- SD/- ( . . ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, /DATED, THE 23 RD FEBRUARY, 2017. JR. # ! $ % $ /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A)-1, CHENNAI 4. /CIT 5. /DR 6. /GF.