ACIT, Ludhiana V. M/s Getrag Hi-tech Gears (India) Pvt. Ltd., Ludhiana

ITA 128/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5312 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 13-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3); 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 128/CHD/2011 ASSESSMENT YEAR: 2006-07 THE ACIT, VS. M/S GETRAG HI-TECH GEARS (INDIA) PV T LTD CIRCLE-I, LUDHIANA LUDHIANA PAN NO. AABCG1650J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY KUMAR SHARMA RESPONDENT BY: NONE ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF C IT(A)-II, LUDHIANA DATED 14.12.2010 RELATING TO ASSESSMENT YE AR 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. A CT, 1961. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 61,73,667/- MADE BY TH E ASSESSING OFFICER BY DISALLOWING EXEMPTION U/S 10B OF THE INCOME TAX ACT, 1961 ON THE FOLLOWING ITEMS OF INCOME WHICH ARE NOT DIRECTLY RELATED TO THE PROFIT S DERIVED FROM INDUSTRIAL UNDERTAKING FROM EXPORT O F ARTICLES OR THINGS:- (I) SUNDRY CREDITORS WRITTEN BACK (RS. 4,25,654/-) (II) EXCHANGE RATE DIFFERENCE (RS. 12,29,174/-) 2 (III) SALE OF EMPTIES AND MISC. SCRAP (RS. 5,65,188/-) (IV) SCRAP SALE (RS. 36,91,553/-) (V) INSURANCE CLAIM AGAINST MACHINERY BREAK DOWN (RS. 2,62,098/-) 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N TREATING ABOVE ITEMS OF INCOME MENTIONED AT (I) TO (V) AS THE BUSINESS INCOME OF THE UNDERTAKING OF THE ASSESSEE WHEREAS THE SAME IS NOT DIRECTLY RELATED T O THE PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING FORM EXPORT OF ARTICLES OR THINGS AS HELD BY THE ASSESSI NG OFFICER IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT V STERLING FOODS 237 ITR 5 79. 3. ON THE APPOINTED DATE OF HEARING, NONE WAS PRES ENT ON BEHALF OF THE ASSESSEE AND WE PROCEED TO DISPOSE OF THE PRESENT A PPEAL AS THE SAID ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE RELATING TO ASSESSMENT YEAR 2005-06. 4. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDER OF THE ASSESSING OFFICER. 5. THE ASSESSING OFFICER HAD DISALLOWED THE EXEMPTI ON U/S 10B OF THE INCOME TAX ACT ON CERTAIN ITEMS OF INCOME HOLDING T HAT THE SAME WERE NOT DERIVED FROM THE EXPORT OF ARTICLES OR THINGS AND H ENCE NOT STRICTLY RELATED TO THE PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING. THE CIT(A) HAD ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE RAT IO LAID DOWN BY THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSM ENT YEAR 2005-06. 6. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD IN ADDITION TO THE PROFITS OF BUSINESS ALSO CLAIMED EXEMPTION U/S 10B OF THE INCOME TAX ACT ON THE FOLLOWING ITEMS OF INCOME:- 3 (I) SUNDRY CREDITORS WRITTEN BACK RS. 4,25,654/- (II) EXCHANGE RATE DIFFERENCE RS. 12,29,174/- (III) SALE OF EMPTIES AND MISC. SCRAP RS. 5,65,188/- (IV) SCRAP SALE RS. 36,91,553/- (V) INSURANCE CLAIM AGAINST RS. 2,62,098/- MACHINERY BREAK DOWN 7. THE NATURE OF THE SAID RECEIPTS WERE EXPLAINED B EFORE THE ASSESSING OFFICER AND ALSO CIT(A) AND ARE INCORPORATED IN THE IR RESPECTIVE ORDERS. THE CLAIM OF THE ASSESSEE WAS THAT THE ABOVE SAID R ECEIPTS OF INCOME WERE EARNED AS PART OF THE BUSINESS OPERATIONS AND HENCE WERE ELIGIBLE TO BE CONSIDERED AS PROFITS DERIVED FROM INDUSTRIAL UNDER TAKING IN TURN ELIGIBLE FOR DEDUCTION U/S 10 B OF THE INCOME TAX ACT. THE TRIBUNAL IN ITA NO. 838/CHD/2009 RELATING TO ASSESSMENT YEAR 2005-06 VI DE ORDER DATED 29.1.2010 HAD CONSIDERED THE ISSUE AND HAD TAKEN SU PPORT FROM THE RATIO LAID DOWN BY THE HON'BLE RAJASTHAN HIGH COURT IN CI T VS. HYCRON INDIA LTD [(2008) 308 ITR 251 (RAJ)] WHEREIN IT WAS HELD AS UNDER: FOR ALL PURPOSES, PROFITS AND GAINS OF BUSINESS OR PROFESSION, AND INCOME FROM OTHER SOURCES, ARE TREATED, BY THE ACT TO BE DIFFERENT SPECIES OF INCO ME. IN THIS BACKGROUND, S.2(24) AS SUCH, DOES NOT CATEGORIZE SEPARATELY, PROFITS AND GAINS OF BUSINES S OR PROFESSION. THUS EXPRESSION PROFITS AND GAINS AS USED IN S.2(24), IS WIDER EXPRESSION, AND IS NOT CONFINED TO PROFITS AND GAINS OF BUSINESS OR PROFESSION:. IN THIS BACKGROUND, THE LANGUAGE OF S . 10B, AGAIN, PROVIDES FOR EXEMPTION, WITH RESPECT TO ANY PROFITS AND GAINS DERIVED BY THE ASSESSEE, AN D IS NOT CONFINED TO PROFITS AND GAINS OF BUSINESS AND PROFESSION AS PROVIDED UNDER S.14D. THE INCOME DERIVED BY THE ASSESSEE FROM SISTER CONCERN, DOES F ALL WITHIN EXPRESSION PROFITS AND GAINS. 8. THE INDIVIDUAL ITEMS OF INCOME WERE REFERRED TO BY THE TRIBUNAL IN PARAS 13 TO 16 OF ITS ORDER DATED 29.10.2010 AND TH E BENEFIT OF DEDUCTION 4 CLAIMED U/S 10B OF THE ACT WAS ALLOWED ON THE UNDER MENTIONED RECEIPTS OF INCOME:- (I) PREVIOUS YEARS PROVISION OF EXPENSES RS. 57,520/- WRITTEN BACK (II) EXCHANGE RATE DIFFERENCE RS. 75,574 /- (III) MISC. INCOME (SALE OF EMPTY PACKING MATERIAL) RS. 1,36,460/- IV) SALE OF SCRAP (GENERATED DURING MANUFACTURING PROCESS) RS. 21,98,999/- TOTAL RS. 23,98,553/- 9. THE RELEVANT FINDINGS OF TRIBUNAL WERE AS UNDER: - 13. NOW COMING TO THE INDIVIDUAL ITEMS OF INCOME, WE FIND THAT DURING THE YEAR THE ASSESSEE HAD WRITTEN BACK PREVIOUS YEAR PROVISIONS OF EXPENSES TOTALING RS. 57,520/-. THE DELHI BENCH OF TRIBUNAL IN CLAAS INDIA LTD VS. ACIT (200 8) 21 SOT 580 (DEL) IN ITA NO. 608/DEL/2006 VIDE ORDER D ATED 22.2.2008 HELD THAT THE PROVISION WRITTEN BACK WERE PART OF BUSINESS INCOME AS PER THE PROVISIONS OF SECTION 41 (1) OF THE ACT. FOLLOWING THE SAID ANALOGY, THE ITEM OF INCO ME BEING PROFITS OF BUSINESS IS ENTITLED TO BE BENEFIT OF DE DUCTION CLAIMED U/S 10B OF THE ACT. 14. THE SECOND ITEM OF INCOME IS THE EXCHANGE RATE DIFFERENCE OF RS.75,574/-. THE AHEMEDABAD BENCH OF TRIBUNAL IN ITO VS. BANYAN CHEMICAL LTD (117 ITD 37 6 ) IN ITA NO. 2702/AHD/2004 ORDER DATED 29.12.2008 HELD T HAT THE FOREIGN EXCHANGE GAIN RECEIVED ON FLUCTUATION OF EX PORT PROCEEDS CONSTITUTES PROFITS DERIVED FROM EXPORT BU SINESS ELIGIBLE FOR EXEMPTION U/S 10B OF THE ACT. RESPECT FULLY, FOLLOWING THE RATIO LAID DOWN BY COORDINATE BENCH O F TRIBUNAL, WE HOLD THAT THE ASSESSEE IS ENTITLED TO BENEFIT OF DEDUCTION U/S 10B OF THE ACT ON THE INCOME ARISING ON EXCHANGE RATE DIFFERENCE, BEING PROFITS OF BUSINESS . 15. THE THIRD ITEM OF INCOME IS ON ACCOUNT OF MISC. INCOME BEING SALE OF EMPTY PACKING MATERIAL AND OLD USED M ACHINERY PARTS GENERATED OUT OF OPERATIONAL ACTIVITIES. THE HON'BLE GUJRAT HIGH COURT IN DCIT VS CORE HEALTHCARE LTD (2 009) [308 ITR 263 (GUJ)] HELD THAT RECEIPTS FROM SALE OF EMPTY CONTAINERS WOULD FORM PART OF PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING ELIGIBLE FOR RELIEF U/S 80HH AND 80I OF THE ACT. FOLLOWING THE SAME ANALOGY, WE HOLD THAT THE MISC. INCOME 5 EARNED BY THE ASSESSEE IS ELIGIBLE TO BE INCLUDED A S PROFITS OF BUSINESS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 1 0B OF THE ACT. 16. THE FOURTH ITEM OF INCOME IS ON ACCOUNT OF SALE OF SCRAP GENERATED DURING THE MANUFACTURING PROCESS TO TALING RS. 21,28,999/-. THE ASSESSEE HAD CLAIMED NOT TO B E A TRADER IN SCRAP. FOLLOWING THE RATIO LAID DOWN BY THE HO N'BLE MADRAS HIGH COURT IN FENNER (INDIA) LTD VS CIT (241 ITR 803)(MAD.) WHEREIN IT HAS BEEN HELD THAT PROFITS FR OM SALE OF SCRAP ARE ELIGIBLE FOR DEDUCTION U/S 80HH OF THE AC T, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF DED UCTION CLAIMED U/S 10B OF THE ACT AS THE SAID ITEMS OF INC OME IS THE PROFITS EARNED BY THE ASSESSEE FROM THE CARRYING ON OF THE BUSINESS BY THE UNDERTAKING. WE UPHOLD THE ORDER O F CIT(A) IN ALLOWING THE BENEFIT OF DEDUCTION CLAIMED UNDER SECTION 10B OF THE ACT ON ALL THE FOUR ITEMS OF INCOME TOTA LING RS. 23,98,553/-. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 10. WE FIND THAT DURING THE YEAR UNDER APPEAL, THE ISSUE RELATES TO THE DIFFERENT ITEMS OF INCOME AND ALSO INSURANCE CLAIM RECEIVED AGAINST MACHINERY BREAK DOWN. FOLLOWING THE ORDER OF THE T RIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2005-06 (SUPRA ), WE ALLOW THE CLAIM OF THE ASSESSEE VIS-A-VIS THE ITEMS OF INCOME I.E. SUNDRY CREDITORS WRITTEN BACK, EXCHANGE RATE DIFFERENCE, SALE OF EMPTIES AND MISC. SCRAP, SCRAP SALE (GENERATED DURING MANUFACTURING PROCESS) AND H OLD THAT THE SAID INCOME BEING PROFITS OF BUSINESS ARE ENTITLED TO BE NEFIT OF DEDUCTION CLAIMED U/S 10B OF THE ACT. 11. THE LAST ITEM OF INCOME IS INSURANCE CLAIM RECE IVED AGAINST MACHINERY BREAK DOWN TOTALING RS. 2,62,098/-. THE LD. AR FOR THE ASSESSEE HAD PLACED RELIANCE ON SRINIVASA CYSTINE L TD VS. JCIT [92 ITD 460 (HYD)] WHEREIN THE INSURANCE CLAIM RECEIVED BY THE ASSESSEE WAS ALSO ON ACCOUNT OF MACHINERY REPAIRS AND IT WAS HELD THA T NET RECEIPTS WERE TO BE CONSIDERED FOR TAXATION. FOLLOWING THE ABOVE S AID, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESS EE IN CASE THE NET 6 RECEIPTS ARE POSITIVE, THE SAME ARE TO BE CONSIDERE D AS TAXABLE AND NOT ENTITLED FOR DEDUCTION U/S 10B OF THE ACT. THUS, T HE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE PARTLY ALLOWED. 12. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF JULY, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : JULY, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH