M/s MSJ Bath Fittings & Accessories Pvt. Ltd., Manimajra V. Addl. CIT, Chandigarh

ITA 1301/CHANDI/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8241 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 07-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO.1301/CHD/2016 ASSESSMENT YEAR: 2009-10 M/S MSJ BATH FITTINGS & VS THE ADDL.CIT, ACCESSORIES PVT.LTD., RANGE-III, SCO 827/NAC,MANIMAJRA CHANDIGARH. (EARLIER M/S ESS ESS BATHROOM PRODUCTS PVT. LTD.) PAN: AAACE7289A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINEET KRISHAN RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 16.02.2017 DATE OF PRONOUNCEMENT : 01.03.2017 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-1 CHANDIGARH DATED 14.10.2016 FOR ASSESSMENT YEAR 2009-10. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO. 1 IS GENERAL. GROUND NO. 3 IS NOT PRESSED BY LD. COUNSEL FOR THE ASSESSEE, SAME IS, THEREFORE, DISMISSED AS NOT PRESSED. 2 4. GROUND NO. 2 READS AS UNDER : 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE ID. COMMISSIONER OF INCOME TAX (APPEALS) GRAVEL LY ERRED IN UPHOLDING THE ORDER OF THE ID. ASSESSING OFFICER UNDER WHICH ADDITION UNDER SECTION 80IC ON ACCOUNT OF DISALLOWANCE UNDER SECTION 40A(IA) AND UNDER SECTION 43B AT RS. 5,40,800/- AND RS. 40,288/- RESPECTIVELY WAS MADE. THIS DEDUCTION IS COVERED EVEN UNDER BOARD'S CIRCULAR NO. 37 OF 2016 DATED 02.11.2016. THE APPELLANT IS ENTITLED TO DEDUCTION UNDER SECTION 80IC ON THE SAID INCREASED PROFIT. 5. THE LD. CIT(APPEALS) NOTED THAT THE CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT ON DISALLOW ANCE UNDER SECTION 40(A)(IA) AND 43B OF THE ACT TO THE E XTENT OF RS. 5,40,800/- AND RS. 40,288/- ARE NOT ELIGIBLE FOR DEDUCTION AND SAME ADDITION WAS CONFIRMED FOLLOWING THE REASON THAT THE ABOVE AMOUNTS HAVE BEEN REMOTELY LI NKED TO THE MANUFACTURING ACTIVITIES. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE IDENTICAL ISSUE HAVE BEEN CONSIDERED BY CBDT IN THE IR RECENT CIRCULAR NO. 37 OF 2016 DATED 02.11.2016 IN WHICH IN PARA 3 DECIDED AS UNDER : IN VIEW OF THE ABOVE, THE BOARD HAS ACCEPTED THE SETTLED POSITION THAT THE DISALLOWANCES MADE UNDER SECTIONS 32, 40(A)(IA), 40A(3), 43B, ETC. OF THE AC T AND OTHER SPECIFIC DISALLOWANCES, RELATED TO THE BUSINE SS ACTIVITY AGAINST WHICH THE CHAPTER VI-A DEDUCTION H AS 3 BEEN CLAIMED, RESULT IN ENHANCEMENT OF THE PROFITS OF THE ELIGIBLE BUSINESS, AND THAT DEDUCTION UNDER CHAPTER VI- A IS ADMISSIBLE ON THE PROFITS SO ENHANCED BY THE DISALLOWANCE. 7. HE HAS RELIED UPON DECISION OF GUJRAT HIGH COURT IN THE CASE OF CIT VS KEVAL CONSTRUCTION 354 ITR 13 IN WHICH IT WAS HELD AS UNDER THAT EVEN IF A CERTAIN EXPENDITURE WHICH WAS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF DEVELOPING HOUS ING PROJECT WAS NOT ALLOWABLE BY VIRTUE OF SECTION 40(A )(IA), SINCE THE ASSESSEE HAD NOT DEDUCTED THE TAX AT SOUR CE AS REQUIRED UNDER LAW, IT COULD NOT BE DENIED THAT SUC H DISALLOWANCE WOULD ULTIMATELY GO TO INCREASE THE ASSESSEE'S PROFIT FROM THE BUSINESS OF DEVELOPING H OUSING PROJECT. WHATEVER BE THE ULTIMATE PROFIT OF THE ASS ESSEE AS COMPUTED EVEN AFTER MAKING DISALLOWANCE UNDER SECTION 40(A)(IA) WOULD QUALIFY FOR DEDUCTION AS PR OVIDED UNDER THE LAW. 8. HE HAS ALSO RELIED UPON ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF BNAL PREFAB PVT. LTD. VS ADDL. CIT DATED 27.06.2012 IN WHICH WHILE CONSIDERING THE DEPARTMENTAL APPEAL, THE ISSUE WAS CONSIDERED WITH REGARD TO DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF INCOME TAX ACT DUE TO WHICH BUSINESS PROFIT HAS INCREASED AND CLAIM WAS MADE UNDER SECTION 80IC OF THE ACT. THE TRIBUNAL NOTED IN THIS CASE THAT AMOUNT I S DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IC OF 4 THE ACT HAVE TO BE RE-WORKED BY ADDING THE SAID DISALLOWANCE TO THE PROFITS OF THE BUSINESS. IN TH E ABSENCE OF RELEVANT MATERIAL, DISALLOWANCE MATTER W AS REMANDED TO THE ASSESSING OFFICER TO DECIDE THE SAM E ISSUE IN THE LIGHT OF ABOVE OBSERVATIONS. ON THE O THER HAND, LD. DR DID NOT DISPUTE THE BOARDS CIRCULAR D ATED 02.11.2016 (SUPRA). 9. IN THIS VIEW OF THE MATTER, I AM OF THE VIEW THE MATTER SHOULD BE REMANDED TO THE ASSESSING OFFICER FOR RE-DECIDING THIS ISSUE IN THE LIGHT OF THE ABOVE BO ARDS CIRCULAR. THE DEDUCTION UNDER SECTION 80IC OF THE ACT ALSO FALLS IN CHAPTER VI-A OF INCOME TAX ACT AND TH E BOARD HAS ALREADY DECIDED THE ISSUE IN FAVOUR OF TH E ASSESSEE BECAUSE WHEN ADDITIONS ARE MADE UNDER SECT ION 40(A)(IA) AND 43B ETC., SUCH DISALLOWANCE WOULD RES ULT IN ENHANCEMENT OF THE PROFITS AND ASSESSEE WOULD BE ENTITLED FOR DEDUCTION IN CHAPTER VI-A ON THE PROFI TS SO ENHANCED BY THE DISALLOWANCE. THIS BOARDS CIRCULA R WAS NOT BEFORE THE AUTHORITIES BELOW. THIS ISSUE IS AL SO SUPPORTED BY DECISION OF HON'BLE GUJRAT HIGH COURT IN THE CASE OF CIT VS KEVAL CONSTRUCTION 354 ITR 13 (S UPRA) AND ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF B NAL PREFAB PVT. LTD. VS ADDL. CIT (SUPRA). 10. IN THIS VIEW OF THE MATTER, I SET ASIDE THE ORD ERS OF AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FIL E OF ASSESSING OFFICER WITH DIRECTION TO RE-DECIDE THIS ISSUE IN 5 ACCORDANCE WITH LAW THE BOARDS CIRCULAR AND DECISI ONS CITED ABOVE BY GIVING SUFFICIENT OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. THIS GROUND OF APPEAL OF TH E ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 1 ST MARCH,2017 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH