M/s Shivom Cotspin Limited, Kala Amb V. DCIT, Parwanoo

ITA 1325/CHANDI/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8340 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 09-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: S P GOYAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NOS.1325 & 1326/CHD/2016 (ASSESSMENT YEARS : 2012-13 & 2014-15) SHIVOM COTSPIN LTD., VS. THE D.C.I.T., KALA AMB, HIMACHAL PRADESH. CIRCLE PARWANOO PAN: AAJCS9111L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.P. GOYAL RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 07.02.2017 DATE OF PRONOUNCEMENT : 07.02.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : BOTH THE ABOVE APPEALS HAVE BEEN FILED BY THE SAME ASSESSEE AGAINST ORDER OF COMMISSIONER OF INC OME TAX (APPEALS), FARIDABAD RELATING TO ASSESSMENT YEA R 2012-13 DATED 17.10.2016 AND COMMISSIONER OF INCOM E TAX (APPEALS), SHIMLA, RELATING TO ASSESSMENT YEAR 2014- 15 DATED 28.10.2016. 2. IT WAS ADMITTED BEFORE US BY BOTH THE PARTIES THAT THE ISSUE INVOLVED IN BOTH THE APPEALS WAS IDE NTICAL THEREFORE BOTH THE CASES WERE HEARD TOGETHER AND A RE BEING DISPOSED OFF BY WAY OF A COMMON ORDER. FOR TH E SAKE OF CONVENIENCE WE SHALL BE DEALING WITH THE FACTS I N ITA 2 NO. 1325/CHANDIGARH/2016 PERTAINING TO ASSESSMENT Y EAR 2012-13. ITA NO. 1325/CHANDIGARH/2016- A.Y 2012-13 3. GROUND NO. 1 RAISED BY THE ASSESSEE READS AS UNDER: 1. THAT THE WORTHY CIT( APPEAL) HAS DISALLOWED THE EXEMPTION U/S 80 IC @ HUNDRED PERCENT AND ALLOWED @ 30%, THUS NOT GIVING THE BENEFIT OF SUBSTANTIAL EXPANSION IN THE EXISTING INDUSTRIAL UNDERTAKING SETUP IN INDUSTRIAL BACKWARD STATE OF HIMACHAL PRADESH. THE DEDUCTION CLAIMED U/S 80 IC WAS RS 2,20,38,126/- AGAINST WHICH THE WORTHY CIT HAS ALLOWED RS.57,29,890/-. THE EXEMPTION U/S 80 IC OF RUPEES 2,20,38,126/- MAY PLEASE BE ALLOWED. THAT THE RATIO OF JUDGEMENT REFERRED BY WORTHY CIT (APPEAL) AND ASSESSING OFFICER ARE NOT APPLICABLE TO THE CASE OF ASSESSEE COMPANY 4. BRIEFLY STATED, THE ASSESSEE IN THE SAID GROUND , HAS CHALLENGED THE REDUCTION OF DEDUCTION CLAIMED U NDER SECTION 80IC OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) @ 100% TO 30%. 5. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD STARTED ITS BUSINESS ACTIVITY/OPERATIO N ON 08.02.2007 AND INITIAL ASSESSMENT YEAR FOR CLAIM OF DEDUCTION U/S 80IC OF THE ACT WAS ASSESSMENT YEAR 2 007- 08. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTIO N 80IC TO THE EXTENT OF HUNDRED PERCENT ELIGIBLE PROF IT FOR 5 3 YEARS PERIOD OF A. Y. 2007-08 TO A. Y. 2011-12. IN THE IMPUGNED YEAR THE ASSESSEE COMPANY HAD AGAIN CLAIME D HUNDRED PERCENT DEDUCTION OF ITS ELIGIBLE PROFITS O N ACCOUNT OF UNDERTAKING SUBSTANTIAL EXPANSION DURING THE F. Y. 2010-11 AND 2011-12. THE AO DENIED THE CLAIM OF DEDUCTION @ HUNDRED PERCENT RESTRICTING IT TO 30% B Y STATING THAT THE BENEFIT OF SUBSTANTIAL EXPANSION I S AVAILABLE ONLY TO EXISTING UNITS I.E. UNITS THAT EX ISTED AND WERE OPERATIONAL AS ON 07.01.2003 IN ORDER TO BE EL IGIBLE FOR HUNDRED PERCENT DEDUCTION UNDER SECTION 80IC FO R 1 ST 5 YEARS. THE AO HELD THAT THE BENEFIT OF HUNDRED PE RCENT DEDUCTION ON ACCOUNT OF SUBSTANTIAL EXPANSION WAS N OT MEANT FOR UNITS THAT CAME INTO BEING ON OR AFTER TH E INTRODUCTION OF THE SCHEME I.E. 07.01.2003. HE THER EFORE DENIED THE ASSESSEES CLAIM OF SUBSTANTIAL EXPANSIO N AND RESTRICTED THE DEDUCTION CLAIMED UNDER SECTION 80IC TO THE EXTENT OF 30% OF ELIGIBLE PROFITS. LD. CIT( APPEALS ) UPHELD THE ORDER OF THE AO RELYING UPON THE DECISION OF TH E ITAT, CHANDIGARH BENCH IN THE CASE OF M/S HYCRON ELECTRON ICS VS ITO IN ITA NO. 798/CHD/2012 AND OTHER RELATED CA SES WHEREIN IDENTICAL ISSUE WAS DEALT WITH. 6. DURING THE COURSE OF HEARING IT WAS FAIRLY ADMITTED BY THE LD.COUNSEL FOR THE ASSESSEE THAT TH E ISSUE WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE ITAT, CHANDIGARH BENCH IN THE CASE OF M/S HYCRON ELECTRONICS (SUPRA). 4 7. IN VIEW OF THE ABOVE WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT( APPEAL) IN T HIS REGARD, THE ISSUE HAVING BEEN ALREADY SETTLED BY TH E ITAT CHANDIGARH BENCH IN THE CASE OF HYCRON ELECTRONICS (SUPRA) WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT THE BENEFIT OF HUNDRED PERCENT DEDUCTION OF ELIGIBLE PR OFITS AVAILABLE TO UNITS UNDERTAKING SUBSTANTIAL EXPANSIO N IS AVAILABLE ONLY TO UNITS WHICH WERE IN EXISTENCE WHE N THE PROVISION OF SECTION 80IC WAS BROUGHT ON THE STATUT E ON 07.01.2003. IT WAS CATEGORICALLY HELD BY THE ITAT I N THAT CASE THAT UNITS WHICH CAME INTO EXISTENCE THEREAFT ER, THE BENEFIT OF HUNDRED PERCENT DEDUCTION ON ACCOUNT OF SUBSTANTIAL EXPANSION WAS NOT AVAILABLE. IT WAS FUR THER HELD BY THE ITAT THAT UNITS SETUP IN SPECIFIED AREA S OF HIMACHAL PRADESH WERE IN ANY CASE ENTITLED TO DEDUC TION UNDER THE PROVISIONS OF SECTION 80IC OF THE ACT TO HUNDRED PERCENT OF ELIGIBLE PROFITS ONLY FOR A PERIOD OF 5 YEARS AND THEREAFTER WAS ENTITLED TO DEDUCTION AT THE PRESCRI BED RATE OF 25% OR 30% AS STATED UNDER THE SECTION. IN VIEW OF THE ABOVE AND IN VIEW OF THE FACT THAT THE ASSESSEE UNI T WAS ESTABLISHED AFTER 07.01.2003 I.E. ON 08.02.2007, TH E ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION AT THE RATE OF HUNDRED PERCENT OF ITS ELIGIBLE PROFITS ON ACCOUNT OF SUBSTANTIAL EXPANSION UNDERTAKEN BY IT. WE THEREFOR E FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT (A) IN UPH OLDING THE ORDER OF THE AO IN THIS REGARD AND RESTRICTING THE CLAIM OF THE ASSESSEE TO DEDUCTION OF ITS ELIGIBLE PROFITS @ 5 30% OF THE SAME. THE GROUND RAISED BY THE ASSESSEE IS THEREFORE DISMISSED 8. GROUND NO. 2 RAISED BY THE ASSESSEE READS AS UNDER: 2.THAT THE WORTHY CIT(APPEAL) HAS ERRED IN REDUCING THE INCOME BY RS.29,38,493/- FROM ELIGIBLE BUSINESS FOR ALLOWING DEDUCTION U/S 80 IC ON THE PLEA THAT THIS IS NOT INCOME DIRECTLY DERIVED FROM MANUFACTURING ACTIVITIES OF THE INDUSTRIAL UNDERTAKING ON WRONG AND UNTENABLE GROUNDS. INTEREST INCOME ON DUTY DRAWBACK RECEIPTS OF RS.29,38,493/- MAY PLEASE BE TREATED AS INCOME DERIVED FROM ELIGIBLE BUSINESS FOR ALLOWING DEDUCTION U/S 80 IC. THAT THE RATIO OF JUDGEMENT REFERRED BY WORTHY CIT(APPEAL) AND ASSESSING OFFICER ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE COMPANY. 9. BRIEFLY PUT, IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE REDUCTION OF ELIGIBLE PROFITS OF THE ASSESSEE FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 80 IC BY RS.29,38,493/-. 10. BRIEF FACTS RELATING TO THE ISSUE ARE THAT, DU RING ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESS EE HAD CLAIMED DEDUCTION UNDER SECTION 80IC ON INTERES T INCOME CREDITED TO THE PROFIT AND LOSS ACCOUNT AMOU NTING TO RS.29,38,488/-. THE AO HELD THAT THE IMPUGNED INCOME COULD NOT BE SAID TO BE DIRECTLY DERIVED FRO M MANUFACTURING ACTIVITIES OF THE INDUSTRIAL UNDERTAK ING AND HENCE WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IC OF TH E 6 INCOME TAX ACT, 1961. ACCORDINGLY AN AMOUNT OF RS.29,38,493/-WAS HELD TO BE INELIGIBLE FOR COMPUTA TION OF ELIGIBLE PROFITS FOR THE CLAIM OF DEDUCTION UNDER S ECTION 80IC OF THE INCOME TAX ACT, 1961. 11. LD. CIT (APPEAL) UPHELD THE ORDER OF THE AO RELYING UPON THE DECISION OF THE ITAT, CHANDIGARH B ENCH IN THE CASE OF M/S OPTEK DISC MANUFACTURING CO. VS ITO, BADDI, IN ITA NO. 1017/CHD/2014 DT.19/01/16, WHEREI N HE HELD THAT IDENTICAL ISSUE HAD BEEN DEALT WITH, D ENYING THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IC ON THE INTEREST INCOME EARNED. 12. BEFORE US LD. COUNSEL FOR THE ASSESSEE STATED THAT THE INTEREST INCOME HAD BEEN EARNED ON FDR WIT H PNB AND ON ADVANCES MADE TO VARIOUS PARTIES AND ALS O INTEREST ON DELAYED PAYMENT BY FEW CUSTOMERS. LD. COUNSEL FOR THE ASSESSEE STATED THAT THE FDR WAS MA DE WITH PNB AS MARGIN MONEY, FOR THE ISSUE OF FOREIGN LETTER OF CREDIT/BANK GUARANTEE FOR IMPORT OF CAPITAL GOOD S TO BE ISSUED IN FAVOUR OF THE FOREIGN SUPPLIER OF CUSTOM AUTHORITY OF DGFT OFFICE. LD. COUNSEL STATED THAT T HE DEPOSITS WERE MADE IN COMPLIANCE WITH VARIOUS STATU TES I.E. IMPORT-EXPORT POLICY ETC AND OTHER APPLICABLE LAWS WHICH WERE NECESSARY TO CONDUCT THE BUSINESS OF THE COMPANY AND THEREFORE THE INTEREST EARNED ON THE SA ME WAS PART AND PARCEL OF THE MAIN BUSINESS OF THE COM PANY ENTITLING THE ASSESSEE TO DEDUCTION UNDER SECTION 8 0IC. SIMILARLY THE INTEREST INCOME EARNED ON VARIOUS ADV ANCES 7 MADE IN THE ORDINARY COURSE OF BUSINESS WAS ALSO ST ATED BY THE LD. COUNSEL TO BE AS PART AND PARCEL OF THE MAIN BUSINESS OF THE COMPANY SINCE THE ADVANCES HAD BEEN MADE IN THE ORDINARY COURSE OF BUSINESS. 13. LD.DR ON THE OTHER HAND RELIED ON THE ORDER OF THE CIT (APPEAL). 14. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES AND ALSO GONE THROUGH THE ORDER OF THE CIT(APPEALS). ONGOING TO THE ORDER OF THE CIT(APPEA LS) WE FIND THAT THE LD. CIT(APPEALS) UPHELD THE DISALLOWA NCE OF 80IC ON THE IMPUGNED INTEREST INCOME BY FOLLOWING T HE ORDER OF THE CHANDIGARH BENCH OF THE ITAT IN THE CA SE OF M/S OPTEK DISC MANUFACTURING CO. VS ITO, BADDI IN I TA NO. 1017/CHD/2014 RELATING TO ASSESSMENT YEAR 2010- 11. 15. WE HAVE GONE THROUGH THE ABOVE ORDER AND FIND T HAT THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S 80IC ON INTEREST INCOME EARNED ON FDRS WHICH WAS GIVEN AS MARGIN MONEY FOR BANK GUARANTEE AND TO SALES TAX AUTHORITY HAD BEEN DEALT BY THE ITAT CHANDIGARH BE NCH WHEREIN FOLLOWING THE DECISION OF THE CHANDIGARH BE NCH OF THE ITAT IN THE CASE OF M/S HYCRON ELECTRONICS (SU PRA) THE BENCH HELD THAT THE ASSESSEE WAS NOT ENTITLED T O CLAIM DEDUCTION U/S 80IC ON THE SAME SINCE IT COULD NOT B E SAID TO BE DERIVED FROM THE INDUSTRIAL UNDERTAKING OF TH E ASSESSEE. THE ISSUE IN THE PRESENT CASE BEING IDENT ICAL TO THAT IN M/S OPTEK DISC (SUPRA) AND NO DISTINGUISHIN G 8 FACTS HAVING BEEN BROUGHT TO OUR NOTICE, THE DECISI ON RENDERED THEREIN SQUARELY APPLIES TO THE PRESENT CA SE. IN VIEW OF THE SAME WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (APPEAL) SINCE THE ISSUE STANDS SQUARELY COVERE D BY THE DECISION OF THE CHANDIGARH BENCH BOTH IN THE CA SE OF M/S HYCRON ELECTRONICS VS ITO (SUPRA) WHICH WAS FOL LOWED BY THE CHANDIGARH BENCH IN THE CASE OF M/S OPTEK DI SC MANUFACTURING CO. VS ITO (SUPRA). IN VIEW OF THE SA ME WE UPHOLD THE ORDER OF THE LD. CIT (APPEAL) IN THIS RE GARD DISALLOWING DEDUCTION U/S 80 IC ON THE INTEREST INC OME EARNED AMOUNTING TO RS.29,38,493/-. THE GROUND OF APPEAL RAISED BY THE ASSESSEE THEREFORE STANDS DISM ISSED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS DISMISSED. ITA NO. 1326/CHD/2016 A.Y. 2015-16 16. SINCE THE FACTS & CIRCUMSTANCES AND ISSUE INVOL VED IN BOTH THE APPEALS ARE IDENTICAL AND EVEN THE SUBMISS IONS MADE BY COUNSELS WERE SIMILAR TO THAT FOR ASSESSMEN T YEAR 2012-13 IN ITA NO.1325/CHD/2016, THEREFORE, OUR DECISION RENDERED IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2012-13 WILL APPLY TO THIS APPEAL WITH EQUAL FORCE. 9 17. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 7 TH FEBRUARY, 2017 *RATI/RKK* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH