DCIT 8(3), MUMBAI V. SAIBABA SPAREPARTS & ENGINEERS P. LTD, MUMBAI

ITA 1332/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1541 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 19-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 27-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E,MUMBAI BEFORE SHRI R.S.SYAL (A.M) AND SHRHI VIJAY PA L RAO (J.M) ITA NO.1332/MUM/2009(A.Y. 2005-06) THE DCIT, RG.8(3), ROOM NO.204, 2 ND FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (APPELLANT) VS. M/S. SAIBABA SPAREPARTS & ENGINEERS PVT. LTD. 3, SMRUTI BUILDING, ASHOK NAGAR SOCIETY, JVPD SCHEME, ROAD NO.11, VILE PARLE (W), MUMBAI 49 PAN: AABCS 3973J (RESPONDENT) APPELLANT BY : SHRI SHRAVAN KUMAR RESPONDENT BY : SHRI K.SHIVRAM ORDER PER VIJAY PAL RAO, J.M THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER DATED 17/1/2008 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-06. THE REVENU E HAS RAISED THE FOLLOWING GROUND. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE DEDUCTION U/S.80IB OF RS. 12, 24,124/- AS THE ASSESSEE WAS NOT PRODUCING OR MANUFACTURING ANY ARTICLE OR THING WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ASSESSEE COMPANY IS A SMALL SCALE INDUSTRIAL UNDERTAKING (SSI) HAVING ITS FACTORY PREMISES IN THE TTC INDUSTRIAL AREA, MIDC, THANE. THE ASSESSEE MANUFACTURES PARTS AND COMPONENTS OF SOAP MAKING MACHINES. THE ASSESSEES MANUFACTURING JOB IS PARTLY ON SALE BASIS AND PARTLY ON LABOUR CHARGE BA SIS. THE ASSESSEE CLAIMED THE DEDUCTION UNDER SECTION 80 IB ON SALES AS WELL AS L ABOUR CHARGES. THE A.O WAS OF THE VIEW THAT DEDUCTION UNDER SECTION 80 IB IS AVAILABL E ONLY TO THE ELIGIBLE BUSINESS AS PER THE ACT WHICH SHOULD BE FROM PRODUCTION OR MANUFACT URING OF AN ARTICLE OR THING. THE ITA NO.1332/MUM/2009(A.Y. 2005-06) 2 A.O HELD THAT SINCE THE ASSESSEE IS NOT MANUFACTUR ING OR PRODUCING ANY ARTICLE OR THING AS IT IS CLEAR FROM THE CHARACTER OF THE RECEIPTS. ACCORDINGLY THE A.O DISALLOWED THE DEDUCTION WITH RESPECT TO THE LABOUR CHARGES. ON A PPEAL THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE ORDER OF CIT(A) FO R THE ASSESSMENT YEAR 2001-02. 3. BEFORE US THE LD. D.R HAS SUBMITTED THAT AS IS CLEAR FROM THE NATURE OF THE RECEIPTS, THE ASSESSEE WAS PUT IN THE JOB WORK AND LABOUR CHARGES WERE RECEIVED BY THE ASSESSEE AGAINST THE JOB WORK AND NOT AN INCOME DE RIVED FROM INDUSTRIAL UNDERTAKING FOR MANUFACTURING OR PRODUCING THINGS OR ARTICLES. HE FURTHER SUBMITTED THAT THE AO IN THE ASSESSMENT ORDER HAS ANALYZED ALL THE FACTS AND COME TO THE CONCLUSION THAT THE LABOUR CHARGES RECEIVED BY THE ASSESSEE IS NOT A PR OFIT OR GAIN DERIVED FROM INDUSTRIAL UNDERTAKING, THEREFORE, THE ASSESSEE IS NOT ENTITLE D FOR DEDUCTION UNDER SECTION 80 IB IN RESPECT OF THE LABOUR CHARGES. HE HAS HEAVILY RELI ED UPON THE ORDER OF THE A.O. 4. ON THE OTHER HAND, LD. A.R OF THE ASSESSEE HAS S UBMITTED THAT THE ASSESSEE HAS USED THE SAME MACHINERY AND OTHER INFRASTRUCTURE F OR THE PURPOSE OF JOB WORK WHICH WERE UTILIZED FOR THE PURPOSE OF ITS OWN MANUFACTUR ING. HE HAS POINTED OUT THAT THE INVESTMENT IN PLANT AND MACHINERY IS ABOUT 70% OF T HE TOTAL ASSETS OF THE ASSESSEE COMPANY, THEREFORE, THE LABOUR CHARGES RECEIVED BY THE ASSESSEE IS REGARDING THE UTILIZATION OF THE PLANT AND MACHINERY OF THE ASSES SEE FOR THE JOB WORK DONE FOR THE CLIENTS. HE HAS FURTHER SUBMITTED THAT THE CIT(A) FOR THE ASSESSMENT YEAR 2001-02 ALLOWED THE CLAIMED OF THE ASSESSEE AND REVENUE HAS NOT FILED ANY APPEAL AGAINST THE SAID ORDER. THUS WHEN THE FACTS ARE IDENTICAL FO R THE ASSESSMENT YEAR UNDER CONSIDERATION AND FOR THE ASSESSMENT YEAR 2001-02 A ND THE REVENUE HAS ACCEPTED THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2001-02 THE N THE CLAIM OF THE ASSESSEE CANNOT ITA NO.1332/MUM/2009(A.Y. 2005-06) 3 BE DENIED FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON. HE HAS SUBMITTED THAT THE JOB CHARGES RECEIPTS IS INCOME DERIVED FROM THE INDUS TRIAL UNDERTAKING AND ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB. HE HAS SUPPORTED T HE ORDER OF CIT(A). 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND REL EVANT RECORD. THE UNDISPUTED FACTS EMERGED OUT FROM THE RECORD IS THAT THE ASSES SEE IS MANUFACTURING SOME PARTS AND COMPONENTS OF SOAP MAKING MACHINERY. AT THE SAME T IME ASSESSEE IS ALSO DOING JOB WORK IN RELATION TO THE SAME. THE GROSS RECEIPTS OF INCOME AS MENTION IN PARA NO.3 OF THE A.OS ORDER IS AS UNDER:- SALES (NET EXCISE & SALES TAX) RS. 7,35,682/- LABOUR CHARGES SALES RS. 1,17,63,110/- OTHER INCOME RS. 8,931/- FROM THE DETAILS OF THE GROSS RECEIPTS ABOVE, IT IS CLEAR THAT THE ASSESSEE WAS MANUFACTURING THE PARTS AND COMPONENTS OF SOAP MAK ING MACHINES FOR ITS OWN SALE AS WELL AS FOR JOB WORK. IT IS UNDISPUTED FACT THAT T HE ASSESSEE IS UTILIZING THE SAME INDUSTRIAL ESTABLISHMENT FOR MANUFACTURING OF THE M ACHINERY COMPONENT FOR JOB WORK AND THEREFORE, THE INCOME EARNED BY THE ASSESSEE FOR DO ING THE JOB WORK IS IN THE NATURE OF OPERATIONAL INCOME OF THE INDUSTRIAL UNDERTAKING. ACCORDINGLY, WHEN THE RECEIPT OF INCOME HAS A DIRECT NEXUS WITH THE OPERATION OF IN DUSTRIAL UNDERTAKING THEN THE SAME IS SAID TO BE INCOME DERIVED FROM THE INDUSTRIAL UNDER TAKING AND ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. ITA NO.1332/MUM/2009(A.Y. 2005-06) 4 6. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY ERROR ILLEGALITY IN THE ORDER OF THE CIT(A), THE SAME IS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4.6.2010 SD SD (R.S.SYAL) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI, DT.4TH JUNE, 2010 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3 . THE CIT(A)CONCERNED 4. THE CIT,CITY -CONCERNED. 5. THE D.RE BENC H. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.