ACIT, New Delhi V. M/s. Rolex Hosiery Pvt. Ltd, New Delhi

ITA 1517/DEL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4259 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 03-05-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 16-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMESH GUPTA
• Keywords: Business income
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : F NEW DELHI) (DELHI BENCH : F NEW DELHI) (DELHI BENCH : F NEW DELHI) (DELHI BENCH : F NEW DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND SHRI A.D. JAIN, JUDICIAL MEMMBER SHRI A.D. JAIN, JUDICIAL MEMMBER SHRI A.D. JAIN, JUDICIAL MEMMBER SHRI A.D. JAIN, JUDICIAL MEMMBER I.T.A. NO.1517/DEL./2009 I.T.A. NO.1517/DEL./2009 I.T.A. NO.1517/DEL./2009 I.T.A. NO.1517/DEL./2009 (ASSESSMENT YEAR : 2001 (ASSESSMENT YEAR : 2001 (ASSESSMENT YEAR : 2001 (ASSESSMENT YEAR : 2001- -- -02) 02) 02) 02) ACIT, CIRCLE 15(1), ACIT, CIRCLE 15(1), ACIT, CIRCLE 15(1), ACIT, CIRCLE 15(1), VS. VS. VS. VS. M/S ROLEX HOS M/S ROLEX HOS M/S ROLEX HOS M/S ROLEX HOSIERY PVT. LTD., IERY PVT. LTD., IERY PVT. LTD., IERY PVT. LTD., NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. 27, COMMUNITY CENTRE, 27, COMMUNITY CENTRE, 27, COMMUNITY CENTRE, 27, COMMUNITY CENTRE, BASANT LOK, VASANT VIHAR, BASANT LOK, VASANT VIHAR, BASANT LOK, VASANT VIHAR, BASANT LOK, VASANT VIHAR, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (PAN/GIR NO. : N.A.) (PAN/GIR NO. : N.A.) (PAN/GIR NO. : N.A.) (PAN/GIR NO. : N.A.) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SHRI UMESH GUPTA, FCA ASSESSEE BY : SHRI UMESH GUPTA, FCA ASSESSEE BY : SHRI UMESH GUPTA, FCA ASSESSEE BY : SHRI UMESH GUPTA, FCA REVENUE BY : SHRI S. MOHANTY, SR.DR REVENUE BY : SHRI S. MOHANTY, SR.DR REVENUE BY : SHRI S. MOHANTY, SR.DR REVENUE BY : SHRI S. MOHANTY, SR.DR ORDER ORDER ORDER ORDER PER A.D. JAIN, JM THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2001-02, T AKING THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD.DR.CIT(A) HAS ERRED IN HOT TREATING MISC. RECEIPTS OF `27180 ON ACCOUNT OF SALE OF SURPLUS T SHIRTS AS INCOME FROM OTHER SOURCES WHILE COMPUTING DEDUCTION U/S 80HH C AS SALE OF SURPLUS IS IN FACT SALE OF SCRAP AS THE TURNOVE R AS PER THE DEFINITION OF SECTION 80HHC HAS TO BE UNDERSTOOD EQUIVALENT TO THE SALES PROCEEDS OF THE GOOD S SOLD BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE TH E LD.DR.CIT(A) HAS ERRED IN HOT TREATING FABRICATION C HARGES OF `1475799 AS INCOME FROM OTHER SOURCES WHILE COMPUTING DEDUCTION U/S 80HHC AS THE TURNOVER AS PER THE DEFINITION OF DEDUCTION U/S 80HHC HAS TO BE UNDER STOOD EQUIVALENT TO THE SALES PROCEEDS OF THE GOODS SOLD BY TH E ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE TH E LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO NET OFF T HE INTEREST RECEIVED AND INTEREST PAID FOR THE PURPOSE OF COLLECTING DEDUCTION UNDER SECTION 80HHC. I.T.A. NO.1517/DEL./2009 (A.Y. : 2001-02) 2 2. APROPOS GROUND NO.1, THE ASSESSEE CLAIMED MISCELLANEOU S RECEIPTS OF `27,180 ON ACCOUNT OF SALE OF SURPLUS T-SHI RTS, AS REGULAR BUSINESS EARNING OF THE ASSESSEE COMPANY AND CLAIMED THAT 100% OF THEIR VALUE SHOULD BE TAKEN FOR WORKING OUT DEDUCTIO N U/S 80HHC OF THE I.T.ACT, 1961. 3. THE AO ASSUMED THE MISCELLANEOUS RECEIPTS OF `27,180 TO BE THE ASSESSEES INCOME FORM OTHER SOURCES. THE CIT(A) TREATED THIS RECEIPT AS THE ASSESSEES BUSINESS INCOME FOR PURPOSES OF CALCULATION OF DEDUCTION U/S 80HHC OF THE ACT. 3. AGGRIEVED, THE DEPARTMENT HAS TAKEN GROUND NO.1 B EFORE US. 4. CHALLENGING THE IMPUGNED ORDER IN THIS REGARD, TH E LD.DR HAS CONTENDED THAT THE CIT(A) HAS ERRED IN NOT TREATING THE MISCELLANEOUS RECEIPTS OF `27,180 ON ACCOUNT OF SALE OF SURPLUS T-SHIR TS AS THE ASSESSEES INCOME FROM OTHER SOURCES WHILE COMPUTING DEDUC TION U/S 80HHC OF THE ACT AS SALE OF SURPLUS IS, IN FACT, SALE OF SCRAP AS THE TURNOVER AS PER THE DEFINITION OF SECTION 80HHC OF TH E ACT HAS TO BE UNDERSTOOD AS EQUIVALENT TO THE SALE PROCEEDS OF THE GO ODS SOLD BY THE ASSESSEE. 5. LD.COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PL ACED RELIANCE ON THE IMPUGNED ORDER. 6. IN THIS REGARD, IT IS SEEN, THAT UNDISPUTEDLY, THE M ISCELLANEOUS RECEIPTS PERTAIN TO THE SALE OF SURPLUS STOCK IN THE ORD INARY COURSE OF BUSINESS OF THE ASSESSEE. THESE RECEIPTS, AS SUCH, FORM PART OF THE ASSESSEES REGULAR RECEIPTS AND ARE ASSESSABLE AS BUSINESS INCOME . AS SUCH, FINDING NO ERROR IN THE ORDER OF THE CIT(A) IN THIS RESPECT, THE SAME IS HEREBY CONFIRMED. GROUND NO.1 IS, THEREFORE, REJECTED. 7. APROPOS GROUND NO.2, THE ASSESSEE CLAIMED FABRICATION CHARGES OF `1475799, RECEIVED AS JOB WORK CHARGES FOR JOB WOR K CARRIED OUT BY I.T.A. NO.1517/DEL./2009 (A.Y. : 2001-02) 3 THE ASSESSEE COMPANY, AS REGULAR BUSINESS INCOME AND CLAIME D THAT 100% OF THEIR VALUE SHOULD BE TAKEN FOR WORKING OUT DEDUCTION U/S 80HHC OF THE ACT. 8. THE AO ASSUMED THE FABRICATION CHARGES OF `1475799 TO BE THE ASSESSEES INCOME FROM OTHER SOURCES. 9. THE CIT(A) TREATED THE FABRICATION CHARGES TO BE THE BUSINESS INCOME OF THE ASSESSEE FOR THE PURPOSES OF CALCULATION OF DEDUCTION U/S 80HHC OF THE ACT. 10. AGGRIEVED, GROUND O.2 AHS BEEN RAISED BY THE DEPA RTMENT BEFORE US. 11. THE LD.DR HAS CONTENDED THAT THE CIT(A) ERRED IN NOT TREATING THE FABRICATION CHARGES OF `1475799 AS THE ASSESSEES INCO ME FROM OTHER SOURCES WHILE COMPUTING THE DEDUCTION U/S 80HHC OF THE ACT, AS ACCORDING TO THE DEFINITION OF DEDUCTION U/S 80HHC O F THE ACT, TURNOVER HAS TO BE UNDERSTOOD AS EQUIVALENT TO THE SA LE PROCEEDS OF THE GOODS SOLD BY THE ASSESSEE. 12. THE LD.COUNSEL FOR THE ASSESSEE PER CONTRA HAS PLACED RELIANCE ON THE ORDER UNDER APPEAL. 13. THE MATTER, IT IS SEEN, STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN T HE CASE OF CIT VS. UNITED INDIA SHOE CORPORATION LTD., 302 I.T.R. 326 (MAD.), WHEREIN IT WAS HELD THAT WHERE INCOME FROM JOB WORK EARNED BY T HE ASSESSEE RELATING TO ASSESSMENT YEAR 1996-97 WAS BY UTILIZATION O F THE ENTIRE RESOURCES OR BUSINESS APPARATUS AND THE TRIBUNAL FOUND TH AT THE JOB WORK WAS LINKED TO THE MANUFACTURING ACTIVITY OF THE ASSESSEE, 90% OF THE JOB WORK CHARGES SHOULD NOT HAVE BEEN EXCLUDED FR OM THE BUSINESS PROFITS WHILE COMPUTING THE DEDUCTION U/S 80HHC OF TH E ACT. THIS DECISION WAS RELIED ON BY THE CIT(A) WHILE DECIDING I N FAVOUR OF THE ASSESSEE. IN THE ASSESSEES CASE, IT IS SEEN, THAT THE CONTENT ION OF THE ASSESSEE WAS SUPPORTED BY THE COPY OF LEDGER ACCOUNT AND THE COPIES OF INVOICES. THEREFORE, THE CIT(A) CORRECTLY DIRECT ED THE AO TO TREAT JOB I.T.A. NO.1517/DEL./2009 (A.Y. : 2001-02) 4 WORK CHARGES AS THE BUSINESS INCOME OF THE ASSESSEE FOR THE PURPOSE OF DEDUCTION U/S 80HHC OF THE ACT. THAT BEING SO, FI NDING NO MERIT THEREIN, GROUND NO.2 IS REJECTED. 14. COMING TO GROUND NO.3, THE ASSESSEE EARNED THE INTE REST OF `28,73,095 ON DEPOSITS CAN BE WITH THE BANK AS MARGIN MONEY FOR AVAILING BANK OVERDRAFT. THE SAME WAS NETTED OFF AGA INST INTEREST PAID. FOR ASSESSMENT YEARS 2002-03 TO 04-05, THE CIT(A), ALLOW ING THE ASSESSEES APPEAL DIRECTED THE AO TO NET OFF THE INTEREST PAID WITH INTEREST RECEIVED FROM THE BANK. FOR THE YEAR UNDER CONSIDERATION, HOWEVER, THE AO AGAIN REFUSED TO ALLOW NETTING OFF O F THE INTEREST PAID WITH THE INTEREST RECEIVED FROM THE BANK. 15. BY VIRTUE OF THE IMPUGNED ORDER, THE CIT(A), FO LLOWING THE EARLIER FIRST APPELLATE ORDERS DIRECTED THE AO TO TREAT THE I NTEREST INCOME AS BUSINESS INCOME OF THE ASSESSEE AND TO NET OFF OF THE INTE REST RECEIVED ON THE INTEREST PAID, FOR CALCULATION OF DEDUCTION U /S 80HHC OF THE ACT. 16. THE LD.DR HAS CONTENDED THAT THE CIT(A) HAS ERRED IN DIRECTING THE AO TO NET OFF OF THE INTEREST RECEIVED WITH THE INTEREST PAID FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC OF THE ACT. 17. THE LD.COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED RELIANCE ON THE IMPUGNED ORDERS. BESIDES, RELIANCE HA S ALSO BEEN PLACED ON CIT(DEL.) VS. SHRIRAM HONDA POWER EQUIP, 158 TAXMAN 474(DEL.). 18. THE MATTER, IT IS SEEN, IS SQUARELY COVERED IN FAVO UR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HI GH COURT IN CIT VS. SHRIRAM HONDA POWER EQUIP(SUPRA). THEREIN, IT H AS BEEN HELD, INTER ALIA, THAT WHERE AS A RESULT OF COMPUTATION OF PROFITS AND GAINS OF BUSINESS AND PROFESSION, THE AO TREATS INTEREST RECEIPTS AS A BUSINESS INCOME, DEDUCTION U/S 80HHC OF THE ACT WOULD BE PER MISSIBLE IN TERMS OF EXPLANATION(BAA) TO SECTION 80HHC OF THE ACT, OF NET INTEREST, I.E., I.T.A. NO.1517/DEL./2009 (A.Y. : 2001-02) 5 GROSS INTEREST LESS EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING SUCH INTEREST. 19. THEREFORE, FOLLOWING SHRIRAM HONDA POWER EQUIP (SUPRA), THE ORDER OF THE CIT(A) IN THIS REGARD IS UPHELD AND GROU ND NO.3 IS REJECTED. 20. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 03.05.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: MAY 03, 2011. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-XVIII, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT