DCIT, CHENNAI V. Shasun Pharmaceuticals Ltd., CHENNAI

ITA 1526/CHNY/2015

• Counselvise Citation: 152621714 RSA 2015
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 05-11-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 30-06-2015
• Court: TRIBUNAL
• Keywords: Business income; Bad and doubtful debts
• Section: 80HHC

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO.1526/MDS/2015 / ASSESSMENT YEAR : 1998-99 THE DEPUTY COMMISSIONER M/S. SHASUN PHARMACEUTICA LS LTD. OF INCOME-TAX, NO.28, SARDAR PATEL ROAD, CORPORATE CIRCLE -6(1), V. POST BOX NO. 2630, GUIN DY, CHENNAI 34. ( /APPELLANT) CHENNAI 600 032. PAN AAACS5031L RESPONDENT) / APPELLANT B : SHRI A.B.KOLI, JCIT / RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE ! / DATE OF HEARING : 05.11.2015 '# ! / DATE OF PRONOUNCEMENT : 27.11.2015 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 23.3.201 5. 2. THERE IS A DELAY OF 2 DAYS IN FILING THIS APPEA L BEFORE THE TRIBUNAL. THE REVENUE HAS FILED A PETITION FOR CON DONATION OF ITA 1526/15 2 DELAY. WE HAVE GONE THROUGH THE REASONS CITED IN T HE PETITION. WE FIND THAT THERE IS GOOD AND SUFFICIENT REASON TO CO NDONE THE DELAY IN FILING THE APPEAL. ACCORDINGLY, THE DELAY IS C ONDONED AND THE APPEAL IS ADMITTED FOR ADJUDICATION. 3. THE GROUND RAISED BY THE REVENUE IN THIS APPEAL IS THAT THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE SCRA P SCALE IS ELIGIBLE FOR DEDUCTION U/S.80HHC. 4. THE FACTS OF THE CASE ARE THAT THE APPEAL FILED BY THE ASSESSEE BEFORE THE CIT(APPEALS) IS AGAINST THE ACTION OF TH E AO IN RESTRICTING THE CLAIM OF DEDUCTION U/S.80HHC OF THE ACT BY EXCLUDIN G 90% OF THE TAX RECEIPT FROM SCRAP SALE AMOUNTING TO ` 16,30,554/- FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.80HHC OF THE ACT. THE AO OBSERVED THAT THE ASSESSEE FAILED TO FURNISH ANY DOCUMENT TO SU BSTANTIATE ITS CLAIM THAT THE SCRAP MATERIAL HAS ANY DIRECT LINK OR NEXU S WITH HIS PROCESS OF MANUFACTURE CARRIED BY THE ASSESSEE. THE AO FURTHE R OBSERVED THAT THE SCRAP SALE IS NOT RELATED TO THE INDUSTRIAL ACT IVITY OF THE ASSESSEE FOR THE PURPOSE OF DEDUCTION U/S.80HHC AND RELIED UPON THE RATIO OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF PANDIAN CHEMICALS VS. CIT (270 ITR 448. DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS THE AR OF THE ASSESSEE VEHEMENTLY ARGUE D AGAINST THE ACTION OF THE AO. ITA 1526/15 3 5. ON APPEAL, THE CIT(APPEALS), AFTER GOING THROUGH THE SUBMISSIONS OF THE LD. AR AND PERUSING THE ORDER OF COMMERCIAL TAX DEPARTMENT DATED 31.03.2000 SUBMITTED BY THE LD. AR REFERRING THE SCRAP SALES AS WELL AS THE FINDINGS OF THE AO, OBSE RVED THAT IT IS NOT CORRECT THAT THE ASSESSEE HAS NOT FURNISHED ANY DE TAILS OF SCRAP SALES TO THE AO AT THE TIME OF ASSESSMENT ORDER. THE HON BLE MADRAS HIGH COURT IN THE CASE OF FENNER (INDIA) LTD. VS CIT (24 1 ITR 803) HELD THAT THE PROFIT FROM SALE OF SCRAP MATERIALS WAS ELIGIBL E FOR DEDUCTION U/S 80HHC OF THE IT ACT. IN THE ASSESSEES OWN CASE FO R A.Y 2000-01 IN ITA NO.1635/MDS/2006, DATED 19.11.2007, THIS TRIBUN AL HELD THAT RECEIPTS SUCH AS SCRAP SALES, BAD DEBTS, CASH DISCO UNTS AND CONSULTANCY CHARGES FOR R&D WORK ETC. CANNOT BE CON STRUED TO BE THE RECEIPTS OF SIMILAR NATURE WITHIN THE MEANING OF CL AUSE (BAA) TO SEC.80HHC OF THE ACT AND ISSUE WAS DECIDED AGAINST THE REVENUE. ACCORDINGLY, THE CIT(APPEALS) OBSERVED THAT THE AO IS NOT CORRECT IN RESTRICTING THE CLAIM OF DEDUCTION U/S 80HHC OF THE ACT BY EXCLUDING 90% OF THE TAX RECEIPTS FROM SCRAP SALES FOR THE PU RPOSE OF GRANTING DEDUCTION U/S 80HHC OF THE IT ACT. AGAINST THIS, T HE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. THE ASSESSEE HAS GIVEN A BREAK UP DETAILS BEFORE THE LOWER AUTHORITIES AS FOLLOWS: ITA 1526/15 4 (I) CHEMICAL BY PRODUCTS LIKE MAGNESIUM BICARBONATE SODIUM METAL, SS SCRAP ETC. ` 16,58,643 (II) EMPTY DRUMS CARRYING CHEMICALS ` 1,03,959 (III) OTHER SUNDRY ITEMS LIKE SAMPLE AND WASTE PACKING MATERIALS ` 48,904 TOTAL ` 18,11,506 =========== BEING SO, IN OUR OPINION, SIMILAR ISSUE WAS CONSIDE RED BY THE CHENNAI BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS.1395, 1396/MDS/2006 AND ITA NOS.1632 TO 1635/MDS/2006. VIDE ITS ORDER DATED 19.11.2007, THE TRIBUNAL OBSERVED THAT THE M ISCELLANEOUS INCOME COMPRISING OF SALE OF SCRAP, BAD DEBTS, AND CONSULTANCY CHARGES CANNOT BE CONSTRUED TO BE RECEIPTS OF SIMIL AR NATURE AND IT SHOULD BE CONSIDERED AS PART OF BUSINESS INCOME IN TERMS OF CLAUSE (BAA) OF THE EXPLANATION TO SEC.80HHC . BEING SO, WE ARE OF THE OPINION THAT THE CIT(APPEALS) IS JUSTIFIED IN FOLLO WING THE EARLIER DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2000-01. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON FRIDAY, THE 27 TH OF NOV.,2015 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 27 TH NOV., 2015. MPO* ITA 1526/15 5 ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.