Hamilton Housewares Pvt.Ltd., SILVASSA V. The ACIT.,Vapi Circle, Vapi

ITA 1587/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9202 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 16-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 80IB; 201; 80IC; 80IC; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE ACIT, VAPI CIRCLE, VAPI (APPELLANT) VS M/S. HAMILTON HOUSEWARE PVT. LTD. 288/1, NEAR DADRA GRAM PANCHAYAT, DEMNI ROAD, DADRA, SILVASSA, PAN: AABCD1683Q (RESPONDENT) M/S. HAMILTON HOUSEWARE PVT. LTD. 288/1, NEAR DADRA GRAM PANCHAYAT, DEMNI ROAD, DADRA, SILVASSA, PAN: AABCD1683Q (APPELLANT) VS THE ACIT, VAPI CIRCLE, VAPI (RESPONDENT) REVENUE BY : S H RI ALOK KUMAR , SR. D . R. ASSESSEE BY: S H RI M.K. PATEL , A.R. DATE OF HEARING : 16 - 02 - 2 017 DATE OF PRONOUNCEMENT : 23 - 02 - 2 017 I T A NO . 1523 / A HD/20 13 A SSES SMENT YEAR 200 9 - 10 ITA NO. 1587 /AHD/20 13 ASSESSMENT YEAR 20 0 9 - 10 I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 2 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS CROSS APPEALS FILED BY REVENUE AND ASSESSEE FOR A.Y. 2009 - 10 , AR IS E FROM ORDER OF THE CIT(A), VALSAD DATED 25 - 03 - 2013 IN APPEAL NO. CIT(A)/VLS/369/11 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN GRANTING OF DEDUCTION U/S. 80IB TO THE DADRA UNIT OF THE COM PANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWI NG THE SALE OF SCRAP AMOUNTING TO RS.16,80,677/ - PERTAINING TO DADRA UNIT OF THE COMPANY, ELIGIBLE U/ S 80IB OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE SALE OF SCRAP AMOUNTING TO RS.25,10,334/ - PERTAINING TO HARDWAR UNIT OF THE COMPANY, ELIGIBLE U/S. 80IC OF THE ACT. 3. THE ASSESSEE HAS RAISED FOLLOWING G ROUNDS OF APPEAL: - 01. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND TAW, THE ADDITIONS MADE BY THE LEARNED JOINT COMMISSIONER OF INCOME TAX (LEARNED ASSESSING OFFICER) AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ARE CONTRARY TO LAW AND BASED ON ERRONEOUS UNDERSTANDING OF THE FACTS. 02. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER IN EXCL UDING I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 3 THE FOLLOWING ITEMS OF INCOME FROM THE PROFIT ELIGIBLE FOR DEDUCTION U/S. 80IB EXPORT INCENTIVES 45,88,217/ - CREDIT BALANCE WRITTEN BACK 4,99,942/ - 03. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER IN EXCLUDING THE FOLLOWING ITEMS OF INCOME FROM THE PROFIT ELIGIBLE FOR DEDUCTION U/S. 80IC EXPORT INCENTIVES 1,77,949/ - MISC. RECEIPTS 46,568/ - ITA NO. 1587 /AHD/2013 (ASSESSEE S APPEAL ) 4. AT THE TIME OF HEARING, LD. AUTHORIZED REPRESENTATIVE DID NOT PRESS THE GROUND NO. 1. SO, THE SAME IS DISMISSED AS NOT PRESSED. 5 . IN THIS CASE, THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 26 TH SEPTEMBER, 2009 DECLARING TOTAL INCOME OF RS. 5,63,32,435/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHILE GRANTING DEDUCTION U/S. 80IB OF THE ACT, THE ASSESSING OFFICER EXCLUDED THE FOLLOWING ITEMS F ROM PROFIT ELIGIBLE FOR DEDUCTION UNDER TH AT SECTION. EXPORT INCENTIVE S RS. 4588,217/ - CREDIT BALANCE WRITTEN BACK RS. 4,99,942/ - 6. AGGRIEVED AGAINST THIS DECISION, THE ASSESSEE FILED APPEAL BE FORE THE LD. CIT(A). THE LD. CIT(A) HAS REJECTED THE APPEAL OF THE ASSESSEE AND SUSTAINED THE DI SALLOWANCE MADE STATING THAT EXPORT INCENTIVE AND CREDIT BALANCE WRITTEN BACK ARE NOT ELIGIBLE FOR DEDUCTION I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 4 U/S. 80IB OF THE ACT. THE DECISION OF THE LD. CIT(A) ON THESE TWO ISSUES IS REPRODUCED AS UNDER: - 7.1 IN THIS REGARD THE APPELLANT COMPANY TRY T O DIFFERENTIATE THE DECISION OF HONORABLE SC IN THE OF LIBERTY INDIA REPORTED IN 317 ITR 218 WITH THAT OF THE DECISION OF TOPMAN EXPORT REPORTED IN 342 ITR 0049. THE LD. AR OF THE APPELLANT COMPANY SUBMITTED CERTAIN OBSERVATIONS OF THE SC IN THE CASE OF TO PMAN EXPORT. SINCE THE HONORABLE SC IN THE CASE OF TOPMAN EXPORTS HAS OBSERVED THAT THERE IS A COST TO THE DEPB CREDITS IT WAS REQUESTED TO CONSIDER THAT THE ENTIRE DEPB CREDITS HAVING A COST EQUIVALENT TO APPLICABLE CUSTOMS DUTY AND THE DECISION OF HONORA BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA BE INTERPRETED ALONG WITH THE ABOVE MENTIONED OBSERVATION IN THE CASE OF TOPMAN EXPORTS HOLD THAT NO PART OF THE DEPB CREDITS SHALL BE EXCLUDED WHILE GRANTING DEDUCTION U/S. 8OIB. 7.2 I HAVE CAREFULLY PERUSED THE FACTS OF THE AND THE SUBMISSIONS MADE BY THE APPELLANT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA V/S, CIT 317 ITR 218 (2009) (SC). THEREFORE THIS GROUND OF APPEAL IS DECIDED AGAINST THE APPELLA NT AND THE ORDER OF AO IS CONFIRMED. THIS PART OF THE GROUND OF APPEAL IS ACCORDINGLY DISMISSED. CREDIT BALANCE WRITTEN BACK RS. 4,99,942/ - 7.5 DECISION: I HAVE CAREFULLY PERUSED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE APPELLANT. I HAVE ALSO GONE THROUGH THE FINDINGS OF THE AO . IT IS WELL SETTLED LAW AFTER THE DECISION OF THE HON'BLE SC I N THE CASE OF LIBERTY INDIA LTD. VS. CIT, THAT THE DEDUCTION U/S, 8O - IB IS AVAILABLE TO THE INCOME HAVING FIRST DEGREE NEXUS WITH THE MANUFACTURING ACTI VITIES. THE NATURE OF CLAIM I.E. CREDIT BALANCE WRITTEN BACK RS.4,99,942/ - IS IN NO WAY CAN BE CONSIDERED AS INCOME HAVING FIRST DEGREE NEXUS TO THE MANUFACTURING. THEREFORE, NOT ELIGIBLE FOR DEDUCTION U/S. 80 - IB OF THE ACT. THIS GROUND IS DISMISSED. 7. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LEARNED COUNSEL CONTENDED THAT BOTH THE ABOVE STATED ISSUES HAS BEEN I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 5 DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO - ORDINATE BENCH OF HON BLE ITAT, AHMEDABAD IN THE TAX APPEAL OF ASSESSEE ITSELF PERTAI NING TO ASSESSMENT YEAR 2005 TO 2008 VIDE ORDER DATED 9 TH JUNE, 2015. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE LD. CIT(A). 8. AFTER HEARING BOTH THE SIDES AND PERUSAL OF THE MATERIAL ON RECORD, WE FIND THAT THE CO - ORD INATE BENCH OF THE ITAT HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND ITS FINDINGS ON THIS ISSUE IS REPRODUCED AS UNDER: - 12. NOW WE COME TO ASSESSEE'S APPEAL ITA 1143/AHD/2009. ITS FIRST SUBSTANTIVE GROUND CHALLENGES ACTION OF THE LOWER AUTHORITIE S' EXCLUDING EXPORT INCENTIVES OF DADRA AND BAYENDERI UNITS AMOUNTING TO RS.65,98,801/ - AND RS.46,51,472/ - FROM PROFITS ELIGIBLE FOR SECTION 80IB DEDUCTION. THE CASE FILE INDICATES THAT THE ASSESSEE HAS ALSO FILED ALTERNATIVE 7 ADDITIONAL GROUNDS VIS - A - VIS ITS FIRST SUBSTANTIVE GROUND BY FILING A PETITION DATED 24.2.2015 READING ASUNDER: 'IN REGARD TO THE CAPTIONED APPEAL PROCEEDINGS BEFORE YOUR HONOURS, WE WOULD LIKE TO HUMBLY REQUEST TO PERMIT US TO RAISE THE FOLLOWING ADDITIONAL GROUND BEFORE YOUR HONOUR AS UNDER. 1. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO OTHER GROUNDS OF APPEAL, THE NOTIONAL INCOME BY WAY OF DEPB CREDITS, DFRC RECEIPTS OR OTHER EXPORT INCENTIVES CREDITED IN THE PROFIT AND LOSS ACCOUNT BE NOT CONSIDERED AS INCOME LIABLE FOR TAX DURING THE YEAR IN ACCORDAN CE WITH THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. REPORTED IN 38 TAXMAN.COM 100 (SC). 2. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CAS E AND WITHOUT PREJUDICE TO OTHER GROUNDS OF APPEAL, THE EXCLUSION OF DEPB CREDITS, DFRC RECEIPTS OR OTHER EXPORT INCENTIVES FOR THE PURPOSE OF CALCULATING THE PROFITS ELIGIBLE FOR DEDUCTION U/S.80IB OF THE ACT SHALL BE RESTRICTED TO THE NET BENEFIT AFTER N ETTING OUT THE COST OF I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 6 OBTAINING THE SAID BENEFIT AS SPECIFIED AND OBSERVED BY THE HON 'BLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT (342ITR49)' THE REVENUE OBJECTS ADMISSIBILITY OF THE ASSESSEE'S ALTERNATIVE/ ADDITIONAL GROUND. THE ASSESSEE QUO TES LAW SETTLED BY THE HON'BLE APEX COURT IN EXCEL INDUSTRIES AND TOPMAN EXPORTS (SUPRA) PROPOUNDING COMPUTATION OF NOTIONAL INCOME FROM DEPB CREDITS/DFRC RECEIPTS/OTHER EXPORT INCENTIVES ACCRUES NOT IN THE YEAR OF EXPORT; BUT IN THE ONE CORRESPONDING TO T HE IMPORTS AND ALSO DEVISING 'NETTING' FORMULA TO BE ADOPTED IN EXCLUDING FACE VALUE OF THE ABOVE CREDITS FOR COMPUTING PROFITS ELIGIBLE FOR SECTION 80IB DEDUCTION; RESPECTIVELY. WE REJECT THE REVENUE'S TECHNICAL OBJECTIONS AND ADMIT THE ADDITIONAL GROUNDS IN VIEW OF THE ABOVE SETTLED LEGAL PREPOSITION IN THE INTEREST OF JUSTICE. THE ASSESSEE ALSO FAILS TO CONTROVERT THE LOWER AUTHORITIES' ACTION EXCLUDING THE ABOVE SUMS FROM THE PURVIEW OF SECTION 80IB DEDUCTION IN PRINCIPLE. THE FACT ALSO REMAINS THAT THE SE ALTERNATIVE PLEADINGS REQUIRE EXAMINATION OF NEW FACTS AND DETAILS FOR THE PURPOSE OF COMPUTATION OF NOTIONAL INCOME FROM EXPORT INCENTIVES AS WELL AS NET PROFITS IN VIEW OF ABOVESTATED CASE LAW. THUS, WE REJECT THE ASSESSEE'S MAIN GROUND IN PRINCIPLE A ND ACCEPT ADDITIONAL/ALTERNATIVE GROUNDS FOR STATISTICAL PURPOSES AND REMIT THE SAME BACK TO THE ASSESSING OFFICER FOR ADJUDICATION AFRESH AS PER LAW. THE ASSESSEE SHALL PRODUCE ALL THE RELEVANT DETAILS IN CONSEQUENTIAL PROCEEDINGS. T HE CO - ORDINATE BENCH OF ITAT BY ITS DECISION MENTIONED SUPRA HAS ALSO DECIDED THE ISSUE IN RESPECT OF CREDIT BALANCE WRITTEN IN FAVOR OF THE ASSESSEE WHICH IS REPRODUCED AS BELOW: - 13. THE ASSESSEE'S NEXT GROUND RAISES ISSUE OF DEBITS/CREDITS WRITTEN OFF AMOUNTING TO RS.77,7 84/ - AND RS. 13,747/ - REGARDING DADRA AND BHAYENDERI UNITS; RESPECTIVELY. THE AUTHORITIES BELOW HAVE EXCLUDED THE SAME FROM ELIGIBLE PROFITS FOR U/S.80IB DEDUCTION. THE ASSESSING OFFICER HOLDS THESE BALANCES AS NOT DIRECTLY RELATED TO THE ASSESSEE'S BUSINE SS BEING IN THE NATURE OF INCIDENTAL INCOME. HE TREATS THESE BALANCES AS THE ONES NOT DERIVED FROM NORMAL BUSINESS OPERATIONS. THE REASONING ADOPTED IS ON IDENTICAL LINES AS DONE IN CASE OF INTEREST ISSUE DECIDED IN THE REVENUE'S APPEAL HEREINABOVE. THE CI T(A) AFFIRMS THE ASSESSING OFFICER'S FINDINGS AND QUOTES ASSESSEE FAILURE IN PRODUCING SPECIFIC DETAILS TO PROVE THAT THE IMPUGNED BALANCES ARE RELATED TO ITS REVENUE EXPENSES. I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 7 14. WE HAVE HEARD RIVAL CONTENTIONS. RECORDS PERUSED. RELEVANT FACTS STAND NAR RATED HEREINABOVE. THE LOWER AUTHORITIES HAVE NOT ADVERTED TO THE ASSESSEE'S BOOKS TO FIND OUT AS TO WHETHER THE IMPUGNED BALANCES STEM FROM ITS REVENUE ACCOUNT OR NOT FOR THE PURPOSE OF GRANTING SECTION 80IB DEDUCTION. WE FEEL THAT THIS ISSUE REQUIRES RE - EXAMINATION IN ASSESSING OFFICER'S HANDS. WE ORDER ACCORDINGLY. THE ISSUE SHALL NOW BE ADJUDICATED AS PER THE ASSESSEE'S BOOKS AND OTHER DETAILS. THE CORRESPONDING GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 8.1 IN VIEW OF THE ABOVE MENTIONED FACTS IT IS UNDISPUTED FACTS THAT BOTH THE ABOVE ISSUES HAVE BEEN RESTORED TO THE ASSESSING OFFICER FOR RE - EXAMINATION BY THE DECISION OF THE COORDINATE BENCH OF THE ITAT IN THE CASE OF THE ASSESSEE ITSELF. AFTER CONSIDERING ABOVE WE DO NOT FIND ANY REASON TO DIFFER FROM THE DECISION OF THE COORDINATE BENCH. THEREFORE, WE CONSIDERED I T APPROPRIATE TO RESTORE BOTH THE ISSUES PERTAINING TO THE YEAR UNDER CONSIDERATION TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH AS PER THE DIRECTION ISSUED IN THE ABOVE CITED DECISION OF CO - ORDINATE BENCH OF ITAT ON THE IDENTICAL ISSUES IN THE CASE OF THE ASSESSEE. GROUND NO . 3 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS STATED THAT EXPORT INCENTIVE OF RS. 1 , 77 , 947/ - WAS NOT ELIGIBLE FOR INTEREST DEDUCTION 80IC OF THE ACT. AGAINST THIS ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE HAS PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAD DECIDED THIS ISSUE AGAINST THE ASSESSEE AS PER HIS FINDINGS REPRODUCED AS UNDER: - I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 8 8.1 E XPORT INCENTIVES: RS. 1,77,949/ - : - IN THIS REGARD THE APPELLANT COMPANY TRY TO DIFFERENTIATE THE DECISION OF HONORABLE SC IN THE OF LIBERTY INDIA REPORTED IN 317 ITR 218 WITH THAT OF THE DECISION OF TOPMAN EXPORT REPORTED, IN 342 ITR 0049. THE LD. AR OF TH E APPELLANT COMPANY SUBMITTED CERTAIN OBSERVATIONS OF THE SC IN THE CASE OF TOPMAN EXPORT. SINCE THE HONORABLE SC IN THE CASE OF TOPMAN EXPORTS HAS OBSERVED THAT THERE IS A COST TO THE DEPB CREDITS IT. WAS REQUESTED TO CONSIDER THAT THE DEPB CREDITS HAVING A EQUIVALENT TO APPLICABLE CUSTOMS DUTY AND THE DECISION OF HONORABLE SUPREME COURT IN THE OF LIBERTY INDIA BE INTERPRETED ALONG WITH THE ABOVE MENTIONED OBSERVATION IN THE OF TOPMAN EXPORTS AND HOLD THAT NO PART OF THE DKPB CREDITS SHALL BE EXCLUDED WHIL E GRANTING DEDUCTION U/S. 8OIC. 8.2 DECISION: - I HAVE CAREFULLY PERUSED, THE OF THE CASE AND THE SUBMISSION S MADE BY THE APPELLANT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE OF LIBERTY INDIA V/S. CIT 317 ITR 218 (200 9) (SC). THEREFORE THIS GROUND OF APPEAL IS DECIDED THE APPELLANT AND THE ORDER OF AO IS CONFIRMED. THIS PART OF THE GROUND OF APPEAL IS ACCORDINGLY DISMISSED. THE ASSESSEE HAS NOT PRESSED THE OTHER ISSUE OF MISCELLANEOUS RECEIPT OF RS. 46 , 568/ - . SO, THE SAME IS DISMISSED AS NOT PRESSED. 10. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LEARNED COUNSEL HAS ST ATED THAT THIS ISSUE IS ALSO DECID ED BY THE ITAT CO - ORDINATE BENCH VIDE ITS ORDER STATED SUPRA BY WHICH THE ISSUE WAS RESTORED BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION . O N THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE LD. CIT(A). AF T ER HEARING BOTH THE SIDES AND PERUSAL OF MATERIAL ON RECORD, WE FIND THAT THE CO - ORDINATE BENCH OF THE ITAT AS S TATED ABOVE IN THE DECISION RESTORED THE ISSUE TO THE FILE O F ASSESSING OFFICER FOR ADJUDICATING AFRESH. THE FINDING OF CO - ORDINATE BENCH OF ITAT IS REPRODUCED AS UNDER: - I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 9 31. NOW WE COME TO THE ASSESSEE'S GROUND NO.4 CHALLENGING LOWER AUTHORITIES ORDERS EXCLUDING EXPORT INCENTIVES FROM DEPB RECEIVED OF RS.47,35,634/ - AND SUNDRY BALANCES RETURN BACK OF RS.86,475/ - FROM PROFITS ELIGIBLE FOR SECTION 80IB DEDUCTION. THE ASSESSEE HAS ALSO FILED ADDITIONAL / ALTERNATIVE GROUNDS IDENTICAL TO THOSE IN PRECEDING AS SESSMENT YEARS (SUPRA). WE DO NOT FIND ANY DISTINCTION ON FACTS FORTHCOMING FROM THE CASE FILE. THUS, WE DISMISS THE MAIN GROUND AND RESTORE THE ASSESSEE'S ALTERNATIVE GROUNDS TO THE ASSESSING OFFICER FOR PROCEEDING AFRESH AS PER OUR OBSERVATION IN ASSESSM ENT YEARS 2005 - 06. WE DEEM IT APPROPRIATE TO OBSERVE THAT IN CASE HE FINDS THE SUNDRY BALANCES WRITTEN BACK IN THE BOOKS TO BE ON REVENUE SIDE, THERE WOULD BE HARDLY ANY LIGHT LEFT TO THE THROWN THAT THE SAME WERE ARISEN FROM ITS MANUFACTURING ACTIVITY. TH E CORRESPONDING GROUND BE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. WE CONSIDERED THAT THIS ISSUE OF EXPORT INCENTIVE FOR GRANTING DEDUCTION U/S. 80IB IS ALSO REQUIRED TO BE RE - EXAMINATION IN THE HANDS OF T HE ASSESSING OFFICER AS DECIDED IN THE CASE OF IDENTICAL ISSUE IN THE EARLIER YEAR BY THE CO - ORDINATE BENCH OF ITAT, THEREFORE, WE RESTORE THIS MATTER TO THE ASSESSING OFFICER FOR DECIDING AFRESH ACCORDING TO THE DIRECTION ISSUED BY THE CO - ORDINATE BENCH OF I TAT IN ITS DECISION AS STATED ABOVE I N THIS MATTER. ITA NO. 1523/AHD/2013 (REVENUE S APPEAL) GROUND NO. 1 11. DURING THE COURSE OF ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED THE DEDUCTION U/S. 80IB OF THE ACT ON THE BASIS OF FINDINGS THAT THE ASSESSEE WAS NOT HAVING FACTORY LIC ENSE BEFORE THE COMMENCEMENT OF THE PRODUCTION I.E.31ST MARCH 2004 FOLLOWING EARLIER YEARS ASSESSMENT ORDERS. AGGRIEVED AGAINST THE ORDER OF THE I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 10 ASSESSING OFFICER, ON THIS ISSUE, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLO WED THE APPEAL OF THE ASSESSEE BY STATING AS UNDER: - DECISION: - I HAVE PERUSED THE FACTS OF THE CASE. THE HON'BLE ITAT HAS ALREADY DECIDED THE ISSUE IN DISPUTE IN SEVERAL CASES AS POINTED OUT BY THE APPELLANT COMPANY AND THE FACTS OF THE CASE FOR TH E YEAR UNDER CONSIDERATION ARE THE SAME AS THAT OF THE EARLIER YEAR. FURTHER THE RECENT DECISION OF HONORABLE MUMBAI HC IN THE CASE OF M/S. JOLLY POLYMERS ARE ALSO SUPPORTIVE OF THE APPELLANT'S CONTENTION. RESPECTFULLY FOLLOWING THE ORDER OF THE HON'BLE I TAT, AHEMDABAD AND THE HONORABLE JURISDICTIONAL HIGH COURT, THE AO IS DIRECTED TO GRANT BENEFIT U/S.8OIB TO THE APPELLANT AS PER THE LAW. THUS, THIS GROUND OF APPEAL IS ALLOWED. 12. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. DEPARTMENTAL R EPRESENTATIVE RELIED ON THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL SUPPORTED THE ORDER OF LD. CIT(A) AND ALSO STATED THAT CO - ORDINATE BENCH OF THE HON BLE AHMEDABAD IN THE CASE OF ASSESSEE ITSELF HAS DECIDED THE IDENTICAL ISSUE IN FAVO UR OF THE ASSESSEE VIDE ITS ORDER PERTAINING TO ASSESSMENT YEAR 2005 - 06 TO 2008 - 09 VIDE ORDER DATED 09 - 06 - 2011. 13. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE NOTICED THAT THE COORDINATE BENCH OF ITAT HAS DECIDED THIS ISSUE IN F AVOR OF THE ASSESSEE AND THE RELEVANT FINDING OF ITS DECISION IS REPRODUCED AS UNDER: - 5. WE HAVE HEARD BOTH SIDES. RELEVANT FINDINGS IN BOTH THE LOWER ORDERS STAND PERUSED. THERE IS NO ISSUE BETWEEN THE PARTIES ABOUT THE FACTS AND FIGURES STATED HEREINAB OVE. THE ASSESSEE'S MANUFACTURING ACTIVITY COMMENCED IN AUGUST, 2003 I.E. BEFORE THE CUT OFF DATE 31.3.2004. IT APPLIED FOR A FACTORY LICENSE ON 9.2.2006. THE SAME STOOD GRANTED WELL AFTER THE IMPUGNED ASSESSMENT YEAR. I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 11 THE ASSESSING OFFICER PERCEIVES IT TO BE A CASE OF UNLAWFUL MANUFACTURING U/S.80IB(4). WE FIND THE HON'BLE BOMBAY HIGH COURT (JURISDICTIONAL HIGH COURT FOR DADRA UNION TERRITORY U/S. 269 OF THE ACT) IN INCOME TAX APPEAL (L) NO. 1622 OF 2012 CIT VS. JOLLY POLYMERS HAS TURNED DOWN A SIMILAR ARG UMENT OF THE REVENUE BY APPROVING THE TRIBUNAL'S ORDER HOLDING THAT SUCH A VIOLATION UNDER THE FACTORIES ACT DOES NOT DISENTITLE A DEDUCTION CLAIMED UNDER SECTION 80IB. THE REVENUE FAILS TO QUOTE ANY CASE LAW TO THE CONTRARY. WE AFFIRM THE CIT(A) FINDINGS IN THESE CIRCUMSTANCES AND REJECT THE REVENUE'S CORRESPONDING GROUND. AFTER CONSIDERING ABOVE WE DO NOT FIND ANY REASON TO DIFFER FROM THE DECISION OF THE COORDINATE BENCH. WE FIND THAT THE HON BLE ITAT HAS DECIDED THIS ISSUE IN FAVOR OF THE ASSESSEE BY FOLLOWING THE JURISDICTIONAL HIGH COURT DECISION OF MUMBAI HIGH COURT AS MENTIONED IN THE FINDINGS OF ITAT CO - ORDINATE BENCH AS S UPRA . THEREFORE, WE REJECT T HIS GROUND OF APPEAL OF REVENUE AS PER THE FINDINGS MENTIONED IN THE DECISION OF THE COORDINATE B ENCH ON THE IDENTICAL ISSUE DECIDED IN THE CASE OF THE ASSESSEE. GROUND NO. 2 14. DURING THE COURSE OF ASSESSMENT ORDER, ASSESSING OFFICER STATED THAT ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S. 8 0IB FROM THE SALE OF SCRAP OF RS 16,80,677/ - . AGGRIEVED AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ISSUE, THE ASSESSEE PREFERRED APPEAR BEFORE THE LD. CIT(A). LD. CIT(A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY STATING AS UNDER: - 7.3 SALE OF SCRAP RS. 16,80,677/ - ZAVERI &: ANR. 258 ITR '85, WHEREIN IT WAS HELD THAT THE SCRAP CANNOT BE SEEN IN ISOLATION FROM THE MANUFACTURING ACTIVITY AS WITHOUT MANUFACTURING ACTIVITY, THERE I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 12 WOULD ALSO BE NO SCRAP GENERATED. THEREFORE, SUCH SCRAP GENERATED CAN BE SAID TO BE EMANATING FROM THE MANUFACT URING ACTIVITY OF THE APPELLANT AND IN THAT SENSE HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY. RESPECTFULLY FOLLOWING THE ABOVE SAID DECISION OF HON'BLE HC, THE AO IS DIRECTED TO INCLUDE INCOME FROM SALE OF SCRAP FOR COMPUTING DEDUCTION U/S. 8OIB OF THE ACT. THUS, THIS PART OF THE GROUND OF APPEAL IS ALLOWED. 15. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL SUPPORTED THE ORDER OF THE L D. CIT(A) AND ALSO STATED THAT IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOR OF THE ASSESSEE BY THE CO - ORDINATE BENCH OF ITAT, AHMEDABAD, VIDE ITS ORDER SUPRA MENTIONED IN THIS ORDER. THE RELEVANT FINDINGS OF ITAT CO - ORDINAT E BENCH IS REPRODUCED AS UNDER: - 9 . THE ASSESSING OFFICER NOTICED THE ASSESSEE'S IMPUGNED SCRAP SALES INCOME OF RS.13,25,610/ - AND HELD IT AS NOT TO HAVE BEEN DERIVED FROM NORMAL BUSINESS OPERATION. THE CIT(A) TREATS THE SCRAP IN QUESTION TO HAVE BEEN GENERATED FROM ITS MANUFACTURING PROCE SS HAVING DIRECT RELATION TO THE SOURCE OF BUSINESS INCOME. THE HON'BLE JURISDICTIONAL HIGH COURT IN DCIT VS. HARJIVANDAS J. ZAVERI 258 ITR 785 DEALS WITH A CASE OF SALE OF EMPTY BOTTLES/PLASTIC WASTE IN CASE OF AN ASSESSEE INVOLVED IN MANUFACTURING ACTIVI TY AND HOLDS THAT THE SAME ARE DIRECTLY CONNECTED WITH THE SAID ACTIVITY. THEIR LORDSHIPS ASSUMED A HYPOTHETICAL SITUATION THAT IN CASE THERE IS NO INDUSTRIAL/MANUFACTURING ACTIVITY, THERE WOULD NOT BE ANY SCRAP GENERATED. THE REVENUE HAS NOT BEEN ABLE TO DISTINGUISH OPERATION OF THE SAME. WE ALSO FOLLOW SUIT AND HOLD THAT THE CIT(A) HAS RIGHTLY INCLUDED SCRAP INCOME OF RS. 13,25,610/ - AS PROFITS ELIGIBLE FOR SECTION 80IB DEDUCTION. THE REVENUE'S CORRESPONDING GROUND IS REJECTED. 16. AFTER HEARING BOTH TH E SIDES AND PERUSAL OF MATERIAL ON RECORD, WE FIND THAT THE ISSUE HAS BEEN DECIDED IN FAVOR OF THE ASSESSEE BY THE COORDINATED BENCH OF THE ITAT ON THE GROUND THAT IF THERE IS NO I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 13 INDUSTRIAL ACTIVITY, THERE WOULD NOT BE ANY SCRAP GENERATED. WE DO NOT FIND ANY REASON TO DIFFER FROM THE DECISION OF THE COORDINATED BENCH. T HEREFORE, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE ON THE REASON MENTIONED IN THE FINDINGS OF THE DECISION OF COORDINATE BENCH ON THE IDENTICAL ISSUE IN THE CASE OF THE ASSESSEE. G ROUND NO . 3 17. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HELD THAT THE SALE OF SCRAP OF RS. 25 , 10 , 334/ - WAS NOT ELIGIBLE FOR DEDUCTION U/S. 80IC OF THE ACT. AGAINST THIS ADDITION, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY STATING AS UNDER: - ' THIS ISSUE IS COVERED BY THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF DCIT V/S. HARJIVANDAS JUTHABHAI ZAVERI & ANR. 258 ITR 785, WHEREIN IT WAS HELD THAT THE S CRAP CANNOT BE SEEN IN ISOLATION FROM THE MANUFACTURING ACTIVITY AS WITHOUT MANUFACTURING ACTIVITY, THERE WOULD ALSO BE NO SCRAP GENERATED. THEREFORE, SUCH SCRAP GENERATED CAN BE SAID TO BE EMANATING FROM THE MANUFACTURING ACTIVITY OF THE APPELLANT AND IN THAT SENSE HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY. RESPECTFULLY FOLLOWING THE ABOVE SAID DECISION OF HON.'BLE HC, THE AO IS DIRECTED TO INCLUDE INCOME FROM SALE OF SCRAP FOR COMPUTING DEDUCTION U/S. 8OIC OF THE ACT. THUS, THIS PART OF THE GROUN D OF APPEAL IS ALLOWED. 18. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LEARNED COUNSEL SUPPORTED THE ORDER OF THE LD. CIT(A) AND ALSO STATED THAT THE S IMILAR ISSUE IN EARLIER YEAR WAS I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 14 DECIDED BY THE CO - ORDINATE BENCH OF HON BLE ITAT VIDE ITS ORDER MENTIONED SUPRA IN FAVOR OF THE ASSESSEE. AFTER HEARING BOTH THE SIDES W E FIND THAT THE IDENTICAL ISSUE PERTAINING TO DEDUCTION U/S. 80IB ON SCRAP INCOME AS STATED ABOVE IN THIS ORDER WAS DECIDED IN FAVOR OF THE ASSESSSEE ON THE BASIS OF DECISION OF HON BLE JURISDICTIONA L HIGH COURT IN THE CASE OF DCIT V/S. HARJIVANDAS JUTHABHAI ZAVERI & ANR. 258 ITR 785 . THE ISSUE WAS DECIDED ON THE GROUND THAT I F THERE IS NO MANUFACTURING UNIT, THERE WOULD NOT BE ANY SCRAP GENERATED .IN VIEW OF THE FINDINGS MENTIONED IN THE DECISION OF THE COORDINATE BENCH OF ITAT ON THE IDENTICAL ISSUE IN THE CASE OF THE ASSESSEE AS SUPRA, WE DO NOT FIND ANY REASON TO DIFFER FRO M THE DECISION OF THE COORDINATE BENCH, THEREFORE , WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 19. IN THE RESULT, THE APPEAL FILED BY ASSESSEE IS PARTLY ALLOWED AND APPEAL FILED BY REVENUE IS DISM I SSED. ORDER PR ONOUNCED IN T HE OPEN C OURT ON 23 - 02 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 23 /02 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVE NUE I.T.A NO S.1523 & 1587 /AHD/20 13 A.Y. 2009 - 10 PAGE NO ACIT VS. HAMILTON HOU SEWARE PVT. LTD. 15 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,