M/s.Chayagraphics (India) Pvt. Ltd., Bangalore V. Commissioner of Income Tax, Bangalore

ITA 1617/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5430 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V NARENDRA SHARMA
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH - SMC C BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 1617 /BANG/201 6 (ASSESSMENT YEAR : 20 09 - 10 ) M/S. CHAYAGRAPHICS (INDIA) PVT. LTD., NO.248 - 249, 4 TH MAIN, ROAD, NEAR KANNADA SAHITYA PAR ISHAD, CHAMARAJPET, BANGALORE - 560 018 PAN AAACC 5904E VS. JOINT COMMISSIONER OF INCOME TAX, CIRCLE 11(2), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI V. NARENDRA SHARMA, ADVOCATE. RESPONDENT BY : SHRI AR.V.SREENIVASAN, JCIT (D.R) DATE OF H EARING : 23.03.2017. DATE OF P RONOUNCEMENT : 05 .0 5 . 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DT.6.7.2016 OF COMMISSIONER OF INCOME TAX (APPEALS), BANGALORE FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 2 ITA NO. 1617 /BANG/ 2016 3 ITA NO. 1617 /BANG/ 2016 3. THE ASSESSEE IS A COM PANY DOING BUSINESS IN MEDICAL IMAGING. THE ASSESSEE IS IN IMPORT, DISTRIBUTION AND TRADING OF RADIOLOGY RELATED ITEMS BUT ALSO MANUFACTURING X - RAY FILM PROCESSOR. THE ASSESSEE HAS ESTABLISHED A NEW INDUSTRIAL UNIT IN THE YEAR 1999 AS A SEPARATE BUSINESS UNIT AND CARRYING ON BUSINESS OF MANUFACTURING, SUPPLY, INSTALLATION AND SERVICE OF X - RAY FILM PROCESSOR MANUFACTURED BY IT. IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB(3) TO THE EXTENT OF 30% OF THE PROFIT AND GAIN GENERA TED FROM THE BUSINESS OF SAID NEW INDUSTRIAL UNDERTAKING. THE ASSESSING OFFICER IN THE SCRUTINY ASSESSMENT RESTRICTED THE DEDUCTION CLAIMED UNDER SECTION 80IB(3) BY EXCLUDING THE SERVICE INCOME AS NOT PART OF THE MANUFACTURING ACTIVITY. THE ASSESSEE CHALL ENGED THE ACTION OF THE A.O. BEFORE THE CIT(APPEALS) AND CONTENDED THAT THE SERVICE INCOME IS PART OF THE 4 ITA NO. 1617 /BANG/ 2016 INTEGRATED ACTIVITY OF THE INDUSTRIAL UNIT QUALIFYING FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. THE ASSESSEE EXPLAINED THAT THE EQUIPMENTS MANUFAC TURED BY THE INDUSTRIAL UNIT ARE SOLD WITH ONE YEAR WARRANTY AND ON EXPIRY OF THE WARRANTY PERIOD THE CUSTOMER TAKES MAINTENANCE CONTRACT. UNDER THE MAINTENANCE CONTRACT, THE ASSESSEE IS NOT ONLY PROVIDES FREE PREVENTIVE SERVICE CONTRACT BUT ALSO PROVIDES REPLACEMENT OF SPARES IN CASE THEY FAIL DURING THE CONTRACT PERIOD. THE CIT (APPEALS) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT THE INCOME FROM SERVICE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(3) OF THE ACT. 4. BEFORE THE TRIBUNAL, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2007 - 08 VIDE ORDER DT.17.10.2016 IN ITA NO.77/BANG/2012 & 7/BANG/2014. THE LEARNED AUTHORISED REPRESENTATIVE HAS ALSO RELIED UPON THE DECISION DT.25.04.2012 OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. TT G INDUSTRIES LTD IN ITA NO.677/2015. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REL IED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE SERVICE CHARGES IS NOT AN INCOME ARISING FROM MANUFACTURING AND SALE OF THE PRODUCT BY THE UNDERTAKING THEREFORE THE PROFIT WILL NOT BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. H E HAS RELIED UPON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF INDIAN ADDITIVES LTD. VS. DCIT 205 TAXMAN 72 (MAD) AND SUBMITTED THAT THE HON'BLE HIGH COURT HAS CONFIRMED THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA AND 80IB IN RE SPECT OF TRAINING ACTIVITY CARRIED 5 ITA NO. 1617 /BANG/ 2016 OUT BY THE ASSESSEE. THE SAID DECISION OF THE HON'BLE HIGH COURT HAS BEEN CONFIRMED BY THE HON'BLE SUPREME COURT AS SLP FILED AGAINST THE HIGH COURT ORDER HAS BEEN DISMISSED BY THE HON'BLE SUPREME COURT VIDE ORDER DT.17 .8.2012. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, IT IS NOTED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSME NT YEAR 2007 - 08 (SUPRA) IN PARA 9 AS UNDER : 9. IT WAS SUBMITTED BY THE LD. AR THAT ALTHOUGH THE INCOME FROM THESE ACTIVITIES OF RENDERING OF SERVICE AND EARNING SERVICE INCOME ETC. IS ELIGIBLE FOR DEDUCTION U/S.80IB BUT EVEN IF THESE ARE TO BE EXCLU DED, THEN ALSO NOT THE GROSS RECEIPTS BUT NET INCOME THEREFROM SHOULD BE REDUCED FROM BUSINESS PROFIT OF THE ASSESSEE FOR COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S. 80IB. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. TO MAINTAIN RULE O F CONSISTENCY AND BY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH (SUPRA), THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE DEDUCTION UNDER SECTION 80IB BY EXCLUDING THE NET INCOME OF SERVICE CHARGES AFTER REDUCING THE EXPENSES INCURRED FOR EARNING SU CH INCOME. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5TH MAY , 201 7 . SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DT. 05 .05 .2017. *REDDY GP 6 ITA NO. 1617 /BANG/ 2016 COPY TO : 1 . APPELLANT 2 . RESPONDENT 3 . C. I.T. 4 . CIT(A) 5 . DR, ITAT, BANGALORE. 6 . GUARD FILE. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL BANGALORE.