DCIT, Circle-1(1), Hyderabad V. M/s. Auctus Pharma Ltd, Hyderabad

ITA 1622/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59109 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 13-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Business income
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1622/HYD/2011 ASSESSMENT YEAR 2008-09 THE DCIT, CIRCLE 1(1), HYDERABAD VS M/S AUCTUS PHARMA LIMITED, HYDERABAD. (PAN AAECA3833 C) APPELLANT RESPONDENT APPELLANT BY : SHRI Y.V.S.T. SAI RESPONDENT BY : SHRI C.P. RAMASWAMY DATE OF HEARING : 5.1.2011 DATE OF PRONOUNCEMENT : 12.1.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) II, HYDERAB AD DATED 13.7.2011 AND PERTAINS TO THE ASSESSMENT YEAR 2008 -09. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF BULK DRUGS AND INTERMEDIARIES. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 29.9.2008 ADMITTING INCO ME OF RS.1,29,35,494 AFTER CLAIMING DEDUCTION U/S 80IB AT RS.40,14,540/- THE RETURN WAS PROCE4SSED U/S 143(1 ). ASSESSMENT WAS COMPLETED U/S 143(3) OF THE IT ACT O N 27.8.2010 DETERMINING THE INCOME AT RS.1,73,27,090/ - BY DISALLOWING THE CLAIM U/S 80IB. ITA NO.1622/HYD/2011 AUCTUS PHARMA LTD., HYDERABAD 2 4. THE ASSESSEE COMPANY WAS HAVING ONLY ONE UNIT A T KOTHUR MANDAL, MAHABOOBNAGAR DISTRICT WHICH IS STATED TO B E ELIGIBLE FOR DEDUCTION U/S 80IB. DURING THE YEAR, THE COMPA NY ADDED TWO MORE UNITS ONE AT JAWAHARLAL NEHRU PHARMA CITY, PARWADA VILLAGE, VISAKHAPATNAM (A NEWLY ESTABLISHED UNIT) A ND THE OTHER BY AMALGAMATION OF ANOTHER COMPANY BY NAME, M/S NEO MEDICHEM P LTD. THUS, THE INCOME ADMITTED DURING T HE YEAR PERTAINS TO THREE UNITS. IN RESPECT OF THE FIRST U NIT, THE COMPANY CLAIMED DEDUCTION OF RS.40,14,450/- U/S 80IB OF THE ACT ON THE GROSS TOTAL INCOME OF RS.1,33,81,800/-. IT WAS NOT ICED BY THE ASSESSING OFFICER THAT THE SALES TURNOVER OF THE FI RST UNIT INCLUDED JOB RECEIPTS OF RS.2,57,74,525/- AS PER P ROVISIONS OF SECTION 80IB OF THE ACT, THE ASSESSEE IS ENTITLED F OR DEDUCTION ON THE PROFITS DERIVED FROM CORE MANUFACTURING ACTIVIT Y ONLY. THE OTHER INCOME SUCH AS MISCELLANEOUS INCOME/INTEREST ETC. ARE NOT ELIGIBLE FOR DEDUCTION U/S80IB. THE ASSESSING OFFI CER THEREFORE PROPOSED TO EXCLUDE THE SAID JOB WORK RECEIPTS FOR THE PURPOSE OF DEDUCTION U/S 80IB AND THE ASSESSEE WAS ASKED TO FI LE ITS OBJECTIONS, IF ANY, IN THIS REGARD. IN RESPONSE, I T WAS STATED THAT THE TRIBUNAL HAS CONSIDERED THE VERY SAME ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 AND 2006-0 7 AND ALLOWED ASSESSEES APPEAL. ACCORDINGLY, IT WAS REQ UESTED NOT TO DISALLOW THE JOB WORK CHARGES FROM THE PROFITS OF T HE UNDERTAKING. 5. HOWEVER, THE ASSESSING OFFICER FOUND THE CONTEN TION OF THE ASSESSEE NOT TENABLE HOLDING THAT THE DEPARTMENT HA S NOT ACCEPTED THE VIEWS OF THE TRIBUNAL AND HAS PREFERRE D AN APPEAL BEFORE THE HONBLE HIGH COURT OF ANDHRA PRADESH. 6. FURTHER, THE ASSESSING OFFICER HAS HELD AS FOLL OWS: FURTHER, THOUGH THE INCOME FROM JOB WORKS CAN BE SAID TO BE ATTRIBUTABLE TO THE INDUSTRIAL UNDERTAKING, IT WAS NOT DERIVED FROM ITA NO.1622/HYD/2011 AUCTUS PHARMA LTD., HYDERABAD 3 THE UNDERTAKING. AS HELD BY VARIOUS COURTS THE WOR K DERIVED FROM HAS NARROWER MEANING TO THE WORD ATTRIBUTABL E. RELIANCE IS PLACED IN CAMBAY ELEC. SUPPLY INDUSTRIAL CO. LTD . VS. CIT 113 ITR 84 (SC), CIT VS. STERLING FOODS 237 ITR 579(SC) , PANDIAN CHEMICALS LTD. (SC) & INDIAN LEATHER CORPN. LTD. VS . CIT 227 ITR 552 (SC). IN THE JOB WORKS, THERE WAS NO MANUFACTU RE OF ARTICLES OR GOODS WHICH IS AN ESSENCE FOR ALLOWING THE DEDUC TION U/S 80IB. FOR DOING JOB WORKS, THE ASSESSEE RECEIVES R EQUIRED MATERIAL AND AFTER DOING CERTAIN MINOR MODIFICATION RETURNS THE SAME TO CONTRACTOR WHO IN TURN MAKES FURTHER ADDITI ONS AND ALTERATIONS AND SELLS. RELIANCE WAS ALSO PLACED ON THE DECISION BY THE APEX COURT IN THE CASE OF M/S LIBERTY INDIA LTD. VS. CIT 317 ITR 218, IT WAS HELD THAT THE DEDUCTION OF PRO FITS OF THE UNDERTAKING WHICH BECOMES ELIGIBLE ON SATISFYING SU B SECTIONS (2) WOULD BE ENTITLED TO DEDUCTION UNDER SUB SECTION (1 ) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH INDUSTRIAL UNDE RTAKING FROM THE SPECIFIED DATE. APART FROM ELIGIBILITY, SUB SE CTION (1) PURPORTS TO RESTRICT THE QUANTUM OF DEDUCTION TO A SPECIFIED PERCENTAGE OF THE PROFITS. THIS IS THE IMPORTANCE OF THE WORDS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS AGAINST THE PROFIT ATTR IBUTABLE TO AN INDUSTRIAL UNDERTAKING. HENCE, RECEIPTS FROM JOB WORKS PARTAKES THE CHARACTER MISCELLANEOUS RECEIPTS. THEREFORE TH E AMOUNT OF JOB WORKS RECEIPTS THOUGH ATTRIBUTABLE TO THE UNDERTAKI NG ARE NOT DERIVED FROM THE UNDERTAKING. HENCE, THE ASSESSING OFFICER EXCLUDED THE SAME FROM THE PROFITS OF THE UNDERTAKI NG FOR THE PURPOSE OF DEDUCTION U/S 80IB. BY DOING SO, THERE IS NO POSITIVE INCOME FROM THE ELIGIBLE INDUSTRIAL UNDERTAKING. H ENCE, NO DEDUCTION IS ALLOWED. 7. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), AND THE CIT(A) HAS HELD AS FOLLOWS: THE ASSESSMENT ORDER, STATEMENT OF FACTS, GROUNDS O F APPEAL AND THE SUBMISSIONS OF THE LEARNED AUTHORIZE D REPRESENTATIVE FOR THE ASSESSEE HAVE BEEN PERUSED A ND CONSIDERED CAREFULLY. DURING THE APPEAL PROCEEDING S, THE ITA NO.1622/HYD/2011 AUCTUS PHARMA LTD., HYDERABAD 4 AR OF THE ASSESSEE SUBMITTED THAT THE APPEAL GROUND IS COVERED IN HIS FAVOUR BY THE ASSESSEE ORDERS OF THE CIT(A) IN ITA NO.0722/CIT(A)-II/06-07 DT. 30.3.2007, ITA NO.0158/CIT(A)-II/07-08 DATED 8.2.2008 AND ITA NO.0127/CIT(A) II/08-09 DATED 7.1.2009 FOR THE ASSESSMENT YEARS IS ENTITLED TO DEDUCTION U/S 80IB IN RESPECT OF THE JOB WORK CHARGES/CONVERSION CHARGES. THIS DECISION OF MY PREDECESSOR HAS BEEN CONFIRMED BY TH E TRIBUNAL IN ITA NO.725/H/2007 DATED 17.6.2009 IN IT A NO.432/H/2008 DATED 14.5.2008 AND IN ITA NO.406/H/2009 DATED 9.11.2009 FOR THE RESPECTIVE ASSESSMENT YEARS AS MENTIONED ABOVE. THAT BEING SO , CONSISTENT WITH THE VIEW TAKEN BY MY PREDECESSOR, W HICH HAS BEEN CONFIRMED BY THE JURISDICTIONAL TRIBUNAL, THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THE JOB WORK/CONVERSION CHARGES RECEIVED BY THE ASSESSEE FO R THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80IB. 8. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 9. THE CO-ORDINATE BENCH IN ITA NO.432/H/2008 FOR THE ASSESSMENT YEAR 2005-06 IN ASSESSEES OWN CASE HAS HELD AS FOLLOWS: ` SIMILAR ISSUE HAD BEEN ADJUDICATED UPON BY THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF BIOL OGICAL E. LTD. IN ITA NO.274/H/2007 DATED 29.4.2008 IN WHICH THE CLAIM OF THE ASSESSEE WAS ALLOWED. RESPECTFULLY FO LLOWING THE SAID ORDER, THE ORDER OF THE CIT(A) ALLOWING TH E CLAIM OF THE ASSESSEE IS UPHELD. ITA NO.1622/HYD/2011 AUCTUS PHARMA LTD., HYDERABAD 5 10. RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE, WE DISMISS THE REVENU E APPEAL. 11. HOWEVER, WE MAKE IT CLEAR THAT INTEREST INCOME IS TO BE EXCLUDED FROM BUSINESS INCOME WHILE COMPUTING DEDUC TION U/S 80IB. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON: 12.1.2 012 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 12 TH JANUARY, 2012 COPY FORWARDED TO: 1. THE DY. CIT, CIRCLE 1(1), 4 TH FLOOR, AAYAKAR BHAVAN, HYDERABAD 2. M/S AUCTUS PHARMA LTD., , FLAT NO.102, ADITYA TRADE CENTRE, AMEERPET, HYDERABAD 3. THE CIT(A)- II, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/