DCIT, CHENNAI V. Computer Graphics P Ltd., CHENNAI

ITA 1723/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96115 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 28-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Business income
• Section: 80IB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # , $ & BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A.NO . 1723/MDS/2015 & C.O. NO.105/MDS/2015 (IN ITA NO.1723/MDS/2015) ( / ASSESSMENT YEAR: 2011-12) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-I(2), CHENNAI. VS M/S. COMPUTER GRAPHICS P.LTD., NO.24 & 25 STERLING SILVER SIVAGANGA ROAD OFF. STERLING ROAD, NUNGAMBAKKAM, CHENNAI-600 034. PAN:AAACC1274F ( /APPELLANT) ( /RESPONDENT/CROSS OBJECTOR) / APPELLANT BY : MR.A.B.KOLI, JCIT /RESPONDENT BY : MR. V.S.JAYAKUMAR, ADVOCATE /DATE OF HEARING : 16 TH SEPTEMBER, 2015 /DATE OF PRONOUNCEMENT : 30 TH SEPTEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THE APPEAL BY THE REVENUE AND CROSS OBJECTION BY TH E ASSESSEE ARE FILED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS)-18,CHENNAI DATED 31.03.2015 FO R THE ASSESSMENT YEAR 2011-12. 2. THE ONLY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIREC TING THE ASSESSING OFFICER TO INCLUDE SALES TAX INCOME OF ` 1,03,64,175/-, FREIGHT AND HANDLING CHARGES OF ` 6,59,077/- 2 ITA NO.1723/MDS/2015 & C.O. NO.105/MDS/2015 AND INTEREST ON SHORT TERM DEPOSIT OF ` 3,24,132/- FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 8 0IB OF THE ACT. 3. IT WAS THE CONTENTION OF THE REVENUE THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FOLLO WING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I N ITA NO.1001/MDS/2009 , 359 & 360/MDS/2010 DATED 30.11.2 010 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 IN ASS ESSEES OWN CASE WHEREIN IT WAS HELD BY THE TRIBUNAL THAT SALES TAX INCENTIVE, FREIGHT AND HANDLING CHARGES AND INTERE ST ON SHORT TERM DEPOSITS, INSURANCE CLAIM ETC. ARE OPERATIONAL /BUSINESS INCOME AND THEREFORE TO BE INCLUDED FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80IB OF THE ACT. 4. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IN APPEAL HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE EARLIER ASSESSMENT YEARS WHICH WAS FO LLOWED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND THERE FORE THE SAID DECISION IN THE ASSESSEES OWN CASE MAY B E FOLLOWED. 3 ITA NO.1723/MDS/2015 & C.O. NO.105/MDS/2015 5. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN EXCLUDING THESE I NCOME FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80 IB OF THE ACT. 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. ON GOING THROUGH THE ORDERS OF THE TRIBUNAL IN ASS ESSEES OWN CASE FOR THE ASSESSMENT YEARS 2005-06 AND 2006- 07 DATED 30.11.2010 AND ORDER FOR THE ASSESSMENT YEARS 2003- 04 & 2004-05 DATED 08.05.2012, WE FIND THAT THE TRI BUNAL DECIDED THE ISSUE TO INCLUDE SUCH INCOME FOR THE PU RPOSE OF COMPUTING DEDUCTION UNDER SECTION 80IB OF THE ACT. RESPECTFULLY FOLLOWING THE SAID ORDERS, WE UPHOLD T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS IS SUE AND REJECT THE GROUNDS RAISED BY THE REVENUE. 7. COMING TO THE CROSS OBJECTION FILED BY THE ASSES SEE , THE GRIEVANCE OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ADDITION O F ` 3,22,067/- TOWARDS COMMISSION AND ` 1,73,82,230/- TOWARDS INTEREST INCOME ON INCOME-TAX REFUND ARE NOT ELIGI BLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. 4 ITA NO.1723/MDS/2015 & C.O. NO.105/MDS/2015 8. COUNSEL FOR THE ASSESSEE PLACES RELIANCE ON THE GROUNDS RAISED IN THE CROSS OBJECTION. 9. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS). 10. ON HEARING BOTH THE PARTIES AND PERUSING THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS), WE FIND THAT COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDER ING THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSING OFFICE R HELD THAT INTEREST ON INCOME TAX REFUND AND COMMISSION ARE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE AC T OBSERVING AS UNDER:- 6.1 HOWEVER, FOR THE YEAR UNDER APPEAL, THE APPELLANT HAS INCLUDED UNDER THE HEAD 'MISCELLANEOUS INCOME, INCOME FROM INTEREST ON INCOME TAX REFUND OF RS.1,73,82,230/- ALSO AND COMMISSION OF RS.3,22,067 /- APART FROM FREIGHT AND HANDLING CHARGES, SALES' TAX INCENTIVE, OTHER INCOME LIKE INTEREST ON SHORT TERM DEPOSIT.. AS' THE HON'BLE ITAT IN THE DECISION MENT IONED SUPRA HAS HELD THAT (I) SALES TAX INCENTIVE FORM'S PART OF OPERATIONAL INCOME OF THE APPELLANT (II) INTEREST O N BANK DEPOSITS, ,SHOULD BE TREATED AS PERTAINING TO INCOM E ARISING FROM THE WORKING CAPITAL FUND OF THE APPELL ANT AND HENCE, IT IS PART AND PARCEL OF ITS, BUSINESS INCOM E (ILL) FREIGHT INSURANCE AND HANDLING' CHARGES- AS THEY AR E' IN THE NATURE OF EXPENSES, INCURRED BY THE APPELLANT I N DELIVERING THE GOODS TO DESTINATIONS OF THE CUSTOME RS AND THEREAFTER RECOVERING' THOSE EXPENDITURES AND HENCE THEY ARE, NOTHING BUT NORMAL BUSINESS COLLECTIONS /REIMBURSEMENTS. 6.2 IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE DECISION MENTIONED SUPRA THE AO IS DIRECTED TO INC LUDE 5 ITA NO.1723/MDS/2015 & C.O. NO.105/MDS/2015 SALES TAX INCENTIVE OF RS.1,03,64,175/-, FREIGHT AN D HANDLING CHARGES OF RS.6,59,077/-, ,INTEREST ON SHO RT TERM DEPOSIT I.E. ` 3,24,132/- FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80-IB OF THE ACT. AS A RESULT, THE GR OUNDS RAISED IN THIS REGARD ARE ALLOWED. 6.3 HOWEVER, THE APPELLANT'S CONTENTIONS IN INCLUDING COMMISSION OF RS.3,22,067 I-RECEIVED AND INTEREST O N INCOME TAX REFUND OF ` 1, 73,82,230/- RECEIVED FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80-IB OF THE ACT ARE N OT ACCEPTABLE AS THE SAID AMOUNTS ARE NOT DERIVED FROM THE APPELLANT'S ACTIVITY. THE INCOME FROM COMMISSION SH OWN BY THE APPELLANT IS NOT DIRECTLY CONNECTED WITH THE MA NUFACTURE' OR PROCESSING OF GOODS. IT IS ALSO NECESSARY THE MATER IAL PART OF THE SAID INCOME SHOULD HAVE BEEN EARNED BY THAT ACT IVITY. AS THE COMMISSION RECEIVED BY THE APPELLANT IS NOT DER IVED FROM THE MANUFACTURING ACTIVITY OF THE APPELLANT,. THE S AME IS NOT ELIGIBLE FOR COMPUTATION OF DEDUCTION U/S 80-IB OF THE ACT. 11. ON GOING THROUGH THE ABOVE ORDER, WE DO NOT FIN D ANY INFIRMITY IN THE FINDINGS OF THE COMMISSIONER OF I NCOME TAX (APPEALS) AND UPHOLD THE SAME. THUS THE GROUNDS RA ISED IN THE CROSS OBJECTION ARE REJECTED. 12. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2015. SD/- SD/- ( ' ) ( % '' ) ( CHANDRA POOJARI ) ( CHALLA NAG ENDRA PRASAD ) ) / ACCOUNTANT MEMBER ' ) / JUDICIAL MEMBER ' /CHENNAI, + /DATED 30 TH SEPTEMBER, 2015 SOMU ./ 0/ /COPY TO: 1. ASSESSEE 2. ASSESSING OFFICER 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .