The ACIT, Circle-9, Surat V. M/s. New Gujarat Plastics, Surat

ITA 1737/AHD/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9969 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 30-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SITA RAM MEENA
• Assessee Lawyers: M K PATEL

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ./ ITA NO. 1737/AHD/2011 / ASSESSMENT YEAR: 2008-09 ACIT, CIRCLE-9, SURAT VS. M/S. NEW GUJARAT PLASTICS, B-729, 7 TH FLOOR, INTERNATIONAL TRADE CENTRE, MAJURA GATE, SURAT PAN : AACFN 0838 R / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI SITA RAM MEENA, SR DR ASSESSEE BY : SHRI M K PATEL, AR / DATE OF HEARING : 17/11/2016 / DATE OF PRONOUNCEMENT: 18/11/2016 / O R D E R PER N.K. BILLAIYA, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE CIT(A)-I, SURAT DATED 15.03.2011 PERTAINING TO AY 2 008-09. 2. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE CI T(A) ERRED IN DELETING THE DISALLOWANCE OF RS.54,14,147/- MADE U/S 80IB(4) OF THE ACT. 3. HAVING HEARD THE RIVAL CONTENTIONS, WE HAVE CARE FULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE FOLLOWING INCOMES WERE CLAIMED TO BE ELIGIBLE FOR DEDUCTION U/S 80IB(4) OF THE ACT:- A. JOB WORK INCOME - RS.27,42,822/- B. FOREIGN EXCHANGE DIFFERENCE - RS. 39,464/- C. PRIOR PERIOD INCOME - RS. 18,739/- D. LIABILITY WRITTEN BACK - RS.13,65,232/- E. INTEREST INCOME - RS.12,47,890/- TOTAL - RS.54,14,147/- ITA NO. 1737/AHD/2011 ACIT VS. NEW GUJARAT PLASTICS AY 2008-09 2 4. THE ASSESSING OFFICER WAS OF THE FIRM BELIEF THA T THE AFORESAID INCOMES ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IB(4) OF THE ACT AS THESE INCOMES ARE NOT DERIVED FROM THE INDUSTRIAL UNDERTA KINGS. WHEN THE MATTER WAS AGITATED BEFORE THE FIRST APPELLATE AUTHORITY, THE FIRST APPELLATE AUTHORITY WAS CONVINCED THAT ALL THESE INCOMES WERE ELIGIBLE FOR THE BENEFIT OF DEDUCTION U/S 80IB(4) OF THE ACT. 5. INCOME FROM JOB WORK WAS CONSIDERED BY THE CO-OR DINATE BENCH IN THE CASE OF DCIT VS. M/S. PIPALIA CABLES & WIRES PV T LTD IN ITA NO.938/AHD/2009 QUA GROUND NO.1 OF THAT APPEAL. TH E RELEVANT FINDINGS OF THE CO-ORDINATE BENCH READ AS UNDER:- 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE AMOUNT ON ACCOUNT OF JOB WORK INC OME WAS DERIVED FROM THE ACTIVITIES OF INDUSTRIAL UNDERTAKING. IN TERMS OF PROVISIONS OF SECTION 80- IA OF THE ACT, ONLY REQUIREMENT FOR ITS APPLICABILI TY IS DERIVING OF INCOME FROM BUSINESS REFERRED TO IN THE SAID PROVISIONS. I T IS NOT THE CASE OF THE REVENUE THAT THE BUSINESS OF THE INDUSTRIAL UNDERTA KING OF ASSESSEE DOES NOT FALL UNDER THESE PROVISIONS OF THE ACT. THE ACTIVIT Y OF THE ASSESSEE IS LIABLE TO BE REGARDED AS MANUFACTURING ACTIVITY IRRESPECTIVE OF THE FACT WHETHER THE PRODUCTS MANUFACTURED THEREIN ARE FOR ITS OWN BUSIN ESS OR FOR OTHERS ON JOB WORK BASIS. EVIDENTLY, SEC. 80IA OF THE ACT DOES NO T DISTINGUISH BETWEEN THE ACTIVITY INVOLVING MANUFACTURING ON OWN ACCOUNT OR FOR OTHERS. HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. J.B. KHARWAR & SONS , 163 ITR 394 (GUJ) WHILE HOLDING THIS VIEW, ALLOWED THE CLAIM FO R DEDUCTION U/S 80J OF THE ACT. HON'BLE DELHI HIGH COURT IN CIT V. NORTHERN AR OMATICS LTD. [2005] 196 CTR (DELHI) 479 ,FOLLOWING THEIR EARLIER DECISI ON IN NU-LOOK (P) LTD. VS. CIT, 157 ITR 253 (DEL) HELD THAT THE MANUFACTURING ACTIVITY, WHICH RESULTED IN RECEIPT OF SUCH CHARGES, NOT DONE BY THE ASSESSE E FOR ITSELF BUT FOR OTHERS, IS ENTITLED TO DEDUCTION U/S 80IA OF THE ACT. SIMILAR VIEW WERE TAKEN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. IMPE L FORGE & ALLIED INDUSTRIES LTD.,183 TAXMAN 38. 6. IN THE LIGHT OF THE VIEW TAKEN IN THE AFORESAID DECISION, WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE CIT(A) IN ALLOWING THE DEDUCTION U/S 80IB(4) OF THE ACT ON THE INCOME FROM JOB WORK RECEIPTS. ITA NO. 1737/AHD/2011 ACIT VS. NEW GUJARAT PLASTICS AY 2008-09 3 7. THE SECOND ITEM OF INCOME RELATES TO FOREIGN EXC HANGE GAIN. WE FIND THAT THE SAME IS EARNED ON ACCOUNT OF OUTSTANDING L IABILITY IN FOREIGN CURRENCY. IN OUR CONSIDERED OPINION, SUCH FOREIGN E XCHANGE GAIN HAS DIRECT NEXUS OF THE FIRST DEGREE WITH THE MANUFACTURING AC TIVITIES OF ELIGIBLE BUSINESS. THEREFORE, THE SAME IS ELIGIBLE FOR THE BENEFIT OF DEDUCTION U/S 80IB(4) OF THE ACT. NO INTERFERENCE IS CALLED FOR. 8. THE THIRD ITEM OF INCOME RELATES TO PRIOR PERIOD INCOME. WE FIND THAT THE PRIOR PERIOD INCOME RELATES TO THE MANUFACTURIN G ACTIVITIES OF THE ASSESSEE AND HENCE HAVE A FIRST DEGREE NEXUS WITH I TS ACTIVITIES, MAKING IT ELIGIBLE FOR DEDUCTION U/S 80IB(4) OF THE ACT. 9. THE FORTH ITEM OF THE INCOME IS THE LIABILITIES WRITTEN BACK SHOWN AS INCOME BY WAY OF CESSATION OF LIABILITY U/S 41(1) O F THE ACT. WE FIND THAT ALL THE LIABILITIES WRITTEN BACK BY THE ASSESSEE RELATE D TO ITS CREDITORS. THE BALANCES OUTSTANDING WERE WRITTEN BACK AND THE OUTS TANDING LIABILITIES PERTAINED TO THE PURCHASE OF STORES FROM THE GE ADV ANCE CERAMICS, SINTEC AND VELMET GENERAL LTD. SINCE ALL THE LIABILITIES WERE IN RELATION TO THE MANUFACTURING ACTIVITIES OF THE ASSESSEE, WRITING B ACK SUCH LIABILITIES HAVE A DIRECT NEXUS, MAKING IT ELIGIBLE FOR DEDUCTION U/S 80IB(4) OF THE ACT. 10. THE LAST ITEM OF INCOME IS THE INTEREST INCOME. WE FIND THAT THE FIRST APPELLATE AUTHORITY HAS ALLOWED THE BENEFIT OF DEDU CTION U/S 80IB(4) ON THE NET INCOME, I.E. THE INTEREST INCOME EARNED BY THE ASSESSEE WAS REDUCED BY THE INTEREST EXPENDITURE. WE FURTHER FIND THAT TH E ASSESSEE HAD PAID INTEREST ON DEPOSITS MADE OUT OF WORKING CAPITAL BORROWING F ROM BANK OF BARODA CASH CREDIT ACCOUNT, ON WHICH IT HAS PAID INTEREST. THIS INTEREST HAS BEEN REDUCED FROM THE INCOME EARNED. THIS NETTING OFF O F INTEREST INCOME HAS BEEN HELD TO BE ELIGIBLE FOR THE BENEFIT OF DEDUCTI ON U/S 80IB(4) OF THE ACT BY ITA NO. 1737/AHD/2011 ACIT VS. NEW GUJARAT PLASTICS AY 2008-09 4 THE HONBLE HIGH COURT OF DELHI IN THE CASE OF SHRI RAM HONDA POWER EQUIPMENT & OTHERS, 207 CTR (DEL) 689, WHICH HAS BE EN CONSEQUENTLY CONFIRMED BY THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD V. CIT , REPORTED IN 343 ITR 89 ( SC). WE, THEREFORE, DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE CIT(A). 11. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF THE DISCUSSION HEREINABOVE, WE DECLINE TO INTERFERE. 12. IN THE RESULT, APPEAL FILED BY THE REVENUE IS A CCORDINGLY DISMISSED. ORDER PRONOUNCED IN THE COURT ON 18 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- (S.S. GODARA) JUDICIAL MEMBER (N.K. BILLAIYA) ACCOUNTANT MEMBER AHMEDABAD; DATED 18/11/2016 BIJU T., SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! # / CONCERNED CIT 4. # ( ) / THE CIT(A ) 5. & ! , ! , / D R, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) # $, / ITAT, AHMEDABAD