ACIT Corporate Circle 6(1) , CHENNAI V. Samco Metals & Alloys Pvt. Ltd. , CHENNAI

ITA 1782/CHNY/2019

AI Insights

The case revolves around the dispute concerning the treatment of testing charges received by M/s. Samco Metals & Alloys Pvt. Ltd. during the Assessment Year 2004-05. The primary legal issue was whether these charges should be considered part of the turnover and thus eligible for deduction under Section 80HHC of the Income Tax Act. The Assessing Officer initially denied the deduction, categorizing the charges differently. However, the CIT(A) reversed this decision, aligning with precedents that recognized such charges as part of operational income linked to manufacturing and export activities. The Tribunal, after reviewing the arguments and relevant legal provisions, agreed with the CIT(A)'s interpretation and dismissed the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133876 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-02-2023
• Assessment Year: 2004-2005
• Appeal Filed On: 06-06-2019
• Other Referred Cases: CIT vs. Bengluru Clothing Company (260 ITR 371)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80HHC

Judgement Text

आयकर अपीलीय अिधकरण ‘डी/ एस एम सी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘D/SMC’ BENCH, CHENNAI माननीय 0ी मनोज कु मार अ4वाल ,लेखा सद8 के सम9। BEFORE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.1782/Chny/2019 (िनधा?रण वष? / Assessment Year: 2004-05) DCIT Corporate Circle-6(1) Chennai. बनाम / V s. M/s. Samco Metals & Alloys Pvt. Ltd. No.29, 3 rd Cross Street, VGP Murthy Square St. Thomas Mount, Chennai-600 016. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAAC S -3 1 0 9 -F (अ पीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Assessee by : None थ की ओरसे/Revenue by : Shri Sanat Kumar Raha (Addl. CIT)-Ld. DR सुनवाई की तारीख/Date of Hearing : 20-02-2023 घोषणा की तारीख /Date of Pronouncement : 20-02-2023 आदेश / O R D E R 1. Aforesaid appeal by Revenue for Assessment Year (AY) 2004-05 arises out of the order of learned Commissioner of Income Tax (Appeals)-15, Chennai [CIT(A)] dated 29-03-2019 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s 147 of the Act on 30-12-2010. None has appeared for assessee. Accordingly, the appeal is proceeded with after hearing Ld. Sr. DR who pleaded for restoration of assessment as framed by Ld. AO. The sole issue that arises for adjudication is whether testing charges as received by the assessee should be treated as part of turnover and deduction u/s 80HHC attributable to this amount should be allowed or not? ITA No.1782/Chny/2019 - 2 - 2. From case records, it emerges that the assessee claimed deduction u/s 80HHC for Rs.6.99 Lacs. However, while computing the deduction, the assessee did not deduct 90% of testing charges for Rs.66.79 Lacs in terms of 80HHC(4C), Explanation baa(1). The assessee submitted that testing charges form part of sales and manufacturing activity and could not be equated with commission, service charge etc. as enumerated in Explanation baa(1). However, Ld. AO denied the deduction. Upon further appeal, Ld. CIT(A) following first appellate order for AY 2003-04 as well as the decision of Hon’ble High Court of Bombay in CIT vs. Bengluru Clothing Company (260 ITR 371) held that testing charges were part of operational income. The same should be considered as linked to manufacturing activity and export sales. Therefore, the same could not be excluded from business profits while computing impugned deduction. Aggrieved, the revenue is in further appeal before me. 3. I find that the findings rendered by Ld. CIT(A) remain undisputed before me. The testing charges form part of manufacturing activity and export sales of the assessee. Therefore, the same would partake the character of business profits and hence, not to be deducted for the purpose of Sec.80HHC. The same is not akin to incomes such as commission, service charge etc. mentioned in in explanation baa(1) to Sec.80HHC(4C). The case law of Hon’ble High Court of Bombay clearly supports the case of the assessee. Therefore, finding no reason to interfere in the impugned order, the appeal stand dismissed. ITA No.1782/Chny/2019 - 3 - 4. The appeal stand dismissed. Order pronounced on 20 th February, 2023. Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद8 / ACCOUNTANT MEMBER चे)ई / Chennai; िदनांक / Dated : 20-02-2023 EDN/- आदेश की Tितिलिप अ4ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु /CIT 4. िवभागीय ितिनिध/DR 5. गाड फाईल/GF