The ITO,Vapi Ward-4, Nani Daman V. M/s. Anand Publication, Nani Daman

ITA 1887/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9417 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-10-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 01-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMIR VAKIL
• Assessee Lawyers: S N L AGARWAL
• Section: 80IB

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M INCOME-TAX OFFICER, VAPI WARD-4, DAMAN. VS. M/S ANAND PUBLICATION, SR.NO.328/17, B/H CRICKET GROUND, KACHIGAM, NANI DAMAN. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SAMIR VAKIL, DR RESPONDENT BY:- SHRI S. N. L. AGARWAL, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUNDS :- (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE OTHER INCOME O F RS.8,18,288/- IN FORM OF SCRAP SALES IS ELIGIBLE FO R DEDUCTION U/S 80IB OF THE ACT. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DIRECTING NOT TO EXCLUDING THE INCOME EARNED FROM SALE OF SCRAP FROM THE PROFITS ELIGIBLE FOR DEDUCTION U/S 80IB, THOUGH SAME HAVE NO DIRECT OR IMMEDIATE N EXUS WITH THE MANUFACTURING ACTIVITY OF THE ASSESSEE. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PRINT ING OF TELEPHONE DIRECTORY, TEXTBOOK, ETC. THE INDUSTRIAL UNDERTAKIN G OF THE ASSESSEE IS LOCATED IN THE UNION TERRITORY OF DAMAN BEING A NOT IFIED BACKWARD AREA. THE ASSESSEE RECEIVED A SUM OF RS.8,18,288/- ON SCR AP SALES WHICH WAS ITA NO.1887/AHD/2010 ASST. YEAR :2006-07 ITA NO.1887/AHD/2010 ASST. YEAR 2006-07 2 CREDITED IN THE PROFIT AND LOSS ACCOUNT. THE AO DIS ALLOWED THE CLAIM BY HOLDING THAT THE SCRAP SALE IS NOT INCOME FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING. THE LD. CIT(A), HOWEVER, ALLOWED THE C LAIM HOLDING THAT SCRAP IS DERIVED IN THE BUSINESS OF ASSESSEES INDU STRIAL UNDERTAKING AND IS GENERATED AS BYE-PRODUCT. THE REVENUE IS IN APPEAL AGAINST THIS ORDER OF LD. CIT(A). 3. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUE HAD ARISEN BEFORE B OF THIS TRIBUNAL IN ITA NO.2415/AHD/2009 ASST. YEAR 2006-07, IN THE CASE OF ITO, VAPI WARD-4, DAMAN VS. M/S CHIRAG PLAST, NANI DAMAN, PRONOUNCED ON 23 RD OCTOBER, 2009. IN THIS CASE THE BENCH HAD OBSERVED AS UNDER :- 4. WE HAVE HEARD LEARNED DR AND LEARNED AR OF THE ASSESSEE. IN OUR CONSIDERED VIEW, THE FIRST ISSUE IS COVERED IN FAVOUR OF THE A SSESSEE. BY IHE DECISION OF THE HON'BLE SUPREME COURT IN INDIAN CINE AGENCIES VS, C IT (2009) 308 ITB 98 (SC) AND ALSO BY FOLLOWING OTHER DECISIONS. 1. IN [2005] 273 ITR (A.T.) 0001- ASSISTANT COMMISS IONER OF INCOME-TAX VS. MAXCARE LABORATORIES LTD. INCOME-TAX APPELLATE TRIB UNALCUTTACK HELD THAT THE INCOME FROM SALE OF EMPTY DRUMS/CONTAINERS, SAF E OF USELESS MATERIALS WAS OUT OF THE BUSINESS OF INDUSTRIAL UNDERTAKING OF THE ASSES SEE. FOR DETERMINING THE PROFITS OF BUSINESS OF THE INDUSTRIAL UNDERTAKING THE SALE OF EMPTY DRUMS/CONTAINERS, SALE OF USELESS MATERIALS COULD BE TAKEN IN TO ACCOUNT. 2. IN [2001] 251 ITR 0806- SHIP SCRAP TRADERS VS. COMMISSIONER OF INCOME -TAX BOMBAY HIGH COURT HAS OBSERVED FOR ASSESSEES ENGAGE D IN SHIP BREAKING THE SCRAP AND, STEEL OBTAINED BY DISMANTLING AND BREAKING UP OF THE SHIP MUST BE REGARDED AS A DIFFERENT COMMERCIAL COMMODITY FROM THE SHIP ITSELF , AND THE ACTIVITY WOULD AMOUNT TO MANUFACTURING. HENCE, THE ASSESSEES WOULD BE ENTITL ED TO THE SPECIAL DEDUCTION UNDER SECTIONS 80HHA AND 80-I 3. IN [1982] 133 ITR 034- COMMISSIONER OF INCOME-TA X VS. SUNDARAM CLAYTON LTD. MADRAS HIGH COURT HELD THAT THE SCRAP SOLD BY THE ASSESSEE BEIN G THE BYPRODUCT ARISING OUL OF THE MANUFACTURED ITEM 1 : COMING WITHIN DIE SCOPE OF A PRIORITY INDUSTRY, THE INCOME ARISING FROM SUCH SALE WOULD BE ATTRIBUT ABLE TO THE PRIORITY INDUSTRY. (CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT (L978) 113 ITR 84 (SC APPLIED.) ITA NO.1887/AHD/2010 ASST. YEAR 2006-07 3 4. IN [2005] 279 ITR (A.T-) 0024- DEPUTY COMMISSION ER OF INCOME-TAX VS. INVESTWEL PUBLISHERS P.. LTD. INCOME-TAX APPELLATE TRIBUNA L MUMBAI HELD THAT THE RADDI SALES FORMED PART OF THE INCOME DERIVED FROM THE PUBLISHING BUSI NESS. THE MAGAZINES WHICH WERE NOT SOLD BECAME OBSOLETE AND WERE SOLD AS RADDI AND THEREFORE THIS INCOME WAS OF THE NATURE AS INCOME RECEIVED BY SALE OF MAGAZINES. DED UCTION UNDER SECTION 80-I WOULD BE ELIGIBLE ON THIS INCOME 5. IN [2000] 241 ITR 0803- FENNER (INDIA) LTD. VS. COMMISSIONER OF INCOME-TAX (NO. 2) MADRAS HIGH COURT HELD THAT IN THE INDUSTRIAL UN DERTAKING IN THE MANUFACTURE OF V- BELTS OIL SEALS O-RINGS AND RUBBER MOULDED PRODUCTS , CERTAIN SCRAP MATERIALS RESULTED WHICH HAD A SALEABLE VALUE. THE SCRAP MATERIALS HAD DIRECT LINK OR NEXUS WITH THE INDUSTRIAL UNDERTAKING. THEREFORE, PROFIT FROM THE SALE OF THE SCRAP MATERIALS WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HH 6. IN NIRMA INDUSTRIES LTD. VS. ASSISTANT COMMISSIO NER OF INCOME-LAX, CENTRAL CIRCLE 2(1} NIRNIA INDUSTRIES LTD, V/S. ACIT, 95 ITD 199 (AND.) (SB) IT WAS HELD: '..... ....REGARDING SALE OF BARD AN A AND SALE OF WASTE MATERIAL 22. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITT ED BY THE LEARNED COUNSEL THAT SALE OF BARDANA AND WASTE MATERIAL HAS GENERATED DURING THE COURSE OF PRODUCTION OF DIE INDUSTRIAL UNDERTAKING. THEREFORE, IT HAS DIRECT AN D IMMEDIATE NEXUS WITH THE INDUSTRIAL UNDERTAKING. THE LEARNED DR COULD NOT CO NTROVERT THE ABOVE STATEMENT MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. MOREO VER IT WAS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE HON'BLE J URISDICTIONAL HIGH COURT HAS DECIDED IDENTICAL ISSUE IN FAVOUR OF THE ASSESSES I N THE CASE OF DY. CTT V. HARJIVANDAS JUTHABHAI ZAVERI VIDE [IT REFERENCE NO. 189 OF 1999 ]. SINCE THE BARDANA WASTE MATERIAL HAS GENERATED DURING THE COURSE OF PRODUCT ION OF THE INDUSTRIAL UNDERTAKING, WE HOLD THAT IT HAS A DIRECT AND IMMEDIATE NEXUS WI TH THE INDUSTRIAL UNDERTAKING AND THEREFORE ENTITLED TO DEDUCTION UNDER SECTION BQHH/ 80-T. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) IN THIS RESPECT. RESPECTFULLY FOLLOWING ABOVE AUTHORITIES, WE HOLD T HAT ASSESSES IS ENTITLED TO DEDUCTION UNDER SECTION 801B ON PRODUCTION AND SALE OF A SCRA P FROM THE SAME RAW MATERIAL FROM WHICH PRODUCT SOLD WERE MANUFACTURED. ACCORDIN GLY THIS GROUND OF THE REVENUE IS REJECTED. ITA NO.1887/AHD/2010 ASST. YEAR 2006-07 4 FOLLOWING THE ABOVE DECISION, WE ALLOW THE CLAIM OF THE ASSESSEE. ACCORDINGLY, THE APPEAL FILED BY THE REVENUE IS DIS MISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 12.11.10. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD, DATED : 12.11.10. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 29/10/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 1/11/2010 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..