M/s. NUCLEUS REMEDIES, MUMBAI V. ITO - 24(2)(1), MUMBAI

ITA 1921/MUM/2006

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3479 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 22-12-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 23-03-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C P PATHAK
• Assessee Lawyers: R C JAIN
• Keywords: Reasonable cause; Condonation of delay
• Section: 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER. I.T.A. NO. 1921/MUM/2006. ASSESSMENT YEAR : 2002-03. NUCLEUSREMEDIES, THE INCOME TAX OFFICER, 5, VINAYAK HEIGHTS, VS. 24(2)(1), MUMBAI. UPPER GOVIND NAGAR, MALAD (E), MUMBAI 400 097. PAN AAAFN5729J APPELLANT. RESPONDENT. APPELLA NT BY : SHRI R.C.JAIN. RESPONDENT BY : SHRI C.P. PATHAK. . O R D E R PER J. SUDHAKAR REDDY, A.M. : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE CIT(APPEALS)-XXIV, MUMBAI DATED 27-12-2005. 2. THERE IS A DELAY OF FOUR DAYS IN FILING OF THE A PPEAL. WE HAVE PERUSED THE PETITION FILED FOR CONDONATION OF DELAY AS WELL AS THE AFFIDAVIT FILED EXPLAINING THE REASONS FOR THE DELAY. 2 3. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE CO NSIDERED OPINION THAT THE ASSESSEE HAS BEEN PREVENTED BY REASONABLE CAUSE FRO M FILING THE APPEAL IN TIME. WE CONDONE THE DELAY AND ADMIT THE APPEAL. 4. THE ASSESSEE IS A MANUFACTURER OF PHARMACEUTICAL PRODUCTS. THE ISSUE ARISING IN THIS APPEAL IS ON THE COMPUTATION OF RELIEF U/S 80IA ON THE FOLLOWING ITEMS : 1) INTEREST : RS. 6,596/- 2) INTEREST ON TDR : RS.15,60,363/- 3) SUNDRY BALANCES WRITTEN OFF : RS. 9,216/ - 4) SCRAP SALE : RS. 58,994/- THE ISSUE IS WHETHER THESE FOUR ITEMS SHOULD BE TAK EN AS INCOME ELIGIBLE FOR RELIEF U/S 80IA OF THE ACT. 5. WE HAVE HEARD MR. R.C. JAIN, LEARNED COUNSEL FOR THE ASSESSEE AND SHRI C.P. PATHAK, LEARNED DR. 6. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRC UMSTANCES OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF T HE AUTHORITIES BELOW, WE HOLD AS FOLLOWS. 7. AS FAR AS INCOME FROM INTEREST AND INCOME FROM I NTEREST ON TDR IS CONCERNED, THE SAME ARE NOT ELIGIBLE FOR RELIEF U/S 80IA AS THESE ARE NOT INCOME DERIVED, FROM AN INDUSTRIAL UNDERTAKING. THE HONBL E SUPREME COURT IN THE RECENT JUDGMENT IN THE CASE OF LIBERTY INDIA VS. CIT 317 ITR 218(SC) HELD AS FOLLOWS : SECTIONS 80-I, 80-IA AND 80IB PROVIDE FOR INCENTI VES IN THE FORM OF DEDUCTIONS WHICH ARE LINKED TO PROFITS AND NOT INVE STMENT. ON ANALYSIS OF SECTIONS 80-IA AND 80-IB IT BECOMES CLEAR THAT ANY INDUSTRIAL UNDERTAKING WHICH BECOMES ELIGIBLE ON SATISFYING SUB-SECTION (2 ) WOULD BE ENTITLED TO DEDUCTION UNDER SUB-SECTION (1) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING AFTER THE SPECIFIED DAT E. APART FROM ELIGIBILITY, 3 SUB-SECTION (1) PURPORTS TO RESTRICT THE QUANTUM OF DEDUCTION TO A SPECIFIED PERCENTAGE OF THE PROFITS. THIS IS THE IMPORTANCE O F THE WORDS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS AGAINST PROFITS ATTR IBUTABLE TO AN INDUSTRIAL UNDERTAKING. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDE R OF THE CIT(APPEALS) ON THIS ISSUE AS INTEREST INCOME IS NOT DERIVED FROM AN IND USTRIAL UNDERTAKING. 8. COMING TO THE SUNDRY BALANCES WRITTEN OFF, WE FI ND THAT THE ASSESSEE STATES THAT IT IS AN UNILATERAL ACT. FOR THE SAME REASONS THAT ARE GIVEN FOR REJECTING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA ON INT EREST INCOME, WE REJECT THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA OF INCOME BY WAY OF SUNDRY BALANCES WRITTEN OFF. THIS INCOME CANNOT BE SAID TO HAVE BEE N DERIVED FROM THE INDUSTRIAL UNDERTAKING. 9. THE LAST ITEM IS SCRAP SALES. THE LEARNED COUNSE L FOR THE ASSESSEE STATES THAT EXCEPT FOR THE INDUSTRIAL UNDERTAKING AND ITS ACTIV ITY, THE ASSESSEE HAS NO OTHER ACTIVITY AND THAT THE SCRAP IS GENERATED FROM THE M ANUFACTURING OF PHARMACEUTICAL PRODUCTS AND HENCE IT IS INCOME DERIVED FROM MANUFA CTURING ACTIVITY. WE ARE OF THE CONSIDERED OPINION THAT THE CLAIM OF THE ASSESSEE H AS TO SUCCEED ON THE ISSUE OF INCOME FROM SCRAP SALES. IN HOLDING SO, WE RELY ON THE FOLLOWING CASE LAWS : CIT VS. SUNDARAM INDUSTRIES LT. 253 ITR 396 (MAD.) FENNER (INDIA) LTD. VS. CIT 241 ITR 803 (MAD.) THUS THE AO IS DIRECTED TO GRANT DEDUCTION U/S 80IA ON INCOME BY WAY OF SCRAP SALES. 10. COMING TO GROUND NO.2, IT IS ON THE ISSUE OF LE VY OF INTEREST U/S 234B. AS THE LEVY OF INTEREST IS MANDATORY AND CONSEQUENTIAL, WE DISMISS THIS GROUND. 4 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DEC. , 2010. SD/- SD/- (VIJAY PAL RAO) (J. SU DHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER MUMBAI, DATED: 31 ST DEC., 2010. WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, G-BENCH (TRUE COPY) BY ORDER ASSTT. REGIST RAR, ITAT, MUMBAI BENCHE S, MUMBAI.