PRINCE PIPES & FITTINGS P. LTD, MUMBAI V. DCIT CC-36, MUMBAI

ITA 1945/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49257 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1945/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. PRINCE PIPES & FITTINGS P. LTD. VS. DCIT, CENTRAL CIRCLE 36 RUBY HOUSE, B - WING MUMBAI 4TH FLOOR, J.K. SAWANT MARG DADAR (W), MUMBAI 400028 PAN - AAACP 2319 J APPELLANT RESPONDENT APPELLANT BY: MS. MRIGAKSHI K. JOSHI RESPONDENT BY: SHRI PARTHASARATHI NAIK O R D E R PER P.M. JAGTAP, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LEARNED CIT(A) XIII, MUMBAI DATED 10.12.2009 AND THE GROUND S RAISED BY THE ASSESSEE THEREIN READ AS UNDER: - THIS IS AN APPEAL AGAINST THE ORDER PASSED U/S. 25 0 BY THE CIT APPEALS- XIII, WHO HAS ERRED IN: 1. TREATING INTEREST INCOME OF RS.8,51,836/- AS INC OME FROM OTHER SOURCES AND THUS NOT ALLOWING DEDUCTION U/S 80IB ON THE SAM E. 2. DISALLOWING DEDUCTION U/S 80IB ON DUTY DRAWBACK OF RS.21,36,914/-. 2. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND A LSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS REGARDS GROUND NO. 2, THE LEARNED REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THE ISSUE INVOLVED THEREIN RELATING TO THE DISALLOWANCE OF ASSESSEES CLAIM FOR DEDUCTION UNDE R SECTION 80IB ON DUTY DRAWBACK IS SQUARELY COVERED IN FAVOUR OF THE REVEN UE AND AGAINST THE ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF LIBERTY INDIA VS. CIT 317 ITR 218 WHEREIN IT WAS HELD THAT DUTY DRAWBACK BEIN G INCENTIVE WHICH FLOWS FROM THE SCHEMES FRAMED BY THE CENTRAL GOVERNMENT ARE NO T PROFITS DERIVED FROM ELIGIBLE 2 ITA NO.1945/MUM/2010 ASSTT. YEAR : 2006-07 BUSINESS UNDER SECTION 80IB. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE HON'BLE SUPREME COURT, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE A.O. OF ASSESSEES CLAIM F OR DEDUCTION UNDER SECTION 80IB ON DUTY DRAWBACK AND DISMISS GROUND NO.2 OF ASSESSE ES APPEAL. 3. AS REGARDS GROUND NO. 1, THE LEARNED COUNSEL FOR TH E ASSESSEE HAS SUBMITTED THAT ASSESSEE IS ENTITLED FOR DEDUCTION U NDER SECTION 80IB IN RESPECT OF INTEREST INCOME AS THE SAME CONSTITUTES INCOME OF T HE ASSESSEE DERIVED FROM ELIGIBLE BUSINESS. IN SUPPORT OF THIS CONTENTION, S HE HAS RELIED ON VARIOUS DECISIONS OF THE TRIBUNAL AS WELL AS THE JUDGEMENT OF THE HON 'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JAGDISHPRADESH M. JOSHI 318 ITR 420 . AFTER HAVING CAREFULLY GONE THROUGH THESE DECISIONS CITED BY THE LEARNED COUNSE L FOR THE ASSESSEE, WE FIND THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF LIBERTY INDIA (SUPRA) APPLICABLE TO THE ISSUE UNDER CONSIDERATION WAS NOT BROUGHT TO THE NOTICE OF THE TRIBUNAL AND THERE WAS THUS NO OCCASION TO CONSIDER THE SAME. IN THE CASE OF CIT VS. JAGDISHPRADESH M. JOSHI (SUPRA), THE DECISION O F THE TRIBUNAL HOLDING THAT THE INTEREST INCOME EARNED BY ASSESSEE ON FIXED DEPOSIT S WITH THE BANK WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA WAS UPHELD BY THE HON' BLE BOMBAY HIGH COURT HOLDING THAT THERE WAS NO SUBSTANTIAL QUESTION OF L AW INVOLVED THEREIN. FOR THIS CONCLUSION, THE HON'BLE BOMBAY HIGH COURT RELIED ON THE JUDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ELTEK SGS P . LTD. 300 ITR 6 WHEREIN IT WAS HELD THAT THE LANGUAGE EMPLOYED IN SECTION 80IB IS DIFFERENT FROM SECTION 80HH AND GOING BY THE EXPRESSION USED IN SECTION 80IB, THERE NEED NOT NECESSARILY BE A DIRECT NEXUS BETWEEN THE ACTIVITY OF AN INDUSTRIAL UNDERTA KING AND THE PROFITS AND GAINS SO AS TO BE ELIGIBLE FOR DEDUCTION. THE HON'BLE SUP REME COURT IN THE CASE OF LIBERTY INDIA (SUPRA), HOWEVER, HAS TAKEN A CONTRARY VIEW A ND HELD AFTER ANALYSING THE RELEVANT PROVISIONS THAT SECTION 80IA/80IB ARE THE CODE THEMSELVES AS THEY CONTAIN BOTH SUBSTANTIVE AS WELL AS PROCEDURAL PROVISIONS. IT WAS HELD THAT SECTION 80IB PROVIDES FOR ALLOWING OF DEDUCTION IN RESPECT OF PR OFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINESS AND THE WORDS 'DERIVED FROM' ARE NARROWER IN CONNOTATION AS COMPARED TO THE WORDS 'ATTRIBUTABLE TO'. IT WAS HEL D THAT BY USING THE EXPRESSION 'DERIVED FROM' IN SECTION 80IB, PARLIAMENT INTENDED TO COVER SOURCES NOT BEYOND THE FIRST DEGREE AND SINCE THE DEPB/DUTY DRAWBACK WERE FOUND TO HAVE FIRST DEGREE CONNECTION WITH THE SCHEMES FRAMED BY THE CENTRAL G OVERNMENT, THE SAME WERE HELD TO BE NOT PROFIT DERIVED FROM ELIGIBLE BUSINES S UNDER SECTION 80IB. IN SO FAR AS THE INTEREST INCOME IN QUESTION IS CONCERNED, THE S AME HAVING BEEN EARNED BY THE 3 ITA NO.1945/MUM/2010 ASSTT. YEAR : 2006-07 ASSESSEE FROM INVESTMENT, IT HAS A FIRST DEGREE CON NECTION WITH THAT INVESTMENT AND THE SAME, IN OUR OPINION, CANNOT BE CONSIDERED AS P ROFITS DERIVED FROM THE ELIGIBLE BUSINESS OF ASSESSEE UNDER SECTION 80IB AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA). MOREOVER, AS HEL D BY THE LEARNED CIT(A), THE INTEREST INCOME IN QUESTION WAS RECEIVED BY ASSESSE E FROM BANK DEPOSITS AND SIMPLY BECAUSE THE SAME WAS OFFERED AS SECURITY FOR AVAILING OF PACKING CREDIT FACILITY, IT COULD NOT BE TREATED AS BUSINESS INCOM E OF ASSESSEE. IN OUR OPINION, THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F LIBERTY INDIA (SUPRA) IS THUS CLEARLY APPLICABLE TO THIS ISSUE ALSO AND RESPECTFU LLY FOLLOWING THE SAME, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION U NDER SECTION 80IB IN RESPECT OF INTEREST INCOME. GROUND NO. 1 OF ASSESSEES APPEAL IS ACCORDINGLY DISMISSED. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE 2011. SD/ - SD/ - ( VIJAY PAL RAO ) ( P.M. JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH JUNE 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XIII, MUMBAI 4. THE CIT VII, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.