PERFECT CARBOUYS P.LTD, MUMBAI V. DCIT 9(2), MUMBAI

ITA 209/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2415 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 29-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-01-2015
• Court: TRIBUNAL
• Department Lawyers: AJAY
• Assessee Lawyers: KETAN L VAJANI
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.209/M/2015 (ASSESSMENT YEAR: 2007 - 2008 ) PERFECT CARBOUYS P LTD., GB/4, VIRWANI INDUSTRIAL ESTATE, WESTERN EXPRESS HIGHWAY, GOREGAON (E), MUMBAI 400 063. / VS. DCIT - 9(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20. ./ PAN : AAACP6643F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI KETAN L. VAJANI / RESPONDENT BY : SHRI AJAY, DR / DATE OF HEARING : 29.06.2016 / DATE OF PRONOUNCEMENT : 22 .07.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 9.1.2015 IS AGAINST THE ORDER OF THE CIT (A) - 20, MUMBAI DATED 28.10.2014 FOR THE ASSESSMENT YEAR 2007 - 2008. 2. IN THIS APPEAL, ASSESSEE RAISED SIX GROUNDS IN TOTO. THE ONLY ISSUE RAISED IN THIS APPEAL RELATES TO IF THE VAT REFUND CONSTITUTES AN ELIGIBLE PROFIT FOR THE PURPOSE OF DEDUCTION U/S 80 - IB OF THE ACT. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PLASTIC CONTAINERS. ASSESSEE BUYS RAW MATERI AL FROM THE SUPPLIES AND PAY VAT AT THE TIME OF PURCHASE OF RAW MATERIAL. ASSESSEE DOES NOT CHARGE VAT WHILE SELLING THE GOODS TO THE BUYERS. CONSIDERING THE BENEFITS GRANTED BY THE GOVERNMENT, ASSESSEE IS ENTITLED TO VAT REFUND. IN THE RETURN OF INCOME , ASSESSEE CONSIDERED THE VAT REFUND AS ELIGIBLE PROFIT OF THE ASSESSEE FOR THE PURPOSE OF DEDUCTION U/S 80 - IB OF THE ACT. THE REASONS BEHIND THAT IS THE REFUNDED VAT WAS PART OF THE COST OF RAW MATERIALS AND THEREFORE, IT CONSTITUTES THE PROFITS OF THE I NDUSTRIAL UNDERTAKING. IN THE ASSESSMENT, AO DID NOT AGREE WITH THE ABOVE 2 CLAIM OF THE ASSESSEE. ON APPEAL, CIT (A) CONFIRMED THE ABOVE DECISION OF THE AO. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. DURING THE PROCEEDINGS BEFORE THE TRIBUNA L, LD COUNSEL FOR THE ASSESSEE BROUGHT MY ATTENTION TO THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. MEGHALAYA STEELS LTD (383 ITR 217) (AY 2004 - 05) (SC) AND SUBMITTED THAT THE SAID JUDGMENT IS RELEVANT FOR THE PROPOSITION THAT WHEN AN ELEM ENT OF COST IS REIMBURSED, THE SAME CONSTITUTES ELIGIBLE PROFIT OF THE ASSESSEE FOR THE PURPOSE OF SECTION 80IB OF THE ACT. THE SAME SHOULD BE CONSIDERED AS PROFIT / GAINS DERIVED FROM THE BUSINESS. FOR THIS PROPOSITION HE RELIED ON THE CONTENTS OF THE P LACITUM AT PAGE 231 OF THE ITR 383. FURTHER, HE ALSO BROUGHT MY ATTENTION TO ANOTHER JUDGMENT OF THE HONBLE GAUHATI HIGH COURT, INVOLVING THE SAME ASSESSEE, FOR THE DIFFERENT AY (2006 - 07) WHEREIN THE HIGH COURT CONCLUDED THAT THE PAYMENT OF EXCISE DUTY H AS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY, HENCE REFUND OF EXCISE UNDER EXEMPTION NOTIFICATIONS QUALIFIES FOR DEDUCTION U/S 80 - IB. 5. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 6. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS BOTH THE CITED JUDGMENTS OF THE HONBLE HIGH COURTS (SUPRA), I AM OF THE OPINION, THE VAT REFUND IS AKIN TO THE EXCISE REFUND FOR MANUFACTURING CONCERNS LIKE THE PRESENT ASSESSE E AND THE SAME UNDOUBTEDLY WAS A PART OF THE COST OF THE RAW MATERIAL. THEREFORE, VAT REFUND CONSTITUTES AN ELIGIBLE PROFIT FOR THE PURPOSE OF DEDUCTION U/S 80 - IB OF THE ACT. CONSIDERING THE SETTLED LEGAL POSITION OF THE ISSUE, I AM OF THE OPINION THE ASS ESSEE IS ENTITLED FOR RELIEF. I ORDER ACCORDINGLY. THUS, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUN CED IN THE OPEN COURT ON 22 ND JULY, 2016. SD/ - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 22.7 .2016 3 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI