The DCITGNR Circle, Gandhinagar V. ECi Technologies (I) Ltd., Gandhinagar

ITA 211/AHD/2011

• Counselvise Citation: 21120514 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 27-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID SR D R
• Keywords: Business income; Depreciation; Advance ruling; Unabsorbed depreciation
• Section: 115JB; 10B; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMADABAD , , , , BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND .., ! '# '# '# '# SHRI T.R. MEENA, ACCOUNTANT MEMBER $%.. , &' ( & ! ) & ! ) & ! ) & ! ) ITA NO. 211/AHD/2011 ASSESSMENT YEAR :2006-07 DEPUTY COMMISSIONER OF INCOME TAX, GANDHINAGAR CRICLE, BLOCK NO. 14, 4 TH FLOOR, UDHYOG BHAVAN, SECTOR-11, GANDHINAGAR V/S . ECI TECHNOLOGIES (P) LTD. (FORMERLY KNOWN AS GEN TEK. P. LTD.) E-3/1,2,3, GIDC ELECTRONICS ESTATE, SECTGOR-26, GANDHINAGAR PAN NO. A A CCG1850F (APPELLANT) .. (RESPONDENT) *+ , - & / BY APPELLANT SHRI J. P. JHANGID, SR. D.R. ./*+ , - & /BY RESPONDENT SHRI DHINAL SHAH, A.R. 0 , 1%' /DATE OF HEARING 24.03.2014 234 , 1%' /DATE OF PRONOUNCEMENT 27.03.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE CIT(A), GANDHINAGAR, ORDER DATED 02.11.2010 FOR A.Y. 2006-2 007. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND O N FACTS OF THE CASE IN ALLOWING THE SET OFF OF UNABSORBED DEPRECIATION OF RS.37,33,910/- FOR THE CALCULATION OF BOOK PROFIT. 2. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONSIDERING EFFECT OF SALE OF SCRAP AND DISALLOW ANCE OF ITS EXPENSES RELATABLE TO EXPORT TURNOVER FOR THE PURPO SE OF DEDUCTION U/S. 10-B OF THE IT ACT, 1961. ITA NO. 211/AHD/2011 DCIT VS. ECI TECHNOLOGIES (P) LTD. A.Y. 2006-2007 PAGE 2 2. THE A.O. WHILE COMPUTING THE INCOME U/S. 115JB H AD REDUCED AMOUNT ON BROUGHT FORWARD LOSSES OR BROUGHT FORWARD DEPREC IATION, WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT AT RS.6,03,926/- AND COMPUT ED INCOME U/S. 115JB AT RS.66,74,326/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD OBSERVED THAT AS R EGARDS DEPRECIATION TO BE SET OFF HIS CONCERN, THE A.O. CLEARLY ALLOWED THE S ET OFF BROUGHT FORWARD DEPRECIATION OF RS.6,03,926/-, WHICH WAS ORIGINALLY SET OFF BY THE ASSESSEE IN ITS RETURN AS ACCORDING TO IT ONLY THIS MUCH OF BOO K PROFIT WERE AVAILABLE TO IT. THE A.O. SHOULD HAVE ALLOWED FIGURES OF UNABSORBED DEPRECIATION BROUGHT FORWARD AND THE BUSINESS LOSS HAS ALSO REQUIRED ANO THER INCOME TAX ACT, WHICH IS HE HAD FAILED TO DO. THUS, HE DIRECTED TH E A.O. TO VERIFY THE FIGURE AND ALLOWED THE UNABSORBED DEPRECIATION CORRECTLY F ROM THE BOOK PROFIT. 4. LD. SR. D.R. FAIRLY ACCEPTED THAT THE A.O. HAD C ALCULATED THE BOOK PROFIT AS PER SECTION 115JB AS PER THE DIRECTION OF THE CI T(A), WHICH HAS BEEN ACCEPTED BY THE LD. A.R. FOR THE ASSESSEE. CONSIDE RING THE FACTS OF THE CASE, THE REVENUES APPEAL ON THIS GROUND IS DISMISSED. 5. GROUND NO.2 IS AGAINST CONSIDERING EFFECT OF SAL E OF SCRAP AND DISALLOWANCE OF ITS EXPENSES RELATABLE TO EXPORT TU RNOVER FOR THE PURPOSE OF DEDUCTION U/S. 10B OF THE IT ACT. THE A.O. OBSERVE D THAT AS PER SECTION 10 B(1), THE DEDUCTION IS AVAILABLE ON INCOME WHICH IS DERIVED FROM THE EXPORT OR ARTICLE OR THINGS BY 100% EXPORT ORIENTED UNDERTAKI NG. THE ASSESSEE HAD CLAIMED DEDUCTION U/S.10B ON INTEREST OF FDR, SALE OF SCRAP AND PACKING MATERIAL HAS BEEN AFFECTED IN LOCAL MARKET. THEREF ORE, HE DISALLOWED THE CLAIM ITA NO. 211/AHD/2011 DCIT VS. ECI TECHNOLOGIES (P) LTD. A.Y. 2006-2007 PAGE 3 MADE BY THE ASSESSEE OF ABOVE INCOME. THE ASSESSEE HAD SHOWN INTEREST INCOME UNDER THE HEAD BUSINESS INCOME WHICH CLEAR LY FALLS UNDER THE HEAD INCOME FROM OTHER SOURCES. FURTHER INCOME FROM S ALE OF SCRAP AND PACKING MATERIAL IN THE LOCAL MARKET IS ALSO NOT INCLUDED. THE DEDUCTION U/S. 10B IS CALCULATED BY THE A.O. AS UNDER: PROFIT AS SHOWN 3,11,99,078 LESS: INTEREST INCOME 2,75,939 (A) ELIGIBLE PROFIT 3,09,23,139 (B) EXPORT TURNOVER AS SHOWN 763,82,81,765 TOTAL TURNOVER AS SHOWN 64,58,63,282 ADD: INCOME FROM SALE OF SCRAP & PACKING MATERIAL 2 6,61,927 (C) TOTAL TURNOVER FOR THE PURPOSE OF SECTION 10B 64,85,25,209 ALLOWABLE DEDUCTION U/S. 10B (A), (B) / (C) 3,04,34,709 6. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE APPEAL PARTLY BY OBSERVING AS UNDER: 4.3 I HAVE CONSIDERED THE CONTENTIONS OF THE APPEL LANT AS WELL AS THE ASSESSMENT ORDER. IT IS CLEAR THAT THE INTEREST INC OME OF RS.2,75,939/- HAS BEEN EARNED FROM THE FIXED DEPOSITS OF THE ASSESSEE WITH ICICI BANK WHICH HAS BEEN USED FOR PLEDGING BONDS WITH ASSTT. COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, GANDHINAGAR FOR ALLOWING THEM IMPORT OF CAPITAL GOODS AND RAW MATERIALS. HOWEVER, THE MERE FACT THAT THE DEPOSIT WAS MADE FOR THE PURPOSE OF BUSINESS OF THE INDUSTR IAL UNDERTAKING DOES NOT ESTABLISH A DIRECT NEXUS BETWEEN THE INTEREST E ARNED AND THE INDUSTRIAL UNDERTAKING. IT IS THE DEPOSIT WHICH IS THE SOURCE OF INCOME AND IS DERIVED FROM FUNDS AND NOT FROM THE INDUSTRIAL UNDERTAKING. THIS DECISION IS SUPPORTED BY THE DECISION OF HON'BLE MADRAS HIGH CO URT ON SIMILAR FACTS IN THE CASE OF MENON IMPEX (P) LTD (2003) 259 ITR 403 (MAD) AND ALSO THE DECISION OF AUTHORITY FOR ADVANCE RULINGS IN THE CA SE OF SHAMS TABREZ VANTI, REPORTED AT (2005) 273 ITR 299 (AAR). THEREFORE THE DECISION OF AO IS UPHELD AND GROUND NO.1 IS DISMISSED . AS FAR AS ISSUE REGARDING EFFECT OF SALE OF SCRAP AND ITS DISALLOWANCE FOR PU RPOSE OF 10B, COMPUTING ITA NO. 211/AHD/2011 DCIT VS. ECI TECHNOLOGIES (P) LTD. A.Y. 2006-2007 PAGE 4 OF BOOK PROFITS IS CONCERNED; THE STAND OF ASSESSEE IS CLEARLY AS PER LAW. NOT ALL THE EXPENSES OR REGULARLY DEBITED ARE TO BE ADDED BACK BUT ONLY THOSE EXPENSES WHICH ARE RELATABLE TO EXPORT TURNOV ER ARE TO BE ADDED BACK. WORKING HAS BEEN GIVEN BY ASSESSEE. THIS HAS BEEN VERIFIED AND RELIEF SHOULD BE PROVIDED IN BOOK PROFITS WORKED U/ S.115JB ACCORDINGLY TAKING EXPENSES IN RELATION TO EXPORT INCOME OF RS. 591,672,430/- AS BELOW. PARTICULARS : AMOUNT (RS.) AMOUNT (RS.) PROFIT BEFORE TAX AS PER P&L ACCOUNT 51448007 ADD: ADJUSTMENTS AS PER EXPLANATION 1 TO SECTION 115JB AMOUNT OF INCOME TAX PAID OR PAYABLE OR PROVISION THEREOF NIL AMOUNT OR AM OUNTS OR EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SECTION 10B APPLY- SEE NOTE BELOW 591672430 16363318 608035748 659483755 LESS: ADJUSTMENTS AS PER EXPLANATION 1 TO SECTION 115JB AMOUNT OF INCOME TO WHICH ANY OF THE PROVISIONS OF SECTION 1 0B APPLY, IF ANY SUCH AMOUNT IS CREDITED TO THE P&L ACCOUNT 638281765 AMOUNT OF DEPRECIAT ION DEBITED TO THE P&L ACCOUNT ( EXCLUDING THE DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS) 16363318 654645083 BOOK PROFITS AS PER PROVISIONS OF SECTION 115JB 4838672 LESS: SET OFF OF BROUGHT FORWARD DEPRECIATION 3733910 BOOK PROFIT UNDER SECTION 11 5JB OF THE ACT 1104762 NOTE: TOTAL EXPENSES INCURRED BY THE APPELLANT 601167866 TOTAL TURNOVER SALES-EXPORT + DOMESTIC 645863282 SALE OF SCRAP AND PACKING MATERIALS 2661927 648525209 EXPORT TURNOVER 638281765 EXPENSES IN RELATION IN EXPORT INCOME RS,.601167866* RS.638281765 / RS. 648525209 591672430 ITA NO. 211/AHD/2011 DCIT VS. ECI TECHNOLOGIES (P) LTD. A.Y. 2006-2007 PAGE 5 7. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. VEHE MENTLY SUPPORTED THE ORDER OF THE A.O. HOWEVER, LD. A.R. FOR THE ASSESS EE ARGUED THAT LD. CIT(A) HAS ALLOWED THE APPEAL BY CONSIDERING THE VARIOUS D ECISIONS AND COMPUTED THE BOOK PROFITS. THEREFORE, THERE IS NO DISCREPAN CY IN THE ORDER OF THE CIT(A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE A.O. DID NOT MAKE ANY ADJUSTMENT FOR E XPENSES IN COMPUTING 10B DEDUCTION, WHO HAS MADE THE ADJUSTMENT ON ACCOU NT OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SECTION 10 APPLIES FOR THE PURPOSE OF 115JB WHICH HAS BEEN HELD BY THE LD. CIT(A) AGAINST THE L AW AND HE HAD ALLOWED THE APPEAL FOR SECTION 115JB COMPUTATION OF INCOME. TH US, REVENUES GROUND NO.2 DOES NOT EXIST FROM THE ORDER OF THE A.O. AS W ELL AS ORDER OF THE CIT(A). 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 27.03.2014 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA &5 &5 &5 &5 , ,, , .16 .16 .16 .16 7&641 7&641 7&641 7&641 / COPY OF ORDER FORWARDED TO:- 1. *+ / APPELLANT 2. ./*+ / RESPONDENT 3. ## 1 ; / CONCERNED CIT 4. ;- / CIT (A) 5. 6? .1 , , / DR, ITAT, AHMEDABAD 6. A BC / GUARD FILE. BY ORDER/ &5 &, / # , )