I.T.O Wd - 1(2),kolkata, Kolkata V. M/s S.K.J.Coke Industries Ltd., Kolkata

ITA 2129/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4714 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 27-05-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 15-07-2013
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: H N DUBEY
• Keywords: Business income; Question of law
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI M.BA LAGANESH, AM] I.T.A NO. 2129/KOL/20 13 ASSESSMENT YEAR : 2005-0 6 I.T.O., WARD-1(2) -VS.- M/S. S.K.J.COKE INDUSTRIES LTD. KOLKATA KOLKATA [PAN : AAECS 2686 K] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI NIRAJ KUMAR , CIT(DR) FOR THE RESPONDENT : SHRI H.N.DUBEY, ADV OCATE & SHRI RAKESH DUBEY, ADVOCATE. DATE OF HEARING : 27.05.2016. DATE OF PRONOUNCEMENT : 01.06.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 30.04.2013 OF CIT(A)- I, KOLKATA, RELATING TO AYR. 2005-06. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS FOLLOWS :- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT WITHDRAWAL OF DEDUCTION U/S 80IC ON TR ANSPORT CHARGES & TRANSPORT SUBSIDY OF RS.8,70,91,329/- & RS.10,22,96,544/- RESPECTIVEL Y CANNOT BE CONSIDERED AS MISTAKE APPARENT FROM RECORD IN TERMS OF SECTION 154 AND CA NNOT BE RECTIFIED U/S 154. 2. THE APPELLANT CRAVES ;LEAVE TO ADD, ALTER OR AME ND ANY OF THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING. 3. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE MANUFACTURE OF LAM COKE AND BREEZE COKE. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S 80IC OF THE INCOME TAX ACT, 1961 (ACT). UNDER SECTION 80 IC (1) OF THE ACT WHERE THE GROSS INCOME OF THE ASSESSEE INCLUDES ANY PROFITS AND GAI NS DERIVED BY AN UNDERTAKING OR AN 2 ITA NO.2129/KOL/2013 M/SS. S.K.J.COKE INDUSTRIES LTD. A.YR.2005-06 2 ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SEC TION (2), THERE SHALL, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUC TION FROM SUCH PROFITS AND GAINS, AS IS SPECIFIED IN SUB-SECTION (3) OF 80IC OF THE ACT. IN THE RETURN OF INCOME FILED FOR A.Y.2005-06 THE ASSESSEE CLAIMED DEDUCTION A SUM OF RS. 11,88,67,798/- AS DEDUCTION U/S 80IC OF THE ACT. AN ORDER OF ASSESSMENT U/S 143 (3) WAS PASSED BY THE AO ON 31.12.2007 IN WHICH THE AO REDUCED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IC OF THE ACT BY A SUM OF RS.24,56,650/-. THE AFORESAID SUM WAS INTEREST PAID TO THE BANK ON CASH CREDIT ACCOUNT. THE AO CAME TO THE CONCLUSION THAT THE AMOUNT BORROWED FROM THE BANK HAD BEEN DIVERTED TO THE SISTER CONCERN MAHABI R COKE INDUSTRIES PVT. LTD AND THEREFORE THE SAID INTEREST INCOME CANNOT BE ALLOWE D AS DEDUCTION U/S 36(1)(III) OF THE ACT. CONSEQUENTLY THE PROFIT TO THE EXTENT OF RS.24 ,56,650/- WAS TREATED BY THE AO AS NOT DERIVED FROM BUSINESS. THE ASSESSEE PREFERRED A PPEAL AGAINST THE ORDER OF AO BEFORE CIT(A), WHO BY AN ORDER DATED 06.09.2010 HELD THAT DEDUCTION U/S 80IC OF THE ACT SHOULD BE ALLOWED WITHOUT EXCLUDING THE INTEREST EX PENDITURE AS WAS DONE BY THE AO. 4. THE AO THEREAFTER ISSUED NOTICE U/S 154 OF TH E ACT, PROPOSING TO MODIFY THE DEDUCTION ALREADY ALLOWED U/S 80IC OF THE ACT BY EX CLUDING TWO ITEMS OF INCOME WHICH WERE INCLUDED IN THE PROFITS OF THE BUSINESS ON WHI CH DEDUCTION U/S 80IC OF THE ACT WAS CLAIMED BY THE ASSESSEE AND ALLOWED BY THE AO IN TH E PROCEEDINGS U/S 143(3) OF THE ACT BY ORDER DATED 31.12.2007. THE FOLLOWING WAS THE BA SIS ON WHICH THE AO ISSUED NOTICE U/S 154 OF THE ACT. INCOME FROM TRANSPORT CHARGES ON FINISHED GOODS OF RS.8,70,91,329/- WOULD NOT CONSTITUTE THE PROFIT DERIVED FROM THE BUSINESS BY AN UNDERTAKING AS MENTIONED IN THE PROVISIONS OF SEC. 80IC. HENCE, WAS NOT ELIGIBLE FO R DEDUCTION U/S 80IC. TRANSPORT SUBSIDY OF RS.10,22,96,544/- AS RECEIVED BY THE ASSESSEE DU RING THE RELEVANT ASST. YEAR ALSO NOT ELIGIBLE FOR DEDUCTION U/S 80IC FOLLOWING THE DECIS ION IN THE CASE OF CIT VS. ANDAMAN TIMBER INDUSTRIES LTD. [2000] 242 ITR 204 (CAL) & C IT VS, MEGHALAYA STEELS LTD. [2011] 332 ITR 91 (GAU), WHERE IT HAS BEEN DECIDED SPECIFI CALLY THAT TRANSPORT SUBSIDY IS NOT ELIGIBLE FOR DEDUCTION U/S 80HH OR 80IB. 3 ITA NO.2129/KOL/2013 M/SS. S.K.J.COKE INDUSTRIES LTD. A.YR.2005-06 3 5. THE AO THEREAFTER PASSED AN ORDER U/S 154 DAT ED 30.03.2012 EXCLUDING THE TRANSPORT CHARGES OF FINISHED GOODS AND TRANSPORT SUBSIDY FRO M THE PROFITS DERIVED BY AN ENTERPRISE AND REVISED THE DEDUCTION U/S 80IC OF TH E ACT ACCORDINGLY. 6. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE PRE FERRED AN APPEAL BEFORE CIT(A). THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE CANCELLED THE ORDER U/S.154 OF THE ACT. THE CIT(A) HELD THAT THE AO WHILE COMPLET ING THE ASSESSMENT HAD CONSCIOUSLY ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S .80-IC OF THE ACT. HE ALSO NOTICED THAT THE HONBLE GUWAHATI HIGH COURT HAD IN THE CA SE OF MEGHALAYA STEELS 317 ITR 259(GUWAHATI HC) INTERPRETED THE EXPRESSION 'DERIVED BY' AN UNDERTAK ING FROM THE BUSINESS OF MANUFACTURE USED IN SECTION 801C(1) WO ULD ALSO INCLUDE SUBSIDIES RECEIVED BY AN ASSESSEE SUCH AS TRANSPORT SUBSIDY. IN ASSES SEES OWN CASE FOR AY - 2003-04 AND 2004-05 THE HON'BLE ITAT, KOLKATA BENCH VIDE OR DER DATED 14.07.2006 ACCEPTED THE CONTENTION OF THE ASSESSEE REGARDING ELIGIBILIT Y OF TRANSPORT CHARGES AND SUBSIDY AS PART OF BUSINESS RECEIPTS AND ELIGIBLE FOR DEDUCTIO N UNDER 80IC AND THE HON'BLE KOLKATA HIGH COURT ALSO VIDE ORDER DATED 02.04.2007 HELD TH AT NO SUBSTANTIAL QUESTION OF LAW WAS INVOLVED IN THE MATTER. THE HON'BLE ITAT IN ITS ORDER DATED 14.07.2006 RELIED UPON THE DECISION OF SUPREME COURT IN THE CASE OF PONNY SUGARS MILLS (ERODE) LTD. TO HOLD THAT TRANSPORT CHARGES AND SUBSIDY WAS INCLUDABLE I N BUSINESS PROFITS ELIGIBLE FOR DEDUCTION U/S.80-IC OF THE ACT. THE CIT(A) FOUND THAT THESE ASPECTS WERE DISCUSSED BY THE AO IN PARA 3.3 OF THE ORDER OF ASSESSMENT DATED 31.12.2007 PASSED U/S.143(3) OF THE ACT. THE CIT(A) ALSO TOOK NOTE OF THE ARGUMENT OF THE ASSESSEE THAT AS PER THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF M/S MEPCO I NDUSTRIES LTD.DTD.19.11.2009 DECISION ON DEBATABLE POINT OF VIEW CANNOT BE TREAT ED AS MISTAKE APPARENT FROM THE RECORD. KEEPING IN VIEW ALL THE ABOVE FACTS AND CIR CUMSTANCES, THE CIT(A) HELD THAT THE ORDER OF AO DATED 31.03.2012 FOR WITHDRAWAL OF DEDU CTION UNDER 80IC ON TRANSPORT CHARGES AND TRANSPORT SUBSIDY CANNOT BE CONSIDERED AS MISTAKE APPARENT FROM RECORD IN TERMS OF SECTION 154 AS ISSUE WAS DEBATABLE AND CAN NOT BE RECTIFIED U/S 154 OF THE IT 4 ITA NO.2129/KOL/2013 M/SS. S.K.J.COKE INDUSTRIES LTD. A.YR.2005-06 4 ACT,1961, ONCE HE HAD CONSIDERED ALL THE RELEVANT F ACTS WHILE ACCEPTING THE CLAIM OF ASSESSEE IN ORDER DTD.31.12.2007 U/S 143(3). 7. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD . DR RELIED ON THE OBSERVATIONS OF THE AO IN THE ORDER PASSED U/S 154 OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A). HE FURTHER BROUGHT TO OUR NOTICE THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS MEGHALAYA STEEL LTD.CIV IL NO.7622 OF 2014 JUDGMENT DATED 09.03.2016 WHEREIN THE HONBLE SUPREME COURT CONSID ERED THE QUESTION AS TO WHETHER IDENTICAL TRANSPORT SUBSIDY IS ELIGIBLE FOR DEDUCTI ON U/S 80IC OF THE ACT. THE HONBLE SUPREME COURT HELD THAT TRANSPORT SUBSIDY HAD TO BE RECORDED AS PART OF THE ELIGIBLE BUSINESS U/S 80IC OF THE ACT HAS TO BE ALLOWED. IN VIEW OF THE AFORESAID DECISION WE ARE OF THE VIEW THAT ORDER OF CIT(A) HAS TO BE UPHELD. AS FAR AS THE TRANSPORT CHARGES ON FINISHED GOODS OF RS.8,70,91,329/- IS CONCERNED, WE FIND THAT THE ASSESSEE HAS BEEN ACCOUNTING FOR THE TRANSPORT CHARGES WHICH IT HAD I NCURRED FOR TRANSPORTATION OF FINISHED GOODS TO ITS CUSTOMER AS PART OF THE SELLING AND DI STRIBUTION EXPENSES. THIS IS CLEAR FROM THE SCHEDULE-B TO THE PROFIT AND LOSS ACCOUNT WHICH CONTAINS EXPENDITURE OF RS.8,43,77,509/- WHICH THE TRANSPORT EXPENSES INCUR RED BY THE ASSESSEE. THE TRANSPORT CHARGES WHICH THE ASSESSEE RECEIVES FROM THE CUSTOM ERS FOR TRANSPORTING FINISHED GOODS IS SHOWN AS INCOME IN THE PROFIT AND LOSS ACCOUNT A S A SUM OF RS.8,70,91,329/- . THE FIRST ASPECT WHICH WE NOTICE IS THAT IF TRANSPORTAT ION CHARGES ARE EXCLUDED FROM THE BUSINESS PROFITS ON WHICH THE DEDUCTION U/S 80IC OF THE ACT IS TO BE ALLOWED THEN THE CORRESPONDING EXPENSES WILL ALSO HAVE TO BE EXCLUDE D IN WHICH CASE PROFITS OF THE BUSINESS WILL GET REDUCED TO THE EXTENT OF DIFFEREN CE BETWEEN THE TRANSPORTATION CHARGES RECEIVED BY THE ASSESSEE NAMELY RS.8,70,91,329/- AN D THE TRANSPORT CHARGES INCURRED BY THE ASSESSEE NAMELY RS.8,43,77,509/-. IT IS NOT POS SIBLE FOR THE AO TO EXCLUDE THE ENTIRE RECEIPTS ON ACCOUNT OF TRANSPORT CHARGES ONLY FROM THE PROFITS ELIGIBLE FOR DEDUCTION U/S 5 ITA NO.2129/KOL/2013 M/SS. S.K.J.COKE INDUSTRIES LTD. A.YR.2005-06 5 80IC OF THE ACT. WE ARE OF THE VIEW THAT THE QUESTI ON AS TO WHETHER THE TRANSPORT CHARES ON FINISHED GOODS COULD BE CONSIDERED AS PROFITS DE RIVED FROM AN UNDERTAKING U/S 80IC OF THE ACT AND WHAT IS TO BE EXCLUDED AS TO WHETHER THE GROSS TRANSPORT CHARGES RECEIVED OR THE NET TRANSPORT CHARGES RECEIVED ARE HIGHLY D EBATABLE ISSUES WHICH CANNOT BE RESOLVED IN THE PROCEEDINGS U/S 154 OF THE ACT. THE CIT(A) HAS TAKEN NOTE OF THIS PRINCIPLE HAS FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. MEPCO INDUSTRIES LIMITED VS CIT CIVIL NO.7662 AND 7 663 OF 2009 JUDGMENT DATED 19.11.2009 WHEREIN THE PRINCIPLE THAT DEBATABLE ISS UES CANNOT BE THE SUBJECT MATTER OF PROCEEDINGS U/S 154 OF THE ACT HAS BEEN REITERATED. IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS REFERRED TO ABOVE WE ARE OF THE VIEW THAT CIT(A) WAS FULLY JUSTIFIED IN CANCELLING THE ORDER U/S 154 OF THE ACT. ORDER OF C IT(A) IS ACCORDINGLY UPHELD AND THIS APPEAL OF THE REVENUE IS DISMISSED. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 01.06.2016. SD/- SD/- [M.BALAGANESH] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICI AL MEMBER DATED : 01.06.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. S.K.J.COKE INDUSTRIES LTD., 5F, ELECTRONIC C ENTRE, 1/1A, BIPLABI ANUKUL CHANDRA STREET, KOLKATA-700072. 2. I.T.O., WARD-1(2), KOLKATA. 3. CIT(A)-I, KOLKATA 4. CIT-I, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 6 ITA NO.2129/KOL/2013 M/SS. S.K.J.COKE INDUSTRIES LTD. A.YR.2005-06 6