MAMANIA FAMILY TRUST, MUMBAI V. THE ASSTT. C.I.T. CENTRAL CIR-41, MUMBAI

ITA 2134/MUM/2009

• Counselvise Citation: 213419914 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: MRS AARTI A SATHE
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NO. 2134/MUM/2009 (ASSESSMENT YEAR: 2006-07) MAMANIA FAMILY TRUST, C/O APPOLO PLASTICS, 33-HUGES, 3 RD FLOOR, OPP.PREMPURI ASHRAM, N.S.PATKAR MARG, GRANT ROAD (WEST), MUMBAI-400007 PAN:AAAAM1339D THE ASSISTANT COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE-14, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 APPELLANT V/S RESPONDENT DATE OF HEARING : 9.8.2011 DATE OF PRONOUNCEMENT : APPELLANT BY : MRS.AARTI A.SATHE RESPONDENT BY : SHRI A.K.NAY AK O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 3.3.2009 PASSED BY THE LEAR NED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE, IS A FAMILY TRUST AND CARRYING ON THE BUSINESS ACTI VITIES UNDER THE NAME AND STYLE OF M/S APPOLO PLASTICS, HAVING TWO UNITS AT DAMAN, ENGAGED IN THE ACTIVITY OF MANUFACTURING OF ELECTRICAL GOODS AND PLASTIC MOULDING ARTICLES, FANS, BRASS AND COPPER PARTS OF ELECTRICAL GOODS. THE RETURN ITA NO. 2134/MUM/2009 (ASSESSMENT YEAR: 2006-07) 2 WAS FILED DECLARING TOTAL INCOME OF RS.NIL. THE A O AFTER PROCESSING THE RETURN UNDER SECTION 143(1) OF THE I NCOME TAX ACT, 1961 (IN SHORT THE ACT) SELECTED THE CASE FOR SCRUTINY AND ACCORDINGLY ISSUED NOTICES UNDER SECTION 143(2) AND 142(1). DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A O, FROM THE DETAILS FILED WITH THE RETURN OF INCOME, NOTED THAT THE ASSESSEE HAS CREDITED RS.76,88,500/- AS SCRAP SALES FROM UNIT II AND CLAIMED DEDUCTION UNDER SECTION 80IB( 4) OF THE ACT. ON BEING ASKED AS TO WHY THE SCRAP SALES SHO ULD NOT BE DISALLOWED FOR THE PURPOSE OF DEDUCTION UNDER S ECTION 80IB(4), IT WAS SUBMITTED BY THE ASSESSEE THAT THE SCRAP HAS BEEN GENERATED DURING THE MANUFACTURING PROCESS AN D HENCE THE SAME IS ALLOWABLE UNDER SECTION 80IB OF THE A CT. THE RELIANCE WAS ALSO PLACED ON THE DECISIONS IN (1) CI T V/S SUNDARAM CLAYTON LTD.(1982) 133 ITR 34 (MADRAS), ( 2) CIT V/S WHEELS INDIA LTD.(1983) 141 ITR 745 (MADRAS) AN D (3) CIT V/S MANSINGHKA OIL MILLS PRIVATE LTD.(1988) 16 9 ITR 158(BOM). HOWEVER, THE AO WAS OF THE VIEW THAT TH E SALE OF SCRAP DOES NOT FORM PART OF BUSINESS INCOME AS THE SAME IS NOT DERIVED OUT OF BUSINESS ACTIVITY OF THE INDUS TRIAL UNDERTAKING FOR THE PURPOSE OF DEDUCTION UNDER SECT ION 80IB(4) OF THE ACT. THE AO AFTER RELYING ON THE D ECISION IN CIT V/S SIDDAGANGA OIL EXTRACTIONS PVT.LTD.(1993) 2 01 ITR 968(KAR.) AND STERLING FOODS V/S CIT (1984) 150 I TR 292 ITA NO. 2134/MUM/2009 (ASSESSMENT YEAR: 2006-07) 3 (KAR.), HELD THAT THE ASSESSEES CLAIM FOR SCRAP S ALES AMOUNTING TO RS.76,88,500/- IS NOT ALLOWABLE FOR T HE PURPOSE OF DEDUCTION UNDER SECTION 80IB. OF THE ACT. APART FROM THIS THE AO FURTHER NOTED THAT THE ASSESSEE HAS CREDITE D RS.5,980/- AS INTEREST INCOME FROM BANK IN RESPECT OF UNIT II AND CLAIMED DEDUCTION UNDER SECTION 80IB(4) OF T HE ACT. THE AO AFTER RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS AND FERTILIZE RS LTD. V/S CIT (1997) 227 ITR 172, THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CIT V/S RAVI RATNA EXPORTS (P.) LTD. (2000) 246 ITR 443 (BOM) AND THE DECISION OF THE HONBLE M ADRAS HIGH COURT IN SOUTH INDIA SHIPPING CORPORATION LTD. V/S CIT (AND VICE VERSA) (1999) 240 ITR 24 (MADRAS) ASSESS ED THE INTEREST RECEIPT OF RS.5,980/- UNDER THE HEAD INC OME FROM OTHER SOURCES AND ACCORDINGLY COMPLETED THE ASSESSM ENT AT AN INCOME OF RS.76,94,480/- VIDE ORDER DATED 24.11 .2008 PASSED UNDER SECTION 143(3) OF THE ACT. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (A) WHILE AGREE ING WITH THE VIEWS OF THE AO CONFIRMED THE ADDITIONS MADE B Y THE AO AND DISMISSED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A), THE ASSESSEE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS OF APPEAL: ITA NO. 2134/MUM/2009 (ASSESSMENT YEAR: 2006-07) 4 1. THE LEARNED CIT(A) ERRED IN DISALLOWING DEDUCTION UNDER SECTION 80IB(4) IN RESPECT OF SCRA P SALES OF RS.76,88,500/- BY TREATING THE SAME AS IN COME NOT DERIVED OUT OF BUSINESS ACTIVITY OF THE INDUSTR IAL UNDERTAKING FOR THE PURPOSES OF DEDUCTION UNDER SE CTION 80IB(4); 2. THE LEARNED CIT(A) ERRED IN DISALLOWING DEDUCTION UNDER SECTION 80IB(4) IN RESPECT OF INTER EST RECEIVED ON BANK FIXED DEPOSITS AMOUNTING TO RS.5,980/- BY TREATING THE SAME AS INCOME FROM OTH ER SOURCES. 4. AT THE TIME OF HEARING, BOTH THE PARTIES HAVE AG REED THAT THE ISSUES IN GROUND NO.1 AND 2 ARE COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN MA MANIA FAMILY TRUST V/S ACIT IN ITA NO.7142/MUM/2008(AY-20 05- 06), 6084/MUM/2007 (AY-2004-05) AND 909/MUM/2007 (A Y- 2003-04) DATED 30.11.2010, THEREFORE, FOLLOWING THE SAME, THE GROUND NO.1 TAKEN BY THE ASSESSEE IN RESPECT OF THE SCRAP SALES IS TO BE SET ASIDE TO THE FILE OF THE AO AND GROUND NO.2 TAKEN BY THE ASSESSEE IN RESPECT OF THE INTEREST RECEIPT ON BANK DEPOSITS IS TO BE DISMISSED. 5. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD, WE FIND MERIT IN THE SUBMISSIONS OF THE PARTIES THAT BOTH THE GROUNDS ARE COVERED BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE (SUPRA). IN GROUND NO.1, WHIC H IS IN ITA NO. 2134/MUM/2009 (ASSESSMENT YEAR: 2006-07) 5 RESPECT OF SCRAP SALES, THE TRIBUNAL VIDE PARAGRAP H 8 OF ITS ORDER HAS HELD AS UNDER : 8. FROM THE ORDERS OF THE LOWER AUTHORITIES, IT IS NOT CLEAR AS TO HOW THE SCRAP WAS GENERATED AND THEREFO RE, IN ORDER TO VERIFY WHETHER THE SCRAP HAD DIRECT NEX US WITH THE INDUSTRIAL OPERATION OR ITS WAS SCRAP OF OTHER NATURE, WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR NEC ESSARY VERIFICATION. TO THE EXTENT, THE SCRAP HAS DIRECT N EXUS WITH THE INDUSTRIAL OPERATIONS THEREBY IMPLYING THA T TO THE EXTENT SCRAP IS IN THE NATURE OF BYE-PRODUCT OF IND USTRIAL OPERATIONS, THE SAME WOULD QUALIFY FOR DEDUCTION U NDER SECTION 80IB. IN THE RESULT, GROUND NO.3 FOR A.Y. 2003- 04 AND GROUND NO.1 FOR A.YS. 2004-05 AND 2005-06 AR E ALLOWED FOR STATISTICAL PURPOSE. 6. IN GROUND NO.2, WHICH IN RESPECT OF INTEREST INC OME, THE TRIBUNAL VIDE PARAGRAPH 4 OF ITS ORDER HAS HELD A S UNDER: 4. HAVING HEARD BOTH THE PARTIES, WE DO NOT FIND A NY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) IN VIEW OF THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF LIBERTY INDIA V/S CIT (2009) 317 ITR 21 8 (SC), WHEREIN IT WAS HELD THAT SECTION 80IB PROVIDE S FOR ALLOWING OF DEDUCTION IN RESPECT OF PROFITS AND GAI NS DERIVED FROM THE ELIGIBLE BUSINESS. THE CONNOTATI ON OF THE WORDS DERIVED FROM IS NARROWER AS COMPARED T O THAT OF THE WORDS ATTRIBUTABLE TO. BY USING THE EXPRESSION DERIVED FROM PARLIAMENT INTENDED TO CO VER SOURCES NOT BEYOND THE FIRST DEGREE. THEREFORE, GR OUND NOS.1 & 2 RAISED BY THE ASSESSEE ARE DISMISSED. 7. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BRO UGHT ON RECORD BY THE PARTIES, WE RESPECTFULLY FOLLOWING TH E ORDER OF THE TRIBUNAL (SUPRA) SET ASIDE THE ISSUE OF SCRAP SALES TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH IN THE LIG HT OF THE DIRECTIONS GIVEN BY THE TRIBUNAL IN PARAGRAPH 8 OF THE SAID ITA NO. 2134/MUM/2009 (ASSESSMENT YEAR: 2006-07) 6 ORDER AND ACCORDING TO LAW AFTER PROVIDING REASONAB LE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORD INGLY, GROUND NO.1 TAKEN BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. WITH REGARD TO THE INTEREST INCOME OF RS.5,980/ -, WE RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (S UPRA), AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF LIBERTY INDIA (SUPRA) HOLD THAT THE INTEREST INCOM E IS NOT DERIVED FROM THE ELIGIBLE BUSINESS AND ACCORDINGLY THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION UNDER SE CTION 80IB OF THE ACT. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, REJECTED. 9. IN THE RESULT, THE ASSESSEES APPEAL STANDS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH AUGUST, 2011. SD SD (RAJENDRA SINGH) (D.K.AG ARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 24TH AUGUST, 2011 SRL: ITA NO. 2134/MUM/2009 (ASSESSMENT YEAR: 2006-07) 7 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI