M/s. Bijay Impex, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-1(1), RAJKOT-GUJARAT

ITA 218/RJT/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62819 (ITAT-RAJKOT)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-06-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 27-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: RK DOSHI
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL, SMC BENCH, RAJKOT. . .. . . .. . , , , , BEFORE SHRI T. K. SHARMA, JM ITA NO. 218/RJT/2012. / ASSESSMENT YEAR 2003-04. M/S. BIJAY IMPEX, S.B.S. ROAD, NAVAGADH, JETPUR. PAN : AAEFB8344G.. ( $/ APPELLANT) VS. THE INCOME TAX OFFICER, WARD-1(1), RAJKOT. %&$/ RESPONDENT ') / ASSESSEE BY SHRI R. K. DOSHI, C.A. ) / REVENUE BY SHRI. AVINASH KUMAR, D.R. ) / DATE OF HEARING 26-06-2012 ) / DATE OF PRONOUNCEMENT 26 - 06-2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 21-03-2012 OF CIT(A)-II, RAJKOT FOR THE ASSESSMENT YEAR 2003-04. 2. THE VARIOUS GROUNDS RAISED IN THIS APPEAL ARE AS UNDER:- (1) THE ORDER OF THE LEARNED CIT(A) IS BAD IN LAW A ND CONTRARY TO THE FACTS OF THE CASE. (2) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO RESTRICTING THE DEDUCTION U/S.80HHC AT RS.1,33,060/ - AS AGAINST THE CLAIM OF YOUR APPELLANT AT RS.2,97,447/-. (3) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO EXCLUDING THE CENVAT CREDIT FROM THE BUSINESS PROFI T WHILE CALCULATING DEDUCTION U/S.80HHC OF THE ACT. ITA 218/RJT/2012 2 (4) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO WORKING OUT THE PROFIT OF THE BUSINESS FOR THE PURP OSE OF DEDUCTION U/S.80HHC AT RS.47,622/- ONLY AS AGAINST THE PROFIT OF THE BUSINESS WORKED OUT BY YOUR APPELLANT AT RS.3,76,998/-. 3. GROUND NO.1 IS GENERAL IN NATURE. THEREFORE, HE ED NO ADJUDICATION. 4. WITH REGARD TO GROUND NOS.2 AND 3, THE COUNSEL O F THE ASSESSEE SUBMITTED AS UNDER:- (I) CENVET CREDIT IS GRANTED UNDER CENVAT CREDIT (T HIRD AMENDMENT) RULES, 2003 NOTIFICATION NO.25/203. (II) AS PER THE SAID RULES, CREDIT OF CENTRAL EXCIS E DUTY ON INPUT LYING IN STOCK AND IN PROCESS IS GRANTED, IRRESPECTIVE OF EX PORTS, I.E. WHETHER EXPORTS OR NO EXPORTS, THE CENVET CREDIT IS GRANTED . THUS CENVAT CREDIT IS NOT IN NATURE OF EXPORT INCENTIVES COVERE D U/S.28 (IIIA) TO (IIIE). (III) GROSS PURCHASES ARE DEBITED TO TRADING ACCOUN T. CENVAT CREDIT IS CREDITED IN TRADING ACCOUNT. CENVAT CREDIT EFFECTIV ELY REDUCED COST OF PURCHASE. PAYMENT OF EXCISE DUTY HAS A DIRECT NE XUS WITH THE MANUFACTURING ACTIVITY. THE CREDIT OF CENTRAL EXCI SE PAID (CENVAT CREDIT) ALSO HAS A DIRECT NEXUS WITH THE MANUFACTUR ING ACTIVITY. (IV) CIT(A) HAS ERRONEOUSLY CONSIDERED PROVISIONS O F SECTION 115 JB AND APPLIED AJANTA PHARMA. ASSESSEE IS NOT A COMPA NY AND PROVISIONS OF SECTION 115 JB ARE NOT AT ALL APPLICA BLE TO ASSESSEE (BEING A PARTNERSHIP FIRM). (V) CENTRAL EXCISE PAID ON PURCHASE IS AN EXPENSE A ND CENVAT CREDIT IS REFUND OF EXCISE PAID. THERE IS NO PROFIT ELEMENT I N IT. WHAT COULD BE EXCLUDED FROM DEDUCTION U/S.80HHC IS PROFIT AS H ELD BY HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT 67DTR 185. 5. RELIANCE WAS ALSO PLACED ON THE DECISION DATED 2 9-07-2011 OF ITAT K BENCH, MUMBAI IN ITA NO.858/MUM/2007 IN THE CASE IF M/S. VALIANT GLASS WORKS PVT. LTD. VS. ACIT FOR THE ASSESSMENT YEAR 2003-04 WHEREIN IT IS HELD THAT DEEMED CREDIT UNDER CENVAT INCENTIVE SCHEME IS PART OF BUSINESS PROFIT ELIGIBLE FOR DEDUCTION U/S.80HHC OF THE INCOME-TAX ACT, 1961 . 6. ON THE OTHER HAND, SHRI AVINASH KUMAR, D.R. APPE ARED FOR THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). ITA 218/RJT/2012 3 7. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDER OF AUTHORITIES BELOW. THE ITAT K BENCH, MUMBAI IN T HE CASE OF M/S. VALIANT GLASS WORKS PVT. LTD.(SUPRA) RELIED BY LD. COUNSEL OF THE ASSESSEE IN PARA-7 AND 8 HELD AS UNDER:- 7. THE VARIOUS EXPORT INCENTIVES UNDER VARIOUS CLA USES OF SEC.28 I.E. (IIIA) TO (IIIE) HAVE BEEN SPECIFIED AND CENVAT INC ENTIVE IS NOT ONE OF THEM. AT THE SAME TIME THE CENVAT CREDIT IS IN THE NATURE OF CREDIT AGAINST EXCISE DUTY PAYABLE AND HENCE IS BUSINESS INCOME. WHAT IS EXCLUDED FROM BUSINESS PROFITS IS ONLY INCENTIVES MENTIONED IN SE C 28(IIIA) TO 28(IIIE). CENVAT CREDIT SHOULD BE CONSIDERED EITHER AS DUTY D RAW BACK OR AN INCENTIVE WHICH IS NOT EXCLUDIBLE FROM BUSINESS PRO FITS. UNDER EITHER CIRCUMSTANCES THE ASSESEE WILL BE ENTITLED TO RELIE F UNDER SEC.80HHC. IN CASE THE CENVAT INCENTIVES ARE CONSIDERED ON PAR WI TH DUTY DRAW BACK THEN 10% OF THE DRAW BACK WILL BE INCLUDED IN THE B USINESS PROFITS AND THE BALANCE 90% WILL BE ENTITLED TO RELIEF UNDER PROVIS O TO SEC. 80HHC(3). IF IT IS NOT ANY OF THE INCENTIVES U/S.28(III), THEN NO P ART OF IT CAN BE EXCLUDED AND THE ENTIRE AMOUNT WILL BE TAKEN INTO ACCOUNT FO R COMPUTING RELIEF U/S.80HHC. 8. IN THESE CIRCUMSTANCES, WE HOLD THAT THE AMOUNT OF DEEMED CREDIT UNDER CENVAT INCENTIVE SCHEME AT RS.89,34,887/- IS PART OF BUSINESS PROFITS ELIGIBLE FOR DEDUCTION U/S.80HHC. HENCE WE ALLOW THE APPEAL OF THE ASSESSEE AND REVERSE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 8. FROM THE PERUSAL OF THE ABOVE, IT CAN BE SEEN TH AT ITAT MUMBAI BENCH IN THE CASE OF M/S. VALIANT GLASS WORKS PVT. LTD. HAS HELD THAT DEEMED CREDIT UNDER CENVAT INCENTIVE SCHEME IS PART OF BUSINESS PROFITS ELIGIBLE FOR DEDUCTION U/S.80HHC. I, THEREFORE, FOLLOWING THIS DECISION O F THE ITAT MUMBAI BENCH IN THE CASE OF M/S. VALIANT GLASS WORKS PVT. LTD. DIRECT T HE AO NOT TO EXCLUDE CENVAT CREDIT FROM BUSINESS PROFITS WHILE CALCULATING THE DEDUCTION U/S.80HHC OF THE INCOME-TAX ACT, 1961. THE AO IS ACCORDINGLY DIRECT ED TO RECOMPUTE THE DEDUCTION U/S.80HHC OF THE INCOME-TAX ACT, 1961. 9. THE GROUND NO.4 IS NOT PRESSED BY THE LD. COUNSE L OF THE ASSESSEE AT THE TIME OF HEARING. HENCE, THIS GROUND OF APPEAL IS RE JECTED. ITA 218/RJT/2012 4 10. IN THE RESULT, FOR STATISTICAL PURPOSES, THE AP PEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE D ATE MENTIONED HEREINABOVE. SD/- ( .. / T. K. SHARMA) /JUDICIAL MEMBER // ORDER DATE 26-06-2012 /RAJKOT ) )) ) %1 %1 %1 %1 21 21 21 21 / COPY OF ORDER FORWARDED TO:- 1. $ / APPELLANT-M/S.BIJAY IMPEX, SBS ROAD, NAVAGADH, J ETPUR.. 2. %&$ / RESPONDENT- THE INCOME TAX OFFICER, WARD-1(1), R AJKOT. 3. 7 / CONCERNED CIT-I, RAJKOT. 4. 7- / CIT (A)-II, RAJKOT. 5. 1 %, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , ASSTT. REGISTRAR , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.