Chirag Plast, Nani Daman V. The Income tax Officer,Vapi Ward-4, Daman

ITA 2196/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8989 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-09-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 13-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C
• Keywords: Business income; Business expenditure; TDS; Set aside
• Section: 40(a)(ia); 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH C CC C AHMEDABAD AHMEDABAD AHMEDABAD AHMEDABAD BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI H.L. KARWA H.L. KARWA H.L. KARWA H.L. KARWA, , , , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER AND AND AND AND SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI, , , , ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE OF HEARING : 14.09.09 DRAFTED ON:15.09. 09 ITA NO.2196/AHD/2009 ASSESSMENT YEAR : 2005-06 CHIRAG PLAST, 145/5, JALARAM INDUSTRIAL ESTATE, NEAR MAHATMA GANDHI UDHYOGNAGAR, DABHEL, NANI DAMAN. VS. INCOME-TAX OFFICER, VAPI WARD 4, DAMAN. PAN/GIR NO. : AADFC 3525H (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI.SAKAR SHARMA RESPONDENT BY: SHRI M.C.PANDIT, SR. D.R. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD.CIT(APPEALS)-I, SURAT, DATED 27.05.2009. ITA NO 2196/AHD/2009. M/S.CHIRAG PLAST. ASST.YEAR -2005-06 - 2 - 2. THE SOLE GROUND OF APPEAL IS TAKEN BY THE ASSESSEE IS THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED ON FACTS AND LAW IN CONFIRMING DISALLOWANCE UNDER SECTION 40(A)(IA) OF RS.1,25,073/- UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF TREATING IT AS BUSINESS INCOME AND GRANTING DEDUCTION UNDER SECTION 80IB ON THE SAME. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF CORRUGATED BOXES, TRAYS, PLATS AND SHEETS. THE MANUFACTURING UNIT IS LOCATED IN THE UNION TERRITORY OF DAMAN WHICH HAS BEEN NOTIFIED BY THE CENTRAL GOVERNMENT AS A BACKWARD AREA SO THE PROFIT FROM THIS MANUFACTURING UNIT IS ELIGIBLE FOR 100% DEDUCTION UNDER SECTION 80IB OF THE INCOME TAX ACT FOR THE FIRST FIVE YEARS S INCE THE COMMENCEMENT OF MANUFACTURING ACTIVITY. THE RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 WAS FILED ON 30.10.2005 SHOWING NIL INCOME. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED TRANSPORT AND SECURITY CHARGES OF RS.1,01,793/- AND TDS DEDUCTED ON THE SAME FOR RS.2,014/- WAS DEPOSITED ON 31.07.2005 TO THE CREDIT OF THE CENTRAL GOVERNMENT, WHICH WAS BEYOND THE DUE DATE PRESCRIBED UNDER THE INCOME TAX ACT, 1961, THEREFORE, THE ASSESSEE OFFICER DISALLOWED THE CLAIM OF DEDUCTION FOR EXPENDITURE OF RS.1,01,793/- . FURTHER, IT WAS ALSO NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION FOR COMMISSION EXPENSES OF RS.23,280/- ON WHICH NO TDS WAS DEPOSITED. THE LEARNED ASSESSING OFFICER THEREFORE, DISALLOWED DEDUCTION FOR COMMISSION EXPENSES TO THE ASSESSEE. IN THIS WAY, THE LEARNED ITA NO 2196/AHD/2009. M/S.CHIRAG PLAST. ASST.YEAR -2005-06 - 3 - ASSESSING OFFICER MADE TOTAL DISALLOWANCE OF RS.1,25,073/- UNDER SECTION 40(A)(IA). IN APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE ACTION OF THE LEARNED ASSESSING OFFICER. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FURTHER OBSERVED THAT THE ASSESSEE HAS ONLY DISPUTED THE DEDUCTION UNDER SECTION 80IB AND NOT THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA). HE OBSERVED THAT AS FAR AS DEDUCTION UNDER SECTION 80IB IS CONCERNED, HE DOES NOT AGREE WITH THE ASSESSEE AS THE DISALLOWANCE IS ONLY TECHNICAL DISALLOWANCE OF THE CURRENT YEAR. THE ASSESSEE WILL BE ALLOWED DEDUCTION IN THE NEXT YE AR FROM THE TOTAL INCOME. IF DEDUCTION UNDER SECTION 80IB IS ALLOWED IN THE CURRENT YEAR ON THE INCREASE PROFIT THEN THE ASSESSEE WILL GET DOUBLE BENEFIT. ON THE SAME CLAIM OF EXPENDITURE, THE ASSESSEE WILL GET DEDUCTION UNDER SECTION 80IB DUE TO DISALLOWANCE AND WHEN IT PAYS LESS TAX AND IN THE NEXT YEAR DUE TO PROVISO UNDER SECTION 40(A)(IA) IT GET DEDUCTION OF THIS PAYMENT AND PAYS LESS TAX IN THE NEXT YEAR ALSO. 4. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS DISPUTED THE ABOVE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND HAS SUBMITTED THAT THE ASSESSEE IS ALLOWED 100% DEDUCTION FOR THE PROFITS EARNED UNDER SECTION 80IB. THE EXPENDITURE ON WHICH THERE WAS DELAY IN DEPOSITING THE TDS WAS CLAIMED DEDUCTION AGAINST THE PROFITS EARNED FROM THE ELIGIBLE INDUSTRIAL UNDERTAKING. SINCE, THE EXPENDITURE WAS DISALLOWED, THEREFORE, THE PROFIT FROM THE ELIGIBLE UNDERTAKING OF THE ASSESSEE INCREASED WHICH WAS ALLOWABLE DEDUCTION ITA NO 2196/AHD/2009. M/S.CHIRAG PLAST. ASST.YEAR -2005-06 - 4 - UNDER SECTION 80IB OF THE ACT. THE OBSERVATION OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THAT THE ASSESSEE WILL GET DOUBLE DEDUCTION ONCE, IN THE PRESENT YEAR UNDER SECTION 80IB AND AGAIN WHEN THE EXPENDITURE IS CLAIMED AS DEDUCTION IN THE SUBSEQUENT YEAR ON PAYMENT OF TDS AMOUNT IS NOT CORRECT BECAUSE THE PROFIT IN THE SUBSEQUENT YEAR FROM THE ELIGIBLE UNDERTAKING WILL BE REDUCED WHEN THE CLAIMED DEDUCTION OF THE EXPENDITURE IN THE SUBSEQUENT YEAR AND CORRESPONDINGLY WILL GET LESS DEDUCTION UNDER SECTION 80IB OF THE ACT. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF 100% OF THE PROFITS AND GAINS DERIVED FROM ITS INDUSTRIAL UNDERTAKING. THE LEARNED ASSESSING OFFICER FOUND THAT A SUM OF RS.1,25,073/- IS NOT ALLOWABLE AS BUSINESS EXPENDITURE OF THE YEAR UNDER CONSIDERATION BECAUSE OF THE PROVISIONS OF SECTION 40(A)(IA) ARE THAT DEDUCTION IN RESPECT OF THIS BUSINESS EXPENDITURE WILL BE ALLOWED TO THE ASSESSEE IN THE SUBSEQUENT YEAR WHEN TDS IN RESPECT OF THIS EXPENDITURE IS DEPOSITED BY THE ASSESSEE. HOWEVER, THE LEARNED ASSESSING OFFICER HAS TREATED THIS AMOUNT OF DISALLOWABLE EXPENDITURE AS INCOME FROM OTHER SOURCES AND THEREBY NOT ALLOWED DEDUCTION UNDER SECTION 80IB IN RESPECT ITA NO 2196/AHD/2009. M/S.CHIRAG PLAST. ASST.YEAR -2005-06 - 5 - OF THAT AMOUNT. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ALSO CONFIRMED THE ABOVE ACTION OF THE LEARNED ASSESSING OFFICER ON THE GROUND THAT ALLOWANCE OF DEDUCTION UNDER SECTION 80IB IN THE YEAR WILL TANTAMOUNT TO DOUBLE DEDUCTION TO THE ASSESSEE. WE FIND THAT THE UNDISPUTED FACTS OF THE CASE ARE THAT BUSINESS EXPENDITURE OF ELIGIBLE UNIT STANDS DISALLOW IN THE YEAR UNDER CONSIDERATION DUE TO APPLICATION OF PROVISIONS OF SECTION 40(A)(IA). THUS, IN OTHER WORDS, THE SAID AMOUNT IS DEEMED AS EXPENDITURE NOT INCURRED BY THE ASSESSEE FOR COMPUTING ITS BUSINESS INCOME. THUS, AS THE EXPENDITURE OF ELIGIBLE UNIT STANDS DISALLOWED CONSEQUENTLY THE SAME RESULTS IN INCREASE OF THE PROFIT OF THE ELIGIBLE UNIT. THE DEDUCTION UNDER SECTION 80IB IS ALLOWABLE IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING. SUCH PROFITS AND GAINS ARE TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 28 TO 44AC WHICH INCLUDES SECTION 40(A)(IA) ALSO. THEREFORE, ANY DISALLOWANCE OF BUSINESS EXPENDITURE OF THE ELIGIBLE UNIT WILL LOGICALLY RESULT IN ENHANCEMENT OF DEDUCTION ALLOWABLE UNDER SECTION 80IB OF THE ACT. THE FEAR EXPRESSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN OUR CONSIDERED OPINION IS UNFOUNDED AND BASELESS. DURING THE YEAR AS THE EXPENDITURE OF THE ELIGIBLE BUSINESS IS DISALLOWED THE ASSESSEES BUSINESS INCOME DERIVED FROM THE ELIGIBLE BUSINESS OF THE INDUSTRIAL UNDERTAKING STANDS AT INCREASED FIGURE AND THEREFORE, THE ASSESSEE WILL BE ELIGIBLE FOR DEDUCTION OF ENHANCED AMOUNT UNDER SECTION 80IB OF THE ACT. HOWEVER, IN THE SUBSEQUENT YEAR IN WHICH TDS IS PAID BY THE ASSESSEE, THE EXPENDITURE WILL BE ALLOWED AS DEDUCTION ITA NO 2196/AHD/2009. M/S.CHIRAG PLAST. ASST.YEAR -2005-06 - 6 - FROM THE ELIGIBLE PROFITS OF THE SUBSEQUENT YEAR AND THEREBY THE ELIGIBLE PROFIT OF THE INDUSTRIAL UNDERTAKING WILL BE REDUCED IN THE SUBSEQUENT YEAR AND CONSEQUENTLY THE ASSESSEE WILL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB AT THE REDUCED AMOUNT ONLY. THUS, THERE CANNOT BE A DOUBLE DEDUCTION TO THE ASSESSEE. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DIRECT THE LEARNED ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80IB IN RESPECT OF ENTIRE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING, AFTER TAKING INTO CONSIDERATION THE PROVISIONS UNDER SECTION 40(A)(IA). THUS, THE GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 18/09/2009. SD/- SD/- ( ( ( ( H.L. KARWA H.L. KARWA H.L. KARWA H.L. KARWA ) )) ) ( N.S. SAINI ) ( N.S. SAINI ) ( N.S. SAINI ) ( N.S. SAINI ) JUDICIAL MEMBER AC JUDICIAL MEMBER AC JUDICIAL MEMBER AC JUDICIAL MEMBER ACCOUN TANT MEMBER COUNTANT MEMBER COUNTANT MEMBER COUNTANT MEMBER AHMEDABAD; DATED 18/09/ 2009