The ACIT, Vapi Circle, Vapi V. Shri Siraj J.Saiyed, Vapi

ITA 220/AHD/2012

• Counselvise Citation: 22020514 RSA 2012
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 25-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV SRDR
• Assessee Lawyers: M K PATEL
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.220 & 221/AHD/2012 ASSESSMENT YEARS : 2007-08 & 2008- 09 ASSTT.COMMISSIONER OF INCOME-TAX, VAPI CIRCLE, VAPI V/S . SHRI SIRAJ J SAIYAD PROP. OF M/S SIGMA PACKAGING, PLOT NO.192, SAURABH SOCIETY, GIDC, VAPI PAN NO.AROPS9743D (APPELLANT) .. (RESPONDENT) /BY ASSESSEE SHRI M.K. PATEL, AR /BY REVENUE SHRI B.L. YADAV, SR-DR /DATE OF HEARING 28-03-2012 /DATE OF PRONOUNCEMENT 13-04-2012 O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST THE DIFFERENT ORDERS PASSED BY THE LD. COMMISSIONER OF INCOME-TAX (APPEALS), VALSAD VIDE APPEAL NO. CIT(A)/VLS/199/225/09-10 OF EVEN DATED 24-11- 20011. IN THIS CASE THE ASSESSMENT ORDERS WERE PASS ED BY THE ADDL. COMMISSIONER OF INCOME-TAX VAPI RANGE, U/S 143(3) O F THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASS ESSMENT YEARS 2007-08 & 2008-09 VIDE ORDERS DATED 19-11-2009 AND 21-12-2010 . ITA NO.220-221/AHD/2012 A.YS. 07-08 & 08-09 ACIT VAPI CIR V. SH SIRAJ J SAIYAD PAGE 2 2. ISSUE INVOLVED IN BOTH THE APPEALS OF THE REVEN UE IS COMMON EXCEPT FIGURE THEREFORE, TAKING THE FACTS OF THE CASE FOR THE ASSESSMENT YEAR 2007-08 AS A LEAD CASE FOR THE SAKE OF CONVENIENCE WE PASS A CONSOLIDATED ORDER FOR BOTH THE APPEALS. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS HAVING A MANUFACTURING UNIT IN THE NAME AND STYLE M/S SIGMA PACKAGING WHICH IS LOCATED IN THE UNION TERRITORY OF DADAR & NAGAR HAVELI SPECIFIED AS A BACKWARD UT IN THE VIIITH SCHEDULE OF THE IT ACT. THE ASSESSEE STARTED ITS MANUFACTURING ACTIVITY FOR THE A.Y. 2004- 05 AND IS ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE A CT @ 100%. THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT WERE CO NCLUDED FOR THE ASSESSMENT 2007-08 VIDE ORDER DATED 19.11.2009. THE ASSESSING OFFICER REJECTED THE CLAIM OF DEDUCTION OF RS.7,12,312/- U/ S 80 IB OF THE ACT. THE ASSESSEE FEELING AGGRIEVED BY THE ASSESSMENT ORDER CARRIED THE MATTER BEFORE THE LEARNED CIT(APPEALS) WHO RELYING UPON THE JUDG EMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT V. HARJIVANDAS JHUTHABHAI ZAVERI AND ANOTHER (2002) 258 ITR 785 (GUJ) ALLOWED THE APPEAL OF TH E ASSESSEE AND DELETED THE DISALLOWANCE MADE BY AO. 4. THE REVENUE FEELING AGGRIEVED BY THE ORDER OF LD . CIT(A) HAS RAISED THE ONLY EFFECTIVE GROUND OF APPEAL AS UNDER:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE INCOME FROM SCRAP SALES OF RS.7,12,326/- IS ELIGIBLE FOR DEDUCTION U/S 80IB, W ITHOUT CONSIDERING FACT THAT IT HAS NO DIRECT OR IMMEDIATE NEXUS WITH THE M ANUFACTURING ACTIVITY OF THE ASSESSEE. 5. LD. SR-DEPARTMENTAL REPRESENTATIVE VEHEMENTLY AR GUED THAT THE IMPUGNED ORDER IS ERRONEOUS AND THERE IS NO JUSTIFI CATION IN DELETING THE DISALLOWANCE MADE BY ASSESSING OFFICER. ITA NO.220-221/AHD/2012 A.YS. 07-08 & 08-09 ACIT VAPI CIR V. SH SIRAJ J SAIYAD PAGE 3 6. ON THE CONTRARY, LD. AUTHORIZED REPRESENTATIVE S UBMITTED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF CARD BOARD BOXES OF VARIOUS SIZED IN THE NAME AND STYLE M/S SIGMA PACK AGING AND SOLD SCRAP GENERATED DURING THE COURSE OF MANUFACTURING PROCES S TO THE TUNE OF RS.7,12,326/- AND CLAIMED INCOME DERIVED FROM MANUF ACTURING ACTIVITY FOR THE PURPOSE OF AVAILING DEDUCTION U/S 80IB OF THE ACT. LD. AR FURTHER STATED THAT SCRAP IS GENERATED AFTER COMPLETION OF THE MANUFACT URING PROCESS INVOLVING CONVERSION OF KRAFT PAPER INTO FINISHED BOXES. ACCO RDINGLY, IT IS GENERATED FROM THE MANUFACTURING PROCESS AND CAN BE CONSIDERED AS PRODUCTS HAVING LESSER VALUE AND SCRAP MATERIAL ALSO CARRIES THE SAME RAW MATERIAL COST IF VALUED ON A UNIT BASIS AS THAT OF THE FINISHED PRODUCT. HE CO NTENDED THAT THE SCRAP GENERATED IS SOLD TO THE PAPER MILLS WHERE IT IS US ED AS A RAW MATERIAL AND THIS DIRECTLY REDUCES THE COST OF RAW MATERIAL CONSUMED AND IN TURN INCREASES MANUFACTURING PROFIT. LD. A R SUBMITTED THE ASSESSI NG OFFICER WRONGLY APPLIED THE DECISION OF HONBLE MADHAYA PRADESH HIGH COURT DELIVERED IN THE CASE OF D.P. AGGARWAL VS CIT 227 ITR 118(MP) AS THE FACTS O F THE PRESENT CASE ARE DISTINGUISHABLE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES PERUSED THE MATERIALS AVAILABLE ON RECORD AND THE JUDGEMENTS CI TED. LD. AR HAS BROUGHT TO OUR NOTICE THE DECISION OF CO-ORDINATE BENCH D AHMEDABAD IN ITA NO.2236/AHD/2010 IN THE CASE OF ACIT V. M/S.PARAS MOTOR MFG. CO. DATED 07- 01-2011, WHEREIN THE TRIBUNAL VIDE PARA-5 & 5.1 DIS MISSED THE REVENUES APPEAL AND FOR THE SAKE OF CLARITY WE REPRODUCE THE RELEVANT CONTENTS OF THE SAME AS UNDER:- 5. IDENTICAL ISSUE HAD COME UP BEFORE THE ITAT AHM EDABAD BENCH D BY WAY OF ITA NO.2235/AHD/2010 (BY REVENUE) AND CO NO.261/AHD/2010 FOR ASSESSMENT YEAR 2007-08 IN THE CASE OF M/S. NATION AL LAMINATION IND., DAMAN, WHEREIN, OUR ORDER OF EVEN DATE, IT WAS DECI DED THE ISSUE AS UNDER:- 5. WITH THIS BACKGROUND, WE HAVE HEARD BOTH THE SI DES AT SOME LENGTH. THE ONLY OBJECTION OF LEARNED DEPARTMENTAL REPRESEN TATIVE SHRI S.R. MALIK WAS THAT THE GENERATION OF SCRAP WAS NOT LINK ED WITH THE MANUFACTURING ACTIVITY AS NOTED BY THE ASSESSING OF FICER, THEREFORE, THE ITA NO.220-221/AHD/2012 A.YS. 07-08 & 08-09 ACIT VAPI CIR V. SH SIRAJ J SAIYAD PAGE 4 ISSUE WAS NOT COVERED BY THE DECISION OF HONBLE HI GH COURT. ON THE OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE HAS S TRONGLY OPPOSED THE SAID OBSERVATION PRIMARILY ON THE GROUND THAT W ITHOUT VERIFYING THE CORRECT FACTS OF THE CASE, THE ASSESSING OFFICER HA D ARBITRARILY HELD THAT THE PRODUCTION OF A SCRAP WAS NOT A BY-PRODUCT OF T HE MANUFACTURING ACTIVITY. IT HAS ALSO BEEN STATED THAT THOUGH THERE WAS NO CHANGE IN THE MANUFACTURING ACTIVITY OF THE ASSESSEE; AND THAT TH ERE WAS NO CHANGE IN THE PRODUCTION OF SCRAP COMPARING THE PAST RECOR DS OF THE CASE; AND THAT THE DEDUCTION ON SALE OF A SCRAP HAS ALWAYS BE EN ALLOWED IN THE PAST, HENCE THERE WAS NO OCCASION ON THE PART OF TH E ASSESSING OFFICER TO DISTURB THE ALREADY ACCEPTED STAND OF THE REVENU E. IN SUPPORT OF THE CLAIM FOLLOWING CASE LAWS HAVE ALSO BEEN RELIED UPO N:- SL.NO(S) DECISION IN THE CASE OF REPORTED IN 1 DY.CIT VS. HARJIVANDAS JUTHABHAI ZAVERI & ANOTHER [2002] 258 ITR 785 (GUJ) 2 DY.CIT VS. CORE HEALTHCARE LTD. [2009] 308 ITR 263 (GUJ) 3 NIRMA INDUSTRIES LTD. VS. ACIT [2005] 95 ITD 119 (AHD.] (SB) 4 FENNER (INDIA) LTD. VS CIT [2000] 241 ITR 803 (M AD) 6. THE ADMITTED FACTUAL POSITION IS THAT THE ASSESS EE IS USING RAW- MATERIAL CALLED AS CRGO ELECTRICAL STEEL SHEETS. TH E STEEL SHEETS ARE IN VARIOUS SHAPES WHICH ARE CUT INTO VARIOUS SIZES. DURING THIS PROCESS, SIGNIFICANT SCRAP IS GENERATED, HENCE, THE VEHEMENT CLAIM IS THAT THE SCRAP OF STEEL CREATED ON CUTTING OF STEEL SHEETS N ATURALLY HAS A DIRECT LINK AS WELL AS NEXUS WITH THE MANUFACTURING ACTIVI TY. WE ARE OF THE VIEW THAT THE TOTALITY OF THE CIRCUMSTANCES THUS, W ARRANTS TO HOLD THAT THE INCOME GENERATED ON SALE OF SCRAP WAS DERIVED F ROM THE INDUSTRIAL MANUFACTURING ACTIVITY OF THE ASSESSEE, THEREFORE, QUALIFIES FOR THE DEDUCTION IS PRESCRIBED UNDER THE ACT. RESULTANTLY, THE LEARNED CIT(APPEALS) HAS RIGHTLY FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AND HIS VIEW IS HEREBY AF FIRMED. THIS GROUND OF THE REVENUE IS DISMISSED. 5.1 SIMILAR VIEW WAS TAKEN IN THE ASSESSEES OWN CA SE FOR THE A.Y. 2006-07 IN ITA NO.1618/AHD/2009. RESPECTFULLY, FOLLOWING THE DECISION OF THE CO-ORDI NATE BENCH IN THE CASE OF M/S PARAS MOTOR MFG. CO. (SUPRA) AND THE RATIO LAID BY THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF DCIT V. HARJIVANDAS JHUTHABHAI ZAVERI AND ANOTHER (2002) 258 ITR 785 (GUJ) WE FIND NO REASON TO INTER FERE WITH THE ORDER OF LD. CIT(A) AND THIS GROUND OF REVENUES APPEAL IS DISMI SSED. ITA NO.220-221/AHD/2012 A.YS. 07-08 & 08-09 ACIT VAPI CIR V. SH SIRAJ J SAIYAD PAGE 5 8. AS THE FACTS ARE IDENTICAL IN REVENUES APPEAL I N ITA NO.221/AHD/2012 THEREFORE, FOLLOWING THE VIEW TAKEN BY US IN REVENU ES APPEAL IN ITA NO.220/AHD/2011, THIS APPEAL OF THE REVENUE ALSO ST ANDS DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP - 13/04/2012 '#$ % & ' ' ' ' ())*+, ())*+, ())*+, ())*+, '-+ '-+ '-+ '-+ / COPY OF ORDER FORWARDED TO:- 1. ',/* 01 / APPELLANT 2. (2301 / RESPONDENT 3. %)4 3 35 / CONCERNED CIT 4. 3 35- ',/* / CIT (A) 5. +7 8/3 ()))4, 3 ',/*/3 ')4, '#$ % / DR, ITAT, AHMEDABAD 6. 8 ;< = >* / GUARD FILE. BY ORDER/ ' , /TRUE COPY/ ?,/# 3 , / 3 ',/*/3 ')4, '#$ % &