DCIT, CHENNAI V. Rajkumar Impex Pvt. Ltd., CHENNAI

ITA 2222/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8140 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 07-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R DURAIPANDIAN IRS
• Assessee Lawyers: HEMALATHA K ACA
• Keywords: Non compliance
• Section: 142(1); 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , #'$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.2222/MDS/2015 # % &% / ASSESSMENT YEAR : 2006-2007 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE 5(3), CHENNAI 600 034. VS. M/S. RAJKUMAR IMPEX PVT. LTD OLD NO.93, NEW NO.119, 4 TH FLOOR, ABHIRAMAPURAM, CHENNAI 600 018. [PAN AAACR 3577J] ( / APPELLANT) ( /RESPONDENT) '( ) * / APPELLANT BY : SHRI. R. DURAIPANDIAN, IRS, JCIT. +,'( ) * /RESPONDENT BY : MS. HEMALATHA K. ACA ! ) - / DATE OF HEARING : 19-01-2016 ./& ) - / DATE OF PRONOUNCEMENT : 05-02-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGA INST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-3, CHEN NAI IN ITA NO. 18/2008-09/A-3, DT 01.09.2015 FOR THE ASSESSMENT Y EAR 2006-2007 ITA NO.2222/MDS/2015. :- 2 -: PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1 961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE ONLY SUBSTANTIVE GROUND RAISED BY THE REVENUE I S THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN D IRECTING THE ASSESSING OFFICER TO EXCLUDE THE LOSS OF <1,36,88,8 06/- ARISING FROM TRADING ACTIVITY FROM PROFITS OF ELIGIBLE BUSINESS FOR CALCULATING RELIEF U/S.80IA OF THE ACT AND ALSO LOSS ARISING FROM HIGH SEA SALES OF RAW CASHEW NUTS WHICH IS AN ACTIVITY OTHER THAN AN ACTI VITY OF INDUSTRIAL UNDERTAKING. 3. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS IN THE BUSINESS OF PROCESSING RAW CASHES NUTS AND INTERNAT IONAL EXPORTS FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 13.11.2006 DECLARING A TOTAL INCOME OF <6,31,99,764/-. AS PER SCRUTINY NORMS THE CASE WAS SELECTED AND NOTICES U/S.143(2) AND 142(1) OF THE ACT WAS ISSUED. IN RESPONSE TO THE NOTICES, THE LD. AUTHORI SED REPRESENTATIVE APPEARED ON VARIOUS DATES AND PRODUCED DETAILS. ON PERUSAL OF COMPUTATION OF INCOME THE ASSESSEE HAS CLAIMED <1,6 6,13,518/- AS DEDUCTION U/S.80IA OF THE ACT ON ELIGIBLE PROFIT OF <5,48,54,425/- AND PROFIT ALSO INCLUDED MISCELLANEOUS INCOME OF <4,96 ,53,528/- COMPRISING OF DEPB OF <1,37,62,620/-, VKUY <2,09,11 ,824/- AND ALSO ITA NO.2222/MDS/2015. :- 3 -: OTHER INCOMES. ON PERUSAL OF THE SCHEDULE A OF PROF IT AND LOSS ACCOUNT, THE ASSESSEE ALSO INCLUDED LOCAL SALES OF EMPTY GUN NY BAGS OF <46,08,290/- ALL THESE AGGREGATING TO <5,46,94,034/ -. AS PER ASSESSING OFFICER ALL THESE ITEMS HAVE TO BE EXCLU DED FROM THE PROFIT AND LOSS ACCOUNT FOR CALCULATION OF DEDUCTION U/S.S EC80IA AND ON THE SAME PARAMETERS ASSESSING OFFICER EXCLUDED THE INC OME AND RECOMPUTED ELIGIBLE PROFITS AT <1,60,391/- AND ALSO FURTHER OBSERVED THAT IF THE PURCHASE AND SALE OF CASHEW KERNELS MAD E DIRECTLY WITHOUT UNDERGOING THROUGH MANUFACTURING PROCESS THERE WILL NOT BE ANY PROFIT AND MADE A DISALLOWANCE OF CLAIM U/S.80IB OF <1,66 ,13,518/- AND ASSESSED TOTAL INCOME AT <2,68,65,150/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN AP PEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE FILED WRITTEN SUBMIS SIONS ON THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE CO MMISSIONER OF INCOME TAX (APPEALS) ON THE OBSERVATIONS OF THE ASS ESSING OFFICER AND ALSO RELYING ON THE SUBMISSIONS OF THE ASSESSEE ON FIRST GROUND, WHICH THE ASSESSEE HAS NOT PRESSED AND WAS DISMISSED. IN RESPECT OF NON CONSIDERATION OF LOSS FROM TRADING ACTIVITY WHICH I S SUBJECT MATTER OF ITA NO.2222/MDS/2015. :- 4 -: DISPUTE, THE LD. AUTHORISED REPRESENTATIVE SUBMITTE D THAT THE PROCESS OF EXTRACTING CASHEW KERNELS FROM RAW CASHEW NUTS I NVOLVES DIFFERENT PROCESSES TO MET AMERICAN STANDARDS. BUT DUE TO NON COMPLIANCE OF INTERNATIONAL STANDARDS THEY WERE SOLD TO THIRD PAR TIES AT HIGH SEAS AT A LOSS OF <1,24,29,031/-. THE ASSESSEE WHILE CONS IDERING THE FINANCIAL STATEMENTS HAS CONSIDERED BOTH THE PROFITS FROM THE ELIGIBLE BUSINESS U/S.80IA AND LOSS FROM TRADING ACTIVITY AND ARRIVED AT NET PROFIT OF <5,48,54,425/-. THE ASSESSING OFFICER WHILE DISALL OWING THE CLAIM OBSERVED THAT THE LOSS DO NOT HAVE NEXUS TO THE EL IGIBLE BUSINESS AND NOT TO BE DEDUCTED. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS OF THE OPINION THAT INCOME FROM ACTIVITIES OTHER TH AN INDUSTRIAL UNDERTAKING SUCH AS TRADING OUGHT TO BE EXCLUDED WH ILE COMPUTING THE ELIGIBLE DEDUCTION AND DIRECTED THE ASSESSING OFFIC ER TO COMPUTE ELIGIBLE DEDUCTION AFTER EXCLUDING LOSS FROM TRADIN G ACTIVITY AS IN THE EARLIER YEARS AND ALLOWED THE APPEAL ON THIS GROUND . AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) O N THIS SPECIFIC GROUNDS, THE REVENUE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. DEPARTMENTAL REPRESENTATIVE REITERATED HIS SUBMISSIONS THAT THE COMMISSIONER OF INCOME TAX (AP PEALS) HAS PASSED AN ORDER CONTRA TO THE LAW AND FACTS AND ERR ED IN DIRECTING THE ITA NO.2222/MDS/2015. :- 5 -: ASSESSING OFFICER TO EXCLUDE LOSS OF <1,36,88,806/- FROM TRADING ACTIVITY FROM PROFITS OF ELIGIBLE BUSINESS FOR THE PURPOSE OF CALCULATING RELIEF U/S.80IB OF THE ACT. FURTHER, HE REITERATED THAT THE TRADING ACTIVITY ON HIGH SEA SALES IS AN ACTIVITY OTHER THA N ACTIVITY OF INDUSTRIAL UNDERTAKING AND ANY LOSS SHALL NOT BE SET OFF AND R ELIED ON LOWER AUTHORITIES ORDER AND PRAYED FOR SETTING ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 6. CONTRA, THE LD. AUTHORISED REPRESENTATIVE OF THE AS SESSEE REITERATED HIS SUBMISSIONS MADE BEFORE THE ASSESSIN G OFFICER AND ALSO WRITTEN SUBMISSIONS FILED BEFORE THE COMMISSIONER O F INCOME TAX (APPEALS) ON THE GROUND IN DISPUTE AND SUBSTANTIATE D HIS ARGUMENTS AND RELIED ON ORDER OF LD. COMMISSIONER OF INCOME T AX (APPEALS) WHO HAS RIGHTLY CONSIDERED THAT LOSS TO BE EXCLUDED FOR THE PURPOSE OF CALCULATING PROFIT OF ELIGIBLE BUSINESS AND ALSO RE LIED ON JUDICIAL DECISIONS SUPPORTING HIS ARGUMENTS AND RELIED ON E ARLIER YEAR ASSESSMENT ORDERS. 7. WE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIE S AND PERUSED THE MATERIAL ON RECORD AND ALSO JUDICIAL DE CISIONS CITED. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE FINDINGS OF THE ASSESSING OFFICER WERE THE BASIC ISSUE BEING THE LOSS DUE TO TRADING ACTIVITY ITA NO.2222/MDS/2015. :- 6 -: SHOULD NOT BE EXCLUDED FROM THE PROFIT ELIGIBLE UN DER SEC.80IA BUT ON THE GROUND OF DISALLOWANCE THE REVENUE ACCEPTED THE ASSESSEE CONTENTION IN EARLIER ASSESSMENT YEARS. ON THE OTH ER HAND, THE LD. AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO THE ORDER OF THE EARLIER ASSESSMENT YEAR 2004-05 WHERE COMPUTATION U /S.80IA OF THE ACT WAS CALCULATED AFTER EXCLUDING INCOME ATTRIBUTI NG TO NON MANUFACTURING ACTIVITIES FROM INCOME FROM DEPB SALE S & PROFIT ON TRADING OF RAW CASHEW NUTS. THE REVENUE HAS ACCEP TED THE CONTENTIONS IN EARLIER YEAR WHICH HAS BECOME FINAL. THE LD. AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO THE PROVISIONS OF THE ACT WHERE COMPUTATION OF ELIGIBLE PROFITS U/SEC. 80IA ARE DE TERMINED AND RELIED ON THE FINDINGS OF DECISION OF HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF LIBERTY SHOES LTD VS. CIT (2007) 158 TAXMAN 340 , WHERE THE LORDSHIP HAS HELD AT PARA 8 AS UNDER:- ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE WILL NOT BE ENTITLED TO DEDUCTION U/S. 80IA OF THE ACT IN RE SPECT OF PROFIT DERIVED FROM BUSINESS OF TRADING OF PRODUCTS OF OTHER CONCERNS AS THE SAME CANNOT BE HELD TO BE PROFITS A ND GAINS DERIVED FROM INDUSTRIAL UNDERTAKING. CONSIDERING THE FACTS AND FINDINGS OF THE JUDICIAL DECISION, WE ARE NOT INCLINED TO INTERFERE WITH ORDER OF THE COMMISSIONE R OF INCOME TAX (APPEALS) ON THIS GROUND AND UPHELD THE SAME AND DI SMISS THE GROUNDS ITA NO.2222/MDS/2015. :- 7 -: OF REVENUE. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IN ITA NO.2222/MDS/2015 IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 5TH DAY OF FEBRUARY, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ' ) (G. PAVAN KUMAR) /JUDICIAL MEMBER / CHENNAI 0 / DATED: 05.02.2016 KV 1 ) +#-23 43&- / COPY TO: 1. '( / APPELLANT 3. ! 5- () / CIT(A) 5. 3 89 +#-# / DR 2. +,'( / RESPONDENT 4. ! 5- / CIT 6. 9:% ; / GF