ACIT Cir, 19 (1), V. Stailay India 73, SSI,

ITA 2223/DEL/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2378 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 17-12-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 06-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAJANAND MEENA
• Assessee Lawyers: ASHOK KR JAIN
• Section: 80HHC

Judgement Text

I.T.A. NO. 2650/DEL/2007 I.T.A. NO.2222, 2223/DEL/2008 1/7 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH G BEFORE SHRI K. G. BANSAL, ACCOUTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO.2650 /DEL/2007 I.T.A. NO. 2222, 2223/DEL/2008 (ASSESSMENT YEAR 2003-04, 2004-05 & 2005-06 RESPECT IVELY) DCIT, CIRCLE 19(1), VS. M/S. STAINLAY INDIA, NEW DELHI 73-551, COOP INDL. ESTATE, G T KARNAL ROAD, DELHI (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAIFS2155C APPELLANT BY: SHRI GAJANAND MEENA, CIT DR RESPONDENT BY: SHRI ASHOK KR. JAIN, CA & SHRI AMOL SINHA, ADV. ORDER PER GEORGE MATHAN, JM: 1. I.T.A. NO. 2650/DEL/2007 IS AN APPEAL FILED BY T HE REVENUE AGAINST THE ORDER OF LD. CIT(A)-XXVII, NEW DELHI IN APPEAL NO.51/2006-07 DATED 14.02.2007 FOR THE ASSESSMENT YEAR 2003-04, I.T.A. NO. 2222/DEL/2008 I S THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER O F LD. CIT(A) XII, NEW DELHI IN APPEAL NO.212/2006-07 DATE D 31.03.2008 FOR THE ASSESSMENT YEAR 2004-05 AND I.T. A. NO. 2223/DEL/2008 IS THE APPEAL FILED BY THE REVENU E I.T.A. NO. 2650/DEL/2007 I.T.A. NO.2222, 2223/DEL/2008 2/7 AGAINST THE ORDER OF LD. CIT(A) XVI, NEW DELHI IN APPEAL NO.157/2007-08 DATED 31.03.2008 FOR THE ASSESSMENT YEAR 2005-06. AS THE ISSUES IN THESE APPEALS ARE COMMON AND RELATE TO THE SAME ASSESSEE, ALL THE THREE APPEALS ARE BEING DISPOSED OFF BY THIS CO MMON ORDER. SHRI GAJANAND MEENA, CIT DR REPRESENTED FOR THE REVENUE AND SHRI ASHOK KUMAR JAIN, CA AND SHRI AMOL SINHA, ADVOCATE REPRESENTED FOR THE ASSESSEE. 2. IT WAS THE SUBMISSION BY THE LD. D.R. THAT IN AL L THE THREE APPEALS THERE ARE ONLY TWO ISSUES. THE FIRST BEING AGAINST THE ACTION OF LD. CIT(A) IN GRANTING THE ASSESSEE THE BENEFIT OF DEDUCTION U/S 80HHC IN RESP ECT OF DEPB ENTITLEMENT AWARDED TO THE ASSESSEE BY THE DGFT. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF SPECI AL BENCH OF THIS TRIBUNAL IN THE CASE OF TOPMAN EXPORT S REPORTED IN (2009) 39 SOT 337 (MUM.)(S.B.). IT WAS SUBMITTED BY THE LD. D.R. THAT THE DECISION OF HON' BLE HIGH COURT OF KERALA IN THE CASE OF GPN CASHEW EXPORTING CO. REPORTED IN 184 TAXMAN 506 ALSO APPLI ES. IT WAS ALSO AGREED BY BOTH THE SIDES THAT IN THE ASSESSEES CASE, THERE WAS A LOSS ON THE SALE OF DE PB AND THE TURNOVER WAS IN EXCESS OF RS.10 CRORES. IT WAS AGREED THAT THE ISSUE IN RESPECT OF DEDUCTION U/S 8 0HHC AFTER CONSIDERING THE DEPB WAS TO BE RESTORED TO TH E I.T.A. NO. 2650/DEL/2007 I.T.A. NO.2222, 2223/DEL/2008 3/7 FILE OF THE A.O. FOR RE-ADJUDICATION IN LINE WITH T HE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE C ASE OF TOPMAN EXPORTS REFERRED TO SUPRA AS ALSO THE DECISI ON OF HON'BLE HIGH COURT OF KERALA IN CASE OF GPN CASHEW EXPORTING CO. REFERRED TO SUPRA. 3. WE HAVE CONSIDERED THE SUBMISSIONS. IT IS NOTICE D THAT THE ISSUE OF DEDUCTION U/S 80HHC AFTER CONSIDERING THE COST ELEMENT AND THE PROFIT/LOSS ON THE TRANSFER OF DEPB ENTITLEMENT IS TO BE RE-ADJUDICATED IN LINE WITH TH E DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE C ASE OF TOPMAN EXPORTS AS ALSO THE DECISION OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF GPN CASHEW EXPORTING CO. REFERRED TO SUPRA. IN THESE CIRCUMSTANCES, THI S ISSUE IS RESTORED TO THE FILE OF THE A.O. FOR RE-ADJUDICA TION IN LINE WITH THE ABOVE TWO DECISIONS. 4. IN REGARD TO THE 2 ND ISSUE, WHICH WAS AGAINST THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF SCRAP GENERATED OUTSIDE THE BOOKS OF ACCOUNTS, IT WAS FAIRLY AGREED BY BOTH THE SIDES T HAT THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 IN I.T.A. NO. 159/DEL/2006 DATED 19.11.2009 WHEREIN THE COORDINAT E BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS: I.T.A. NO. 2650/DEL/2007 I.T.A. NO.2222, 2223/DEL/2008 4/7 31. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS IN THE LIGHT OF HE MATERIAL PLACED BEFO RE US. THE ASSESSING OFFICER CONSIDERED THE GENERATIO N OF SCRAP WITH A VIEWPOINT OF ENTRY IN APPENDIX 41 (ITEM NO. 1) WHICH STATES THE GENERATION OF SCRAP WHEN THE STAINLESS STEEL UTENSILS ARE MANUFACTURED FROM STAINLESS STEEL SHEETS AND CIRCLES. HE ALSO R ELIED UPON ONE ORDER OF THE CIT(A) IN WHICH SUCH GENERATION OF SCRAP @ 25% WAS FOUND TO BE IN ORDER. AGAINST THESE FINDING OF THE ASSESSING OFFICER, THE LD. CIT(A) HAS GIVEN THE CATEGORICAL FINDINGS THAT THE STAINLESS STEEL UTENSILS ARE MANUFACTURED BY THE ASSESSEE FROM FLAT/PATTI WHERE GENERATION OF SCRAP IS MORE. THESE FINDINGS OF THE CIT(A) ARE RECORDED IN PARA 7.5 OF THE IMPUGNED ORDER. LD. CIT(A) REFERRE D IN PARA 7.4 THAT THE DECISION OF CIT(A) [PREDECESSO R OF CIT(A)] ALSO WHO WAS IN RESPECT OF A CASE WHERE STAINLESS STEELS UTENSILS MANUFACTURE BY THE ASSESS EE FROM COILS IN WHICH THE RATE OF GENERATION OF SCRAP WAS LOW. THEREFORE, THE CIT(A) HAS OBSERVED THAT THE SAID CASE WAS NOT APPLICABLE. LD. CIT(A) HAS ALSO OBSERVED THAT EVEN THOUGH THE ASSESSING OFFICE R HAS MENTIONED THAT IN MOST OF THE EXPORTERS CASES I N WAZIRPUR INDUSTRIAL AREA, THE SCRAP PERCENTAGE HAS BEEN SHOWN AT 25%, BUT NO SINGLE INSTANCE AS BEEN QUOTED OR SUBSTANTIATED BY THE ASSESSING OFFICER IN HIS FINDINGS RECORDED IN THE ASSESSMENT ORDER. HOWEVER, THE CIT(A) RELYING ON THE CERTIFICATE OF STAINLESS STEEL TRADE FEDERATION OF WAZIRPUR INDUSTRIAL AREA, HAS APPLIED THE RATE OF 30% BY GIVING THE PART RELIEF TO THE ASSESSEE. HERE, IT W ILL ALSO BE IMPORTANT TO NOTE THAT THE APPENDIX 1, TH E RELIANCE OF WHICH HAS BEEN PLACED BY THE ASSESSING OFFICER IN ITEM NO. 1 ITSELF, STATE IN ITEM NO. 76 THAT IF STAINLESS STEEL UTENSILS ARE MADE FROM STAINLESS STEEL COIL, THE GENERATION OF SCRAP WILL BE AROUND 39%. A FULL COPY OF APPENDIX 41 HAS BEEN PLACED I.T.A. NO. 2650/DEL/2007 I.T.A. NO.2222, 2223/DEL/2008 5/7 ON RECORD BY THE LD. AR OF THE ASSESSEE. APPENDIX 41 IS NORMS OF SCRAP/WASTE MATERIAL FOR AN EXPORT PROJECT UNDER EXPORT-ORIENTED UNITS AND UNITS IN EXPORT PROCESSING ZONES. THEREFORE, THE AUTHENTICITY OF THE SAID APPENDIX CANNOT BE DENIED. IT DESCRIBES PERCENTAGE OF SCRAP/WASTE MATERIAL FOR MANUFACTURE OF VARIOUS ITEMS, WHICH ARE INTENDED TO BE EXPORTED. THE CERTIFICATE WHICH WAS RELIED UPON BY THE CIT(A), ACCORDING TO THE ASSESSEE WAS NOT CONFRONTED. AS AGAINST THAT A CERTIFICATE DATED 7 TH DECEMBER, 2006 IN RESPECT OF ANOTHER YEAR WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) WHICH IS ALSO GIVEN BY THE SAME AUTHORITY I.E., DELHI STAINL ESS STEELS TRADE FEDERATION, WAZIRPUR INDUSTRIAL AREA, IN WHICH THE PERCENTAGE OF SCRAP BY FINANCIAL YEAR 2001-02 HAS BEEN DESCRIBED AT DIFFERENT RATES. THE COPY OF THE CERTIFICATE IS REPRODUCED IN PARA 14 OF THIS ORDER AND WHERE THE PERCENTAGE OF WASTAGE IF T HE UTENSILS ARE PRODUCED FROM S.S. PATTI, FLAT, COIL, VARIES BETWEEN 34 TO 37%. TE CERTIFICATE ISSUED BY DELHI STAINLESS STEELS TRADE FEDERATION MAY NOT BE CONSIDERED RELIABLE EVIDENCE WHEN COMPARED WITH THE APPENDIX 41 WHICH PRESCRIBE THE NORMS OF SCRAP IN RESPECT OF VARIOUS ITEMS. IF THE GENERATI ON OF SCRAP IS VIEWED FROM THE ANGLE OF APPENDIX 41, WHICH IS AN EVIDENCE RELIED UPON BY THE ASSESSING OFFICER TO HOLD THAT GENERATION OF SCRAP WAS 25%, I T COULD BE SEEN THAT IF THE STAINLESS STEEL UTENSILS ARE MANUFACTURED FROM STAINLESS STEEL COIL, THEN GENERATION OF SCRAP WILL BE 39%. THE RELIANCE BY ASSESSING OFFICER ON ITEM NO. 1 HAS ALREADY BEEN HELD BY THE LD. CTI(A) TO BE INCORRECT AS THE SAME DESCRIBED THE NORMS OF MANUFACTURING OF STAINLESS STEEL UTENSILS FROM STAINLESS STEEL SHEETS AND CIRC LES WHICH IS NOT APPLICABLE TO THE FACTS OF THE ASSESSE ES CASE. IT HAS ALSO BEEN POINTED OUT THAT IT HAS BEE N HELD BY THE CIT(A) THAT NO COMPARABLE CASE HAS BEEN I.T.A. NO. 2650/DEL/2007 I.T.A. NO.2222, 2223/DEL/2008 6/7 BROUGHT BY THE ASSESSING OFFICER ON RECORD TO SHOW THAT IN ANY OF THE COMPARABLE CASE, THE WASTAGE/SCRAP WAS TO THE EXTENT OF 25% AND THE SINGLE CASE WHICH WAS QUOTED BY THE ASSESSING OFFICER WAS DISTINGUISHED BY THE CIT(A). THEREFORE , IN VIEW OF OUR FINDING THAT IN THE ASSESSEE S CASE THE STAINLESS STEEL UTENSILS PRODUCED FROM SHEETS AND CIRCLES, ITEM NO. 1 IN APPENDIX 41 SHALL HAVE NO APPLICATION AND AS AGAINST THAT ITEM NO. 76 WILL BE APPLICABLE WHERE WASTAGE/SCRAP NORMS ARE PRESCRIBED IN RESPECT OF STAINLESS STEEL UTENSILS MANUFACTURED FROM STAINLESS STEEL COIL. IN THE CAS E OF THE ASSESSEE, SCRAP IS GENERATED @ 40% AS AGAINST SCRAP GENERATED IN IMMEDIATE PRECEDING YEAR @ 41.42%. AS NO INSTANCE OF SALE OR PURCHASE, ETC. O UT OF BOOKS HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER, LD. CIT(A) WAS WRONG IN SUSTAINING THE PART ADDITION BY APPLYING THE RATE O F GENERATION OF SCRAP @ 30% FOR WHICH THERE WAS NO AUTHENTIC EVIDENCE ON RECORD. AS THERE IS NO DEFEC T WHATSOEVER FOUND IN THE SALE OF PURCHASE OF UTENSIL S AND RATE OF GENERATION OF SCRAP IS COMPARABLE WITH THE IMMEDIATE PRECEDING YEAR AND THE GENERATION OF SCRAP IS IN THE NEAR VICINITY OF NORMS PRESCRIBED I N APPENDIX 41, WE FIND NO MERIT IN THE SUSTENANCE O F PART ADDITION WHICH IS DELETED. 32. KEEPING IN VIEW THE ABOVE DISCUSSION, WE ARE OF THE OPINION THAT NO ADDITION COULD HAVE BEEN MADE I N RESPECT OF GENERATION OF EXCESS SCRAP. THEREFORE, GROUND RAISED BY THE REVENUE IS DISMISSED AND GROUND RAISED BY THE ASSESSEE IS ALLOWED. 5. AS IT IS NOTICED THAT THIS ISSUE IS SQUARELY COV ERED BY THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN TH E ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 , I.T.A. NO. 2650/DEL/2007 I.T.A. NO.2222, 2223/DEL/2008 7/7 RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE B ENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03, THE FINDING OF LD. CIT(A) ON THIS ISSUE IS CONFIRMED. 6. IN THE RESULT THE APPEALS OF THE REVENUE IN I.T. A. NO.2650/DEL/2007 AND I.T.A. NO. 2222/DEL/2008 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND I.T.A. NO. 2223/DEL/2008 IS DISMISSED. 7. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 23 RD DEC., 2009. SD./- SD./- (K. G. BANSAL) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:23 RD DEC., 2009 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI