MILI STEELS P. LTD, MUMBAI V. ACIT RG 5(2), MUMBAI

ITA 2494/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7191 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 25-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 17-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DEEPESH T CHHEDA
• Keywords: Business income; TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SMT. P.MADHAVI DEVI, JM & SHRI RAJENDRA SINGH, AM. I.T.A.NO.2494/MUM/2009 - A.Y 2005-06 MILI STEELS PRIVATE LIMITED, D-18, SARVODAYA NAGAR, 1, PANJARAPOLE LANE, MUMBAI 400 004 PAN NO.AAACM 5722 A VS. ADD. COMMISSIONER OF I.T., RANGE 5-(2), MUMBAI I.T.A.NO.3209/MUM/2009 - A.Y 2005-06 ADD. C.I.T., RANGE 5-(2), MUMBAI MILI STEELS PRIVATE LIMITED, MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. DEEPESH T. CHHEDA. REVENUE BY : MR. MOHD. USMAN. O R D E R PER P.MADHAVI DEVI, JM: THESE CROSS APPEALS ARE DIRECTED AGAINST CIT[A] S ORDER DATED 5-3-2009. THEY ARE HEARD TOGETHER AND THEY ARE DISP OSED OF BY THIS COMMON ORDER. 2. I.T.A.NO.2494/M/09 [ASSESSEES APPEAL] : THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- 1. RE: DEDUCTION U/S.80IB. 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX [APPEALS] HA S ERRED IN CONFIRMING THE ACTIONS OF THE ASSESSING OFFICER OF RESTRICTING THE CLAIM FOR DEDUCTION U/S.80IB IN RESPECT OF PROF ITS OF NEWLY ESTABLISHED INDUSTRIAL UNDERTAKING AS CLAIMED BY TH E APPELLANT, ON ACCOUNT OF VARIOUS OBSERVATIONS, WHICH ARE BAD I N LAW AND ON FACTS IN RESPECT OF WHICH THE APPELLANT IS AGGRI EVED AS DETAILED HEREINAFTER IN GROUNDS 2 AND 3. 2. RE: EXCLUSION OF SALE OF DEPB OF RS.34,37,180/- FOR THE PURPOSE OF DEDUCTION U/S.80IB. 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT[A] GROSSLY ERRED IN NOT CONSIDERING THE DEPB 2 INCOME AS INCOME OF THE ELIGIBLE INDUSTRIAL UNDERTA KING FOR PURPOSE OF COMPUTATION OF DEDUCTION U/S.80IB. 2.2 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED THAT THE SALE OF DEPB IS INCOME OF EXPORT UNIT OF THE APPELLANT AND NOT THE INCOME OF ITS ELI GIBLE UNDERTAKING U/S.80IB AND HENCE THE SAME NEED NOT CO NSIDERED FOR THE PURPOSE OF WORKING OUT THE DEDUCTION U/S.80 IB. 3. RE: EXCLUSION OF OTHER INCOME OF RS.1,64,773/- F OR THE PURPOSE OF DEDUCTION U/S.80IB. 3.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT[A] ERRED IN NOT CONSIDERING THE INTEREST INCOME ON ELECTRICITY DEPOSIT AND SALE TAX REFUND F OR CALCULATING THE PROFITS OF ITS ELIGIBLE UNDERTAKING FOR THE PUR POSE OF DEDUCTION U/S.80IB[10]. 4. RE: DISALLOWANCE OF INTEREST ON DELAYED PAYMENT OF TDS OF RS.8,267/-. 4.1 THE LEARNED CIT[A] ERRED IN CONFIRMING THE ACTIONS OF THE ASSESSING OFFICER IN DISALLOWING THE INTEREST ON L ATE DEPOSIT OF TDS WITHOUT FURNISHING ANY REASONING FOR THE SAME. 3. AS REGARDS GROUND NO.1, WE FIND THAT IT IS GENE RAL IN NATURE AND NEEDS NO ADJUDICATION. 4. AS REGARDS GROUND NO.2, THE LD. COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED THAT THIS ISSUE IS COVERED AGAINST THE ASS ESSEE BY THE DECISION OF THE APEX COURT IN THE CASE OF LIBERTY INDIA [317 ITR 219] (S.C) WHEREIN IT HAS BEEN HELD THAT INCENTIVE PROFITS ARE NOT PROFITS DERIVED FROM THE ELIGIBLE BUSINESS U/S.80IB BUT THEY FLOW F ROM INCENTIVE SCHEMES ENACTED BY THE GOVERNMENT OR U/S.75 OF THE CUSTOMS ACT. THIS GROUND IS ACCORDINGLY REJECTED. 5. AS REGARDS GROUND NO.3, WE FIND THAT IT HAS TWO COMPONENTS [I] INTEREST INCOME ON ELECTRICITY DEPOSIT AND [II] SALES TAX REFUND. AS REGARDS INTEREST INCOME ON ELECTRICITY DEPOSIT IS C ONCERNED, THE LD. COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED THAT THIS ISSUE NEEDS TO BE DECIDED AGAINST THE ASSESSEE AS IT IS COVERED AGAIN ST THE ASSESSEE BY THE DECISION OF THE SUPREME COURT IN THE CASE OF LI BERTY INDIA [CITED SUPRA]. THIS ADDITION IS, THEREFORE, CONFIRMED. AS REGARDS SALES TAX 3 REFUND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SALES TAX IS PAID OUT OF ITS BUSINESS INCOME AND WHEN IT IS REFU NDED IT IS NOTHING BUT RECOUPMENT OF ITS LOSSES AND THEREFORE IT IS IN THE NATURE OF THE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING ELIG IBLE FOR DEDUCTION U/S.80IB. 6. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT TH E SALES TAX REFUND MAY ALSO CONTAIN THE INTEREST COMPONENT ON T HE REFUNDED AMOUNT WHICH WOULD NOT BE ELIGIBLE FOR DEDUCTION U/ S.80IB. 7. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE MATERIAL ON RECORD, WE FIND THAT THE SALES TAX REFU ND IS NOTHING BUT RECOUPMENT OF LOSSES AND IT IS DERIVED FROM THE IND USTRIAL UNDERTAKING. HOWEVER, AO IS DIRECTED TO VERIFY WHETHER THIS SALE S TAX REFUND ALSO CONSISTED OF INTEREST ON SUCH REFUND AND IF IT IS F OUND TO BE SO, THEN THE INTEREST COMPONENT OF THE SALES TAX REFUND MAY BE E XCLUDED FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.80IB. THIS GROUND IS ACCORDINGLY PARTLY ALLOWED FOR STATISTICAL PURPOSES . 8. GROUND NO.4 IS REJECTED AS NOT PRESSED BY THE AS SESSEE. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. 10. I.T.A.NO.3209/M/09 [REVENUES APPEAL] : THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT[A] MUMBAI ERRED IN HOLDING THAT ASSESSEE IS ENTITLED FOR DEDUCTION U/S.80IB IN RESPECT OF SALE OF SCRAP OF RS.1,37,17,748/- WHICH IS A PART OF MANUFACTURING P ROCESS IGNORING THE FACT THAT SCRAP IS GENERATED PRIOR TO THE MANUFACTURING PROCESS. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT[A] MUMBAI ERRED IN HOLDING THAT DISCOUNT RECEIVED OF RS.7,807/- AND SUNDRY BALANCE WRITTEN BACK OF RS .60,554/- ARE PROFIT AND GAIN DERIVED FROM INDUSTRIAL UNDERTA KING AND ARE 4 ELIGIBLE FOR DEDUCTION U/S.80IB OF THE I.T.ACT WHEN THESE RECEIPTS ARE INCOME FROM OTHER SOURCES. 11. THE LD. DR WHILE SUPPORTING THE ORDER OF THE AO PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RAVINDRANATHAN NAIR [295 ITR 228] FOR THE PROPOSITI ON THAT THE SCRAP SALES ARE LIKE PROCESSING CHARGES WHICH ARE HELD TO BE PART OF THE GROSS TOTAL INCOME AND FORM AN ITEM OF AN INDEPENDENT INC OME LIKE RENT, COMMISSION, BROKERAGE ETC. AND THEREFORE 90% OF THE SAME HAS TO BE REDUCED FROM THE GROSS TOTAL INCOME TO ARRIVE AT TH E BUSINESS PROFIT. 12. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIED UPON THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y 2004-05 WHEREIN THE ISSUE HAS BEEN HELD IN FAVOUR O F THE ASSESSEE. 13. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THEIR RIVAL CONTENTIONS, WE FIND THAT THE SCRAP IS GENERATED OU T OF THE MANUFACTURING ACTIVITY OF THE ASSESSEE. THE CIT[A] HAS RECORDED A FINDING THAT THE ASSESSEE IS IN THE BUSINESS OF MAN UFACTURING OF UTENSILS AND FOR THIS PURPOSE IT PURCHASES SHEETS WHICH ARE CUT INTO ROUND BLANKS AND IN THE PROCESS THE SCRAP IS GENERATED. W E AGREE WITH THE FINDING OF THE CIT[A] THAT THIS PROCESS IS A PART OF THE MANUFACTURING ACTIVITY OF THE UNDERTAKING AND, THEREFORE, INCOME FROM THE SALE OF SUCH SCRAP HAS TO BE INCLUDED WHILE COMPUTING THE PROFIT S AND GAINS OF THE ASSESSEE DERIVED FROM ITS INDUSTRIAL UNDERTAKING. I N THE CASE OF RAVINDRANATHAN NAIR [CITED SUPRA], THE HON'BLE APEX COURT WAS DEALING WITH THE ISSUE OF THE PROCESSING CHARGES EARNED BY THE ASSESSEE BY PROCESSING GOODS BELONGING TO THIRD PARTIES WHICH I S NOT THE CASE BEFORE US. THEREFORE, THE SAID DECISION IS NOT APPL ICABLE TO THE CASE 5 BEFORE US. FURTHER, IN THE ASSESSEES OWN CASE FOR THE A.Y 2004-05 THIS TRIBUNAL HAS HELD THAT THE SALE OF SCRAP HAS A DIRE CT LINK OR NEXUS WITH THE INDUSTRIAL UNDERTAKING AND IS ELIGIBLE FOR DEDU CTION U/S.80IB OF THE ACT. IN VIEW OF THE SAME, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT[A] AND THIS GROUND OF APPEAL IS REJECTED. 14. AS REGARDS GROUND NO.2 RELATING TO THE DISCOUNT RECEIVED AND SUNDRY BALANCE WRITTEN BACK, WE AGREE WITH THE FIND INGS OF THE CIT[A] THAT THEY ARE PART OF THE PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING AS THEY ARE NOTHING BUT THE RECOUPMENT OF THE LOSS INCURRED BY THE ASSESSEE FOR ITS OPERATIONS OF INDU STRIAL ACTIVITY. THIS GROUND OF APPEAL IS ACCORDINGLY REJECTED. 15. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF MARCH, 2010. SD/- SD/- (RAJENDRA SINGH) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI:30 TH MARCH, 2010. P/-*