ACIT, CHENNAI V. Carborandum Universal Ltd., CHENNAI

ITA 250/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8279 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 19-11-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 29-01-2015
• Court: TRIBUNAL
• Department Lawyers: DR U ANJANEYALU
• Assessee Lawyers: R VIJAYARAGHAVAN
• Section: 80HHC; 80IB; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.250/MDS/2015 / ASSESSMENT YEAR : 2002-03 THE ASSTT. COMMISSIONER OF INCOME-TAX LARGE TAXPAYER UNIT-I CHENNAI VS. M/S CARBORANDUM UNIVERSAL LTD PARRY HOUSE, VI FLOOR 43, MOORE STREET CHENNAI 600 001 [PAN AAACC 2474 P ] ( %& / APPELLANT) ( '(%& /RESPONDENT) ./ I.T.A.NO.298/MDS/2015 / ASSESSMENT YEAR : 2002-03 M/S CARBORANDUM UNIVERSA L LTD PARRY HOUSE, VI FLOOR 43, MOORE STREET CHENNAI 600 001 VS. THE ADDL. COMMISSIONER OF INCOME-TAX LARGE TAXPAYER UNIT CHENNAI ( %& / APPELLANT) ( '(%& /RESPONDENT) DEPARTMENT BY : DR. U. ANJANEYALU, CIT ASSESSEE BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE / DATE OF HEARING : 19 - 1 1 - 2015 / DATE OF PRONOUNCEMENT : 01 - 01 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER BOTH REVENUE AND ASSESSEE FILED APPEALS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), LARGE TAXPAYER UNIT, CHENNAI, DATED 31.10.2014 FOR ASSESSMENT YEAR 20 02-03. THEREFORE, ITA NO. 250 & 298/15 :- 2 -: WE HEARD BOTH THE APPEALS TOGETHER AND DISPOSE OF T HE SAME BY THIS COMMON ORDER. 2. LET US FIRST TAKE UP REVENUES APPEAL I.T.A.NO. 250/MDS/2015. THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS DEDUCTION U/S 80HHC OF THE ACT WITHOUT REDUCING THE DEDUCTION ALLOWED U/S 80IB OF THE ACT. 3. DR.U.ANJANEYULU, LD. DEPARTMENTAL REPRESENTATIVE SU BMITTED THAT THE ASSESSEE CLAIMED DEDUCTIONS U/S 80HHC AN D 80IB OF THE ACT. THE ASSESSING OFFICER FOUND THAT IN VIEW OF SEC. 80 IA(9) OF THE ACT, THE DEDUCTION GRANTED U/S 80HHC SHALL BE REDUCED WHILE CONSIDERING THE DEDUCTION U/S 80IB OF THE ACT. HOWEVER, THE CIT(A ) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF DECISION OF THIS TRIBUNAL IN THE CASE OF M/S RANE BRAKE LINING LTD IN I.T.A.NO. 104/ MDS/2009, DATED 21.4.2011. ACCORDING TO THE LD. DR, THIS TRIBUNAL HAS NOT CONSIDERED THE PROVISIONS OF SEC. 80IA(9)OF THE ACT, THEREFORE , THE DEDUCTION ALLOWED UNDER ANY OF THE SECTIONS OF CHAPTER VI HAS TO BE REDUCED WHILE CONSIDERING THE DEDUCTION UNDER ANY OTHER PRO VISIONS OF CHAPTER VI. 4. ON THE CONTRARY, SHRI R. VIJAYARAGHAVAN, LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE MADRAS HIGH COURT HAD A N OCCASION TO CONSIDER AN IDENTICAL ISSUE IN CIT VS MRF LTD, TAX CASE APPEAL ITA NO. 250 & 298/15 :- 3 -: NO.1020 OF 2009. ACCORDING TO THE LD. COUNSEL, THE MADRAS HIGH COURT BY FOLLOWING ITS EARLIER ORDER IN DCIT VS CHOLA TE XTILES P. LTD [2008] 304 ITR 256, FOUND THAT WHILE COMPUTING DEDUCTION U/S 80HHC THE DEDUCTION ALLOWED U/S 80IA NEED NOT BE REDUCED. I N FACT, ACCORDING TO THE LD. COUNSEL, THE MADRAS HIGH COURT FOLLOWED THE JUDGMENT OF THE BOMBAY HIGH COURT IN CIT VS NIMA SPECIFIC FAMILY TR UST [2001] 248 ITR 29. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. SEC . 80IA(9) IS VERY CLEAR THAT WHERE ANY AMOUNT OF PROFITS AND GAINS OF AN UNDERTAKING IS CLAIMED AND ALLOWED, DEDUCTION TO THE EXTENT OF SUC H PROFITS AND GAINS SHALL NOT BE ALLOWED UNDER ANY OTHER PROVISIONS OF CHAPTER VI OF THE ACT. IT FURTHER SAYS THAT THE DEDUCTION SHALL NOT E XCEED THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS AS THE CASE MAY. W HILE INTERPRETING SEC. 80IA(9) OF THE ACT, THE BOMBAY HIGH COURT IN C IT VS NIMA SPECIFIC FAMILY TRUST [2001] 248 ITR 29, MADHYA PRADESH HIGH COURT IN J.P. TOBACCO PRODUCTS P. LTD VS CIT [1998] 229 ITR 123 A ND APEX COURT IN JT. CIT VS MANDIDEEP ENGINEERING AND PACKAGING INDU STRIES P. LTD [2007] 292 ITR 1, FOUND THAT DEDUCTION ALLOWED U/S 80HHC NEED NOT BE REDUCED WHILE COMPUTING DEDUCTION U/S 80IA OF T HE ACT. IN VIEW OF THE JUDGMENT OF BOMBAY HIGH COURT IN NIMA SPECIFIC FAMILY TRUST(SUPRA) WHICH WAS FOLLOWED BY THE JURISDICTION AL HIGH COURT IN ITA NO. 250 & 298/15 :- 4 -: MRF LTD. (SUPRA), THIS TRIBUNAL DO NOT FIND ANY REA SON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 6. NOW, COMING TO ASSESSEES APPEAL I.T.A.NO.298/MDS/ 2015, THE FIRST GROUND OF APPEAL IS WITH REGARD TO INCLUS ION OF RECEIPT FROM SCRAP SALES IN THE TOTAL TURNOVER. 7. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE APEX COURT IN CIT VS PUNJAB STAI NLESS STEEL INDUSTRIES, 364 ITR 144, HAD AN OCCASION TO CONSIDE R AN IDENTICAL ISSUE. THE APEX COURT FOUND THAT SALE PROCEEDS OF THE SCRAP NEED NOT BE INCLUDED IN THE TOTAL TURNOVER. THE CIT(A), BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESS MENT YEARS 2001-02 AND 2002-03 IN I.T.A.NOS.1240 & 1241/MDS/2006 DATED 28.12.2007, DISALLOWED THE CLAIM OF THE ASSESSEE. THE JUDGMEN T OF THE APEX COURT IN PUNJAB STAINLESS STEEL INDUSTRIES(SUPRA) W AS NOT AVAILABLE BEFORE THE LOWER AUTHORITIES. 8. WE HEARD DR.U. ANJANEYALU, LD. DEPARTMENTAL REPRESE NTATIVE ALSO. ACCORDING TO THE LD. DR, THE CIT(A) HAS FOLL OWED THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA RS 2001-02 AND 2002-03, THEREFORE, THERE IS NO INFIRMITY IN THE OR DER OF THE CIT(A). ITA NO. 250 & 298/15 :- 5 -: 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT(A), BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS, FOUND THAT SALE PROCEEDS OF SCRAP HAS TO BE INCLUDED IN THE BUSINESS PROFIT AS WELL AS TOTAL TU RNOVER WHILE COMPUTING DEDUCTION U/S 80HHC. NOW, THE APEX COURT IN THE CASE OF PUNJAB STAINLESS STEEL INDUSTRIES(SUPRA) FOUND THAT THINGS LIKE OLD FURNITURE ARE SOLD, THE SALE PROCEEDS THEREFROM WOU LD NOT BE INCLUDED IN SALES BUT WOULD BE SHOWN SEPARATELY. THE SALE P ROCEEDS FROM SCRAP MAY EITHER BE SHOWN SEPARATELY IN THE PROFIT & LOSS ACCOUNT OR MAY BE DEDUCTED FROM THE AMOUNT SPENT BY THE MANUFACTURING UNIT ON THE RAW MATERIAL FROM WHICH GOODS ARE MANUFACTURED. THE RAW MATERIAL WHICH IS NOT CAPABLE OF BEING USED FOR MANUFACTURING THE GOODS WILL HAVE TO BE EITHER SOLD AS SCRAP OR MIGHT HAVE TO BE RECYCLE D. WHEN SUCH SCRAP IS SOLD, THE SALE PROCEEDS CANNOT BE INCLUDED IN TH E TOTAL TURNOVER. THEREFORE, THE PROCEEDS OF THE SALE OF SUCH SCRAP W OULD NOT BE INCLUDED IN THE SALES IN THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE. IN THE CASE BEFORE US, THE ASSESSEE IS ADMITTEDLY A M ANUFACTURING COMPANY, THEREFORE, THE SALE PROCEEDS OF THE SCRAP CANNOT FORM PART OF THE TOTAL TURNOVER. THEREFORE, WE ARE UNABLE TO UP HOLD THE ORDER OF THE LOWER AUTHORITY. IN VIEW OF THE JUDGMENT OF TH E APEX COURT IN PUNJAB STAINLESS STEEL INDUSTRIES(SUPRA) AND FOR TH E REASONS STATED ITA NO. 250 & 298/15 :- 6 -: THEREIN, WE SET ASIDE THE ORDERS OF THE LOWER AUTHO RITIES AND THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE THE SALE P ROCEEDS OF SCRAP FROM THE TOTAL TURNOVER. 10. THE NEXT GROUND OF APPEAL IS WITH REGARD TO EXCLUSI ON OF FREIGHT AND INSURANCE FROM THE TOTAL TURNOVER. 11. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT FREIGHT AND INSURANCE CHARGES ARE EX CLUDED FROM THE EXPORT TURNOVER. HOWEVER, THE ASSESSING OFFICER FA ILED TO EXCLUDE THE SAME FROM THE TOTAL TURNOVER. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE SAME HAS TO BE EXCLUDED FROM THE TOTAL TURNOVER ALSO. 12. WE HEARD DR. U. ANJANEYALU, LD. DR ALSO. ACCORDING TO THE LD. DR,THIS ISSUE IS COVERED IN FAVOUR OF THE ASSE SSEE BY THE ORDER OF SPECIAL BENCH OF THIS TRIBUNAL IN ITO VS SAKSOFT LT D. 121 TTJ 865. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TOT AL TURNOVER AND EXPORT TURNOVER SHALL BE OF THE SAME FACTOR. IN OT HER WORDS, THE DENOMINATOR AND NUMERATOR SHALL BE OF THE SAME FACT OR WHILE COMPUTING THE DEDUCTION U/S 80HHC. THEREFORE, ONC E THE ASSESSING OFFICER EXCLUDED THE FREIGHT AND INSURANCE CHARGES FROM THE EXPORT TURNOVER THE SAME SHALL ALSO BE EXCLUDED FROM THE T OTAL TURNOVER. ITA NO. 250 & 298/15 :- 7 -: THEREFORE, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE THE INSURA NCE AND FREIGHT CHARGES FROM THE TOTAL TURNOVER ALSO. 14. THE NEXT ISSUE ARISES FOR CONSIDERATION IS EXCLUSIO N OF 90% OF INTEREST, AGENCY COMMISSION, RENT AND MISCELLANEOUS INCOME FROM THE PROFITS OF BUSINESS WHILE COMPUTING DEDUCTION U/S 80HHC. 15. SHRI R.VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS EXCLUDED 9 0% OF THE GROSS INCOME WHILE COMPUTING DEDUCTION U/S 80HHC. REFER RING TO EXPLANATION (BAA) OF SEC. 80HHC, THE LD. COUNSEL SU BMITTED THAT THE INCOME WHICH IS MISCELLANEOUS IN NATURE HAS TO BE E XCLUDED IN CASE IT FORMS PART OF THE PROFIT OF THE ASSESSEE. ACCORDI NG TO THE LD. COUNSEL, WHAT IS INCLUDED IN THE PROFIT OF THE BUSINESS IS N ET RECEIPT OF THE ASSESSEE AND NOT THE ENTIRE RECEIPT. THEREFORE, T HE ASSESSING OFFICER HAS TO CONFINE HIMSELF ONLY TO THE NET RECEIPT AND NOT THE GROSS RECEIPT. THE LD. COUNSEL PLACED HIS RELIANCE ON THE JUDGMEN T OF THE APEX COURT IN ACG ASSOCIATED CAPSULES PVT. LTD VS CIT, 2012] 2 43 ITR 89. 16. ON THE CONTRARY, DR.U.ANJANEYALU, LD. DR SUBMITTED THAT EXPLANATION (BAA) OF SEC. 80HHC CLEARLY SAYS THAT PROFIT OF THE BUSINESS MEANS THE PROFITS OF THE BUSINESS AS COMP UTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE LD. DR FURTHER ITA NO. 250 & 298/15 :- 8 -: SUBMITTED THAT 90% OF THE SUM REFERRED TO IN SEC. 2 8 OR OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CH ARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN THE PROFIT HAS TO BE REDUCED WHILE COMPUTING DEDUCTION U/S 80HHC. ACCORDING TO THE LD. DR WHAT IS INCLUDED IN THE PROFIT IS THE GROSS PROFIT AND N OT THE NET PROFIT. THEREFORE, NO INTERFERENCE IN THE ORDER OF THE CIT( A) IS CALLED FOR. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL, 90% THE MISCELLANEOUS INCOMES LIKE , INTEREST, AGENCY COMMISSION, RENT ETC. WHICH ARE INCLUDED IN THE PRO FIT OF THE ASSESSEE HAS TO BE EXCLUDED WHILE COMPUTING DEDUCTION U/S 80HHC OF THE ACT. THE PROFIT OF THE BUSINESS HAS TO BE COMPUTED UNDER THE PROVISIONS OF THE INCOME-TAX ACT, 1961, THEREFORE, THE EXPENDITU RE INCURRED BY THE ASSESSEE HAS TO BE EXCLUDED AND WHAT IS INCLUDED IS THE NET INCOME AND NOT THE GROSS INCOME. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHAT IS TO BE EXCLUDED UNDER EXPLANATION (BAA ) OF SEC. 80HHC IS NET INCOME INCLUDED IN THE PROFIT. THEREFORE, THE ORDERS OF THE LOWER AUTHORITIES ARE MODIFIED AND THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE 90% OF THE NET RECEIPT LIKE INTEREST, AGENC Y COMMISSION, RENT ETC FROM THE PROFIT OF THE ASSESSEE WHILE COMPUTI NG DEDUCTION U/S 80HHC OF THE ACT. ITA NO. 250 & 298/15 :- 9 -: 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND THAT OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST OF JANUARY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 1 ST JANUARY, 2016 RD !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF