Asstt.Commissioner of Income-tax Circle-4, Nagpur V. M/s. Ankur Seeds Pvt.Limited, Nagpur

ITA 26/NAG/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3102 (ITAT-NAGPUR)
• Duration Of Justice: 8 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2002-2003
• Appeal Filed On: 11-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND BHUSANI
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D. T. GARASIA, HONBLE JUDICIAL MEMBER I.T.A. NOS. 26, 27 & 28 /NAG/11 ASSESSMENT YEARS: 02 - 03, 07 - 08 & 08 - 09 A.C.I.T., VS. M/S ANKUR SEEDS PVT. LTD., CIRCLE - 4, 27, NEW COTTON MARKET LAYOUT, NAGPUR. OPP. BUS STATION, NAGPUR. PAN:AABCA0981E (APPELLANT) (RESPONDENT) APPELLA NT BY : DR. MILIND BHUSANI, C.I.T. (D.R.) RESPONDENT BY : SHRI K. P. DEWANI, ADVOCATE DATE OF HEARING :1 8 /10/2012 DATE OF PRONOUNCEMENT : 07/12/2012 ORDER PER P. K. BANSAL: ALL THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE COMMON ORDER OF THE CIT(A) DATED 14 / 12 /201 0 . IN THESE APPEAL, T HE REVENUE HAS TAKEN THE FOLLOWING COMMON EFFECTIVE GROUNDS : 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN INCLUDING THE INTEREST INCOME TITLED AS INCOME FROM BOOKING SCHEMES FOR THE PURPOSES OF COMPUTING DEDUCTION U/S 80 - IB. 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN INCLUDING THE INCENTIVE AMOUNT IN THE I.T.A. NO. 26, 27 & 28/NAG/2011 2 TOTAL EXPENSES WHILE PROPORTIONATELY ALLOCATING THEM FOR COMPUTATION OF AGRICULTURAL INCOME, AS HE HAS TAKEN GROSS SALES AMOUNT FOR THE PURPOSE. 2. AT THE VERY OUTSET, THE LEARNED AR POINTED OUT THAT THE GROUNDS TAKEN BY THE REVENUE ARE DULY COVERED BY THE ORDER OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2004 - 2005 IN THE CASE OF THE ASSESSEE ITSELF. FOR THIS HE HAS DRAWN OUR ATTEN TION TO PAGE NO. 1 TO 12 OF THE PAPER BOOK. 3. THE LEARNED D. R. WAS FAIR ENOUGH TO CONCEDE THE POSITION. 4. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIONS, WE NOTED THAT THE SIMILAR GROUND HAS BEEN TAKEN BY THE REVENUE IN I.T.A. NO.336/NAG/07 IN THE ASSESSMENT YEAR 2004 - 2005 IN THE CASE OF THE ASSESSEE. BOTH THESE GROUNDS WERE DISPOSED BY THIS TRIBUNAL UNDER PARA 8 OF ITS ORDER DATED 03/03/2009 WHICH IS REPRODUCED AS UNDER: 8. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE LD. CIT(A) HAS ADJUDICATED THE MATTER AS UNDER : '5.10. T HEREFORE, IN VIEW OF THE ACCOUNTING SYSTEM FOLLOWED BY THE APPELLANT, WHEREIN THE NET SALES AFTER DEDUCTING INCENTIVE GIVEN TO THE DEALERS, HAVE BEEN CREDITED TO THE P&L A/C., IT WOULD BE APPROPRIATE THAT THE GROSS SALES INCLUSIVE OF INCENTIVE IS ADOPTED. RESULTANTLY, THE EXPENDITURE IN THE FORM OF INCENTIVES ALLOWED TO THE DEALERS WOULD BE SET OFF AGAINST THE INCOME FROM ADVANCE BOOKING SCHEME, MAKING IT NIL. ACCORDINGLY, TOTAL EXPENDITURE IN THE FORM OF INCENTIVES OF RS.2,99, 54,130/ - NEEDED TO BE REDUCED FROM THE GROSS TOTAL INTEREST OF RS.4, 45, 39, 532/ - EARNED FROM THE FDRS OUT OF THE FUNDS MADE OUT OF ADVANCES FROM THE DEALERS AND OTHER SOURCE AND ONLY THE NET BALANCE OF INTEREST OF I.T.A. NO. 26, 27 & 28/NAG/2011 3 RS.1 ,45,85, 402/ - CAN ONLY BE THE SUBJECT MATTER OF INCOME FOR THE PURPOSE OF DEDUCTION U/S. 80IB OF THE ACT . 5. 11 IN VIEW OF THE ABOVE FACTS ARID CIRCUMSTANCES, I A M OF THE CONSIDERED VIEW THAT GROSS SALES BEFORE DEDUCTION OF INCENTIVE ON BOOKING SHOULD BE CONSIDERED AS THE ORIGINAL SALES PRICE, SINCE THE SALES INVOICES ARE ALSO PREPARED ACCORDINGLY. INCENTIVE ALLOWED ON ADVANCE BOOKING SCHEME IS A CHARGE ON THE ADVANCE RECEIVED FROM THE DEALER. HAD THERE BEEN NO ADVANCE RECEIVED, NO INCENTIVE WOULD HAVE BEEN ALLOWED AND SALES AT GROSS PRICE WOULD HAVE ONLY BEEN BOOKED AND CONSIDERED ACCORDINGLY. SIMILARLY, IF BOOKING SCHEMES WERE NOT LAUNCHED, FUNDS WOULD NOT HAVE BEEN AVAILABLE WITH THE APPELLANT. T HEREFORE, IT WAS SIMPLY AN ISSUE OF PRESENTATION OF ACCOUNTS WHEREIN THE APPELLANT HAD CREDITED THE SALES ON THE NET VALUE AFTER REDUCING THE EXPENDITURE TOWARDS INCENTIVE. WHILE ON THE OTHER HAND THE APPELLANT COULD HAVE CREDITED THE SALES ON GROSS VALUE AND WOULD HAVE DEBITED THE EXPENDITURE TOWARDS INCENTIVES AGAINST THE INCOME FROM BOOKING SCHEME AND BY DOING SO THE DISPUTED ISSUE OF INCOME FROM BOOKING SCHEME WOULD HAVE BEEN AVOIDED. I AM THEREFORE, OF THE CONSIDERED VIEW THAT THE INCENTIVE ALLOWED TO THE DEALERS ON ACCOUNT OF ADVANCE BOOKING SCHEME, SHOULD BE REDUCED FROM THE INCOME GENERATED FROM THE DEPOSITS OF FUNDS RAISED BY LAUNCHING OF SUCH SCHEME. THEREFORE, CONSEQUENTLY THE EXPENDITURE IN THE FORM OF INCENTIVES GIVEN TO THE DEALERS, AS DISCUSSED IN THE PRECEDING P ARAS NEEDED TO BE SET OFF AGAINST THE 'INCOME FROM BOOKING SCHEME' OF RS. 1,89, 63,960/ - IN RESPECT OF THE ELIGIBLE UNITS COMPUTED BY THE A.O. IN THE RESULT, THE I NCOME FROM BOOKING SCHEME WOULD BE NIL AND HENCE THE DISALLOWANCE OF SUCH I N COME FOR THE PURPOSE OF DEDUCTION U/S. 80IB STANDS NULLIFIED. ACCORDINGLY, THE DISALLOWANCE OF SUCH INCOME FROM BOOKING SCHEME BY THE A.O. STANDS DELETED WHILE DETERMINING THE DEDUCTION U/S 80IB AS PER CHART GIVEN IN ANNEXURE - B OF THIS ORDER. 5.12. AS FAR AS ARGUMENT OF THE APPELLANT FOR INCLUSION OF THE INTEREST INCOME OF RS.9234688/ - APPORTIONED ON THE TWO MANUFACTURING UNITS FOR THE PURPOSE OF DEDUCTION U/S. 801B GOES, I FIND THAT IT HAS NO MERIT. THE APPELLANT COMPANY HAS EARNED SUM OF RS.4,45,39,5 32/ - ON ACCOUNT I.T.A. NO. 26, 27 & 28/NAG/2011 4 OF I NTEREST ON VARIOUS FIXED DEPOSITS WITH BANKS AND FROM OTHER INSTITUTIONS . AS THE INCENTIVES ON ADVANCE BOOKING SCHEME OF RS.2,99,54,129/ - HAVING DIRECT NEXUS WITH INTEREST ON FDR FROM ADVANCE BOOKING SCHEME, T HE BALANCE AMOUNT OF RS . 1,45,85,402/ - IS HELD TO HAVE BEEN EARNED OUT OF OTHER FUNDS, WHICH H AS NO CONNECTION WITH THE ADVANCE BOOKING SCHEME. THUS THE INTEREST INCOME OF RS.92346 8 8/ - A LLOCATED TO THE TWO UNITS CANNOT QUALIFY FOR DEDUCTION U/S 80IB . I AM, THEREFORE, OF THE CONSIDERED VIEW THAT THE INTEREST INCOME OF RS.9234688/ - HAS NO CONNECTION WITH THE FUNDS RECEIVED FROM ADVANCE BOOKING SCHEME AND, THEREFORE, SUCH I NTEREST INCOME HAS NOT. BEEN DERIVED OUT OF THE MANUFACTURING ACTIVITY OF THE INDUSTRIAL UNDERTAKING OF THE APPELLANT. THIS INTEREST INCOME HAS NEITHER BEEN DERIVED FROM NOR ATTRIBUTABLE TO THE MANUFACTURING ACTIVITY OF THE INDUSTRIAL UNDERTAKING AND HENCE DOES NOT QUA L IFY F OR DEDUCTION U/S 80IB OF THE ACT . FROM THE ABOVE IT IS EVIDENT THAT THE LEARNED CIT(A) HAS NEVER HELD THAT INTEREST INCOME TO BE ELIGIBLE FOR DEDUCTION U/S. 80IB. IN PARA 5. 1 2, HE HAD CLEARLY HELD THAT THE INTEREST I N COME HAS NEITHER BEEN DERIVED FROM NOR ATTRIBUTABLE TO THE MANUFACTURING ACTIVITY O F THE INDUSTRIAL UNDERTAKING AND HENCE, DOES NOT QUALIFY FOR DEDUCTION U/S 80IB OF THE ACT. HOWEVER, HE HAS NOTICED THAT THE ASSESSEE HAS LAUNCHED AN ADVANCE BOOKING/SCHEME. THIS SCHEME IS OPTIONAL AND NOT BINDING ON THE DEALERS A ND DISTRIBUTORS . HOWEVER, THE PERSONS WHO OPTED FOR ADVANCE BOOKING SCHEME WERE REQUIRED TO PAY IN A D VANCE FOR THE ORDERS OF THE SEEDS BOOKED BY THEM AND AT THE S AME TIME, THEY ARE ENTITLED TO INCENTIVE. THE SALES INVOICES ARE PREPARED AS PER ORIGINAL SALE PRICE FIXED FOR EACH PRODUCT ON THE BASIS OF PRICE LIST ISSUED B Y THE COMPANY FROM TIME TO TIME. THE PRICE REMAINS SAME FOR THE DEALERS AND DISTRIBUTORS WHO O PTED F OR T HE ADVANCE BOOKING SCHEME AND WHO DO NOT OPT FOR THE SCHEME. HOWEVER, T HE PERSONS WHO OPTED FOR ADVANCE BOOKING SCHEME ARE ALLOWED INCENTIVE ON ACCOUNT OF ADVANCE BOOKING, SUCH INCENTIVE IS REDUCED FRO M THE S ALE PRICE . THE FUND RECEIVED BY THE ASSESSEE AS PER ADVA N CE BOOKING SCHEME WAS DEPOSITED IN BAN K FROM WHICH INTEREST WAS RECEIVED, THEREFORE, THE LD. CIT(A) HELD THAT THERE WAS A DIRECT NEXUS BETWEEN THE INTEREST EARNED AND THE INCENTIVE GIVEN BY THE ASSESSEE. HE SET OFF THE INCENTIVE AGAINST THE INTEREST INCOME AND HELD THAT THE GROSS SALE WITHOUT REDUCING THE INCENTIVE FOR ADVANCE BOOKING SCHEME IS TO BE CONSIDERED FOR THE PURPOSE OF I.T.A. NO. 26, 27 & 28/NAG/2011 5 COMPUTING AGRICULTURAL INCOME AS WELL AS DEDUCTION U/S 80IB. HOWEVER, FOR BALANCE INTEREST WHICH REMAINED AFTER THE SET OFF OF INCENTIVE, HE HELD THAT INTEREST INCOME IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES AND THE FACTS OF THE CASE, WE ENTIRELY AGREE WITH THE FINDING OF THE LD.CIT(A). IN OUR OPINION, THE LD. CIT(A) WAS RIG HT IN HOLDING THAT THERE IS A DIRECT NEXUS BETWEEN THE INTEREST INCOME WHICH IS EARNED BY THE ASSESSEE FROM THE DEPOSIT RECEIVED FROM ADVANCE BOOKING SCHEME AND THE INCENTIVE GIVEN BY THE ASSESSEE TO THE PERSONS WHO OPTED FOR ADVANCE BOOKING SCHEME. IN VIE W OF THE ABOVE, WE HOLD THAT THE LD. CIT(A) HAS RIGHTLY DIRECTED SETTING OFF OF EXPENDITURE ON INCENTIVE AGAINST THE INTEREST INCOME. 5. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL, WE DISMISS ALL THE THREE APPEALS FILED BY THE REVENUE. 6. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 07/12/2012 ) SD/. SD/. ( D. T. GARASIA ) ( P. K. BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07/12/2012 *CL SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR