The ACIT, B.K. Circle, Palanpur V. M/s. Banpal Oil Chem Pvt.Ltd., Palanpur

ITA 2621/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6506 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 18-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K VOHRA SRDR
• Assessee Lawyers: JAMIN GANDHI
• Section: 271(1)(c); 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER AND SHRI A.N.PHAUJA, HONBLE ACCOUNTANT MEMBER ITA NO.2621/AHD/2009 ASSESSMENT YEAR:2006-07 ITA NO.2644/AHD/2009 ASSESSMENT YEAR: 2004-05 DATE OF HEARING:19.5.11 DRAFTED:19.5.11 ACIT, B.K. CIRCLE, PLANPUR V/S. M/S. BANPAL OIL CHEM PVT. LTD. 5, FIRST FLOOR, GITANJALI COMPLEX, PALACE ROAD, PALANPUR PAN NO.AAACB8580Q (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI JAMIN GANDHI & SHRI TUSHAR P HEMANI, AR REVENUE BY:- SHRI R.K. VOHRA, SR-DR O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THESE ARE REVENUES APPEAL AGAINST THE ORDER OF LD . COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AHMEDABAD IN APPEAL NOS. C IT(A)-XV/ACIT B.K>CIR./PLN/188/08-09 & CIT(A)-XV/ACITB.K.CIR./PLN /03/09-10 FOR THE ASSESSMENT YEARS 2006-07 & 2004-05. FIRST WE TAKE UP ITA NO.2621/AHD/2009. 2. REVENUE HAS TAKEN FOLLOWING GROUND:- 1. THE LD. COMMISSIONER OF INCOME-TAX(A)-XV, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO TREAT THE DEPB INCOME OF RS.3615976/- AS INCOME DERIVED FROM ELIGIBLE BUSINE SS FOR DEDUCTION U/S.80IB. ITA 2621 & 2644/AHD/2009 A.Y. 06- 07 & 04-05 ACIT B.K. CIR- PLP V. M/S. BANPAL OIL CHEM PV T. LTD. PAGE 2 3. THE BRIEF FACTS ARE THAT DURING THE ASSESSMENT P ROCEEDINGS ASSESSING OFFICER DID NOT FIND DUTY ENTITLEMENT PASSBOOK SCHE ME (DEPB IN SHORT) INCOME ELIGIBLE FOR CONSIDERATION WHILE COMPUTING A LLOWABLE DEDUCTION U/S 80IB OF THE ACT. IN APPEAL, LD. CIT(A) FOLLOWING TH E DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SARAF SEASONING UDYOG V. ITO (2008) 219 CTR 461 (RAJ) DIRECTED THE ASSESSING OFFICER TO INCLUDE DEPB INCOME OF RS.36,15,976/- FOR THE PURPOSE OF COMPUTING THE DED UCTION AVAILABLE TO THE ASSESSEE U/S.80IB. 4. AFTER HEARING BOTH THE PARTIES WE FIND THAT ISSU E INVOLVED IN THE PRESENT CASE IS COVERED IN FAVOUR OF REVENUE BY THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA V. CIT (2009) 317 ITR 218 (SC), WHEREIN FOLLOWING WAS HELD:- DUTY DRAWBACK RECEIPTS AND DEPB BENEFITS DO NOT FO RM PART OF THE NET PROFITS OF ELIGIBLE INDUSTRIAL UNDERTAKINGS FOR THE PURPOSE OF THE DEDUCTION UNDER SECTION 80I/80-IA-IB OF THE INCOME-TAX ACT, 1 961. THE INCOME-TAX ACT, 1961, BROADLY PROVIDES FOR TWO TYPES OF TAX INCENTIVES, VIZ., INVESTMENT-LINKED INCENTIVES AND PROFIT-LINKED INCENTIVES. CHAPTER VI-A OF THE ACT WHICH PROVIDES FOR INCENTIVES IN THE FORM OF DEDUCTIONS ESSENTIALLY BELONGS TO THE CATEG ORY OF PROFIT-LINKED INCENTIVES. THEREFORE, WHEN SECTION 80-IA/80-IB RE FERS TO PROFITS DERIVED FROM ELIGIBLE BUSINESS, IT IS NOT THE OWNERSHIP OF THAT BUSINESS WHICH ATTRACTS THE INCENTIVES; WHAT ATTRACTS THE INCENTIV ES UNDER SECTION 80- IA/80-IB IS THE GENERATION OF PROFITS (OPERATIONAL PROFITS)., IT IS FOR THIS REASON THAT PARLIAMENT HAS CONFINED DEDUCTION OF PR OFITS DERIVED FROM ELIGIBLE BUSINESSES MENTIONED IN SUB-SECTIONS (3) T O (11A). EACH OF THE BUSINESS MENTIONED IN SUB-SECTIONS (3) TO (11A) CON STITUTES A STAND- ALONE ITEM IN THE MATTER OF COMPUTATION OF PROFITS. SECTIONS 80-IB AND 80-IA ARE A CODE BY THEMSELVES A S THEY CONTAIN BOTH SUBSTANTIVE AS WELL AS PROCEDURAL PROVISIONS. SECTION 80-IB PROVIDES FOR THE ALLOWING OF DEDUCTIO N DIN RESPECT OF PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINES S. THE CONNOTATION OF THE WORDS DERIVED FROM IS NARROWER AS COMPARED TO THAT OF THE WORDS ATTRIBUTABLE TO . BY USING THE EXPRESSION DERIVED FROM PARLIAMENT INTENDED TO COVER SOURCES NOT BEYOND THE FIRST DEGR EE. ITA 2621 & 2644/AHD/2009 A.Y. 06- 07 & 04-05 ACIT B.K. CIR- PLP V. M/S. BANPAL OIL CHEM PV T. LTD. PAGE 3 SECTIONS 80-I, 80-IA AND 80-IB ARE TO BE READ AS HA VING A COMMON SCHEME. SUB-SECTION (5) OF SECTION 80-IA (WHICH IS REQUIRED TO BE READ INTO SECTION 80-IB) PROVIDES FOR THE MANNER OF COMP UTATION OF THE PROFITS OF AN ELIGIBLE BUSINESS. SUCH PROFITS ARE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESS EE. THEREFORE, DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFITS OF THE ELIGIBLE BUSINESS HAVE TO BE REJECTED IN VIEW OF THE OVERRIDING PROVI SIONS OF SECTION 80- IA(5). SECTIONS 80-I, 80-IA AND 80-IB PROVIDE FOR INCENTIV ES IN THE FORM OF DEDUCTIONS WHICH ARE LINKED TO PROFITS AND NOT INVE STMENT. ON ANALYSIS OF SECTIONS 80-IA AND 80-IB IT BECOMES CLEAR THAT A NY INDUSTRIAL UNDERTAKING WHICH BECOMES ELIGIBLE ON SATISFYING SU B-SECTION (2) WOULD BE ENTITLED TO DEDUCTION UNDER SUB-SECTION (1) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING AF TER THE SPECIFIED DATE. APART FROM ELIGIBILITY, SUBSECTION (1) PURPORTS TO RESTRICT THE QUANTUM OF DEDUCTION TO A SPECIFIED PERCENTAGE OF THE PROFITS. THIS IS THE IMPORTANCE OF THE WORDS DERIVED FROM AN INDUSTRIAL UNDERTAKIN G: AS AGAINST PROFITS ATTRIBUTABLE TO AN INDUSTRIAL UNDERTAKING. DEPB/DUTY DRAWBACK ARE INCENTIVES WHICH FLOW FROM T HE SCHEMES FRAMED BY THE CENTRAL GOVERNMENT OR FROM SECTION 75 OF THE CUSTOMS ACT, 1962. INCENTIVE PROFITS ARE NOT PROFITS DERIVE D FROM ELIGIBLE BUSINESS UNDER SECTION 80-IB; THEY BELONG TO THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERTAKING. PROFITS DERIVED BY WAY OF INCENTI VES SUCH AS DEPB/DUTY DRAWBACK CANNOT BE CREDITED AGAINST THE C OST OF MANUFACTURE OF GOODS DEBITED I THE PROFIT AND LOSS ACCOUNT AND THEY DO NOT FALL WITHIN THE EXPRESSION PROFITS DERIVED FRO M INDUSTRIAL UNDERTAKING UNDER SECTION 80-IB. RESPECTFULLY FOLLOWING THE SAME THE ORDER PASSED BY LD. CIT(A) IS REVERSED AND THAT OF ASSESSING OFFICER IS RESTORED. 5. IN THE RESULT APPEAL OF REVENUE IS ALLOWED. COMING TO REVENUES APPEAL ITA NO.2644/AHD/2009. 6. THE REVENUE HAS TAKEN FOLLOWING GROUND:- THE LD. COMMISSIONER OF INCOME-TAX(A)-XV, AHMEDABA D HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY U/S.271(1) (C) OF RS.585300/-. 7. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSING O FFICER HAS IMPOSED PENALTY ON DISALLOWANCE MADE U/S.80HHC. THESE DISAL LOWANCES WERE MADE ITA 2621 & 2644/AHD/2009 A.Y. 06- 07 & 04-05 ACIT B.K. CIR- PLP V. M/S. BANPAL OIL CHEM PV T. LTD. PAGE 4 AS IN THE AMOUNT OF DEDUCTION CLAIMED U/S.80HHC, TH E ASSESSEE-COMPANY HAD NOT EXCLUDED INCOME FROM DEPB INCOME, FDR INTER EST AND SALE OF WASTE MATERIAL AND OLD BARDAN. THIS ACTION OF AO WAS CONF IRMED BY LD. CIT(APPEALS) AND THEREFORE PENALTY U/S 271(1)(C) WAS IMPOSED BY AO. 8. IN APPEAL LD CIT(APPEALS) PLACING RELIANCE ON TH E CASE OF CIT V. CAPALIN POINT LABORATORIES LTD. (2007) 293 ITR 524 (MAD), WHEREIN IT WAS HELD THAT MERE REJECTION OF THE CLAIM OF THE ASSESSEE BY RELYING ON DIFFERENT INTERPRETATIONS OF SECTION 80HHC AND 80I DO NOT AMO UNT TO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME, DELETED THIS PENALTY. NO CONTRARY DECISION WAS CITED ON BEH ALF OF REVENUE AT THE TIME OF HEARING BEFORE US AND THEREFORE THE ORDER PASSED BY LD. CIT(A) IS HEREBY CONFIRMED. REVENUES APPEAL IS DISMISSED. 9. IN THE RESULT, REVENUES APPEALS IN ITA NO.2621/AHD /2009 IS ALLOWED AND THAT OF ITA NO.2644/AHD/2009 IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 27/05/2011 SD/- SD/- (A.N.PHAUJA) (D.K. TYAGI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 27/05/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XV, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD