The DCIT, Circle-6, Ahmedabad V. M/s. Matangi Industries, Ahmedabad

ITA 2655/AHD/2004

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8762 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 03-09-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Assessee Lawyers: S N SOPARKAR
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO. 2669/AHD/2004 A. Y.: 2001-02 M/S. MATANGI INDUSTRIES, PLOT NO.28, PHASE-I, NELSON INDUSTRIES, GIDC, VATVA, AHMEDABAD 45 PA NO. AAEFM 6021 B VS THE A. C. I. T., CIRCLE-6, AAYAKAR BHAVAN, AHMEDABAD (APPELLANT) (RESPONDENT) ITA NO. 2655/AHD/2004 A. Y.: 2001-02 THE D. C. I. T., CIRCLE-6, AAYAKAR BHAVAN, AHMEDABAD VS M/S. MATANGI INDUSTRIES, PLOT NO.28, PHASE-I, NELSON INDUSTRIES, GIDC, VATVA, AHMEDABAD 45 PA NO. AAEFM 6021 B (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S. N. SOPARKAR, AR DEPARTMENT BY SHRI M. C. PANDIT, DR O R D E R PER BHAVNESH SAINI: BOTH THESE CROSS APPEALS ARE DIRECTED AGAINST ORDER OF THE CIT(A)- XII, AHMEDABAD DATED 15-06-2004 FOR THE ASSESSMENT YEAR 2001-02. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. ITA NO.2669/AHD/2004 (ASSESSEES APPEAL) 3. LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS G ROUND NOS. 1 AND 2 OF THE APPEAL OF THE ASSESSEE. SAME ARE ACCORDING LY DISMISSED BEING NOT PRESSED. ITA NO.2669 AND 2655/AHD/2004 M/S. MATANGI INDUSTRIES 2 4. ON GROUND NO.3 THE ASSESSEE CHALLENGED THE ORDER OF THE LEARNED CIT(A) CONFIRMING THE DENIAL OF DEDUCTION U/S 80 IA OF THE IT ACT ON EXPORT INCENTIVES AMOUNTING TO RS.5,37,247/- AND RS .2,37,279/- ON THE GROUND THAT SAME ARE NOT DERIVED FROM THE INDUSTRIA L UNDERTAKING OUT OF ITS MANUFACTURING ACTIVITIES. THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED AGAINS T THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F LIBERTY INDIA LTD. VS CIT 317 ITR 218 (SC) IN WHICH IT WAS HELD THAT DUTY DRAW BACK RECEIPTS AND DEPB BENEFITS DO NOT FORM PART OF THE NET PROFIT OF ELIGIBLE INDUSTRIAL UNDERTAKINGS FOR THE PURPOSE OF DEDUCTIO N U/S 80 I/80 IA/80 IB OF THE IT ACT. CONSIDERING THE ABOVE, THE APPEA L OF THE ASSESSEE HAS NO MERIT. THE SAME IS ACCORDINGLY DISMISSED 5. ON GROUND NO.4 THE ASSESSEE CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN NOT GRANTING DEDUCTION U/S 80 IA AND HO H HC OF THE IT ACT ON THE SAME AMOUNT OF GROSS TOTAL INCOME. IT IS PRAYED THAT BOTH THE SECTIONS ARE INDEPENDENT AND DEDUCTION SHOULD BE AL LOWED INDEPENDENTLY AND SEPARATELY. LEARNED COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE JUDGME NT OF SPECIAL BENCH OF ITAT DELHI BENCHES IN THE CASE OF ACIT VS HINDUSTAN MINT AND AGRO PRODUCTS LTD. 119 ITD (SB) 107 IN WHICH THE ISSUE W AS DECIDED IN FAVOUR OF THE REVENUE BY FOLLOWING THE PROVISIONS OF SECTI ON 80 IA (9) OF THE IT ACT. ON CONSIDERATION OF THE ABOVE, WE ARE OF THE V IEW THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF ITA T DELHI SPECIAL BENCH IN THE CASE OF HINDUSTAN MINT AND AGRO PRODU CTS LTD. (SUPRA) IN WHICH IDENTICAL ISSUE WAS CONSIDERED IN THE LIGHT O F PROVISIONS OF SECTION 80 IA (9) OF THE IT ACT WHICH IS APPLICABLE TO THE ASSESSMENT YEAR UNDER APPEAL ALSO IN WHICH IT WAS HELD THAT DEDUCTIONS T O BE ALLOWED UNDER CHAPTER VI - A WITH HEAD C IS TO BE REDUCED BY THE AMOUNT OF DEDUCTION ALLOWED U/S 80 IB/80IA OF THE ACT. SINC E THE ISSUE IS COVERED ITA NO.2669 AND 2655/AHD/2004 M/S. MATANGI INDUSTRIES 3 AGAINST THE ASSESSEE BY THE ORDER OF THE SPECIAL BE NCH OF THE TRIBUNAL, THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 6. LEVY OF INTEREST IS CONSEQUENTIAL. 7. AS A RESULT, THE APPEAL OF THE ASSESSEE IS DISM ISSED. ITA NO.2665AHD/2004 (DEPARTMENTAL APPEAL) 8. ON GROUND NOS. 1 AND 2, THE REVENUE CHALLENGED T HE ORDER OF THE LEARNED CIT(A) IN DIRECTING THE AO TO EXCLUDE SALES TAX AND EXCISE DUTY FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTIN G DEDUCTION U/S 80 HHC OF THE IT ACT. THE LEARNED DR SUBMITTED CONCEDE D THAT THE ISSUE IS COVERED IN AGAINST THE REVENUE BY THE JUDGMENT OF T HE LAKSHMI MACHINE WORKS 290 ITR 667 (SC) IN WHICH IT WAS HELD THAT E XCISE DUTY AND SALE TAX WOULD NOT FORM PART OF THE TOTAL TURNOVER WHILE CONSIDERING THE DEDUCTION U/S 80 HHC OF THE IT ACT. BY FOLLOWING T HE SAME DECISION, WE DISMISS THESE GROUNDS OF APPEAL OF THE REVENUE. 9. ON GROUND NOS. 3 AND 4, THE REVENUE CHALLENGED T HE ORDER OF THE LEARNED CIT(A) IN DIRECTING THE AO TO INCLUDE THE A MOUNT OF JOB CHARGES IN TOTAL TURNOVER AND IN NOT CONSIDERING THE ABOVE ISSUE UNDER CLAUSES (BAA) OF EXPLANATION 2 TO SECTION 80 HHC OF THE IT ACT. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ISSUE IS COVERED BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS BAN GALORE CLOTHING CO. 260 ITR 371 (BOM.) IN WHICH IT WAS HELD THAT DISMISSING THE APPEAL, THAT THE RECEIPT ACCRUED FROM MANUFACTURING ACTIVITY. TH E TRIBUNAL HAD FOUND THAT THE JOB PROCESSING ACTIVITY WAS LINKED TO THE MANUFACTURING ACTIVITY OF THE ASSESSEE. THERE WAS NO CHALLENGED TO THE FINDIN G OF FACT RECORDED BY THE TRIBUNAL IN RELATION TO THE PROCESSING ACTIVITY FORMING PART OF THE MANUFACTURING ACTIVITY OF THE ASSESSEE. THE TRIBUNA L WAS RIGHT IN HOLDING THAT 90 PER CENT OF THE LABOUR CHARGES OUGHT NOT TO HAVE BEEN EXCLUDED ITA NO.2669 AND 2655/AHD/2004 M/S. MATANGI INDUSTRIES 4 FROM SUCH BUSINESS PROFITS WHILE COMPUTING DEDUCTIO N UNDER SECTION 80 HHC. THE LEARNED CIT(A) CONSIDERING THE ABOVE DECISION OF THE HONBLE BOMBAY HIGH COURT DIRECTED THE AO TO INCLUDE THE AM OUNT OF JOB CHARGES RECEIPTS IN THE TOTAL TURNOVER OF THE BUSINESS AFTE R VERIFYING THE FACTS THAT MANUFACTURING ACTIVITIES CARRYING BY THE ASSESSEE I S THE SAME AS MANUFACTURING ACTIVITY CARRYING ON FOR OTHERS ON WH ICH JOB CHARGES HAVE BEEN RECEIVED. THE AO WAS ACCORDINGLY DIRECTED TO A MEND HIS ORDER ON THIS POINT. 10. THE LEARNED DR CONCEDED THAT THE ISSUE IS COVER ED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BAN GALORE CLOTHING CO. (SUPRA) AGAINST THE REVENUE. IN THIS VIEW OF THE MA TTER, WE DO NOT FIND ANY MERIT IN THESE GROUNDS OF APPEAL OF THE REVENUE . THE LEARNED CIT(A) HAD DIRECTED THE AO TO VERIFY THE FACTS AND AMEND T HE ORDER ACCORDINGLY. SINCE THE MATTER IS BEFORE THE AO TO RECONSIDER AS PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT BY VERIFYING THE FACTS, T HEREFORE, NOTHING SURVIVE IN FAVOUR OF THE REVENUE. WE ACCORDINGLY, D ISMISS THESE GROUNDS OF APPEAL OF THE REVENUE. 11. ON GROUND NOS. 5 AND 6, THE REVENUE CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN HOLDING THAT DEPB LICENCE IS COVE RED U/S 28 (IIIB) OF THE IT ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE A O IN REDUCING SALE PROCEEDS OF DEPB LICENSE FROM BUSINESS PROFITS FOR THE PURPOSE OF DEDUCTION U/S 80 HHC OF THE IT ACT. IN ALTERNATIVE GROUND OF APPEAL, IT WAS PRAYED THAT ONLY PROFITS ON SALE OF DEPB LICENS E MAY BE EXCLUDED FROM THE BUSINESS PROFITS FOR THE PURPOSE OF CALCUL ATING DEDUCTION U/S 80 HHC OF THE ACT. THE LEARNED CIT(A) REPRODUCED THE W RITTEN SUBMISSION OF THE ASSESSEE IN THE IMPUGNED ORDER AND NOTED THAT T HE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT AHMEDABAD BENCH IN THE CASE OF ACIT VS PRAIBHA SYNTEX LTD. 63 TTJ (AHD ) 409. THE LEARNED CIT(A) ACCORDINGLY HELD THAT SALE OF DEPB LICENSE I F COVERED U/S 28 (IIIB) ITA NO.2669 AND 2655/AHD/2004 M/S. MATANGI INDUSTRIES 5 OF THE IT ACT AND ACCORDINGLY DIRECTED THE AO TO GI VE APPROPRIATE RELIEF TO THE ASSESSEE. 12. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUT SET SUBMITTED THAT THE ISSUE NO LONGER SURVIVES BECAUSE OF THE AMENDME NT IN THE PROVISIONS OF SECTION 80 HHC (3) OF THE IT ACT. HE HAS SUBMITT ED THAT THE TOTAL TURNOVER OF THE BUSINESS AS PER FORM NO.10 CCAC OF IS RS.3,87,76,040/- AND INCLUDING SALES TAX AND EXCISE DUTY THE TOTAL T URNOVER CAME TO RS.4,00,96,777/-. HE HAS SUBMITTED THAT SECOND PROV ISO TO SECTION 80 HHC (3) HAS BEEN INSERTED IN THE IT ACT BY TAXATION LAWS (AMENDMENT) ACT 2005 WITH EFFECT FROM 01-04-1998 WHICH READS AS UNDER: PROVIDED FURTHER THAT IN THE CASE OF AN ASSESSEE HAVING EXPORT TURNOVER NOT EXCEEDING RUPEES TEN CRORES DUR ING THE PREVIOUS YEAR, THE PROFITS COMPUTED UNDER CLAUSE (A ) OR CLAUSE (B) OR CLAUSE (C) OF THIS SUB-SECTION OR AFTER GIVI NG EFFECT TO THE FIRST PROVISO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO NINETY PER CENT OF ANY SU M REFERRED TO IN CLAUSE (IIID) OR CLAUSE (IIIE), AS THE CASE M AY BE, OF SECTION 28 , THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE AS SESSEE : THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SU BMITTED THAT SINCE THE TURNOVER OF THE ASSESSEE HAS NOT EXCEEDED RS.10 COR ES DURING THE PREVIOUS YEAR, THEREFORE, THERE IS NO PERVERSITY IN THE ORDER OF THE LEARNED CIT(A) IN GRANTING RELIEF TO THE ASSESSEE. 13. LEARNED DR DID NOT DISPUTE THE ABOVE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 14. ON CONSIDERATION OF THE ABOVE FACTS, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) BECAUSE THE ISSUE IS NO W SQUARELY COVERED BY PROVISO 2 TO SECTION 80 HHC (3) OF THE IT ACT AS NOTED ABOVE, BECAUSE THE TURNOVER OF THE ASSESSEE IS ADMITTEDLY BELOW RS.10 CRORES. ITA NO.2669 AND 2655/AHD/2004 M/S. MATANGI INDUSTRIES 6 WE ACCORDINGLY, DO NOT FIND ANY MERIT IN THESE GROU NDS OF APPEAL OF THE REVENUE. THE SAME ARE ACCORDINGLY DISMISSED. 15. AS A RESULT, THE DEPARTMENTAL APPEAL STANDS DIS MISSED. 16. AS A RESULT, BOTH THE CROSS APPEALS ARE DISMISS ED. ORDER PRONOUNCED ON 22-03-2010. SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 22-03-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD