M/s. Alpanil Industries, Ahmedabad V. The DY.CIT.,Circle-6, Ahmedabad

ITA 2896/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0396 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 24-11-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 26-12-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Initiation of penalty proceedings; Set aside
• Section: 271(1)(c); 80HHC; 80IB; 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING: 24.11.09 DRAFTED ON:25.11.09 ITA NO.2896/AHD/2006 ASSESSMENT YEAR : 2003-2004 M/S. ALPANIL INDUSTRIES, PLOT NO.81-82, PHASE-II, GIDC, VATVA, AHMEDABAD. VS. DCIT, CIRCLE-6, AHMEDABAD. PAN/GIR NO. : AAEFA 4803 D (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI S.N.SOPARKAR RESPONDENT BY: SHRI C.K.MISHRA SR. D. R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER : - THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD.CIT(APPEALS)-XII, AHMEDABAD, DATED 22.09.2006 IN APPEAL NO.CIT(A)- XII/CIR.6/51/06-07. 2. THE GROUND NOS. 1 AND 2 OF THE APPEAL READS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN DENYING DEDU CTION UNDER SECTION 80IB OF THE ACT ON SALE OF DEPB LICENSES AM OUNTING TO RS.1,33,88,413/- ON THE GROUND THAT THE SAME ARE NO T DERIVED FROM THE INDUSTRIAL UNDERTAKING OUT OF ITS MANUFACTURING ACTIVITIES. 2. ALTERNATIVELY AND WITHOUT PREJUDICE, ONLY THE INC OME AND NOT THE ENTIRE SALE PROCEEDS OF THE SAID DEPB LICENSES MAY BE REDUCED FROM THE TOTAL INCOME WHILE CALCULATING DEDUCTION U NDER SECTION 80IB OF THE ACT. 3. THE FACTS OF THE CASE OBSERVED BY THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) IN HIS ORDER READS AS FOLLOWS:- ITA NO.2896/AH D/2006. M/S.M/S. ALPANIL INDUSTRIES ASST.YEAR -2003-04 - 2 - AS PER THE A.O. THE APPELLANT IS ENGAGED IN BUSINE SS OF MANUFACTURING, TRADING AND EXPORT OF SYNTHETIC ORGANIC PIGMENT DYE S & CHEMICALS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE APPELLANT CLAIMED DEDUCTION UNDER SECTION 80IA WITHOUT EXCLUDING THE DEPB INCOME, WHI CH IS NOT A INCOME FROM INDUSTRIAL UNDERTAKING. THE A.O, ALSO STATED T HAT IT IS PRODUCT OF THE INCENTIVE GIVEN BY GOVERNMENT OF INDIA AND IN THIS ISSUE DECISION GIVEN BY THE HON'BLE SUPREME COURT IN CASE OF CIT VS. STERLI NG FOOD LTD. 237 ITR 579 IS RELEVANT. THE DECISION RELATES TO SECTION 80 HH OF THE I.T. ACT AND THE RATIO IS IDENTICAL THAT THE EXPORT INCENTIVE CANNOT BE DERIVED PROFIT AND GAIN FROM THE MANUFACTURING ACTIVITY TO BE ELIGIBLE FOR CALCULATING DEDUCTION. THE LEARNED ASSESSING OFFICER FURTHER STATED THAT THE A S WHILE CALCULATING PROFIT OF INDUSTRIAL UNDERTAKING HAS TAKEN INTO ACCOUNT DEPB INCOME OF RS.1,33,88,413/-, WHICH IS NOT ELIGIBLE FOR CALCULA TING DEDUCTION UNDER SECTION 80IA. THE LEARNED ASSESSING OFFICER THEREF ORE, WORKED OUT PROFITS OF BUSINESS OF M/S. ALPANIL INDUSTRIES AFTER REDUCING THE ABOVE MENTIONED AMOUNT AND ALLOWED DEDUCTION UNDER SECTION 80IA AT 25% OF THE REMAINING INCOME BEING PROFITS ELIGIBLE FOR DEDUCTION UNDER S ECTION 80IA OF THE INCOME TAX ACT. THE LEARNED ASSESSING OFFICER WORKED OUT T HE ALLOWABLE DEDUCTION UNDER SECTION 80IA IN THE ABOVE MANNER AT RS.14,61, 747/-. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS) HELD AS UNDER: 4. I HAVE PERUSED FACTS OF THE CASE IN THE LIGHT OF THE ASSESSMENT ORDER. THE WORDING USED IN SECTION 80IA INCOME DER IVED FROM BUSINESS OF INDUSTRIAL UNDERTAKING SHOULD BE READ AND INTERPRE TED AS A WHOLE AND NOT IN ISOLATION. AGAIN IN THE SAME SECTION BUSINESS HAS A LSO BEEN DEFINED IN SUB SECTION (4) TO WHICH PROVISIONS OF THE SECTION APPL Y. IT MEANS THE USE OF WORD BUSINESS OF INDUSTRIAL UNDERTAKING HAS BEEN USED WITH REGARD TO THAT ONLY AND NOT IN THE SENSE THAT INCOME OF ANY TYPE WILL B E ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA. DEPB IS NOT DIRECTLY ARISING FR OM ACTIVITIES OF INDUSTRIAL ITA NO.2896/AH D/2006. M/S.M/S. ALPANIL INDUSTRIES ASST.YEAR -2003-04 - 3 - UNDERTAKING AND THEREFORE, THERE ARE NOT DERIVED FR OM THE REAL OPERATION OF INDUSTRIAL UNDERTAKING. AS PER THE DECISION OF HON' BLE SUPREME COURT IN THE CASE OF CIT VS. STERLING FOODS 237 ITR 579 (SC) AN D PANDIAN CHEMICALS 262ITR 278 (SC) SUCH INCOME WHICH IS NOT DIRECTLY A RISING FROM THE ACTIVITIES OF INDUSTRIAL UNDERTAKING IS NOT ELIGIBL E FOR DEDUCTION UNDER SECTION 80I & 80IA. IN THE CASE OF PANDIAN CHEMICALS (SUPRA ), THE WORD ELIGIBLE FROM HAS BEEN CLEARLY DEFINED AND IN THE SPIRIT OF INTERPRETATION GIVEN THERE, AND SO FAR AS MATTER OF DEDUCTION IS CONCERNED THE APPELLANT IS NOT ENTITLED FOR DEDUCTION ON DEPB UNDER SECTION 80IA. THEREFORE, TH IS GROUND OF APPEAL IS DISMISSED. 5. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE ARGUED THAT ISSUE IS COVERED BY THE DECISION OF MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS VS. INCOME-TAX OFFICER, [2009] 318 ITR (AT) 87 (MUMBAI)[SB] AND STATED THAT AS PER THE SAID DECISI ON, THE PROFIT ON DEPB SHOULD BE TREATED SEPARATELY FROM THE VALUE OF DEPB RECEIVED ON EXPORT. HE SUBMITTED THAT THE ISSUE SHOULD SET ASIDE TO THE FI LE OF THE LEARNED ASSESSING OFFICER FOR DECIDING THE SAME AFRESH IN LIGHT TO TH E AFORESAID DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDER OF THE LEARNED ASSESSING OFFICER AND SUBMITTED THAT THE IS SUE STANDS COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LI BERTY INDIA VS. CIT [2009] 317 ITR 218 (SC) AGAINST THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IB IN RESPECT OF PROFIT DERIVED BY IT FROM THE BUSINES S OF ITS NEWLY ESTABLISHED INDUSTRIAL UNDERTAKING. THE ONLY DISPUTE IS THAT TH E SALE PROCEEDS OF DEPB AND/OR THE VALUE OF DEPB (EXCEPT PROFIT ON SALE OF DEPB) RECEIVED ON EXPORT ITA NO.2896/AH D/2006. M/S.M/S. ALPANIL INDUSTRIES ASST.YEAR -2003-04 - 4 - OF FINISHED GOODS OF THE INDUSTRIAL UNDERTAKING IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OR NOT. THE LEARNED ASSESSING OFFICER AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HELD THAT THE A SSESSEE IS NOT ENTITLED FOR DEDUCTION IN RESPECT OF ENTIRE PROFITS OF DEPB UNDER SECTION 80IB OF THE ACT AS DEPB IS NOT DERIVED FROM THE INDUSTRIAL UNDE RTAKING. WE FIND THAT BY UNDERTAKING THE ACTIVITY OF SALE OF DEPB THE ASSES SEE UNDERTOOK A STEP REMOVED FROM THE ACTUAL CONDUCT OF THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. THE ASSESSEES BUSINESS IN THE INDUSTRIAL UNDERTAKI NG IS TO MANUFACTURE AND SALE SYNTHETIC ORGANIC PIGMENT DYES AND CHEMICALS A ND ITS CANNOT BE HELD THAT THE SALE OF DEBP WAS THE ACTIVITY OF THE SAID INDUS TRIAL UNDERTAKINGS BUSINESS. THEREFORE, IN OUR CONSIDERED OPINION, PRO FIT ON SALE OF DEPB IS CLEARLY NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB AS THE PROFIT IS DERIVED FROM AN ACTIVITY WHICH IS STEP REMOVED FROM THE ACT UAL CONDUCT OF THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE POINTED OUT FROM THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS VS. INCOME-TAX OFFICER, [2009] 318 ITR (AT) 87 (MUMBAI)[SB] THAT THE VALUE OF DEPB RECEIVED FOR EXPORT IS A DISTINCT AND DIFFERENT INCOME FROM THE INCOME DERIVED BY WAY OF PROFIT ON SALE OF DEPB. THE ASSESSEE CONTENDED THAT TO EXPORT THE FINISHED GOODS OF INDUSTRIAL UNDERTAKING IS AN ACTIVITY DERI VED TOWARDS THE CONDUCT OF THE BUSINESS OF THE INDUSTRIAL UNDERTAKING AND THE ASSESSEE DURING THE CONDUCT OF THIS BUSINESS ONLY RECEIVED THE DEPB AND NO STEP REMOVED FROM THE ACTUAL CONDUCT OF THE BUSINESS OF THE INDUSTRIAL UNDERTAKI NG WAS TAKEN BY THE ASSESSEE IN RESPECT OF RECEIPT OF PRINCIPAL VALUE O F DEPB. THEREFORE, THE SAID VALUE OF DEPB SHOULD BE TAKEN AS DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THE ASSESSEE SHOULD BE ELIGIBLE FOR DEDUCTION U NDER SECTION 80IB WITH RESPECT OF THE SAME. HOWEVER, WE FIND THAT THE ISSU E OF DEPB RECEIVED ON EXPORT IS CONCLUDED BY THE SUPREME COURT IN THE CAS E OF LIBERTY INDIA VS. CIT [2009] 317 ITR 218 (SC) AGAINST THE ASSESSEE W HEREIN IT WAS HELD THAT THE RECEIPT OF DEPB IS IN THE NATURE OF EXPORT INCE NTIVE AND CANNOT BE HELD AS ITA NO.2896/AH D/2006. M/S.M/S. ALPANIL INDUSTRIES ASST.YEAR -2003-04 - 5 - DERIVED FROM INDUSTRIAL UNDERTAKING. WE THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISION, DECIDE THIS PART OF THE ISSUE ALSO AGAINST THE ASSESSEE. THUS, THE ABOVE GROUNDS OF APPEAL OF THE ASSESSEE ARE DIS MISSED. 8. THE GROUND NO.3 AND 4 READS AS UNDER:- 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN CALCULATING THE DEDUCTION UNDER SE CTION 80IB FIRST AND THEN CALCULATING THE DEDUCTION UNDER SECTION 80HHC AFTER EXCLUDING DEDUCTION CLAIMED UNDER SECTION 80IB FROM THE GROSS TOTAL INCOME OF THE APPELLANT. BOTH THESE DEDUCTIONS OUGHT TO HAVE B EEN GRANTED ON THE SAME AMOUNT OF GROSS TOTAL INCOME. 4. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN NOT PROPERLY APPRECIATING AND CONSIDERING VARIOUS SU BMISSIONS, EVIDENCES AND SUPPORTING PLACED ON RECORD DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NOT PROPERLY APPRECIATIN G VARIOUS FACTS AND LAW IN ITS PROPER PERSPECTIVE. 9. AT THE TIME OF THE HEARING, THE LEARNED AUTHORIS ED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED AG AINST THE ASSESSEE BY THE DECISION OF THE DELHI SPECIAL BENCH IN THE CASE OF ASSTT. COMMISSIONER OF INCOME TAX VS. HINDUSTAN MINT & AGRO PRODUCTS (P). LTD. [2009] 119 ITD 107 (DELHI) (SB), WHEREIN IT WAS HELD DEDUCTION TO BE ALLOWED UNDER ANY OTHER PROVISION OF CHAPTER-VI-A WITH THE HEADING C ,(WHICH INCLUDES SECTION 80H, 80HHC ETC., ) IS TO BE REDUCED BY AN AMOUNT OF DEDUCTION ALLOWED UNDER SECTION 80IA/80IB. THEREFORE, THIS GROUND OF APPEA L OF THE ASSESSEE IS DISMISSED. 10. GROUND NO.5 OF THE APPEAL READS AS UNDER:- 5. LEVY OF INTEREST UNDER SECTION 234A/B/C OF THE A CT IS NOT JUSTIFIED. 11. AT THE TIME OF THE HEARING, NO ARGUMENTS WERE A DVANCED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE. ACCORDINGLY, WE HOLD THAT CHARGING OF INTEREST IS CONSEQUENTIAL AND DISP OSE OF THIS GROUND OF APPEAL OF THE ASSESSEE. ITA NO.2896/AH D/2006. M/S.M/S. ALPANIL INDUSTRIES ASST.YEAR -2003-04 - 6 - 12. GROUND NO.6 OF THE APPEAL READS AS UNDER:- 6. INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IS NOT JUSTIFIED. 13. THE ABOVE GROUND OF APPEAL OF THE ASSESSEE IS P REMATURE AND ACCORDINGLY THE SAME IS DISMISSED. 14 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30/11/2009. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 30/11/2009 PREPARED AND COMPARED BY : PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XII, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD