The DCIT, Circle-1, Surat V. Aakash Plastopack Pvt. Ltd., Surat

ITA 2953/AHD/2009

• Counselvise Citation: 295320514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-12-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 30-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.2953/AHD/2009: A. Y.: 2004-05 THE D. C. I.T., CIRCLE-1, ROOM NO.108, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS M/S. AKASH PLASTOPACK PVT. LTD., 402, MERIDIAN TOWER, NEAR RAJKUMAR CINEMA, UDHNA DARWAJA, SURAT PA NO. AABCA 9803 D (APPELLANT) (RESPONDENT) APPELLANT BY SHRI VINOD TANWANI, SR. DR RESPONDENT BY NONE (WRITTEN SUBMISSION) DATE OF HEARING: 21-12-2011 DATE OF PRONOUNCEMENT: 27-03-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A)-I, SUR AT DATED 26-08-2009 FOR ASSESSMENT YEAR 2004-05 IN APPEAL NO.CAS-I/73/0 9-10, ON THE FOLLOWING GROUND: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED BY THE AO OF RS.15,68,714/- ON ACCOUNT OF FURNISHING OF INACC URATE PARTICULARS OF INCOME IN RESPECT OF GP AS COMPARED TO EARLIER YEARS. 2. THE FACTS IN BRIEF, AS EMERGED FROM THE ORDER OF THE LEARNED CIT(A) ARE THAT IN THE PENALTY ORDER THE AO STATED THAT TH E ASSESSMENT WAS COMPLETED U/S 143 (3) OF THE IT ACT ON 03-0-10-2006 BY REDUCING DEDUCTION U/S 80 IB OF THE IT ACT IN RESPECT OF THE FOLLOWING AMOUNTS ITA NO.2953/AHD/2009 (AY 2004-05): DC1T, CIR-1, SUR AT VS M/S. AKASH PLASTOPACK PVT. LTD. 2 WHICH HAVE BEEN CONFIRMED BY THE LEARNED CIT(A) AND IN RESPECT OF WHICH PENALTY U/S 271 (1) (C) OF THE IT ACT WAS INI TIATED: BANK INTEREST RS.2,05,248 EXPORT INCENTIVE RS.38,78,979 SUNDRY BALANCE WRITTEN OFF RS.2,88,569/- IN THE PENALTY ORDER THE AO HAS STATED THAT THE ADD ITION WAS MADE BY REDUCING THE DEDUCTION U/S 80 IB OF THE IT ACT, BY CONSIDERING THE BANK INTEREST OF RS.2,05,248/- RECEIVED ON DEPOSITS AS I NCOME FROM OTHER SOURCES, BY TREATING RS.38,78,979/- ON ACCOUNT OF S ELF-UTILIZATION OF DEPB INCENTIVE AS ALSO TRANSFER OF DEPB LICENCE AS INCOME FROM OTHER SOURCES AND RS.2,88,569/- ON ACCOUNT OF SUNDRY CRED ITORS WRITTEN OFF AS INCOME FROM OTHER SOURCES. THE ASSESSEE CLAIMED DEP B AS INCOME ELIGIBLE FOR DEDUCTION U/S 80 IB OF THE IT ACT IN V IEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF INDIA GEL ATIN & CHEMICALS LTD., 225 ITR 284 WHEREIN THE HONBLE HIGH COURT HE LD THAT THE DUTY DRAWBACK SCHEME WAS INTENDED TO REDUCE THE COST OF PRODUCTION AND HENCE, DERIVED FROM INDUSTRIAL UNDERTAKING AND ACCO RDINGLY LEVIED THE PENALTY. 2.1 WITH RESPECT TO THE BANK INTEREST AND NETTING O F INTEREST AMOUNTING TO RS.2,05,248/-, THE ASSESSEE RELIED ON THE DECISI ON OF THE ITAT, SPECIAL BENCH, AHMEDABAD IN THE CASE OF LALSON ENTE RPRISE VS DCIT 82 TTJ (DEL) (SB) 1048. THE AO ON THE OTHER HAND RELIE D ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PANDIAN CH EMICALS, 262 ITR 278 TO SAY THAT THESE ARE NOT INCOME DERIVED FROM I NDUSTRIAL UNDERTAKING BUT ARE INCOME FROM OTHER SOURCES. THE ASSESSEE FUR THER RELIED ON THE DECISION OF ITAT AHMEDABAD BENCH IN ASSESSEES OWN CASE FOR AY 201- 02, 2002-03 AND 2003-04 WHEREIN THE TRIBUNAL HAS AP PLIED THE DECISION ITA NO.2953/AHD/2009 (AY 2004-05): DC1T, CIR-1, SUR AT VS M/S. AKASH PLASTOPACK PVT. LTD. 3 OF LALSON ENTERPRISE (SUPRA) AND ALLOWED THE NETTIN G OF INTEREST. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION OF TH E ASSESSEE AND LEVIED THE PENALTY. 2.2 WITH RESPECT TO SUNDRY CREDITORS WRITTEN OFF O F RS.2,88,569/-, THE CREDITORS BEING VERY OLD AND IN THE ABSENCE OF RELE VANT MATERIAL BROUGHT ON RECORD THE AO STATED THAT IT WAS NOT VERIFIABLE WHETHER THEY PERTAIN TO INDUSTRIAL UNDERTAKING OR TO ANY OTHER EXPENSES NOT CONCERNED WITH THE INDUSTRIAL UNDERTAKING AND HENCE PENALTY WAS LEVIED . 2.3 WITH RESPECT OF EXPORT INCENTIVE ON DEPB OF RS. 38,78,979/- THE AO STATED THAT THIS IS NOT SIMILAR TO DUTY DRAW BAC K AND IT HAS BEEN EQUATED WITH THE DUTY DRAWBACK AND RELYING UPON THE DECISION IN THE CASE OF PENDIAN CHEMICALS (SUPRA) HELD THIS INCOME NOT TO BE DERIVED FROM THE INDUSTRIAL UNDERTAKING. THE ASSESSEE REITE RATED HIS SUBMISSION ADVANCED DURING THE ASSESSMENT PROCEEDINGS AS WELL AS IN THE APPELLATE PROCEEDINGS OF QUANTUM APPEAL. THE AO DID NOT ACCEP T THE EXPLANATION OF THE ASSESSEE AND LEVIED THE MINIMUM PENALTY HOLD ING THAT THE ASSESSEE HAS KNOWINGLY AND INTENTIONALLY CLAIMED HI GHER DEDUCTION U/S 80 IB OF THE IT ACT AND LEVIED THE PENALTY ACCORDIN GLY. 3. WHILE CARRYING ON THE MATTER IN APPEAL, IT WAS S UBMITTED BEFORE THE LEARNED CIT(A) THAT IN THE AY 2001-02 PENALTY ON SI MILAR ISSUE INITIATED BY THE AO WAS DROPPED BY HIMSELF AND NO PENALTY PR OCEEDING WAS INITIATED IN AYS 2002-03, 2003-04 AND 2005-06 ON SI MILAR ISSUE. THE ASSESSEE FURTHER ARGUED THAT DEPB INCENTIVE WAS CLA IMED IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF INDIA GELATIN & CHEMICALS LTD. (SUPRA) AS MENTIONED ABOVE AND HENCE THE CLAIM DOES NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING O F INACCURATE PARTICULARS OF INCOME. SIMILARLY, THE ASSESSEE SUBM ITTED THAT NETTING OF ITA NO.2953/AHD/2009 (AY 2004-05): DC1T, CIR-1, SUR AT VS M/S. AKASH PLASTOPACK PVT. LTD. 4 BANK INTEREST WAS CLAIMED IN VIEW OF THE DECISION O F ITAT IN THE CASE OF LALSON ENTERPRISES AS MENTIONED HEREINABOVE. 3. THE LEARNED CIT(A) CONSIDERING THE FACTS OF THE CASE, SUBMISSIONS MADE BY THE ASSESSEE AND THE OBSERVATION OF THE AO, IN RESPECT OF BANK INTEREST HELD THE ASSESSEES CLAIM TO BE CORRECT T HAT THE NETTING WAS A DEBATABLE ISSUE IN VIEW OF THE DECISION OF THE ITAT IN THE CASE OF LALSONS ENTERPRISE (SUPRA) EVEN THOUGH TREATING IT AS INCOME FROM OTHER SOURCES IN VIEW OF THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF PANDIAN CHEMICALS (SUPRA) AND THAT NETTING BEING ALLOWED BY ITAT , COULD HAVE CREATED DOUBT IN THE ASSESSEE AND HENCE NO PENALTY COULD BE LEVIED ON THIS ISSUE. IN RESPECT OF EXPORT INCENTIVE I.E. DEPB, THE LEARNED CIT(A) IN VIEW OF THE DECISION OF THE H ONBLE GUJARAT HIGH COURT IN THE CASE OF INDIA GELATIN & CHEMICALS (SUP RA) HELD THIS ISSUE ALSO TO BE A DEBATABLE ONE AND THAT PENALTY COULD N OT BE LEVIED. REGARDING SUNDRY BALANCES WRITTEN OFF, THERE BEING NO DEFINITE FINDING OF THE AO, THE LEARNED CIT(A) HELD THAT THE ASSESSMENT HAS NOT CONCEALED THE INCOME OF FURNISHED ANY INACCURATE PARTICULARS OF INCOME AND DELETED THE PENALTY. 4. BEING AGGRIEVED AND DISSATISFIED WITH THE ABOVE FINDINGS OF THE LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS ALONG WITH THE CITATIONS REFERRED TO THEREIN, PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND CONSIDERED THE MATERIAL ON RECORD. BEFORE US, THE L EARNED DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. ON THE OTHER H AND, THE LEARNED COUNSEL FOR THE ASSESSEE IN THE WRITTEN SUBMISSION BEFORE US REFERRING TO PB 26 TO 29 CONTENDED THAT THE ISSUE OF NETTING OFF OF INTEREST IS COVERED BY THE DECISION OF THE ITAT AHMEDABAD BENCH (SURAT CAMP) IN THE ITA NO.2953/AHD/2009 (AY 2004-05): DC1T, CIR-1, SUR AT VS M/S. AKASH PLASTOPACK PVT. LTD. 5 ASSESSEES OWN CASE FOR AY 2001-02 DATED 25-08-2008 IN ITA NO.1605/A/2004, BY HOLDING IN PARA 12 AND 13 OF THE SAID ORDER AS UNDER: 12. THE THIRD ISSUE IS INTEREST ON DEPOSIT OF RS.1 ,75,719/-. SUBMISSIONS OF THE LD. AR THAT THE CLAIM OF ASSESSE E IS ONLY NETTING BENEFIT. 13. AFTER HEARING BOTH THE SIDES, WE FIND SUBSTANCE IN THE SUBMISSIONS OF LD. AR. AO IS DIRECTED TO ALLOW THE BENEFIT OF NETTING IN ACCORDANCE WITH THE DECISION OF THE TRIB UNAL (SB) IN THE CASE OF M/S. LALSONS ENTERPRISES VS. DCIT 82 TT J 1048. IN VIEW OF THE ABOVE, WE FIND NO JUSTIFICATION TO I NTERFERE IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE PENALTY LEVIED B Y THE AO IN RESPECT OF THIS ADDITION. ACCORDINGLY, HEREBY CONFIRM HIS FIND INGS AND DISMISS THE GROUND OF APPEAL ON THIS ISSUE. 6. IN RESPECT TO THE OTHER TWO ISSUES VIZ CHARGING OF INTEREST ON DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80 IB OF THE IT ACT IN RESPECT OF EXPORT INCENTIVE I.E. DEPB AND SUNDRY CREDITORS WRI TTEN OFF, THE LEARNED DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW O N THE OTHER HAND, THE LEARNED AR IN THIS WRITTEN SUBMISSIONS, PLEADED BEF ORE US THAT BOTH THE ISSUES HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL VIDE ITS ORDER DATED 18-09-2009 IN ASSESSEES OWN CASE I N ITA NO.4111/AHD/2007 IN AY 2004-05 (PAPER BOOK PAGE 15 TO 25) AND THE ISSUE IN THE PRESENT CASE IS COVERED BY THE SAID OR DER OF THE TRIBUNAL AND FURTHER SUBMITTED THAT PENALTY ON THESE TWO ISS UES MAY BE DELETED AND THE APPEAL OF THE REVENUE MAY DISMISSED. THE RE LEVANT FINDINGS OF THE ABOVE ORDER OF THE TRIBUNAL IN PARA 13, 14 AND 19 ARE REPRODUCED AS UNDER: 13. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE A ND FIND THAT SELF UTILIZATION AS ALSO TRANSFER OF DEPB WHIC H IS INTENDED TO REDUCE THE COST OF PRODUCTION AND THE SAME BEING AN ITA NO.2953/AHD/2009 (AY 2004-05): DC1T, CIR-1, SUR AT VS M/S. AKASH PLASTOPACK PVT. LTD. 6 INTEGRAL PART OF THE PRICING OF GOODS IS PART OF TH E COST OF PRODUCTION OF THE INDUSTRIAL UNDERTAKING AND HENCE, IT IS DERIVED FROM THE INDUSTRIAL UNDERTAKING, ELIGIBLE F OR DEDUCTION U/S 80 J. THE DEPB SCHEME ARE ALSO AVAILABLE TO EXP ORT AS PER THE PROVISIONS OF INCOME TAX ACT PROVIDED IN EXPLAN ATION 3 TO SECTION 80 HHC OF THE ACT. THE SIMILAR ISSUE HAD CO ME UP BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SHAH ORIGINALS V/S ACIT REPORTED IN 19 SOT 568 WHEREIN I T HAS BEEN HELD THAT THE PROFIT DERIVED FROM THE BUSINESS IS E NTITLED TO DEDUCTION U/S 80HHC. THE HON. DELHI HIGH COURT IN T HE CASE OF CIT V/S ELTEC SGS P. LTD. REPORTED IN 300 ITR 6 (DEL) HAS HELD THAT THE EXPRESSION DERIVED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING USED IN SECTION 80 IB IS NE ITHER AS BROAD AS ATTRIBUTABLE TO NOR AS NARROW AS DERIVE D FROM BUT IS SOME WHEREIN BETWEEN AND WHEN THE SOURCE OF EXPO RT INCENTIVE (DUTY DRAWBACK) IS THE BUSINESS OF INDUST RIAL UNDERTAKING WHICH IS TO MANUFACTURE AND EXPORT GOOD S OUT OF RAW MATERIAL I.E. IMPORTED ON WHICH CUSTOM DUTY IS PAID, THE SAME IS ELIGIBLE FOR DEDUCTION U/S 80 IB. THEREFORE , WE RESPECTFULLY FOLLOWING THE LAW LAID DOWN BY T4HE HO N. DELHI HIGH COURT IN THE CASE OF CIT V/S ELTEK SGS P LTD.( SUPRA) WE ALLOW THE CLAIM OF THE ASSESSEE. 14. IN THE RESULT GROUND NO.1 (B) TAKEN BY THE ASSE SSEE IS ALLOWED. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AVAILABLE BEFORE US. WE FIND THAT THE ISSUE IN CONT ROVERSY IS COVERED BY THE DECISION OF DELHI BENCH OF THE TRIBU NAL IN THE CASE OF DCIT VS METRO TYRES LD. (2001) REPORTED IN 79 ITD 557) WHEREIN IT HAS BEEN HELD THAT TH4E AMOUNT OF CLAIM RECEIVED FROM TRANSPORTERS AND INSURANCE COMPANY WERE TRADIN G RECEIPTS OF THE INDUSTRIAL UNDERTAKING HAVING DIREC T NEXUS WITH THE ACTIVITY OF SUCH INDUSTRIAL UNDERTAKING AND ACC ORDINGLY FORMED PART OF INCOME DERIVED FROM SUCH INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF DEDUCTION U/S 80I. T HE LD. AR SUBMITTED THAT THE DISCOUNT AND VATAV KASAR WRITTEN OFF IN RESPECT OF THE GROSS EXPENDITURE DEBITED IS NOT ACT UALLY INCOME BUT IS SHORT PAYMENT OF EXPENSES ALREADY CLA IMED AND THUS, SHOULD NOT BE EXCLUDED FROM THE PROFITS AND G AINS OF THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80 IB. WE ALSO FIND THAT THIS ISSUE A LSO STANDS COVERED BY THE DECISION OF BANGALORE BENCH OF THE T RIBUNAL IN THE CASE OF WIPRO INFORMATION TECHNOLOGY LTD. V/S D EPUTY ITA NO.2953/AHD/2009 (AY 2004-05): DC1T, CIR-1, SUR AT VS M/S. AKASH PLASTOPACK PVT. LTD. 7 COMMISSIONER OF INCOME TAX REPORTED IN 88 TTJ (BANG ) 778, IN WHICH IT HAS BEEN HELD THAT THE MISCELLANEOUS IN COME WHICH IS IN THE NATURE OF TRADING RECEIPT LIKE DISC OUNT RECEIPT FROM THE SUPPLIER FOR EARLY PAYMENT AND AMOUNT RETU RN BACK IN RESPECT OF SUNDRY CREDITORS BALANCE SHOULD FORM PAR T OF PROFIT OF BUSINESS AND IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. RESPECTFULLY FOLLOWING THE ABOVE RULINGS, WE ALLOW GROU9ND NO.1(C) OF ASSESSEES APPEAL. THE LEARNED DR HAS NOT PRODUCED ANY MATERIAL BEFORE US TO CONTROVERT THE AFORESAID SUBMISSIONS OF THE AR AND THE DECISIO NS REFERRED TO THEREIN. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWI NG THE ABOVE ORDER OF THE TRIBUNAL, WE DISMISS THE APPEAL OF THE REVENUE ON THESE TWO ISSUES ALSO. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IN ALL THE ABOVE ISSUES ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF MARCH, 2012 SD/- SD/- (D.K.TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - 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 DY. REGISTRAR, ITAT, AHMEDABAD