M/s. Gokul Refoils & Solvent Ltd., Dist.Patan V. The Income tax Officer,Ward-1, Patan

ITA 2990/AHD/2008

• Counselvise Citation: 299020514 RSA 2008
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 21-12-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 22-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.2990 & 3234/AHD/2008 ASSESSMENT YEAR:2002-03 M/S GOKUL REFOILS & SOLVENT LTD., SUJANPURPATIA, AT & POST: SIDHPUR, DIST. PATAN PAN NO.AACG8316N ACIT, PATAN, CIRCLE, PATAN / V/S . / V/S . INCOME TAX OFFICER, WARD-1, PATAN, DIST. PATAN GOKUL REFOILS & SOLVENT LTD. SUJANPUR PATIYA, SIDHPUR / APPELLANT .. / RESPONDENT / ASSESSEE BY: SHRI S.N. SOPARKAR, SR-AR / BY REVENUE SHRI S.S. PARIDA, CIT-DR ! / DATE OF HEARING 21-12-2011 '#$% ! / DATE OF PRONOUNCEMENT 30-12-2011 &'( &'( &'( &'( / / / / ORDER PER B.P. JAIN, ACCOUNTANT MEMBER:- THESE CROSS-APPEALS OF THE ASSESSEE AND THE REVENUE ARISE FROM THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-G ANDHINAGAR DATED 06- 06-2008 FOR THE ASSESSMENT YEAR 2002-03. THE ASSESS EE AND THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- ITA NO.2990/AHD/2008 (BY ASSESSEE) 1.THE LD. C.I.T(A) ERRED IN LAW AND ON FACTS IN UP HOLDING THE ASSESSMENT REOPENED U/S.147 OF THE I.T. ACT. ITA NO.2990 & 3234/AHD/2008 A.Y. 2002-03 M/S GOKUL REFOILS & SOLVENT LTD. V. ITO WD-1 PTN PAGE 2 2. THE LD. C.I.T.(A) ERRED IN LAW AND ON FACTS IN C ONFIRMING THE WITHDRAWAL OF REBATE ALLOWED U/S.80IA AT RS46,57,63 1/- IN RESPECT OF GROSS AMOUNT OF OTHER INCOME OF RS.1,55,25,437/- 3. THE LD. C.I.T.(A) ERRED IN LAW AND ON FACTS IN C ONFIRMING WITHDRAWAL OF REBATE U/S. 80IA IN RESPECT OF FOLLOWING GROSS AMOU NT INCLUDED UNDER THE HEAD OTHER INCOME. 1. INSURANCE CLAIM RECEIPTS RS.10,03,568 2. VATAV AKASAR RS.23,90,138 3. BANK CHARGES RS. 37,087 4. INSURANCE CHARGES RECEIVED RS. 6,30,306 5. PACKING CHARGES RECEIVED RS. 1,23,329 RS.41,84,428 4. THE LD. C.IU.T.(A) ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE MANUFACTURING PROFIT AT RS.7,85,27,203/- ARRIVED AT AFTER ADJUSTING TRADING BUSINESS LOSS OF RS.2,62,92,620/-. 6. THE LD. C.I.T.(A) ERRED IN LAW AND ON FACTS IN A DOPTING RS.57,68,968/- AS INTEREST PAID TO BANK INSTEAD OF RS.87,14,682/-. ITA NO.3224/AHD/2008 (BY REVENUE) (1) THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND O N FACTS IN REDUCING THE DISALLOWANCE OF DEDUCTION U/S.80IA OF RS.46,57, 631/- TO RS.29,26,940/-. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(APPEALS) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. FIRST WE TAKE UP THE ASSESSEES APPEAL IN ITA NO.29 90/AHD/2008. 2. MR. S.N.SOPARKAR, SR-ADVOCATE DID NOT PRESS GROU ND NO.1 AND 4 AND THEREFORE THE SAME ARE DISMISSED AS NOT PRESSED. 3. AS REGARDS TO GROUND NO.2 AND 3. THE FACTS IN BR IEF ARE THAT THE ASSESSEE HAS CLAIMED EXCESS DEDUCTION OF RS.46,57,6 31/- INCLUDING RECEIPT FROM INSURANCE CLAIM, INTEREST INCOME, VATAV KASAR, BANK CHARGES, INSURANCE CHARGES AND PACKING CHARGES IN RESPECT OF GROSS AMO UNT OF OTHER INCOME AMOUNTING TO RS.1,55,25,437/- IN THE PROFIT AND GAI NS DERIVED FROM THE INDUSTRIAL UNDERTAKING. THESE CLAIMS OF THE ASSESSE E WERE MADE IN THE COMPUTATION OF INCOME IN THE RE-ASSESSMENT PROCEEDI NGS AND SAID CLAIMS ITA NO.2990 & 3234/AHD/2008 A.Y. 2002-03 M/S GOKUL REFOILS & SOLVENT LTD. V. ITO WD-1 PTN PAGE 3 WERE NOT ALLOWED BY THE ASSESSING OFFICER. LD CIT(A ) VIDE PARA-3.4.1 OF HIS ORDER OBSERVED THAT SUCH CLAIMS CANNOT BE RAISED DU RING THE RE-ASSESSMENT PROCEEDINGS SINCE THE SAME IS NOT BASED ON FILING O F THE REVISED RETURN NOR IT WAS RELATED TO THE INFORMATION ALREADY AVAILABLE ON RECORD. THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE LD. CIT(A) CONFIRMING THE ACTION OF AO FOR THE REASON THAT THERE IS NO LEGAL BASIS FOR ENTERTAININ G SUCH CLAIM BECAUSE IT IS NOT BORNE OUT ON THE MATERIAL ON RECORD AND HAS ONLY BE EN RAISED ON THE CONSEQUENT REOPENING OF THE ASSESSMENT VIDE PARA-3. 4.1 OF HIS ORDER. 4. MR. S.N.SOPARKAR, LD. COUNSEL FOR THE ASSESSEE R ELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT. V. SPORTKING INDIA LTD. (2010) 324 ITR 283 (DEL) WHERE IT HAS BEEN HELD THAT ON AC COUNT OF LOSS OF GOODS WHICH WERE DESTROYED IN FIRE, ASSESSEE RECEIVED INS URANCE CLAIM. SUCH CLAIM HAS A NEXUS TO BUSINESS AND IS DERIVED FROM MANUFAC TURING ACTIVITY OF ASSESSEE. THEREFORE, THE ASSESSEE IS ENTITLED FOR D EDUCTION U/S.80-IA OF THE ACT. ON IDENTICAL FACTS THE CLAIM OF THE PRESENT AS SESSEE WITH REGARD TO INSURANCE CLAIM RECEIPT AMOUNTING TO RS.10,03,568/- BE ALLOWED. MR. SOPARKAR ALSO RELIED UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. METALMAN AUTO P. LTD. (2011) 336 ITR 434 (P&H) WHERE IT HAS BEEN HELD THAT MISCELLANEOUS RECEIPTS FROM REBA TE, DISCOUNT AND BALANCES WRITTEN OFF WERE INCIDENTAL TO THE PROFITS AND GAIN S DERIVED FROM ELIGIBLE BUSINESS U/S.80-IB OF THE ACT. THEREFORE, THEY WERE ENTITLED TO SPECIAL DEDUCTION U/S 80-IB OF THE ACT. SIMILARLY, THE PRES ENT ASSESSEE IS ALSO ENTITLED TO DEDUCTION U/S 80-IA FOR VATAV KASAR (DISCOUNT) A MOUNTING TO RS.23,90,138/-. MR. SOPARKAR FURTHER RELIED UPON THE DECISION OF HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT V. HARJIVANDAS JUTHABHAI ZAVERI AND OTHER (2002) 258 ITR 785 (GUJ), WHERE IT HAS BEEN HELD THAT AMOU NT RECEIVED FROM JOB WORK, EMPTY SODA ASH BARDANA, EMPTY BARRELS AND PLA STIC WASTE QUALIFY FOR DEDUCTION U/S. 80IA OF THE ACT. ON IDENTICAL FACTS IN THE PRESENT CASE PACKING CHARGES RECEIVED AMOUNTING TO RS.1,23,329/- BE ALLO WED A DEDUCTION U/S 80- IA OF THE ACT. ON THE OTHER HAND, LD. CIT-DR ARGUED THAT ALL THESE CLAIMS WERE ITA NO.2990 & 3234/AHD/2008 A.Y. 2002-03 M/S GOKUL REFOILS & SOLVENT LTD. V. ITO WD-1 PTN PAGE 4 NOT AGITATED IN THE ORIGINAL RETURN. THE ASSESSEE C ANNOT BE ALLOWED TO MAKE FRESH CLAIMS IN THE RE-ASSESSMENT PROCEEDINGS AND S UPPORTED THE ORDER OF LD. CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS ON RECORD. AT THE OUTSET, WE MAY CLARIFY THAT THE MATTER WHICH IS NOT AGITATED IN THE ORIGINAL ASSESSMENT PROCEEDINGS CANNOT BE PERMITTED TO BE AG ITATED IN THE RE- ASSESSMENT PROCEEDINGS. THE RE-ASSESSMENT PROCEEDIN GS U/S.147 OF THE INCOME-TAX ACT, 1961 ARE FOR THE BENEFIT OF THE REV ENUE AND NOT FOR THE BENEFIT OF ASSESSEE. THE ASSESSEE CANNOT BE PERMITTED TO CO NVERT THE RE-ASSESSMENT PROCEEDINGS INTO AN APPEAL FOR REVISION AND SEEK TH E RELIEF IN RESPECT OF ITEMS WHICH HAVE NOT BEEN CLAIMED IN THE ORIGINAL ASSESSM ENT PROCEEDINGS. OUR VIEWS FIND SUPPORT FROM THE JUDGMENT OF HONBLE SUP REME COURT OF INDIA IN THE CASE OF CIT V. SUN ENGINEERING WORKS P. LTD. (1992) AS REPORTED IN 198 ITR 297 (SC). 6. IN THE PRESENT CASE, THE ASSESSEE HAD MADE THE C LAIMS IN THE RETURN FILED IN RESPONSE TO NOTICE U/S.148 OF THE ACT WHIC H WAS NOT CLAIMED IN THE ORIGINAL RETURN. THEREFORE, IN THE FACTS AND CIRCUM STANCES OF THE PRESENT CASE, THE ASSESSEE CANNOT BE ALLOWED TO RAISE THE VARIOUS CLAIMS IN THE RE- ASSESSMENT PROCEEDINGS. THEREFORE, WE FIND NO INFIR MITY IN THE ORDER OF LD. CIT(A). THUS, GROUND NO. 2 & 3 OF THE ASSESSEES AP PEAL ARE DISMISSED. 7. NOW, WE TAKE UP GROUND NO.6 OF THE ASSESSEE AND THE GROUNDS IN REVENUES APPEAL TOGETHER SINCE ISSUES ARE INTER-RE LATED. 8. THE BRIEF FACTS ARE THAT THE ASSESSEE HAS CLAIME D THE EXCLUSION OF THE NET INTEREST INCOME FOR THE PURPOSE OF DEDUCTION U/ S.80IA OF THE ACT WHICH WAS NOT ALLOWED BY THE ASSESSING OFFICER. LD. CIT(A) VI DE PARA-3.4.2 AND 3.4.3 HAS OBSERVED AS UNDER:- ITA NO.2990 & 3234/AHD/2008 A.Y. 2002-03 M/S GOKUL REFOILS & SOLVENT LTD. V. ITO WD-1 PTN PAGE 5 3.4.2 COMING TO THE APPELLANTS ATTEMPT TO WORK OU T THE NET INTEREST RECEIPTS ASSOCIATED WITH THE MANUFACTURING ACTIVITY /TRADING ACTIVITY BY TAKING IT AS PERCENTAGE OF THE TURNOVER IN MY VIEW, THE COMPUTATION DOES NOT HAVE MUCH RELEVANCE FROM THE POINT OF VIEW OF S ECTION 80IA. THE ISSUE IS THAT THE PENALTY PROCEEDINGS HAS RECEIVED INTEREST INCOME OF RS.1,13,41,009/- WHICH IS NOT DERIVED FROM THE MANU FACTURING ACTIVITY. THERE IS NO SCOPE OF FURTHER EXTRACTING THE ELEMENT OF PROFIT OUT OF THIS INTEREST RECEIPT BECAUSE OF THE EXPENSES STAND ALRE ADY DEBITED TO THE PROFIT & LOSS ACCOUNT AND DULY ACCOUNTED FOR. HOWEV ER, AS FAR AS THE CONCEPT OF NET INTEREST INCOME IS CONCERNED, THE SA ME HAS SOME JUSTIFICATION. IT IS SEEN THAT APPELLANT HAS SECURE D LOAN FROM THE BANKS WHILE IT HAS RS.3.64 CR. OF UNSECURED LOANS. IT IS NEITHER THE CLAIM OF THE APPELLANT THAT IT HAS OBTAINED THE UNSECURED LOANS TO PREPARE FDRS OF THE BANKS FROM WHICH IT IS GETTING INTEREST. AT THE MOST THE INTEREST PAID TO BANK WHICH IS STYLED AS BANK CHARGES CAN BE TREATED AS AN EXPENSES TO EARN THE INTEREST INCOME. THIS AMOUNT I S RS.57,68,968/- 3.4.3 THEREFORE, TO SUM UP, WHILE THE ENTIRE INCOME UNDER THE HEAD OTHER INCOME SHALL BE EXCLUDED FOR THE PURPOSE OF DEDUCTION U/ S.80IA, BUT THE INTEREST INCOME TO BE EXCLUDED SHALL BE RES TRICTED TO ITS NET AMOUNT OF RS.55,72,041/- I.E. RS.113,41,009/- RS.57 ,68,96. HENCE THE TOTAL AMOUNT ON WHICH THE DEDUCTION U/S.80IA WILL B E WITHDRAWN SHALL BE RS.97,56,469/-. THE CONSEQUENT REDUCTION IN DEDUCTI ON SHALL BE 30% OF RS.97,56,469/- I.E. RS.29,26,940/-. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE LD. CIT(A) HAS MENTIONED IN HIS ORDER THAT ASSE SSEE IS HAVING SECURED LOANS FROM BANKS WHILE IT HAS RS.3.64 CRORES OF UNS ECURED LOAN. THERE IS NOTHING BROUGHT ON RECORD WHETHER INTEREST PAID TO THE BANK AND WHICH IS STYLED AS BANK CHARGES HAS BEEN PAID TO EARN INTERE ST INCOME. THIS ASPECT HAS NOT BEEN EXAMINED BY THE LD. CIT(A) AND THERE I S NO RECORD MADE AVAILABLE BY THE LD. AR EVEN BEFORE US IN THIS RESP ECT. THEREFORE, WE DO NOT CONCUR WITH THE VIEWS OF LD. CIT(A) THAT INTEREST P AID TO THE BANK FOR EARNING INTEREST INCOME HAS TO BE NETTED BUT THIS ASPECT TH AT HOW MUCH INTEREST HAS BEEN PAID TO EARN THE INTEREST INCOME HAS TO BE EXA MINED FROM THE RECORD, WHICH HAS NOT BEEN DONE BY LD CIT(A). THEREFORE, IT WILL BE IN THE INTEREST OF JUSTICE, IF THE MATTER IS RESTORED TO THE FILE OF A SSESSING OFFICER WHO WILL EXAMINE THE ISSUE WHETHER INTEREST PAID TO THE BANK STYLED AS BANK CHARGES IS ITA NO.2990 & 3234/AHD/2008 A.Y. 2002-03 M/S GOKUL REFOILS & SOLVENT LTD. V. ITO WD-1 PTN PAGE 6 AN EXPENSE TO EARN THE INTEREST INCOME. THE AMOUNT REFERRED BY LD. CIT(A) AS THE INTEREST PAYMENT IS AT RS.57,68,968/- AT PAGE-6 OF HIS ORDER AND IT IS RS.87,14,682/- AT PAGE-4 OF THE ORDER. THE ASSESSIN G OFFICER IS REQUIRED TO EXAMINE THE SAME FROM THE RECORDS AND DECIDE THE IS SUE ACCORDINGLY. THE WHOLE MATTER IS RESTORED TO THE FILE OF ASSESSING O FFICER, WHO WILL DECIDE THE ISSUE BY AFFORDING OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. THUS GROUND NO.6 OF ASSESSEE AND ALL THE GROUND OF REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, APPEAL OF ASSESSEE IN ITA NO.2990/AHD/2008 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THAT OF REVENU ES APPEAL IN ITA NO.3234/AHD/2008 IS ALLOWED FOR STATISTICAL PURPOSES. ) &'( '#$% *'+, / 12 /2011 # ! 0 1 2 3 THIS ORDER PRONOUNCED IN OPEN COURT ON /12/ 2011 . SD/- SD/-DDDD ( BHAVNESH SAINI ) ( B.P. JAIN ) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) *'+,- 30/12/2011 5'' 3 DKP* &'( &'( &'( &'( 6 6 6 6 76$ 76$ 76$ 76$ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ++ & &: / CONCERNED CIT 4. & &:- / CIT (A) 5. 6=2 , & %, 5'' / DR, ITAT, AHMEDABAD 6. 2@ A) / GUARD FILE. BY ORDER/ &'( , /TRUE COPY/ B/5 + & %, 5'' 3