Electronic Instrumentation & Control Private Limited, Ahmedabad V. The ACIT, Circle-4, Ahmedabad

ITA 3056/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6162 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 23-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PAMIL SHAH
• Keywords: Business income; Principle of natural justice
• Section: 143(3); 80IB; 194C; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ELECTRONIC INSTRUMENTATION & CONTROL PVT. LTD. 56, PANCHARATAN INDUSTRIAL ESTATE, SARKHEJ BAVLA ROAD, CHANGODAR, AHMEDABAD - 382213 PAN: AAACE4798G (APPELLANT) VS THE ITO, WARD - 4(1), AHMEDABAD (RESPONDENT) REVENUE BY : S H RI K. MADHUSUDAN , SR. D . R. ASSESSEE BY: S H RI PAMIL SHAH , A.R. DATE OF HEARING : 12 - 04 - 2 017 DATE OF PRONOUNCEMENT : 20 - 04 - 2 017 / ORDER P ER : AMA RJIT SINGH, ACCOUNTANT MEMBER : - THESE TWO ASSESSEE S APPEAL S FOR A.Y S. 2009 - 10 & 2010 - 11 , AR ISE FROM ORDER OF THE CIT(A) - VIII, AHMEDABAD DATED 15 - 10 - 2013 IN APPEAL NO S . CIT(A) - VIII/ITO / WD. 4(1)/13/11 - 12 & CIT(A) - VIII/ITO/WD. I T A NO S . 3055 & 3056 / A HD/20 13 A SSES SMENT YEAR 200 9 - 10 & 2010 - 11 I.T.A NO S . 3055 & 3056 /AHD/20 13 A.Y. 2009 - 10 & 2010 - 11 PAGE NO ELECTRONIC INSTRUMENTATION & CONTROL PV T. LTD. VS ITO 2 4(1)/69/12 - 13; RESPECTIVEL Y, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. AS THE FACTS IN THESE TWO APPEALS FOR ASSESSMENT YEAR 2009 - 10 & 2010 - 11 ARE SIMILAR, SO, WE TAKE ITA NO. 3055/AHD/2013 AS THE LEAD CASE AND DECIDE BOTH OF THEM ACCO RDINGLY. 3 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE ASSESSMENT ORDER PASSED BY LEARNED ASSESSING OFFICER IS WHOLLY UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND EQUITY. 2. THAT THERE IS NO CASE OF DISALLOWANCE O F RS. 7,62,000/ - OF DRAWING CHARGES AND RS. 3,12,200/ - OF PLC PROGRAMMING CHARGES ON ACCOUNT OF NON DEDUCTION OF TAX U/S. 194 - J. WHEREAS THE APPELLANT IS OF THE OPINION THAT THE PAYMENT IS COVERED U/S. 194 - C AND THEREFORE APPELLANT HAS NOT DEDUCTED TAX ON JOB WORK WHEREIN THRESHOLD LIMIT OF RS. 20,000 FOR EACH WORK DOES NOT EXCEED AND THE AGGREGATE AMOUNT OF SUCH SUMS CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR DOES NOT EXCEEDS RS. 50,000 THEREFORE THESE DISALLOWANCES DESERVE TO BE DELETED. 3. THAT, SECTION 40(A)(IA) IS APPLICABLE ONLY TO THE AMOUNTS OUTSTANDING I.E. 'PAYABLE' AS ON 31 ST MARCH,2009 AND THE AMOUNTS WHICH HAVE ALREADY BEEN 'PAID' DURING THE YEAR ARE OUT OF THE SCOPE OF SECTION 40(A)(IA) OF THE ACT. HENCE DISALL OWANCES MADE IN REFERENCE OF THE SAME SHOULD BE DELETED. 4. THE ID. A.O. HAS CONSIDERED SUPERVISION INCOME AMOUNTING TO RS. 6,68,727/ - AS INCOME FROM OTHER SOURCES WHILE COMPUTING PROFIT OF THE BUSINESS, FOR COMPUTING DEDUCTION U/S 80 - IB, BUT THIS INCOME IS WHOLLY RELATED WITH THE MANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE. THEREFORE SUPERVISION INCOME SHOULD BE ALLOWED AS INCOME FROM MANUFACTURING ACTIVITY. 4 . IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 1,43,82,600/ - WAS FILED ON 29 - 0 9 - 2009. THEREAFTER, THE CASE WAS I.T.A NO S . 3055 & 3056 /AHD/20 13 A.Y. 2009 - 10 & 2010 - 11 PAGE NO ELECTRONIC INSTRUMENTATION & CONTROL PV T. LTD. VS ITO 3 SELECTED UNDER SCRUTINY BY ISSUING NOTICE U/S. 143(2) OF THE ACT ON 07 - 02 - 2011. BRIEF FACTS OF THE CASE IS BEING DISCUSSED GROUND - WISE AS FOLLOWS. GROUND NOS. 02 & 03 5 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE A SSESSING OFFICER NOTICED THAT ASSESSEE HAD CLAIMED RS. 7,65,700/ - UNDER THE HEAD DRAWING CHARGES AND RS. 2,84,050/ - AS PLC PROGRAMMING WAGES. THE ASSESSING OFFICER FURTHER NOTICED THAT NO T AX WAS DEDUCTED WHILE MAKING THE PAYMENT OF DRAWING WAGES. THE AS SESSEE WAS SHOW CAUSED AS TO WHY THIS PAYMENT SHOULD NOT BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. THE ASSESSEE EXPLAINED THAT NATURE OF THIS PAYMENT IS A KIND OF JOB WORK AND PAYMENT FOR EACH WORK WAS BELOW THE THRESHOLD LIMIT OF RS. 20,000/ - PER WORK AND AGGREGATE AMOUNT OF SUCH SUMS CREDITED DURING THE FINANCIAL YEAR DID NOT EXCEED RS. 50,000/ - . THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND DISALLOWED THE CLAIM OF THE ASSESSEE BY TREATING THE DRAWING CHARGES AS TEC HNICAL SE RVICES RENDERED BY THE PERSONS COVERED UNDER SECTION 194 J OF THE ACT. 6 . AGGRIEVED AGAINST THE DECISION OF THE ASSESSING OFFICER , THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICE R BY OBSERVING AS UNDER: - 3.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MADE I.T.A NO S . 3055 & 3056 /AHD/20 13 A.Y. 2009 - 10 & 2010 - 11 PAGE NO ELECTRONIC INSTRUMENTATION & CONTROL PV T. LTD. VS ITO 4 THE ADDITION UNDER SECTION 40(A)(IA) AS THE APPELLANT DID NOT DEDUCT TAX ON DR AWING CHARGES AND THE PLC PROGRAMMING CHARGES PAID. IT WAS HELD BY THE AO THAT SINCE THESE SERVICES WERE IN THE NATURE OF TECHNICAL SERVICES AS IT REQUIRED TECHNICAL EXPERTISE THE APPELLANT SHOULD HAVE DEDUCTED TAX AS PER THE PROVISIONS OF SECTION 194J. TH E APPELLANT ON THE OTHER HAND HAS SUBMITTED THAT THE SERVICES ARE IN THE NATURE OF CONTRACT PAYMENTS AND WERE THEREFORE, COVERED UNDER SECTION 194C OF THE ACT AND ACCORDING TO THAT SECTION THE TAX WAS TO BE DEDUCTED ONLY IF THE PAYMENT TO ANY SINGLE CONTRA CT EXCEEDED RS.50,000. SINCE THE PAYMENT TO INDIVIDUAL CONTACTORS WERE LESS THAN RS.50,000 THE TAX WAS NOT DEDUCTED BY THE APPELLANT. AFTER CONSIDERING THE FACTS AND EXAMINING VARIOUS EVIDENCES GIVEN BY THE APPELLANT I AM OF THE OPINION THAT THE DRAWING C HARGES FOR WHICH THE APPELLANT HAS MADE PAYMENT TO SEVERAL PARTIES ARE IN THE NATURE OF TECHNICAL SERVICES. THE DETAILS OF DRAWING CHARGES SUBMITTED BY THE APPELLANT SHOW THAT THE PAYMENTS HAVE BEEN MADE FOR DRAWING OF POWER SUPPLY PROJECT WHICH HAVE BEEN CARRIED OUT BY THE APPELLANT DURING THE YEAR. MAKING A DRAWING IS A WORK OF TECHNICAL EXPERTISE AND CANNOT BE DONE MERELY BY A MACHINE WITHOUT ANY HUMAN INTERVENTION. IT REQUIRES HUMAN INTERVENTION OF TECHNICAL NATURE BY A PERSON HAVING EXPERTISE AND KNOWL EDGE ABOUT THE DRAWING PROCESS. THEREFORE, THE CLAIM OF THE APPELLANT THAT IT WAS A MERE CONTRACT WORK IS NOT ADMISSIBLE. THE AO HAD RIGHTLY HELD IT TO BE A TECHNICAL SERVICES AND ACCORDINGLY THE APPELLANT SHOULD HAVE DEDUCTED TAX AS PER THE PROVISIONS OF SECTION 194J. THE DISALLOWANCE MADE BY THE AO UNDER SECTION 40(A)(IA) IS ACCORDINGLY UPHELD. SIMILARLY THE DETAILS OF THE PLC PROGRAMMING CHARGES SUBMITTED BY THE APPELLANT SHOW THAT IT INVOLVED PAYMENT OF PROGRAMMING CHARGES FOR VARIOUS PROJECT PANELS AN D CONTROL BOXES ETC. THIS AGAIN IS A HIGHLY TECHNICAL WORK AND CANNOT BE DONE WITHOUT HUMAN INTERVENTION. THIS WORK ALSO REQUIRES ASSISTANCE OF A PERSON WHO HAS GOOD TECHNICAL KNOWLEDGE ABOUT THE SUBJECT AND TR \ E WORK BEING DONE. SINCE THIS IS ALSO A WORK OF TECHNICAL NATURE THE AO WAS JUSTIFIED THESE SERVICES AS TECHNICAL IN NATURE ACCORDINGLY HE HAS RIGHTLY HELD IT TO BE THE PAYMENTS COVERED UNDER SECTION 194J ON WHICH THE TAX SHOULD HAVE BEEN DEDUCTED. SINCE THE TAX WAS NOT DEDUCTED AS PER THE PROVISIONS OF THE ACT THE DISALLOWANCE MADE BY THE AO UNDER SECTION 40(A)(IA) WAS JUSTIFIED. I.T.A NO S . 3055 & 3056 /AHD/20 13 A.Y. 2009 - 10 & 2010 - 11 PAGE NO ELECTRONIC INSTRUMENTATION & CONTROL PV T. LTD. VS ITO 5 THE APPELLANT HAS ALSO RELIED ON CERTAIN CASE LAWS REGARDING THE DEDUCTION OF TAX AT SOURCE. I HAVE CAREFULLY PERUSED THE JUDGEMENTS MENTIONED BY THE APPELLANT. HOWEVER, IT IS NOTED THAT NONE OF THE JUDGEMENTS CITED BY THE APPELLANT ARE OF ANY HELP TO IT. THE JUDGEMENTS RELATES TO THE CASES WHERE THE TAX WAS DEDUCTED BUT WAS NOT DEDUCTED AS PER THE PRESCRIBED RATE. THERE WAS A SHORT DEDUCTION OF TAX BUT IN NONE OF THE CASES THE ISSUE OF NON - DEDUCTION OF TAX HAS BEEN EXAMINED. IN THE CASE OF THE APPELLANT THAT TAX HAS NOT BEEN DEDUCTED AT ALL. THE CLAIM OF THE APPELLANT THAT IT CONSIDERED THE PAYMENT AS UNDER SECTION 194J AND AFTER TAKING THE LIMIT OF RS. 50,000 IT DID NOT DED UCT THE TAX IS CLEARLY AN AFTERTHOUGHT. THERE IS NO CONTEMPORARY EVIDENCE TO PROVE THE CLAIM OF THE APPELLANT. THE APPELLANT HAS NOT DEDUCTED THE TAX AS PER THE PROVISION OF SECTION 194J AND THEREFORE, ALL THE JUDGEMENTS MENTIONED BY IT ARE RESPECTFULLY DI STINGUISHED. THE GROUND OF APPEAL IS ACCORDINGLY, DISMISSED. 7 . WE HAVE HEARD THE RIVAL CONTENTIONS. WE OBSERVED THAT THE LD. CIT(A) IS JUSTIFIED IN CONCLUDING THAT DRAWING IS A WORK OF TECHNICAL EXPERTISE AND CANNOT BE DONE MERELY BY A MACHINE WITHOU T ANY HUMAN INTERVENTION. IN VIEW OF THE TE CH NICAL NATURE OF WORK , THE PROVISION OF SECTION 194J ARE ATTRACTED IN THE CASE OF THE ASSESSEE. WE HAVE CONSIDERED THE CONTENTION OF THE ASSESSEE THAT THE C O - ORDINATE BENCH OF ITAT AHMEDABAD IN THE ITA NO. 148 1 /AHD/2013 IN THE CASE OF M/S. AMRUTA AUARY WORKS HELD THAT DISALLOWANCE TO BE RESTRICTED TO 30% OF THE DISALLOWANCE IN VIEW OF THE AMENDMENT BY FINANCE ACT 2014. THE RELEVANT PART OF THE DECISION OF THE CO - ORDINATE BENCH IS REPRODUCED AS UNDER: - 6. THE L D. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ASSESSEE DOES NOT WANT TO GO WITH ANY OTHER FACTUAL ARGUMENTS EXCEPT THAT BY AMENDMENT IN SECTION 40(A)(IA) BROUGHT IN BY FINANCE (NO.2) ACT, 2014, WHICH READS AS UNDER: - I.T.A NO S . 3055 & 3056 /AHD/20 13 A.Y. 2009 - 10 & 2010 - 11 PAGE NO ELECTRONIC INSTRUMENTATION & CONTROL PV T. LTD. VS ITO 6 14.4 ACCORDINGLY, SECTION 40(A)(IA) O F THE INCOME - TAX ACT HAS BEEN AMENDED TO PROVIDE THAT IN CASE OF NON - DEDUCTION OF TAX AT SOURCE OR NON - PAYMENT OF TAX SO DEDUCTED ON PAYMENTS MADE TO RESIDENTS AS SPECIFIED IN SECTION 40(A)(IA) OF THE INCOME - TAX ACT, THE DISALLOWANCE SHALL BE RESTRICTED TO 30% OF THE AMOUNT OF EXPENDITURE CLAIMED. 6.1 LD. COUNSEL FOR THE ASSESSEE THEN CONTENDS THAT THE AMENDMENT IS CLARIFICATORY IN NATURE INASMUCH AS IN CLAUSE 14.3 OF THE EXPLANATORY NOTES IN THIS BEHALF MENTIONED AS UNDER: - 14.3 AS MENTIONED ABOVE, IN CASE OF NON - DEDUCTION OF TAX AT SOURCE OR NON - PAYMENT OF TAX SO DEDUCTED FROM CERTAIN PAYMENTS MADE TO RESIDENTS, THE ENTIRE AMOUNT OF EXPENDITURE ON WHICH TAX WAS DEDUCTIBLE IS DISALLOWED UNDER SECTION 40(A)(IA) FOR THE PURPOSES OF COMPUTING INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION . THE DISALLOWANCE OF WHOLE OF THE AMOUNT OF EXPENDITURE CAUSES HARDSHIP, ESPECIALLY IN CASE OF PAYMENT MADE TO A RESIDENT IN WHOSE CASE THE WITHHOLDING OF TAX IS ONLY A MODE OF COLLECTION OF TAX AND DOES NOT RESULT INTO FINAL DISCHARGE OF TAX LIABILITY. 6.2 SINCE THE AMENDMENT HAS BEEN BROUGHT TO REMOVE THE HARDSHIP CAUSED TO THE ASSESSEE, THE AMENDMENT ASSUMES THE CHARACTER OF BEING CLARIFICATORY IN NATURE AND IS RETROSPECTIVELY APPLICABLE. RELIA NCE IS PLACED ON FIVE MEMBERS CONSTITUTION BENCH OF SUPREME COURT IN THE CASE OF CIT VS. VATIKA TOWNSHIP PRIVATE LIMITED, REPORTED IN (2014) 367 ITR 466 (SC), WHEREIN IT HAS BEEN OBSERVED THAT IN CASE THE AMENDMENT IS BROUGHT TO REMOVE THE HARDSHIP CAUSED TO THE ASSESSEE, THE SAME ASSUMES THE CHARACTER OF BEING CLARIFICATORY IN NATURE. 6.3 LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE AMENDMENT TO SECTION 40(A)(IA) BROUGHT IN BY FINANCE (NO.2) ACT, 2014 MAY BE HELD AS RETROSPECTIVELY APPLICABLE; IN VIEW THEREOF 30% OF THE AMOUNT ON WHICH TDS HAS NOT BEEN DEDUCTED MAY BE HELD AS DISALLOWABLE U/S 40(A)(IA). 7. LD. DEPARTMENTAL REPRESENTATIVE IS HEARD. 8. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. I FIND MERIT IN THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE. RESPECTFULLY FOLLOWING THE JUDGMENT OF VATIKA TOWNSHIP I.T.A NO S . 3055 & 3056 /AHD/20 13 A.Y. 2009 - 10 & 2010 - 11 PAGE NO ELECTRONIC INSTRUMENTATION & CONTROL PV T. LTD. VS ITO 7 PRIVATE LIMITED (SUPRA), THE AMENDMENT BROUGHT IN BY FINANCE (NO.2) ACT OF 2014 IN SECTION 40(A) (IA), THE SAME IS HELD TO BE RETROSPECTIVE IN NATURE; THEREFORE, THE AMOUNT TO BE DISALLOWED U/S 40(A)(IA) SHOULD BE RESTRICTED TO 30% OF THE IMPUGNED AMOUNT. THUS, THE ASSESSEE S APPEAL IS PARTLY ALLOWED. RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF ITAT AHMEDABAD, WE CONSIDERED THAT THE AMOUNT TO BE DISALLOWED U/S. 40(A)(IA) SHOULD BE RESTRICTED TO 30% OF THE IMPUGNED AMOUNT. GROUND NO. 3 8 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE H AS CLAIMED DEDUCTION U/S. 80IB O N INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER STATED THAT INTEREST INCOME, SUPERVISION INCOME AND OTHER MISC. INCOME EARNED BY THE ASSESSEE CANNOT BE CONSIDERED AS INCOME ATTRIBUTABLE TO MANUFACTURING ACTIVITIES, THERE FORE, HE REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80IB OF THE ACT. 9 . AGGRIEVED AGAINST THE DECISION OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSIN G OFFICER EXCLUDING THE CLAIM OF REIMBURSEMENT OF EXPENSES FROM THE SUPERVISION CHARGES. THE RELEVANT PART OF THE DECISION OF THE LD. CIT(A) IS REPRODUCED AS UNDER: 4.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80 IB ON THE INCOME SHOWN FROM OTHER SOURCES. THE INCOME INCLUDED INTEREST, I.T.A NO S . 3055 & 3056 /AHD/20 13 A.Y. 2009 - 10 & 2010 - 11 PAGE NO ELECTRONIC INSTRUMENTATION & CONTROL PV T. LTD. VS ITO 8 SUPERVISION INCOME AND OTHER INCOMES. THE APPELLANT HAD HIMSELF DISALLOWED THE INTEREST INCOME FROM THE CLAIM. HOWEVER, IT CLAIMED THE DEDUCTION UNDER SECTION 80 IB ON THE SUPERVISION AND OTHER MISCELLANEOUS INCOME. THE AO HELD THAT SINCE THIS INCOME WAS NOT ATTRIBUTABLE TO MANUFACTURING ACTIVITIES IT COULD NOT BE CONSIDERED AS E NTITLED FOR DEDUCTION. THE APPELLANT HAS SUBMITTED THAT THE INCOME WAS VERY MUCH PART OF THE BUSINESS ACTIVITY AND SHOULD NOT BE EXCLUDED. THE APPELLANT HAS SUBMITTED THAT THE CREDIT OF EXCISE DUTY, MODVAT, CESS ETC HAVE BEEN RECEIVED AND ARE RELATED TO MA NUFACTURING ACTIVITIES OF THE COMPANY AND THEREFORE, THE SAME SHOULD BE TREATED AS THE INCOME FROM MANUFACTURING ACTIVITY AND ACCORDINGLY THE DEDUCTION SHOULD BE ALLOWED. REGARDING THE SUPERVISION INCOME IT HAS BEEN CLAIMED BY THE APPELLANT THAT IT WAS REL ATED TO MANUFACTURING ACTIVITY OF THE COMPANY. THE COMPANY HAD TO DEPUTE REPRESENTATIVES FOR SUPERVISION WORK FOR THE PROJECTS UNDERTAKEN BY IT. THE SUPERVISION CHARGES HAS BEEN CHARGED SEPARATELY FOR THOSE SERVICES AND THEREFORE, SINCE IT WAS RELATED TO T HE MANUFACTURING ACTIVITY THE SAME SHOULD BE CONSIDERED AS BUSINESS INCOME AND DEDUCTION UNDER SECTION 80 IB SHOULD BE ALLOWED. THE APPELLANT HAS ALSO GIVEN DETAILS OF THE SUPERVISION IN COMMISSIONING CHARGES RECEIVED DURING THE YEAR. IT IS NOTED THAT THES E CHARGES ARE RECEIVED AS IT WAS SPECIFICALLY REQUESTED, BY THE COMPANIES FOR WHOM THE APPELLANT HAD EXECUTED PROJECT, TO SEND THE PERSONS FOR SUPERVISION AND COMMISSIONING. AFTER CONSIDERING THE DETAILS SUBMITTED BY THE APPELLANT I AM OF THE OPINION THAT SUPERVISION CHARGES ARE DIFFERENT THAN THE MANUFACTURING ACTIVITY CARRY DOWN BY THE APPELLANT. THE APPELLANT HAD DEPUTED ITS PERSONS FOR SUPERVISING CERTAIN SPECIFIC PROJECT IN SOME CASES. THE APPELLANT HAS CLAIMED THAT IN THESE CASES IT HAS SEPARATELY CHA RGED THE SUPERVISION AND COMMISSIONING CHARGES WHICH ARE OTHERWISE INCLUDED IN THE OVERALL PROJECT COST. A PERUSAL OF THE BILLS RELATED TO THESE PROJECTS FOR WHICH THE SUPERVISION CHARGES HAVE BEEN SEPARATELY CHARGED SHOW THAT THERE IS NO MATERIAL TO SHOW THAT THE CLAIM OF THE APPELLANT IS CORRECT. THE APPELLANT HAS SEPARATELY RECEIVED THE REQUISITION FOR SUPERVISION AND COMMISSIONING IN THE CASES IT HAS RECEIVED THE SUPERVISION CHARGES. THE APPELLANT HAS SUBMITTED CERTAIN BILLS IN WHICH IT IS NOTED THAT TH E APPELLANT HAD TO DEPUTE ITS REPRESENTATIVE AT THE SITE FOR SUPERVISION FREE OF COST. IN THE PRESENT CASE THE APPELLANT HAS SEPARATELY CHARGED AND THEREFORE, THOUGH IT IS RELATED TO THE ACTIVITY OF MANUFACTURING BUT THE NATURE OF RECEIPTS ARE DIFFERENT AN D CANNOT BE I.T.A NO S . 3055 & 3056 /AHD/20 13 A.Y. 2009 - 10 & 2010 - 11 PAGE NO ELECTRONIC INSTRUMENTATION & CONTROL PV T. LTD. VS ITO 9 CONSIDERED AS PART OF THE MANUFACTURING ACTIVITY. NORMALLY, THE INSTALLATION AND COMMISSIONING IS INCLUDED IN THE SUPPLY CONTRACT AND ARE NOT CHARGED SEPARATELY. THESE ARE THE ACTIVITIES SPECIALLY UNDERTAKEN ON SEPARATE REQUEST OF THE CLIENT AN D ARE NOT RELATED TO THE PROCESS OF MANUFACTURING BUT RELATE TO THE ACTIVITIES SUBSEQUENT TO THE MANUFACTURING PROCESS. THEREFORE, THE RECEIPTS HAVE BEEN RIGHTLY TREATED AS FROM OTHER THAN MANUFACTURING ACTIVITY BY THE AO. THE DISALLOWANCE MADE BY THE AO I N RESPECT OF THE SUPERVISION IN COMMISSIONING CHARGES IS THEREFORE, UPHELD. THE APPELLANT HAS ALSO, IN THE ALTERNATIVE, CLAIMED THAT OUT OF THE TOTAL CHARGES WHICH HAVE BEEN CREDITED UNDER THE HEAD SUPERVISION INCOME CERTAIN CHARGES WERE IN THE NATURE OF REIMBURSEMENT. THE APPELLANT HAS RECEIVED ITS REIMBURSEMENT FOR THE TRAVELLING AND CONVEYANCE EXPENSES INCURRED BY ITS EMPLOYEES WHILE SUPERVISING THE PROJECTS. THE CLAIM OF THE APPELLANT APPEARS TO BE IN ORDER. THE APPELLANT HAS SHOWN TRAVELLING REIMBURSE MENT OF RS. 52007/ - AND CONVEYANCE EXPENSES REIMBURSEMENT OF RS. 16034/ - WHICH SHOULD BE REDUCED FROM THE TOTAL INCOME SHOWN UNDER THE HEAD SUPERVISION INCOME. THE AO IS ACCORDINGLY DIRECTED TO VERIFY THE CLAIM OF REIMBURSEMENT AND TREAT THE SUPERVISION CHA RGES OF RS. 4577007 - ONLY AS INCOME FROM OTHER SOURCES NOT RELATED TO THE MANUFACTURING ACTIVITY AFTER REDUCING THE REIMBURSEMENTS, AFTER VERIFICATION, AS DISCUSSED ABOVE. THE APPELLANT HAS ALSO CLAIMED THAT LORRY FREIGHT INCOME, EXCISE DUTY INCOME, ADDIT IONAL DUTY INCOME, SERVICE TAX INCOME, EDUCATION CESS AND HIGHER EDUCATION CESS AGGREGATING TO RS. 753937 - SHOULD ALSO BE CONSIDERED AS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB. AFTER EXAMINING THE RELEVANT FACTS I AM OF THE OPINION THAT THE LORRY FREIGH T INCOME CANNOT BE CONSIDERED AS INCOME RELATING TO MANUFACTURING ACTIVITY AS THIS FREIGHT HAS BEEN RECEIVED BY THE APPELLANT FOR TRANSPORTING CERTAIN THING. THE APPELLANT HAS NOT DEMONSTRATED SEPARATELY THAT HOW THE INCOME CAN BE TREATED AS RELATABLE TO M ANUFACTURING ACTIVITY. THE APPELLANT DOES NOT RECEIVE ANY LORRY FREIGHT OR IS NOT IN THE BUSINESS OF TRANSPORTATION. THE INCOME MUST THEREFORE, BE AN ISOLATED INCOME WHICH IS IN THE NATURE OF TRANSPORTATION CHARGES. SINCE IT IS NOT RELATED TO ACTIVITY OF T HE BUSINESS OR AN INTEGRAL PART OF THE MANUFACTURING ACTIVITY THE SAME CANNOT BE CONSIDERED AS ENTITLED FOR DEDUCTION UNDER SECTION 80 IB. SIMILARLY, REGARDING EXCISE DUTY INCOME, ADDITIONAL DUTY INCOME, SERVICE TAX INCOME, EDUCATION CESS AND HIGHER EDUCAT ION CESS I.T.A NO S . 3055 & 3056 /AHD/20 13 A.Y. 2009 - 10 & 2010 - 11 PAGE NO ELECTRONIC INSTRUMENTATION & CONTROL PV T. LTD. VS ITO 10 RECEIVED BY THE APPELLANT DURING THE YEAR IT IS NOTED THAT NORMALLY THESE TYPE OF DUTIES ARE NOT IN THE NATURE OF INCOME. HOWEVER, THE APPELLANT HAS NOT DEMONSTRATED AS TO WHY AND HOW THESE INCOME ARE RELATABLE TO MANUFACTURING ACTIVITY OF THE APP ELLANT COMPANY. SINCE NO RELATIONSHIP HAS BEEN EXPLAINED BY THE APPELLANT THE ACTION OF THE AO IN NOT TREATING IT AS RELATABLE TO MANUFACTURING ACTIVITY IS UPHELD. IN VIEW OF THE ABOVE DISCUSSION, THE ACTION OF THE AO IN NOT TREATING THE INCOME FROM OTHER SOURCES, OTHER THAN INTEREST INCOME, AS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80 IB IS UPHELD EXCEPT FOR THE REIMBURSEMENT CHARGES FOR TRAVELLING AND CONVEYANCE RECEIVED BY THE APPELLANT AS A PART OF THE SUPERVISION CHARGES. THE GROUND OF APPEAL IS ACCO RDINGLY, PARTLY ALLOWED. 10 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICED THAT THE ABOVE REFERRED RECEIPT EARNED BY THE ASSESSEE ARE NOT RELATED TO THE PROCESS OF MANUFACTURING BUT RELATED TO OTHER ACTIVITIES. IN VIEW OF THE DETAILED FINDINGS GIVEN BY THE LD. CIT(A) IN HIS ABOVE REFERRED DECISION , WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE LD. CIT(A). 11 . IN THE RESULT, BOTH THE APPEAL S OF THE ASSESSEE ARE PARTLY ALLOWED. ORD ER PR ONOUNCED IN THE OPEN C OURT ON 20 - 04 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 20 /04 /2017 / COPY OF ORDER FORWARDED TO: - I.T.A NO S . 3055 & 3056 /AHD/20 13 A.Y. 2009 - 10 & 2010 - 11 PAGE NO ELECTRONIC INSTRUMENTATION & CONTROL PV T. LTD. VS ITO 11 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,