Sreelakshmi Cashew Co., Kollam V. ACIT, Kollam

ITA 311/COCH/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52313 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 18-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2009
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: T V HARIHARAN CAAR
• Keywords: Business income
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND SANJAY AROR A, AM I.T.A NOS. 311/COCH/2009 & 568/COCH/2010 ASSESSMENT YEARS: 2005-06 & 2006-07 SREELAKSHMI CASHEW CO., KADAPPAKKADA, KOLLAM-691008. [PAN:AAZFS 1211Q] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, KOLLAM. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI T.V.HARIHARAN, CA-AR REVENUE BY MS. S. VIJAYAPRABHA, JR.DR DATE OF HEARING 18/10/2011 DATE OF PRONOUNCEMENT 27/12/2011 O R D E R PER SANJAY ARORA, AM: THESE ARE A SET OF TWO APPEALS BY THE ASSESSEE, CO NTESTING ITS ASSESSMENTS FOR TWO CONSECUTIVE YEARS (A.Y.S), BEING 2005-06 AND 2006-0 7, AS CONFIRMED BY THE FIRST APPELLATE AUTHORITY (`CIT(A) FOR SHORT) VIDE HER O RDERS DATED 06-08-2010 AND 11-03-2009 FOR THE TWO CONSECUTIVE YEARS RESPECTIVELY, DISMISS ING ITS APPEALS. 2. THE ISSUE ARISING BEING COMMON, THE APPEALS WERE HEARD TOGETHER, AND ARE BEING DISPOSED OF BY A COMMON, CONSOLIDATED ORDER. A.Y. 2005-06 (IN I.T.A. NO. 568/COCH/2010) 3. THE ASSESSEE, A FIRM, IS IN THE BUSINESS OF PROCESSING AND EXPORT OF CASHEW KERNELS. IT FILED ITS RETURN OF INCOME FOR A.Y. 2005-06 ON 3 1-03-2006 AT AN INCOME OF ` 1121584/-, CLAIMING DEDUCTION U/S. 80IB AT ` 1328976/-. THE SAME, IT WAS EXPLAINED, WAS IN RESPE CT I.T.A. NOS. 311/COCH/2009 & 568/COCH/2010 SREELAKSHMI CASHEW CO.VS. ACIT, KOLLAM 2 OF TWO UNITS AT AYIROOR AND ALAMCODE, OUT OF THE TO TAL OF THREE CASHEW PROCESSING UNITS BEING RUN BY THE ASSESSEE. THE CLAIM FOR SEC. 80IB DEDUCTION WAS FOUND NOT ACCEPTABLE BY THE ASSESSING OFFICER (AO). THE FIGURE OF PROFIT ON WHICH DEDUCTION U/S. 80IB STOOD CLAIMED AROSE ONLY ON ACCOUNT OF AN AMOUNT OF ` 315.56 LAKHS REALIZED BY WAY OF SALE OF IMPORT LICENSE/S, CREDITED TO THE PROFIT AND LOSS A CCOUNT, EXCLUDING WHICH WOULD RESULT IN A LOSS FROM `MANUFACTURING ACTIVITY AT ` 56.88 LAKHS. THE PROFIT ON SALE OF IMPORT LICENSE/S WAS NOT MANUFACTURING INCOME OR A PROFIT DERIVED FR OM AN INDUSTRIAL UNDERTAKING, ELIGIBLE FOR DEDUCTION U/S. 80IB. SECONDLY, THE PROFIT ARRIV ED AT BY THE ASSESSEE WAS AFTER TAKING INTO ACCOUNT ONLY THE MANUFACTURING WAGES, WHILE OT HER DIRECT AND INDIRECT COSTS HAD ALSO TO BE TAKEN INTO ACCOUNT. DEDUCTING THE SAME WOULD AGAIN LEAD TO THE NET RESULT FROM MANUFACTURING AT A LOSS. IN FACT, THE FIGURE OF PRO FIT WAS NOT WORKED OUT ON A VALID BASIS IN-AS-MUCH AS THE SALE FIGURE IS ONLY THE RESULT OF AN ESTIMATION, WHILE DEDUCTION U/S. 80IB IS TO BE ALLOWED ON ACTUAL PROFITS. THE DEDUCTION U /S. 80IB WAS, ACCORDINGLY, DISALLOWED. THE SAME STOOD CONFIRMED BY THE LD. CIT(A); HER FIN DINGS APPEARING AT PARA 7 (PGS. 5 & 6 OF THE IMPUGNED ORDER), ENDORSING EACH OF THE OBJEC TIONS RAISED BY THE AO. THERE HAD BEEN, IT WAS FURTHER OBSERVED BY HER, NO SATISFACTO RY FINDINGS ON RECORD FOR THE EARLIER YEAR/S AS WELL, WHEREAT THE MATTER WAS RESTORED TO THE ASSESSING AUTHORITY FOR VERIFICATION, EVEN AS THE REQUIREMENTS OF THE SECTION HAD TO BE P OSITIVELY MET. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE FIND THAT THE ASSESSEES PRINCIPAL CASE, BOTH BEFORE THE AUTHORIT IES BELOW, AS WELL AS BEFORE US, RESTS ON THE BASIS THAT THE CONVERSION OF RAW NUTS INTO KERN ELS AMOUNTS TO A MANUFACTURING ACTIVITY, ENTITLED FOR S. 80IB BENEFIT. FURTHER, THE NON-MAI NTENANCE OF SEPARATE BOOKS, I.E., IN RESPECT OF OPERATION OF ELIGIBLE UNIT/S WOULD NOT D IS-ENTITLE IT TO ITS SAID CLAIM, TOWARD WHICH IT PLACES RELIANCE ON THE DECISIONS BY THE TR IBUNAL IN THE CASE OF T.C. USHA VS. ACIT, KOLLAM (IN I.T.A. NOS. 1268 TO 1270/COCH/2004 DATED 21-04 -2006); TATA FINANCE INTER SERVICES LTD. V. ITO (2010) 39 SOT 106 (DEL.). WE FIND THAT THE ASSESSE E HAS NOWHERE ADDRESSED THE PRINCIPAL OBJECTIONS RAISED B Y THE REVENUE, I.E., THAT THE NET RESULT OF ITS `MANUFACTURING ACTIVITY IS A LOSS, AND THE POSITIVE FIGURE WORKED OUT BY IT IS ONLY ON ACCOUNT OF PROFIT ON SALE OF IMPORT LICENSE/S, AS W ELL AS BY NON-RECKONING DIRECT AND I.T.A. NOS. 311/COCH/2009 & 568/COCH/2010 SREELAKSHMI CASHEW CO.VS. ACIT, KOLLAM 3 INDIRECT COSTS (OTHER THAN DIRECT WAGES) IN WORKING OUT THE OPERATIONAL RESULTS. THERE IS NO, OR CANNOT BE ANY, DISPUTE WITH REGARD TO THESE CLAI MS BY THE REVENUE, I.E., EVEN OVERLOOKING THE OTHER CLAIMS RAISED BY THE AO, BEIN G PRINCIPALLY WITH REGARD TO THE QUANTUM OF SALE AND, THUS, THAT OF PROFIT OF THE EL IGIBLE UNITS. THE ASSESSEES ARGUMENT THAT IT IS THE `GROSS PROFIT (WHICH THOUGH WOULD REQUIR E DEDUCTION OF DIRECT COSTS), AND NOT THE `NET PROFIT, THAT IS TO BE RECKONED FOR THE PURPOS E OF DEDUCTION U/S. 80IB, AS THE WORDS USED IN THE SECTION ARE GROSS TOTAL INCOME, IS TO TALLY MIS-CONCEIVED, AS IT IS ONLY THE `NET PROFIT (AND NOT `GROSS PROFIT) THAT ENTERS THE `G ROSS TOTAL INCOME, FROM WHICH THE DEDUCTIONS UNDER CHAPTER VIA, INCLUDING U/S. 80IB, ARE TO BE ALLOWED. ALSO, THE EXCLUSION OF THE PROFIT ARISING ON THE SALE OF IMPO RT LICENSES FOR THE PURPOSE STANDS CONFIRMED BY THE APEX COURT AS BEING NOT A PROFIT D ERIVED FROM THE INDUSTRIAL UNDERTAKING (REFER, INTER ALIA , LIBERTY INDIA VS. CIT (2009) 317 ITR 218 (SC); CIT VS. STERLING PRODUCTS (1999) 237 ITR 579 (SC). 5. IN VIEW OF THE FOREGOING, WE FIND NO MERIT IN THE ASSESSEES CLAIMS AND, ACCORDINGLY, UPHOLD THE IMPUGNED ORDER. WE DECIDE ACCORDINGLY. A.Y. 2006-07 (IN I.T.A. NO. 311/COCH/2009) 6. THE FACTS FOR THE FOLLOWING YEAR, I.E., A.Y. 200 6-07, ARE PRINCIPALLY THE SAME, AND FURTHER, LIKE-WISE UNCONTROVERTED, SO THAT WE NEED NOT REPEAT THEM. IN FACT, THE COMPUTATIONS OF INCOME FOR BOTH THE YEARS (COPY PLA CED ON RECORD), REVEAL THAT THE POSITIVE SUM ASSESSED AS BUSINESS INCOME, I.E., EVE N IF TAKEN FOR ALL THE THREE UNITS, WOULD STAND REDUCED TO A NEGATIVE FIGURE IF THE `CASH CRE DIT/S IN THE CAPITAL ACCOUNT, ADDED U/S. 68, IN THE SUM OF ` 25 LAKHS OR ` 75 LAKHS FOR THE TWO CONSECUTIVE YEARS RESPECTIVELY , WERE TO BE EXCLUDED, AS IT INDEED HAS TO BE. WHEN QUESTI ONED BY THE BENCH WITH REGARD TO THE SAID EXCLUSION, THE LD. AR COULD NOT FURNISH ANY PE RTINENT OR SATISFACTORY ANSWER. THE CLAIM FOR DEDUCTION U/S. 80IB FOR THIS YEAR IS, AGA IN, WITHOUT MERIT. WE DECIDE ACCORDINGLY. I.T.A. NOS. 311/COCH/2009 & 568/COCH/2010 SREELAKSHMI CASHEW CO.VS. ACIT, KOLLAM 4 7. IN THE RESULT, THE ASSESSEES APPEALS FOR B OTH THE YEARS ARE DISMISSED. SD/- SD/- (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 30TH DECEMBER, 2011 GJ COPY TO: 1. M/S. SREELAKSHMI CASHEW CO., KADAPPAKKADA, KOLLA M 691 008. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1, KOLLAM. 3A. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRI VANDRUM. 3B. THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KO CHI. 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE .