M/s Rahul Ginning Industries, Sanawad V. The ACIT, Indore

ITA 316/IND/2011

• Counselvise Citation: 31622714 RSA 2011
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 30-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: ASHVIN SETHI
• Keywords: Business income
• Section: 133A; 80IB

Judgement Text

IN THE INCOME TAX APPELATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI R.C. SHARM A, AM ITA NO. 316/IND/2011 A.Y. 2007-08 RAHUL GINING INDUSTRIES SANAWAD PAN AAFFR 7581Q ::: APPELLANT VS ASSTT. COMMR. OF INCOME TAX 5(1), INDORE ::: RESPONDENT APPELLANT BY SHRI ASHVIN SETHI RESPONDENTS BY SHRI ARUN DEWAN DATE OF HEARING 26.4.2012 DATE OF PRONOUNCEMENT 27 .4.2012 O R D E R PER R.C. SHARMA, ACCOUNTANTD MEMBER BY WAY OF THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ORDER DATED 12.8.2011 OF THE LEARNED CIT(A) FOR THE ASSESSMENT YEARS 2007-08. 2. THE ONLY GRIEVANCE OF THE REVENUE RELATES TO DEL ETION OF DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80IB ON T HE INCOME SURRENDERED DURING THE COURSE OF SURVEY. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE FACTS, IN BRIEF, ARE THAT THERE WAS S URVEY AT THE ASSESSEES BUSINESS PREMISES U/S 133A OF THE AC T WHEREIN THE ASSESSEE SURRENDERED RS. 80,01,172/- AS ADDITIONAL INCOME OF THE CURRENT YEAR IN ADDITION T O HIS REGULAR BUSINESS INCOME AS UNDER :- EXCESS CASH 4,70,230 EXCESS STOCK OF KAPAS 7,07,872 INVESTMENT IN PURCHASE OF AGIL. LAND 12,00,000 INVESTMENT IN HOUSE REPAIRS 2,20,000 EXCESS STOCK OF COTTON RUI BALES44,03,070 ADVANCE TO FARMERS 10,00,000 80,01,172 IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED DEDUC TION U/S 80IB IN RESPECT OF SUCH SURRENDERED INCOME WHIC H WAS DECLINED BY THE ASSESSING OFFICER ON THE PLEA T HAT THIS INCOME WAS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING. 4. BY THE IMPUGNED ORDER, THE LEARNED CIT(A) CONFIR MED THE DISALLOWANCE BY OBSERVING IT IS AN ADMITTED FACT THAT THE APPELLANT HAS SURRENDERED ADDITIONAL INCOME UNDER FOLLOWING HEADS :- NATURE OF HEAD AMOUNT EXCESS CASH 4,70,230 EXCESS STOCK OF KAPAS 7,07,872 INVESTMENT IN PURCHASE OF LAND 12,00,000 INVESTMENT IN HOUSE REPAIRS 2,20,000 EXCESS STOCK OF COTTON BALES 44,03,070 ADVANCE TO FARMERS 10,00,000 TOTAL 80,01,172 THUS, IT IS CLEAR THAT THE APPELLANT HAS NOT ONLY SURRENDERED ADDITIONAL INCOME UNDER BUSINESS HEAD BUT HAS SURRENDERED IT IN DIFFERENT HEADS OTHER THAN BUSINESS ALSO. SO FAR AS THE QUESTION OF THE APPELLANTS CONTENTION THAT THE APPELLANT WAS ENGAGED ONLY IN THE ACTIVITIES OF INDUSTRIAL UNDERTAKING IS CONCERNED, IT IS PROVED FALSE FROM THE CONDUCT OF THE APPELLANT ITSELF. THE ADVANCE TO FARMERS, INVESTMENT IN HOUSE PROPERTY AND IN AGRICULTURAL LANDS BY NO STRETCH OF IMAGINATION CAN BE CALLED INDUSTRIAL ACTIVITIES. THE ASSESSEES ADVANCES TO FARMERS IS NOTHING BUT A SORT OF MONEY LENDING BUSINESS FOR CLAIMING DEDUCTION U/S 80IB. SIMILAR IS THE POSITION IN RESPECT OF OTHER HEADS OF DECLARATION OF ADDITIONAL INCOME EXCEPT EXCESS STOCK OF COTTON (RUI) BALES WHICH IS OBTAINED FROM INDUSTRIAL UNDERTAKING BUT THAT TOO REQUIRES TO BE PROVED THAT THE APPELLANT HAS ACTUALLY GOT GINNED RAW COTTON AND OBTAINED RUI AND GOT THEM PRESSED. FROM THE QUANTITATIVE DETAILS OF SALE AND PURCHASE AS PER AUDITED ACCOUNTS, IT IS SEEN THAT THE APPELLANT PURCHASED LOOSE RUI 1153.66 QUINTALS AND 1011 FUL PRESSED BALES OF RUI FOR RS. 56,28,978/- AND RS. 82,72,597/- RESPECTIVELY WHICH COVER THE EXCESS STOCK OF RUI BALES FOUND AT THE TIME OF SURVEY. PROFIT ARISING FROM THE SALE OF SUCH READYMADE BALES OF RUI CANNOT BE CALLED A PROFIT ARISING FROM INDUSTRIAL ACTIVITY ENTITLED TO DEDUCTION U/S 80IB. THIS IS MERELY A TRADING ACTIVITY AND NO BENEFIT OF INDUSTRIAL ACTIVITY CAN BE GIVEN IN RESPECT OF THIS PART OF THE BUSINESS. EVEN OTHERWISE, THE APPELLANT CANNOT CLAIM THAT IT WAS ENGAGED ONLY IN INDUSTRIAL ACTIVITIES AND ADDITIONAL INCOME SURRENDERED IS TOTALLY OUT OF INDUSTRIAL UNDERTAKING FOR THE SIMPLE REASON THAT NO MODUS OPERANDI OF EARNING SUCH INCOME FROM INDUSTRIAL UNDERTAKING HAS BEEN SHOWN BY THE APPELLANT NOT TO TALK OF ESTABLISHING THE SAME WITH THE HELP OF ADMISSIBLE EVIDENCE. THE APPELLANT HAS NOT FURNISHED ANY DETAILS OF PURCHASES OF RAW KAPAS, PAYMENT OF GINNING AND PRESSING CHARGES INCURRED FOR OBTAINING RUI FROM RAW COTTON AND OTHER ATTENDANT EXPENSES LIKE BARDANA, GINNING STORES, PACKING MATERIAL ETC. INCURRED FOR EARNING THE ADDITIONAL INCOME SURRENDERED DURING SURVEY. FROM THE DETAILS OF CLOSING STOCK IT IS SEEN THAT COTTON (RUI) BALES VALUING RS. 44,03,070/- REMAINED IN STOCK ON THE LAST DAY OF ACCOUNTING EYAR. SINCE NO SALES OF SUCH SURRENDERED STOCK TOOK PLACE DURING THE YEAR, ANY QUESTION OF ARISING OF ANY PROFIT THEREFROM DOES NOT ARISE. HENCE THERE IS NO PROFIT OF SINGLE NAYA PAISE FROM INDUSTRIAL UNDERTAKING ENTITLED FOR DEDUCTION U/S 80IB TO THE EXTENT OF INCOME SURRENDERED DURING SURVEY. IF AT ALL ANY PROFIT CAN BE SAID TO HAVE ARISEN FROM INDUSTRIAL UNDERTAKING IT CAN ARISE ONLY IN THE YEAR OF SALE OF THAT UNSOLD STOCKI AND NOT BY ANY STRETCH OF IMAGINATION, IN THE YEAR UNDER APPEAL. THE LARGE NUMBER OF COURT DECISIONS CITED BY THE APPELLANT HAVE NO APPLICATION TO THE CLEAR AND NARROW COMPASS OF THE FACTS OF THE APPELLANTS CASE. THE ACTION OF THE A.O. IS, THEREFORE, BASED FULY ON THE MATERIAL FACTS AVAILABLE ON RECORD AND IS WITHIN THE FOUR CORNERS OF LAW. 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEA L BEFORE US. 6. SHRI ASHVIN SETHI APPEARED ON BEHALF OF THE ASSE SSEE AND PLACED ON RECORD THE ORDER OF THE I.T.A.T., PUN E BENCH IN THE CASE OF MEDICORE LABORATORIES PRIVATE LIMITED; ITA NO. 402/PN/2009 ORDER DATED 31 ST MARCH, 2011 AND CONTENDED THAT SIMILAR DEDUCTION WAS ALLOW ED U/S 80IB OF THE ACT IN RESPECT OF THE INCOME SURREN DERED DURING THE COURSE OF SURVEY. ACCORDINGLY, THE LOWE R AUTHORITIES WERE NOT JUSTIFIED IN DECLINING THE CLA IM OF DEDUCTION U/S 80IB OF THE ACT. 7. ON THE OTHER HAND, THE LEARNED SENIOR DR RELIED ON THE FINDINGS RECORDED BY THE LOWER AUTHORITIES AND CONTENDED THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 80IB AS THE INCOME WAS NOT DERIVED FR OM THE INDUSTRIAL UNDERTAKING. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFUL LY AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W AND FIND THAT IN ADDITION TO ITS INDUSTRIAL INCOME, THE ASSESSEE HAS ALSO CLAIMED DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF INCOME SURRENDERED DURING THE COURSE OF SURVEY ON ACCOUNT OF EXCESS CASH, EXCESS STOCK, INVESTMENT IN AGRICULTURAL LAND, ETC. AS PER THE PROVISIONS OF SECTION 80IB OF THE ACT, THE DEDUCTIO N IS ALLOWABLE ONLY WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFIT AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTIONS (3) TO (11). IN THE CASE OF THE ASSESSEE, THE SURRENDER HAS BEEN MADE U NDER VARIOUS HEADS WHICH CANNOT BE SAID TO BE INCOME DER IVED FROM THE INDUSTRIAL UNDERTAKING AND THE ON MERE FAC T THAT SUCH INCOME WAS SURRENDERED IN THE COURSE OF BUSINESS OF INDUSTRIAL UNDERTAKING, NO DEDUCTION CA N BE CLAIMED ON SUCH INCOME. SIMILAR PROPOSITION OF LAW HAS BEEN LAID DOWN BY THE I.T.A.T., INDORE BENCH, IN TH E CASE OF ANIL KUMAR GARG; ITA NO. 758/IND/06. THE LAW IS CLEAR FROM THE JUDICIAL PRONOUNCEMENTS OF THE HON'B LE SUPREME COURT IN THE CASES OF LIBERTY INDIA; 317 IT R 218 AND STERLING FOODS; 237 ITR 579. 9. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMI TY IN THE ORDERS OF THE LOWER AUTHORITIES IN DECLINING TH E CLAIM OF DEDUCTION U/S 80IB OF THE ACT. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 27.4.2012 SD SD (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER 27 TH APRIL, 2012 DN/-