The ACIT,Vapi Circle, Vapi V. M/s. Pyramid Plastics, Daman

ITA 3173/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89601 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 15-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: PARIN SHAHA R
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 143(3); 80IB

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI PRAMOD KUNMAR, JUDICIAL MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER) NO.3173/AHD/2011 / ASSESSMENT YEAR: 2007-2008 ASSISTANT COMMISSIONER OF INCOME TAX, VAPI CIRCLE, VAPI. VS M/S. PYRAMID PLASTICS 377/1(1) & 2, KACHIGAM CHAR RASTA, DAMAN. / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI DINESH SINGH, SR.D.R. ASSESSEE(S) BY : SHRI PARIN SHAH,A.R. PAN ;AADFP 1691B / DATE OF HEARING : 29/04/2015 / DATE OF PRONOUNCEMENT: 19/6/2015 ITA NO.3173/AHD/2011 2 ASSESSMENT YEAR 2007-08 / O R D E R PER SHRI S.S. GODARA JUDICIAL MEMBER. THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2007-08 ARISES FROM ORDER OF THE COMMISSIONER OF INCOME TAX (APPEA LS)-VALSAD DATED 14-09-2011 HOLDING ASSESSEES INCOME FROM EXC HANGE RATE DIFFERENCE OF RS.2,38,164/- AS ELIGIBLE FOR SECTION 80IB DEDUCTION ALONG WITH SUNDRY BALANCES WRITTEN BACK OF RS.3,05 ,574/-AND THE SAME ARISING FROM SCRAP SALES OF RS.37,60,588/-, RE SPECTIVELY, IN PROCEEDINGS UNDER SECTION 143(3) OF THE ACT. 2. THE REVENUE REITERATE ITS PLEADING ON ALL THESE ISSUES IN THE COURSE OF HEARING. THE ASSESSEE STRONGLY SUPPORTS T HE CIT (A) ORDER UNDER CHALLENGE. 3. THE REVENUES FIRST GROUND RELATES TO AN AMOUNT OF RS.2,38,164/-ARISEN FROM EXCHANGE RATE DIFFERENCE. THE ASSESSING OFFICER TREATED THIS SUM AS SPECULATION PROFITS EAR NED ON ACCOUNT OF PURCHASE OF FORWARD CONTRACT EXCHANGE RATE FLUCT UATION BENEFIT. HE TREATED THE SAME AS HAVING NO CONNECTION WITH TH E ASSESSEES EXPORT BUSINESS. THE CIT (A) HAS REVERSED THE SAID FINDING BY QUOTING DECISION OF THE HONBLE MUMBAI HIGH COURT I N CIT V/S. RACHANA UDYOG (BOM.) ITA NO.2394 OF 2009 DATED 13-01 -2010 HOLDING IT AS ELIGIBLE FOR SECTION 80IB DEDUCTION. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE FIND THAT HONBLE JURISDIC TIONAL HIGH COURT IN THE ITA NO.3173/AHD/2011 2 ASSESSMENT YEAR 2007-08 CASE OF CIT VS. ALPS CHEMICALS LTD., 367 ITR 594 (G UJ.) HOLDS THAT SIMILAR FOREIGN EXCHANGE FLUCTUATION GAIN ARE ENTIT LED FOR SECTION 80 IB DEDUCTION. THE REVENUE FAILS TO POINT ANY DISTINCT ION ON FACTS. WE FOLLOW THE HONBLE JURISDICTIONAL HIGH COURT AND UP HOLD THE CIT(A)S FINDINGS. THIS GROUND IS REJECTED. 5. THE REVENUES SECOND GROUND CHALLENGES THE CIT ( A)S ORDER TREATING SUNDRY BALANCES WRITTEN BACK AMOUNTING TO RS.3,05,574/- AS ELIGIBLE FOR SECTION 80 IB DEDUCTION. 6. THE CIT (A)S ORDER DISCUSSES THE ASSESSING OFFI CERS OBSERVATION, ASSESSEES SUBMISSIONS AND FINDINGS UNDER CHALLENGE AS UNDER:- 6. GROUND NO.3 ; THE LD. AO HAS ERRED IN CONSIDERING SUNDRY BALANCES WRITTEN BACK AMOUNTING TO RS.3,05,574/- AS NOT ELIGIBLE FOR DEDUCTION U/S. 80-IB OF THE ACT. 6.1 OBSERVATIONS OF AO : WHILE MAKING THE ADDITION, AO OBSERVED THAT THE SUNDRY BALANCES WRITTEN OFF REPRE SENTS THE AMOUNT OF OLD CREDITORS AFTER THE LIABILITY PAYABLE AND CARRIED FORWARD TO THE YEAR UNDER CONSIDERATION. HE ALSO OB SERVED THAT THE AMOUNT IN QUESTION WAS TAKEN CARE OF WHILE AVAI LING THE BENEFIT U/S. 8OIB OF THE ACT, IN WHICH, THE EXPENDI TURE WAS INCURRED AND AMOUNT WERE DUE TO THE CREDITORS. REFE RRING TO THE DECISION OF THE HON.'BLE SUPREME COURT IN THE CASE, OF CIT V/S. HUKUMCHAND MOHANALAL 82 ITR 64,HE OBSERVED THAT IT IS ONLY BECAUSE THE FICTION CREDIT BY SECTION 41(1) OF THE ACT. IT IS A DEEMED INCOME. THEREFORE, THE SAID RECEIPT IS TREAT ED AS INCOME BUT THE SAME CAN NOT BE TREATED AS INCOME DERIVED' FROM INDUSTRIAL UNDERTAKING AND THEREFORE, THE SAME IS N OT ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. HE ALSO REFERRED TO THE DECISION OF THE DCIT V/S. MIRA INDUSTRIES 87 ITD 475. THE AR OF THE APPELLANT ITA NO.3173/AHD/2011 2 ASSESSMENT YEAR 2007-08 CONTENDED THAT IT IS AN UNDISPUTED FACT THAT WHEN S UCH AN AMOUNT IS EARLIER DEBITED TO THE PROFIT AND LOSS ACCOUNT, THE BENEFIT U/S. 80IB MUST HAVE GONE DOWN IN THOSE YEARS AND YEAR IN WHICH, THE SAME IS WRITTEN BACK, THE BENEFIT U/S.80IB MAY NOT BE DEPRIVED OF AS THE SAME EXPENDITURE/LIABILITY HAS THE DIRECT NE XUS TO THE BUSINESS UNDERTAKING. 6.2 SUBMISSION OF ID. AR : CONSIDERING THE ARGUMENTS ADVANCED BY THE AR OF THE APPELLANT ARE PERUSED AND FOUND FORCE IN HIS CONTENTIONS THAT THE AMOUNT WRITTEN BACK IS IN RELATION TO THE LIABILITIES ARISED ON ACCOUNT OF CERTAIN EXPENS ES AND THEREBY IN THE YEAR INCREASED SUCH EXPENDITURE/LIABILITY, THE BENEFIT UNDER SECTION 80IB MUST HAVE BEEN REDUCED IN THAT PARTICU LAR YEAR. THEREFORE, IT WOULD BE MORE LOGICAL TO CONSIDER SUC H AMOUNT WRITTEN BACK ELIGIBLE FOR THE DEDUCTION U/S. 80IB O F THE ACT. 6.3 DECISION ; I HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE ID. AR OF THE APPELLANT CAREFULLY. THE AO IS NOT JUSTIFIED IN RAISING AN A ISSUE OF FICTION CREATED U/S. 4:(1) OF THE ACT AND DEPRIVE OF THE BENEFIT TO THE ASSESSEE. THE TOTAL I NCOME TO BE DETERMINED FOR ALLOWING THE BENEFITS U/S. 8O-IB AND THE DEEMED INCOME U/S. 41(1) CONSTITUTES THE TOTAL INCOME. HOW EVER, A PRECAUTION CAN BE TAKEN THAT SUCH INCOME IS OUT OF BUSINESS INCOME OF THE INDUSTRIAL UNITS WHICH IS ELIGIBLE FO R THE BENEFITS U/S. 8O-IB OF THE ACT. IN THIS CASE THE ID. AR HAD DEMON STRATED THAT THE DEEMED INCOME U/S. 41(1) CONSTITUTED INCOME FRO M THE INDUSTRIAL UNIT ELIGIBLE FOR THE BENEFITS U/S. 80-I B. IN VIEW OF ABOVE. I DIRECT THE AO TO INCLUDE THE DIFFERENCE OF SUNDRY BALANCE WRITTEN BACK IN COMPUTATION OF DEDUCTION U/S 80IB O F THE ACT. ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED. ITA NO.3173/AHD/2011 2 ASSESSMENT YEAR 2007-08 WE HAVE EXAMINED RIVAL CONTENTIONS. THE CIT (A) HO LDS THAT THE ASSESSEES INCOME IN QUESTION HAS BEEN DERIVED FROM ITS INDUSTRIAL UNDERTAKING IN QUESTION. THE REVENUE FAILS TO FILE ANY EVIDENCE REBUTTING THE SAME. WE APPROVE CIT (A)S ORDER IN T HESE FACTS AND REJECT THE REVENUES GROUND. 7. THE REVENUES THIRD AND LAST GROUND CHALLENGES L OWER APPELLATE ORDER TREATING INCOME OF RS.37,60,588/- DERIVED FRO M SCRAP SALES AS ELIGIBLE FOR SECTION 80-IB DEDUCTION. THERE IS NO I SSUE ON FACTS. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HA RJIVANDAS JUTHABHAI ZAVERIS CASE IN 258 ITR 785 (GUJ.) HAS TREATED IDE NTICAL INCOME AS ELIGIBLE FOR SECTION 80-IB DEDUCTION. THE REVENUE IS NOT ABLE TO POINT OUT ANY DISTINCTION ON FACTS. WE AFFIRM CIT (A)S FINDINGS IN THESE CIRCUMSTANCES. 8. THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON __________ THE ___ __ 2015 AT AHMEDABAD. SD/- SD/- (PRAMOD KUMAR) (S.S. GODARA) ACCOUNTANT MEMBER. JUDICIAL MEMBER. PRONOUNCED ON 19/6/2015 SD/- SD/- (ANIL CHATURVEDI) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER ITA NO.3173/AHD/2011 2 ASSESSMENT YEAR 2007-08 !'# $# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) VALSADI 5. !' ## , / DR, ITAT, 6. '$% & / GUARD FILE. % / & '( ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION- : 20-5-2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER; 22-5-2015 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. 22-5-2015 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 19-6-2015. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER