POLYSIL PIPES, MUMBAI V. ITO 15(1)(3), MUMBAI

ITA 346/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3906 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 04-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-01-2013
• Court: TRIBUNAL
• Department Lawyers: S R KIRTNEY
• Section: 80IB

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER I.T.A. NO.346/M/2013 (ASSESSMENT YEAR: 2008 - 2009 ) M/S. POLYSIL PIPES, 507, EMBASY CENTRE, NARIMAN POINT, MUMBAI - 400021. / VS. ADDL.CIT, CIRCLE 5(1), MUMBAI. ./ PAN : AAGFO5540G ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY MEHTA / RESPONDENT BY : SHRI S.R. KIRTNEY, DR / DATE OF HEARING : 18.02.2016 / DATE OF PRONOUNCEMENT : 18 .02.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 11.1.2013 IS AGAINST THE ORDER OF THE CIT (A) - 26, MUMBAI DATED 11.10.2012 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, ASSESSEE RAISED 4 GROUNDS IN TOTO AND GROUND NO.2 IS ONLY EFFECTIVE GROUND AND THE SAME R EADS AS UNDER: - 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT (A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DENYING DEDUCTION U/S 80IB IN RESPECT OF THE INCOME FROM INTEREST, MISCELLANEOUS SALES / SALE OF SCRAP AGGREGATING TO R S. 14,17,148/ - CLAIMED BY THE APPELLANT. 3. THE ABOVE GROUND RELATES TO THE DENIAL OF DEDUCTION IN RESPECT OF INTEREST RECEIPTS AMOUNTING TO RS. 1,62,239/ - AND MISCELLANEOUS SALES RECEIPTS AMOUNTING TO RS. 12,54,909/ - U/S 80IB OF THE ACT. IN CONNECTION W ITH THE ISSUE RELATING TO THE ALLOWABILITY OF DEDUCTION REGARDING THE INTEREST RECEIPTS, LD COUNSEL FOR THE ASSESSEE FAIRLY MENTIONED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE REVENUE BY VIRTUE OF THE HONBLE SUPREM E COURT JUDGMENT IN THE CASE OF LIBE RTY INDIA VS. CIT [2009] 317 ITR 218 (SC), DATED 31.8.2009 AND THE DECISION OF THE TRIBUNAL IN THE CASE OF DAMAM PLASTICS VS. ADDL.CIT IN ITA NO.7507/M/2012, DATED 16.12.2015, WHEREIN ONE US ( AM ) IS THE PARTY TO THE SAID ORDER. 2 4. WE HAVE HEARD BOTH THE PA RTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED JUDGMENT OF THE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) AND THE DECISION OF THE TRIBUNAL IN THE CASE OF DAMAN PLASTICS (SUPRA). AFTER HEARING BOTH THE PARTIES AND ON P ERUSAL OF THE ORDERS OF THE SAID DECISIONS, WE ARE OF THE OPINION THAT THE THIS PART OF THE GROUND RAISED BY THE ASSESSEE SHOULD BE DISMISSED. WE ORDER ACCORDINGLY AND CONFIRM THE DECISION OF THE CIT (A) ON THIS ISSUE. 5. THE SECOND LIMB OF THE GROUND RELATES TO THE ALLOWABILITY OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF SCRAP SALES. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT SCRAP SALES HAS TWO SEGMENTS NAMELY (I) SCRAP SALES ON ACCOUNT OF PACKING MATERIAL AND (II) SCRAP SALES O N ACCOUNT OF SCRAP GENERATED IN THE MANUFACTURING PROCESS. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THIS ISSUE STANDS COVERED BY VARIOUS DECISIONS. REFERRING TO THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF FENNER (INDIA) LTD VS. CIT (241 ITR 803), LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT PROFIT SALE OF SCRAP GENERATED OUT OF MANUFACTURING PROCESS IS ELIGIBLE FOR DEDUCTION AND SIMILAR IS THE CASE WITH RESPECT TO SCRAP PROCEEDS ON SALE OF PACKING MATERIAL. THE JUDGMEN T OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF GE BE P. LTD VS. ACIT [2015] 371 ITR 32 (KARN) ARE RELEVANT IN THIS REGARD. IT IS A COMMON ARGUMENT OF THE ASSESSEE THAT THE COST OF PACKING MATERIAL IS INCLUDED IN THE COST OF PURCHASES. SO, THE PROCE EDS, IF ANY, RECEIVED ON THE SALE OF SUCH SCRAP O F A N Y K I N D I N C L U D I N G P A C K I N G M A T E R I A L S GOES TO REDUCE THE COST OF THE MATERIAL THEREBY I NCREASING THE PROFIT SEGMENT. CONSIDERING THE SETTLED NATURE OF THE ISSUE, WE DIRECT THE AO TO GRANT DEDUCTION IN RESPECT OF THE CITED RECEIPTS EARNED ON SALE OF SCRAP GENERATED OUT OF THE PACKING MATERIAL AS WELL AS THE MANUFACTURING PROCESS. ACCORDINGLY THIS PART OF THE GROUND IS ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNC ED IN THE OPEN COURT ON 1 8 T H FEBRUARY, 2016. S D / - S D / - ( PAWAN SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 8 .2.2016 . . ./ OKK , SR. PS 3 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI