The ACIT, Vapi Circle, Vapi V. Paras Motor Mfg.Co., Daman

ITA 3585/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0098 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-08-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 31-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 43B; 80IB; 15

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M ASSTT. CIT, VAPI CIRCLE, VAPI. VS. PARAS MOTOR MFG. CO., A-3/8, DAMAN INDL. ESTATE SOMNATH, DAMAN 396210. (APPELLANT) .. (RESPONDENT) REVENUE BY:- SHRI BHUBNESH KULSHRESTHA, DR SHRI YAGNESH M. DESAI, AR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THESE ARE TWO APPEALS FILED BY THE DEPARTMENT FOR THE ASST. YEARS. 2003-04 & 2005-06. 2. IN ASST. YEAR 2003-04 THE REVENUE HAS RAISED THE FOLLOWING GROUND: (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE PAYMEN TS OF PF AND ESIC AMOUNTING TO RS.34,609/- MADE BEFORE FILIN G THE RETURN ARE ELIGIBLE FOR DEDUCTION WITHOUT CONSIDERI NG THE FACT THAT THE DUE DATES IN THE RESPECTIVE ACTS FOR THE S AID PAYMENTS IS 15 TH AND 21 ST OF EVERY MONTH. WHEREAS IN ASST. YEAR 2005-06 THE REVENUE HAS RAISE D THE FOLLOWING GROUNDS:- ITA NOS.3706 & 3585/AHD/2007 ASST. YEARS :2003-04 & 2005-06 2 (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE OTHER INCOME O F RS.1,19,40,209/- IN FORM OF SCRAP SALES IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DIRECTING NOT TO EXCLUDE THE IN COME EARNED FROM SALE OF SCRAP FROM THE PROFITS ELIGIBLE FOR DE DUCTION U/S 80IB, THOUGH SAME HAVE NO DIRECT OR IMMEDIATE NEXUS WITH THE MANUFACTURING ACTIVITY OF THE ASSESSEE AS PER RATIO LAID DOWN BY THE HON. APEX COURT IN THE CASES CIT VS. STERLING F OODS (1999) 237 ITR 579 AND PANDIAN CHEMICALS VS. CIT (2003) 26 2 ITR 278 (SC). ASST. YEAR 2003-04 3. IN THIS CASE THE ISSUE INVOLVED IS PAYMENT BY TH E EMPLOYER TO PF & ESIC FOR RS.34,609/-. THE AO FOUND THAT ASSESSEE HA S NOT MADE THE PAYMENT BEFORE THE DUE DATE WHICH IS 15 TH OF EVERY MONTH. ACCORDING TO HIM FOLLOWING TWO PAYMENTS WERE BELATED:- APRIL, 2002 RS.16,584/- 15.5.2002 16.5.200 2 MARCH, 2003 RS.17,925/- 15.4.2003 17.4.2003 SINCE THE PAYMENTS WERE NOT MADE WITHIN GRACE PERIO D HE CONSIDERED THEM FOR DISALLOWANCE. 4. THE LD. CIT(A) DELETED THE ADDITION AND ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE DECISION IN HANSUR PLYWOOD W ORKS LTD. VS. DCIT 54 ITD 394, MODERN STEEL INDUSTRIES VS. DCIT 67 TTJ 354 (DEL), AND IN ALEMBIC GLASS INDUS. LTD. (2005) 149 TAXMAN 15 WHER EIN IT IS HELD THAT IF THE PAYMENT IS MADE BEFORE THE DUE DATE OF FILIN G THE RETURN THEN DISALLOWANCE CANNOT BE MADE UNDER SECTION 43B. 5. WE HAVE HEARD THE PARTIES. IN OUR VIEW THE ISSUE IS NOW COVERED BY THE DECISION OF HON. SUPREME COURT IN CIT VS. ALAM EXTRUSION 319 ITR 3 306 (SC) WHEREIN IT IS HELD THAT AMENDMENT TO SECTI ON 43B IS CURATIVE AND WOULD BE APPLICABLE W.E.F. 1.4.1988. THE ISSUE IS A LSO COVERED BY THE DECISION OF HON. DELHI HIGH COURT IN CIT VS. AIMIL LTD. (2010) 321 ITR 508 (DEL) WHEREIN IT IS HELD IF PAYMENT IS MADE BEFORE FILING OF THE RETURN THE ASSESSEE WILL BE ELIGIBLE FOR DEDUCTION. IN VIEW OF THIS, WE UPHOLD THE ORDER OF LD. CIT(A) AND DISMISS THE APPE AL FILED BY THE REVENUE. 6. IN ANY CASE REVENUE EFFECT INVOLVED IN THIS APPE AL IS LESS THAN RS.2 LACS AND HENCE THE APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED IN LIMINE ON LOW REVENUE EFFECT IN VIEW OF THE DECISIO N OF HON. DELHI HIGH COURT IN THE CASE OF CIT VS. MANGLAM RICINUS LTD. ( 2008) 174 TAXMAN 186 (DEL). RESPECTFULLY FOLLOWING THE ABOVE DECISIO NS, WE DISMISS THE APPEAL FILED BY THE REVENUE. ASST. YEAR 2005-06 7. IN THIS APPEAL THE ISSUE INVOLVED IS ABOUT ALLO WABILITY OF DEDUCTION UNDER SECTION 80IB ON SCRAP SALES. THE AO WAS OF TH E VIEW THAT RECEIPTS FROM THE SCRAP SALES IS NOT DERIVED FROM BUSINESS O F THE ASSESSEE AND, THEREFORE, IS NOT ELIGIBLE FOR DEDUCTION UNDER SECT ION 80IB WHEREAS THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT SCRAP IS ALSO COMING OUT FROM SAME RAW MATERIAL AS THE FINAL PROD UCT AND, THEREFORE, SALE OF SCRAP CANNOT BE DISTINGUISHED FROM FINAL PR ODUCT AND ACCORDINGLY IT IS ENTITLED FOR DEDUCTION UNDER SECTION 80IB. IN ANY CASE THE ISSUE IS NOW COVERED BY THE DECISION OF THE TRIBUNAL IN ACIT VS. BIOTECH MEDICALS (P) LTD. (2009) 119 ITD 143 (HYD) AND IN S HIP SCRAP TRADERS VS. CIT (2001) 251 ITR 806 (BOM). THUS WE AGREE WIT H THE REASONING GIVEN BY THE LD. CIT(A) THAT SCRAP GENERATED FROM M ANUFACTURING HAS THE SAME COMPOSITION AS THE FINAL PRODUCT SOLD BY THE A SSESSEE BECAUSE RAW 4 MATERIAL IN MANUFACTURING THE FINAL PRODUCT OF THE SCRAP GENERATED DURING THE COURSE OF MANUFACTURING OF SUCH FINAL PRODUCT I S THE SAME. THEREFORE, THERE CANNOT BE ANY DISTINCTION MADE BETWEEN THE IN COME RECEIVED ON SALE OF SCRAP AND INCOME RECEIVED FROM SALE OF FINAL PRO DUCT. IN VIEW OF THIS, WE CONFIRM THE ORDER OF LD. CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 27/8/2010. SD/- SD/- (BHAVNESH SAINI) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBE R AHMEDABAD, DATED :27/8/2010. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD