ACIT CC.8, MUMBAI V. J.B. CHEMICALS & PHARMACEUTICAL LTD, MUMBAI

ITA 3597/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1505 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 15-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 02-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K BALODIA
• Assessee Lawyers: D R RAIYANI
• Keywords: Business income
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J BEFORE SHRI N.V. VASUDEVAN (JM) & SHRI B. RAMAKOTAI AH (AM) I.T.A.NO. 3597/MUM/2009 (ASSESSMENT YEAR : 2006-07 ) I.T.A.NO. 3596/MUM/2009 (ASSESSMENT YEAR : 2005-06 ) ACIT CENTRAL CIRCLE 8 8 TH FLOOR, OLD CGO BUILDING ANNEXE, M.K. ROAD MUMBAI-400 020. VS. M/S. J.B. CHEMICALS & PHARMACEUTICALS LIMITED B WING, 4 TH FLOOR NEELAM CENTRE HIND CYCLE ROAD, WORLI MUMBAI-400 030. APPELLANT RESPONDENT PAN/GIR NO. : AAACJ1482J ASSESSEE BY : SHRI D.R. RAIYANI DEPARTMENT BY : SHRI N.K. BALODIA ORDER PER BENCH :- THESE ARE APPEALS BY THE REVENUE AGAINST THE ORDER S BOTH DATED 6.3.2009 OF LEARNED CIT(A)-CENTRAL II, MUMBAI RELAT ING TO A.Y. 2005-06 & 2006-07 RESPECTIVELY. 2. GROUNDS OF APPEAL FOR A.Y. 2005-06 ARE AS FOLLOW S :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN DELETING THE ADDITIONS MADE ON ACCO UNT OF SALE OF SCRAP, EXCHANGE DIFFERENCE, SALE OF STREAM AND INSU RANCE CLAIM WITHOUT CONSIDERING THE FACT THAT THESE INCOME ARE NOT DERIVED FROM INDUSTRIAL UNDERTAKING. 3. GROUNDS OF APPEAL FOR A.Y. 2006-07 ARE AS FOLLOW S :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN DELETING THE ADDITIONS MADE ON ACCO UNT OF SALE OF SCRAP, EXCHANGE DIFFERENCE WITHOUT CONSIDERING THE FACT THAT THESE INCOME ARE NOT DERIVED FROM INDUSTRIAL UNDERTAKING . 4. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLING OF PHARMACEUTICAL PRODUCT AND BULK DRUGS. M/S. J.B. CHEMICALS & PHARMACEUTICALS LIMITED 2 THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION U/S. 8 0IB OF THE ACT. IN RESPECT OF MANUFACTURING ACTIVITY CARRIED ON AT DAM AN SOMNATH UNIT AND DAMAN NON EOU UNIT, FOR A.Y. 2005-06, THE ASSESSEE CLAIMED DEDUCTION U/S. 80IB AT RS. 9,15,54,726/- AS PER THE FOLLOWING DETAILS :- DAMAN/SOMNATH (30% DEDUCTION AVAILABLE) DAMAN/NON EOU (100% DEDUCTION AVAILABLE) TOTAL DEDUCTION U/S.80IB 3,17,22,313 5,98,32,413 9,15,54,726 THE ASSESSING OFFICER WAS OF THE VIEW THAT THE FOLL OWING INCOMES HAVE TO BE EXCLUDED FROM THE PROFITS ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. ACCORDING TO THE ASSESSING OFFICER THEY CANNOT BE S AID TO BE INCOME DERIVED FROM ELIGIBLE BUSINESS. DETAILS IN THIS REG ARD ARE AS FOLLOWS :- HEAD OF INCOME DAMAN/SOMNATH (30% UNIT) DAMAN/NON EOU (100% UNIT) TOTAL SALES OF SCRAP 69106 226862 295968 SALES OF STEAM 97111 0 97111 INSURANCE CLAIM 141984 0 141984 EXCHANGE DIFFERENCE 0 2673033 2673033 TOTAL 308201 2899895 3208096 5. IN A.Y. 2006-07, THE ASSESSEE CLAIMED DEDUCTION U/S. 80IB OF THE ACT AS FOLLOWS :- DAMAN KADIYA (100% DEDUCTION AVAILABLE) TOTAL DEDUCTION U/S.80IB 1,37,14,549 1,37,14,549 THE ASSESSING OFFICER WAS OF THE VIEW THAT THE FOLL OWING INCOMES HAVE TO BE EXCLUDED FROM THE PROFITS ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT ON THE GROUND THAT THEY CANNOT BE SAID TO BE INCOME DE RIVED FROM ELIGIBLE BUSINESS. DETAILS IN THIS REGARD ARE AS FOLLOWS :- HEAD OF INCOME DAMAN K SALES OF SCRAP 290459 EXCHANGE DIFFERENCE 5624187 TOTAL 5914646 M/S. J.B. CHEMICALS & PHARMACEUTICALS LIMITED 3 6. LEARNED CIT(A), HOWEVER, TREATED THE AFORESAID INCOME ALSO AS PART OF THE PROFITS OF THE BUSINESS ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. IN DOING SO, LEARNED CIT(A) FOLLOWED THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2002-03 & 2003-04 IN ITA 2644/MUM /2006 & 2645/MUM/2005. 7. AGGRIEVED BY THE ORDERS OF LEARNED CIT(A), THE R EVENUE HAS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. WE NOTICE THAT THE TRIBUNAL IN A.Y. 2002- 03 & 2003-04 HAS CONSIDERED THE VERY SAME ISSUES IN ASSESSEES OWN CASE. ON THE QUESTION WHETHER EXCHANGE GAIN ARISIN G FROM SALE WAS TO BE TREATED AS PART OF THE SALE PROCEEDS; AND HENCE, PA RT OF THE PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING, THE TRIBUNAL HELD AS F OLLOWS :- WE HAVE HEARD BOTH THE PARTIES. IT IS NOT DISPUTED BY THE DEPARTMENT THAT EXCHANGE GAIN HAS ARISEN OUT OF THE SALES MADE BY THE ASSESSEE. IT IS PART OF EXPORT TURNOVER AND HENCE IT CANNOT BE SAID THAT IT IS NOT PART OF THE PROFITS DERIVED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING. WE HAVE PERUSED THE OPER ATIVE PORTION OF THE APPELLATE ORDERS PASSED BY LEARNED CIT(A). H E HAS GIVEN CONVINCING REASONS FOR INCLUDING THE EXCHANGE GAIN AS PART OF THE PROFITS DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. WE THEREFORE CONFIRM HIS ORDER IN THIS BEHALF. GRO UND NO. 1 TAKEN BY THE DEPARTMENT IN BOTH THE APPEALS IS DISMISSED. ON THE QUESTION WHETHER SALE PROCEEDS OF SCARP AND INSURANCE CLAIM CAN BE TREATED AS PART OF THE SALE PROCEEDS; AND HENCE, PART OF THE PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING, THE TRIBUNAL H ELD AS FOLLOWS :- GROUND NO. 2 IN THE APPEAL FOR A.Y. 2002-03 IS DIR ECTED AGAINST THE ORDER OF LEARNED CIT(A) HOLDING THAT THE SALE O F STEAM (RS. 97,295) AND SCRAP FROM MANUFACTURING PROCESS (RS. 4 1,827) WERE PART OF THE PROFITS DERIVED FROM THE BUSINESS OF IN DUSTRIAL UNDERTAKING AS THEY WERE GENERATED IN THE COURSE OF MANUFACTURING OF AN ARTICLE OR THING, SO AS TO BE I NCLUDIBLE IN THE PROFITS ARRIVED FROM THE BUSINESS OF INDUSTRIAL UND ERTAKING. GROUND NO. 2 IN THE DEPARTMENTS APPEAL FOR A.Y. 20 03-04 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) HOLDIN G THAT THE M/S. J.B. CHEMICALS & PHARMACEUTICALS LIMITED 4 INSURANCE CLAIM, APART FROM SALE OF STEAM AND SALE OF SCRAP, WAS IN THE NATURE OF PROFITS DERIVED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING SO AS TO BE ELIGIBLE FOR RELIEF U/S. 80 IA/80IB OF THE I.T. ACT. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDE R PASSED BY THE LEARNED CIT(A). SALE OF STEAM AND SCR AP AND RECEIPT OF INSURANCE CLAIM HAVE PROXIMATE AND DIRECT RELATI ONSHIP WITH BUSINESS OF INDUSTRIAL UNDERTAKING AND HENCE, IT CA NNOT BE SAID THAT THEY ARE NOT IN THE NATURE OF THE PROFITS DERI VED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. WE HAVE PER USED THE ORDER OF LEARNED CIT(A) IN THIS BEHALF. IN OUR VIEW, HE H AS CORRECTLY APPRECIATED THE FACTUAL AND LEGAL ASPECTS OF THE CA SE. HIS ORDER IS THEREFORE CONFIRMED. GROUND NO. 2 IN BOTH THE APPEA LS IS DISMISSED. 9. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE ON IDENTICAL FACTS, WE UPHOLD T HE ORDERS OF LEARNED CIT(A) AND DISMISS BOTH THESE APPEALS BY THE REVENU E. 10. IN THE RESULT, APPEALS BY THE REVENUE ARE DISMI SSED. ORDER PRONOUNCED ON 18 TH DAY OF JUNE, 2010. SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 18 TH JUNE, 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS