ISOLLOYD ENGINEERING TECHNOLOGIES LTD., NEW DELHI V. DCIT, CIRCLE- 12(2), NEW DELHI

ITA 3936/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6957 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 16-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 80IC; 80IC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.3936/DEL./2017 (ASSESSMENT YEAR : 2012-13) ISOLLOYD ENGINEERING TECHNOLOGIES LTD., VS. DCIT, CIRCLE 12 (2), 2, PUNJ STAR PREMISES, NEW DELHI. KALKAJI INDUSTRIAL AREA, NEW DELHI 110 019. (PAN : AABCI3194H) (APPELLANT) (RESPONDENT) DATE OF HEARING : 20.02.2020 ASSESSEE BY : NONE REVENUE BY : SHRI S.N. MEENA, SENIOR DR CLARIFICATION DATE OF HEARING : 04.09.2020 ASSESSEE BY : NONE REVENUE BY : SHRI M. BARNWAL, SENIOR DR DATE OF ORDER : 04.09.2020 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, ISOLLOYD ENGINEERING TECHNOLOGIES LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 14.03.2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS)-39, ITA NO.3936/DEL./2017 2 NEW DELI QUA THE ASSESSMENT YEAR 2012-13 ON THE GRO UNDS INTER ALIA THAT :- 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.7,0 8,730/- U/S 80IC ON ACCOUNT OF SCRAP SALES ALLEGING THE SAME NO T RELATING TO THE MANUFACTURING ACTIVITY OF THE APPELLANT COMPANY . THE DISALLOWANCE SUSTAINED BY THE LD. CIT (A) IS WRONG AND BAD IN LAW AND HENCE DESERVES TO BE DELETED. 2. THE APPELLANT CONTENDS THAT INCOME FROM SALE OF SCRAP ARE INEXTRICABLY INTRINSICALLY CONNECTED WITH THE INDUS TRIAL UNDERTAKING AND IS DERIVED FROM SUCH INDUSTRIAL UND ERTAKING. THEREFORE THE CLAIM MADE BY THE ASSESSEE IS A LEGAL LY AND FACTUALLY ALLOWABLE CLAIM U/S 80IC AND THE SAME SHO ULD BE ALLOWED TO THE APPELLANT.' 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE IS HAVING 3 MANUFACTURING UNITS AT NALAGARH, BADDI, DISTRICT SOLAN, HIMACHAL PRADES H. ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IC OF THE INCOME- TAX ACT, 1961 (FOR SHORT THE ACT) QUA ITS SUPERCERA FIBRES UNI T, POLYURETHANE UNIT AND ACOUSTIC UNIT @ 30% ON THE FIRST TWO UNITS AND @ 100% ON THE LAST ONE. HOWEVER, ASSESSING OFFICER (AO) NO TICED SUBSTANTIAL AMOUNT OF SCRAP SALES HAVING BEEN CREDI TED IN THE PROFIT AND LOSS ACCOUNT QUA WHICH ASSESSEE HAS CLAIMED DED UCTION UNDER SECTION 80IC OF THE ACT AT THE RESPECTIVE RATES OF REDUCTION. DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE CO MPANY, AO DISALLOWED DEDUCTION CLAIMED UNDER SECTION 80IC ON THE AMOUNT OF SCRAP SALES AND ADDED TO THE TOTAL INCOME FOR THE T AXATION AS UNDER:- NAME OF THE UNIT AMOUNT RATE OF DEDUCTION ITA NO.3936/DEL./2017 3 OF SCRAP SALE (IN RS.) DEDUCTION CLAIMED U/S 80IC (IN RS.) SUPERCERA FIBRES UNIT 297409 30% 89223 POLYURETHANE UNIT 3624514 30% 1087354 ACOUSTIC DIVISION 4090661 100% 4090661 TOTAL AMOUNT OF DISALLOWANCE 5267238 AND THEREBY MADE AN ADDITION OF RS.52,67,238/- AND ASSESSED THE TOTAL INCOME AT RS.5,14,04,350/-. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY FILING THE APPEAL WHO HAS RESTRICTED THE ADDITION TO RS.7, 08,730/- BY ALLOWING THE DEDUCTION TO THE EXTENT OF RS.45,58,50 0/- U/S 80IC BY PARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PR ESENT APPEAL. 4. ASSESSEE HAS NOT PREFERRED TO PUT IN APPEARANCE DESPITE ISSUANCE OF THE NOTICE AND CONSEQUENTLY, WE PROCEED ED TO DECIDE THE PRESENT APPEAL WITH THE ASSISTANCE OF THE LD. D R AS WELL AS ON THE BASIS OF DOCUMENTS AVAILABLE ON THE FILE. 5. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E FOR THE REVENUE TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.A WE HAVE HEARD LD. DR FOR THE REVENUE ON CLARIFI CATION WHO HAS EXPLAINED THE QUERIES PUT FORTH BY THE BENCH. ITA NO.3936/DEL./2017 4 6. UNDISPUTEDLY, SCRAP QUA WHICH DEDUCTION HAS BEEN CLAIMED BY THE ASSESSEE IS CONSISTING OF EMPTY DRUMS, OFF C UTS, TRIMS, COIL, LEFTOVERS, PACKING MATERIAL, GATTA, SCRAP ROLLS, ET C. WHICH HAS BEEN GENERATED IN THE BUSINESS OF THE ASSESSEE. IT IS S ETTLED PRINCIPLE OF LAW THAT SCRAP GENERATED IN THE BUSINESS IS PART AN D PARCEL OF THE INCOME DERIVED FROM BUSINESS AND AS SUCH FORMS PART OF THE BUSINESS PROFIT AS HAS BEEN HELD BY HONBLE HIGH CO URT OF DELHI IN CASE OF CIT VS. SADU FORGINGS LTD. (2011) 336 ITR 444 (DEL. ) . HOWEVER, LD. CIT (A) THOUGH MENTIONED IN PARA 5.3 O F THE IMPUGNED ORDER THAT, THE ASSESSEES CONTENTION APPEARS PRIMA FACIE PLAUSIBLE YET IT IS NECESSARY TO EXAMINE THE ASSESSEES CLAIM IN THE PRESENT CASE TO ENSURE THAT THE FACTS OF THE CASE ALIGNING WITH THE EXTANT LAW . LD. CIT (A) ACCEPTING THE CONTENTIONS RAISED BY THE ASSESSEE ALLOWED THE DEDUCTION UNDER SECTION 80 IC TO THE EXTENT OF RS.45,58,508/- BUT DISALLOWED THE DEDUCTION TO T HE TUNE OF RS.7,08,730/- ON THE BASIS OF WHIMS AND FANCIES. 7. WE ARE OF THE CONSIDERED VIEW THAT DURING THE AP PELLATE PROCEEDINGS, WHEN LD. CIT (A) HAS DULY OBTAINED AND ANALYZED UNITWISE DETAILS OF SCRAP SOLD IN THE YEAR UNDER AS SESSMENT AND HAS NOT NOTICED ANY DISCREPANCY THEREIN, THE DECISION R ENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SADU FORGINGS LTD. (SUPRA) IS APPLICABLE TO THE FACTS AND CIRCUMSTANC ES OF THE CASE. ITA NO.3936/DEL./2017 5 HENCE, RECEIPT OF SCRAP SALES CLAIMED AS DEDUCTION BY THE ASSESSEE U/S 80IC IS PART AND PARCEL OF BUSINESS ACTIVITIES AND FORMS PART OF THE BUSINESS GAINS, THUS REQUIRED TO BE INCLUDED IN THE GAINS FROM BUSINESS TO BE ELIGIBLE FOR DEDUCTION U/S 80IC. SO , WE ARE OF THE CONSIDERED VIEW THAT LD. CIT (A) HAS ERRED IN DISAL LOWING THE AMOUNT OF RS.7,08,730/- AS DEDUCTION FROM SCRAP SAL ES U/S 80IC. CONSEQUENTLY, THE APPEAL FILED BY THE ASSESSEE IS H EREBY ALLOWED AND REMAINING DISALLOWANCE OF RS.7,08,730/- CLAIMED BY THE ASSESSEE AS DEDUCTION U/S 80IC IS HEREBY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 4 TH DAY OF SEPTEMBER, 2020. SD/- SD/- (O.P. KANT) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 4 TH DAY OF SEPTEMBER, 2020. TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-39, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.