Satnam Overseas Ltd., V. ITO, Co. Ward-7(4),

ITA 416/DEL/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9970 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 29-07-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 28-01-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S NARSIMA
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G. BANSAL ITA NO.416/D/05 ASSESSMENT YEAR : 1999-2000 M/S SATNAM OVERSEAS LTD., VS. INCOME-TAX OFFICER, 201, VIIPS CENTRE, MASJID WARD 7(4), MOTH, G.K.-II, NEW DELHI NEW DELHI PAN/GIR NO.AAACS2470D ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI SALIL AGGARWAL, ADVOCATE RESPONDENT BY : SMT. S. NARSIMA, SR. DR O R D E R PER C.L. SETHI, JM: THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 2 3.11.2004 PASSED BY THE LEARNED CIT(A) FOR THE ASSESSMENT YEAR 1999-200 0. 2. THE GROUND NO.1 RAISED BY THE ASSESSEE IS DIRECT ED AGAINST THE CIT(A)S ORDER IN CONFIRMING THE ACTION OF THE ASSE SSING OFFICER IN NOT ALLOWING DEDUCTION U/S 80 1A IN RESPECT OF INCOME FROM SALE OF LICENSES, WEIGH BRIDGE INCOME, RENT RECEIVED AND OTHER MISCEL LANEOUS INCOME COMPRISING SCRAP SALE AND CLAIM RECEIVED FROM FOREI GN BUYERS FOR NOT HONORING CONTRACTS ENTERED INTO WITH THEM. ITA NO.416/D/05 2 2.1 WHILE COMPUTING THE DEDUCTION U/S 80 1A, THE AS SESSING OFFICER HAS NOT ALLOWED DEDUCTION IN RESPECT OF THE FOLLOWING I TEMS:- S.NO. PARTICULARS AMOUNT (RS.) 1. SALE OF LICENCES 1,44,40,867 2. OTHER MISC. INCOME SCRAP SALE AND CLAIM RECEIVED FROM FOREIGN BUYERS FOR NON COMMITMENT OF HONORING THEIR CONTRACTS 2,40,946 3. WEIGH BRIDGE INCOME 57,263 4. RENT RECEIVED 4,800 TOTAL 1,47,43,876 2.2 ON APPEAL, THE CIT(A) CONFIRMED THE ASSESSING O FFICERS ACTION BY HOLDING THAT THE AFORESAID INCOME CANNOT BE SAID TO HAVE BEEN DERIVED FROM INDUSTRIAL UNDERTAKING SO AS TO ALLOW DEDUCTION U/S 80 1A IN RESPECT OF THE AFORESAID INCOMES. 2.3 IN THE COURSE OF HEARING OF THIS APPEAL, THE LE ARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT EXCEPT MISCELLANEOUS IN COME COMPRISING SCRAP SALE AND CLAIM FROM FOREIGN BUYER, THE ASSESSEE HAS NO CASE TO CLAIM DEDUCTION U/S 80 1A OF THE ACT. IN OTHER WORDS, TH E ASSESSEE SUBMITTED THAT AS PER LAW, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCT ION U/S 80 1A IN RESPECT OF THE INCOME BY WAY OF SALE OF LICENCES, WEIGH BRIDGE INCOME AND RENT RECEIVED. HOWEVER, HE SUBMITTED THAT WITH REGARD T O THE INCOME FROM SCRAP SALE AND CLAIM RECEIVED FROM FOREIGN BUYER, THE ASS ESSEE IS ELIGIBLE FOR ITA NO.416/D/05 3 DEDUCTION U/S 80 1A PROVIDED, IT IS ESTABLISHED THA T THE SALE OF SCRAP IS OF SUCH A SCRAP WHICH WAS GENERATED IN THE COURSE OF M ANUFACTURING PROCESS AND THE CLAIM RECEIVED FROM FOREIGN BUYER IS IN RES PECT OF ANY SALE OF GOODS MANUFACTURED BY THE ASSESSEE IN THE ELIGIBLE INDUST RIAL UNDERTAKING. IN THIS RESPECT, HE SUBMITTED THAT IDENTICAL ISSUE HAS BEEN RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR HIS FRESH ADJUDICATION AF TER EXAMINING WHETHER THE SCRAP SOLD BY THE ASSESSEE WAS GENERATED IN THE COU RSE OF MANUFACTURING PROCESS OR NOT AND SIMILARLY IT IS TO BE ASCERTAIN ED AS TO WHETHER CLAIM RECEIVED FROM FOREIGN BUYER IS IN RESPECT OF THE SU PPLY OF GOODS MANUFACTURED IN THE ELIGIBLE INDUSTRIAL UNITS OF TH E ASSESSEE. 2.4 AFTER CONSIDERING THE AFORESAID SUBMISSION AND HEARING BOTH THE PARTIES, WE UPHOLD THE ORDER OF CIT(A) IN SO FAR AS CONFIRMING THE ASSESSING OFFICERS ORDER IN NOT ALLOWING DEDUCTION U/S 80 1A IN RESPECT OF SALE OF LICENCES, WEIGH BRIDGE INCOME AND RENT RECEIVED. H OWEVER, WITH REGARD TO THE ASSESSEES CLAIM OF DEDUCTION U/S 80 1A IN RESP ECT OF INCOME FROM SCRAP SALE AND CLAIM RECEIVED FROM FOREIGN BUYER, THE MAT TER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR HIS FRESH ADJUDIC ATION AS PER THE OBSERVATION MADE BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN THE ASSESSMENT YEARS 1997-98 & 1998-99. THE ASSESSING OFFICER SHALL EXA MINE WHETHER THE SCRAP IN QUESTION WAS GENERATED IN THE COURSE OF MANUFACT URING PROCESS AND ITA NO.416/D/05 4 WHETHER THE CLAIM RECEIVED FROM FOREIGN BUYER IS IN CONNECTION WITH THE GOODS MANUFACTURED IN THE ELIGIBLE INDUSTRIAL UNDER TAKING OF THE ASSESSEE OR WHETHER IT IS DIRECTLY CONNECTED TO THE BUSINESS OF INDUSTRIAL UNDERTAKING. THE ASSESSING OFFICER SHALL PROVIDE ADEQUATE OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. 3. THE NEXT GROUND IS WITH REGARD TO THE ASSESSEES CLAIM OF DEDUCTION U/S 80HHC OF THE ACT. 3.1 IN THE COURSE OF HEARING OF THE APPEAL, LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES REPORTED IN 266 ITR 5 21, THE ASSESSEE IS OBLIGED TO SET OFF THE LOSS ARISING FROM TRADING AC TIVITY AGAINST THE PROFIT FROM MANUFACTURING ACTIVITY, FOR THE PURPOSE OF DETERMIN ING THE DEDUCTION AVAILABLE U/S 80HHC OF THE ACT. IN SUBSTANCE, IT H AS BEEN SUBMITTED THAT ASSESSEE HAS NO SUBSTANTIVE ARGUMENT TO BE MADE IN SUPPORT OF THE GROUND NO.2 RELATING TO THE DEDUCTION U/S 80HHC OF THE ACT . 3.2 WE HAVE HEARD BOTH THE PARTIES, AND IN THE ABSE NCE OF ANY ARGUMENT AGAINST THE VIEW TAKEN BY THE CIT(A) IN HIS ORDER, WE UPHOLD THE ORDER OF CIT(A) IN SO FAR AS THE ASSESSEES CLAIM OF DEDUCTI ON U/S 80HHC IS CONCERNED. THUS, GROUND NO.2 IS DISMISSED. ITA NO.416/D/05 5 4. IN RESULT, THE APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED IN THE MANNER AS INDICATED ABOVE. 5. THIS ORDER PRONOUNCED IN THE COURT ON 07.08.2009 . SD/- SD/- ( K.G. BANSAL ) ( C.L. SETHI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : AUGUST 7, 2009 NS : COPY OF THE ORDER IN ITA NO.416/D/05 FORWARDED TO : - 1. M/S SATNAM OVERSEAS LTD., 201, VIPPS CENTRE, 2, COMMUNITY COMPLEX, GK-II, NEW DELHI. 2. ITO, WARD 7(4), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY DY. REGISTRAR, ITA NO.416/D/05 6