ITO - 8(2)(1), MUMBAI V. M/s. INFINITI MODULES P. LTD., MUMBAI

ITA 4350/MUM/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55327 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 07-09-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 28-07-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income
• Section: 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SI NGH (AM) ITA NO. 4350/M/2006 ASSESSMENT YEAR: 2001-2002 THE INCOME TAX OFFICER-8(2)(1), ROOM NO.212, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI 400 020. INFINITE MODULES PRIVATE LIMITED , SHIV KUTIR, N.S. ROAD, NO.5, JVPD SCHEME, VILE PARLE (W), MUMBAI 400 049. PAN: AAACI4696P (APPELLANT) (RESPONDENT) APPELLANT BY: RESPONDENT BY: SHRI D.S. SUNDER SINGH, DR SHRI I.P. RATHI, AR DATE OF HEARING: DATE OF PRONOUNCEMENT: 07-09-2011 21-09-2011 O R D E R PER RAJENDRA SINGH (AM): THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 3.5.2006 OF CIT (A) FOR THE ASSESSMENT YEAR 2001-2002. THE ONLY DISPUTE IS REGARDING THE RECTIFICATION APPLICATION OF THE ASSESSEE U/S 1 54 OF THE INCOME TAX ACT WHICH HAD BEEN REJECTED BY THE AO BUT ON APPEAL IT WAS ALLOWED BY THE LD. CIT (A). 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY WAS IN THE BUSINESS OF MANUFACTURING AND ASSEMBLING OF MODULAR FURNITURE. FOR THE RELEVANT YEAR, THE ASSESSEE HAD DECLARED TOTAL TURN OVER OF RS. 3,01,68,607/- WHICH INCLUDED SALES OF RS. 2,99,44,516/- AND OTHER INCOME OF RS. 2,24,091/-. THE AO NOTED THAT THE ASSESSEE PROCURED RAW MATERIA L IN THE FORM OF LAMINATED ITA 4350/M/2006 INFINITI MODULES PVT. LTD. 2 PANELS, ALUMINUM EXTRUSIONS, VARIOUS ANGLES, CHANNE LS AND BRACKETS AND THEN THESE MATERIAL WERE CUT OR PRESSED OR CUT ACCORDING TO THE VARIOUS SIZES NEEDED BY THE ASSESSEE COMPANY FOR ASSEMBLING THE SAME AS MODULAR FURNITURE REQUIRED BY THE CUSTOMERS, AT THEIR SITES. THUS TH E MANUFACTURING ACTIVITY WAS LIMITED TO CUTTING, PRESSING, GIVING VARIOUS SIZES AND SHAPES TO THE PANELS AT FACTORY PREMISES AT GOA. AO ALSO NOTED THAT ASSEMB LING OF COMPONENTS MANUFACTURED BY THE ASSESSEE WERE DONE AT THE SITE OF THE CUSTOMERS WHERE THE GOODS WERE SUPPLIED BY THE SUPPLIERS DIRECTLY. THEREFORE, THOUGH THE MANUFACTURING OF COMPONENTS WAS DONE IN THE SPECIFI ED AREA AS MENTIONED IN THE EIGHTH SCHEDULE OF THE IT ACT, THE ASSEMBLING O F THESE COMPONENTS ALONG WITH OTHER PARTS, WHICH WERE PROCURED DIRECTLY FROM THE MARKET, WERE DONE AT THE PLACES LIKE MUMBAI, AHMEDABAD, BANGALORE AND PU NE ETC. AO THEREFORE, HELD THAT THE ASSESSEE COMPANY WAS ELIGIBLE FOR DED UCTION U/S 80-IB(4) ONLY IN RESPECT OF GOODS OR ARTICLES MANUFACTURED OR PRODUC ED IN THE INDUSTRIAL UNDERTAKING SITUATED IN THE INDUSTRIALLY BACKWARD A REA AS SPECIFIED IN THE EIGHTH SCHEDULE. THE AO NOTED FROM THE EXCISE REGISTER RG (1) THAT THE ASSESSEE HAD MANUFACTURED CERTAIN ITEMS IN ITS FACTORY AT GOA. THE AO ASKED THE ASSESSEE TO GIVE BREAK UP OF THE TOTAL TURN OVER WITH REGARD TO THE GOODS MANUFACTURED AND GOODS PROCURED FROM VARIOUS PARTIES OUTSIDE THE SPECIFIED AREA AND USED DIRECTLY ON THE SITES OF THE CUSTOMERS LOCATED IN D IFFERENT SITES LIKE MUMBAI, BANGALORE, CHENNAI, AHMEDABAD & PUNE. THE ASSESSE E EXPRESSED ITS INABILITY TO QUANTIFY THE AMOUNT OF SALES OF GOODS MANUFACTUR ED AT ITS FACTORY AND OTHER GOODS PROCURED FROM OUTSIDE. THE AO HOWEVER, NOTED THAT AS PER THE EXCISE REGISTER, RG-1, THE TOTAL SALE WAS RS. 2,03,20,279/ -. THE AO FURTHER NOTED THAT OUT OF THE SAID TOTAL SALES OF GOODS AMOUNTING TO R S. 77,10,568/- AND RS. 8,01,313/- HAD NOT BEEN MANUFACTURED IN THE UNIT AS NO EXCISE DUTY HAD BEEN ITA 4350/M/2006 INFINITI MODULES PVT. LTD. 3 PAID. THEREFORE, THE GOODS MANUFACTURED IN THE FAC TORY SITUATED IN THE NOTIFIED AREA WERE ONLY TO THE EXTENT OF RS. 1,18,08,398/-. AO THEREFORE, ALLOWED DEDUCTION U/S 80-IB(4) ONLY IN RELATION TO THE SALE S OF RS. 1,18,08,398/-, WHICH CAME TO RS. 33,54,446/-. 2.1 IN APPEAL, THE ASSESSEE SUBMITTED THAT THE GOOD S TO THE EXTENT OF RS. 77,08,982/- AND RS. 8,01,313/- (AGGREGATED TO RS. 8 5,11,881/-) HAD BEEN SOLD TO COGNIZANT TECHNOLOGY SOLUTIONS INDIA LTD. WHICH WAS 100% EXPORT ORIENTED UNIT AND THEREFORE, THE GOODS WERE EXEMPTED FROM PA YMENT OF EXCISE DUTY. THE GOODS SOLD TO THE SAID PARTY WERE CLEARED WITHO UT PAYMENT OF EXCISE DUTY. THE ASSESSEE HAD MANUFACTURED THE GOODS BUT NO EXCI SE DUTY WAS PAYABLE BECAUSE SALES HAD BEEN MADE TO THE 100% EXPORT ORI ENTED UNIT. THE LD. CIT (A), THEREFORE, HELD THAT THE ASSESSEE WAS ENTITLED FOR DEDUCTION U/S 80-IB(4) IN RESPECT OF SAID SALES. AS REGARDS THE OTHER INCOM E OF RS. 2,24,091/- WHICH COMPRISED OF INTEREST AND OTHER INCOME, CIT (A) UP HELD THE ORDER OF AO DENYING EXEMPTION U/S 80-IB(4). THE AO WHILE GIVIN G EFFECT TO THE ORDER OF THE CIT (A) DATED 20.10.2004, COMPUTED DEDUCTION U/S 80 -IB(4) ON TURN OVER OF RS. 2,03,20,279/- AT RS. 6,77,241/-. SUBSEQUENTLY, THE ASSESSEE FILED PETITION U/S 154 BEFORE THE AO FOR RECTIFYING THE ORDER ON T HE GROUND THAT THE TURN OVER COMPUTED WHILE COMPUTING THE DEDUCTION U/S 80-IB(4) HAD BEEN INCORRECTLY ADOPTED. THE ASSESSING OFFICER IN THE ORDER DATED 24.6.2005 U/S 154 HELD THAT THE AO HAD CORRECTLY COMPUTED DEDUCTION U/S 80-IB(4 ) ON TURN OVER OF RS. 2,03,20,279/- AS PER THE DIRECTION OF THE CIT (A) A ND THEREFORE, THERE WAS NO APPARENT MISTAKE. ACCORDINGLY THE PETITION U/S 154 WAS REJECTED. 2.2. THE ASSESSEE DISPUTED THE DECISION OF THE AO A ND SUBMITTED BEFORE THE CIT (A) THAT THE ACTION OF THE AO IN ADOPTING TOTAL TURNOVER OF ONLY RS. 2,03,20,779/- WAS NOT CORRECT. THE CIT (A) AGREED WITH THE ASSESSEE AND HELD ITA 4350/M/2006 INFINITI MODULES PVT. LTD. 4 THAT WHEN THE AO CAME TO THE CONCLUSION THAT TURNOV ER TO THE EXTENT OF RS. 85,11,881/- DID NOT REPRESENT THE GOODS MANUFACTURE D IN THE FACTORY OF THE ASSESSEE COMPANY, THE SAID AMOUNT WAS REQUIRED TO B E DEDUCTED FROM THE TOTAL TURNOVER OF RS. 2,99,44,516/- AND NOT FROM RS. 2,03 ,20,279/- . HE THEREFORE, DIRECTED THE AO TO ADOPT THE TURN OVER OF RS. 2,99, 44,516/- FOR COMPUTING OF DEDUCTION U/S 80-IB(4) AND THUS ALLOWED THE APPLICA TION OF THE ASSESSEE U/S 154. AGGRIEVED BY THE SAID DECISION, THE REVENUE I S IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUPPOR TED THE ORDER OF THE CIT (A) AND SUBMITTED THAT THERE WAS APPARENT MISTAKE I N THE ORDER OF AO WHICH WAS REQUIRED TO BE CORRECTED AND THEREFORE, ORDER O F THE CIT (A) SHOULD BE UPHELD. THE LEARNED DR ON THE OTHER HAND STRONGLY SUPPORTED THE AO REJECTING THE RECTIFICATION PETITION. HE PLACED RELIANCE ON THE FINDING OF THE AO IN THE ASSESSMENT ORDER AND IN THE ORDER U/S 154. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE ASSESSEE COMPANY WHO WAS IN THE BUS INESS OF MANUFACTURING OF MODULAR FURNITURE HAD DECLARED TOTAL TURNOVER OF RS . 2,99,44,516/- FOR THE RELEVANT YEAR. THE AO NOTED THAT THE ASSESSEE WAS MANUFACTURING CERTAIN COMPONENTS IN THE FACTORY PREMISES SITUATED IN THE BACKWARD AREA WHICH WAS ENTITLED FOR DEDUCTION U/S 80-IB(4). THE ASSESSEE WAS ASSEMBLING THESE COMPONENTS AND OTHER PARTS PROCURED DIRECTLY FROM T HE MARKET AT THE PREMISES OF THE CUSTOMERS AT DIFFERENT PLACES LIKE MUMBAI, A HMEDABAD, PUNE ETC. THE AO CALLED FOR DETAILS OF SALES OF GOODS MANUFACTURE D BY THE ASSESSEE AT ITS FACTORY AND OTHER GOODS PROCURED FROM OUT SIDE WHIC H WERE INCLUDED IN THE SALES BUT THE ASSESSEE COULD NOT GIVE THE BIFURCATI ON. THE AO, THEREFORE, CONSIDERED THE SALES OF RS. 2,03,20,279/- AS PER TH E EXCISE REGISTER RG-1 AS ITA 4350/M/2006 INFINITI MODULES PVT. LTD. 5 THE MANUFACTURING SALES. FROM THE SALES, AO EXCLU DED THE SALES TO THE TUNE OF RS. 85,11,881/- WHICH WERE NOT SUBJECT TO LEVY OF E XCISE DUTY AND ALLOWED DEDUCTION U/S 80-IB(4) ONLY IN RESPECT OF SALES OF RS. 1,18,08,398/- (2,03,20,279 85,11,881). SUBSEQUENTLY CIT (A) AL LOWED THE SUM OF RS. 85,11,881/- ALSO AS A MANUFACTURING SALE AND THEREA FTER WHILE GIVING EFFECT TO THE ORDER OF CIT (A), THE AO ALLOWED DEDUCTION IN R ESPECT OF THE TURNOVER OF RS. 2,03,20,279/-. THERE WAS THUS NO APPARENT MISTAKE IN THE ORDER OR AO. THE AO IN THE ASSESSMENT ORDER HAD CONSIDERED THE TOTAL SALES OF RS. 2,99,44,516/- AND AFTER EXAMINATION CONCLUDED THAT THE MANUFACTUR ING SALES WERE ONLY TO THE TUNE OF RS. 2,03,20,279/- AT THE FACTORY PREMISES I N THE BACKWARD AREA WHICH WAS ENTITLED FOR DEDUCTION U/S 80-IB(4). THE BALAN CE SALES WERE OBVIOUSLY NOT TREATED BY AO AS MANUFACTURING SALES ENTITLED FOR D EDUCTION U/S 80-IB(4). IT WAS A CONSCIOUS DECISION OF THE AO AND IN CASE THE ASSESSEE WAS NOT SATISFIED, IT COULD HAVE DISPUTED THE SAME BEFORE THE CIT (A). THE DISPUTE RAISED BEFORE THE CIT (A) WAS ONLY IN RESPECT OF EXCLUSION OF SAL ES OF RS. 85,11,881/- ON THE GROUND OF NON-PAYMENT OF EXCISE DUTY, WHICH WAS ALL OWED BY CIT(A), THE AO IN THE APPEAL EFFECT ORDER CONSIDERED THE SALES OF RS. 2,03,20,279/- AS MANUFACTURED SALES FOR DEDUCTION U/S 80-IB(4). THE REFORE, THERE WAS NO APPARENT MISTAKE WHICH COULD BE RECTIFIED U/S 154. THE ORDER OF CIT (A) HOLDING THAT THERE WAS APPARENT MISTAKE IN THE ORDE R OF AO CANNOT BE SUSTAINED. WE THEREFORE, SET ASIDE THE ORDER OF CI T (A) AND ALLOW THE APPEAL OF THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED. THE ORDER WAS PRONOUNCED IN OPEN COURT ON 21 ST SEPTEMBER, 2011 SD/- SD/- (D.K. AGARWAL) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA 4350/M/2006 INFINITI MODULES PVT. LTD. 6 DATE :21-09-2011 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR A BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI