Saraswati Dynamics Pvt. Ltd., Roorkee V. ACIT, Haridwar

ITA 4376/DEL/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3042 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 22-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 03-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: DR RAKESH GUPTA; SOMIL AGARWAL S
• Keywords: Depreciation
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER R.K. PANDA, ACCOUNTANT MEMBER R.K. PANDA, ACCOUNTANT MEMBER R.K. PANDA, ACCOUNTANT MEMBER AND AND AND AND MS. SUCHITRA KAMBLE MS. SUCHITRA KAMBLE MS. SUCHITRA KAMBLE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA ITAITA ITA NO NONO NO S SS S . .. . 1563/DEL/2011 & 4376/DEL/2011 1563/DEL/2011 & 4376/DEL/2011 1563/DEL/2011 & 4376/DEL/2011 1563/DEL/2011 & 4376/DEL/2011 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR S SS S : : : : 2006 2006 2006 2006 - -- - 07 & 2007 07 & 2007 07 & 2007 07 & 2007 - -- - 08 0808 08 M/S SARASWATI DYNAMICS, M/S SARASWATI DYNAMICS, M/S SARASWATI DYNAMICS, M/S SARASWATI DYNAMICS, C CC C- -- -7, INDUSTRIAL ESTATE, 7, INDUSTRIAL ESTATE, 7, INDUSTRIAL ESTATE, 7, INDUSTRIAL ESTATE, ROORKEE. ROORKEE. ROORKEE. ROORKEE. PAN : AAECS6262M. PAN : AAECS6262M. PAN : AAECS6262M. PAN : AAECS6262M. VS. VS. VS. VS. ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, HARDWAR RANGE, HARDWAR RANGE, HARDWAR RANGE, HARDWAR RANGE, HARDWAR. HARDWAR. HARDWAR. HARDWAR. (APPELLANT) (RESPONDENT) APPELLANT BY : DR. RAKESH GUPTA AND SHRI SOMIL AGARWAL, ADVOCATES. RESPONDENT BY : SHRI S.S. RAN A, CIT - DR. DATE OF HEARING : 22.05.2017 22.05.2017 22.05.2017 22.05.2017 DATE OF PRONOUNCEMENT : 26.05.2017 26.05.2017 26.05.2017 26.05.2017 ORDER ORDER ORDER ORDER PER R.K. PANDA, AM PER R.K. PANDA, AM PER R.K. PANDA, AM PER R.K. PANDA, AM : :: :- -- - THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE SEPARATE ORDERS DATED 13 TH DECEMBER, 2010 AND 1 ST JULY, 2011 OF LEARNED CIT(A)-1, DEHRADUN RELATING TO ASSESSMENT YEAR 2006-07 AND 2007-08 RESPECTIVELY. SINCE IDENTICAL ISSUES ARE INVOL VED IN BOTH THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL OF BOTH THE APPEALS RELATES TO DENIAL OF DEDUCTION UNDER SECTION 80IC OF THE INCOME-TAX ACT, 1961 ON THE INCOME ON ACCOUNT O F SERVICE CHARGES. ITA-1563 & 4376/D/2011 2 ITA NO.1563/DEL/2011 ITA NO.1563/DEL/2011 ITA NO.1563/DEL/2011 ITA NO.1563/DEL/2011 (AY : 2006 (AY : 2006 (AY : 2006 (AY : 2006- -- -07) 07) 07) 07) : :: :- -- - 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF PRODUCTION OF ELECTRONIC SY STEM/MACHINES AND EQUIPMENTS AS PER CUSTOMERS VARYING SPECIFICATION S. IT FILED ITS RETURN OF INCOME ON 30 TH NOVEMBER, 2006 DECLARING NIL INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAS RECEIVED AN AMOUNT OF `42, 67,468/- AS SERVICE CHARGES ON WHICH DEDUCTION U/S 80IC HAS BEEN C LAIMED. ON BEING QUESTIONED BY THE ASSESSING OFFICER, IT WAS EXPLAIN ED BY THE ASSESSEE THAT THE SERVICE CHARGES ARE RELATED TO SERVICES RELATED TO AMC OF THE PRODUCTS AND FOR THE SERVICES PROVIDED AFTE R THE WARRANTY PERIOD IS OVER. IT WAS SUBMITTED THAT THE EARNING OF SERVICE CHARGE IS IN CONSEQUENCE AND SUBSEQUENT TO THE MANUFACTURING OF TH E EQUIPMENT HAVING BEEN SOLD BY THE COMPANY DURING THE COURSE OF BUSINESS AND RECEIVED FROM THE CUSTOMERS WHO DO NOT OPT FOR AMC AN D SHOULD THE EQUIPMENTS SOLD REQUIRED MAINTENANCE OR REPAIR OF FAU LT, FOR WHICH, AS A PROVISION FOR AFTER SALES SERVICE AMC. THEREFORE, EA RNING OF THE SERVICE CHARGES IS THE DIRECT RESULT OF THE MANUFACTUR E AND ITS SUBSEQUENT SALE OF EQUIPMENT BY THE COMPANY AND, THERE FORE, CANNOT BE BIFURCATED FOR THE LIMITED PURPOSE OF NOT ALLOWI NG AS REVENUE QUALIFIED FOR THE PURPOSE OF CLAIM U/S 80IC OF THE AC T. 3.1 THE ASSESSING OFFICER CALLED FOR THE DETAILS FROM TH E ASSESSEE AND CONFRONTED THE ASSESSEE TO EXPLAIN AS TO HOW IT IS EN TITLED FOR DEDUCTION U/S 80IC SINCE SUCH SERVICE CHARGES ARE NOT DE RIVED FROM THE ELIGIBLE BUSINESS. REJECTING THE VARIOUS EXPLANATIONS G IVEN BY THE ASSESSEE, THE ASSESSING OFFICER REJECTED THE CLAIM OF 80IC DEDUCTION ON SUCH AMC CHARGES. ITA-1563 & 4376/D/2011 3 4. BEFORE LEARNED CIT(A), THE ASSESSEE, RELYING ON VARI OUS DECISIONS, SUBMITTED THAT IT IS ENTITLED TO DEDUCTION U/S 80IC ON SUCH AMC CHARGES. IT WAS ARGUED THAT FOR CLAIMING SUCH DEDUC TION U/S 80IC OF THE ACT, THE PROFITS AND GAINS SHOULD BE DERIVED BY THE IN DUSTRIAL UNDERTAKING. IT IS NOT NECESSARY THAT THE INCOME SHOU LD BE DERIVED FROM THE MANUFACTURING ACTIVITY ALONE. IT WAS FURTH ER ARGUED THAT SERVICING IS JUST AN EXTENSION AND PART AND PARCEL OF I TS MANUFACTURING ACTIVITY. THE ASSESSEE MANUFACTURES EQUIPMENTS FOR ITS CU STOMERS AND SELLS THE SAME TO THE LATTER. UNDER THE CONTRACT OF SA LES, THE ASSESSEE GIVES A YEARS WARRANTY WHICH MEANS THAT IF THE EQUIPM ENT HAS ANY MANUFACTURING DEFECT OR MALFUNCTIONS, IT IS INCUMBENT UPON THE ASSESSEE TO REMOVE SUCH DEFECT AT ITS OWN COST. THEREFORE , THE SERVICING OR REPAIR AND MAINTENANCE OF THE EQUIPMENT S DONE DURING THE WARRANTY PERIOD CAN BE TAKEN AS PART AND PARCEL OF THE CONTRACT FOR SALE. IT WAS ACCORDINGLY ARGUED THAT THE ASSESSEE IS ENTI TLED TO DEDUCTION U/S 80IC OF THE ACT ON ACCOUNT OF AMC CHAR GES. 5. HOWEVER, LEARNED CIT(A) WAS ALSO NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ACTION OF THE ASSESSING OFFICER WITH MINOR RELIEF TO THE ASSESSEE, BY OBSE RVING AS UNDER :- 1.9 IF THE ASSESSEES CONTENTIONS WERE ACCEPTED, THE DIVIDING LINE BETWEEN THE TERMS DERIVED FROM AND ATTRIBUTABLE TO WOULD GET WIDE OUT. SINCE THESE A RE TWO DIFFERENT TERMS WITH CLEARLY DISTINGUISHABLE CONNOTATI ONS, IT IS HELD THAT THE PROFIT ELIGIBLE FOR THE DEDUCTION I N QUESTION IS ONLY THAT WHICH ARISES DIRECTLY FROM THE MANUFACTUR ING OPERATIONS OF THE ASSESSEE AND NOT FROM SECONDARY ACTIVITIES (SUCH AS SERVICING) OR FROM APPLICATION OF INCOME DERIVED FROM MANUFACTURING ACTIVITY (SUCH AS INTEREST INCOME) OR OTHER INCOME WHICH IS INCIDENTAL TO THE OPERATION OF BUSINESS (SUCH AS INSURANCE CLAIM) OR INCOME WHICH HAS NOTHING TO DO WITH THE BUSINESS (SUCH AS GAINS ON SALE OF LAND). ITA-1563 & 4376/D/2011 4 1.10 HAVING HELD THAT THE PROFIT FROM SERVICE CHARGE S IS TAXABLE, THE NEXT STEP WOULD BE TO LOOK AT ITS QUANTI FICATION. THE ASSESSEE HAS NOT MAINTAINED ANY DISTINCTION IN ITS ACCOUNTS BETWEEN THE DIRECT EXPENDITURE INCURRED ON FREE SERVICES AND THAT INCURRED ON PAID SERVICE. SIMILARLY , THERE IS NO SUCH DISTINCTION IN RESPECT OF THE INDIRECT EXP ENSES ALSO. HENCE, THE PROFIT FROM SERVICING HAS TO BE ESTIM ATED. THE AO IGNORED EXPENDITURE ON PARTS AND ON TRAVELLIN G OUTRIGHT AND ALLOWED EXPENDITURE ON SALARY, WAGES AND RENT FULLY WHILE ESTIMATING SUCH PROFIT. IN MY CONSID ERED OPINION, THIS APPROACH IS NOT CORRECT. THE ASSESSEE HAS T O INCUR EXPENDITURE ON PARTS AND TRAVELLING IN CONNECT ION WITH PAID SERVICING JUST AS IT HAS TO INCUR EXPENDITURE ON SALARY AND WAGES AND RENT IN CONNECTION WITH FREE SERVICING. HENCE, APPROPRIATE ALLOCATION OF THESE EX PENSES HAS TO BE MADE BETWEEN THESE TWO COMPONENTS. IN THE ABSENCE OF THE RELEVANT INFORMATION (WHICH COULD BE PROVIDED BY THE ASSESSEE ONLY), I WOULD APPLY THE THUM B RULE AND ALLOCATE THE ENTIRE QUANTUM OF EXPENDITURE RELATING TO SERVICE EQUALLY BETWEEN THE CHARGEABLE P ART AND FREE PART OF SERVICING. BY THIS LOGIC, THE DEDU CTIBLE DIRECT EXPENDITURE WORKS OUT TO RS.12,87,585/-. AS RE GARDS INDIRECT EXPENDITURE, THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE SHOWS THE FOLLOWING INDIRECT EXPENSES. ADMINISTRATIVE AND OTHER EXPENSES 12285253 SELLING AND DISTRIBUTION EXPENSE S 5962532 FINANCIAL CHARGES 3040479 DEPRECIATION 3349558 TOTAL 24637822 CONSIDERING THAT SERVICE CHARGES CONSTITUTED 5.70% OF SALES, THE SAME PERCENTAGE OF THE INDIRECT EXPENSES MAY BE TAKEN AS INCURRED TOWARDS INCOME BY WAY OF SERVIC E CHARGES. THIS AMOUNT COMES TO RS.2,43,245/-. THUS, THE INCOME BY WAY OF SERVICE CHARGES MAY BE RECOMPUTED AS BELOW : RECEIPT OF SERVICE CHARGES 4267468 LESS DIRECT EXPENSES 1287585 INDIRECT EXPENSES 243245 1530830 PROFIT FROM SERVICING 2736638 ITA-1563 & 4376/D/2011 5 THE ASSESSEE THUS GETS RELIEF OF RS.6,82,022/- IN COMPUTATION OF PROFIT FROM SERVICING OF EQUIPMENT. THE OTHER ITEMS OF INCOME TAKEN BY THE AO REMAIN UNCHANG ED. THE AO WILL RECOMPUTE THE TAXABLE INCOME AND TAX PA YABLE ACCORDINGLY. AGGRIEVED BY SUCH ORDER OF LEARNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 6. LEARNED COUNSEL FOR THE ASSESSEE, REFERRING TO THE DE CISION OF CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. SPRAY ENGINEERING DEVICES LTD. [2012] 53 SOT 0070, SUBMITTED THAT IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL AND, THE TRIBUNAL, RELYING ON VARIOUS DECISIONS IN PARAGRAPH 53 OF THE OR DER, HAS HELD THAT AMC CHARGES RECEIVED BY THE ASSESSEE ARE DIRECTLY RELATA BLE TO THE BUSINESS CARRIED ON BY THE ASSESSEE OF MANUFACTURING, COMM ISSIONING AND ERECTION OF COOLING SYSTEM AND CONSEQUENTLY, THE A SSESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IB/80IC OF THE ACT. REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INTERNATIONAL DATA MANAGEMENT LTD. [2003] 261 ITR 177, HE SUBMITTED THAT HONBLE BOMBAY HIGH COURT IN THE SAID DECISION HAS HELD THAT WHERE THE ASSESSEE DERIVED INCOME AS IT RENDE RED SERVICE AND MAINTENANCE FACILITY TO ITS CLIENTS FOR WHICH IT CHARGED SERVICE AND MAINTENANCE CHARGES, THERE WAS A DIRECT NEXUS BETWEEN THE RECEIPTS FROM RENDERING SERVICES AND MAINTENANCE FACILITY TO I TS CLIENTS AND LEASE RENT AND THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE. THEREFORE, THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80I IN RESPECT OF THAT INCOME. HE, ACCORDINGLY, SUBMITTED THAT IN VIEW OF THE ABOVE TWO DECISIONS, THE AMC CHARGES RECEIVED BY THE ASSESSEE ARE EL IGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. ITA-1563 & 4376/D/2011 6 7. LEARNED DR, ON THE OTHER HAND, HEAVILY RELIED ON THE ORDER OF THE LEARNED CIT(A). HE SUBMITTED THAT SINCE ANNUAL MAINT ENANCE CHARGES ARE NOT DERIVED FROM THE ELIGIBLE BUSINESS OF THE ASSESSEE , THEREFORE, THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN DENYING THE BENEFIT OF DEDUCTION U/S 80IC OF THE ACT. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND LEARNED C IT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE AL SO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THAT TH E ONLY ISSUE TO BE DECIDED IN THE IMPUGNED APPEAL IS REGARDING THE ELIG IBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S 80IC ON ACCOUNT OF THE A MC CHARGES. IT IS THE CASE OF THE REVENUE THAT SUCH SERVICE CHARGES ARE NOT DERIVED FROM THE ELIGIBLE BUSINESS AND, THEREFORE, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80IC. IT IS THE CASE OF THE ASSESSEE THA T SUCH AMC CHARGES ARE DIRECTLY RELATABLE TO THE BUSINESS CARRIED ON BY THE ASSESSEE OF MANUFACTURING, COMMISSIONING AND ERECTION OF ELECTRONIC SYSTEMS, MACHINES AND EQUIPMENTS AS PER CUSTOMERS VARYING SPECIFICATIONS AND, THEREFORE, SUCH AMC CHARGES ARE DIR ECTLY RELATABLE TO THE BUSINESS CARRIED ON BY THE ASSESSEE. 9. WE FIND MERIT IN THE ABOVE ARGUMENT OF THE LEARN ED COUNSEL FOR THE ASSESSEE. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF SPRAY ENGINEERING DEVICES LTD. (SUPRA). WE FIND THE TRIBUNAL, FOLLOWING THE DECISIO N OF HONBLE HIMACHAL PRADESH HIGH COURT IN ASSESSEES OWN CASE, HAS AL LOWED THE CLAIM OF DEDUCTION U/S 80IC ON ANNUAL MAINTENANCE CH ARGES RECEIVED BY THE ASSESSEE. THE RELEVANT OBSERVATION OF THE TRIBUN AL AT PARAGRAPH NOS.52 & 53 READS AS UNDER :- ITA-1563 & 4376/D/2011 7 52. THE ASSESSEE HAS FURNISHED ON RECORD COMMUNICATION WITH CERTAIN CUSTOMERS TO WHOM IT HAD SUPPLIED THE COOLING AND CONDENSING SYSTEMS AND ANNUAL MAINTENANCE CONTRACT (AMC) OF THE SAID SYSTEMS WERE TO BE CARRIED OUT BY THE ASSESSEE AT NEGOTIATED TERMS AND CONDITIONS. THE CLAIM OF THE ASSESSEE WAS THAT IT WAS PROVIDING AMC TO ONLY SUCH COOLING AND CONDENSING SYSTEMS, WHICH WERE MANUFACTURED BY IT AND SUPPLIED TO THE CUSTOMERS AS THE SYSTEMS PROVIDED BY THE ASSESSEE WERE CLIENT BASED, DEPENDING ON THE SIZE OF THE SUGAR MILL AND TYPE OF THE EXISTING SUGAR MILL. THE TOTAL AMC CHARGES RECEIVED BY THE ASSESSEE DURING THE YEAR WERE RS.37,75,423/-. WE FIND THAT THE HONBLE HIMACHAL P RADESH HIGH COURT IN ASSESSEES OWN CASE IN ITA NO.39 OF 2006 VIDE DECISION DATED 7.11.2009 HAD HELD THAT THE WORD S DERIVED FROM IN SECTION 80IB OF THE ACT WERE MUCH NARROWER IN CONNOTATION AS COMPARED TO THE WORDS ATTRIBUTABLE TO. IT WAS FURTHER LAID DOWN THAT TH E INDUSTRIAL UNDERTAKING WOULD BE ENTITLED TO CLAIM DEDUCTIONS UNDER SECTION 80-IB ONLY IF IT SHOWS THAT T HE PROFIT IS DERIVED FROM THE BUSINESS OF SUCH INDUSTRIAL UNDERTAKING. THE INCOME SHOULD BE DERIVED FROM THE OPERATIONAL PROFITS OF THE BUSINESS AND THE SOURCE OF INCOME SHOULD BE BUSINESS ITSELF. THE HONBLE HIGH COUR T AFTER LAYING DOWN THE ABOVE SAID PRINCIPLES HELD THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80IB OF THE ACT ON MODVAT CREDIT AND ALSO ERECTION A ND COMMISSIONING CHARGES, BEING DIRECTLY RELATABLE TO THE BUSINESS AND THE SOURCE OF THE INCOME BEING BUSINESS ITSELF. THE HONBLE HIGH COURT FURTHER HELD THAT WH EN THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE, THE WORK MANUFACTURE CANNOT BE READ SO NARROWLY SO AS TO LIMIT THE AMOUNT ONLY TO THE PRICE OF THE GOODS SOLD. IF THE MANUFACTURER IS REQUIRED BY THE CUSTOMER TO ERECT AND COMMISSION THE MACHINERY THE AMOUNT RECEIVED BY IT ON THIS COUNT IS INCOME DERIVED FROM THE BUSINESS ITSELF AN D THEREFORE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-I B. 53. FOLLOWING THE ABOVE SAID PARITY OF REASONING AND IN VIEW OF THE FACTUAL ASPECT BROUGHT ON RECORD BY THE ASSESSEE, WE HOLD THAT AMC CHARGES RECEIVED BY THE ASSESSEE ARE DIRECTLY RELATABLE TO THE BUSINESS CARRIED ON BY THE ASSESSEE OF MANUFACTURING, COMMISSIONING AND ERECTION OF COOLING SYSTEM AND CONSEQUENTLY THE ASSESSEE IS ELIGIBLE TO THE CLAIM OF DEDUCTION U/S 80IB/80IC O F THE ACT. GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED. ITA-1563 & 4376/D/2011 8 10. WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF INTERNATIONAL DATA MANAGEMENT LTD. (SUPRA) HAS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80I ON ITS INCOME FROM SERVICE CHARGES, MAINTENANCE REVENUE AND LEASE RENT. THE RELEVANT OB SERVATION OF HONBLE HIGH COURT AT PAGE 184 READS AS UNDER :- QUESTION NO.6 : 6. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW AND WITHOUT PREJUDICE TO THE AB OVE, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 8 0-I ON MERITS AS THE ASSESSEES INCOME FROM SERVICE CHARGES, MAINTENANCE REVENUE AND LEASE RENT CANNOT BE TREATED AS INCOME DERIVED FROM INDUSTRIAL UNDERTAKING WITHIN TH E MEANING OF SECTION 80-I? UNDER SECTION 80-I(1), SPECIAL DEDUCTION IS GIVEN IN R ESPECT OF PROFITS AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKI NG. ACCORDING TO THE ASSESSING OFFICER, RECEIPTS BY WAY OF SERVICE AND MAINTENANCE CHARGES HAVE BEEN INCLUDED IN PROFITS DERIVED FROM MANUFACTURING OPERATIONS. THAT THESE RECEIPTS CANNOT FORM PART OF PROFITS DERIVED FROM IND USTRIAL UNDERTAKING. THEREFORE, THE ASSESSING OFFICER EXCLUDED RECEIPT OF SERVICE CHARGES AND MAINTENANCE CHARGES FRO M THE ELIGIBLE PROFITS. IN THIS CASE, THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF MANUFACTURE AND SALE OF DATA PROCESSING CARDS, RIBBONS AND MINI MICRO-BASED SYSTEMS. IT IS ALSO A DEALER IN COMPUTER SOFTWARE AND COMPUTER HARDWARE. THIS FINDING IS ALSO RECORDED BY THE TRIBUNAL IN ITS ORDERS FOR THE EARLIER YEARS. THE ASSESSEE DERIVES INCOME AS IT RENDERS SERVICE AND MAINTENANCE FACILITY TO ITS CLIENTS FOR W HICH IT CHARGES SERVICE AND MAINTENANCE CHARGES. THEREFORE, THERE IS A DIRECT NEXUS BETWEEN THE IMPUGNED RECEIPTS AND THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE. THIS IS A FINDING OF FACT ALSO RECORDED BY THE TRIBUNAL. WE DO NOT SEE ANY REASON TO INTERFERE WITH THIS FINDING OF FACT. ACCORDINGLY, WE ANSWER THE QUESTION IN THE AFFIRMATIV E, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. ITA-1563 & 4376/D/2011 9 11. RESPECTFULLY FOLLOWING THE DECISIONS CITED SUPRA, W E HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IC ON THE AMC CHA RGES. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. ITA NO.4376/DEL/2011 ITA NO.4376/DEL/2011 ITA NO.4376/DEL/2011 ITA NO.4376/DEL/2011 (AY : 2007 (AY : 2007 (AY : 2007 (AY : 2007- -- -08) 08) 08) 08) : :: :- -- - 12. AFTER HEARING BOTH SIDES, WE FIND THE GROUNDS RAISE D BY THE ASSESSEE IN THIS APPEAL ARE IDENTICAL TO THE GROUNDS RAISE D BY IT IN ITA NO.1563/DEL/2011 FOR ASSESSMENT YEAR 2006-07. WE HAVE ALREADY DECIDED THE ISSUE BY HOLDING THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S 80IC OF THE ACT ON THE AMC CHARGES RECE IVED BY IT. FOLLOWING THE SAME REASONING, THE GROUNDS RAISED BY TH E ASSESSEE IN THIS APPEAL ARE ALSO ALLOWED. 13. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 26.05.2017. SD/- SD/- (SUCHITRA KAMBLE (SUCHITRA KAMBLE (SUCHITRA KAMBLE (SUCHITRA KAMBLE ) )) ) ( (( ( R.K. PANDA R.K. PANDA R.K. PANDA R.K. PANDA ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER VK. COPY FORWARDED TO: - 1. APPELLANT : M/S SARASWATI DYNAMICS, M/S SARASWATI DYNAMICS, M/S SARASWATI DYNAMICS, M/S SARASWATI DYNAMICS, C CC C- -- -7, INDUSTRIAL ESTATE, ROORKEE. 7, INDUSTRIAL ESTATE, ROORKEE. 7, INDUSTRIAL ESTATE, ROORKEE. 7, INDUSTRIAL ESTATE, ROORKEE. 2. RESPONDENT : ADDITIONAL COMMISSIONER OF INCOME TA X, ADDITIONAL COMMISSIONER OF INCOME TAX, ADDITIONAL COMMISSIONER OF INCOME TAX, ADDITIONAL COMMISSIONER OF INCOME TAX, HARDWAR HARDWAR HARDWAR HARDWAR RANGE, HARDWAR. RANGE, HARDWAR. RANGE, HARDWAR. RANGE, HARDWAR. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR