M/s Maini Precision Products Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 457/BANG/2010

• Counselvise Citation: 45721114 RSA 2010
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-04-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 05-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 80HHC; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE RESIDENT AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO.454, 455, 456, 457 & 83 8/BANG/2010 (ASST. YEARS -1998-99, 1999-00, 2000-01, 2002-03 & 2003-04) M/S MAINI PRECISION PRODUCTS PVT. LTD., 6 TH FLOOR, DEVATHA PLAZA, 131, RESIDENCY ROAD, BANGALORE-560 025. . APPELLANT PAN NO.AABCM8269R. VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-12(1), BANGALORE. . RESPONDENT APPELLANT BY : SHRI BALRAM R RAO, ADVOCATE RESPONDENT BY : SHRI SARAVANAN, JCIT DATE OF HEARING : 02-04-2012 DATE OF PRONOUNCEMENT : 13-04-2012 O R D E R PER BENCH : THESE APPEALS ARE FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEARS ARE 1998-99, 1999-00, 2000-01, 2002-03 & 2003 -04. THE APPEALS ARE DIRECTED AGAINST THE ORDER OF THE COMM ISSIONER OF ITA NO.454, 455, 456, 457, 838/B/10 2 INCOME-TAX (APPEALS)- III AT BANGALORE DATED 13.01. 2010. THE APPEALS ARISE OUT OF THE ASSESSMENT COMPLETED U/S 1 43(3) OF THE INCOME-TAX ACT, 1961 2. IN ALL THESE APPEALS THOUGH THE ASSESSEE HAS RAI SED AS MANY AS EIGHT GROUNDS OF APPEAL, WE FIND THAT THE ISSUES AR E ONLY THREE. 3. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF M ACHINING CHARGES FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC. 4. THE SECOND ISSUE RELATES TO NETTING OF MACHINING CHARGES FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC. 5. THE THIRD ISSUE RELATES TO THE LEVY OF INTEREST U/S 234B OF THE INCOME-TAX ACT. 6. AS FAR AS THE FIRST ISSUE IS CONCERNED, WE FIND THAT THE CIT(A) HAS FOLLOWED THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE ASSESSEES OWN CASE IN ITA NOS. 182 TO 285 OF 2009 DATED 18 TH AUG, 2009 FOR THE ASSESSMENT YEARS 1993-94 TO 1997-98, W HEREIN THE HONBLE HIGH COURT HAS DIRECTED THE EXCLUSION OF 90 % OF MACHINING ITA NO.454, 455, 456, 457, 838/B/10 3 CHARGES FOR COMPUTING THE DEDUCTION U/S 80HHC. AS THE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CAS E HAS MADE THE DISALLOWANCE AND THE CIT(A) HAS FOLLOWED PRECEDENT ON THE ISSUE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE SAME. THEREFORE, THE FIRST ISSUE IS DECIDED AGAINST THE ASSESSEE. 7. AS FAR AS THE SECOND ISSUE RELATING TO THE NETTI NG OF MACHINING CHARGES IS CONCERNED, WE FIND THAT IT IS THE CONTEN TION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT ONLY 90% OF NET MACHI NING CHARGES BEING THE GROSS RECEIPT AS REDUCED BY THE RELATED EXPENSE S CHARGED OFF IN THE P & L ACCOUNT ARE TO BE DISALLOWED AND NOT THE GROS S RECEIPTS. FOR THIS PURPOSE, THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES LTD., REPORTED IN 2012-TIOL-13-SC-IT-LB. 8. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ISSUE IS C OVERED IN FAVOUR OF THE REVENUE BY THE FOLLOWING DECISIONS : 1) CIT VS. ASIAN STAR CO. LTD. 326 ITR 56 (BOM) 2) K.S SUBBIAH PILLAI & CO. (INDIA) LTD. VS. CIT, 260 ITR304 (MAD) ITA NO.454, 455, 456, 457, 838/B/10 4 3) RANI PALIWAL VS. CIT, 268 ITR 220 (R & H); WHEREIN IT HAS BEEN HELD THAT GROSS OF INTEREST, BROKERAGE OR COMM ISSION IS TO BE DISALLOWED UNDER CLAUSE (I) OF EXPLANATION (BAA) TO SEC. 80HHC. HE SUBMITTED THAT IN THE CASE BEFORE US, THE ASSESSEE HAS CLAIMED NETTING OF RELATED EXPENSES FROM THE MACHINING CHARGES RECE IVED AND THAT IT CAN BE ALLOWED ONLY WHEN IT IS WHOLLY AND EXCLUSIVE LY INCURRED FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME AS PER THE PROVISIONS OF THE ACT. HE DREW OUR ATTENTION TO THE ASSESSMENT O RDER WHEREIN THE AO HAS HELD THE ASSESSEE HAS FAILED TO SUBSTANTIATE THAT THE EXPENSES CHARGED OFF TO THE P & L ACCOUNT ARE LAID OUT OR EX PENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING TH E MACHINING INCOME AND, THEREFORE, THE SAID EXPENSES CANNOT BE CONSIDERED TO HAVE BEEN INCURRED FOR EARNING MACHINING INCOME. HE SUBM ITTED THAT THE ASSESSEE HAS FAILED TO PRODUCE SUCH AN EVIDENCE EVE N BEFORE THE TRIBUNAL AND, THEREFORE, THE SAME CANNOT BE ALLOWED . 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE HAS FAILED T O SUBSTANTIATE HIS CLAIM THAT THE EXPENSES CHARGED OFF TO THE P & L AC COUNT ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING T HE MACHINING INCOME WHICH IS TREATED AS INCOME FROM OTHER SOURCE S, WHERE AS IN THE ITA NO.454, 455, 456, 457, 838/B/10 5 CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. VS. CIT, THE HONBLE SUPREME COURT UPHELD THE FINDING OF THE HONBLE DEL HI HIGH COURT IN THE CASE OF CIT VS. SHRI RAM HONDA POWER EQUIP, 28 9 ITR 475 HOLDING THAT ONLY 90% OF THE NET AMOUNT OF ANY RECE IPT OF THE NATURE MENTIONED IN CLAUSE (I) OF EXPLANATION (BAA) OF SEC . 80HHC WHICH IS ACTUALLY INCLUDED IN THE PROFITS OF THE ASSESSEE IS TO BE DEDUCTED FROM THE PROFITS OF THE ASSESSEE FOR DETERMINING PROFITS OF THE BUSINESS. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES (CITED SUPRA) W HICH HAS REVERSED THE DECISION OF HONBLE BOMBAY HIGH IN THE CASE OF CIT VS. ASIAN STAR CO LTD., (CITED SUPRA), WE DIRECT THE A O TO RECONSIDER THE ISSUE OF NETTING OF THE MACHINING CHARGES FOR DISAL LOWANCE OF 90% OF THE SAME UNDER CLAUSE (I) OF EXPLANATION (BAA) OF S EC. 80HHC IN ACCORDANCE WITH THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES (CITED SUPRA). THE ASSESSEE SHALL BE ALLOWED TO PRODUCE THE NECESSARY DETAILS BEFORE THE AO TO SUBSTANTIATE ITS CLAIM. THIS GROUND OF APPEAL IS ACCORDINGLY ALL OWED FOR STATISTICAL PURPOSES. ITA NO.454, 455, 456, 457, 838/B/10 6 10. THE THIRD ISSUE RELATING TO INTEREST U/S 234B IS CONSEQUENTIAL IN NATURE. THEREFORE, THIS ISSUE IS ALSO SET ASIDE TO THE FILE OF THE ASSESSING AUTHORITY TO GIVE CONSEQUENTIAL RELIEF, IF ANY, TO THE ASSESSEE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH APR, 2012. SD/- SD/- (N BARATHVAJA SANKAR) (P MADHAVI DEVI) VICE PRESIDENT JUDICIAL MEMBER VMS. BANGALORE DATED : 13/04/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.