M/s. Bhansali Cables & Conductors (P) Ltd., New Delhi V. ITO, New Delhi

ITA 4842/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65976 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR KEDIA SENIOR
• Assessee Lawyers: G KOHLI
• Keywords: Business income
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) SHRI U.B.S. BEDI, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.4842/DEL./2012 (ASSESSMENT YEAR : 2009-10) M/S. BHANSALI CABLES & CONDUCTORS (P) LTD., VS. ITO , WARD 2(4), GB 17, NAJAFGARH ROAD, NEW DELHI. SHIVAJI ENCLAVE, NEW DELHI 110 027. (PAN : AAACB3427F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.. KOHLI, CA REVENUE BY : SHRI RAJESH KUMAR KEDIA, SENIOR DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM TH E ORDER OF CIT (APPEALS)-V, NEW DELHI DATED 06.06.2012 FOR THE ASS ESSMENT YEAR 2009-10. THE GROUNDS OF APPEAL READ AS UNDER :- 1. THAT THE LEARNED A.O. AS WELL AS C.I.T. (APPEAL ) WERE NOT JUSTIFIED IN DISALLOWING AN AMOUNT OF INTEREST RECE IVED FOR RS.7,82,942/- IN ALLOWING THE DEDUCTION U/S 80IB OF INCOME-TAX ACT, 1961. THAT AN INTEREST RECEIVED IS EXCLUSIVELY RELATED T O BUSINESS ACTIVITIES AND THUS IT DESERVES TO BE TREATED AS PA RT AND PARCEL OF BUSINESS INCOME IN ALLOWING THE DEDUCTION U/S 80- IB OF INCOME-TAX ACT, 1961. ITA NO.4842/DEL./2012 2 2. THAT THE APPELLANT CRAVES THEIR RIGHT TO AMEND, DELETE OR ADD ANY GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTU RING OF ELECTRICAL WIRE AND CABLES. THE RETURN OF INCOME WAS FILED ON 27.09.2009. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB OF THE ACT @ 30% AMO UNTING TO RS.27,22,948/- ON THE PROFIT OF RS.90,76,494/- ON THE BASIS OF UNIT AT BHIWADI. THIS AMOUNT OF PROFIT ALSO INCLUDED THE INCOME OF R S.7,82,942/- WHICH IS EARNED BY WAY OF INTEREST ON THE FDRS HELD WITH THE BANKS FOR MARGIN MONEY AND LC. 3. THE CIT (A) HAS CONFIRMED THE ADDITION BY HOLDIN G AS UNDER :- 4. THE ISSUE INVOLVED AND THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CONSIDERED. IN APPEAL ORDER DAT ED 12.10.2010 IN APPEAL NO.60/09-10 FOR THE AY 2007-08 , THE CIT(A) HAD ALLOWED THE DEDUCTION U/S 80 IB OF THE I .T. ACT ON INTEREST INCOME ALSO HOLDING THE INTEREST ON THE MA RGIN MONEY AND FDR ETC. AS INCOME DERIVED FROM INDUSTRIAL UNDE RTAKING. IT APPEARS THAT THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA V/S CIT 317 ITR 218 HAS ESCAPED AT TENTION OF THE CIT(A). THE JUDGEMENT OF THE HON'BLE SUPREME CO URT IN THE CASE OF LIBERTY INDIA IS DIRECTLY ON THE ISSUE OF A LLOWABILITY OF DEDUCTION U/S 80 IB OF THE I.T.ACT. THE HON'BLE SUP REME COURT IN THE CASE OF LIBERTY INDIA V/S CIT 317 ITR 218 HA S HELD THAT FOR AN INCOME TO BE TAKEN AS 'DERIVED' FROM ELIGIBL E BUSINESS IT IS NECESSARY TO PROVE THAT THE INCOME SO GENERATED SHO ULD BE OF FIRST DEGREE SOURCE OF SPECIAL ACTIVITY, BUT NOT OF ANCILLARY AND INCIDENTAL ACTIVITY. KEEPING THE RATIO OF THE AFOR ESAID JUDGEMENTS IN VIEW, THE INTEREST FROM FDR ETC. IS N OT ELIGIBLE FOR DEDUCTION U/S 80-IB. THE APPELLANT IS ENGAGED IN TH E BUSINESS OF MANUFACTURING OF ELECTRICAL WIRES AND CABLES, INTER EST INCOME IS NOT EMANATING FROM THE BUSINESS OF THE APPELLANT AN D THEREBY NOT ELIGIBLE FOR DEDUCTION U/S 80-IB. THE ACTION OF THE AO IN PARA 3.2 OF THE ASST. ORDER IS CONFIRMED. ITA NO.4842/DEL./2012 3 4. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND AF TER HEARING, WE HOLD THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT REPORTED IN 317 ITR 218 (SC) WHEREIN HON'BLE SUPREME COURT HAS CONSIDERED T HE CONNOTATION OF THE WORDS DERIVED FROM AND HAS ALSO COMPARED IT WITH THE WORD ATTRIBUTABLE TO. THE HON'BLE APEX COURT HAS HELD THAT BY USIN G THE EXPRESSION DERIVED FROM, PARLIAMENT INTENDED TO COVER THE SOURCES NOT BEYOND FIRST DEGREE. IN OUR CONSIDERED VIEW, INTEREST EARNED ON THE FDRS IS TO BE ASSESSED UNDER THE HEAD OTHER SOURCES. IT IS THE INCOME FROM OTHE R SOURCES HENCE CANNOT BE SAID AS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAK ING. THERE IS NO FIRST DEGREE NEXUS. THE INCOME IS NOT DERIVED FROM THE E LIGIBLE UNDERTAKING. THE HON'BLE SUPREME COURT IN THIS CASE HAS HELD AS UNDE R :- SECTIONS 80-IB AND 80-IA ARE A CODE BY THEMSELVES AS THEY CONTAIN BOTH SUBSTANTIVE AS WELL AS PROCEDURAL PROVISIONS. SECTION 80-IB PROVIDES FOR THE ALLOWING OF DEDUCTIO N IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINES S. THE CONNOTATION OF THE WORDS DERIVED FROM IS NARROWER AS COMPARED TO THAT OF THE WORDS ATTRIBUTABLE TO. BY USING T HE EXPRESSION DERIVED FROM PARLIAMENT INTENDED TO COVER SOURCE NOT BEYOND THE FIRST DEGREE. SECTIONS 80-1, 80-IA AND 80-IB ARE TO BE READ AS HA VING A COMMON SCHEME. SUB-SECTION (5) OF SECTION 80-IA (WHICH IS REQUIRED TO BE READ INTO SECTION 80-IB) PROVIDES FOR THE MANNER OF COMPUTATION OF THE PROFITS OF AN ELIGIBLE BUSINESS. SUCH PROFITS A RE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. THEREFORE, DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFITS OF THE ELIGIBLE BUSINESS HAVE TO BE REJECTED IN VIEW OF TH E OVERRIDING PROVISIONS OF SECTION 80-IA(5). ITA NO.4842/DEL./2012 4 SECTIONS 80-1, 80-IA AND 80-IB PROVIDE FOR INCENTIV ES IN THE FORM OF DEDUC-TIONS WHICH ARE LINKED TO PROFITS AND NOT INVESTMENT. ON ANALYSIS OF SECTIONS 80-IA AND 80-IB IT BECOMES CLE AR THAT ANY INDUSTRIAL UNDERTAKING WHICH BECOMES ELIGIBLE ON SA TISFYING SUB- SECTION (2) WOULD BE ENTITLED TO DEDUCTION UNDER SU B-SECTION (1) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH IND US-TRIAL UNDERTAKING AFTER THE SPECIFIED DATE. APART FROM EL IGIBILITY, SUB- SECTION (1) PURPORTS TO RESTRICT THE QUANTUM OF DED UCTION TO A SPECIFIED PERCENTAGE OF THE PROFITS. THIS IS THE IM PORTANCE OF THE WORDS 'DERIVED FROM AN INDUSTRIAL UNDERTAKING' AS A GAINST 'PROFITS ATTRIBUTABLE TO AN INDUSTRIAL UNDERTAKING'. DEPB/DUTY DRAWBACK ARE INCENTIVES WHICH FLOW FROM T HE SCHEMES FRAMED BY THE CENTRAL GOVERNMENT OR FROM SECTION 75 OF THE CUSTOMS ACT, 1962. INCENTIVE PROFITS ARE NOT PROFIT S DERIVED FROM ELIGIBLE BUSINESS UNDER SECTION 80-IB : THEY BELONG TO THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERTAKING. PROFITS D ERIVED BY WAY OF INCENTIVES SUCH AS DEPB/DUTY DRAWBACK CANNOT BE CRE DITED AGAINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PRO FIT AND LOSS ACCOUNT AND THEY DO NOT FALL WITHIN THE EXPRESSION 'PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING' UNDER SECTION 80-IB. CONSIDERING THESE FACTS, WE FIND NO MERITS IN THE A PPEAL OF THE ASSESSEE, HENCE SAME IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2012. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 30 TH NOVEMBER, 2012/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-V, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.