DCIT 8(3), MUMBAI V. TECHNOCRAFT INDUSTRIES (I) LTD, MUMBAI

ITA 5016/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93216 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Bench Allotted: E
• Next Hearing Date: 05-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 03-07-2013
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: SHRI
• Keywords: Business income
• Section: 143(3); 10B; 147

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 5016/M/2013 ( AY: 2005 - 2006 ) DCIT - 8(3), R.NO. 217, AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 20. / VS. M/S. TECHNOCRAFT INDUSTRIES (I) LTD, A - 25, MIDC, MAROL INDUSTRIAL AREA, ROAD NO.3, ANDHERI (E), MUMBAI 400093. ./ PAN : AAACT2724P ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NEIL PHILIP, DR / RESPONDENT BY : SHRI PANKAJ R. TOPRANI, AR / DATE OF HEARING : 05 .5 .2015 / DATE OF PRONOUNCEMENT : 17 .7 .2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 3.7.2013 IS AGAINST THE ORDER OF THE CIT (A) - 18, MUMBAI DATED 23.4.2013 FOR THE ASSESSMENT YEAR 2005 - 2006. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN HOLDING THE PROCEEDINGS INITIATED U/S 147 AS BAD IN LAW WITHOUT APPRECIATING THAT THE ASSESSEE HAD CLAIMED AND WRONGLY ALLOWED EXCESSIVE DEDUCTION U/S 10B RESULTING IN E SCAPE OF INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD WRONGLY CLAIMED AND HAD BEEN ALLOWED EXCESSIVE DEDUCTION U/S 10B OF THE ACT, IN THE ORIGINAL ASSESSMENT ON ACCO UNT OF FAILURE TO EXCLUDE RECEIPTS OF CSWT REFUND AND RENT RECEIPTS FROM THE PROFIT ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD C IT (A) ERRED IN HOLDING THAT THE RECEIPT BY WAY OF CST REFUND IS ELIGIBLE FOR DEDUCTION U/S 10B WITHOUT APPRECIATING THAT THIS RECEIPT BEING ATTRIBUTABLE TO INCENTIVE GIVEN BY THE GOVERNMENT, CANNOT BE CONSIDERED AS AN INCOME DERIVED FROM THE EXPORT OF GOODS MANUFACTURED / PRODUCED BY THE UNDERTAKING. 2 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURER AND EXPORTER OF DRUM CLOSURES. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 30,88,05,800/ - AFTER CLAIMING THE DEDUCTION OF RS. 47,16,953/ - . ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 31,62,22,030/ - DISALLOWING THE CLAIM OF DEDUCTION OF RS. 21,46,154/ - U/S 10B OF THE ACT. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APP EAL BEFORE THE FIRST APPELLATE AUTHORITY. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) PARTLY ALLOWED THE APPEAL. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUN DS. 3. IN CONNECTION WITH GROUND NO.1 RELATING TO THE VALIDITY OF THE REASSESSMENT, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE NEED NOT BE ADJUDICATED, IF THE ISSUE RELATING TO THE ALLOWABILITY OF CST REFUND IS DE CIDED IN FAVOUR OF THE ASSESSEE CONSIDERING THE TRIBUNALS ORDER IN THE CASE OF CENTURY TEXTILES AND INDUSTRIES LIMITED VS. DCIT IN ITA NO.3896/M/2005 (AY 2001 - 2002), DATED 16.5.2012 A COPY OF WHICH IS PLACED ON TO THE RECORD. IN CONNECTION WITH THE ALLOWABILIITY OF DEDUCTION U/S 10B IN RESPECT OF THE RENTAL RECEIPTS, LD COUNSEL FOR THE ASSESSEE FAIRLY RELIED ON THE ORDER OF THE CIT (A) WHICH WAS ACTUALLY DECIDED AGAINST THE ASSESSEE. 4. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO. 5. ON HEARING BOTH THE PARTIES, WITHOUT GOING TO THE ISSUE OF VALIDITY OF THE REASSESSMENT RAISED IN GROUND NO.1, WE PICKED - UP THE ISSUES IN GROUND NO.2 FOR ADJUDICATION AND IT RELATES TO THE DEDUCTION U/S 10B OF THE ACT IN RESPECT OF (I) RENTAL RECEIPTS OF RS. 17,258/ - AND (II) CST REFUND RECEIPTS. CONSIDERING THE CONCESSIONS GIVEN BY THE ASSESSEE ON THE ISSUE OF RENTAL RECEIPTS, THE SAME IS DECIDED AGAINST THE ASSESSEE . T HE ASSESSEE IS NOT ENTITLED FOR DEDUCTION IN RESPECT OF THE SAID RENTAL INCOME. THUS, THIS PART OF THE GROUND IS DECIDED AGAINS T THE ASSESSEE. 6. REGARDING THE SECOND LIMB OF THE GROUND RELATING TO THE ALLOWABILITY OF DEDUCTION U/S 10B IN RESPECT OF CST REFUND RECEIPTS, WE FIND AN IDENTICAL ISSUE WAS ADJUDICATED BY THE TRIBUNAL IN THE CASE OF CENTURY TEXTILES AND INDUSTRIES LIMIT ED (SUPRA). ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL DATED 16.5.2012 (SUPRA), WE FIND PARA 10 IS RELEVANT IN THIS REGARD. CONSIDERING THE SIGNIFICANCE OF THE SAID PARA 3 10 OF THE TRIBUNALS ORDER, AND FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SA ME IS EXTRACTED AS FOLLOWS: - 10. GROUND NO.2(II) RELATES TO THE C.S.T. REIMBURSEMENT CLAIM RECEIVED AT RS. 22,27,850/ - IN CENTURY YARN AND RS. 34,80,311/ - RECEIVED IN CENTURY DENIM. WE FIND THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN T HE PRECEDING YEAR BY THE ITAT IN ITA NO.3925/M/2005 & ITA NO. 4170/MUM/2005 IN ASSESSMENT YEAR 2000 - 01 IN PARAS 14.2, 15, 16 AND 17 WHICH ARE AS UNDER: 14.2. AS FAR AS THE ISSUE REGARDING CST REIMBURSEMENT IS CONCERNED, THE LD COUNSEL FOR THE ASSESSEE POINTED OUT THAT SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE VIDE PARA 11.1 IN ITA NO.9329/MUM/2004. 15. ON THE OTHER HAND, THE LD DR SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DRESSOR RA ND INDIA PVT LTD [2010] 323 ITR 429 (BOM). 16. IN THE REJOINDER, THE LD COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS LITTLE DIFFERENT. IT IS NOT A CASE OF SALES - TAX REFUND WHICH WAS BEFORE THE HONBLE BOMBAY HIGH COUR T IN THE CASE OF DRESSER RAND INDIA P LTD WHERE THE ASSESSEE PAYS SALES TAX WHICH IS REFUNDED LATER ON IF THE GOODS MANUFACTURED ARE EXPORTED AND THAT IS WHY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IS NOT APPLICABLE. 17. AFTER CONSIDERING THE SUBMISS IONS, WE AGREE WITH THE CONTENTION OF THE LD SR. ADVOCATE, SHRI Y.P. TRIVEDI, THAT WHEN SALES TAX IS INITIALLY PAID, THAT WILL GO ON TO INCREASE THE PURCHASES WHICH MEANS PROFIT IS REDUCED AND WHEN SALES TAX IS REFUNDED THE PROFIT WOULD INCREASE AND THEREF ORE, PAYMENT AND REIMBURSEMENT WOULD NULLIFY EACH OTHER. THEREFORE, WE HOLD THAT REFUND OF SALES TAX CANNOT BE REDUCED FROM PROFITS. RESPECTFULLY FOLLOWING THE AFORESAID ORDER, WE SET ASIDE THE ORDER OF THE CIT (A) ON THIS ISSUE AND DIRECT THE AO TO TREAT THE REIMBURSEMENT OF CST AS BUSINESS RECEIPT FOR THE PURPOSE OF CLAIMING EXEMPTION U/S 10B. 7. CONSIDERING THE ABOVE COVERED NATURE OF THE ISSUE, WE ARE OF THE OPINION THAT THE CST REFUND SHOULD BE TREATED AT BUSINESS RECEIPT AND THEREFORE, ASSESS EE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S 10B OF THE ACT. ACCORDINGLY, THIS PART OF THE GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JULY , 2015. SD/ - SD/ - ( VIJAY PAL RAO ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 17.7 . 201 5 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 4 2. / THE RESPONDENT. 3. ( ) / THE CIT - 4. / 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI