M/s. Puru Chemicals, Kathua V. The Income tax Officer, Kathua

ITA 528/ASR/2013

• Counselvise Citation: 52820914 RSA 2013
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-09-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 12-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TARSEM LAL
• Assessee Lawyers: J S BHASIN
• Keywords: Business income
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH;(SMC) AMRITSAR BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER I.T.A. NO.528 (ASR)/2013 ASSESSMENT YEAR: 2003-04 PAN: AAFFP4125Q M/S PURU CHEMICALS, C/O CHINTPURNI ENGG. WORKS, 20-21, INDUSTRIAL AREA EXTN, KATHUA. VS. INCOME TAX OFFICER, KATHUA, (J&K). (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J. S. BHASIN (ADV.) RESPONDENT BY: SH. TARSEM LAL (DR) DATE OF HEARING: 0 7.09.2015 DATE OF PRONOUNCEM ENT: 07.09.2015 ORDER PER A.D.JAIN (JM): THIS IS ASSESSEES APPEAL FOR ASST. YEAR 2003-04, TAKING THE FOLLOWING EFFECTIVE GROUNDS: (I) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING ITOS ACTION TO DISALL OW DEDUCTION OF RS.13,15,100/- CLAIMED U/S. 80IB IN RESPECT OF PROF ITS ON MANUFACTURING OF GYPSUM POWDER. (II) THAT THE LEARNED CIT(A), WHILE CONFIRMING THE ABOVE DISALLOWANCE, NEITHER APPRECIATED THE ASSESSEES EXPLANATION IN CORRECT P ERSPECTIVE, NOR DISCUSSED AND DISTINGUISHED VARIOUS JUDICIAL AUTHORITIES RELI ED UPON BY THE ASSESSEE. 2. ITA NO. 528(ASR)2013 ASST. YEAR 2003-04 (III) THAT THE LEARNED CIT(A), ALSO GROSSLY MISCONSTRUED THE DEFINITION OF THE TERM MANUFACTURE AS INSERTED IN SECTION 2(29BA) OF IT ACT, 1961 W.E.F 01.04.2009L, QUA THE FACTS OF THIS CASE. (IV) THAT THE ABOVE DISALLOWANCE WAS ALSO NOT WARRANTED, WHEN IDENTICAL CLAIM IN EARLIER TWO YEARS, WITH ASST. YEAR 2001-02, BEING T HE INITIAL YEAR, STOOD ACCEPTED AND ALLOWED. (V) THAT THE QUANTUM OF DISALLOWANCE, AS WORKED OUT BY THE LEARNED ITO ON HIS OWN, HAS ALSO BEEN WRONGLY UPHELD BY LEARNED CIT(A) . 2. THE ASSESSEE COMPANY, DURING THE YEAR, WAS IN THE B USINESS OF MAKING OF GYPSUM POWDER AND PLASTER OF PARIS. DURING THE YEAR , IT HAD EARNED A PROFIT OF RS.20,29,108/- ON ACCOUNT OF THIS ACTIVITY, AS PER THE ASSESSMENT ORDER, ON TOTAL SALES OF GYPSUM POWDER OF RS.32,60,600/- AND PLASTER OF PARIS RS.29,62,162/-. IT WAS HELD BY THE TAXING AUTHORITI ES THAT THE ASSESSEE HAD NOT CARRIED OUT A MANUFACTURING ACTIVITY IN MAKING GYPSUM, AS NO NEW OTHER DISTINCT OBJECT WITH ANY DIFFERENT NAME, CHARACTER, AND USE EMERGED FROM THE MAKING OF GYPSUM POWDER. THE ASSESSEE WAS THUS HELD INELIGIBLE FOR DEDUCTION 80IB OF THE ACT. DURING THE HEARING BEFORE US, IT H AS BEEN POINTED OUT ON BEHALF OF THE ASSESSEE THAT THE LEARNED CIT(A) DID NOT DEC IDE GROUND NO.2(D) SPECIFICALLY RAISED BEFORE HIM. 3. THE ASSESSEES THIS CONTENTION IS FOUND TO BE CORRE CT. AS REPRODUCED AT PAGE-2 OF THE OF THE IMPUGNED ORDER, GROUND NO.2(D) RAISED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) READS AS FOLLOWS: THAT ONCE IT IS ESTABLISHED AND ACCEPTED BY THE A. O THAT THE ASSESSEE IS RUNNING THE BUSINESS OF INDUSTRIAL UNDERTAKING, THE N THE INCOME FROM ALL THE 3. ITA NO. 528(ASR)2013 ASST. YEAR 2003-04 BY-PRODUCTS, INTERMEDIATE PRODUCTS, RESIDUAL PRODUC TS AND OTHER TRANSACTIONS HAVING CLOSE CONNECTION WITH THE BUSINESS ACTIVITIE S OF THE INDUSTRIAL UNDERTAKING ARE ENTITLED FOR BENEFIT FOR DEDUCTION U/S 80IB OF THE I.T ACT AS UPHELD BY THE HONBLE COURTS ESPECIALLY IN AHMEDABA D MANUFACTURING & CALICO PVT. LTD. VS. C.I.T REPORTED IN (1985)162 ITR 800 ( GUJARAT HIGH COURT) AND IN DY. C.I.T VS. CHAMAN LAL & SONS REPORTED IN (2005) 93 ITJ 132 (HONBLE I.T.A.T, AMRITSAR BENCH. A PERUSAL OF THE IMPUGNED ORDER, HOWEVER, SHOWS THA T THIS ISSUE HAS NOT AT ALL BEEN DEALT WITH, MUCH LESS DECIDED BY THE LE ARNED CIT(A). THE PURPORT OF THIS CONTENTION OF THE ASSESSEE IS THAT EVEN IF THE MAKING OF GYPSUM POWDER IS HELD TO BE AN INTERMEDIATE ACTIVITY, THE MAIN PRODU CT BEING PLASTER OF PARIS, GYPSUM POWDER BEING AN INTERMEDIATE PRODUCT, AS HEL D, INTER ALIA, IN THE TWO DECISIONS REFERRED TO IN THE SAID GROUND NO. 2(D), THE INCOME OF THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE FROM, INTER ALIA, INTER MEDIATE PRODUCTS, INCLUDING GYPSUM POWDER, IS ENTITLED FOR DEDUCTION UNDER SECT ION 80IB OF THE I.T. ACT. 5. NOW, THIS IS AN IMPORTANT ISSUE RAISED BY THE AS SESSEE. AS A RESULT OF NON DECISION THEREOF AT THE HANDS OF THE LEARNED CIT(A) , THE ASSESSEE HAS BEEN VISITED WITH UNCALLEDFOR PREJUDICE, WHICH REQUIRES TO BE RECTIFIED. 6. IN THIS VIEW OF THE MATTER, THE ISSUE OF GYPSUM POWDER BEING ELIGIBLE FOR DEDUCTION 80IB OF THE ACT, AS IT IS AN INTERMEDIATE PROJECT HAVING A DIRECT NEXUS WITH THE MANUFACTURE OF PLASTER OF PARIS BEING THE MAIN PRODUCT, IS REMITTED TO THE FILE OF THE A.O TO BE DECIDED IN ACCORDANCE WIT H LAW, PARTICULARLY IN THE LIGHT OF THE DECISIONS POINTED OUT BY THE ASSESSEE IN GRO UND NO. 2(D) TAKEN BY THE ASSESSEE BEFORE THE CIT(A). THE AO WILL PROVIDE AD EQUATE OPPORTUNITY OF 4. ITA NO. 528(ASR)2013 ASST. YEAR 2003-04 HEARING AND THE ASSESSEE, NO DOUBT, SHALL COOPERATE IN THE REMAND PROCEEDINGS. ORDERED ACCORDINGLY. 7. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL OF THE ASSESSEE IS TREATED AS ALLOWED, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH SEPTEMBER, 2015. SD/- (A.D. JAIN) JUDICIAL MEMBER DATED: 07.09. 2015 /PK/ PS. COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S PURU CHEMICAL 2. THE INCOME TAX OFFICER, KATHUA (J&K) 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.