DCIT, Solan V. M/s Bio Veda Action Research Pvt. Ltd., Sirmour

ITA 528/CHANDI/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1623 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 22-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.528 /CHD/2014 (ASSESSMENT YEAR : 2007-08) THE D.C.I.T., VS. BIO VEDA ACTION RESEARCH PVT. LTD., CIRCLE PARWANOO. DHARAMKOT, POANTA SAHIB, SOLAN. DISTT. SIRMOUR. PAN: AABCB7964J AND C.O.NO.33/CHD/2014 ARISING OUT OF ITA NO. 528/CHD/2014 (ASSESSMENT YEAR : 2007-08) BIO VEDA ACTION RESEARCH PVT. LTD., VS. THE D.C.I.T., DHARAMKOT, POANTA SAHIB, CIRCLE PARWANOO. DISTT. SIRMOUR. SOLAN. PAN: AABCB7964J APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TEJ MOHAN SINGH DEPARTMENT BY : SHRI SUSHIL KUMAR, DR DATE OF HEARING : 03.12.2015 DATE OF PRONOUNCEMENT : 10.12.2015 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INC OME 2 TAX (APPEALS), SHIMLA DATED 6.2.2014 FOR ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS FILED CROSS OBJECTI ONS AGAINST THE SAME. ITA NO.528/CHD/2014 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURING AN D TRADING OF AYURVEDIC MEDICINES AND HERBAL PRODUCTS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER ASKED THE ASSESSEE TO JUSTIFY THIS CLAIM OF DEDUCTI ON UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSEE REPLIED THAT REGISTRATION CHARGES ARE RECEIVED BY THE ASSESSEE FROM NEW CUSTOMER AS A ND WHEN THEY ARE APPOINTED. SINCE THIS AMOUNT IS TOWA RDS THE PRODUCT KIT, WHICH IS NOTHING BUT A NORMAL SALE AND PART OF THE NORMAL BUSINESS SALES. THEREFORE, DEDU CTION UNDER SECTION 80IC OF THE ACT IS ALLOWABLE ON THE S ALE. REGARDING OTHER HEADS, INTEREST RECEIVED, MISCELLAN EOUS INCOME AND SCRAP SALE, IT WAS CONTENDED THAT ALL TH ESE ARE CONSEQUENTIAL TO BUSINESS. THEREFORE, DEDUCTION U NDER SECTION 80IC OF THE ACT IS TO BE ALLOWED ON THE SAM E. THE ASSESSING OFFICER REJECTING ALL THESE CONTENTIO NS OF THE ASSESSEE DISALLOWED DEDUCTION UNDER SECTION 80 IC OF THE ACT ON REGISTRATION CHARGES AMOUNTING TO RS.59,59,500/-, INTEREST RECEIVED AT RS.91,544/-, 3 MISCELLANEOUS INCOME AT RS.75,115/- AND SCRAP SALE AT RS.6,71,539/-. 3. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE SUBMITTED AS REGARDS THE REGISTRATION KIT THAT IT REPRESENTS SALE MADE THROUGH DIRECT MARKETING AGENT S CALLED ADVISORS. THIS KIT CONTAINS LITERATURE ABOU T THE PRODUCTS AND COST OF THE KIT IS RS.1450/- WHICH INC LUDES RS.1258/- ON ACCOUNT OF GOODS SOLD AND RS.192/- ON ACCOUNT OF LITERATURE, APPLICATION FORM, ETC. THER EFORE, THE REGISTRATION CHARGES RECEIPT IS THE INCOME DERI VED FROM THE MANUFACTURING ACTIVITIES AND AS SUCH, ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT. REGARDING SCRAP SALES, IT WAS SUBMITTED THAT IT IS PART AND PARCEL OF THE ACTIVITY OF THE INDUSTRIAL UNDERTAKING AND ELIGIBLE TO CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT. RELIAN CE WAS PLACED ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SADHU FORGING LTD., 336 ITR 444 (D EL). REGARDING INTEREST AND MISCELLANEOUS INCOME, IT WAS SUBMITTED THAT THESE ALSO QUALIFY FOR DEDUCTION UND ER SECTION 80IC OF THE ACT AS THE SAME HAS BEEN EARNED DURING THE COURSE OF BUSINESS ACTIVITIES. THE LEAR NED CIT (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE UNDER S ECTION 80IC OF THE ACT ON ACCOUNT OF REGISTRATION FEE TO T HE EXTENT OF COST OF PRODUCTS, THE KIT CONTAINING BUT DID NOT ALLOW IT THE BENEFIT OF INTEREST RECEIVED ON MISCELLANEOUS I NCOME AND SCRAP SALES. 4. AGGRIEVED BY THIS ORDER, THE DEPARTMENT HAS COME IN APPEAL AGAINST THE ACTION OF THE LEA RNED CIT 4 (APPEALS) IN ALLOWING DEDUCTION UNDER SECTION 80IC OF THE ACT ON REGISTRATION FEE, WHILE THE ASSESSEE HAS FIL ED CROSS OBJECTION AGAINST THE ACTION OF THE LEARNED CIT (AP PEALS) IN DISALLOWING THE DEDUCTION UNDER SECTION 80IC OF THE ACT ON INTEREST RECEIVED, MISCELLANEOUS INCOME AND SCRA P SALES. 5. THE LEARNED D.R. RELYING ON THE ORDER OF THE ASSESSING OFFICER, SUBMITTED THAT THE REGISTRATION CHARGES RECEIVED BY THE ASSESSEE CANNOT BE HELD TO BE RELAT ED TO THE NORMAL BUSINESS OF THE ASSESSEE. THEREFORE, DE DUCTION UNDER SECTION 80IC OF THE ACT CANNOT BE ALLOWED ON THE SAME. 6. THE LEARNED COUNSEL FOR THE ASSESSEE IN REPLY REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND EXPLAINED THE NATURE OF THE REGISTR ATION FEE RECEIVED BY THE ASSESSEE. IT WAS EXPLAINED TO US THAT THE ASSESSEE MAKE SALE THROUGH DIRECT MARKETING AGE NTS OR ADVISORS, WHO ARE GIVEN A KIT, WHICH CONTAINS THE LITERATURE ABOUT THE PRODUCTS AND 8 TO 10 ITEMS OF PRODUCTS. THE COST OF THE KIT IS RS.1450/-, WHICH INCLUDES RS.1258/- ON ACCOUNT OF GOODS SOLD AND RS. 192/- ON ACCOUNT OF LITERATURE, APPLICATION FORM, ETC. THUS REGISTRATION CHARGES RECEIVED IS THE INCOME DERIVED FROM THE MANUFACTURING ACTIVITIES AND AS SUCH, THE INCOM E SHOWN UNDER THIS HEAD ALSO QUALIFIES FOR DEDUCTION UNDER 5 SECTION 80IC OF THE ACT. IT WAS SUBMITTED THAT THE LEARNED CIT (APPEALS) HAS CONSIDERED THE PORTION OF RS.192/ - AS NOT ELIGIBLE FOR DEDUCTION, THE BALANCE AMOUNT BEIN G SALE OF PRODUCTS IS DEFINITELY ENTITLE TO DEDUCTION UNDE R SECTION 80IC OF THE ACT. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. ON PERUSAL OF THE ORDER OF THE LEARNED CIT (APPEALS ), WE FIND THAT HE HAS GIVEN A VERY APT FINDING ON THE ALLOWABILITY OF REGISTRATION FEE FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IC OF THE ACT IN PARA 3.5 , WHICH READS AS UNDER : 3.5 REGARDING THE INCOME GENERATED ON ACCOUNT OF 'REGISTRATION FEE', IT IS NOTED THAT THE COMPANY CHAR GES RS.1,450/- PER KIT FROM NEW APPOINTEES AS ADVISORS. THE KIT CONTAINS PRODUCTS WORTH RS. 1,258/- AND LITERATURE ETC ., WORTH RS.192/-. SO, THE 'REGISTRATION FEE' HAS PRODUCT COMP ONENTS WHICH ARE MANUFACTURE BY THE COMPANY AND SOLD IN THE K IT TO THE NEW APPOINTEES AS ADVISORS. SIMILAR TO THE AVAILABILI TY OF CLAIM OF DEDUCTION OF 80IC ON INCOME GENERATED THROUGH PR ODUCTS SOLD BY THE COMPANY, THE DEDUCTION U/S 80IC IS ALSO AVAI LABLE ON THE PRODUCTS SOLD THROUGH THE KIT. THEREFORE, OUT OF TH E TOTAL AMOUNT CREDITED UNDER HEAD 'REGISTRATION CHARGES', AN AMOUNT OF RS.51,70,380/- BEING ON ACCOUNT OF PRODUCT S IS FOUND TO BE ELIGIBLE FOR DEDUCTION U/S 80IC OF THE AC T. THE BALANCE AMOUNT OF RS.7,89,120/- ON ACCOUNT OF INCOME GENERATED ON REGISTRATION AND CHARGED FOR LITERATUR E, APPLICATION FEE ETC IS NOT ELIGIBLE FOR DEDUCTION U/S 80IC OF T HE ACT AS THE SAME IS NOT FOUND TO BE INCOME DERIVED FROM THE ELI GIBLE INDUSTRIAL UNDERTAKING AS DISCUSSED IN PRECEDING PA RA. 6 8. FROM THE PERUSAL OF THE ABOVE PARAGRAPH, WE DO NOT FIND ANY INFIRMITY IN THE FINDING GIVEN BY THE LEARNED CIT (APPEALS) AS THE KIT FOR WHICH REGISTRATION FE E IS RECEIVED BY THE ASSESSEE CONTAINS THE PRODUCTS OF T HE ASSESSEE IN WHICH THE ASSESSEE DEALS TOGETHER WITH THE LITERATURE EXPLAINING THE USE OF THE PRODUCT. BY N O STRETCH OF IMAGINATION, THIS KIT CAN BE SAID TO BE NOT RELATED TO THE BUSINESS OF THE ASSESSEE. SINCE DED UCTION UNDER SECTION 80IC OF THE ACT IS ALLOWED ON ANY INC OME ON SALE OF PRODUCTS OF THE COMPANY. THE PRODUCT SOLD THROUGH A KIT CANNOT BE SAID TO BE NOT OF THE BUSIN ESS. THEREFORE, WE CONFIRM THE ACTION OF THE LEARNED CIT (APPEALS) IN DELETING THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80IC OF THE ACT ON REGISTRATION CHARGES TO THE EXTENT OF COST OF PRODUCTS CONTAINED BY THE KIT. 9. THE APPEAL OF THE DEPARTMENT IS DISMISSED. C.O.NO.33/CHD/2014 : 10. IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISE D THE ISSUE OF DEDUCTION ON INTEREST INCOME, MISCELLA NEOUS INCOME AND SALE OF SCRAP. HOWEVER, AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE DID N OT MAKE ANY SUBMISSION WITH REGARD TO DEDUCTION UNDER SECTION 80IC OF THE ACT ON INTEREST AND MISCELLANEO US INCOME. WITH REGARD TO SALE OF SCRAP, RELIANCE WAS PLACED ON AN ORDER OF THE I.T.A.T., CHANDIGARH BENCH IN TH E CASE 7 OF M/S ANSYSCO VS. ADDL.CIT IN ITA NO.895/CHD/2012 DATED 15.9.2014, IN WHICH CASE, IT HAS BEEN HELD TH AT SALE OF SCRAP IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IC OF THE ACT, RELYING ON AN EARLIER ORDER IN THE CASE OF M/S ANSYSCO ONLY, IN ASSESSMENT YEAR 2008-09. 11. THE LEARNED D.R. IN REPLY SUBMITTED THAT THE DEPARTMENT HAS GONE IN APPEAL BEFORE THE HON'BLE PU NJAB & HARYANA HIGH COURT ON THE ISSUE OF DEDUCTION UNDE R SECTION 80IC OF THE ACT ON SALE OF SCRAP IN THE CAS E OF ACIT VS. ANSYSCO SUNRISE COMPLEX FOR ASSESSMENT YEA R 2008-09. COPIES OF THE DOCUMENTS EVIDENCING FILING OF APPEAL WERE PLACED ON RECORD. IN VIEW OF THIS, IT WAS PRAYED TO CONFIRM THE DISALLOWANCE. 12. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE ONLY ISSUE TO BE DECIDED BY US IN THIS CROSS OB JECTION IS WITH REGARD TO INCOME FROM SALE OF SCRAP FOR THE PU RPOSES OF DEDUCTION UNDER SECTION 80IC OF THE ACT. FROM THE PERUSAL OF THE ORDER OF THE I.T.A.T., CHANDIGARH BENCH IN T HE CASE OF M/S ANSYSCO (SUPRA), WE HOLD THAT THE SALE OF SCRAP BE HELD TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT. THE FACT THAT THE DEPARTMENT HAS GONE IN APPEAL AGA INST THE SAID ORDER BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT DOES NOT MAKE ANY DIFFERENCE SINCE AS ON THE DATE O RDER OF THE COORDINATE BENCH IS BINDING ON US, SINCE IT IS A TRITE LAW THAT AN ORDER RENDERED BY ANY AUTHORITY IS A GOOD L AW 8 TILL THE DAY WHEN THE SAID ORDER IS SET ASIDE BY A PROCESS KNOWN TO THE LAW. THEREFORE, TILL THE DATE THE OR DER OF THE HON'BLE HIGH COURT COMES, THE SAID ORDER OF THE I.T .A.T. IS BINDING ON US. 13. THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IN IT A NO.528/CHD/2014 IS DISMISSED AND CROSS OBJECTIONS F ILED BY THE ASSESSEE IN C.O.NO.33/CHD/2014 IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF DECEMBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 10 TH DECEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH