Nahar Spinning Millst Ltd., Ludhiana V. Addl. CIT, Ludhiana

ITA 54/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63943 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 17-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Section: 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 54/CHD/2012 ASSESSMENT YEAR : 2008-09 NAHAR SPINNING MILLS LTD. V ADDL CIT, RANGE VII 373, INDUSTRIAL AREA A AYAKAR BAHWAN LUDHIANA LUDHIANA AAACN 5710 D (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI MANJEET SINGH DATE OF HEARING : 03.09.2012 DATE OF PRONOUNCEMENT : 12.09.2012 O R D E R PER T.R.SOOD, A.M IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GR OUND:- 1 THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN SUSTAINING THE ACTION OF ASSESSING OFFICER OF REDUC ING THE CLAIM OF DEDUCTION U/S 10B OF ITS 100% EOU TO RS. 53,77,376/-OF ITS UNIT AT JALALPUR BY ASSUMING THE JURISDICTION TO REALLOCATE THE EXPENSES AND FURTHER REDUCING PROPORTIONATE EXPENSES OF MANAGING DIRECTO RS REMUNERATION FROM THE PROFITS OF THE UNDERTAKING WH ICH IS NOT AUTHORIZED BY THE PROVISIONS OF SECTION 10B OF THE ACT. DIRECTIONS MAY BE GIVEN TO ALLOW DEDUCTIONS OF RS. 63,85,351/- AS CLAIMED BY THE APPELLANT IN ITS RETU RN. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE HAVING THE DATE NOTED IN THE EARLIER HEARING. IT TRANSPIR ED THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 VIDE ITA NO. 64/CHD/2011, THEREFORE, WE PROCEED TO HEAR THE APP EAL ON EX- PARTE BASIS. 3. THE LD. DR FOR THE REVENUE WAS HEARD. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. DR FOR THE REVENUE AND RELEVANT MATERIAL ON RECORD, WE FIND TH AT IDENTICAL 2 ISSUE CAME UP FOR CONSIDERATION IN ASSESSEES OWN C ASE IN ASSESSMENT YEAR 2007-08 IN ITA NO. 64/CHD/2011. GR OUND NO. 2 IN THAT APPEAL READS AS UNDER:- 2 THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN SUSTAINING THE ACTION OF THE ASSESSING OFFICER OF R EDUCING THE CLAIM OF DEDUCTION U/S 10-B OF ITS 100% EOU TO RS. 8,31,70,843/- OF ITS UNITS AT JALAPUR AND LALRU BY ASSUMING THE JURISDICTION TO REALLOCATE THE EXPENSE S AND FURTHER REDUCING PROPORTIONATE EXPENSES OF M.DS REMUNERATION FROM THE PROFITS OF THE UNDERTAKINGS W HICH IS NOT AUTHORIZED BY THE PROVISIONS OF SECTION 10B OF THE ACT. DIRECTIONS MAY BE GIVEN TO ALLOW DEDUCTIONS AS CLAI MED BY THE APPELLANT IN ITS RETURN. ON THE ABOVE GROUND, THE FINDING OF THE TRIBUNAL AR E RECORDED IN PARA 9 TO 12 WHICH ARE AS UNDER:- 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. UNDER THE PROVISIONS OF SECTION 10B OF THE ACT DEDUCTION OUT OF PROFITS & GAINS ARE ALLOWED TO 100% EXPORT ORIENTED UNDERTAKING FROM THE EXPORT OF ARTI CLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CON SECUTIVE ASSESSMENT YEARS BEGINNING FROM THE ASSESSMENT YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE. TH E SAID DEDUCTION IS ALLOWABLE TO AN UNDERTAKING WHICH FULFILLS THE CONDITIONS LAID OUT IN SUB-SECTION (2) TO SECTION 10B OF THE ACT. UNDER SUB-SECTION (4) TO SECTION 10 B OF THE ACT FOR COMPUTING THE DEDUCTION UNDER SECTION, THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS O R COMPUTER SOFTWARE SHALL THE AMOUNT WHICH BEARS TO T HE PROFITS OF BUSINESS OF THE UNDERTAKING THE SAME PROPORTION AS THE EXPORT TURN OVER IN RESPECT OF SU CH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO TH E TOTAL TURN OVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. UNDER SECTION 10B(5) OF THE ACT, THE REQUIREMENT IS TO FURNISH AUDIT REPORT IN THE PRESC RIBED FORM ALONGWITH RETURN OF INCOME. UNDER SECTION 10B (7) OF THE ACT IT IS PROVIDED THAT THE PROVISIONS O F SUB- SECTIONS (8) AND (10) OF SECTION 80IA OF THE ACT SH ALL APPLY. SECTION 80IA(8) OF THE ACT TALKS OF RECOMPUT ATION OF DEDUCTION WHERE ANY GOODS OR SERVICES HELD FOR T HE PURPOSE OF ELIGIBLE BUSINESS ARE TRANSFERED TO ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE AND THE CONSIDE RATION FOR SUCH TRANSFER DOES NOT CORRESPOND TO THE MARKET VALUE OF THE GOODS OR THE SERVICES SO TRANSFERRED. SECTION 80IA(10) OF THE ACT REFERS TO CLOSE CONNECT ION BETWEEN THE ASSESSEE CARRYING ON ELIGIBLE BUSINESS WITH ANY OTHER PERSON WHERE THE COURSE OF BUSINESS BETWE EN THEN IS SO ARRANGED THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCES TO THE ASSESSEE MORE THAN THE ORDI NARY PROFITS, WHICH MIGHT BE ACCEPTED TO ARI SE IN SUCH ELIGIBLE BUSINESS. 3 10. READING THE PROVISIONS OF SECTION 80IA (8) OF THE ACT IT IS APPARENT THAT THE SAME ARE APPLIC ABLE ONLY WHERE THE GOODS OR SERVICES ARE TRANSFERR ED FROM THE ELIGIBLE BUSINESS TO ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE OR VICE VERSA. IN THE FACTS OF THE PRE SENT CASE BEFORE US, ADMITTEDLY THERE IS NO SUC H TRANSFER OF GOODS OR SERVICE BETWEEN DIFFERENT UNITS RUN BY THE ASSESSEE. THE ASSESSIN G OFFICER IN THE PRESENT CASE HAS RECOMPUTED THE ELIG IBLE PROFITS UNDER SECTION 10B OF THE ACT ON ACCOUNT OF REALLOCATION OF THE EXPENDITURE OF MANAGI NG DIRECTOR'S REMUNERATION DEBITED TO ANOTHER UNIT OF THE ASSESSEE FIRM, BEING RELATABLE TO THE ELIGIBLE UNIT . 11. THE PROVISIONS OF SECTION 80IB(10) REFER TO THE CONNECTION BETWEEN THE ASSESSEE CARRYING ON THE ELIGIBLE BUSINESS AND ANY OTHER PERSON AND WHERE THE BUSINESS TRANSACTED BETWEEN THEM IS SO ARRANGED THAT IT PRODUCES MORE THAN ORDINARY PROFITS WHICH M IGHT ARISE IN SUCH ELIGIBLE BUSINESS. THE REFERENCE IN SECTION 80IB(10) IS TO AN ASSOCIATION BETWEEN PERSO N CARRYING ON ELIGIBLE BUSINESS AND ANY OTHER PERSON. WE FIND NO MERIT IN THE STAND OF THE REVENUE THAT T HE REFERENCE SO MADE IS BETWEEN DIFFERENT UNITS OF T HE ASSESSEE ITSELF AND BY WAY OF DEBITING COMMON EXPENDITURE TO A NON-ELIGIBLE UNIT, THE ASSESSEE BY SHOWING HIGHER PROFITS OF BUSINESS HAD CLAIMED HI GHER DEDUCTION UNDER SECTION 10B OF THE ACT. WE FUR THER FIND THAT THE RELIANCE BY THE LEARNED A.R. FOR THE ASSESSEE ON CIT VS. M/S PUNJAB CONCAST STEELS LTD. (SUPRA) IS MISPLACED AS THE FACTS IN THE CASE OF CIT VS. M/S PUNJAB CONCAST STEELS LTD. (SUPRA ) BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT AND BEFORE US ARE AT VARIANCE. 12. NOW COMING TO THE RECOMPUTATION OF THE PROFITS IN THE CASE OF THE BUSINESS BY ALLOCATING PROPORTIONA TE MANAGING DIRECTOR'S REMUNERATION, DEBITED TO NON-EL IGIBLE UNITS OF THE ASSESSEE COMPANY, TO THE ELIGIBLE UNIT OF THE ASSESSEE COMPANY IS ADMISSIBLE OR NOT. UNDER TH E PROVISIONS OF SECTION 10B OF THE ACT THE DEDUCTION IS TO BE ALLOWED ON SUCH PROFITS & GAINS OF BUSINESS WHIC H ARE DERIVED BY 100% EXPORT ORIENTED UNDERTAKING AND IN ORDER TO DETERMINE THE PROFITS & GAINS OF THE ELIGI BLE UNITS, ALL EXPENDITURE RELATABLE TO SUCH UNITS ARE TO BE DEDUCTED FOR COMPUTING THE ELIGIBLE PROFITS. THE REMUNERATION PAID TO THE MANAGING DIRECTOR BEING CO MMON EXPENDITURE BETWEEN THE ELIGIBLE UNITS AND THE NON- ELIGIBLE UNIT RUN BY THE ASSESSEE COMPANY NEED TO BE ALLOCAT ED IN ORDER TO DETERMINE THE ELIGIBLE PROFITS OF BUSIN ESS UNDER SECTION 10B OF THE ACT. WE ARE IN CONFORMITY WITH THE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD AND UPHOLDING THE SAME WE DISMISS GROUND NO.2 RAISED BY THE ASSESSEE. 4 SINCE THE FACTS ARE IDENTICAL, FOLLOWING THE ABOVE ORDER WE DECIDE THE ISSUE AGAINST THE ASSESSEE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED ON 12.09.2012 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICAL MEMBER ACCOUNTANT MEMBER DATED : 12 .09. 2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 5