PREETAM ENTERPRISES, Kolhapur V. CIT - I , Kolhapur

ITA 545/PUN/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49745 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 07-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Assessee Lawyers: ARVIND SONDE; SUHAS DESH
• Keywords: Business income; Depreciation
• Section: 80IB; 32; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI D. KARUNAKARA RAO, AM I.T.A. NO. 544, 545 AND 613/PN/2009 A.Y.2004-05, 2005-06 AND 2006-07 PREETAM ENTERPRISES 1325/91 SHIVAJI UDYAMNAGAR KOLHAPUR PAN AACFP 2436 P APPELLANT VS. JT. CIT RANGE 1, KOLHAPUR RESPONDENT AND I.T.A. NO. 780/PN/2009: A.Y. 2006-07 ASSTT. CIT CIR. 1, KOLHAPUR APPELLANT VS. PREETAM ENTERPRISES 1325/91 SHIVAJI UDYAMNAGAR KOLHAPUR PAN AACFP 2436 P RESPONDENT DEPARTMENT BY : SHRI ABHAY DAMLE ASSESSEE BY: SHRI ARVIND SONDE AND S HRI SUHAS DESHPANDE ORDER PER BENCH ALL THESE APPEALS PERTAIN TO SAME ASSESSEE FOR A.Y ., 2004- 05, 2005-06 AND 2006-07. SO THEY ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 780, 613, 544 AND 545/PN/2009 PREETAM ENTERPRISES A.Y. 2004-05. 2005-06 AND 2006-07 , 2 ITA NO. 613/PN/2009 FOR A.Y. 2006-07 2. FIRST ISSUE IN THE ASSESSES APPEAL IS REGARDIN G REJECTION OF CLAIM OF DEDUCTION U/S 80-IA(IV)(A) ON INCOME GE NERATED FROM THE WINDMILL. THE ASSESSEES CLAIM WAS BASED ON THE PROVISIONS OF THE SECTION 80-IA AS AMENDED BY THE F INANCE ACT 1999 W.E.F. 1-4-2000. AS PER THE AMENDED PROVISION THE DEDUCTION IS AVAILABLE FOR A PERIOD OF TEN CONSECUT IVE YEARS DURING A PERIOD OF FIRST FIFTEEN YEARS STARTING WIT H THE COMMENCEMENT OF BUSINESS. HOWEVER, THE ASSESSEE IS GIVEN THE OPTION TO CHOOSE THE FIRST YEAR OF DEDUCTION. IN THE CASE OF THE ASSESSEE, SUCH OPTION WAS EXERCISED DURING A.Y. 2004-05 RELEVANT TO FINANCIAL YEAR 2003-04. IN THIS REGARD , THE LEARNED AR RELIED ON THE DECISION OF PUNE BENCH OF THE TRIB UNAL IN ITA NO. 92/PN/2008 AND SUBMITTED THAT DEPRECIATION AND LOSSES OF EARLIER YEARS WERE ALREADY ABSORBED AGAINST THE OTHER BUSINESS INCOME OF A.Y. 2002-03 AND 2003-04 AND ACCORDINGLY, THERE WAS NO QUESTION OF AGAIN NOTIONA LLY CARRYING FORWARD AND SETTING OFF THE SAID DEPRECIATION AND L OSSES AGAINST THE INCOME FOR A.Y. 2004-05. THE ASSESSEE S CLAIM IS SUPPORTED BY THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ASSTT. CIT (231 CTR 368) AND OF THE DECISION OF THE B BENCH OF ITAT CHENNAI IN THE CASE OF MOHAN BREWERIES AND DISTILLE RIES LTD. VS. ACIT (114 TTJ 532). THE ASSESSEE ALSO TAKES SU PPORT OF ITA NO. 780, 613, 544 AND 545/PN/2009 PREETAM ENTERPRISES A.Y. 2004-05. 2005-06 AND 2006-07 , 3 THE UNREPORTED DECISION OF THE MADRAS HIGH COURT IN TAX CASE (APPEAL) NO. 715 OF 201 IN THE CASE OF CIT VS. M/S. EMERALD JEWEL INDUSTRY P. LTD. IT WAS ALSO SUBMITTED THAT PUNE BENCH OF THE TRIBUNAL HAS TAKEN A SIMILAR VIEW IN ITA NO. 92/PN/2008. 2.1 WE ALSO FIND THAT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD., VS ACIT (2010) 231 CTR (MA D) 368 HONBLE MADRAS HIGH COURT HAS HELD THAT LOSSES AND DEPRECIATION OF THE YEARS EARLIER TO THE INITIAL AS SESSMENT YEAR WHICH HAVE ALREADY BEEN ABSORBED AGAINST THE PROFIT S OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FORWARD AND S ET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS FOR CO MPUTING THE DEDUCTION UNDER SECTION 80-IA. FOLLOWING THIS JUDGM ENT OF HONBLE MADRAS HIGH COURT, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. THE ASSESSEE IS ENTITLED TO CLAIM FO R DEDUCTION U/S 80IA(4)(IV)(A) OF THE ACT. 3. NEXT ISSUE IS WITH REGARD TO ENTITLEMENT FOR DEP RECIATION ON MACHINERY USED IN JOB WORK DONE BY ASSESSEES VE NDORS. THIS ISSUE HAS BEEN DEALT IN ITA NO. 1237 AND 1238/PN/2008 FOR A.Y. 2004-05 AND 2005-06 WHEREIN FOLLOWING THE DECISION IN THE CASE OF A SISTER CONC ERN THIS ISSUE HAS BEEN DISCUSSED AND DECIDED AS UNDER PARA 11 AND 12. 11. WE HAVE HEARD BOTH THE SIDES. AS FAR AS THE FACT OF OWNERSHIP IS CONCERNED, WHICH IS ONE OF THE ITA NO. 780, 613, 544 AND 545/PN/2009 PREETAM ENTERPRISES A.Y. 2004-05. 2005-06 AND 2006-07 , 4 BASIC INGREDIENT OF SEC. 32 OF I.T. ACT, THE SAME H AS NOT BEEN DOUBTED BY THE REVENUE DEPARTMENT. THE ADMITTED FACTUAL POSITION IS THAT THE APPELLANT HAD SUPPLIED THE MACHINERIES TO THE VENDORS WHO WERE DOING MACHINING WORK FOR THE ASSESSEE. NEXT IS THE QUESTION THAT, WHETHER THE MACHINERIES WERE USED FOR THE PURPOSE OF THE ASSESSEES BUSINESS. IN THIS REGARD, THE APPELLANT HAS SUBMITTED A DETAILED NOTE BEFORE THE REVENUE AUTHORITIES COPY PLACED ON PAGE 306 TO 315 OF THE COMPILATION TO ESTABLISH THAT TH E PARTIES TO WHOM THE MACHINERIES WERE GIVEN HAS SUBSTANTIALLY WORKED FOR THE ASSESSEE ONLY. THE ASSESSEE HAS GIVEN THE FIGURES OF THE VALUE OF MACHINERY AND THEN ALSO DEMONSTRATED THAT ALL THE PARTIES TO WHOM THE MACHINERIES WERE GIVEN HAVE SHOWN IN THE RESPECTIVE ACCOUNTS RECEIPTS OF MACHINING CHARGES FROM THE ASSESSEE AND ITS SISTER CONCERN. KEEPING BREVITY IN MIND WE ARE NOT REPRODUCING THE FIGURES OF TOTAL RECEIPTS SHOWN BY THOSE VENDORS IN THEIR RESPECTIVE ACCOUNTS AND THE BIFURCATION OF THE AMOUNT RECEIVED FROM THE ASSESSEE. WE CONFINE OURSELVES TO THE LEGAL ASPECT OF THE ISSUE THAT WHETHER IN THE CIRCUMSTANCES WHEN THE OWNERSHIP AND THE USER HAS NOT BEEN DOUBTED, MOREOVER THE MAXIMUM WORK UNDERTOOK PERTAINED TO THE ASSESSEE, THEN THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. INDIAN EXPRESS 255 ITR 68 MAD.) SHALL APPLY ON THE FACTS O F THIS APPEAL. THE HONBLE HIGH COURT, HAS HELD AS FOLLOWS:- HELD, THAT THE MACHINE WAS USED TO OBTAIN A TAPE WHICH IS ESSENTIAL FOR CARRYING ON THE BUSINESS OF THE ASSESSEE, VIZ., THE PRODUCTION OF THE SUNDAY MAGAZINE. THE USE OF THE MACHINE WAS THEREFORE AN EXCLUSIVE USE FOR THE PURPOSE OF THE BUSINESS OF TH E ASSESSEE. THE MAKING AVAILABLE TO ITS SISTER CONCER N OF THE TAPE OBTAINED FROM THE USE OF THIS MACHINE WAS A SUBSEQUENT EVENT WHICH MIGHT AMOUNT TO A GRATUITOUS ACT ON THE PART OF THE ASSESSEE BUT WOUL D NOT RENDER THE USER NON-EXCLUSIVE SO FAR AS THE ASSESSEE WAS CONCERNED FOR THE PURPOSE OF ITS BUSINESS. THE BENEFIT OF DEPRECIATION AND INVESTMENT ALLOWANCE COULD NOT, AS PROPOSED BY THE REVENUE, BE REDUCED BY HALF, SINCE HAVING REGARD TO THE NATURE OF THE USER OF THE MACHINE, DEPRECIATION WAS INEVITABLE AND THE REPLACEMENT OF THE MACHINE AT A LATER POINT OF TIME WOULD BE NECESSARY. THE ITA NO. 780, 613, 544 AND 545/PN/2009 PREETAM ENTERPRISES A.Y. 2004-05. 2005-06 AND 2006-07 , 5 INVESTMENT HAVING BEEN MADE BY THE ASSESSEE, INVESTMENT ALLOWANCE WAS PROPERLY CLAIMABLE BY THE ASSESSEE AND BY NONE ELSE. THE EXPENDITURE INCURRED BY THE ASSESSEE BY WAY OF INTEREST ON LOAN S OBTAINED FOR FUNDING THE PURCHASE OF THAT MACHINE WAS AN EXPENDITURE WHICH THE ASSESSEE WAS REQUIRED TO MEET AND WHICH EXPENDITURE IT WAS ENTITLED TO CLAIM AS A DEDUCTION. 12. SINCE THE HONBLE HIGH COURT HAS HELD THAT THE MACHINERY INSTALLED BY THE ASSESSEE AND USED FOR THE PURPOSES OF ITS BUSINESS, IT WAS NOT RELEVANT THAT THE MACHINERY WAS ALSO USED BY THE SISTER CONCERN AND THE ASSESSEE IS ENTITLED TO DEPRECIATIO N. RESPECTFULLY FOLLOWING THE DECISION WE HEREBY REVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND DIRECT TO ALLOW THE CLAIM. BEFORE WE CONCLUDE WE MAY LIKE TO MENTION THAT THE REASON OF CONFIRMATION OF DISALLOWANCE BY CIT(A) PERTAINING TO ADEQUACY OF THE RATES CHARGED BY THE VENDORS FROM THE ASSESSEE HAD NO CONSEQUENCE AND BEYOND THE SCOPE OF THE PROVISIONS OF SEC. 32 OF I.T. ACT. SUCH A REASONING FOR THE ALLEGED DISALLOWANCE IS HEREBY DISAPPROVED. ASSESSEES GROUND IS ALLOWED. APPEAL ALLOWED. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE FACTS BEING SIMILAR SO FOLLOWING SAME REASONING ASSESSEE S CLAIM IN QUESTION IS ALLOWED. 3.1 NOTHING CONTRARY IS BROUGHT TO OUR NOTICE AND, THEREFORE, FOLLOWING THE ABOVE DECISION, THIS ISSUE REGARDING DEPRECATION ON MACHINERY USED IN JOB WORK DONE BY THE ASSESSEE S VENDORS IS DECIDED IN FAVOUR OF THE ASSESSEE. 4. SO FAR AS THE ISSUE OF ESTIMATING SELLING AND ADMINISTRATIVE EXPENSES OF RS. 1,00,000/- AS ATTRIB UTABLE TO WINDMILL IS CONCERNED, THE ASSESSEE IS CLAIMED TO B E MAINTAINING SEPARATE SET OF ACCOUNTS FOR THE WINDMI LL DIVISION. STAND OF THE ASSESSEE IS THAT AFTER REDUCING EXPENS ES OF RS. ITA NO. 780, 613, 544 AND 545/PN/2009 PREETAM ENTERPRISES A.Y. 2004-05. 2005-06 AND 2006-07 , 6 38,646/- NET PROFIT IS SHOWN OF RS. 11,32,862/- IN THE WIND MILL DIVISION. ASSESSEE CONTENDED THAT EXPENDITURE NOT DIRECTLY RELATABLE TO THE INDUSTRIAL UNIT CANNOT BE ALLOCATED WHILE COMPUTING THE DEDUCTION U/S 80-IA. IN THIS R EGARD, THE ASSESSEE PLACED RELIANCE ON THE DECISION OF I.T.A.T . MUMBAI IN THE CASE OF DCW LTD., VS. ADDL. CIT 132 TTJ 442. TH E LD. DR RELIED ON THE ORDER OF THE CIT(A) ON THIS ISSUE. AF TER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD, W E FEEL THAT THIS ISSUE HAS TO BE APPRECIATED IN LIGHT OF ABOVE DISCUSSION. SO, THIS ISSUE IS RESTORED TO THE ASSESSING OFFICER WITH DIRECTION TO DECIDE THE ISSUE AT HAND AFTER LOOKING TO THE FACT WHETHER ASSESSEE IS MAINTAINING SEPARATE BOOKS OF A CCOUNT TO JUSTIFY ITS CLAIM AND ASSESSING OFFICER WILL DECID E THIS ISSUE AS PER FACT AND LAW AFTER PROVIDING OPPORTUNITY OF HEA RING TO ASSESSEE. ACCORDINGLY, THIS APPEAL IS PARTLY ALLOWE D. ITA NO 544/PN/2009 AND 545/PN/2009 5. THE ORDER OF AO HAS BEEN REVISED BY CIT IN A.Y 2 004-05 AND 2005-06 FOLLOWING THE VIEW TAKEN IN A.Y. 2006-0 7 BY INVOKING PROVISIONS OF SECTION 263. THE STAND OF TH E ASSESSEE IS THAT IN A.Y. 2004-05 AND 2005-06, AO HAS ADOPTED A POSSIBLE VIEW IN ALLOWING THE DEDUCTION U/S 80-IA. THIS VIEW OF AO IS IN LINE WITH THE DECISION OF B BENCH OF THE CHENNAI TRIBUNAL IN THE CASE OF MOHAN BREWERIES AND DISTILL ERIES LTD. V. ACIT (114 TTJ 532). IN THIS REGARD, IT WAS SUBMI TTED THAT ITA NO. 780, 613, 544 AND 545/PN/2009 PREETAM ENTERPRISES A.Y. 2004-05. 2005-06 AND 2006-07 , 7 THE AO HAS ADOPTED A POSSIBLE VIEW, SO THE CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SEC. 263 IN BOTH THESE YEARS. ON THE OTHER HAND, THE LD DR SUPPORTED THE O RDER OF THE CIT WITH REGARD TO REVISION OF THE ORDER OF AO BY I NVOKING THE PROVISIONS OF SEC. 263. AFTER GOING THROUGH THE MAT ERIAL ON RECORD, WE ARE NOT INCLINED TO CONCUR WITH THE VIEW TAKEN BY THE CIT WHILE REVISING THE ORDER OF THE AO BY INVOK ING THE PROVISIONS OF SEC. 263, BECAUSE THE AO HAS ADOPTED A POSSIBLE VIEW AVAILABLE AT THE RELEVANT POINT OF TIME. SIMIL AR VIEW HAS BEEN TAKEN BY THE B BENCH OF THE CHENNAI TRIBUNAL IN THE CASE OF MOHAN BREWERIES AND DISTILLERIES LD. VS ACI T (114 TTJ 532), AND WE HAVE ALSO TAKEN A SIMILAR VIEW ON MERI T IN A.Y 2006-07, VIDE PARAGRAPH 2 OF THIS ORDER. IN VIEW OF ABOVE, WE ARE OF THE OPINION THAT CIT WAS NOT JUSTIFIED IN RE VISING THE ORDER OF AO BY INVOKING THE PROVISIONS OF SEC. 263. OUR THIS VIEW IS FORTIFIED BY THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (2 000) 243 ITR 83 (SC). ACCORDINGLY, BOTH THESE APPEALS FILED BY A SSESSEE ARE ALLOWED. ITA NO 780/PN/09 ASSESSMENT YEAR 2006-07 6. IN THE APPEAL FILED BY THE DEPARTMENT, THE FOLLO WING GROUNDS HAVE BEEN RAISED. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING ASSESSEES CL AIM OF DEDUCTION U/S 80-IA/80-IB ON INCOME FROM MACHINING CHARGES RECEIVED OF RS. 91,27,049/-, SALE OF SCRAP OF RS. ITA NO. 780, 613, 544 AND 545/PN/2009 PREETAM ENTERPRISES A.Y. 2004-05. 2005-06 AND 2006-07 , 8 34,02,352/-, OTHER INCOME (I.E. DEPB SALE OF RS. 78,125/- AND TURNOVER TAX AND SURCHARGE REFUND ON PURCHASES OF RS. 2,15,106/-) 6.1 THE ISSUE INVOLVED IN THIS APPEAL IS IN RESPECT OF CLAIM OF SEC. 80-IB IN RESPECT OF INCOME FROM MACHINING CHAR GES (JOB WORK) AND SCRAP SALE. THE ISSUE OF CLAIM OF DEDUCT ION U/S 80- IA ON INCOME FROM MACHINING AND SCRAP SALE IS COVER ED BY THE DECISION OF B BENCH OF THE TRIBUNAL IN THE CASE O F RAMCHANDRA ENTERPRISES IN ITA NO. 1066, 1067/PN/200 8 AND 353/PN/2009 WHEREIN THE ISSUE HAS BEEN DECIDED AS U NDER: 5. THE LD. CIT(A) HAS APPRECIATED THIS SUBMISSIONS THEREFORE HE HAS HELD THAT THE MACHINING CHARGES RECEIVED BY THE ASSESSEE DID QUALIFY THE DEDUCTION U/S 80IB AFTER CONSIDERING THE PRECEDENTS NAMELY RANE (MADRAS) LTD., 238 ITR 377, TAJ FIRE WORKS INDUSTRI ES 288 ITR 92 (MAD.) AND NORTHERN AROMATICS LTD., 196 CTR 479 (DEL.) .WE FIND NO FALLACY IN THE DECISION OF L D. CIT(A) FOR ALLOWING THE CLAIM IN RESPECT OF MACHINING CHAR GES RECEIVED BY THE ASSESSEE. HOWEVER, THE QUESTION BEF ORE US AS RAISED FROM THE SIDE OF THE ASSESSEE IS IN RESPE CT OF SCRAP SALES. IN THIS REGARD THE SUBMISSION OF THE A SSESSEE WAS THAT THE SCRAP IS GENERATED DURING MANUFACTURIN G ACTIVITY HENCE, THE VEHEMENT SUBMISSION WAS THAT TH E GENERATION OF SCRAP WAS INCIDENTAL TO THE MANUFACTU RING ACTIVITY. HENCE THE ARGUMENT WAS THAT THE INCOME EARNED ON SALE OF SCRAP WAS INCOME FROM BUSINESS OF AN ELIGIBLE INDUSTRIAL UNDERTAKING HENCE ENTITLED FOR 80IB DEDUCTION. A RELEVANT PORTION OF THE SUBMISSION PERTAINING TO SALE OF SCRAP IS REPRODUCED BELOW:- 3.1 INCOME FROM SALE OF SCRAP. THE SCRAP IS GENERATED DURING VARIOUS MACHINING ACTIVITIES CARRIED OUT BY THE APPELLANT DURING THE COURSE OF MANUFACTURING ACTIVITY. THE GENERATION OF SCRAP IT-SELF IS DUE TO BUSINESS ACTIVITY OF THE APPELLANT. THUS INCOME EARNED ON ACCOUNT OF SALE OF SCRAP HAS DIRECT LINK / NEXUS WITH THE INDUSTRIAL ITA NO. 780, 613, 544 AND 545/PN/2009 PREETAM ENTERPRISES A.Y. 2004-05. 2005-06 AND 2006-07 , 9 UNDERTAKING AND THEREFORE, ENTITLED FOR DEDUCTION U/S 80IB. 3.2 IN THIS CONNECTION THE RELIANCE IS PLACED ON HON. ITAT MUMBAI G BENCHS DECISION IN THE CASE OF ASIA INVESTMENTS LTD., VS. D.C.I.T (90 TTJ 65). IN THIS CASE ISSUE INVOLVED WAS DEDUCTION U/S 80HH IN RESPECT OF RECEIPTS FROM SALE OF SCRAP. FOLLOWING THE DECISION OF HON. MADRAS HIGH COURT IN THE CASE OF FENNER (INDIA) LTD. VS. CIT (241 ITR 803) THE HON. ITAT HELD THAT PROFIT FROM SALE OF THE SCRAP MATERIAL WAS ELIGIBLE FOR DEDUCTION U/S. 80HH. 6. ON THE BASIS OF THE ABOVE FACTS WE HAVE EXAMINED FEW PRECEDENTS NAMELY FENNER (INDIA) LTD., 241 ITR 803, WHEELS (I) LTD. 141 ITR 745. THE OBSERVATION OF THE COURTS WERE THAT A DEDUCTION CAN BE CLAIMED ONLY IN RESPEC T OF PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING. AN INDUSTRIAL UNDERTAKING ITSELF MUST BE THE SOURCE OF THAT PROFIT. OBSERVATION HAS ALSO BEEN MADE THAT IT IS WRONG TO SAY THAT THE SCRAP HAS NO DIRECT NEXUS WITH INDU STRIAL UNDERTAKING MANUFACTURING SUCH PRODUCTS. IN THE OTH ER CASE, WHEELS (I) LTD. (SUPRA) THE COURT WAS OF THE VIEW THAT THE SALE OF SCRAP WAS NOTHING BUT A BYPRODUCT OF THE INDUSTRY. THE GENERATION OF SCRAP IF HAPPENS DURING THE MANUFACTURING ACTIVITY THEN ELIGIBLE FOR DEDUCTION. AN ANOTHER DECISION OF RESPECTED CO ORDINATE BENCH MUM BAI HAS ALSO BEEN QUOTED NAMELY ASIAN INVESTMENTS 90 TT J 65. THUS CONSIDERING THE FACTUAL ASPECT AS ALSO THE LEGAL ASPECT A VIEW CAN BE TAKEN IN FAVOUR OF THE ASSESSE E ESPECIALLY UNDER THE CIRCUMSTANCES WHEN IT IS DEMONSTRATED BEFORE THE AUTHORITIES BELOW THAT THE GENERATION OF THE SCRAP IN THIS CASE HAD A DIRECT L INK AND CLOSE NEXUS WITH THE MANUFACTURING ACTIVITY OF THE ASSESSEE. ONCE IT IS ESTABLISHED THAT DURING THE MANUFACTURING ACTIVITY SCRAP WAS GENERATED AS A BYPRODUCT HENCE, FOLLOWING THE VIEW PRONOUNCED BY T HE HONBLE COURTS WE ARE OF THE CONSIDERED OPINION THA T THE ASSESSEE IS ELIGIBLE FOR THE CLAIM OF DEDUCTION U/S 80IB IN RESPECT OF SALE OF SCRAP. SIMILAR VIEW HAS BEEN TAKEN IN ASSESSEES OWN CASE IN ITA NO. 1237 AND 1238/PN/2008 FOR A.Y. 2004-05 AND 2005-06. ITA NO. 780, 613, 544 AND 545/PN/2009 PREETAM ENTERPRISES A.Y. 2004-05. 2005-06 AND 2006-07 , 10 6.2 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR NOTIC E BY THE LEARNED DR. SO FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL IN THE CASE OF RAMCHANDRA ENTERPRISES (SUPRA), THE ISS UE WITH REGARDS TO ALLOWABILITY OF DEDUCTION U/S 80-IB IN R ESPECT OF INCOME FROM MACHINING CHARGES AND SALE OF SCRAP IS DECIDED IN FAVOUR OF THE ASSESSEE. 6.3 THE NEXT ISSUE RAISED IN DEPARTMENTAL APPEAL IS WITH REGARDS TO CLAIM OF DEDUCTION ON ACCOUNT OF DEPB SA LE, TURNOVER TAX AND SURCHARGE REFUND ON PURCHASES, WE FIND THAT THE ISSUE WITH REGARDS TO DEPB SALE IS COVERED AGAI NST THE ASSESSEE BY THE DECISION OF THE SUPREME COURT IN TH E CASE OF LIBERTY INDIA VS. CIT (2009) 317 ITR 218 (SC). SIM ILARLY, WITH REGARDS TO THE ISSUE OF TURNOVER TAX AND SURCHARGE, WE ARE NOT INCLINED TO CONCUR WITH THE DECISION OF THE CIT(A) IN VIEW OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF S. N. GUPTA REPORTED IN 297 ITR 322 (SC) WHEREIN IT HAS BEEN HE LD AS UNDER: THE PROVISO WAS INSERTED IN SECTION 113 TO INDICAT E THAT THE FINANCE ACT OF THE YEAR IN WHICH THE SEARCH WAS INITIATED WOULD APPLY. THAT PROVISO WAS ONLY CLARI FICATORY IN NATURE. THERE IS NO QUESTION OF RETROSPECTIVE EF FECT. THE PROVISO HAS TO BE READ AS IT STANDS. PRIOR TO JUNE 1, 2002, IN SEVERAL CASES, TAX WAS PRESCRIBED SOMETIME S IN THE INCOME TAX ACT AD SOMETIMES IN THE FINANCE ACT AND SOMETIMES IN BOTH. THIS MADE LIABILITY UNCERTAIN. THEREFORE, CLARIFICATION WAS NEEDED. THE PROVISO I S CURATIVE IN NATURE. THE PROVISO ONLY CLARIFIES THA T OUT OF THE FOUR DATES, PARLIAMENT HAS OPTED THE DATE, NAME LY, THE YEAR IN WHICH THE SEARCH UNDER SECTION 158BC IS INITIATED, WHICH DATE WOULD BE RELEVANT FOR APPLICA BILITY OF A PARTICULAR FINANCE ACT. ITA NO. 780, 613, 544 AND 545/PN/2009 PREETAM ENTERPRISES A.Y. 2004-05. 2005-06 AND 2006-07 , 11 IN VIEW OF ABOVE, ISSUE OF DEDUCTION ON ACCOUNT OF DEPB SALE, TURNOVER TAX AND SURCHARGE REFUND ON PURCHASES IS D ECIDED AGAINST ASSESSEE. 7. IN THE RESULT, ASSESSEES APPEAL FOR A.Y 2006-07 IS PARTLY ALLOWED. APPEALS OF ASSESSEE FOR A.Y 2004-05 AND 20 05-06 ARE ALLOWED AS INDICATED ABOVE AND REVENUES APPEAL FOR A.Y 2006- 07 IS PARTLY ALLOWED. ALL THESE APPEALS ARE DISPOSE D OF AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL 2011 SD/- SD/- (D. KARUNAKARA RAO) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE,DATED THE 29 TH APRIL 2011 ANKAM COPY FORWARDED TO: (1) ASSESSEE (2) DEPARTMENT (3) CIT- I KOLHAPUR (4) CIT(A)-I KOLHAPUR (5) THE D.R. A' BENCH, PUNE TRUE COPY BY ORDER, ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, PUNE BENCHES, PUNE