M/s. Manatec Electronics Pvt. Ltd., Pondicherry V. ACIT, Pondicherry

ITA 57/CHNY/2014

• Counselvise Citation: 5721714 RSA 2014
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 06-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 07-01-2014
• Court: TRIBUNAL
• Department Lawyers: DR B NICHALJCIT D R
• Assessee Lawyers: JHARNA B HARILALF
• Section: 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.57 /MDS./2014 ( !' #' / ASSESSMENT YEAR :2010-11) M/S.MANATEC ELECTRONICS PVT. LTD., C-22 & 23, INDUSTRIAL ESTATE, THATTANCHAVADY, PONDICHERRY 605 009. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I, PONDICHERRY. PAN AAFCM 1685 D ( / APPELLANT ) ( / RESPONDENT ) $% & ' / APPELLANT BY : MS.JHARNA B. HARILAL,F.C.A ()$% & ' / RESPONDENT BY : DR.B.NICHAL,JCIT, D.R * + & ,- / DATE OF HEARING : 06.10.2015 .# & ,- /DATE OF PRONOUNCEMENT : 20.11.2015 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-VI, CHENN AI DATED ITA NO.57 /MDS/2014 2 28.10.2013 IN ITA NO.667/13-14 PASSED UNDER SEC.14 3(3) READ WITH SECTION 250 OF THE ACT. 2. THE ASSESSEE HAS RAISED THREE ELABORATE GROUNDS IN ITS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT:- I) THE LD. CIT(A) HAD ERRED BY HOLDING THAT THE A SSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(4) OF THE ACT TO TH E EXTENT OF FREIGHT INCOME, WHICH IS NOT DERIVED FROM THE MANUF ACTURING ACTIVITY. II) THE LD. CIT (A) ERRED IN SUSTAINING THE INTERE ST CHARGED U/S. 234B & 234C OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING A ND SERVICING OF AUTOMOBILE GARAGE EQUIPMENTS, FILED ITS RETURN OF I NCOME ON 30.09.2010 ADMITTING INCOME OF ` 3,15,47,240/-. SUBSEQUENTLY, THE RETURN WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON 30.11.2012 WHEREIN THE LD. ASS ESSING OFFICER DISALLOWED THE SUM OF ` 92,75,813/- BY WITHDRAWING THE BENEFIT U/S.80- ITA NO.57 /MDS/2014 3 IB(4) OF THE ACT AND FURTHER LEVIED INTEREST U/S.23 4B & 234C OF THE ACT. ON APPEAL, THE LD. CIT (A) ALLOWED DEDUCTION U /S.80-IB(4) OF THE ACT, HOWEVER SUSTAINED ADDITION FOR ` 27,66,294/- BEING INCOME EARNED ON ACCOUNT OF FREIGHT CHARGES AND THEREFORE, NOT DERIVED FROM MANUFACTURING ACTIVITY. 4. THE LD. A.R. SUBMITTED BEFORE US THAT FREIGHT CHARGES RECEIVED BY THE ASSESSEE PERTAINS TO THE DELIVERY OF MANUFAC TURED ITEMS AT THE PREMISES OF THE CLIENTS OF THE ASSESSEE; THEREFORE, IT IS AN INTEGRAL REVENUE INGREDIENT OF THE MANUFACTURING ACTIVITY OF THE ASSESSEE. HENCE IT WAS ARGUED THAT THE SAME SHOULD BE TAKEN I NTO CONSIDERATION FOR THE PURPOSE OF GRANTING BENEFIT U /S.80-IB(4) OF THE ACT. THE LD. D.R ON THE OTHER HAND ARGUED IN SUPPO RT OF THE ORDERS OF THE REVENUE. 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. SECTION-80-IB OF THE ACT GRANTS DEDUCTION TO THE ASSESSEE WHERE THE GROSS TOTAL INC OME OF THE ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FRO M ANY ELIGIBLE ITA NO.57 /MDS/2014 4 BUSINESS PRESCRIBED UNDER THE ACT. THE BUSINESS OF THE ASSESSEE IS MANUFACTURING OF ARTICLES OR THINGS, NOT BEING AN A RTICLE OR A THING SPECIFIED IN THE 11 TH SCHEDULE, IN AN INDUSTRIAL BACKWARD STATE SPECIFIED IN THE 8 TH SCHEDULE. HENCE, IT IS EVIDENT FROM THE FACTS OF THE CASE THAT THE BUSINESS OF THE ASSESSEE IS MANUF ACTURING ACTIVITY AND THE LD. CIT (A) FOLLOWING THE DECISION OF THE T RIBUNAL IN ITA NO.1955/MDS./2012 FOR A.Y 2009-10 HAS ALLOWED DEDUC TION U/S.80- IB(4) OF THE ACT AND THE SAME IS ACCEPTED BY THE AS SESSEE. HOWEVER, WHILE GRANTING DEDUCTION THE LD. CIT (A) H AD DISALLOWED THE INCOME OF ` 27,66,294/- HOLDING IT TO BE ON ACCOUNT OF INCOME D ERIVED FROM FREIGHT CHARGES. WHILE DOING SO, THE LD. CIT ( A) HAD RELIED IN THE DECISION OF THE APEX COURT IN THE CASE OF M/S.PANDI AN CHEMICALS LTD., REPORTED IN 262 ITR 278(SC). WE ARE ALSO REMI NDED OF THE DECISION OF THE APEX COURT IN THE CASE OF CAMBAY EL ECTRICAL SUPPLY CO. LTD., REPORTED IN 113 ITR 84 WHICH HIGHLIGHTS T HE DISTINCTION BETWEEN THE TWO EXPRESSIONS INCOME DERIVED FROM A ND INCOME ATTRIBUTABLE TO. ACCORDING TO THE HONBLE APEX CO URT THE EXPRESSION ATTRIBUTABLE TO HAS A MUCH WIDER MEANING THAN THE EXPRESSION DERIVED FROM THEREBY INTENDING TO COVER RECEIPTS FROM SOURCES OTHER ITA NO.57 /MDS/2014 5 THAN THE ACTUAL CONDUCT OF THE BUSINESS OF THE INDU STRIAL UNDERTAKING. IN OTHER WORDS, IT CAN BE UNDERSTOOD TO MEAN THAT T HERE CAN BE RECEIPTS WHICH ARE INCIDENTAL TO THE ACTUAL CONDUCT OF THE BUSINESS OF INDUSTRIAL UNDERTAKING YET THE SAME MAY NOT FALL WI THIN THE EXPRESSION OF DERIVED FROM SO AS TO BE ELIGIBLE FOR THE BENE FIT ENVISAGED UNDER THE PROVISIONS OF THE ACT. THE HONBLE APEX COURT IN THE CASE STERLING FOODS REPORTED IN 237 ITR 53(SC) ALSO OPINED THAT WHERE THE NEXUS BETWEEN THE INCOME AND THE INDUSTRIAL UNDERTAKING W AS NOT DIRECT BUT WAS ONLY INCIDENTAL, IT WOULD NOT FALL WITHIN THE E XPRESSION PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING. SIMILAR IS TH E DECISION OF THE HONBLE APEX COURT IN THE CASE OF PANDIAN CHEMICALS LTD., (SUPRA) WHICH IS RELIED UPON BY THE LD. CIT (A) WHILE HOLDI NG THE ISSUE AGAINST THE ASSESSEE. WHILE ANALYZING ALL THESE DECISIONS, IT BECOMES CLEAR FROM THE ABOVE THAT THE ASSESSEE WOULD BE ELIGIBLE FOR DEDUCTION U/S. 80IB(4) OF THE ACT FOR THE INCOME EARNED FROM THE S OURCE OF MANUFACTURING ACTIVITY. THE ASSESSEE WOULD NOT BE E LIGIBLE FOR DEDUCTION FOR ANY INCOME EARNED WHICH IS ATTRIBUTAB LE TO THE BUSINESS OF THE ASSESSEE OTHER THAN MANUFACTURING ACTIVITY. THEREFORE, THE LD. CIT (A) HAS RIGHTLY HELD THAT THE INCOME EARNED FRO M FREIGHT CHARGES ITA NO.57 /MDS/2014 6 CANNOT BE ALLOWED FOR DEDUCTION U/S.80-IB OF THE AC T AND DISALLOWED ` 27,66,294/-. HOWEVER, WE ARE NOT SURE THAT WHETHER THE AMOUNT OF ` 27,66,294/- IS THE GROSS RECEIPTS OF FREIGHT CHARGE S OR THE INCOME EARNED FROM FREIGHT CHARGES. THEREFORE, WE HEREBY R EMIT BACK THE MATTER TO THE FILE OF THE LD. ASSESSING OFFICER FOR MAKING DISALLOWANCE ONLY TO THE EXTENT OF THE NET INCOME EARNED ON FREI GHT CHARGES WHILE GRANTING THE BENEFIT OF SECTION-80-IB(4) OF THE ACT TO THE ASSESSEE AND NOT ON THE GROSS FREIGHT CHARGES RECEIVED. IT I S ORDERED ACCORDINGLY. 6. WITH RESPECT TO THE SECOND GROUND IN REGARD TO CHARGEABILITY OF INTEREST U/S. 234B & 234C OF THE ACT, ON SEVERAL OC CASIONS WE HAVE HELD THAT IT IS CONSEQUENTIAL IN NATURE. ACCORDINGL Y THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREIN ABOVE. ITA NO.57 /MDS/2014 7 ORDER PRONOUNCED ON 20 TH NOVEMBER, 2015 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 20 TH NOVEMBUR, 2015. K S SUNDARAM. & (,/0 1 0#, /COPY TO: 1. $% /APPELLANT 2. ()$% /RESPONDENT 3. * 2, ( ) /CIT(A) 4. * 2, /CIT 5. 05 (,6! /DR 6. ' 7+ /GF