Thomson Press (India) Ltd., New Delhi V. DCIT, New Delhi

ITA 5793/DEL/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7384 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 10-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Keywords: Business income
• Section: 10B; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH H NEW DELHI BEFORE : SHRI I.C. SUDHIR, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 5793/DEL./2010 ASSTT. YEAR : 2007 - 08 THOMSON PRESS (INDIA) LTD., VS. DCIT, CIRCLE 16(1), K - 9, CANNAUGHT CIRCUS, NEW DELHI. NEW DELHI. [PAN: AAACT4827F] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SALIL AGARWAL, ADVOCATE & SHRI SHAILESH GUPTA, ADVOCATE RESPONDENT BY : SHRI S.R. SENAPATI, SR. DR DATE OF HEARING : 19.11.2015 DATE OF PRONOUNCEMENT : 15 .01.2016 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - XIX, NEW DELHI DATED 01.10.2010 FOR THE ASSESSMENT YEAR 2007 - 08 ON THE FOLLOWING GROUNDS : 1. THAT THE ORDER OF THE LD. COMMISSIONER (APPEALS) OF INCOME TAX IS CONTRARY TO LAW AND THE FACTS OF THE CASE AND IS REQUIRED TO BE QUASHED. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN REDUCING THE AMOUNT OF EXEMPTION U/S. 10B. ITA NO. 5793/DEL./2010 2 3(A). THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN CALCULATING THE PROFITS DERIVED FROM EXPORT OF ARTICLE OR THINGS BY REDUCING MISC. INCOMES OF RS.39,393/ - FOR F - 5 NOIDA UNIT. 3.(B). THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN CALCULATING THE PROFITS DERIVED FROM EXPORT OF ARTICLE OR THINGS BY REDUCING MISC. INCOMES OF RS.22,970/ - FOR FBD. DIGITAL SECTOR - 16 UNIT. 3(C). THAT THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN CALCULATING THE PROFITS DERIVED FROM EXPORT OF ARTICLE OR THINGS BY REDUCING MISC. INCOMES OF RS. 5,31,107/ - TOWARDS COMPENSATION. 4(A). THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN NOT TREATING THE MISC. INCOME OF RS.22,970/ - FOR FBD. DIGITAL SECTOR - 16 UNIT EARNED FROM EXPORT ACTIVITIES. 4(B). THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN NOT TREATING THE MISC. INCOME OF RS.22,970/ - TOWARDS COMPENSATION OF FBD. DIGITAL SECTOR - 16 UNIT EARNED FROM EXPORT ACTIVITIES. 4(C). THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GONE WRONG IN NOT TREATING THE MISC. INCOME OF RS.5,31,107/ - F - 5 NOIDA UNIT EARNED FROM EXPORT ACTIVITIES. 2. THE BRIEF FACTS O F THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME OF RS.17,65,29,535/ - . THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF COMMERCIAL PRINTING AND PHOTO TYPE SETTING. THE BUSINESS OF THE ASSESSEE WAS NOT CHANGED COMPARED TO THE PRECEDING YEAR. THE ASSESSEE WAS OWNER OF TWO UNITS NAME LY , FARIDABAD DIGITAL AND F - 5 NOIDA AND CLAIMED EXEMPTION U/S. 10B OF THE ACT . DURING THE ITA NO. 5793/DEL./2010 3 COURSE OF SCRUTINY PROCEEDINGS, THE AO REDUCED THE EXEMPTION CLAIMED U/S. 10B FOR RS.1,24,52,0 81/ - STATING THAT MISCELLANEOUS INCOME, FLUCTUATION GAIN ON FOREIGN EXCHANGE AND COMPENSATION ARE NOT ELIGIBLE FOR THE PURPOSE OF CALCULATION OF EXEMPTION U/S. 10B OF THE INCOME - TAX ACT. THE DETAILS OF DEDUCTION CLAIMED AND ALLOWED U/S. 10B IN RESPECT OF T WO UNITS MAINTAINED BY THE ASSESSEE ARE AS UNDER : DEDUCTION CLAIMED DEDUCTION ALLOWED EXCESS CLAIM FARIDABAD, DIGITAL UNIT 47,15,626 41,88,103 5,27,523 F - 5 NOIDA 7,32,32,608 6,13,08,050 1,19,24,558 THE PROFITS DERIVED BY 100% EXPORT ORIENTED UNDERTAKING (EOU) OF THE ASSESSEE COMPANY FROM EXPORT IS AS UNDER : NAME OF EOU AS PER CO ACT AS PER IT ACT FARIDABAD DIGITAL UNIT 54,29,215 47,15,626/ - F - 5, NOIDA UNIT [AFTER REDUCING INTEREST INCOME FROM HEAD OFFICE/FARIDABAD OFFICE] 7,38,81,079/ - 7,32,32,608/ - THE TOTAL TURNOVER AND EXPORT TURNOVER OF EOU IS AS UNDER : - NAME OF EOU TOTAL TURNOVER EXPORT TURNOVER FARIDABAD DIGITAL UNIT 1,67,02,149/ - 1,67,02,149/ - F - 5, NOIDA UNIT [AFTER REDUCING INTEREST INCOME FROM HEAD OFFICE/FARIDABAD OFFICE] 15,39,94,868/ - 15,39,94,868/ - FOLLOWING ARE THE DETAILS OF OTHER INCOMES WHICH ARE EXCLUDED BY THE AO ON THE GROUND THAT THESE INCOMES/RECEIPTS ARE NOT DERIVED FROM EXPORT ORIENTED ITA NO. 5793/DEL./2010 4 UNDERTAKING FOR THE EXPORT OF GOODS WHILE CALCULATING DEDUCTION U/S. 10B OF THE ACT : FARIDABAD, DIGITAL UNIT F - 5, NOIDA MISC. INCOME 22,970.80 39,393.00 FLUCTUATION GAIN ON FOREIGN EXCHANGE 3,72,786.24 5,33,555.89 COMPENSATION 5,31,107.41 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHO VIDE IMPUGNED ORDER CONSIDERED THE FLUCTUATION GAIN ON FOREIGN EXCHANGE AS ELIGIBLE FOR THE PURPOSE OF COMPUTATION OF EXEMPTION U/S. 10B OF THE ACT, BUT HE DID NOT CONSIDER THE MISCELLANEOUS INCOME AND COMPENSATION EARNED BY THE APPELLANT AS ELIGIBLE FOR THE PURPOSE OF EXEMPTION U/S. 10B. AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT MISC. INCOME AND COMPENSATION WAS RECEIVED IN ORDINARY COURSE OF EXPORT BUSINESS. THE MISC. INCOME AND COMPENSATION IS RELATED TO EXPORT TURNOVER ONLY. BOTH THE UNITS ARE EXPORT ORIENTED UNITS (EOUS) ELIGIBLE F OR DEDUCTION U/S. 10B AND TOTAL SALES ARE MADE AS EXPORT SALES. THE LD. AR REFERRED TO SECTION 10B(1) OF THE IT ACT AND SECTION 10B(4) WHICH ARE REPRODUCED AS UNDER : 10B. (1) SUBJECT TO THE PROVISIONS OF THIS SECTION, A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY A HUNDRED PER CENT EXPORT - ORIENTED UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEA RS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR ITA NO. 5793/DEL./2010 5 PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE : PROVIDED THA T WHERE IN COMPUTING THE TOTAL INCOME OF THE UNDERTAKING FOR ANY ASSESSMENT YEAR, ITS PROFITS AND GAINS HAD NOT BEEN INCLUDED BY APPLICATION OF THE PROVISIONS OF THIS SECTION AS IT STOOD IMMEDIATELY BEFORE ITS SUBSTITUTION BY THE FINANCE ACT, 2000, THE UND ERTAKING SHALL BE ENTITLED TO THE DEDUCTION REFERRED TO IN THIS SUB - SECTION ONLY FOR THE UNEXPIRED PERIOD OF AFORESAID TEN CONSECUTIVE ASSESSMENT YEARS : PROVIDED FURTHER THAT FOR THE ASSESSMENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2003, THE DEDUCTION U NDER THIS SUB - SECTION SHALL BE NINETY PER CENT OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM THE EXPORT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE: PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SECTION SHALL BE ALLOWED TO ANY UNDERTAKING FOR TH E ASSESSMENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2012 AND SUBSEQUENT YEARS : PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SECTION SHALL BE ALLOWED TO AN ASSESSEE WHO DOES NOT FURNISH A RETURN OF HIS INCOME ON OR BEFORE THE DUE DATE SPECIFIED UNDER SUB - SE CTION (1) OF SECTION 139 . 4) FOR THE PURPOSES OF SUB - SECTION (1), THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE THE AMOUNT WHIC H BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. HE RELIED ON THE F OLLOWING JUDGMENTS : (I). CIT VS. PUNJAB STAINLESS STEEL INDUSTRIES, 364 ITR 144 (SC) (II). CIT VS. UNIVERSAL PRECISION SCREWS IN ITA NO. 392/2015 (DEL. H.C) (III). DEEPAK PANDURANG GADRE VS. DCIT IN ITA NO.225/PN/2007 (ITAT PUNE). (IV). DCIT VS. EXL SERVICE.COM INDIA (P) LTD. IN ITA NO. 4459/DEL./2013 (ITAT DELHI). HE FURTHER SUBMITTED THAT FORM 56G DULY CERTIFIED BY THE CHARTERED ACCOUNTANT IN RESPECT OF THESE TWO EOUS WERE FILED BEFORE THE ASSESSING OFFICER. I N THESE FORMS, THE CHARTERED ACCOUNTANT HAS ALSO WORKED OUT DEDUCTION U/S. 10B BY CALCULATING PROFITS OF BUSINESS OF UNDERTAKING AS PER SECTION 10B(4) ONLY. BASED ON THE CERTIFICATES ISSUED BY THE CHARTERED ITA NO. 5793/DEL./2010 6 ACCOUNTANT IN THIS REGARD, EXEMPTION U/S. 10B HAS BEEN CLAIMED BY THE ASSESSEE COMPANY. HE INVITED OUR ATTENTION TO PAGE 17 OF THE PAPER BOOK - 2 CONTAINING THE DETAILS OF MISCELLANEOUS INCOME AND COMPENSATION FROM A.Y. 2002 - 03 TO 2007 - 08. THESE DETAILS SHOW THAT THE ASSESSEE HAS BEEN GRANTED EXEMPTION ON MISCELLANEOUS INCOME AND COMPENSATION IN EARLIER YEARS 2002 - 03 TO 2006 - 07, BUT THE SAME HAS BEEN DISALLOWED IN THE YEAR UNDER CONSIDERATION. 4. THE LEARNED DR ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE PAR TIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD . WE HAVE ALSO GONE THROUGH THE COPY OF LEDGER ACCOUNT OF MISC. INCOME AT PLACED AT PAGE 7 TO 9 OF PAPER BOOK NO. 2 RELATING TO F - 5 NOIDA UNIT OF RS.39,993/ - WHICH CLEARLY SHOWS THAT ALL THE AMOUNTS REC EIVED UNDER THIS HEAD ARE OUT OF SALE OF WASTE SCRAP PAPERS, OUT OF WHICH RS.800/ - IS RELATED FOR SALE OF WASTE OIL. FURTHER AT PAGE NO. 10, FROM THE LEDGER ACCOUNT OF FARIDABAD UNIT, TOTAL MISC. INCOME HAS BEEN SHOWN OF RS.22,971/ - APPROX., OUT OF WHICH R S.6500/ - IS RELATED TO SALE OF WOODEN TABLE, CHAIR, WASTE COOLER AND REST AMOUNT IS RELATED TO SALE OF WASTE SCRAPE PAPER. HE HAS FURTHER SUBMITTED THE ITA NO. 5793/DEL./2010 7 DETAILS OF LEDGER ACCOUNT OF COMPENSATION OF F - 5 NOIDA UNIT (PB - 2 PAGE 11 TO 16) FOR COMPENSATION RECEI VED OF RS.5,31,107.41. THE COMPENSATION RECEIVED IS CLEAR FROM LEDGER ACCOUNT SUBMITTED THAT IT HAS BEEN RECEIVED FROM HIS EMPLOYEES EITHER AS UNPAID SALARY OR LEAVE WITH WAGES PAYABLE, WHICH HAS BEEN SURRENDERED BY THE EMPLOYEES. AS FAR AS THE MISC. INCO ME RECEIVED AS A RESULT OF SALE OF SCRAP PAPER , WE FIND THAT THE ISSUE REGARDING MISC. INCOME DERIVED FROM SALE OF SCRAP STOOD DECIDED IN FAVOUR OF THE ASSESSEE IN THE IDENTICAL FACTS OF THE CASE BY JURISDICTIONAL HIGH COURT IN THE CASE OF PRINCIPAL CIT VS . UNIVERSAL PRECISION SCREWS IN ITA NO. 392/2015 AFTER FOLLOWING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. PUNJAB STAINLESS STEEL INDUSTRIES (SUPRA). BESIDES, THE SCRAP PAPER IS AN INTEGRAL PART OF PRODUCTION WHICH STOOD EXPORTED BY THE EOUS OF ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON BLE DELHI HIGH COURT, WE DIRECT THE AO TO TREAT THE MISC. INCOME RECEIVED FROM THE SALE OF SCRAP AS ELIGIBLE FOR DEDUCTION U/S. 10B OF THE ACT. HOWEVER, THE MISC. INCOME RECEIVED BY EO US OUT OF SALE OF WOODEN FURNITURE OR WASTE COOLERS, TO OUR MIND, BEING NOT INTEGRALLY CONNECTED WITH THE EXPORT BUSINESS , SHALL NOT BE ELIGIBLE FOR DEDUCTION U/S. 10B OF THE ACT. SIMILAR IS NOT POSITION WITH RESPECT TO COMPENSATION ALLEGED TO HAVE BEEN RE CEIVED AS A RESULT OF UNPAID SALARY OR LEAVE WITH WAGES, SURRENDERED BY THE EMPLOYEES, AS SUCH RECEIPTS COULD NOT BE ESTABLISHED TO ITA NO. 5793/DEL./2010 8 HAVE ANY RELATION WITH THE EXPORT BUSINESS OF THE ASSESSEE UNDERTAKING. WE, THEREFORE, CONFIRM THE ORDER OF THE LD. CIT(A) O N THIS COUNT. THE AO IS, THEREFORE, DIRECTED TO WORK OUT THE DEDUCTION U/S. 10B OF THE ACT ACCORDINGLY. 6. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.01.2016 . SD/ - SD/ - ( I.C. SUDHIR ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 15.01.2016 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI