DCIT, Sangrur V. M/s H.M. Steel Ltd., Sangrur

ITA 582/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80853 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 582/CHD/2014 ASSESSMENT YEARS : 2007-08 D.C.I.T. CIRCLE, SANGRUR V M/S H.M. STEEL LTD SANGRUR ROAD, DIRBA DISTT. SANGRUR AABCH 0164Q (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. JYOTI KUMARI RESPONDENT BY: NONE DATE OF HEARING 20.8.2014 DATE OF PRONOUNCEMENT 10. 9.2014 O R D E R PER T.R. SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 28. 3.2014 OF THE LD CIT(A), PATIALA. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS: 1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN DELETING THE PENALTY IMPOSED U/S 271(1)(C) OF TH E INCOME TAX ACT, 1961 BY RELYING UPON THE ORDER DATED 17.06.2013 PAS SED BY THE HONBLE ITAT, CHANDIGARH IN ITA NO. 643/CHD/2011, WITHOUT A PPRECIATING THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE SAID ORDER DATED 17.06.2013 AND HAS FILED APPEAL BEFORE THE HONBLE PUNJAB & HA RYANA HIGH COURT, CHANDIGARH WHICH IS PENDING ON THE FOLLOWING QUESTI ONS OF LAW :- (I) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE ITAT WAS RIGHT IN LAW IN HOLDING THAT THE FREIGHT SUBSIDY RE CEIVED FROM THE HIMACHAL GOVT. BY THE ASSESSEE IS ALLOWED TO BE INC LUDED AS PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING AND ELIGIBLE AS DEDUCTION U/S 80IC OF THE INCOME TAX ACT, 1961, WHEN IT HAS BEEN CLEARLY LAID DOWN BY SUPREME COURT IN ITS DECISION IN THE CASES OF CA MBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. VS. CIT 1978 (TR/HON'BLE SUPREME COURT) 50:/1978) 1/3 ITR 84/HON'BLE SUPREME COURT) THAT TH E WORDS DERIVED FROM REFERRED TO IN THE SECTION 80IC HAS NARROWER M EANING THAN ATTRIBUTABLE TO AND THE FREIGHT SUBSIDY CANNOT BE T REATED AS PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING THROUGH IT MAY BE ATTRIBUTABLE TO INDUSTRIAL UNDERTAKING. 2 (II) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ITAT WAS RIGHT IN LAW IN HOLDING THAT THE FREIGHT SUBSIDY WA S RIGHTLY TAKEN INTO CONSIDERATION BY THE ASSESSEE IN WORKING OUT THE PR OFITS AND GAINS OF THE BUSINESS UNDERTAKING RELYING ON THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF MERINO PLY AND CHEMICALS LTD. VS. CIT (1004) 122 CTR (CAL) 262: (1994) 209 ITR 508 (CAL.) WHERE THE POINT IN ISSUE WAS WHETHER A RECEIPT ON ACCOUNT OF TRANSPORT / FREIGHT SUBSIDY WAS OF A REVENUE NATURE AND WAS INSEPARABLY CONNECT ED WITH THE BUSINESS AND NOT WHETHER IT WAS INCOME DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING AND ELIGIBLE FOR DEDUCTI ON U/S 80HH/80IA/80IB OF THE INCOME TAX ACT, 1961? (III) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ITAT WAS RIGHT IN LAW IN NOT APPRECIATING THE JUDGMENT OF HO NBLE HIMACHAL PRADESH HIGH COURT IN ITS DECISION IN THE CASE OF C IT VS. KIRAN ENTERPRISES REPORTED IN 327 ITR 520 AND M/S MEHAR P ACKAGING PVT. LTD. VS. CIT REPORTED IN 24 TAXMAN 204 WHICH ARE AP PLICABLE IN THIS CASE WHEREIN IT HAS ALREADY BEEN HELD THAT THE AMOU NT OF TRANSPORT / FREIGHT SUBSIDY RECEIVED FROM THE GOVERNMENT. BY TH E ASSESSEE IS NOT A PROFIT DERIVED FROM BUSINESS SINCE IT IS NOT AN O PERATIONAL PROFIT. THE SOURCE OF SUBSIDY IS NOT THE BUSINESS OF ASSESS EE BUT SCHEME OF CENTRAL GOVERNMENT AND CANNOT BE INCLUDED IN THE PR OFITS ELIGIBLE FOR DEDUCTION U/S 80IC. THE ITAT WAS ALSO NOT RIGHT IN LAW IN NOT APPRECIATING THE RATIO OF HONBLE SUPREME COURT IN THE CASES OF M/S LIBERTY INDIS VS. CIT 225 CTR 233 (SC), CIT VS. ST ERLING FOODS 153 CTR 439, 237 ITR 589, VELLORE ELECTRIC CORPORATION LTD. VS. CIT 227 ITR 557 (SC). (IV) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ITAT WAS RIGHT IN LAW IN HOLDING THAT THE INCOME FROM SALES TAX DEFERMENT REBATE RECEIVED BY THE ASSESSEE IS ALLOWED TO BE IN CLUDED AS PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING AND ELIGIBLE FO R DEDUCTION U/S 80IC OF THE INCOME TAX ACT, 1961, WHEN THE ASSESSEE RECEIVED IT FROM THE HIMACHAL GOVT. FOR THE BENEFIT OF ANY INCE NTIVE OF SALES TAX LEVIABLE ON THE SALE OF MANUFACTURED GOODS UNDER HI MACHAL PRADESH GENERAL SALES TAX ACT, 1968 AND THE INCOME DERIVED FROM SUCH REBATE IS NOT AN INCOME DERIVED FROM INDUSTRIAL UND ERTAKING. HOWEVER, THE IMMEDIATE SOURCE OF THIS REBATE WAS THE SCHEME OF GOVT. TO GIVE SUCH REBATE AND NOT THE CONDUCT OF THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. (V) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE ITAT WAS RIGHT IN LAW IN DIRECTING THE AO TO PASS A FRESH OR DER, ON THE ISSUE OF BANK INTEREST, IN TERMS OF THE JUDGMENT OF JURISDIC TIONAL HIGH COURT IN THE CASE OF VISHAL INDUSTRIES AS WELL AS IN THE LIG HT OF THE APEX COURT DECISION IN THE CASE OF ACG ASSOCIATES CAPSULES PVT . LTD., IGNORING THE FACT THAT DECISION OF NETTING WAS HELD TO BE CO RRECT FOR COMPUTING DEDUCTION U/S 80HHC IN VIEW OF THE DEFINITION OF PROFITS OF BUSINESS IN EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT AN D NOT FOR SECTION 80IC OF THE ACT WHICH DEALS WITH PROFITS DERIVED FR OM THE ELIGIBLE BUSINESS, AND IS DIFFERENT FROM THE COMPUTATION OF SECTION 80HHC. 2. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3 3 IN THIS CASE THE ASSESSEE HAS MOVED AN APPLICATIO N FOR ADJOURNMENT WHICH WAS REJECTED BY US. PERUSAL OF T HE RECORD SHOWS THAT THE ISSUE CAN BE DECIDED ON EXPARTE BASI S. 4 THE LD. D.R FOR THE REVENUE WAS HEARD. 5 AFTER CONSIDERING THE SUBMISSIONS OF THE LD. D.R FOR THE REVENUE AND THE RELEVANT MATERIAL ON RECORD, WE FIN D THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IC. DEDUCTION WAS DENIED ON TRANSPORT SUBSIDY, SALES TAX DEFERMENT RE BATE AND INTEREST INCOME TO THE EXTENT OF RS. 181,02,711/-, RS. 24,98,964/- AND RS. 728,318/- BECAUSE THE SAME WER E NOT DERIVED FROM INDUSTRIAL UNDERTAKING OF THE ASSESSE E. PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED ON THIS. ULTIMATELY PENALTY U/S 271(1)(C) WAS LEVIED ON THIS ADDITION A MOUNTING TO RS. 7250060/-. 6 ON APPEAL IT WAS MAINLY SUBMITTED THAT THE DEDUCT ION U/S 80IC WAS CLAIMED ON THE BASIS OF AUDITOR CERTIFICA TE. IT WAS FURTHER POINTED OUT THAT DEDUCTION WAS ALLOWED IN E ARLIER YEAR AND THE QUESTIONS WERE RAISED FOR THE FIRST TIME IN ASSESSMENT YEAR 2007-08 ONLY. LATER ON RELIEF WAS GIVEN BY T HE TRIBUNAL IN RESPECT OF THE ISSUE RAISED. SOME CASE LAWS WER E ALSO RELIED. 7 THE LD. CIT(A) FIND FORCE IN THE SUBMISSIONS AND DELETED THE PENALTY VIDE PARA 4.3 WHICH IS UNDER: 4.3 I HAVE CONSIDERED THE SUBMISSIONS MADE. IT IS N OTED THERE FROM THAT IN THE A.Y. 2005-06 BEING THE FIRST YEAR OF PR ODUCTION, THE APPELLANT HAS CLAIMED DEDUCTION U/S 80IC. THE SAID ASSESSMENT WAS COMPLETED U/S 143(3) OF THE IT ACT 61 AND THE DEDUCTION U/S 80IC HAS BEEN ALLOWED AT 100% OF THE PROFITS / GAINS. SIMILARLY, IN A.Y. 200 6-07 AGAIN THE DEDUCTION U/S 80IC HAS BEEN ALLOWED U/S 143(3) OF T HE IT ACT 61. IN THE A.Y. 207-08, THE DEPARTMENT FOR THE FIRST TIME RAIS ED SOME DISPUTE AND 4 THE MATTER HAS TRAVELED TO HONBLE ITAT, CHANDIGARH AND VIDE ORDER DATED 17.06.2013 HONBLE ITAT HAS ALLOWED SOME RELI EF. IT IS ALSO CONTENDED THAT HONBLE GUWAHATI HIGH COURT, IN THE LATEST CASE OF CIT VS. MEGHALAYA STEELS LTD 91 DTR 81 HAS CATEGORICALL Y HELD THE TRANSPORT SUBSIDY OR OTHER SUBSIDY OF LIKE NATURE CANT EXCLU DED WHILE COMPUTING DEDUCTION U/S 80IC. I HAVE CONSIDERED THE SUBMISSIO NS MADE. FIRSTLY, IT IS SEEN THAT ON THE DATE OF FILING THE RETURN THE A SSESSEES CLAIM FOR DEDUCTION U/S 80IC IN THE PREVIOUS YEAR STOOD ALLOW ED IN SCRUTINY PROCEEDINGS. IT IS ALSO NOTED THAT THE APPELLANT HA S DULY DISCLOSED ALL THE PRIMARY FACTS IN THE RETURN. THE HONBLE SUPREME CO URT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 1 58 HAS OBSERVED AS UNDER:- A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) O F THE INCOME TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INC OME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHE D INACCURATE PARTICULARS IF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS F OUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE THE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPO SE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISH ING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOND TO BE INACCU RATE, THE LIABILITY WOULD ARISE. THE ATTRACT PENALTY, THE DET AILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRE CT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. SECONDLY, IT IS ALSO SEEN THAT HONBLE JURISDICTION AL ITAT IN THE APPELLANTS CASE IN THIS A.Y. HAS ALREADY GIVEN ITS FINDING. ACCORDINGLY, IT HAS BEEN HELD THAT THE TRANSPORT SUBSIDY IS TO BE A DJUSTED AGAINST THE EXPENDITURE FOR WHICH IT WAS PROVIDED AND IF ANY SU RPLUS IS LEFT THAT HAS TO BE TREATED AS REVENUE RECEIPT. ACCORDINGLY ADDIT ION ON A/C OF TRANSPORT SUBSIDY WAS DELETED. SIMILARLY, ON THE IS SUE OF SALES TAX REBATE, THE HONBLE ITAT ALLOWED THE CLAIM OF THE A PPELLANT. AS REGARDS, THE INTEREST INCOME IT HAS BEEN HELD THAT BENEFIT F OR NETTING OFF OF INTEREST IS TO BE ALLOWED. THUS, CONSIDERING THE FACTS OF TH E CASE, IT IS CLEAR THAT THE CLAIM OF THE APPELLANT STOOD ALLOWED BY THE ASS ESSING OFFICER IN THE PREVIOUS YEARS AS ON THE DATED OF FILING OF THIS RE TURN. FURTHER LOOKING INTO VARIOUS JUDGMENTS IT IS ALSO A CASE OF DIFFERE NCE OF OPINION ON THE ISSUES INVOLVED. SECONDLY ALL PARTICULARS AND FACTS ARE DULY DISCLOSED BY THE APPELLANT. IN THE CASE OF RELIANCE PETROPRODUCT S (SUPRA) IT HAS BEEN HELD THAT BY NO STRETCH OF IMAGINATION MAKING AN IN CORRECT CLAIM IS TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. IN MY OPINION, THEREFORE, CONSIDERING THE FACTS OF THE CASE AND RELYING ON TH E CASE LAWS, THE PENALTY CANT BE IMPOSED U/S 271(1)(C) OF THE IT AC T 61 AND, THEREFORE, THE PENALTY IS HEREBY CANCELLED. THE LD. CIT(A) HAS CORRECTLY ADJUDICATED THE ISSUE BECAUSE PART OF THE ADDITION HAS ALREADY BEEN DELETED BY TH E TRIBUNAL. OTHERWISE MERE CLAIM OF DEDUCTION UNDER BONAFIDE BE LIEF 5 CANNOT BE TAKEN AS CONCEALMENT OF INCOME OR FURNISH ING INACCURATE PARTICULARS OF INCOME PARTICULARS. IN T HIS REGARD THE HON'BLE SUPREME COURT HAS CLEARLY OBSERVED IN CASE OF CIT V. RELIANCE PETROPRODUCTS PVT LTD, 322 ITR 158 (SC) : A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BED COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICU LARS IF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTI ON 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO IN FORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STR ETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISH ING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHI NG WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS T HE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF H IS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LI ABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. THEREFORE FOLLOWING THE SAME WE UPHOLD THE ORDER OF THE LD. CIT(A). 8 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 10.9.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10.9.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 6