M/s Superman Knitters (P) Ltd., Ludhiana V. JCIT, Ludhiana

ITA 60/CHANDI/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68473 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 18-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, JM ITA NO. 60/CHD/2012 ASSESSMENT YEAR : 2005-06 SUPERMAN KNITTERSW (P) LTD VS. J.C.I.T. RANGE II XXXII-E-10-7768 LUDHIANA VEER NAGAR BAHADUR KE ROAD LUDHIANA AACCS 4623 C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ASHWANI KUMAR RESPONDENT BY: SHRI AKHILESH GUPTA DATE OF HEARING 26.8.2013 DATE OF PRONOUNCEMENT 6.9.2013 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 19.12.2011 OF THE LD. CIT(A)-II, LUDHIANA. 2 IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1 THAT THE ORDER PASSED U/S 250(6) BY THE LD. CIT( A)-II, LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD THE ACTION OF THE ASSESSING OFFICER IN NEGATING THE CLAIM OF DEDUCTIO N U/S 80IB AMOUNTING TO RS. 4,43,473/-. 2 THAT THE LD. CIT(A) GRAVELY ERRED IN UPHOLDING TH E ACTION OF THE ASSESSING OFFICER IN RECALCULATING THE PROFI TS OF UNIT II FOR THE PURPOSE OF REJECTING THE CLAIM OF DEDUCTION U/S 80IB BY CONSIDERING THE EXPORT INCENTIVES RECEIVED IN RESPE CT OF EXPORT BY UNIT I WHEREAS BOTH THE UNITS ARE SEPARATELY LOC ATED AND THE ACCOUNTS ARE ALSO MAINTAINED SEPARATELY. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IB OF IT ACT. THE ASSE SSEE WAS RUNNING TWO UNITS. UNIT I WAS ENGAGED IN THE MANUF ACTURING OF READY MADE GARMENTS LOCATED AT SUNDER NAGAR, LUDHIA NA AND UNIT II WAS LOCATED AT BAHADUR KE ROAD. LUDHIANA AN D IS ENGAGED IN THE BUSINESS OF KNITTING OF YARN. THE D EDUCTION U/S 2 80IB WAS CLAIMED IN RESPECT OF UNIT II. THE ASSESS ING OFFICER AFTER DETAILED DISCUSSION FOUND THAT PROFIT IN UNIT I WAS VERY LOW AT RS. 1,55,848/- AGAINST TURNOVER OF RS. 6.49 CROR ES WHEREAS IN RESPECT OF UNIT II THE PROFIT WAS RS. 14,35,678 /- AGAINST TURNOVER OF RS. 60.80 LAKHS. HE DOUBTED THESE RESU LTS. HE ALSO OBSERVED THAT THE ASSESSEE HAD RECEIVED INCENT IVES AMOUNTING TO RS. 18,47,106/- AND INTEREST INCOME OF RS. 1,09,997/-. THE ASSESSING OFFICER ISSUED SHOW CAUS E NOTICE ALSO AGAINST WHICH DETAILED REPLY WAS ALSO FILED. THE ASSESSING OFFICER DISCUSSED IN DETAIL ABOUT THE LOW PROFIT IN UNIT II WHICH HAS BEEN DOUBTED. HOWEVER, HE HAS FU RTHER DISCUSSED THE CONCEPT ATTRIBUTABLE TO INDUSTRIAL UNDERTAKING AND VARIOUS CASE LAWS HAVE BEEN DISCUSSED. THE ASS ESSING OFFICER AFTER DISCUSSING THE ALLOWABILITY OF DEDUCT ION U/S 80IB, OBSERVED THAT IF INCENTIVE AMOUNTING TO RS. 18,47,1 06/- AND INTEREST AMOUNTING TO RS. 1,09,997/- WAS REDUCED FR OM THE PROFIT THEN IT WILL BE A CASE OF NET LOSS AND THERE FORE, DEDUCTION WAS NOT ALLOWED. THIS HAS BEEN WORKED OU T AS UNDER: GROSS TOTAL INCOME FOR UNIT NO. I & II RS. 16,41,347/- LESS: EXPORT INCENTIVE= INTEREST INCOME= RS. 18,47,106/- RS. 109,997/- (-) RS. 19,57,103/- GROSS TOTAL INCOME ELIGIBLE FOR DEDUCTION U/S 80IB (-) RS. 3,15,756/- 4 THE ACTION OF THE ASSESSING OFFICER HAS BEEN CONF IRMED BY THE LD. CIT(A) VIDE PARA 4 WHICH IS AS UNDER: I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN TS COUNSEL AND ALSO PERUSED APPELLANTS REPLY IN THIS REGARD. THE ASSESSING OFFICER REJECTED APPELLANTS CLAIM REGARD ING DEDUCTION U/S 80IB OF THE ACT ON ACCOUNT THAT THE G ROSS INCOME OF THE APPELLANT AFTER REDUCING EXPORT INCEN TIVES AND INTEREST INCOME COMES TO NEGATIVE ONE AND AS PER TH E PROVISIONS OF SECTION 80IB THE DEDUCTION ALLOWABLE ON THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROF ITS AND GAINS DERIVED FROM ANY BUSINESS. HOWEVER, THE APPEL LANT CONTENDED THAT BOTH THE UNITS ARE SEPARATELY ACCOUN TED AND LOCATED AT DIFFERENT PLACES. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM NOT I NCLINED TO AGREE WITH THE CONTENTION OF THE APPELLANTS COUNSE L AS THE DEDUCTION U/S 80IB IS ALLOWABLE ON THE WHOLE INDUST RIAL UNDERTAKING. THEREFORE, I DO NOT FIND ANY INFIRMI TY W9THTHE CALCULATION MADE BY THE ASSESSING OFFICER IN HIS AS SESSMENT 3 ORDER AT PAGE NO. 10 VIDE PARA 6.3. THUS THE GROUN DS OF APPEAL OF THE APPELLANT ARE DISMISSED. 5 BOTH THE PARTIES WERE HEAD IN DETAIL. 6 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE PRINCI PALLY AGREE WITH THE SUBMISSIONS OF THE LD. COUNSEL OF TH E ASSESSEE THAT DEDUCTION HAS TO BE ALLOWED ONLY IN RESPECT OF ELIGIBLE UNIT AND THEREFORE, SAME HAS TO BE WORKED OUT SEPARATE LY. THE ASSESSING OFFICER HAS WRONGLY COMBINED THE RESULTS OF BOTH THE UNDERTAKINGS. HOWEVER, IT IS NOT CLEAR FROM THE AS SESSMENT ORDER WHETHER HE WANTED TO DISALLOW THE DEDUCTION O N THE COMBINED WORKING OR BECAUSE THE PROFIT IN UNIT II H AS BEEN INFLATED. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR DENOVO ADJUDICATION ON THIS ISSUE. WE MAY CLARIFY THAT DEDUCTION CANNOT BE DENIED SIMPLY BY COMBINING THE RESULTS OF BOTH THE UNITS I.E. IF NET RESULT IS A PROFIT WITHO UT REDUCING THE INCENTIVES WHICH HAVE BEEN RECEIVED BY NON ELIGIBLE UNITS I.E. UNIT I AND THEREFORE, THEY CANNOT BE REDUCED FROM THE PROFITS. 7 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 6.9.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 6.9.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR