ACIT CEN CIR 8, MUMBAI V. J.B. CHEMICALS & PHARMACEUTICALS LTD, MUMBAI

ITA 6075/MUM/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7976 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 28-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 30-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T ROUMUAN PAITE
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Gift; Transfer pricing; International transaction; Earning of tax free income; Rule 8D
• Section: 92B; 14A; 80IB; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 6075 / MUM . /2014 ( ASSESSMENT YEAR : 200 9 10 ) ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 8, MUMBAI . APPELLANT V/S J.B. CHEMICALS & PHARMACEUTICALS LTD. B WING, 4 TH FLOOR, NEELAM CENTRE HIND CYCLE ROAD, WORLI MUMBAI 400 030 PAN AAACJ1482G . RESPONDENT ITA NO. 6317 /MUM. /2014 ( ASSESSMENT YEAR : 200 9 10 ) J.B. CHEMICALS & PHARMACEUTICALS LTD. B WING, 4 TH FLOOR, NEELAM CENTRE HIND CYCLE ROAD, WORLI MUMBAI 400 030 PAN AAACJ1482G . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 8, MUMBAI . RESPONDENT REVENUE BY : SHRI T. ROUMUAN PAITE ASSESSEE BY : SHRI SANJAY R. PARIKH DATE OF HEARING 22 .0 1 .201 9 DATE OF ORDER 16.04.2019 2 J.B. CHEMICALS & PHARMACEUTICALS LTD. O R D E R PER SAKTIJIT DEY. J.M. T HE AFORESAID CROSS APPEAL S ARISE OUT OF ORDER DATED 22TH JULY 2014, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 15, MUMBAI, FOR THE ASSESSMENT YEAR 2009 10. ITA NO.6317/MUM./2014 ASSESSEES APPEAL 2 . IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED PART DISALLOWANCE OUT OF EXPENDITURE INCURRED TOWARDS GIFT AND SALES PROMOTIONS. 3 . BRIEF FACTS ARE, THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING AND DOMESTIC AS WELL AS EXPORT SALES OF PHARMACEUTICAL PRODUCTS AND BULK DRUGS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RE TURN OF INCOME ON 30 TH SEPTEMBER 2009, DECLARING TOTAL INCOME OF ` 48,68,55,740. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF ` 2,26,34,864, TO THE PROFIT & LOSS ACCOUNT TOWARDS GIFT / SA LES PROMOTION EXPENSES. ON CALLING FOR AND VERIFYING THE DETAILS FURNISHED BY THE ASSESSEE, HE FOUND THAT THE EXPENDITURE INCURRED WAS FOR PROVIDING GIFT TO DOCTORS / MEDICAL PRAC TI TIONERS. THEREFORE , BEING OF THE VIEW THAT AS PER CBDT CIRCULAR NO.5/2012, DATED 1 ST AUGUST 2012, MEDICAL PRAC TI TIONERS ARE PROHIBITED FROM 3 J.B. CHEMICALS & PHARMACEUTICALS LTD. ACCEPTING GIFT, TRAVEL FACILITY, HOSPITALITY , CASH OR MONETARY GRANT FROM P HARMACEUTICAL COMPANIES AS PER INDIAN MEDICAL COUNCIL REGULATION DATED 10 TH DECEMBER 2009, CALLED UPON THE ASSESSEE TO JUSTIFY THE CLAIM. IN RESPONSE, IT WAS SUBMITTED BY THE ASSESSEE THAT THE EXPENDITURE WAS INCURRED FOR DISTRIBUTING GIFT ITEMS BEARING THE LOGO AND NAME OF THE ASSESSEE COMPANY AND THEY WERE DISTRIBUTED TO CUSTOM ERS, DOCTORS, DELEGATES AT CONFERENCES BOTH IN INDIA AND ABROAD. THEREFORE, IT WAS SUBMITTED , IT IS ALLOWABLE AS SALES PROMOTION EXPENSES. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. FROM THE DETAILS FURNISHED, HE FOUND THAT OUT OF THE TOTAL EXPENDITURE INCURRED TOWARDS GIFT / SALES PROMOTION, AN AMOUNT OF ` 1, 00, 90,141, WAS DEBITED TO UNITS ENJOYING DEDUCTION UNDER SECTION 10A / 10B OF THE ACT. STATING THAT ANY DISALLOWANCE OF SUCH EXPENDITURE WOULD ONLY ENHANCE T HE DEDUCTION UNDER THE AFORESAID PROVISIONS , THE ASSESSING OFFICER ALLOWED THE SAME. INSOFAR AS THE BALANCE AMOUNT OF ` 1,25,44,723, IS CONCERNED, HE FOUND THAT IT WAS FOR PURCHASE OF SHIRTS, SIYARAM SUITS, POW D ERS, ELECTRONIC ITEMS LIKE CAMERA, PRINTERS, ETC. OUT OF THE AFORESAID AMOUNT, THE ASSESSING OFFICER ON AD HOC BASIS CONSIDERED 40% TO HAVE BEEN SPENT F OR PRESENTING GIFT ARTICLES TO D OCTORS IN INDIA. ACCORDINGLY, HE DISALLOWED AN AMOUNT OF ` 50,17,890. 4 J.B. CHEMICALS & PHARMACEUTICALS LTD. 4 . THE ASSESSEE CHALLENGED THE AFORESAID DISALLOW ANCE BEFORE THE FIRST APPELLATE AUTHORITY. L EARNED COMMISSIONER (APPEALS), HOWEVER, ENDORSING THE VIEW OF THE ASSESSING OFFICER CONFIRMED THE ADDITION. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE PROHIBITION IMPOSED BY THE INDIAN MEDICAL COUNCIL AS REFERRED TO IN THE CBDT CIRCULAR NO.5 OF 2012, IS ONLY IN RESPECT OF DOCTOR S / MEDICAL PRACTITIONER S AND NOT APPL ICABLE TO PHARMACEUTICAL COMPANIES . FURTHER, HE SUBMITTED , THE CBDT CIRCULAR REFERRED TO BY THE ASSESSING OFFICER IS APPLICABLE PROSPECTIVELY, HENCE, CANNOT BE APPLIED TO THE IMPUGNED ASSESSMENT YEAR. IN SUPPORT OF HIS CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE FOLLOWING DECISIONS: I ) DCIT V/S PHL ARMA PVT. LTD., [2017] 55 ITR (TRIB.) 168 (MUM.); AND II ) SOLVAY PHARMACEUTICAL INDIA LTD. V/S PCIT, [2018] 163 DTR 249 . 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS). 7 . WE HAVE CON SIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSEE HAS INCURRED EXPENDITURE OF ` 2,26,34,864, TOWARDS GIFTS, TRAVEL FACILITI ES AND HOSPITALITY PROVIDED TO D OCTORS, CUSTOMERS AND MEDICAL PRACTITIONERS IN MEDICAL CONFERENCE S 5 J.B. CHEMICALS & PHARMACEUTICALS LTD. HELD BOTH IN INDIA AND ABROAD. OUT OF THE AFORESAID AMOUNT, THE ASSESSING OFFICER HAS SEGREGATED AN AMOUNT OF ` 1,25,44,723, FOR COMPUTING DISALLOWANCE TOWARDS EXPENDITURE INCURRED IN INDIA. AS COULD BE SEEN FROM THE ASSESSMENT ORDER, THE GIFT ITEMS PROV IDED BY THE ASSESSEE ARE T SHIRTS, SUIT LENGTHS, UMBRELLA, ELECTRONIC GOODS, ETC. IT IS THE CONTENTION OF THE ASSESSEE THAT THE AFORESAID GIFT ITEMS BEARING ASSESSEES NAME AND LOGO ARE ONLY FOR SALES PROMOTION. THE AFORESAID FACTUAL POSITION HAS NOT BEEN CONTROVERTED BY THE ASSESSING OFFICER. THE ONLY REASON FOR MAKING AN AD HOC DISALLOWANCE OF 40% IS , CBDT CIRCULAR NO.5/2012, DATED 1 ST AUGUST 2012, WHEREIN, THE PROHIBITION IMPOSED BY INDIAN MEDICAL COUNCIL WITH REGARD TO ACCEPTANCE OF GIFT BY MEDICAL PRAC TITIONER / DOCTOR WAS IMPOSED W.E.F. 10 TH DECEMBER 2009. THUS, AS COULD BE SEEN, THE PROHIBITION IMPOSED BY INDIAN MEDICAL COUNCIL AGAINST ACCEPTANCE OF GIFT IS ON THE MEDICAL PRACTITIONER AND DOCTOR AND NOT ON THE PHARMACEUTICAL COMPANIES. THE APPLICABILI TY OF THE AFORESAID CBDT CIRCULAR A S WELL AS PROHIBITION IMPOSED BY INDIAN COUNCIL ON PHARMACEUTICAL COMPANIES CAME UP FOR JUDICIAL SCRUTINY BEFORE THE TRIBUNAL IN DCIT V /S PHL PHARMA PVT. LTD. (SUPRA). T HE CO ORDINATE BENCH AFTER EXAMINING THE REGULATION ISSUED BY THE MEDICAL COUNCIL OF INDIA AS WELL AS THE CBDT CIRCULAR REFERRED TO ABOVE , ULTIMATELY CONCLUDED THAT THE PROHIBITION IMPOSED BY THE INDIAN MEDICAL COUNCIL REGULATION ARE NOT APPLICABLE TO PHARMACEUTICAL COMPANIES. FURTHER, THE SAID VIEW WAS AGA IN REITERATED BY THE CO 6 J.B. CHEMICALS & PHARMACEUTICALS LTD. ORDINATE BENCH IN SOLVAY PHARMA INDIA LTD. (SUPRA). THE CO ORDINATE BENCH HAS ALSO HELD THAT THE CBDT CIRCULAR REFERRED TO BY THE DEPARTMENTAL AUTHORITIES WILL NOT APPLY RETROSPECTIVELY. NO CONTRARY DECISION ON THE ISSUE HAS BEEN BR OUGHT TO OUR NOTICE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. IN VIEW OF THE AFORESAID, FOLLOWING THE RATIO LAID DOWN BY THE CO ORDINATE BENCH IN THE DECISIONS REFERRED TO ABOVE, WE ALLOW ASSESSEES CLAIM OF EXPENDITURE. CONSEQUENTLY, THE DISALLOWANCE MA DE OF ` 50,17,890, IS DELETED. THIS GROUND IS ALLOWED. 8 . IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF ` 7,36,702, UNDER SECTION 14A OF THE ACT. 9 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THOUGH THE ASSESSEE HAS EARNED EXEMPT INCOME OF ` 21,50,732, BY WAY OF DIVIDEND, HOWEVER, IT HAS NOT MADE ANY DISALLOWANCE UNDER SECTION 14A R/W RULE 8D TOWARDS EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME. HE, THEREFORE, CALLED UPON THE ASSESSEE TO EXPLAIN WHY SU CH DISALLOWANCE SHOULD NOT BE MADE UNDER SECTION 14A OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER PROCEEDED TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D FOR AN AMOUNT OF ` 7,36,702, COMPRISING OF INTERES T DISALLOWANCE OF ` 5,85,473=37 UNDER RULE 8D(2)(II) AND ADMINISTRATIVE EXPENSES OF ` 1,51,228=62. THE 7 J.B. CHEMICALS & PHARMACEUTICALS LTD. ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY. 10 . L EARNED COMMISSIONER (APPEALS), HOWEVER, SUSTAINED THE ADDITION MAD E BY THE ASSESSING OFFICER. 11 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , MAJOR INVESTMENT MADE BY THE ASSESSEE IS IN FOREIGN SUBSIDIARIES AND DIVIDEND ON SUCH INVESTMENT IS TAXABLE. FURTHER, HE SUBMITTED , NO DISALLOWANCE OF INTEREST EXPENDITURE CAN BE MADE AS THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH IT TO TAKE CARE OF THE INVESTMENT. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE BALANCE SHEET AS AT 31 ST MARCH 2009, A COPY OF WHICH IS PLACED AT PAGE 46 OF THE PAPER BOOK. IN SUPPORT , HE RELIED UPON THE FOLLOWING DECISIONS: I ) CIT V/S HDFC BANK LTD., [2014] 366 ITR 505 (BOM.); AND II ) HDFC BANK LTD. V/S DCIT, [2016] 383 ITR 529 (BOM.). 12 . AS REGARDS DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III), THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THESE ARE OLD INVESTMENTS, HENCE, THE ASSESSEE DOES NOT HAVE TO INCUR ANY ADMINISTRATIVE EXPENDITURE WITH REGARD TO SUCH INVESTMENT. 13 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPO N THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS). 8 J.B. CHEMICALS & PHARMACEUTICALS LTD. 14 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. NO DOUBT, THE PROVISIONS OF RULE 8D ARE APPLICABLE TO THE IMPUGNED ASSESSMENT YEAR. HOWEVER, ON A PERU SAL OF THE BALANCE SHEET OF THE COMPANY AS AT 31 ST MARCH 2009, IT IS NOTICED THAT AS AGAINST INTEREST FREE FUNDS OF ` 52205.45 LAKH AVAILABLE WITH THE ASSESSEE , THE INVESTMENTS MADE BY THE ASSESSEE STOOD AT ` 4559.44 LAKH. THUS, FROM THE AFORESAID FACTS, I T IS EVIDENT THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH IT TO TAKE CARE OF THE INVESTMENTS. THAT BEING THE CASE, DISALLOWANCE OF INTEREST EXPENDITURE UNDER RULE 8D(2)(II) CANNOT BE MADE. HOWEVER, TO KEEP TRACK OF ITS INVESTMENTS AN D MANAGE THE FUNDS, THE ASSESSEE MUST BE INCURRING CERTAIN ADMINISTRATIVE EXPENDITURE. THEREFORE, REASONABLE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D(2)(III) HAS TO BE MADE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE OF ADMI NISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III) AFTER EXCLUDING FROM THE AVERAGE VALUE OF INVESTMENT, THE INVESTMENTS WHICH HAVE NOT YIELDED ANY EXEMPT INCOME DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER DISPUTE. THIS GROUND IS PARTLY ALLOWED. 15 . IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED THE ADDITION OF ` 17,18,941, ON ACCOUNT OF DETERMINATION OF ARM'S LENGTH PRICE OF CORPORATE GUARANTEE GIVEN TO THE A E. 9 J.B. CHEMICALS & PHARMACEUTICALS LTD. 16 . BRIEF FACTS ARE, IN COURSE OF ASSESSMENT PROCEEDINGS, THE TRANSFER PRICING OFFICER NOTICED THAT THE ASSESSEE HAS PROVIDED CORPOR ATE GUARANTEE TO ITS OVERSEAS AE WITHOUT CHARGING ANY FEES. HE, THEREFORE, ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN WHY ARM'S LENGTH PRICE OF CORPORATE GUARANTEE FEE SHOULD NOT BE DETERMINED. THOUGH, THE AS SESSEE OBJECTING TO THE PROPOSED DETERMINATION OF ARM'S LENGTH PRICE OF CORPORATE GUARANTEE F EE SUBMITTED THAT THE PROVISION OF CORPORATE GUARANTEE IS NOT IN THE NATURE OF INTERNATIONAL TRANSACTION, HOWEVER, THE TRANSFER PRICING OFFICER REJECTING THE OBJEC TION OF THE ASSESSEE DETERMINED THE ARM'S LENGTH PRICE OF THE CORPORATE GUARANTEE FEE @ 1.5% PER ANNUM. APPLYING THE SAID RATE, HE ULTIMATELY DETERMINED THE ARM'S LENGTH PRICE OF CORPORATE GUARANTEE FEE AT ` 17,18,941. ON THE BASIS OF THE AFORESAID ADJUSTM ENT MADE BY THE TRANSFER PRICING OFFICER, THE ASSESSING OFFICER ADDED BACK THE AMOUNT TO THE INCOME OF THE ASSESSEE. 17 . THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID DECISION BEFOR E THE LEARNED COMMISSIONER (APPEALS), HOWEVER, HE REFUSED TO INTERFERE WITH TH E DECISION OF THE TRANSFER PRICING OFFICER. 18 . THE LEARNED AUT HORISED REPRESENTATIVE REITERATING THE STAND TAKEN BEFORE THE DEPARTMENTAL AUTHORITIES SUBMITTED , THE PROVISION OF CORPORATE GUARANTEE DOES NOT COME WITHIN THE DEFINITION OF INTERNATIONAL TRANSACT ION UNDER SECTION 92B OF THE ACT. IN SUPPORT, HE 10 J.B. CHEMICALS & PHARMACEUTICALS LTD. RELIED UPON SOME DECISIONS OF THE TRIBUNAL AS SUBMITTED IN THE PAPER BOOK. 19 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS ). 20 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. INSOFAR AS THE ISSUE WHETHER THE PROVISION OF CORPORATE GUARANTEE COMES WITHIN THE PURVIEW OF INTERNATIONAL TRANSACTION AS DEFINED UNDER SECTION 92B OF THE ACT IS CONCERNED , THERE IS A CLEAVAGE IN THE VIEW EXPRESSED BY DIFFERENT BENCHES OF THE TRIBUNAL ON THE ISSUE. WHILE SOME BENCHES HAVE HELD THAT PROVISION OF CORPORATE GUARANTEE DOES NOT COME WITHIN THE MEANING OF INTERNATIONAL TRANSACTION, HOWEVER, THERE ARE MANY DECISIONS WHICH HA VE HELD THAT IT COMES WITHIN THE DEFINITION OF INTERNATIONAL TRANSACTION AS PROVIDED UNDER ARTICLE 92B OF THE ACT. IN FACT, IN MANY OF THE CASES, THE ASSESSEE S HAVE ACCEPTED PROVISION OF CORPORATE GUARANTEE AS INTERNATIONAL TRANSACTION UNDER SECTION 92B OF THE ACT. IN ONE OF SUCH CASES VIZ. EVEREST KANTO CYLINDERS LTD., [2015] 58 TAXMANN.COM 254 (BOM.), THE HON'BLE JURISDICTIONAL HIGH COURT HAS UPHELD THE DECISION OF THE TRIBUNAL IN COMPUTING THE ARM'S LENGTH PRICE OF CORPORATE GUARANTEE FEE @ 0.5%. FOLLOWI NG THE AFORESAID DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO DETERMINE 11 J.B. CHEMICALS & PHARMACEUTICALS LTD. THE ARM'S LENGTH PRICE OF CORPORATE GUARANTEE FEE BY APPLYING THE RATE OF 0.5%. THIS GROUND IS PARTLY ALLOWED. 21 . GROUND NO.4, THE ASSESSEE HAS SOUGHT RELIEF WITH REGARD TO DEDUCTION CLAIMED UNDER SECTION 10B OF THE ACT ON THE TURNOVER OF SCRAP SALES. 22 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB AS WE LL AS 10B OF THE ACT IN RESPECT OF SCRAP SALES OF ` 3,92,091 AND ` 51.51.738 RESPECTIVELY CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE DEDUCTION CLAIMED SHOULD NOT BE DISALLOWED. AFTER CONSIDERING THE SUBMISSIONS OF THE A SS ESSEE THE ASSESSING OFFICER , HOWEV ER, HELD THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCT ION UNDER SECTION 80IB / 10B OF THE ACT ON THE TURNOVER OF SCRAP SALE AND REDUCE D THE SAME FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER THE AFORESAID PROVISIONS. 23 . THE ASSESSEE CHALLENGED THE AFORESAID DECISION OF THE ASSESSING OFFICER BEFORE THE FIRST APPELLATE AUTHORITY. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LEARNED COMMISSIONER (APPEALS) THOUGH ULTIMATELY DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCT ION UNDER SECTION 80IB / 10B ON THE TURNOVER OF SCRAP SALES, HOWEVER, HE QUANTIFIED SUCH TURNOVER AT ` 3,92,091. 12 J.B. CHEMICALS & PHARMACEUTICALS LTD. 24 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE AMOUNT OF ` 3,92,091, IS ONLY IN RESPECT OF SCRAP SALES OF 80IB UNIT. THEREFORE, LEARNED COMMISSIONER (APPEALS) SHOULD HAVE QUANTIFIED THE TURNOVER OF 10B UNIT. THE LEARNED AUTHORISED REPRESENTATIVE FURTHER SUBMITTED , THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ITS FAVOUR IN ASSESSMENT YEARS 2002 03 TO 2006 07. IN THIS CONTEXT, HE DREW OUR A TTENTION TO THE ORDERS OF THE TRIBUNAL PLACED AT PAPER BOOK. 25 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER. 26 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. NOTABLY, WHILE DECIDING SIMIL AR ISSUE IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEARS, THE TRIBUNAL HAS HELD THAT SINCE THE SALE OF SCRAP IS INTEGRALLY CONNECTED TO THE BUSINESS ACTIVITY OF THE ASSESSEE , IT SHOULD FORM PART OF THE TURNOVER FOR COMPUTING DEDUCTION UNDER SECTI ON 80IB/10B OF THE ACT. IN FACT, LEARNED COMMISSIONER (APPEALS) ACCEPTING THE AFORESAID LEGAL POSITION HAS DIRECTED THE ASSESSING OFFICER TO ALLOW DE DUCTION UNDER SECTION 80IB / 10B OF THE ACT . HOWEVER, HE HAS WRONGLY QUANTIFIED THE AMOUNT AT ` 3,92,091, W HICH IS THE SC RAP SALES RELATING TO 80IB UNIT, W HILE LEAVING OUT THE SCRAP SALES OF 10B UNIT AMOUNTING TO ` 51,51,738. IN VIEW OF THE AFORESAID, WE DIRECT THE ASSESSING OFFICER TO ALLOW ASSESSEES CLAIM OF 13 J.B. CHEMICALS & PHARMACEUTICALS LTD. DEDUCTION UNDER SECTION 10B / 80IB ON THE RESPECTI VE SALES TURNOVER OF SCRAP RELATING TO THE AFORESAID UNITS. THIS GROUND IS ALLOWED. 27 . IN THE RESULT, APPEAL IS PARTLY ALLOWED. ITA NO. 6075 /MUM./2014 REVENUE S APPEAL 28 . THE ONLY ISSUE ARISING IN THE AFORESAID APPEAL IS WITH REGARD TO ALLOWANCE OF ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 10B/80IB OF THE ACT IN RESPECT OF SALE OF SCRAP. 29 . WHILE DECIDING GROUND NO.4 OF ASSESSEES APPEAL , SUPRA, WE HAVE HELD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IB/80B IN RESPECT OF SCRAP SALE. THAT BEIN G THE CASE, GROUND RAISED BY THE REVENUE DESERVES TO BE DISMISSED. 30 . I N THE RESULT, REVENUES APPEAL IS DISMISSED. 31 . TO SUM UP, AS SESSEES APPEAL IS PARTLY ALLOWED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 16.04.2019 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 16.04.2019 14 J.B. CHEMICALS & PHARMACEUTICALS LTD. COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI