NEEL KANTH GUM & CHEMICALS, Jaipur V. ACIT, JHUNJHUNU

ITA 613/JPR/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5933 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 01-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G M MEHTA
• Section: 80HHC; 133A; 80IB; 6; 28

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC H B JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA- @ ITA NO. 613/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2013-14 M/S NEEL KANTH GUM & CHEMICALS, NEAR RAILWAY STATION, SARDARSHAHAR (CHURU) CUKE VS. ACIT, JHUNJHUNU LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAEFN6786C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI G. M. MEHTA (CA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. RUNI PAL (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 26/09/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 01/10/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-3, JAIPUR DATED 01.03.2019 WHEREIN THE ASSESSEE HAS TA KEN THE FOLLOWING GROUNDS OF APPEAL:- 1. LD. CIT(A) HAS ERRED IN LAW IN DENYING DEDUCTIO N UNDER SECTION 80IB OF INCOME TAX ACT UNDER THE HEAD DUTY DRAWBACK , VKGUY AND FPS PREMIUM, BEING AMOUNT RECEIVED FROM CENTRAL GOVERNM ENT AND CHARGEABLE TO TAX UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION UNDER SECTION 28 (IIIB)/(IIID) OF INCOM E TAX ACT. 2. LD. CIT (A) WAS NOT JUSTIFIED IN DENYING DEDUCTI ON U/S 80IB ON RS. 42,52,425/- WHICH WAS THE BUSINESS PROFIT, NOTI CED IN FORM OF DISCREPANCY IN QUANTITY/VALUATION OF BUSINESS STOCK IN SURVEY, DERIVED BY ITA NO. 613/JP/2019 M/S NEEL KANTH GUM & CHEMICALS, CHURU V S. ACIT, JHUNJHUNU 2 THE ASSESSEE FROM ELIGIBLE BUSINESS AND DISCLOSED U NDER OTHER HEAD OF INCOME AT THE INSISTENCE OF SURVEY TEAM. 2. AT THE OUTSET, IT IS NOTED THAT THE GROUND NO. 1 IS DECIDED AGAINST THE ASSESSEE BY THE CO-ORDINATE BENCH VIDE ITS ORDER DA TED 30.01.2017 (ITA NO. 285- 288/JP/2016) AND THE RELEVANT FINDINGS READS AS UNDER:- WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PA RTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THRO UGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS. 17,38,256/- UNDER THE HEAD V.K.G.U.Y (VISHESH KRISHI GRAM UDHYOG YOJANA) AND RS. 1,68,379/- ON AC COUNT OF DEPB. BOTH THESE AMOUNTS BEING INCENTIVE TO THE ASSESSEE, DO NOT QUALIFY FOR DEDUCTION U/S 80IB OF THE ACT, WHEREAS THE ASSESSEE HAS CLAIMED THESE AMOUNTS AS DEDUCTION U/S 80IB OF THE ACT. NOW THE I SSUE TO BE DEICED WHETHER THE ASSESSING OFFICER WAS CORRECT IN HOLDIN G THAT THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION U/S 80IB IN RESPECT OF AMOUNT OF RS. 17,38,256/- UNDER THE HEAD VKGUY AND RS. 1,68,379/- ON ACCOUNT OF DEPB. LD. COUNSEL HAS HEAVILY RELIED ON THE PROVISI ONS OF SECTION 28(IIIB) AND 28(IIID) OF THE ACT, FOR THE SAKE OF CLARITY, T HE SAME IS REPRODUCED HEREIN BELOW:- (IIIB) CASH ASSISTANCE (BY WHATEVER NAME CALLED) R ECEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS UNDER ANY SCHEME OF T HE GOVERNMENT OF INDIA ; (IIID) ANY PROFIT ON THE TRANSFER OF THE DUTY ENTIT LEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME UNDER THE E XPORT AND IMPORT POLICY FORMULATED AND ANNOUNCED UNDER SECTION 5 OF THE FOREIGN TRADE (DEVELOPMENT AND REGULATION) ACT, 1992 (22 OF 1992) . ITA NO. 613/JP/2019 M/S NEEL KANTH GUM & CHEMICALS, CHURU V S. ACIT, JHUNJHUNU 3 THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY IN DIA VS. CIT (SUPRA) AFTER ADVERTING TO RELEVANT PROVISIONS HAS HELD THAT SECTION 80IB/80IA ARE THE CODE BY THEMSELVES AS THEY CONTAI N BOTH SUBSTANTIVE AS WELL AS PROCEDURAL PROVISION. THEREFORE, WE NEED TO EXAMINE WHAT THESE PROVISIONS PRESCRIBE FOR COMPUTATION OF PROF ITS OF THE ELIGIBLE BUSINESS. IT IS EVIDENT THAT SECTION 80IB PROVIDES FOR ALLOWING OF DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED F ROM THE ELIGIBLE BUSINESS. IT IS HELD BY THE HON'BLE SUPREME COURT T HAT WORDS, BY USING THE EXPRESSION DERIVED FROM, PARLIAMENT INTENDE D TO COVER SOURCES NOT BEYOND THE FIRST DEGREE. AFTER ANALYZING THE PROVIS ION, IT HELD BY THE HON'BLE SUPREME COURT THAT THE DEPB IS AN INCENTIVE . IT IS GIVEN UNDER DUTY EXEMPTION REMISSION SCHEME. ESSENTIALLY, IT IS AN EXPORT INCENTIVE. NO DOUBT, THE OBJECT BEHIND DEPB IS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY PAYMENT ON THE IMPORT CONTENT OF EXPORT PRODUCT. THIS NEUTRALIZATION IS PROVIDED FOR BY CRE DIT TO CUSTOMS DUTY AGAINST EXPORT PRODUCT. HON'BLE SUPREME COURT HAS H ELD THAT THE DUTY DRAWBACK RECEIPT/DEPB BENEFITS DO NOT FORM PART OF THE NET PROFITS OF ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF SECTIONS 80I/80IA/80IB OF THE ACT. THE LD AR OF THE ASSESSEE HAS RELIED UP ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF NISSAN EXP ORTS VS. CIT (SUPRA), THE DEDUCTION AS CLAIMED FALLS U/S 80HHC OF THE ACT AND ALSO IN THE CASE OF GLOBAL AGRO PRODUCTS PVT. LTD. VS. ITO (SUPRA) P ERTAINS TO CLAIM OF DEDUCTION U/S 80HHC OF THE ACT, THEREFORE, THIS WOU LD HAVE APPLICATION ON THE FACTS OF THE PRESENT CASE. ACCORDINGLY, IN T HE LIGHT OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF LI BERTY INDIA VS CIT (SUPRA), WE DO NOT SEE ANY REASON TO INTERFERE IN T HE ORDER PASSED BY THE LD. CIT(A), THEREFORE, THE ORDER PASSED BY THE LD. CIT(A) IS HEREBY CONFIRMED. ITA NO. 613/JP/2019 M/S NEEL KANTH GUM & CHEMICALS, CHURU V S. ACIT, JHUNJHUNU 4 3. THE LD AR HAS CONTENDED THAT THE ASSESSEE HAS NO T ACCEPTED THE AFORESAID ORDER OF THE TRIBUNAL AND HAS FILED AN AP PEAL BEFORE THE HONBLE RAJASTHAN HIGH COURT. HE FURTHER SUBMITTED THAT TH OUGH THE ASSESSEE HAS NOT GOT ANY RELIEF FROM THE HONBLE RAJASTHAN HIGH COUR T, THE ASSESSEE HAS PREFERRED AN SLP BEFORE THE HONBLE SUPREME COURT. 4. PER CONTRA, THE LD DR SUBMITTED THAT FILING OF A N SLP BEFORE THE HONBLE SUPREME COURT IS NOT AN ESTOPPEL AGAINST THE DECISI ON OF THE HONBLE RAJASTHAN HIGH COURT WHEREIN THE APPEAL OF THE ASSESSEE HAS B EEN DISMISSED. IT WAS FURTHER SUBMITTED THAT THE LD CIT(A) HAS FOLLOWED T HE DECISION OF THE TRIBUNAL AS WELL AS THE DECISION OF THE HONBLE RAJASTHAN HI GH COURT AND THEREFORE, THE ORDER OF THE LD CIT(A) SHOULD BE CONFIRMED. 5. IN LIGHT OF ABOVE DISCUSSIONS, RESPECTIVELY FOL LOWING THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT, THE MATTER IS DECIDED AGAINST THE ASSESSEE. IN THE RESULT, THE GROUND OF APPEAL IS DISMISSED. 6. REGARDING GROUND NO. 2, BRIEFLY STATED, THE FAC TS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF GUWAR GUM & CHURI ETC AND HAS CLAIMED DEDUCTION U/S 80IB OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE HAS INCLUDED THE SURRENDERED INCOME OF RS. 42,52,425/- WHILE CALCULATING THE GROSS TOTAL INCOME FOR WORKING OUT ELIGIBLE DEDUCTION U/S 80IB OF THE ACT AND A SHOW CAUSE WAS ISSUED TO THE ASSESSEE. IN RESPONSE, THE ASSESSEE SUBMITTED THAT AT THE TIME OF SURVEY, IT WAS UNDERSTOOD THAT THIS INC OME IS FROM BUSINESS AND CONSISTED OF INCOME DUE TO SOME DISCREPANCIES IN TH E STOCK AND CASH FOUND AT THE TIME OF SURVEY AND DEDUCTION U/S 80IB WAS ALLOW ABLE AS THIS INCOME IS DERIVED DIRECTLY FROM THE PURCHASE AND SALE OF GOOD S FOR WHICH SURVEY U/S 133A WAS CARRIED OUT. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ITA NO. 613/JP/2019 M/S NEEL KANTH GUM & CHEMICALS, CHURU V S. ACIT, JHUNJHUNU 5 AMOUNTS SURRENDERED BY THE ASSESSEE AT THE TIME SUR VEY PROCEEDINGS U/S 133A DOES NOT FALL WITHIN THE EXPRESSION PROFIT DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THE DEDUCTION TO THAT EXTENT WAS DE NIED TO THE ASSESSEE. ON APPEAL, THE SAME HAS BEEN CONFIRMED BY THE LD. CIT( A) AND NOW THE ASSESSEE IS IN APPEAL BEFORE US. 7. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT IN THIS CASE, SURVEY U/S. 133A OF I.T. ACT WAS CONDUCTED ON 30.05 .2012. DURING THE COURSE OF SURVEY, NO INCRIMINATING MATERIAL WAS FOU ND BUT THE SURVEY TEAM PERSUADED THE ASSESSEE TO MAKE SURRENDER. FOR ONE REASON OR THE OTHER, SURVEY TEAM POINTED OUT SOME DISCREPANCY IN QUANTITY AND VALUE OF GOODS FOR WHICH ASSESSEE WAS ASKED TO MAKE SURRE NDER RS.42,52,425/-. THOUGH THE STOCK IS VALUED ON ACTUA L STOCK TAKING BUT IN ORDER TO CO-OPERATE WITH THE DEPARTMENT, ASSESSEE A GREED FOR SURRENDER. 8. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS A SKED BY SURVEY TEAM TO SHOW THE SURRENDERED AMOUNT SEPARATELY IN I TS P&L ACCOUNT FOR THE REASON THAT DEDUCTION U/S 801B OF IT ACT ON NET PROFIT COULD BE DENIED. HAD THE ASSESSEE INCLUDED THE SURRENDERED A MOUNT IN ITS CLOSING STOCK (ACTUAL STOCKTAKING), THE ASSESSEE WOULD HAVE BEEN ALLOWED DEDUCTION U/S. 801B OF IT ACT ON ITS NET PROFIT. 9. IT WAS FURTHER SUBMITTED THAT THE AO DID NOT AGR EE THAT THE CLOSING STOCK IS THE ACTUAL STOCK TAKING AT THE CLOSE OF THE YEAR WHICH IS VALUED AT COST OR MARKET WHICHEVER IS LOWER AND THEREFORE, TH E CLOSING STOCK SO ARRIVED AT IS INCLUSIVE OF SURRENDERED AMOUNT, NOT REQUIRING TO BE SHOWN SEPARATELY IN P&L ACCOUNT. HOWEVER IF THE AMOUNT O F SURRENDER IS ENHANCED IN ACTUAL CLOSING STOCK WHICH IS CORRECT A S PER PRINCIPLE OF ACCOUNTING, ON THE SAME HIGHER NET PROFIT OF BUSINE SS, DEDUCTION UNDER ITA NO. 613/JP/2019 M/S NEEL KANTH GUM & CHEMICALS, CHURU V S. ACIT, JHUNJHUNU 6 SECTION 80IB OF IT ACT IS ALLOWABLE. THEREFORE BOTH THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DENYING DEDUCTION U/S. 8018 O F I.T. ACT ON NET PROFIT WHICH WAS INCLUSIVE OF SURRENDERED AMOUNT OF 42,52, 425/- APPEARING IN PROFIT AND LOSS ACCOUNT. 10. THE LD DR WAS HEARD WHO HAS RELIED ON THE ORDE R OF THE ASSESSING OFFICER AND SUBMITTED THAT THE SURRENDERED INCOME I S NOT PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING AND IN ABSENCE OF THE S AME, THE SAID AMOUNT OF SURRENDERED STOCK IS NOT ELIGIBLE FOR DEDUCTION UND ER SECTION 80IB OF THE ACT. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON PERUSAL OF THE STATEMENT OF SH. YOGES H KUMAR RECORDED DURING THE COURSE OF SURVEY ON 31.05.2012 U/S 133A OF THE ACT, THE RELEVANT QUESTION IS QUESTION NO. 13, AND THE RESPO NSE OF SH. YOGESH KUMAR AND THE SAME ARE REPRODUCED AS UNDER:- IZ%13 LOSZ DH DK;ZOKGH DS NKSJKU ES- FUYD.B XE ,.M DSFEDYL DS O;KIKJHD LALFKKU IJ LVKWD DK HKKSFRD LR; KIU DS CKN IZKIR LVKWD DH LWPH ESA VKIDKS FN[KK JGK GWWA FTLESA XOKJ DK VKF/KD; LVKWD (EXCESS STOCK) 14.04.2015 FDOAVY D`I;K BL VF/KD LVKWD DK LI'VHDJ.K NS ? MRRJ VKIDS }KJK HKKSFRD LR;KIU LS FTU VKF/KD; LVKWD XOKJ DK VKIDS }KJK EQ>S CRK;K X;K GS BLDS CKJS ESA ESA VHKH DQN HKH LI'V DJUS DH FLFKFR ESA UGHA GWWA D;KSAFD ESJS IWT; NKNKTH DK LOXZOKL GKSUS DH OTG LS GEKJK IZFRLBKU I J DK;Z LAPKYU CAN GSA YSFDU ESA BLDS ,SOT ESA VKIDKS BL VKF/KD; LVKWD IJ CUUS O KYS DJ DKSS NSUS DS FY, RS;KJ GWWA ;G VKF/KD; (144.15 X 29500) = 42,52,425/- : GSA BL JKFK IJ DJ 13,14,000/- DK PSD LA 379650 FN- 15/9/2013 ESA VKIDKS NS JGK GWWAA 12. THE EXCESS UNDISCLOSED STOCK SO FOUND DURING TH E COURSE OF SURVEY IS THUS THE STOCK OF GUWAR WHICH IS USED AS A RAW MATE RIAL FOR THE MANUFACTURE OF GUWAR GUM, A FACT NOT DISPUTED BY THE REVENUE. THE ASSESSEE HAS REFLECTED THE AMOUNT SURRENDERED ON ACCOUNT OF EXCESS STOCK S EPARATELY AS SURRENDERED AMOUNT IN ITS PROFIT AND LOSS ACCOUNT AND HAS CLAIM ED DEDUCTION THEREON UNDER SECTION 80IB OF THE ACT. THE CONTENTION OF THE ASS ESSEE IS THAT HAD THE SAME BEEN SHOWN AS PART OF CLOSING STOCK, THE CLOSING ST OCK VALUE WOULD HAVE ITA NO. 613/JP/2019 M/S NEEL KANTH GUM & CHEMICALS, CHURU V S. ACIT, JHUNJHUNU 7 INCREASED BY AN EQUIVALENT AMOUNT AND IN BOTH SCENA RIOS, THE NATURE OF SURRENDER WOULD REMAIN THE SAME AS EXCESS UNDISCLOS ED STOCK OF GUWAR AND THE EXCESS STOCK THUS FOUND WILL FORM PART OF THE C LOSING STOCK & CHURI ETC AND HAS RIGHTLY CLAIMED DEDUCTION U/S 80IB OF THE ACT. IN OUR VIEW, UNDER THE DOUBLE ENTRY SYSTEM OF ACCOUNTING, WHERE ANY UNACCO UNTED STOCK IS BROUGHT IN THE BOOKS OF ACCOUNTS, THE STOCK ACCOUNT IS INCREAS ED BY VALUE OF UNACCOUNTED STOCK AND CORRESPONDING ENTRY IS PASSED WHEREBY INV ESTMENT IN SUCH UNACCOUNTED STOCK IS CREDITED TO THE PROFIT/LOSS AC COUNT. IN THE INSTANT CASE, IT IS NOT CLEAR HOW THE ASSESSEE HAS PASSED THE DOUBLE ENTRY IN ITS BOOKS OF ACCOUNTS AND HOW THE SAME HAS BEEN CONSIDERED FOR C LAIMING DEDUCTION UNDER SECTION 80IB OF THE ACT IN ABSENCE OF WORKING OF DE DUCTION UNDER SECTION 80IB OF THE ACT ON RECORD. FURTHER, WE FIND THAT THERE I S NO SPECIFIC FINDING RECORDED BY THE LD CIT(A) IN THIS REGARD THOUGH THE ASSESSEE HAS RAISED THIS GROUND BEFORE THE LD CIT(A). WE ARE ACCORDINGLY CONSTRAIN ED TO SET-ASIDE THE MATTER TO THE FILE OF THE LD CIT(A) TO EXAMINE THE SAME AFRES H AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01/10/2019. SD/- SD/- LANHI XKSLKBZ FOE FLAG ;KNO ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 01/10/2019 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S NEEL KANTH GUM & CHEMICALS, CHUR U 2. IZR;FKHZ@ THE RESPONDENT- ACIT, JHUNJHUNU ITA NO. 613/JP/2019 M/S NEEL KANTH GUM & CHEMICALS, CHURU V S. ACIT, JHUNJHUNU 8 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 613/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR