M/s. Jakson and Co., New Delhi V. ACIT, New Delhi

ITA 6182/DEL/2013

• Counselvise Citation: 618220114 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SULEKHA VERMA
• Assessee Lawyers: NIREN GUPTACA
• Section: 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : D NEW DELHI BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NOS.: 6182,6183/DEL/2013 ASSESSMENT YEARS : - 2006-07,2007-08 JAKSON AND CO. VS. ACIT 47, G.B. ROAD CENTRAL C IRCLE-25 NEW DELHI 110 006. NEW DELHI. (PAN AAAFJ544IN) (APPELLANT) (RESP ONDENT) APPELLANT BY : SHRI NIREN GUPTA,CA RESPONDENT BY : MS. SULEKHA VERMA, CIT(DR) DATE OF HEARING : 11.5.2015 DATE OF PRONOUNCEMENT : 02.06.2015 O R D E R PER G.C. GUPTA, VICE PRESIDENT THESE TWO APPEALS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 ARE DIRECTED AGAINST THE ORDER OF THE CIT(A ). THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. IDENTICAL GROUND OF A PPEAL NO. 1 IN BOTH THESE APPEALS OF THE ASSESSEE IS AS UNDER :- THAT THE CIT(A) HAS ON WRONG INTERPRETATION OF SE C. 153 A HAS ERRED IN CONFIRMING THE ADDITIONS MADE BY AO WHICH ARE NOT B ASED ON ANY MATERIAL FOUND IN THE SEARCH OR CONCEALED INCOME. THAT THE A DDITION NOT BEING SUSTAINABLE IN LAW BE DELETED. 2. LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THIS GROUND OF THE APPEAL OF THE ASSESSEE WHICH IS ACCORDINGLY DISMISSED. 3. IDENTICAL GROUND OF APPEAL NO. 2 OF THE ASSE SSEE FOR BOTH THE YEARS READS AS UNDER:- ITA NOS 6182,6183/DEL/2013 2 2. THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DISALL OWANCE U/S 80IB IN RESPECT OF SCRAP SALES CALCULATED AT RS. 1231865, F OR THE ASSESSMENT YEAR 2006-07 AND RS. 1840749/- FOR THE ASSESSMENT YEAR 2007-08 CONTRARY TO PROVISIONS OF LAW. THAT IT MAY BE HELD THAT SALE OF SCRAP GENERATED IN THE MANUFACTURING PROCESS IS PROFIT AND GAINS DERIVED FROM THE INDUST RIAL UNDERTAKING ENTITLED TO DEDUCTION U/S 80IB. 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IDENTICAL ISSUE OF THE DISALLOWANCE U/S 80IB OF THE ACT IN RESPECT OF SCRAP SALES IS IN VOLVED IN BOTH THE RELEVANT ASSESSMENT YEARS IN APPEAL BEFORE THE TRIBUNAL. H E SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF THE DELHI TRIBUNAL IN ASSESSEES OWN CASE FOR THE YEAR 2008-09 AND 2009-1 0 IN ITA NO. 1238/DEL/2013 AND ITA NO. 1239/DEL/2013 DATED 20.12.2013 WHEREIN THE ISSUE OF DEDUCTION U/S 80IB OF THE ACT ON SCRAP SALES WAS ALLOWED TO THE A SSESSEE. THE DELHI TRIBUNAL IN THIS CASE OF THE ASSESSEE HAS FOLLOWED THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CIT- III VS. SADHU FORGING LTD. 336 ITR 44 4 (DELHI) WHEREIN HELD THAT MANUFACTURING ACTIVITY OF THE TYPE OF MATERIAL BEIN G UNDERTAKEN BY THE ASSESSEE WOULD ALSO GENERATE SCRAP IN THE PROCESS OF MANUFAC TURING . THE RECEIPTS OF SALE OF SCRAP BEING PART AND PARCEL OF THE ACTIVITY AND BEI NG PROXIMATE THERETO WOULD ALSO BE WITHIN THE AMBIT OF GAINS DERIVED FROM INDUSTRIA L UNDERTAKING FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80IB. 5. LD. CIT (DR) HAS OPPOSED THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. SHE SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF DG SETS AND THE SCRAP IS NOT A BY-PRODUCT OF THE PROCE SS. SHE SUBMITTED THAT THE ITA NOS 6182,6183/DEL/2013 3 DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT-III VS. SADHU FORGING LTD. (SUPRA) WAS DISTINGUISHABLE ON FACTS AND IN T HAT CASE THE ASSESSEE WAS IN THE BUSINESS OF FORGING RESULTING IN GENERATION OF SCRA P TO A LARGE EXTENT AND IN THE CASE OF THE ASSESEE THE SCRAP COULD NOT BE SAID TO BE A BY PRODUCT OF THE PROCESS. SHE SUBMITTED THAT THE CIT(A) HAS RIGHTLY DISTINGUISHED THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT-III VS . SADHU FORGINGS LTD. (SUPRA) AND OBSERVED THAT IN THAT CASE THE ITEMS MANUFACTURED WAS IRON/STEEL FORGING WHEREAS IN THE CASE OF ASSESSEE THE ITEM MANUFACTURED IS DG SETS AND THE SCRAP IS GENERATED WHILE CUTTING, RESIZING AND FABRICATING THE BASE F RAME, CONTROL PANEL AND STAND, FUEL TANK, SILENCER ETC. THE CIT (A) HAS HELD THAT THE TWO CASES THEREFORE WERE NOT IDENTICAL ON FACTS AND THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT WAS NOT STRICTLY APPLICABLE TO THE CASE OF THE APPELLANT. 6. LD. COUNSEL FOR THE ASSESSEE IN HIS REJOI NDER SUBMITTED THAT SCRAP WAS VERY MUCH GENERATED IN THE MANUFACTURING PROCESS ITSELF AND THEREFORE THE RATIO OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE O F CIT-III VS.. SADHU FORGING LTD. (SUPRA) WAS APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. HE SUBMITTED THAT IN DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF R.N. GUPTA AND CO. LTD. VS. CIT (2013) 351 ITR 369 (P & H) ISSUE WAS D ECIDED IN FAVOUR OF THE ASSESSEE. HE SUBMITTED THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX-VII, NEW DELHI VS. PUNJA B STAINLESS STEEL INDUSTRIES 2014 (5) TMI 238 COVERS THE CASE OF THE ASSESSEE IN ITS FAVOUR WHEREIN HELD THAT SALE PROCEEDS FROM THE SALE OF SCRAP WOULD NOT BE I NCLUDED IN THE TOTAL TURNOVER U/S 80HHC OF THE ACT. ITA NOS 6182,6183/DEL/2013 4 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS A ND HAVE PERUSED THE ORDER OF CIT(A) AND AO. WE FIND THAT THE ONLY ISSUE IN THI S GROUND OF APPEAL OF THE ASSESSEE IS REGARDING THAT WHETHER THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80IB IN RESPECT OF SCRAP SALE FOR THE RELEVANT ASSESSMENT Y EARS . THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT-III VS. SADHU FORGING LTD. (SUPRA) WHE REIN HELD THAT SINCE MANUFACTURING ACTIVITY OF TYPE OF MATERIAL BEING UN DERTAKEN BY THE ASSESSEE WOULD ALSO GENERATE SCRAP IN THE PROCESS OF MANUFACTURING , RECEIPTS OF SALE OF SCRAP BEING PART AND PARCEL OF ACTIVITY AND BEING PROXIMATE THE RETO WOULD ALSO BE WITHIN AMBIT OF GAINS DERIVED FROM INDUSTRIAL UNDERTAKING FOR PURPO SE OF COMPUTING DEDUCTION U/S 80IB OF THE ACT. WE FIND THAT THE ASSESSEE IS IN T HE BUSINESS OF MANUFACTURING/ASSEMBLING OF DG SETS AND IT WOULD NE CESSARILY RESULT IN THE GENERATION OF SCRAP IN THE PROCESS UNDERTAKEN BY IT FOR THE PURPOSE OF MAKING THE DG SETS. THE MANUFACTURING PROCESS WOULD GENERATE S CRAP AND THE SALE THEREOF BEING PART AND PARCEL OF ACTIVITY AND BEING PROXIMA TE THERETO WOULD ALSO BE WITHIN THE AMBIT OF GAINS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE DELHI TRIBUNAL IN ASSESSEES OWN CASE FOR THE SUBSEQUENT ASSESSMENT Y EARS 2008-09 AND 2009-10 HAS ALLOWED THE DEDUCTION U/S 80IB TO THE ASSESSEE IN I DENTICAL FACTS VIDE ITS ORDER DATED 20 DECEMBER , 2013 (SUPRA) AND FOLLOWED THE DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT-III VS. SADHU FORGING LTD.(SUPRA). THE CIT(A) HAS WRONGLY DISTINGUISHED THE BINDING DECISION OF THE H ONBLE JURISDICTIONAL HIGH COURT IN CIT III VS. SADHU FORGING LTD.(SUPRA). THE TWO CAS ES COULD NOT BE IDENTICAL ON FACTS AND IT IS A RATIO OF THE DECISION BY A SUPERIOR COU RT THAT HAS TO BE APPLIED IN THE FACTS OF A CASE. THE SCRAPS WERE GENERATED DURING THE MAN UFACTURING / ASSEMBLING ITA NOS 6182,6183/DEL/2013 5 PROCESS OF MAKING DG SETS AND THE SCRAP WAS A NECE SSARY PRODUCT AND THEREFORE WE HOLD THAT THE DECISION OF HONBLE JURISDICTIONAL HI GH COURT IN THE CASE OF CIT-III VS. SADHU FORGING LTD.(SUPRA) APPLIES TO THE FACTS OF T HE CASE OF THE ASSESSEE AND RESPECTFULLY FOLLOWING THE SAME WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE GROUND OF APPEAL NO. 2 OF THE ASSESSEE IN BOTH THE ASSESSMENT YEARS BEFORE US ARE ALLOWED. 8. IN THE RESULT BOTH THE APPEALS OF THE ASS ESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 2.06.2015. SD/- SD/- (T.S. KAPOOR) (G.C. GUPTA) ACCOUNTANT MEMBER VICE PRESIDE NT DATED: 02.06.2015 *VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR ITA NOS 6182,6183/DEL/2013 6 SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 11.5.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 12.5.2015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER