NICE PACK INDUSTRIES P. LTD, MUMBAI V. DCIT 9(2), MUMBAI

ITA 6211/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71048 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 16-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SURENDRA NISSURE
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, A.M. AND SHRI AMIT SHUKL A, J.M. ./ I.T.A. NO. 6211/MUM/2010 ( / ASSESSMENT YEAR: 2007-08) NICE PACK INDUSTRIES PVT. LTD. 115, NEHA INDL. ESTATE, OFF DATTAPADA ROAD, BORIVALI(E), MUMBAI-400 066 / VS. DY. CIT 9(2), MUMBAI ' ./# ./PAN/GIR NO. AABCN 2025 Q ( '$ /APPELLANT ) : ( %&'$ / RESPONDENT ) '$ ' / APPELLANT BY : SHRI SURENDRA NISSURE %&'$ ( ' / RESPONDENT BY : SHRI O. P. SINGH )* + ( , / DATE OF HEARING : 01.08.2013 -./ ( , / DATE OF PRONOUNCEMENT : 06.09.2013 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-20, MUMBAI (CIT(A) FOR SH ORT) DATED 17.06.2010, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2007-08 VIDE ORDER DATED 18.11.2009. 2 ITA NO. 6211/MUM/2010 (A.Y. 2007-08) NICE PACK INDUSTRIES PVT. LTD. VS. DY. CIT 2. THE ONLY ISSUE ARISING IN THE INSTANT APPEAL IS THE DISALLOWANCE OF THE CLAIM U/S.80- IB(4) ON INCOMES BY WAY OF SALE OF SCRAP, SUNDRY BA LANCE/S WRITTEN BACK AND MACHINERY HIRE CHARGES. THE ASSESSEE-COMPANY IS IN THE BUSINE SS OF MANUFACTURING CORRUGATED BOXES FROM, PRINCIPALLY, CRAFT PAPER, AND ITS INDUSTRIAL UNDERTAKING IS ELIGIBLE FOR CLAIM U/S.80- IB. TO THIS EXTENT, THE FACTS ARE NOT IN DISPUTE, W HICH, THEREFORE, EXTENDS ONLY TO THE VALIDITY IN LAW OF ITS CLAIM FOR DEDUCTION QUA THE STATED ITEMS OF INCOME. IN FACT, THE LD. A.R. BEFORE US NOT PRESSING ITS CLAIM IN RESPECT OF THE MACHINERY HIRE CHARGES (RS.10,000/-), THE SAME STANDS RESTRICTED TO ONLY T HE FIRST TWO ITEMS, BEING IN THE SUM OF RS.8,50,229/- AND RS.1,00,557/- RESPECTIVELY. THE R EVENUE HAS DENIED THE ASSESSEES CLAIM RELYING ON THE DECISIONS IN THE CASE OF CIT VS. PANDIAN CHEMICALS LTD. [1998] 233 ITR 497 (MAD.) AND LIBERTY INDIA VS. CIT [2009] 317 ITR 218 (SC). 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD, AS WELL AS THE CASE LAW RELIED UPON. THOUGH THE LD. AR BEFORE US CLAIMED THAT THE SCRAP GENERATED IS ACTUALLY A BY- PRODUCT, INASMUCH AS THE SAME IS SUBJECT TO EXCISE- DUTY, ADDUCING THE RELEVANT TARIFF SCHEDULE, WE FIND THE SAME AS NOT RELEVANT. THIS IS AS NO SUCH CLAIM HAS BEEN RAISED BEFORE THE AUTHORITIES BELOW, SO THAT THE SAME IS A NEW FACT. SECONDLY, AND EVEN MORE IMPORTANTLY, THE LEVY OF EXCISE-DUTY WOULD NOT BY I TSELF CONFER THE STATUS OF A BY- PRODUCT, WHICH IS LARGELY A QUESTION OF FACT. WHAT IS THE SCRAP FOR ONE MAY WELL BE AN ESSENTIAL INPUT FOR MANUFACTURE FOR ANOTHER, SO THA T THE FACTUM OF LEVY OF EXCISE-DUTY, ASSUMING SO, BY ITSELF IS NOT DETERMINATIVE OF THE ISSUE, I.E., WHETHER THE INCOME ARISING ON ITS SALE CAN BE SAID TO BE DERIVED FROM THE ASSESSE ES ELIGIBLE BUSINESS. WE SHALL, THEREFORE, PROCEED ON THE BASIS THAT THE SAME IS S CRAP AND DISCARDED/SECOND RATE BOXES. ON MERITS, HOWEVER, WE SEE NO REASON NOT TO ACCEPT THE ASSESSEES CLAIM. SCRAP, WHICH IS CONSTITUTED PRINCIPALLY OF THE RAW MATERIAL/S, IS G ENERATED IN THE COURSE OF THE MANUFACTURING PROCESS/ACTIVITY, AS THE RAW MATERIAL /S IS SUBJECT TO DIFFERENT PROCESSES. THE SAME, THUS, IS AS MUCH AN OUTPUT OF AN INDUSTRIAL U NDERTAKING, AS IS THE PRINCIPAL PRODUCT/S, FOR WHICH THE MANUFACTURING FACILITY IS SET UP, AND ITS CLASSIFICATION AS A BY- 3 ITA NO. 6211/MUM/2010 (A.Y. 2007-08) NICE PACK INDUSTRIES PVT. LTD. VS. DY. CIT PRODUCT OR OTHERWISE, VIZ. SCRAP, DEPENDS LARGELY O N ITS PERCEIVED VALUE VIS--VIS THE OTHER OUTPUT/S OF THE INDUSTRIAL UNDERTAKING, AS ALSO THE SEPARATE PROCESSING THAT MAY BE REQUIRED TO BE UNDERTAKEN IN ITS RESPECT. THE SAID STATUS, I.E., SCRAP OR BY-PRODUCT, WOULD BE THUS LARGELY IRRELEVANT FOR OUR PURPOSES. THE DE FECTIVE PRODUCTION IS AGAIN AN INTEGRAL PART OF THE MANUFACTURING OPERATIONS. WE, ACCORDIN GLY, ACCEPT THE ASSESSEES CLAIM. AS REGARDS THE CLAIM QUA SUNDRY BALANCES WRITTEN BACK, IT WAS CONFIRMED BY THE LD. AR DURING HEARING THAT THE RELEVANT AMOUNT/S STOOD CLAIMED FOR AN EARLIER YEAR/S FOR WHICH THE ASSESSEES UNDERTAKING WAS ELIGIBLE FOR C LAIM U/S.80-IB. THE SAME BEING NO LONGER PAYABLE STAND WRITTEN BACK IN ACCOUNTS AND, THEREFORE, WOULD FORM AS MUCH A PART OF BUSINESS INCOME OF THE ASSESSEES UNDERTAKING AS ANY OTHER. WE COULD NOT AGREE MORE. AS APPARENT FROM THE RECORD, THE ASSESSEES UNIT IS AN OLD ONE; IT HAVING BEEN ALLOWED DEDUCTION U/S.80-IB FOR AS FAR AS BACK AS A.Y. 1998 -99. WHEN THE EXPENSES CLAIMED HAVE BEEN ALLOWED TO COMPUTE THE INCOME OF THE ELIGIBLE BUSINESS, THE SAME ON WRITE BACK WOULD DEFINITELY GO TO INFLATE THE SAME, I.E., THE INCOME OF THE ELIGIBLE BUSINESS. THE GENUINENESS OF THE WRITE BACK IS NOT IN DOUBT, IN W HICH CASE IT WOULD, THROUGH ITS DISALLOWANCE, GO TO FORM THE INCOME OF THE YEAR FOR WHICH THE LIABILITY STOOD BOOKED AND CLAIMED. HOWEVER, THAT BEING NOT THE CASE, AND THE INCOME HAVING BEEN ASSESSED FOR THE CURRENT YEAR, WE FIND NO REASON FOR NOT ALLOWING TH E ASSESSEES CLAIM FOR DEDUCTION U/S.80- IB THEREON. FINALLY, WITH REGARD TO THE CASE LAW, WE ARE UNABLE TO DRAW ANY SUSTENANCE TOWARD THE REVENUES DENIAL OF DEDUCTION FROM THE CITED CA SE LAW, WHICH ARE BINDING ON US, WITH REFERENCE TO THE FACTS OF THE CASE. THERE IS NOTHIN G IN THE INSTANT CASE THAT IS CONTRARY OR OTHERWISE INCONSISTENT WITH THE DECISION IN THE CAS E OF PANDIAN CHEMICALS (SUPRA) OR, FOR THAT MATTER, STERLING FOODS (SUPRA) AND LIBERTY INDIA (SUPRA), RELIED UPON BY THE REVENUE. REFERENCE IN THIS CONTEXT MAY BE DRAWN TO THE DECIS ION IN THE CASE OF TESSITURA MONTI (P.) LTD. V. ITO [2013] 141 ITD 531(MUM.) [22 ITR (TRIB) 329], REND ERED IN THE CONTEXT OF S. 10B, WHEREIN, WITH REFERENCE TO, INTER ALIA , THESE VERY DECISIONS, THE EXIGIBILITY OF THESE SUMS, AMONG OTHERS, FOR DEDUCTION THERE-UNDER, STAN DS APPROVED OF. WE DECIDE ACCORDINGLY. 4 ITA NO. 6211/MUM/2010 (A.Y. 2007-08) NICE PACK INDUSTRIES PVT. LTD. VS. DY. CIT 4. IN THE RESULT, THE ASSESSEES APPEAL PARTLY ALLO WED. 0/ 1 )2 30 ( * 4 ( 56 ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 06, 2013 SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 7+ MUMBAI; 8) DATED : 06.09.2013 *.)../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. ;*< = %)>2 , , >2/ , 7+ / DR, ITAT, MUMBAI 6. = ?3 @ + / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , 7+ / ITAT, MUMBAI