ITO 15(1)(3), MUMBAI V. DAMAN PLASTIC, MUMBAI

ITA 6225/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1061 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 14-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 02-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Keywords: Set aside
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI R.V. EASWAR (PRESIDENT) AND SHRI R.K. PANDA (ACCOUNTANT MEMBER) I.T.A. NO. 6225/MUM/2009 (ASSESSMENT YEAR : 2005-06) I.T.A. NO. 6226/MUM/2009 (ASSESSMENT YEAR : 2005-07) INCOME-TAX OFFICER-15(1)(3) MATRU MANDIR R.NO. 108 MUMBAI-400 007 VS. M/S. DAMAN PLASTICS 507, EMBASSY CENTRE, NARIMAN POINT, MUMBAI-400 021 PAN: AADFD7256Q APPELLANT RESPONDENT APPELLANT BY : SHRI SUMEET KUMAR RESPONDENT BY : NONE ORDER DATE OF HEARING: 14.07.2010 DATE OF ORDER: 23.07.2010 PER R.K.PANDA, AM , THE ABOVE TWO APPEALS FILED BY THE REVENUE ARE DIR ECTED AGAINST THE SEPARATE ORDERS DATED 25 TH SEPTEMBER, 2009 OF THE CIT(A)-26, MUMBAI RELATING TO ASSESSMENT YEARS 2005-06 AND 2006-07, RESPECTIVELY. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN IN BOTH THE APPEALS BY THE REVENUE, THER EFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE ALTHOUGH NOTICE WAS SENT BY RPAD. THEREFORE, THE APPEALS ARE BEING DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LEARNED DR. I.T.A. NO. 6225/MUM/2009 (A.Y. 2005-06): 3. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL IS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LAW IN HOLDING THAT THE INCOME FROM INTEREST ON FIX ED DEPOSITS BEING SECURITY DEPOSIT WITH ELECTRICITY BOARD, INCOME FRO M JOB WORK CHARGES, MISCELLANEOUS SALE AND RECEIPTS AGGREGATING TO RS.6 ,44,039/- ARE DERIVED FROM THE BUSINESS ACTIVITY, AND HENCE, ELIG IBLE FOR DEDUCTION U/S. 80IB OF THE I.T. ACT, IGNORING THE FACTS THAT IMPUGNED RECEIPTS DONT ITA NOS. 6225 & 6226/MUM/2009 M/S. DAMAN PLASTICS ========================= 2 HAVE FIRST DEGREE NEXUS WITH THE INDUSTRIAL UNDERTA KING BEING THE ANCILLARY INCOME ONLY, AND THEREFORE, THEY CANNOT B E SAID TO HAVE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING U/S. 8 0I, 80IA, 80-IB, AS DECIDED BY HONBLE SUPREME COURT IN THE CASE OF LIB ERTY INDIA V/S. CIT, 317 ITR 218. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE FIRM WHICH IS ENGAGED IN THE MANUFACTURE OF POLYMER GRANULES FROM POLYMER WASTE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS.1,96,945/- AFTER CLAIM ING DEDUCTION U/S. 80IB AT RS.3,11,25,522/-. DURING THE ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IB O N THE FOLLOWING AMOUNTS ALSO. I) INTEREST INCOME RS.1,09,445 II) RECEIPT FROM JOB CHARGES RS.4,09,430 III) MISCELLANEOUS SALES & OTHER RECEIPTS RS.1 ,23,764 IV) OTHER RECEIPTS RS. 1,400 THE ASSESSING OFFICER HELD THAT THE ABOVE AMOUNTS A RE NOT ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. HE ACCORDINGLY RECOMPUTED THE DED UCTION U/S. 80IB. 5. IN APPEAL, THE LEARNED CIT(A) RELYING ON A COUPL E OF DECISIONS ALLOWED THE CLAIM OF DEDUCTION U/S. 80IB ON ACCOUNT OF THE ABOV E ITEMS. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFOR E US. 6. AFTER HEARING THE LEARNED DR AND ON PERUSAL OF T HE ORDERS OF AUTHORITIES BELOW, WE FIND THE ISSUE STANDS COVERED IN FAVOUR O F THE REVENUE AND AGAINST THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF LIBERTY INDIA VS. CIT REPORTED IN 317 ITR 218. WE FIND THE HONB LE SUPREME COURT IN THE SAID DECISION WHILE DECIDING THE ISSUE RELATING TO DEDUC TION U/S. 80IB (AT PAGE 232 PLACENTUM 14) HAS HELD AS UNDER: 14. ANALYSING CHAPTER VI-A, WE FIND THAT S. 80-IB/ 80-IA ARE THE CODE BY THEMSELVES AS THEY CONTAIN BOTH SUBSTANTIVE AS W ELL AS PROCEDURAL PROVISIONS. THEREFORE, WE NEED TO EXAMINE WHAT THES E PROVISIONS PRESCRIBE FOR 'COMPUTATION OF PROFITS OF THE ELIGIB LE BUSINESS'. IT IS EVIDENT THAT S. 80-IB PROVIDES FOR ALLOWING OF DEDU CTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINES S. THE WORDS 'DERIVED FROM' IS NARROWER IN CONNOTATION AS COMPAR ED TO THE WORDS 'ATTRIBUTABLE TO'. IN OTHER WORDS, BY USING THE EXP RESSION 'DERIVED FROM', PARLIAMENT INTENDED TO COVER SOURCES NOT BEY OND THE FIRST DEGREE. . 7. IN VIEW OF THE DECISION OF THE HONBLE SUPREME C OURT, WE HOLD THAT THE ABOVE RECEIPTS ARE NOT DERIVED FROM THE ELIGIBLE BUSINESS SO AS TO GET THE BENEFIT OF DEDUCTION U/S. 80IB. WE, THEREFORE, SET ASIDE THE ORDERS OF THE CIT(A) ALLOWING THE ITA NOS. 6225 & 6226/MUM/2009 M/S. DAMAN PLASTICS ========================= 3 CLAIM OF DEDUCTION U/S. 80IB ON THE ABOVE RECEIPTS. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY ALLOWED. I.T.A. NO. 6226/MUM/2009 (A.Y. 2006-07): 8. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LAW IN HOLDING THAT THE INCOME FROM INTEREST ON FIX ED DEPOSITS BEING SECURITY DEPOSIT WITH ELECTRICITY BOARD, INCOME FRO M JOB WORK CHARGES, SALE OF SCRAP AND SUNDRY BALANCES WRITTEN OFF AGGRE GATING TO RS.7,29,128/- ARE DERIVED FROM THE BUSINESS ACTIVIT Y, AND HENCE, ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE I.T. ACT, I GNORING THE FACTS THAT IMPUGNED RECEIPTS DONT HAVE FIRST DEGREE NEXUS WIT H THE INDUSTRIAL UNDERTAKING BEING THE ANCILLARY INCOME ONLY, AND TH EREFORE, THEY CANNOT BE SAID TO HAVE PROFIT DERIVED FROM INDUSTR IAL UNDERTAKING U/S. 80I, 80IA, 80-IB, AS DECIDED BY HONBLE SUPREME COU RT IN THE CASE OF LIBERTY INDIA V/S. CIT, 317 ITR 218. 9. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND IS IDENTICAL TO THE GROUND RAISED IN I.T.A. NO. 6225/MUM/2009. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN ALLOWED. FOLLOWING THE SAME RATIO THIS GROUND BY THE REVENUE IS ALLOWED. 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 23 RD JULY, 2010 SD/- (R.V. EASWAR) PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATE 23 RD JULY, 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-26, MUMBAI 4. THE CIT, CITY-15, MUMBAI 5. THE DR D BENCH. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES, MUMBAI TPRAO