ASSTT. C.I.T.3(2), MUMBAI V. M/S. PET FIBRES LTD., MUMBAI

ITA 6266/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1591 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 23-10-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMOL KAMAL
• Keywords: Set aside
• Section: 80IB; 80HH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO 6266/MUM/2008 (ASSESSMENT YEAR: 2005-06) ACIT 3(2), R NO 608, 6TH FLOOR, AAYAKAR BHAVAN, MUMBAI -400 020 VS M/S PET FIBRES LTD, 807 EMBASSY CENTRE, NARIMAN POINT, MUMBAI-400 021 PAN: AAACP 2521 L APPELLANT RESPONDENT APPELLANT BY: SHRI AMOL KAMAL RESPONDENT BY: SHRI VIJAY MEHTA ORDER PER T.R. SOOD, ACCOUNTANT MEMBER IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT (A) ERRED IN ALLOWING DEDUCTION U/S 80IB ON ACCOUNT OF RS 28,59,050/- BEING AGGREGATE OF RECEIPT FROM INTEREST SALE OF SCRAP, SUNDRY BALA NCE WRITTEN OFF AND INSURANCE CLAIMED WHICH WERE NOT CONSIDERED BY THE AO FOR THE PURPOSE OF DEDUCTION U/S 80IB OF THE ACT WITHOUT APPRECIATING THAT THIS INCO ME WERE NOT DERIVED FROM THE ELIGIBLE ACTIVITY OF THE ASSESSEE. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT (A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT GROU ND RAISED BY THE REVENUE INVOLVES FOUR ISSUES, WHICH WE SHALL DEAL SEPARATELY. I) INTEREST : AS FAR AS INTEREST IS CONCERNED AFTER HEARING BO TH THE PARTIES WE FIND THAT THIS ISSUE IS FAIRLY COVERED AGAINST T HE ASSESSEE BY THE DECISION OF THE ITA 6266/M/2008 M/S PET FIBRES LTD 2 HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMIC ALS LTD VS CIT (262 ITR 278) WHEREIN IT WAS HELD:- THAT INTEREST DERIVED BY THE INDUSTRIAL UNDERTAKI NG OF THE ASSESSEE ON DEPOSITS MADE WITH THE ELECTRICITY BOARD FOR THE SUPPLY OF E LECTRICITY FOR RUNNING THE INDUSTRIAL UNDERTAKING COULD NOT BE SAID TO FLOW DI RECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF AND WAS NOT PROFITS OR GAINS DER IVED BY THE UNDERTAKING FOR THE PURPOSE OF THE SPECIAL DEDUCTION UNDER SECTION 80HH . 3. FOLLOWING THE ABOVE DECISION, WE DECIDE THIS ISS UE AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY HOLDING THAT DEDUCTION U/S 80IB IS NOT AVAILABLE IN RESPECT OF INTEREST INCOME. II) SALE OF SCRAP : LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT HONBLE MADRAS HIGH COURT HAS HELD IN CASE OF FENNER (INDIA) LTD VS CIT (241 ITR 803) THAT DEDUCTION U/S 80HH WAS AVAIL ABLE IN RESPECT OF SCRAP SALE INCOME. HE FURTHER POINTED OUT THAT DECISION OF HONBLE MAD RAS HIGH COURT HAS ALREADY BEEN FOLLOWED BY MUMBAI BENCH OF THE TRIBUNAL IN CASE OF ASIA INVESTMENTS LTD VS DCIT (90 ITD 630). 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THIS ISSUE IS COVERED BY THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN CASE OF ASIA INV ESTMENT LTD VS DCIT (SUPRA) WHEREIN IT WAS HELD AS UNDER:- IN FENNER (INDIA) LTD VS CIT (NO.2) [2000]241 ITR 803, THE MADRAS HIGH COURT EXPRESSED THE VIEW THAT THE SCRAP MATERIALS HAS DIR ECT LINK OR NEXUS WITH THE INDUSTRIAL UNDERTAKING AND, THEREFORE, PROFIT FROM THE SALE OF THE SCRAP MATERIALS SHOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80HH . FOLLOWING THAT DECISION, IT WAS TO BE HELD IN THE INSTANT CASE THAT THE RELIEF UNDER SECTION 80HH WAS ALLOWABLE TO THE ASSESSEE ON PROFIT ON SALE OF SCRAP. 5. FOLLOWING THE ABOVE DECISION WE DECIDE THIS ISSU E AGAINST THE REVENUE. ITA 6266/M/2008 M/S PET FIBRES LTD 3 III) SUNDRY BALANCES WRITTEN OFF : AFTER HEARING BOTH THE PARTIES WE FIND THAT DEDUCTION HAS BEEN DENIED BY THE ASSESSING OFFICER ON THE AMOUNT WRITTEN BACK BY THE ASSESSEE ON ACCOUNT OF WRITE OFF OF SUNDRY BALANCES . 6. ON APPEAL, THE LEARNED CIT (A) ACCEPTED THE CLAI M OF THE ASSESSEE. 7. BEFORE US LEARNED DEPARTMENTAL REPRESENTATIVE PO INTED OUT THAT DETAILS HAVE NOT BEEN GIVEN BY THE LEARNED CIT (A) OR EVEN BY THE AS SESSING OFFICER AND, THEREFORE, MATTER MAY GO BACK FOR FRESH ADJUDICATION. 8. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT SUNDRY BALANCES WERE WRITTEN OFF AGAINST TRADE CREDITORS A GAINST THE PURCHASE OF RAW MATERIALS ETC IN THE ELIGIBLE UNIT. THIS WOULD AMOUNT TO A D EDUCTION OF PURCHASE AND EVEN IF ASSESSEE HAD PAID THESE AMOUNTS THE PURCHASES WOULD NOT HAVE REDUCED PROFIT WOULD HAVE GONE UP AND, THEREFORE, ASSESSEE WAS ELIGIBLE FOR DEDUCTION ON ACCOUNT OF THESE WRITE BACKS. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND FORCE IN SUBMISSION OF LEARNED AR, HOWEVER, FACTS HAVE NOT BEEN DISCUSSED BY THE LOWER AUTHORITIES THEREFORE, IN THE INTEREST OF JUSTICE WE SET ASIDE THE ORDER OF LEARNED CIT (A ) AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THAT IF S UNDRY BALANCES ARE WRITTEN OFF AGAINST THE PURCHASE OF RAW MATERIALS OR OTHER REVENUE EXPENDIT URES IN THE ELIGIBLE UNIT THEN DEDUCTION U/S 80IB MAY BE ALLOWED. IV) INSURANCE CLAIM : AFTER HEARING BOTH THE PARTIES WE FIND THAT INSUR ANCE CLAIM WAS INCLUDED IN THE PROFIT AND LOSS ACCOUNT A ND DEDUCTION WAS CLAIMED U/S 80IB. HOWEVER, AO WAS OF THE OPINION THAT ASSESSEE WAS NO T ENTITLED TO DEDUCTION U/S 80IB ON SUCH CLAIM. ITA 6266/M/2008 M/S PET FIBRES LTD 4 10. BOTH THE PARTIES WERE HEARD IN DETAILS. IT WAS POINTED OUT BY LEARNED AR THAT A WORKER GOT INJURED AND THE ASSESSEE SPENT SOME MONE Y ON HIS TREATMENT, WHICH WAS RECEIVED BACK FROM THE INSURANCE COMPANY AND, THERE FORE, HAD NEUTRALISING EFFECT, AND THUS ASSESSEE WAS ENTITLED TO THE DEDUCTION. 11. HAVING CONSIDERED THE RIVAL SUBMISSIONS WE FIND DETAILS REGARDING INSURANCE CLAIM HAVE NOT BEEN DISCUSSED BY THE ASSESSING OFFICER OR CIT (A). THEREFORE, WE SET ASIDE THE ORDER OF LEARNED CIT (A) AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE DETAILS AND IF IT WA S ONLY A CASE OF REIMBURSEMENT OF MEDICAL EXPENSES, WHICH WOULD GO ON TO REDUCE ACTUAL EXPEND ITURE INCURRED BY THE ASSESSEE THEN DEDUCTION U/S 80IB SHOULD BE ALLOWED. 12. IN THE RESULT, REVENUE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 16TH DAY OF NOVEMBER 2009. SD/- (R.K. GUPTA) JUDICIAL MEMBER SD/- (T.R. SOOD) ACCOUNTANT MEMBER MUMBAI, DATE: 16TH NOVEMBER 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CENTRAL -II, MUMBAI. 4) THE CIT- CENTRAL-IV, MUMBAI. 5) THE D.R. C BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA 6266/M/2008 M/S PET FIBRES LTD 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 10.11.09 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 10.11.09 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER