RACHANA PLASTICIZER, MUMBAI V. ADDL CIT 19(1), MUMBAI

ITA 650/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1807 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 01-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DIPAK KUMAR SINHA

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI .. , ! ' #. $.. % , & ', ' BEFORE SHRI R.S.SYAL, AM AND DR.T.M.PAVALAN, JM ITA NO.650/MUM/2012 : ASST.YEAR 2007-2008 M/S.RACHANA PLASTICIZER PLOT NO.143, SHANTI NIKETAN S.V.ROAD, KHAR (WEST) MUMBAI 400 013. PAN : AAAFR7811A. THE ADDL.COMMISSIONER OF INCOME-TAX RANGE 19(1) MUMBAI. ( () / // / APPELLANT) % % % % / VS. ( +,()/ RESPONDENT) () - -- - . . . . / APPELLANT BY : SHRI MAYUR MAKADIA +,() - . - . - . - . / RESPONDENT BY : SHRI DIPAK KUMAR SINHA % - /! / / / / DATE OF HEARING : 30.01.2013 012 - /! / DATE OF PRONOUNCEMENT : 05.02.2013 ' 3 ' 3 ' 3 ' 3 / / / / O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 23.11.2011, IN RELATION TO THE ASSESSMENT YEAR 2007-2008. 2. FIRST GROUND IS GENERAL WHICH DOES NOT REQUIRE A NY SEPARATE ADJUDICATION. 3. SECOND GROUND IS AGAINST THE DENIAL OF DEDUCTION U/S 80-IB(4) IN RESPECT OF (I) RECEIPT OF INSURANCE CLAIM FOR LOSS OF RAW MATERIAL OF ` 10,91,347, (II) COMPENSATION FOR NOT SUPPLYING THE RAW MATERIAL IN ITA NO.650/MUM/2012. M/S.RACHANA PLASTICIZER. 2 TIME OF ` 3,00,000, AND (III) INTEREST ON L/C MARGIN OF ` 71,409. THE LEARNED AR DID NOT PRESS THE CLAIM OF DEDUCTION IN RESPECT OF THIRD ITEM, BEING, INTEREST ON LC MARGIN. TO THIS EXTEN T THE IMPUGNED ORDER IS UPHELD. 4. FIRST ISSUE IS AGAINST THE DENIAL OF DEDUCTION U /S 80-IB(4) IN RESPECT OF RECEIPT OF INSURANCE CLAIM FOR LOSS OF R AW MATERIAL. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE RECEIVED INSURANCE CLAIM OF ` 10,91,347 AND ADJUSTED THE SAME AGAINST COST OF RAW MATERIAL. ON BEING CALLED UPON TO EXPLAIN AS TO WHY DEDUCTION SHOULD NOT BE GRANTED ON THIS ITEM, THE ASSESSEE SUBMITTED THAT IN THE YEAR 2005 THERE WERE HEAVY FLOOD AS A RESULT OF WHICH TH E ASSESSEES STOCK OF RAW MATERIALS AND PLANT AND MACHINERY WERE HEAVI LY DAMAGED. INSURANCE CLAIM OF ` 90,91,347 WAS LODGED, OUT OF WHICH A SUM OF ` 85,07,369 WAS PERTAINING TO STOCK. A SUM OF ` 80 LAKH WAS ADJUSTED IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 20 05-2006 WHICH WAS DULY ACCEPTED BY THE ASSESSING OFFICER. THE REM AINING AMOUNT OF ` 10,91,347 WAS RECEIVED IN THE PREVIOUS YEAR RELEVAN T TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS CONTEND ED THAT SINCE THE SAME RELATED TO RECOUPMENT OF LOSS ON STOCK IN TRAD E, THE SAME WAS DEDUCTIBLE. THE ASSESSING OFFICER REFUSED THIS CLAI M. THE LEARNED CIT(A) ECHOED THE ASSESSMENT ORDER ON THIS POINT. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT TH E INSURANCE CLAIM OF ` 90.91 LAKH ACCEPTED BY THE INSURANCE COMPANY COMPRI SED OF THE LOSS ITA NO.650/MUM/2012. M/S.RACHANA PLASTICIZER. 3 OF STOCK-IN-TRADE TO THE TUNE OF ` 85.07 LAKH AND THE REMAINING AMOUNT TOWARDS PLANT AND MACHINERY. IN THE PRECEDING YEAR, THE ASSESSEE RECEIVED ` 80 LAKH, WHICH IT ADJUSTED AGAINST THE RAW MATERIA L COST AND THE SAME WAS GRANTED THE BENEFIT OF DEDUCTION AS WELL. HOWEVER THE ASSESSEE IN THE CURRENT YEAR PROPOSED TO ADJUST THE ENTIRE AMOUNT OF THE REMAINING CLAIM OF ` 10.91 LAKH AGAINST THE RAW MATERIAL COST. IT IS NOT UNDERSTANDABLE AS TO HOW THE ASSESSEE COULD SET OFF THE INSURANCE CLAIM RELATING TO PLANT AND MACHINERY AGA INST THE RAW MATERIALS COST INCURRED DURING THE YEAR. AS PER ASS ESSEES OWN VERSION, A SUM OF ` 5.84 LAKH WAS TOWARDS PLANT AND MACHINERY OUT OF THE TOTAL INSURANCE CLAIM OF ` 90.91 LAKH. BY NO STRETCH OF IMAGINATION THIS PART OF INSURANCE CLAIM, BEING ON CAPITAL ACCO UNT, CAN BE CONSIDERED AS ELIGIBLE FOR DEDUCTION AS RECOUPMENT OF LOSS OF RAW MATERIAL COST. AS REGARDS THE REMAINING AMOUNT OF ` 5.07 LAKH, WE FIND THAT THE SAME IS ON ACCOUNT OF RAW MATERIAL CO ST. THE LEARNED AR HAS PLACED ON RECORD A COPY OF THE ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN M/S.CASTROL INDIA LTD. V. ACIT IN ITA NO.3938/MUM /2010. VIDE ITS ORDER DATED 14.09.2012, THE TRIBUNAL HAS GRANTED DEDUCTION U/S 80-IB IN RESPECT OF INSUR ANCE CLAIM. THIS VIEW HAS BEEN CANVASSED BY FOLLOWING ANOTHER ORDER PASSED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL AT DELHI IN M/S.J .K.ALUMINIUM CO. V. ITO. IN THE CONTEXT OF SECTION 80-IA, THE HONBL E DELHI HIGH COURT IN THE CASE OF CIT V. SPORTKING INDIA LTD. [(2010) 324 ITR 283 (DE L.)] HAS ALLOWED DEDUCTION U/S 80-IA IN RESPECT OF INSUR ANCE CLAIM ON ACCOUNT OF LOSS ON GOODS DESTROYED BY FIRE. IN THE LIGHT OF THE ABOVE ITA NO.650/MUM/2012. M/S.RACHANA PLASTICIZER. 4 NOTED PRECEDENTS, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE DESERVES TO GET DEDUCTION U/S 80-IB(4) IN RESPECT O F ` 5.07 LAKH REPRESENTING INSURANCE CLAIM IN RESPECT OF LOSS OF RAW MATERIAL. WE ORDER ACCORDINGLY. 6. THE OTHER ITEM FOR WHICH THE ASSESSEE WAS DENIED DEDUCTION U/S 80-IB(4) IS `COMPENSATION FOR NOT SUPPLYING RAW MAT ERIAL IN TIME. THE ASSESSEE RECEIVED COMPENSATION OF ` 3 LAKH ON ACCOUNT OF CONTRACT WITH M/S.CRESCENT CHEMSOLE PVT. LTD. AND C LAIMED DEDUCTION U/S 80-IB ON THIS AMOUNT. ON BEING CALLED UPON TO EXPLAIN AS TO WHY DEDUCTION SHOULD NOT BE DENIED ON THIS AM OUNT, THE ASSESSEE STATED THAT IT MADE A CONTRACT WITH CRESCE NT CHEMSOLE PVT. LTD. FOR SUPPLY OF 100 MT OF DI-OCTYL PHTHALATE IN JUNE 2006. AS THE RAW MATERIAL WAS NOT SUPPLIED, THE ASSESSEE HAD TO PURCHASE SIMILAR RAW MATERIAL FROM OUTSIDE THE MARKET FOR WHICH IT P AID A HIGHER PRICE. IT WAS CLAIMED THAT THERE WAS A LOSS TO THE ASSESSE E WHICH WAS RECOUPED FROM CRESCENT CHEMSOLE PVT. LTD. AS COMPEN SATION FOR SUCH LOSS SUFFERED. NOT SATISFIED WITH THE ASSESSEES CO NTENTION, THE ASSESSING OFFICER REFUSED TO GRANT DEDUCTION U/S 80 -IB(4) ON THIS AMOUNT. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT TH E ASSESSEE CLAIMED DEDUCTION U/S 80-IB(4) ON THE COMPENSATION AMOUNT O F ` 3 LAKH RECEIVED BY IT FROM CRESCENT CHEMSOLE PVT. LTD. THE CASE OF THE ASSESSEE FOR DEDUCTION IS BASED ON THE FOUNDATION T HAT IT HAD TO ITA NO.650/MUM/2012. M/S.RACHANA PLASTICIZER. 5 PURCHASE RAW MATERIAL FROM MARKET AFTER CANCELLATIO N OF THE CONTRACT WITH CRESCENT CHEMSOLE PVT. LTD. AT A HIGHER PRICE. ON A POINTED QUERY, THE LEARNED AR COULD NOT LEAD ANY EVIDENCE TO SHOW AS TO THE ALLEGED HIGHER PURCHASE PRICE OF THE RAW MATERIAL F ROM A THIRD PARTY JUSTIFYING THE COMPENSATION OF ` 3 LAKH. IN OUR CONSIDERED OPINION THIS COMPENSATION OF ` 3 LAKH CANNOT BE CONSIDERED AS DERIVED FROM INDUSTRIAL UNDERTAKING IN TERMS OF SECTION 80IB(4) . IN ORDER TO BRING A CASE WITHIN THE FOLD OF THIS DEDUCTION PROVISION, IT IS FOR THE ASSESSEE TO SHOW THAT THERE IS A DIRECT NEXUS OF SUCH INCOME WITH THE INDUSTRIAL UNDERTAKING. IN THE ABSENCE OF ANY EVIDENCE PRODUCE D BEFORE US, WE ARE OF THE CONSIDERED OPINION THAT THE ORDERS OF TH E AUTHORITIES BELOW CANNOT BE TINKERED WITH ON THIS ASPECT. THIS GROUND IS, THEREFORE, PARTLY ALLOWED. 8. LAST GROUND ABOUT THE CONFIRMATION OF ADDITION O F ` 1,25,000 AS ADMINISTRATIVE COST FOR EARNING DIVIDEND INCOME OF ` 17.16 LAKH WAS NOT PRESSED BY THE LEARNED AR. THE SAME IS, THEREFO RE, DISMISSED. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 05 TH DAY OF FEBRUARY, 2013. ' 3 - 012 4'%5 1 - 6 SD/- SD/- (DR.T.M.PAVALAN) (R.S.SYAL) & ' & ' & ' & ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; 4'% DATED : 05 TH FEBRUARY, 2013. DEVDAS* ITA NO.650/MUM/2012. M/S.RACHANA PLASTICIZER. 6 ' 3 - +&/78 9 82/ ' 3 - +&/78 9 82/ ' 3 - +&/78 9 82/ ' 3 - +&/78 9 82// COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. +,() / THE RESPONDENT. 3. : () / THE CIT(A)-XXII, MUMBAI. 4. : / CIT 5. 8=6 +&/&% , , / DR, ITAT, MUMBAI 6. 6 > / GUARD FILE. ' 3% ' 3% ' 3% ' 3% / BY ORDER, ,8/ +&/ //TRUE COPY// ? ? ? ?/ // /@ A @ A @ A @ A ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI