Sh. Sumer Sharma, Ambala Cantt. V. ITO, Ambala

ITA 683/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80893 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 05-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACOCUNTANT MEMBER ITA NO. 683/CHD/2013 ASSESSMENT YEAR 2009-10 SUMER SHARMA V I.T.O. WARD 3 PROP. M/S MAA LUXMI INDUSTRIES AMBALA 74, DEFENCE COLONY AMBALA CANTT ALFPC 900 R (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SUDHIR SEHGAL RESPONDENT BY SHRI MAHAVIR SINGH DATE OF HEARING 16.9.2014 DATE OF PRONOUNCEMENT 23.9.2014 ORDER PER BHAVNESH SAINI, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), PANCHKULA DATED 24.4.2013 FOR ASSESSMENT YE AR 2009-10. 2 WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 3 ON GROUNDS NO. 1 TO 3 THE ASSESSEE CHALLENGED THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80 IC OF IT ACT. THE ASS ESSEE CHALLENGED THE DISALLOWANCE OF RS. 14,35,198/- U/S 80 IC OF IT ACT BEFORE THE LD. CIT(A). DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS . 14,,35,198/- U/S 80 IC OF IT ACT IN SCHEDULE XIV (PART C) CLAUSE 18 I.E . NON TIMBER FOREST PRODUCT BASED INDUSTRIES. THE ASSESSEE ALSO MOV ED AN APPLICATION TO THE ADDITIONAL CIT, AMBALA RANGE, AMBALA U/S 144A O F IT ACT VIDE HIS LETTER DATED 22.12.2011 AND SUBMITTED AS UNDER: NON TIMBER FOREST PRODUCTS HAS NOT BEEN DEFINED IN THE IT ACT. THE LIME ROCKS WHICH IS RAW MATERIAL OF THE ASSESSEE IS FOUN D IN FOREST ONLY. THE GOVERNMENT OF HIMACHAL PRADESH HAS ALLOWED THE EXT RACTION OF LIME ROCKS BY PAYING ROYALTY. AS SUCH LIME ROCKS ARE PR ECUTS OF FOREST ONLY. 2 THE ASSESSING OFFICER HOWEVER, DID NOT ALLOW CLAIM OF THE ASSESSEE AND OBSERVED THAT THE ACTIVITIES CARRIED ON BY THE ASSE SSEE IS AT BEST COVERED UNDER MINING AND FURTHER PROCESSING OF MINERAL SO E XTRACTED. THE TERM NON TIMBER FOREST PRODUCT IS NOT DEFINED IN IT ACT BUT THE SAME IS STILL A TECHNICAL TERM USED IN SEVERAL DISCIPLINES SUCH AS FORESTRY, AGRO- ECONOMICS ETC. THEREFORE IT CANNOT BE USED IN A WID E SENSE TO APPLY TO INSTANCES WHICH ARE NOT EVEN REMOTELY LINKED. LIME STONE AND ALLIED MINERALS CANNOT BE COVERED UNDER NON TIMBER FOREST PRODUCTS BY ANY STRETCH OF IMAGINATION. MERELY BY STATING THAT EXT RACTION OF LIME ROCK IS ALLOWED BY GOVERNMENT OF HIMACHAL PRADESH, DOES NO T GIVE IT A CHARACTER OF A NON TIMBER FOREST PRODUCT. TO STATE THAT LIME ROCKS ARE FOUND IN THE FOREST IS TO OVER SIMPLIFY THE ISSUE. LIMES TONE IS EXTRACTED FROM THE HILL/MOUNTAIN SIDE FROM QUARRIES AFTER CLE ARING THE FORESTS FROM UNDERNEATH THE GROUND SURFACE WHICH CAN AT THIS CAS E IS THE HILL SIDE. MOREOVER SCHEDULE XIV OF IT ACT IS A RESTRICTIVE LI ST AND ITEMS NOT COVERED BY IT EXPLICITLY CANNOT BE IMPLIED/DERIVED/ ASCRIBED/WIDELY CONSTRUCTED TO INDIRECTLY. THEREFORE THE CLAIM OF THE ASSESSEE U/S 80 IC OF IT ACT WAS NOT FOUND ALLOWABLE. 4 THE ASSESSEE CHALLENGED THE FINDINGS OF THE ASSES SING OFFICER BEFORE THE LD. CIT(A) AND THE SUBMISSIONS OF THE AS SESSEE ARE REPRODUCED IN THE APPELLATE ORDER IN WHICH THE ASSE SSEE BRIEFLY EXPLAINED THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF LI ME STONE POWDER AND POULTRY GRIT. THE BASIC RAW MATERIAL FOR SAME IS L IME STONE. THE ASSESSEE IS CLAIMING DEDUCTION U/S 80 IC(2)(B)(II) OF IT ACT. IN THIS CASE THE ASSESSEE IS PRODUCING LIME STONE POWDER IN THE STATE OF HIMACHAL PRADESH. LIME STONE POWDER IS COVERED UNDER SCHEDU LE XIV AT S NO. 18 IN THE PART C, WHICH READS AS UNDER: NON TIMBER FOREST PRODUCT BASED INDUSTRIES. THE PHRASE NON TIMBER FOREST PRODUCT BASED INDUSTR IES MEANS ANY INDUSTRY THAT DOES NOT USE FOREST TIMBER AND FOREST PRODUCT PRODUCE. IT IS THE INTENTION OF THE ACT. THE INTENTION OF THE ACT IS THAT IN A HILL STATE LIKE HIMACHAL PRADESH NATURAL SOURCES ARE NOT MIS-UTILIZ ED THE SANCTITY OF 3 THE PHRASE LIES IN THE FACT THE FORESTS SHOULD NOT BE CUT IN ORDER TO EARN PROFITS. THE ASSESSING OFFICER IN THE SHOW CAUSE N OTICE MENTIONED CERTAIN ITEMS TO BE EXEMPT UNDER THE ABOVE PROVISIO NS TO PROVE THAT NON TIMBER FOREST PRODUCTS OR PRODUCE ARE OTHERWISE EXE MPT BY VIRTUE OF SOME OTHER CLAUSES IN THE SAME SCHEDULE. THE CLAIM OF TH E ASSESSEE IS ALLOWABLE. 5 THE LD. CIT(A) CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE CONFIRMED THE ADDITION. HIS FINDINGS IN PARAS NO. 4.4 TO 4.7 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 4.4 THE FACTS AND SUBMISSIONS OF THE APPELLANT HAV E BEEN CONSIDERED BY THE UNDERSIGNED. THE CASE CITED IS DISTINGUISHA BLE ON FACTS. THE APPELLANT IS LIMESTONE POWDER AND POULTRY GRIT PROD UCER HAS SOUGHT EXEMPTION U/S 80 IC(2)(B)(II) OF IT ACT 1961. SECT ION 80 IC(2)(B)(II) READS AS UNDER: SECTION 80 IC(2)(B)(II) THIS SECTION APPLIES TO A NY UNDERTAKING OR ENTERPRISE: (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURED OR PR ODUCE ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR C OMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE OR WHICH MANUF ACTURES OR PRODUCES ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SC HEDULE OR COMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE AND UNDERT AKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING (II) ON THE 7 TH DAY OF JAN 2003 AND ENDING BEFORE THE IST DAY OF A PR 2012, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL. 4.5 FROM THE WORDS OF SECTION 80 IC(2)(B)(II) IT IS CLEAR THAT THE EXEMPTION UNDER THIS SECTION IS AVAILABLE ONLY TO T HE UNDERTAKING OR ENTERPRISES WHICH FULFILS FOLLOWING CONDITIONS: I BEGINS TO MANUFACTURE / PRODUCE ANY ARTICLE OR T HING II SPECIFIED IN THE FOURTEENTH SCHEDULE III ON 7.1.2013 AND ENDING BEFORE 1.4.2012 IV IT IS LOCATED IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL. 4.6 THE APPELLANT FAILED TO FULFILL THE CONDITIONS OF MANUFACTURING THE ITEMS SPECIFIED IN THE 14 TH SCHEDULE OF SECTION 80 IC(2) PART C WHICH SPECIFIES THE ACTIVITY OR ARTICLE OR THING OR OPERA TION ALONG WITH EXCISE CLASSIFICATION FOR THE STATE OF HIMACHAL PRADESH AN D UTTRANCHAL. 4.7 THE APPELLANTS PLEA OF INCLUSION UNDER S NO. 1 8 OF PART C TO SCHEDULE XIV I.E. NON TIMBER FOREST BASED INDUSTRIE S IS NOT ACCEPTABLE IN VIEW OF THE SPECIFIED MENTION OF ITEMS ALLOWED UNDE R THIS SECTION. LIME STONE POWDER AND POULTRY GRIT CANNOT BE COVERED UND ER NON TIMBER FOREST PRODUCE BY ANY STRETCH OF IMAGINATION SINCE LI9MEST ONE IS EXTRACTED FROM THE HILLS/MOUNTAIN SIDE QUARRIES AFTER CLEARING THE FOREST FROM UNDERNEATH THE GROUND SURFACE / HILL SIDE WHICH IS NOT THE INT ENTION OF THE LEGISLATURE. MOREOVER SCHEDULE XIV IS A RESTRICTIVE LIST AND ITE MS NOT SPECIFIED BY IT 4 CANNOT IMPLIED OR WIDELY CONSTRUED TO OR DERIVED IN DIRECTLY. THEREFORE THE CLAIM U/S 80 IC IS HELD AS NOT ALLOWABLE AND TH IS GROUND OF APPEAL IS DISMISSED. 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULL Y. 7 THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE S UBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND ALSO REFERRED TO T HE INDIAN FOREST ACT, 1927 AND INDUSTRIAL POLICY OF HIMACHAL PRADESH. CO PIES OF THE SAME ARE PLACED ON RECORD. 8 ON THE OTHER HAND, THE LD. D.R FOR THE REVENUE SU BMITTED THE PHOTOCOPIES OF WIKIPEDIA TO EXPLAIN NON TIMBER FORE ST PRODUCT AND RELIED UPON THE ORDER OF ASSESSING OFFICER. IT IS NOT THE DISPUTE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF LIME STONE POWDER AND POULTRY GRIT. THE BASIC RAW MATERIAL OF THE SAME IS LIME S TONE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS PRODUCING LIME STONE P OWDER IN THE STATE OF HIMACHAL PRADESH. THE LD. CIT(A) IN HIS FINDINGS H AS REPRODUCED THE RELEVANT PROVISIONS OF SECTION 80 IC WHICH IS REPRO DUCED ABOVE. ONLY DISPUTE BETWEEN THE PARTIES ARE WHETHER THE ASSESSE E FULFILLED THE CONDITIONS OF SCHEDULE XIV OF IT ACT I.E. NON TIMB ER FOREST PRODUCT BASED INDUSTRIES. THE ASSESSING OFFICER OBSERVED THAT T HE TERM NON TIMBER FOREST PRODUCT IS NOT DEFINED IN THE IT ACT. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE INDIAN FOREST ACT, 1927 WH ICH PROVIDES THE DEFINITION OF FOREST PRODUCE IN SECTION 2(4) AND SU B-CLAUSE (IV) OF THIS ACT PROVIDES THE MEANING OF FOREST PRODUCE INCLUDES P EAT, SURFACE SOIL, ROCK AND MINERALS (INCLUDING LIME S TONE, LATERITE, MINE RAL OILS, AND ALL PRODUCTS OF MINES OR QUARRIES). THE LD. COUNSEL FOR THE ASSE SSEE THEREFORE SUBMITTED THAT FOREST PRODUCE /PRODUCTS INCLUDE LIM E STONE AS WAS USED IN THE CASE OF ASSESSEE. COPY OF INDUSTRIAL POLICY OF HIMACHAL PREDESH AND UTTARANCHAL HAS BEEN FILED BEFORE US IN WHICH T HRUST INDUSTRIES FOR THESE STATES INCLUDES NON TIMBER FOREST PRODUCT BAS ED INDUSTRIES AND LIST OF INDUSTRIES THAT CAN BE PERMITTED IN DOON VALLEY WITH PROPER ENVIRONMENTAL CONTROL ARRANGEMENT INCLUDES LIME MA NUFACTURING. ON GOING THROUGH THE SAME, WE FIND THAT EVEN IF DEFINI TION OF NON TIMBER FOREST PRODUCE IS NOT DEFINED IN THE IT ACT BUT AID FROM OTHER ACTS COULD 5 BE TAKEN TO DECIDE THE ISSUE BECAUSE THE INDIAN FOR EST ACT, 1927 AND INDUSTRIAL POLICY OF HIMACHAL PRADESH CLEARLY SUPPO RT THE CASE OF THE ASSESSEE THAT THE FOREST PRODUCE INCLUDES LIME STO NE WHICH IS BASIC RAW MATERIAL USED BY THE ASSESSEE IN THE UNDERTAKING OR BUSINESS ACTIVITIES OF THE ASSESSEE. IT IS, THEREFORE CLEAR THAT THE ASSE SSEE IS PRODUCING LIME STONE POWDER IN THE STATE OF HIMACHAL PRADESH AND T HE LIME ROCKS WHICH IS RAW MATERIAL OF THE ASSESSEE ARE FOUND ONLY IN T HE FORESTS AND GOVERNMENT OF HIMACHAL PRADESH HAS ALLOWED SUCH AC TIVITY TO THE ASSESSEE. LIME STONE IS THEREFORE A NON TIMBER FOR EST PRODUCT. SCHEDULE XIV (PART C, ITEM NO. 18) PROVIDES DEDUCTION TO NO N TIMBER FOREST PRODUCT BASED INDUSTRIES, WHICH IS LIME STONE, IS SPECIFICALLY INCLUDED IN THE FOREST PRODUCE AND IS A NON TIMBER FOREST PRODU CTS. IT IS A CARDINAL PRINCIPLE OF INTERPRETATION OF STATUTE THAT THE WOR D OF STATUTE MUST BE UNDERSTOOD IN THEIR NATURAL, ORDINARY OR POPULAR SE NSE AND CONSTRUED ACCORDING TO THEIR GRAMMATICAL MEANING. THE WORD O F STATUTE MUST, PRIMA FACIE BE GIVEN THEIR ORDINARY MEANING. SINCE IN SC HEDULE XIV THE ITEM NON TIMBER FOREST PRODUCT BASED INDUSTRIES IS MEN TIONED, IT WOULD DEFINITELY INCLUDE MANUFACTURING OF LIME STONE POWE R IN THE STATE OF HIMACHAL PRADEDSH AND AS SUCH CLAIM OF ASSESSEE U/ S 80 IC SHOULD HAVE BEEN ALLOWED BY THE AUTHORITIES BELOW. ACCORDINGLY, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND ALLOW THE CLAIM OF THE ASSESSEE OF DEDUCTION U/S 80 IC OF IT ACT. 9 GROUNDS NO. 1 TO 3 OF ASSESSEES APPEAL ARE ALLOW ED. 10 IN GROUNDS NO. 4 & 5 THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 2,40,000/- ON ACCOUNT OF HOUSEHOLD EXPENSES. 11 THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFI CER THAT HE HAS AN AGRICULTURAL INCOME ESTIMATED AT RS. 1,60,000/- PER ANNUM. HOWEVER, NO EVIDENCE REGARDING SALE OF AGRICULTURAL PRODUCE WAS FILED. NO SUCH AGRICULTURAL INCOME IS DECLARED IN THE RETURN OF IN COME. THE ASSESSEE IN HIS FAMILY HAS HIS WIFE AND TWO SCHOOL GOING CHILDR EN. THE ASSESSING OFFICER ACCORDINGLY ESTIMATED THE HOUSEHOLD EXPENS ES AT RS. 20,000 PER MONTH AND MADE ADDITION OF RS. 2,40,000/-. 6 12 THE LD. CIT(A) DISMISSED THESE GROUNDS OF APPEAL IN IMPUGNED ORDER. 13 THE LD. COUNSEL FOR THE ASSESSEE DID NOT DISPUTE THE ESTIMATION OF HOUSEHOLD EXPENSES BY THE ASSESSING OFFICER. HOWEVE R, HE HAS SUBMITTED THAT THE ASSESSEE HAS AGRICULTURAL INCOME AND HE HA S 14 BIGHAS OF LAND IN VILLAGE SANGRAH DISTT. SIRMOUR (HP). COPY OF KHASRA GIRDAWRI IS ALSO FILED. HE HAS REQUESTED THAT SOME BENEFIT OF AGRICULTURAL INCOME MAY BE GIVEN TO THE ASSESSEE. 14 ON THE OTHER HAND, THE LD. D.R FOR THE REVENUE RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 15 CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THAT HE HAS AGRICULTURAL HOLDING WHICH IS EXPLAINED IN THE DOCU MENT OF THE AGRICULTURAL LAND TO BE UNDER CULTIVATION WOULD SUGGEST THAT SOM E BENEFIT OF AGRICULTURAL INCOME EARNED BY THE ASSESSEE, CAN BE GIVEN TO THE ASSESSEE. THEREFORE ESTIMATE MADE BY THE ASSESSEE OF EARNING AGRICULTURAL INCOME AT RS. 1,60,000/- THE ASSESSEE CAN BE GIVEN BENEFIT OF AGRICULTURAL INCOME IN A SUM OF RS. 80,000/- ONL Y. THE ASSESSEE THUS WOULD BE ENTITLED FOR MEETING OUT HOUSEHOLD EXPENSE S OUT OF AGRICULTURAL INCOME IN A SUM OF RS. 80,000/- ONLY. THUS THE ADD ITION OF RS. 2,40,000/- MADE BY THE AUTHORITIES BELOW WOULD BE REDUCED TO R S. 1,60,000/-. THE ADDITION IS, THEREFORE RESTRICTED TO RS. 1,60,000/- AS AGAINST ADDITION OF RS. 2,40,000/-. 16 GROUNDS NO. 4 & 5 OF ASSESSEES APPEAL ARE PARTL Y ALLOWED. 17 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.9.2014 SD/- SD/- (T.R. SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23.9.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 7