BRIGHT BROTHERS LTD, MUMBAI V. ADDL CIT RG 6(1), MUMBAI

ITA 6907/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8959 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 13-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMARDR
• Assessee Lawyers: AJAY R SINGHAR
• Keywords: Business income

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -BBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./6907/MUM/2014, / ASSESSMENT YEAR: 2011-12 M/S. BRIGHT BROTHERS LTD. 610/611, NIRMAN KENDRA DR. MOSES ROAD, FAMOUS STUDIO LANE MAHALAXMI,MUMBAI-400 011. PAN:AAACB 3010 G VS. ADDL. CIT RANGE-6(1) AAYAKAR BHAVAN, 5 TH FLOOR MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI SUMAN KUMAR-DR /ASSESSEE BY: SHRI AJAY R. SINGH-AR / DATE OF HEARING: 05/12/2016 / DATE OF PRONOUNCEMENT: 11.01.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA A.M. - CHALLENGING THE ORDER DATED 14.8.14 OF CIT(A)-14,MU MBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURING,JOB WORK AND TRADING OF INJECTION-MOULDED PLASTIC PRODUCTS,FILED ITS RETURN OF INCOME ON 27.09.2011,DECLARING TOTAL INCOME AT RS.1.81 CRORES.THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT ON 28.10.13,DETERMINING ITS INCOME AT RS.3. 38 CRORES. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DISALLOWANCE OF DEDUCTION,CLAIMED U/S.80IC OF THE ACT, AMOUNTING TO RS.1.57CRORES.DURING THE ASSESSMENT PR OCEEDINGS,THE AO FOUND THAT ASSESSEE HAD SHOWN INCOME UNDER THE HEAD BUSINESS AND PROFES SION OF RS.58.51 LAKHS,THAT THE INCOME WAS SET OFF AGAINST LOSS FOR THE EARLIER YEARS,THAT THE FINAL INCOME SHOWN UNDER THE HEAD BUSINESS/PROFESSION WAS NIL,THAT IT HAD SHOWN CAPIT AL GAINS OF RS.87,140/-,THAT THE INCOME FROM OTHER SOURCES,I.E. INTEREST INCOME WAS SHOWN A T RS.3.37CRORES, THAT IT HAD CLAIMED DEDUCTION U/S.80IC OF THE ACT OF RS.1,57,15,486/-, THAT THE NET TAXABLE INCOME OFFERED BY THE ASSESSEE WAS OF RS.1.81CRORES. HE DIRECTED IT TO F ILE WRITTEN EXPLANATION REGARDING THE DEDUC -TION CLAIMED U/S. 80IC IN VIEW OF NIL BUSINESS INC OME.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,DT.9.10.13, THE AO OBSERVED THAT THE A SSESSEE HAD CLAIMED DEDUC -TION U/S. 80IC ON THE INTEREST INCOME AND NOT ON BUSINESS INCOME.H E REFERRED TO MEMORANDUM EXPLAINING PROVISIONS OF FINANCE BILL 1980,SPECIALLY SUB CLAUS E 5 TO SECTION 80I OF THE ACT AND RELIED UPON THE CASE OF LIBERTY INDIA & ORS. (317ITR218). HE HELD THAT THE WORD DERIVED FROM WAS NARROWER AS COMPARED TO THE WORDS ATTRIBUTABLE TO , THAT THE PARLIAMENT INTENDED TO COVER 6907/M/14(BRIGHT BROS.) 2 SOURCES NOT BEYOND THE FIRST DEGREE,THAT BUSINESS I NCOME SHOWN BY THE ASSESSEE WAS NIL AND THAT IT WAS NOT ENTITLED TO CLAIM DEDUCTION U/S. 80 IC. 2. AGAINST THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,THE ASSESSEE ARGUED THAT DEDUCTION U/S. 80IC WAS TO BE ALLOWABLE FROM GROSS TOTAL INCOME,THAT THE DEDUCTION WAS RIGH TLY CLAIMED FROM THE INCOME EARNED FROM OTHER SOURCES I.E.INTEREST INCOME AND CAPITAL GAINS .AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER,THE FAA REFERRED TO THE CASES OF CAMBAY ELECTRICAL SUPPLY CO. LTD.(113 ITR 84); STERLING FOOD (237 ITR 53);PANDIAN CHEMICALS LTD. (262 ITR 278); AND HELD THAT SECTION 80 IC REFERRED TO PROFI TS DERIVED FROM ELIGIBLE BUSINESS, THAT IT WAS NOT THE OWNERSHIP OF THE BUSINESS THAT ATTRACTED TH E INCENTIVES,THAT THE INCENTIVES WERE AVAILABLE TO OPERATIONAL PROFITS OF THE BUSINESS,TH AT THERE WAS DISTINCTION BETWEEN PROFIT LINKED INCENTIVES AND INVESTMENT LINKED INCENTIVES.HE ALSO REFERRED TO THE CASES OF KIRLOSKAR OIL ENGINES LTD.(157ITR762),KOTHATRI PRODUCTS LTD. (295 ITR223);SHRI RAMA STEELS (ITA/236/ CHD./2013 DT.2.9.13) AND HELD THAT IT WAS THE DUTY OF THE ASSESSEE TO ESTABLISH THAT THE PROFITS AND THE GAINS CLAIMED BY THE ASSESSEE TO BE ELIGIBL E FOR DEDUCTION FELL UNDER THE PURVIEW OF THE CONCEPT OF DERIVED FROM,THAT THE ASSESSEE WAS CLAIMING THE DEDUCTION AGAINST INTEREST INCOME AND CAPITAL GAINS AND NOT FROM ANY BUSINESS, THAT THE BASIS OF GRANT OF DEDUCTION U/S. 80IC OF THE ACT WAS THE PROFITS AND GAINS DERIVED B Y AN UNDERTAKING FROM THE BUSINESS CARRIED OUT,THAT THE PROFITS AND GAINS CLAIMED FOR DEDUCTIO N WERE NOT DERIVED FROM THE BUSINESS OF THE ASSESSEE,THAT THE DISPUTED RECEIPT DID NOT COME WIT HIN FIRST DEGREE SOURCE FROM THE ELIGIBLE BUSINESS,THAT NEXUS BETWEEN THE INCOME AND THE INDU STRIAL UNDERTAKING WAS NOT DIRECT, THAT IT WAS ONLY INCIDENTAL.FINALLY, THE FAA DISMISSED THE APPEAL FILED BY THE ASSESSEE. 3. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) CONTENDED THAT FOR CLAIMING DEDUCTION U/S. 80IC THE FIRST REQUIREM ENT WAS THAT THERE SHOULD BE PROFIT, THAT THE SECOND REQUIREMENT WAS THAT THERE SHOULD BE POSITIV E GROSS TOTAL INCOME, THAT THE ASSESSEE HAD POSITIVE GROSS TOTAL INCOME AND SAME DID NOT EXCEED GROSS TOTAL INCOME.THE AR RELIED UPON THE CASES OF PRECISION ELECTRONICS LTD.(ITA/6621/D EL./2013,DT.8.1.215 AY.2009-10); M/S. J.B.BODA & CO.P.LTD.(ITA NO.3224 OF 2009DT.18.10.20 10).THE DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ORDER OF THE FAA. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD BROUGHT FORWARD THE EARLIER YEARS LOSS ,THAT THE SETTING OFF OF LOSSES RESULTED IN DECLARING NIL BUSINESS INCOME,THAT THE DEPARTMENTAL AUTHORITIES HELD THAT IN ABSENCE OF 6907/M/14(BRIGHT BROS.) 3 BUSINESS INCOME 80IC DEDUCTION WAS NOT AVAILABLE TO THE ASSESSEE ,THAT THEY HELD THAT ASSESSEE WAS NOT ENTITLED TO THE DEDUCTION AS IT HAD INCOME FROM CAPITAL GAINS INTEREST INCOME ONLY, THAT THEY WERE OF THE OPINION THAT INTEREST INCOME WAS NOT DERIVED FROM THE ACTIVITIES OF THE UNDERTAKING.IF THE GROSS TOTAL INCOME OF THE ASSESS EE IS TAKEN IN TO CONSIDERATION,IT IS CLEAR THAT IT HAD POSITIVE INCOME,EVEN AFTER THE SET OFF OF LO SSES.THUS,THE GROSS TOTAL INCOME WAS NOT NIL THAT COULD DISENTITLE THE ASSESSEE FROM CLAIMING DE DUCTION.CASES RELIED UPON BY THE ASSESSEE ALSO HOLD THE SAME VIEW.SO,REVERSING THE ORDER OF T HE FAA,WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT,AP PEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY, 2017. 11 , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 11.01.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR B BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.