The ACIT, Vapi Circle, Vapi V. M/s. Mitsu Ltd., Vapi

ITA 725/AHD/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9327 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 21-07-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 15-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHI V K BATRA
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Bonafide belief; Bad and doubtful debts
• Section: 271(1)(c); 143(3); 115JB; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI T.K. SHARMA, JUDICIAL MEMBER AND P.K. BANSAL, ACCOUNTANT MEMBER) ITA.NO.725/AHD/2007 WITH CO NO.83/AHD/2007 [ASSTT.YEAR : 2001-2002] ACIT, VAPI CIRCLE VAPI. VS. MITSU LTD. IIND PHASE, PLOT NO.304/2 GIDC,VAPI. REVENUE BY : SHI V.K.BATRA ASSESSEE BY : SHRI MEHUL K. PATEL O R D E R PER T.K. SHARMA, JUDICIAL MEMBER : THIS IS REVENUES APPEAL AND THE ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF THE CIT(A) DATED 13-11-2006 FOR A.Y.2001-2002. 2. IN THE REVENUES APPEAL THE FOLLOWING GROUNDS AR E RAISED: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED U/S .271(1)(C) ON THE EXPORT BENEFIT RECEIVABLE AND INTEREST INCOME, THRO UGH THE SAME HAS NO DIRECT OR IMMEDIATE NEXUS WITH THE MANUFACTURING AC TIVITY OF THE INDUSTRIAL UNDERTAKING. 2. THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED U/S.271(1)(C) ON THE EXPORT BENEFIT RECEIVABLE AND INTEREST INCOME WITHOUT APPRECIATING THE FACT THAT HONBLE APEX COU RT IN THE CASE OF CIT VS. STERLING FOODS, 237 ITR 579 AND PANDIAN CHEMICA LS VS. CIT, 262 ITR 278 HAS CLEARLY HELD THAT SUCH INCOME ARE ATTR IBUTABLE TO THE BUSINESS BUT IS NOT DERIVED FROM THE MANUFACTURIN G ACTIVITY. 3. THE FACTS IN BRIEF ARE THAT FOR THE ASSESSMENT Y EAR UNDER APPEAL, THE ASSESSEE COMPANY FILED RETURN OF INCOME DECLARING T OTAL INCOME OF RS.45,34,360/- AND BOOK PROFIT OF RS.68,65,850/- U NDER SECTION 115JB OF THE ACT. THE AO FRAMED ASSESSMENT UNDER SECTION 143(3) BY COMPUTING TOTAL PAGE - 2 ITA.NO.725/AHD/2007 WITH CO NO.83/AHD/2007 -2- INCOME AT RS.3,03,63,440/-. AGAINST VARIOUS ADDITI ON, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED PARTIAL RELIEF . THEREAFTER, THE AO LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT AMOUNTIN G TO RS.35,35,898/- FOR CONCEALMENT OF INCOME TO THE EXTENT OF RS.89,40,325 /-. VARIOUS ITEMS OF DISALLOWANCES IN RESPECT OF WHICH THE AO LEVIED PEN ALTY ARE AS UNDER: STAFF WELFARE EXPENSES : RS.1,31,880/- LATE PAYMENT OF PF & ESIC : RS.880/- PROVISION OF DOUBTFUL DEBTS : RS.3,84,312/- SUSPENSE ACCOUNT : RS.9000/- CLAIM OF DEDUCTION U/S.80IB : RS.84,14,253/- ON APPEAL, THE LEARNED CIT(A) AFTER CONSIDERING VA RIOUS SUBMISSION DELETED THE PENALTY IN RESPECT OF STAFF WELFARE EXP ENSES, LATE PAYMENT OF PF & ESCI, PROVISION FOR DOUBTFUL DEBTS, SUSPENSE ACCOUN T AND CLAIM OF DEDUCTION U/S.80IB. AGGRIEVED BY THE ORDER OF THE LEARNED CI T(A), THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, LEARNED DR CONTENDED THA T THE AO IN THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT MADE ADD ITIONS OF DISALLOWANCES TO THE EXTENT OF RS.1,92,13,703/- AND RESTRICTED THE D EDUCTIONS CLAIMED UNDER SECTION 80IB AT RS.NIL AS AGAINST THE CLAIM OF RS.8 4,14,253/-. FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC, TOTAL TURNOVER WA S TAKEN AFTER INCLUDING EXCISE DUTY AND SALES TAX AND THE PENALTY WAS INITI ATED IN RESPECT OF THE AFORESAID ADDITIONS. REGARDING EXPORT BENEFIT AND INTEREST RECEIVED ARE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB, IT IS HE LD BY THE CIT(A) THAT ADDITIONS WERE MADE ON ACCOUNT OF DIFFERENT INTERPR ETATIONS OF SECTION 80IB AS REGARDS ELIGIBILITY OF OTHER INCOME FOR DEDUCTION U /S.80IB. HE ACCORDINGLY TOOK THE VIEW THAT WHILE CLAIMING DEDUCTION UNDER SECTIO N 80IB, IT COULD NOT BE CONCLUDED THAT THE ASSESSEE HAS NEITHER CONCEALED I NCOME NOR FURNISHED INACCURATE PARTICULARS BY NOT EXCLUDING THE ABOVE I NCOME FROM PROFITS ELIGIBLE PAGE - 3 ITA.NO.725/AHD/2007 WITH CO NO.83/AHD/2007 -3- FOR DEDUCTION UNDER SECTION 80IB. THE LEARNED DR POINTED OUT THIS VIEW TAKEN BY THE LEARNED CIT(A) IS NOT ACCEPTABLE BECAU SE THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. STERLING FOODS , 237 ITR 579 WAS DELIVERED IN THE YEAR 1999. IN THE SAID JUDGMENT, IT WAS CATEGORICALLY HELD THAT THERE SHOULD BE A DIRECT AND IMMEDIATE NEXUS OF THE INCOME WITH THAT OF THE ASSESSEES INDUSTRIAL UNDERTAKING. THE EXPORT BENE FIT RECEIVABLE AND INTEREST INCOME HAS NO DIRECT NEXUS WITH THE PROFITS AND GAI NS OF INDUSTRIAL UNDERTAKING AND THE NEXUS IS ONLY INCIDENTAL AS HELD BY THE CIT (A) WHILE CONFIRMING THE STAND OF THE DEPARTMENT THAT IT WILL BE EXCLUDED FR OM THE PROFITS ELIGIBLE FOR DEDUCTION U/S.80IB. THEREFORE, THE ISSUE UNDER CO NSIDERATION WAS NOT IN DISPUTE WHEN THE ASSESSEE FILED RETURN OF INCOME FO R THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE DECISION OF HONBLE SUPREME C OURT WAS ALREADY DELIVERED BY THAT TIME. DESPITE THESE FACTS, THE ASSESSEE CL AIMED THE DEDUCTION U/S.80HHC AND 80IB ON THE EXPORT BENEFIT RECEIVABLE . THE LEARNED DR FURTHER SUBMITTED THAT THE LEGAL CONTROVERSY ON THIS SUBJEC T WAS SETTLED BY THE DECISION OF THE SUPREME COURT IN THE CASE OF PANDIAN CHEMICA LS VS. CIT, 129 TAXMAN 539 (SC). THE INTEREST ON SECURITY DEPOSIT WITH TH E ELECTRICITY BOARD WAS HELD TO BE NOT ELIGIBLE FOR TAX HOLIDAY UNDER SECTION 80 HH OF THE ACT. THE APEX COURT HELD THAT SUCH DEPOSIT WAS A STEP REMOVED FRO M THE BUSINESS OF INDUSTRIAL UNDERTAKING AND THE PHRASE DERIVED FROM MEANS SOM ETHING WHICH HAD A DIRECT OR IMMEDIATE NEXUS WITH THE ASSESSEES INDUS TRIAL UNDERTAKING. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED I NACCURATE PARTICULARS WHILE CLAIMING THE DEDUCTION UNDER SECTION 80IB IN RESPEC T OF BOTH THE AFORESAID ITEMS. THEREFORE, THE PENALTY OF THESE ITEMS IS RI GHTLY LEVIED BY THE AO AND TO THAT EXTENT THE LEARNED CIT(A) OUGHT TO HAVE CONFIR MED THE ACTION OF AO IN LEVYING PENALTY UNDER SECTION 271(1)(C). 5. ON THE OTHER HAND, THE LEARNED COUNSEL OF THE AS SESSEE CONTENDED THAT AT THE RELEVANT TIME WHEN THE RETURN WAS FILED, THERE WERE DIVERGENT DECISIONS OF PAGE - 4 ITA.NO.725/AHD/2007 WITH CO NO.83/AHD/2007 -4- HIGHER JUDICIAL AUTHORITIES IN REGARD TO RECEIPTS B Y WAY OF EXPORT INCENTIVES WHILE GRANTING DEDUCTION UNDER SECTION 80IB OF THE ACT. EXPORT BENEFITS RECEIVED ARE IN THE NATURE OF DEPB CREDITS. DEPB C REDITS ARE INTENDED TO NEUTRALIZE THE CUSTOMS DUTY ELEMENT IN THE COST OF IMPORTED RAW MATERIALS. HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. I NDIA GELATINE AND CHEMICALS LTD., 275 ITR 284 TOOK A VIEW THAT THE AS SESSEE COMPANY HAS FURNISHED INACCURATE PARTICULARS OF INCOME. MOREOV ER, IF THE DEPB CREDITS ARE CONSIDERED AS PROFITS ELIGIBLE FOR DEDUCTION AS PER THE ABOVE DECISION OF GUJARAT HIGH COURT, THE COMPUTED PROFITS OF THE ASSESSEE CO MPANY WOULD BE POSITIVE. THE ASSESSEE COMPANY HAS DISCLOSED ALL THESE RECEIP TS AS INCOME IN ITS ACCOUNT. THE AO MADE THE ADDITION ON INTERPRETATION OF PROVI SIONS CONTAINED IN SECTION 80IB AS REGARDS ELIGIBLE OF OTHER INCOME FOR DEDUCT ION UNDER THAT SECTION. HE FURTHER SUBMITTED THAT EVEN TODAY THIS ISSUE HAS NO T FREE FROM DOUBT AND DEBATED AND THEREFORE IN RESPECT OF BOTH THESE ITEMS, PENAL TY UNDER SECTION 271(1)(C) IS RIGHTLY DELETED BY THE LEARNED CIT(A). 6. AFTER HAVING HEARD BOTH PARTIES AND CONSIDERING MATERIAL ON RECORD, WE FIND THAT NO INTERFERENCE IS CALLED FOR IN THE IMPU GNED ORDER OF THE CIT(A) CONSIDERING THE FACT THAT THE CLAIM OF THE ASSESSEE WAS BASED ON INCONSISTENT AND DIVERGENT INTERPRETATIONS OF THE LAWS ON THE IS SUE. ADMITTEDLY THE ASSESSEE HAS DISCLOSED ALL THE FIGURES AND INFORMATION IN IT S RETURN OF INCOME AND THERE WAS NO DISPUTE THEREOF AND THAT THE ASSESSEE WAS UN DER BONAFIDE BELIEF THAT ALL THE INCOME RECEIVED FROM THE INDUSTRIAL UNDERTAKING OR ARISING OUT OF THE BUSINESS ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 8 0IB OF THE ACT. THIS BONAFIDE BELIEF OF THE ASSESSEE HAS NOT BEEN FOUND UNBELIEV ABLE FOR THE REASONS STATED HEREINABOVE. WHEN ALL THE FACTS ALREADY ON RECORD BEFORE THE AO AND BONAFIDE REASONS FOR CREATING IMPRESSION OF CLAIMING THE RE LIEF UNDER THE IMPUGNED SECTION WERE BEFORE THE AO, THE ASSESSEE C ANNOT BE SAID TO BE CONCEALED INCOME OR FURNISHED INACCURATE PARTICULAR S THEREOF. THEREFORE, WE PAGE - 5 ITA.NO.725/AHD/2007 WITH CO NO.83/AHD/2007 -5- ARE OF THE VIEW THAT THIS IS NOT FIT CASE TO VISIT WITH VIGOUR OF PROVISIONS OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, AND ACC ORDINGLY WE FIND THE CIT(A) IS JUSTIFIED IN HIS ACTION IN DELETING THE IMPUGNED PENALTY, WHICH IS UPHELD AND THE APPEAL OF THE REVENUE IS DISMISSED. 7. SINCE THE ASSESSEES CO MERELY SUPPORT THE ORDER OF THE CIT(A) ABOVE, WHICH WE HAVE ALREADY DEALT WITH, THE SAME DOES NOT SURVIVE AND IS DISMISSED AS SUCH. 7. IN THE RESULT, APPEAL OF THE REVENUE AND THE CO OF THE ASSESSEE ARE DISMISSED ORDER PRONOUNCED IN OPEN COURT ON 31 ST AUGUST, 2009. SD/- SD/- (P.K. BANSAL) ACCOUNTANT MEMBER (T.K. SHARMA) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 31-08-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD