ACIT, Chandigarh V. M/s Euro Containers, Chandigarh

ITA 73/CHANDI/2010

• Counselvise Citation: 7321514 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 14-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: AMRINDER SINGH
• Keywords: Business income
• Section: 2; 80HHC; 133A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 73/CHD/2010 ASSESSMENT YEAR: 2004-05 ACIT, CENTRAL CIRCLE-II, V M/S EURO CONTAINERS, CHANDIGARH. 70, INDUSTRIAL AREA, PHASE-1, CHANDIGARH. PAN: AAAFE-9069R & CO NO.16/CHD/2010 IN ITA NO.73/CHD/2010 M/S EURO CONTAINERS, V ACIT, CENTRAL CIRCLE-II, 70, INDUSTRIAL AREA, CHANDIGARH. PHASE-1, CHANDIGARH. DEPARTMENT BY: SHRI N.K.SAINI ASSESSEE BY: SHRI AMRINDER SINGH DATE OF HEARING : 30.08.2011 DATE OF PRONOUNCEMENT : 30.08.2011 ORDER PER MEHAR SINGH, AM THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJEC TION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDE R PASSED BY THE CIT(A) ON 16.10.2009 RELATING TO ASSESSMENT YEA R 2004-05. 2. IN THE APPEAL, THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL : 1. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FAC TS OF THE CASE IN ALLOWING THE ASSESSEE'S CLAIM OF DEDUCTION U/S 80IB ON JOB WORK DONE BY IT WHEREAS T HE MAIN ACTIVITY OF THE ASSESSEE IS MANUFACTURING OF PLASTIC DRUMS WHICH ALONE ENTITLES IT TO DEDUCTION U/S 80IB. 2 2. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACT S OF THE CASE IN HOLDING THAT THE ASSESSEE IS ELIGIBL E FOR DEDUCTION U/S 80IB ON REBATE ON PURCHASES OF RS.3,73,436/- 3. IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE ORDER PASSED BY THE LD. CIT(A) LUDHIAN A IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) GRAVELY ERRED IN UPHOLDING THE ACTIO N OF THE LD. AO IN DISALLOWING DEDUCTION UNDER SECTION 8 0IB IN RESPECT OF ADDITIONAL INCOME SURRENDERED UNDER SECTION 133A BY THE ASSESSEE INDUSTRIAL UNDERTAKING . THE INDUSTRIAL UNDERTAKING HAD NO OTHER SOURCE OF INCOME EXCEPT FOR MANUFACTURING. 4. NOW WE ARE TAKING UP THE APPEAL FILED BY THE REV ENUE. IN THE FIRST GROUND OF APPEAL, THE REVENUE CONTENDED T HAT THE CIT(A) ERRED IN ALLOWING THE ASSESSEE'S CLAIM U/S 8 0IB OF THE ACT ON JOB WORK DONE. THE LD. DR PLACED RELIANCE O N THE ASSESSMENT ORDER WHILE STATING THAT THE ISSUE IS CO VERED BY THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT . LD. AR SUPPORTED THE DECISION OF THE LD. CIT(A) AND ALSO V EHEMENTLY CONTENDED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT, L UDHIANA V IMPEL FORGE & ALLIED INDUSTRIES LTD. (2009) 183 TAX MAN 38 (P&H). 5. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE RIV AL SUBMISSIONS, FACTS OF THE CASE AND THE ORDER PASSED BY THE LOWER AUTHORITIES. ON APPRECIATION OF THE FACTUAL A ND LEGAL POSITION OF THE CASE, WE ARE OF THE CONSIDERED OPIN ION THAT THE 3 ISSUE OF ALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF JOB CHARGES IS SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT. THE LD. CIT(A), AFTER A PPRECIATION OF THE SUBMISSIONS FILED BY THE ASSESSEE CONCLUDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IT IS PERTINENT TO REPRODU CE THE SAID FINDINGS HEREUNDER : 4.2 ON THE ISSUE OF JOB CHARGES AS TO WHETHER DEDU CTION U/S 80IB IS ALLOWABLE OR NOT, HON'BLE PUNJAB & HARY ANA HIGH COURT HAS RECENTLY HELD IN THE CASE OF CIT-I LUDHIANA VS. IMPEL FORGE & ALLIED INDUSTRIES LTD. ( 2009) 183 TAXMAN 38 (P&H) THAT THE ASSESSEE IS AT LIBERTY TO DO MANUFACTURE FOR ITSELF OR FOR OTHERS WHICH MAKES NO DIFFERENCE FOR THE PURPOSE OF SECTION 80IB OF THE A CT. RELEVANT PARA OF THE JUDGEMENT READS AS UNDER : 5. REFERENCE TO SECTION 80IB OF THE ACT SHOWS THA T ONLY REQUIREMENT FOR ITS APPLICABILITY IS DERIVING OF INCOME FROM BUSINESS REFERRED TO IN SUB-SECTION (3) TO (11), (11A) AND (11B) OF THE ACT, APART FROM OTH ER CONDITIONS WITH WHICH WE ARE NOT CONCERNED. IT IS NOT THE CASE OF THE REVENUE THAT THE BUSINESS OF TH E ASSESSEE DOES NOT FALL UNDER SUB-SECTIONS (3) TO (11), (11A) OR (11B) OF THE ACT. THE ASSESSEE IS AT LIBERTY TO DO MANUFACTURE FOR ITSELF OR FOR OTHERS, WHICH MAKES NO DIFFERENCE FOR THE PURPOSE OF SECTION 80IB OF THE ACT. THE TRIBUNAL HAS ALSO RELIED UPON SIMILAR VIEW TAKEN BY DELHI HIGH COURT IN CIT V. NORTHERN AROMATICS LTD. (2005) 196 CTR (DELHI) 479. 4.3 FOLLOWING THE ABOVE JUDGEMENT, I HOLD THA T JOB WORK INCOME IS FROM THE MANUFACTURING ACTIVITY AND THE SAME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. HENCE, THIS GROUND OF APPEAL IS ALLOWED. 6. IN VIEW OF THE ABOVE DISCUSSION, THIS GROUN D OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 4 7. IN GROUND NO.2, THE REVENUE CONTENDED THAT THE CIT(A) WAS WRONG IN UPHOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT ON REBATE ON PURCHASE S OF RS.3,73,436/-. THE LD. DR PLACED RELIANCE ON THE A SSESSMENT ORDER WHEREAS THE LD. AR FOR THE ASSESSEE SUPPORTED THE FINDINGS OF THE LD. CIT(A). 8. WE HAVE CAREFULLY PERUSED THE FACT SITUATION OF THE CASE, RIVAL SUBMISSIONS AND FOUND THAT REBATE ON PU RCHASES AFFECTS THE COST STRUCTURES OF THE ASSESSEE. THUS, BY REDUCING THE COST OF PURCHASES, IT ENHANCED THE PROFIT OF TH E ASSESSEE. IN VIEW OF THIS, THE REBATE ON PURCHASES IS INEXTRI CABLY LINKED TO THE DEDUCTION OF COST OF PURCHASES AND MANUFACTU RING ACTIVITY OF THE ASSESSEE. THE REBATE ASPECT ON PUR CHASES CANNOT BE ARTIFICIALLY SEPARATED AND CONSIDERED IN ISOLATION. THE FINDINGS OF THE CIT(A) ARE REPRODUCED HEREUNDER : 4.6 AS REGARDS THE REBATE ON PURCHASES, THE REBA TE ON PURCHASES GOES TO REDUCE THE MANUFACTURING COST OF THE APPELLANT AND THE SAME IS DIRECTLY LINKED TO TH E MANUFACTURING ACTIVITY. THEREFORE, I HOLD THAT THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 80IB ON REB ATE ON PURCHASES OF RS.3,73,436/- AND THE AO IS ACCORDINGLY DIRECTED TO ALLOW THE DEDUCTION UNDER SECTION 80IB ON THIS AMOUNT. 9. HAVING REGARD TO THE DISCUSSION, WE DO NOT FI ND ANY GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CI T(A) AND HENCE, THE SAME ARE CONFIRMED. 10. GROUND NOS. 3 & 4 OF THE APPEAL OF THE REVENUE ARE GENERAL IN NATURE AND HENCE, NO SEPARATE ADJUDICATI ON IS 5 REQUIRED. CONSEQUENTLY, THE APPEAL OF THE REVENUE IS DISMISSED. 11. NOW WE WOULD DISCUSS THE CROSS OBJECTION RAISED BY THE ASSESSEE. THE SUBSTANCE OF THE THREE CROSS OBJECTI ONS RAISED BY THE ASSESSEE REVOLVES AROUND THE FACTUM THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT IN RE SPECT OF ADDITIONAL INCOME SURRENDERED BY THE ASSESSEE IN TH E COURSE OF SURVEY OPERATION U/S 133A OF THE ACT. IN THE COU RSE OF PROCEEDINGS BEFORE THE BENCH, THE AR CONTENDED THAT THE IMPUGNED SURRENDERED INCOME REPRESENTS NOT ONLY BUS INESS INCOME BUT THE INCOME DERIVED FROM SUCH BUSINESS AC TIVITIES UNDERTAKEN BY THE ASSESSEE. THEREFORE, SUCH SURREND ERED INCOME IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE AC T. LD. DR, ON THE OTHER HAND, POINTED OUT THAT THE IDENTICAL I SSUE IS COVERED BY THE DECISION OF THE CHANDIGARH BENCH IN THE CASE OF ACIT V ARORA FABRICS PVT.LTD. (2008) 171 TAXMAN 113 (CHD). 12. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISS IONS AND CONTENTS OF THE CROSS OBJECTIONS RAISED BY THE ASSE SSEE. THE EXPRESSION DERIVED FROM IS JUDICIALLY DEFINED IN NU MEROUS DECISIONS OF THE HON'BLE APEX COURT AND VARIOUS HIG H COURTS. THE ASSESSEE IS ELIGIBLE IN RESPECT OF SUCH PROFIT WHICH SPROUTS FROM THE INDUSTRIAL UNDERTAKING ITSELF AND NOT IN R ESPECT OF PROFIT WHICH EMANATES FROM UNDISCLOSED INCOME SURRE NDERED IN THE COURSE OF SURVEY OPERATIONS. THE IDENTICAL ISSUE HAS BEEN COVERED IN THE DECISION OF CHANDIGARH BENCH OF THE TRIBUNAL IN ACIT V ARORA FABRICS PVT.LTD. (SUPRA) A ND JURISDICTIONAL HIGH COURT IN THE CASE OF NATIONAL L EGGUARD 6 WORKS V CIT (APPEALS) (2007) 288 ITR 18 (P&H). FIN DINGS OF THE LD. CIT(A) ON THE ISSUE IN QUESTION ARE REPRODU CED HEREUNDER: IN THE CASE OF ACIT V ARORA FABRICS PVT.LTD. (2008 ) 171 TAXMAN 113 (CHD)(MAJ), THE FACTS OF THE CASE WERE T HAT THE ASSESSEE COMPANY WAS CARRYING ON THE BUSINESS O F MANUFACTURING OF KNITTED CLOTH. A SURVEY UNDER SEC TION 133A WAS CARRIED OUT AT THE PREMISES OF THE ASSESSE E BY THE DEPARTMENT WHEREIN THE ASSESSEE COMPANY SURRENDERED AN INCOME OFRS.52.50 LACS. SUBSEQUENTL Y, THE ASSESSEE COMPANY CLAIMED THAT THE SURRENDERED AMOUNT WAS ITS BUSINESS INCOME ELIGIBLE FOR DEDUCTI ON UNDER SECTION 80IB. HOWEVER, THE AO DID NOT ALLOW T HE DEDUCTION UNDER SECTION 80IB ON THE SURRENDERED AMOUNT. THE HON'BLE JURISDICTIONAL TRIBUNAL ON THE SE FACTS HELD THAT AS THE ASSESSEE HAD NOT SUBSTANTIAT ED ITS CLAIM WITH DOCUMENTARY EVIDENCE THAT THE SURRENDERED AMOUNT WAS EARNED FROM MANUFACTURING ACTIVITY OR WAS DERIVED FROM INDUSTRIAL UNDERTAKING , DEDUCTION UNDER SECTION 80IB COULD NOT BE ALLOWED O N THE SURRENDERED INCOME. 13. THE ISSUE IS ALSO SQUARELY COVERED BY THE D ECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF NATIONAL L EGGUARD WORKS (SUPRA). THE RELEVANT PARA OF THE SAID DECIS ION IS REPRODUCED HEREUNDER : EXPORT SPECIAL DEDUCTION UNDER SECTION 80HHC- AMOUNT SURRENDERED BY ASSESSEE AFTER SURVEY OPERATIONS DISCLOSED EXCESS STOCK BURDEN ON ASSES SEE TO PROVE AMOUNT REPRESENTED EXPORT PROFITS BURDEN NOT DISCHARGED ASSESSEE NOT ENTITLED TO SPECIAL DEDUC TION UNDER SECTION 80HHC IN RESPECT OF SUCH AMOUNT INCOME-TAX ACT, 1961, SS. 80 HHC, 133A. 7 14. HAVING REGARD TO THE LEGAL AND FACTUAL DISC USSIONS, WE ARE OF THE CONSIDERED OPINION THAT THE CONTENTIONS RAISED BY THE ASSESSEE IN THE IMPUGNED CROSS OBJECTIONS CANNO T BE ACCEPTED AND HENCE, THE SAME ARE DISMISSED. 15. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE A ND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2011. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH AUGUST,2011 POONAM COPY TO: 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), 4. THE CIT 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH ASSISTANT REGISTRAR, ITAT, CHANDIGARH