ITO, Coimbatore V. M/s. Velplast, Coimbatore

ITA 737/CHNY/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6530 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: I VIJAYAKUMAR
• Assessee Lawyers: R VIJAYARAGHAVAN
• Section: 244A; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 737/MDS/2009 ASSESSMENT YEAR : 2005-06 THE INCOME-TAX OFFICER, WARD-II(3), COIMBATORE. V. M/S. VELPLAST, 550-15, 4 TH STREET, D.B. ROAD, R.S. PURAM, COIMBATORE-641 002. (PAN: AACFV8490M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI I. VIJAYAKUMAR RESPONDENT BY : SHRI R. VIJAYARAGHAVAN O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-I, COIMBATORE IN APPEAL NO.168/07-08 D ATED 02-03-2009 FOR THE ASSESSMENT YEAR 2005-06. 2. SHRI I. VIJAYAKUMAR, LEARNED CIT-DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI R. VIJAYARAGHAVAN, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSE SSEE IS A PARTNERSHIP FIRM DOING THE BUSINESS OF MANUFACTURE OF INJECTED MOULD ED PLASTIC COMPONENTS. IT WAS THE SUBMISSION THAT IT WAS NOTICED THAT THE ASS ESSEE HAD RECEIVED CONTRACT I.T.A. NO.737/MDS/2009 2 RECEIPTS AND ALSO ON THE GROUND THAT THE ASSESSEE H AD CLAIMED DEDUCTION U/S 80- IB ON THE MISCELLANEOUS INCOME AND FOREIGN EXCHANGE DIFFERENCE AS ALSO ON THE GROUND THAT THE PROFITS DECLARED BY THE ASSESSEE WA S FAR IN EXCESS OF THE POSSIBLE PROFITS FROM THE BUSINESS RUN BY THE ASSESSEE WHEN COMPARED TO SIMILAR BUSINESSES RUN BY THE PARTNERS OF THE ASSESSEE FIRM IN THEIR INDIVIDUAL CAPACITY. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80-IB AND TR EATED THE INCOME DISCLOSED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES AS NOT RELATED TO THE ELIGIBLE BUSINESS. IT WAS THE SUBMISSION THAT ON APPEAL THE LEARNED CIT(A) HAD HELD THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION US. 80-IB . IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DE DUCTION U/S 80-IB COULD NOT BE GRANTED ON THE INTEREST U/S 244A. IT WAS THE FURTH ER SUBMISSION THAT THE LEARNED CIT(A) HAD FAILED TO APPRECIATE THAT THE LABOUR CHA RGES PAID BY THE ASSESSEES SISTER CONCERN PROVED THAT THE MANUFACTURING ACTIVI TY HAD NOT BEEN DONE BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THAT THE AUDI T REPORT FILED WITH THE RETURN OF INCOME FOR PURPOSE OF CLAIMING DEDUCTION U/S 80- IB WAS DEFECTIVE BUT THE LEARNED CIT(A) ADMITTED FRESH REPORT WHICH WAS NOT PERMISSIBLE. HE VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. IT W AS THE SUBMISSION THAT THAT THE ORDER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERS ED. 4. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT FOR THE EARLIER ASSESSMENT YEARS BEING THE ASSESSMENT YEARS 2001-02, 2002-03,& 2004- 05 THE ISSUE OF DEDUCTION U/S 80-IB HAD BEEN THE SU BJECT MATTER OF APPEAL BEFORE I.T.A. NO.737/MDS/2009 3 THE TRIBUNAL IN ITA NOS. 1163 TO 1165/MDS/2008, 121 8 & 1219/MDS/2008 & 442/MDS/2009 AND THE TRIBUNAL HAD VIDE ITS ORDER DA TED 29-05-2009 RESTORED THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S 80-IB TO THE ASSESSING OFFICER. IT WAS THE SUBMISSION THAT THE CONSEQUENTIAL ORDER HAS BEEN PA SSED BY THE ASSESSING OFFICER WHEREIN THE ASSESSEE HAD BEEN HELD TO BE EL IGIBLE FOR THE DEDUCTION U/S 80-IB. IT WAS THE SUBMISSION THAT AS THE ASSESSING OFFICER HIMSELF HAS FOUND THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUC TION UNDER SECTION 80-IB IN THE SET ASIDE PROCEEDINGS, THE APPEAL OF THE REVENUE WA S LIABLE TO BE DISMISSED. IT WAS THE FURTHER SUBMISSION THAT IN REGARD TO THE IS SUE OF THE AUDIT REPORT THAT WAS FOUND TO BE DEFECTIVE BY THE ASSESSING OFFICER AND FRESH AUDIT REPORT HAS BEEN FILED BEFORE THE LEARNED CIT(A), IN VIEW OF TH E DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. JAY ANT PATEL REPORTED IN 248 ITR 199, AS THE CORRECTED AUDIT REPORT HAVING BEEN FILE D BEFORE THE LEARNED CIT(A) THE SAME IS LIABLE TO BE CONSIDERED. IT WAS THE FU RTHER SUBMISSION THAT HE HAD NO OBJECTION IF THE ISSUE WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER. IT WAS THE SUBMISSION THAT THE INTEREST U/S 244A COULD NOT BE PART OF THE CLAIM OF DEDUCTION U/S 80-IB. IN REGARD TO THE COMPARISON O F THE ASSESSEES PROFITS WITH THAT OF OTHER CONCERNS, IT WAS SUBMITTED THAT THE P ROVISIONS OF SECTION 80-IA(10) COULD NOT BE CONSIDERED AS THERE WAS NO BUSINESS TR ANSACTION WITH THE SISTER CONCERNS OR RELATED CONCERNS. HE VEHEMENTLY SUPPOR TED THE ORDER OF THE LEARNED CIT(A). I.T.A. NO.737/MDS/2009 4 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE ASSESSING OFFICER HAS GONE INTO THE ISSUE AS TO WHETHER THE PAYMENT MADE TO THE RELATED CONCERN ON ACCOUNT OF THE JOB WORKS WAS LIABLE TO BE TREATED AS BEING NOT ELIGIBLE FOR DEDUCTION U/S 80-IB(4). IT WAS ALSO NOTICED THAT THE ASSESSING OFFICER HAS CONSIDE RED THE ISSUE AS TO WHETHER THE MISCELLANEOUS INCOME AS ALSO FOREIGN EXCHANGE D IFFERENCE IS LIABLE TO BE TREATED AS INCOME DERIVED BY THE INDUSTRIAL UNDERTA KING FROM ITS ACTIVITY. CONSEQUENTLY, HE HAS TREATED THAT THE MISCELLANEOUS INCOME AND FOREIGN EXCHANGE DIFFERENCE WAS NOT INCOME DERIVED BY THE I NDUSTRIAL UNDERTAKING FROM ITS ACTIVITIES. IT IS ALSO NOTICED THAT THE ASSESS ING OFFICER HAS COMPARED THE ASSESSEES GROSS PROFIT WITH THAT OF THE GROSS PROF IT EARNED BY THE CONCERNS WHICH WERE OPERATED BY THE PARTNERS AND RELATIVES AND CON SEQUENTLY HAS HELD THAT FORM NO. 10CCB FILED ALONG WITH THE RETURN WITH REGARD T O THE CLAIM OF DEDUCTION UNDER SECTION 80-IB(4) WAS DEFECTIVE AND REJECTED T HE ASSESSEES CLAIM. A PERUSAL OF THE ORDER OF THE LEARNED CIT(A) SHOWS TH AT THE LEARNED CIT(A) HAS HELD THAT THE MERE FACT THAT SMALL PORTION OF RECEI PTS WERE FROM LABOUR COULD NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE WAS NOT EN GAGED IN MANUFACTURING ACTIVITIES. THIS FINDING OF THE LEARNED CIT(A), IT IS NOTICED, IS ALSO SUPPORTED BY THE ORDER OF THE ASSESSING OFFICER IN THE SET ASIDE PROCEEDINGS FOR THE ASSESSMENT YEARS 2000-01, 2002-03 AND 2004-05 DATED 29-03-2010 WHEN THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THAT MANUFAC TURING PROCESSES WERE I.T.A. NO.737/MDS/2009 5 CARRIED ON AT THE FACTORY PREMISES OF THE ASSESSEE WITH THE WORKERS SUPPLIED BY THE LABOUR CONTRACTOR AS WELL AS THE ASSESSEES OWN PERMANENT EMPLOYEES. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FIND ING OF THE LEARNED CIT(A) THAT MERELY BECAUSE A SMALL PORTION OF THE RECEIPTS ARE FROM LABOUR CHARGES, DOES NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE IS NOT ENG AGED IN MANUFACTURING ACTIVITIES, IS UPHELD. IT IS FURTHER NOTICED THAT THE LEARNED CIT(A) HAS HELD THAT IF THE ASSESSEE FIRM IS OTHERWISE ELIGIBLE FOR THE STA TUTORY DEDUCTION AND IF ALL THE PROVISIONS OF SECTION 80-IB ARE FOUND APPLICABLE, T HEN A MERE DEFECT IN THE AUDIT REPORT CANNOT BE A REASON FOR THE DENIAL OF THE CLA IM OF DEDUCTION, IS ALSO SUPPORTED BY THE DECISION OF THE HON'BLE JURISDICTI ONAL HIGH COURT IN THE CASE OF JAYANT PATEL, CITED SUPRA. IN ANY CASE, AS THE ASS ESSEE HAS FILED THE CORRECTED AUDIT REPORT IN THE FORM 10CCB BEFORE THE APPELLATE AUTHORITY AND THE SAME HAS ALSO BEEN SENT BY THE LEARNED CIT(A) TO THE ASSESSI NG OFFICER FOR HIS REBUTTAL VIDE A LETTER DATED 04-12-2008, WE ARE OF THE VIEW THAT THE FINDING ON THE ISSUE BY THE LEARNED CIT(A) DOES NOT CALL FOR ANY INTERFEREN CE. 6. IN REGARD TO THE FINDING OF THE LEARNED CIT(A) R EGARDING RE-COMPUTATION OF PROFITS AND CLAIM OF DEDUCTION U/S 80-IB, WE ARE OF THE VIEW THAT THIS ISSUE WILL HAVE TO BE RESTORED TO THE FILE OF THE ASSESSING OF FICER ESPECIALLY IN VIEW OF THE FACT THAT THE MISCELLANEOUS INCOME WHICH INCLUDES T HE INTEREST UNDER SECTION 244A OBVIOUSLY IS NOT THE INCOME DERIVED BY THE IND USTRIAL UNDERTAKING FROM ITS ACTIVITY. FURTHER IT IS NOTICED THAT THE ASSESSING OFFICER HAS TOUCHED UPON THE I.T.A. NO.737/MDS/2009 6 PROVISIONS OF SECTION 80-IA(10) BUT HAS NOT CONSIDE RED THE ISSUE NOR HAS TAKEN A DECISION ON THE ISSUE TO A LOGICAL END. EVEN THOUG H THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT THE PROVISIONS OF SECTION 80-IA(10) ARE NOT APPLICABLE TO THE ASSESSEES CASE INSOFAR AS THERE IS NO BUSINESS ARRANGEMENT BETWEEN THE ASSESSEE AND ANY OTHER PERSONS FOR THE ASSESSEE TO GENERATE MORE THAN THE ORDINARY PROFITS WHICH MIGHT BE EXPECTED T O ARISE IN THE ELIGIBLE BUSINESS, THIS HAS NOT BEEN CONSIDERED BY THE ASSES SING OFFICER. HOWEVER, EVEN THOUGH THE CLAIM OF THE ASSESSEE IS THERE, AS THE A SSESSING OFFICER HAS NOT DWELT UPON THIS ISSUE, THE SAME MAY ALSO BE EXAMINED BY T HE ASSESSING OFFICER WHEN RE-COMPUTING THE ELIGIBLE DEDUCTION U/S 80-IB(4). IN THE CIRCUMSTANCES, THE ISSUE OF RE-COMPUTATION OF THE DEDUCTION U/S 80-IB( 4) IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE-ADJUDICATION. IN THE CIRCUMSTANCES, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. THE ORDER WAS PRONOUNCED IN THE COURT ON 27/05/2 011. SD/- SD/ - (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 27 TH MAY, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE