DAMAN PLASTICS, MUMBAI V. ADDL CIT CIR 15(1), MUMBAI

ITA 7507/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1886 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 25-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 19-12-2012
• Court: TRIBUNAL
• Keywords: Business income
• Section: 80IB

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER I.T.A. NO. 7507/M/2012 (ASSESSMENT YEAR : 2009 - 2010 ) DAMAN PLASTICS, 507, EMBASSY CENTRE, NARIMAN POINT, MUMBAI - 21. / VS. ADD. CIT - 15(1), MATRU MANDIR, TARDEO ROAD, MUMBAI 400 007. ./ PAN : AADFD7256Q ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ANUJ KISNADWALA / RESPONDENT BY : SHRI SATYAJIT MANDAL, DR / DATE OF HEARING : 04 .11.2015 / DATE OF PRONOUNCEMENT : 16 .12.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 19.12.2012 IS AGAINST THE ORDER OF THE CIT (A) - 26, MUMBAI DATED 27.9.2012 FOR THE ASSESSMENT YEAR 2011 - 2012. 2. IN THIS APPEAL, ASSESSEE RAISED FIVE GROUNDS IN TOTO. GROUND NOS. 1, 3, 4, 5 ARE GENERAL IN NATURE . CO NSIDERING THE GENERAL NATURE, THE SAID GROUNDS ARE DISMISSED AS SUCH . THE ONLY GROUND LEFT FOR OUR ADJUDICATION IS GROUND NO.2 AND THE SAME IS AS FOLLOWS: - 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN DENYING DEDUCTION U/S SECTION 80IB IN RESPECT OF INCOME FROM INTEREST, JOB WORK CHARGES AND SUNDRY BALANCES WRITTEN OFF AGGREGATING TO RS. 27,1 2,300/ - CLAIMED BY THE APPELLANT. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURER OF POLYMER GRANULES FROM POLYMER WASTE. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS . 3,36,63,132/ - . ASSESSEE HAS BEEN CLAIMED DEDUCTION U/S 80IB OF THE ACT FOR MANY YEARS IN THE PAST. DURING THE ASSESSMENT PROCEEDINGS FOR THIS AY, AO FOUND THAT THE ASSESSEE RECEIVED INTEREST RECEIPTS, JOB WORK RECEIPTS AND SUNDRY BALANCES WRITTEN OFF T O THE P & L ACCOUNT AND 2 CLAIMED DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF THE SAID RECEIPTS. AO DENIED THE BENEFIT OF DEDUCTION U/S 80IB OF THE ACT AND REFUSED THE RELATABLE PROFITS. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APP ELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ON THE AOS DENIAL OF DEDUCTION ON THE SAID THREE RECEIPTS, CIT (A) DISMISSED THE SAME AND UPHELD THE DECISION OF THE AO AS PER THE DISCUSSION GIVEN IN PARA 4.2 OF THE IMPUGNED ORDER. AGAIN AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 5. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE ELABORATED THE ABOVE FAC TS RELATING TO DEDUCTION U/S 80IB OF THE ACT AND SUBMITTED THAT THE ASSESSEE IS ENTITLED TO DEDUCTION ESPECIALLY IN RESPECT OF JOB WORK CHARGES AND SUNDRY BALANCES WRITTEN OFF. REGARDING THE ALLOWABILITY OF DEDUCTION ON THE INTEREST EARNED FROM THE FIXED DEPOSITS (FDS) FROM THE BANKS, LD COUNSEL FOR THE ASSESSEE FAIRLY MENTIONED THAT THE ISSUE IS NOW DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL FOR THE AY 2008 - 2009 VIDE ITA NO.7506/M/2012, DATED 1.2.2013. PARA 4 OF THE SAID TRIBUNALS IS RELEVANT IN THIS REGARD. 6. ON HEARING BOTH THE PARTIES ON THIS ISSUE AND ON PERUSAL OF THE SAID DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2008 - 2009 (SUPRA) DATED 1.2.2013, WE ARE OF THE OPINION THAT THE ISSUE RELATING TO THE ALLOWABILITY OF DEDUCTION ON T HE INTEREST SHOULD BE DECIDED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE . REGARDING THE ALLOWABILITY OF DEDUCTION IN RESPECT OF JOB WORK CHARGES, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PARA 5 OF THE SAID TRIBUNALS ORDER (SUPRA) AND SUBMITTED THAT ON THE SIMILAR ISSUE, THE TRIBUNAL HELD IN FAVOUR OF THE ASSESSEE AND AFFIRMED THE ALLOWABILITY OF DEDUCTION ON THE JOB WORK CHARGES U/S 80D. WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE, TRIBUNAL RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF SADHU FORGING LTD (2011) 336 ITR 444 AND OTHERS. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAID PRARA 5 IS EXTRACTED AS UNDER: - 5. ASSESSEE HAS SHOWN SMALL MISCELLANEOUS INCOME ON ACCOUNT OF MISCELLANEOUS SALES AT R S. 2,819/ - . THE HONBLE DELHI HIGH COURT IN THE CASE OF SADHU FORGING LTD (2011) 336 ITR 444 HAS HELD THAT SALE OF SCRAP / LABOUR CHARGES AND JOB WORK CHARGES ARE ALLOWABLE AS DEDUCTION U/S 80IB OF THE ACT. SIMILAR VIEW HAS BEEN EXPRESSED IN THE CASE OF C IT VS. IMPEL FORGE & ALLIED INDUSTRIES LTD (2010) 326 ITR 27 (P & H). IN 3 THIS CASE, THE HONBLE PUNJAB & HARYANA HIGH COURT HAS HELD THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURING AND TRADING OF TRACTOR AND AUTO PARTS AND ALSO DOING JOB WORKS OF SIMILAR N ATURE. THE ASSESSEE WAS AT LIBERTY TO DO MANUFACTURE FOR ITSELF OR FOR OTHERS, WHICH MAKES NO DIFFERENCE FOR THE PURPOSES OF SECTION 80IB OF THE ACT. ACCORDINGLY, DEDUCTION ON ACCOUNT OF JOB WORK CHARGES WAS ALLOWED BY THE PUNJAB & HARYANA HIGH COURT UND ER SECTION 80IB. AGAIN IN THE CASE OF CIT VS. METALMAN AUTO P. LTD (2011) 336 ITR 434 (P & H) HAS ALLOWED DEDUCTION U/S 80IB ON JOB WORK CHARGES AND ON SALE OF SCRAP. ACCORDINGLY, I DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80IB ON SALE OF SCRA P AS WELL AS ON ACCOUNT OF JOB WORK CHARGES AT RS. 1,09,800/ - . 7. WE HAVE ALSO GONE THROUGH THE OTHER ORDER OF THE TRIBUNAL IN THE CASE OF ADD. CIT VS. M/S. NARENDRA PLYPLAST IN ITA NO.4567/M/2012 (AY 2008 - 2009) DATED 19.12.2014, WHEREIN ONE OF US (AM) IS A PARTY TO THE SAID ORDER, AND FIND, AS PER THE DISCUSSION GIVEN IN PARA 6 OF THE SAID ORDER, JOB CHARGES ARE HELD ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE INCOME FROM JOB CHARGES HELD AS INCOME DERIVED FROM INDUSTRIAL UNDERTAKING AS PER THE PROVI SIONS OF SECTION 80IB VIDE THE SAID PARA 6 OF THE CITED TRIBUNALS ORDER (SUPRA). REFERRING TO THE ANOTHER ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2008 - 2009 IN ITA NO.6225/M/2009 (AY 2005 - 06), DATED 23.7.2010, LD COUNSEL FOR THE ASSES SEE MENTIONED THAT THE ISSUE WAS DECIDED AGAINST THE ASSESSEE IN RESPECT OF THE JOB CHARGES AND THE SAME IS DUE TO THE FACT THAT THERE WAS NONE TO REPRESENT THE ASSESSEE ON THE SCHEDULED DATE. THE TRIBUNAL FOR THAT YEAR PASSED THE ORDER EXPARTE THEREFORE, THE SAID RATIO FOR THE AY 2005 - 06 SHOULD NOT BE IGNORED. 8. ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL AND ALSO THE CITED JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF SADHU FORGING LTD (SUPRA), WE FIND THAT IT IS NOW A SETTLED LAW THAT THE JOB CHARGES EARNED BY THE ASSESSEE JOB WORKS EXECUTED USING THE PLANT AND MACHINERY AND BUILDING OF THE ASSESSEE AMOUNTS TO MANUFACTURING. THEREFORE, RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. NARENDRA PLYPLAST (SUPRA) AS WELL AS THE CITE D JUDGMENT OF THE DELHI HIGH COURT, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 9. FINALLY, REGARDING THE BALANCES WRITTEN OFF, IT WAS DEMONSTRATED BEFORE THAT THE BALANCES IN QUESTION WERE OFFERED AS INCOME OF THE ASSESSEE AND THEY RELATES TO THE SAL ES AND OTHER MANUFACTURING ACTIVITIES. WE HAVE ALSO PERUSED THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2008 - 2009 (SUPRA), WHEREIN PARA 6 OF THE SAID TRIBUNALS ORDER IS RELEVANT IN THIS REGARD. VIDE THE SAID PARA 6, THE TRIBUNAL DISC USSED THE ISSUE AND FIND THAT THE SAID BALANCES WRITTEN OFF STANDS COVERED BY THE 4 PROVISIONS OF SECTION 41(1) OF THE ACT. THEREFORE, CONSIDERING THE SIGNIFICANCE OF THE SAID PARA 6 OF THE TRIBUNALS ORDER FOR THE AY 2008 - 2009 (SUPRA), WE FIND IN RELEVANT TO EXTRACT THE SAME, WHICH READ AS UNDER: - 6. REMAINING ITEM IS SUNDRY BALANCE WRITTEN OFF AGGREGATING TO RS. 24,936/ - IE., IN RESPECT OF SUNDRY BALANCES ALL CREDITORS WRITTEN OFF. I NOTED THAT THE PURCHASE OF MATERIAL / SERVICE FROM SUCH CREDITOR HAS GO NE TO REDUCE THE PROFIT OF THE FIRM THEREBY REDUCING THE CLAIM OF DEDUCTION UNDER SECTION 80IB IN EARLIER YEAR. HENCE, CREDIT BALANCE WRITTEN OFF FROM SUCH EXPENSES WOULD FORM PART OF THE BUSINESS INCOME UNDER SECTION 41(1) OF THE ACT. THEREFORE, I AM OF THE CONSIDERED VIEW THAT DEDUCTION UNDER SECTION 80IB IS ALLOWABLE ON THIS AMOUNT ALSO. ACCORDINGLY, I DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80IB ON ACCOUNT OF JOB WORK CHARGES, SALE OF SCRAP AND SUNDRY BALANCES WRITTEN OFF. HOWEVER, NO DE DUCTION WILL BE ALLOWED IN RESPECT OF INTEREST AT RS. 1,65,288/ - . 10. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE OF SUNDRY BALANCES WRITTEN OFF IN FAVOUR OF THE ASSESSEE AS WELL AS RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IS PARTLY ALLOWED . 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 1 6 T H DECEMBER, 2015. S D / - S D / - ( RAM LAL NEGI ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 6 /12/2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI