ACIT, Chandigarh V. M/s VTL Investment Ltd., Chandigarh

ITA 762/CHANDI/2009

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5767 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 16-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHD; G S PHANI CIT DR ITA NOS
• Assessee Lawyers: SUBHASH AGRAWAL
• Keywords: Business income; Depreciation; Earning of tax free income; Tax effect; Rule 8D
• Section: 14A; 80IC

Judgement Text

- , , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , ! '# $ % & '# , () BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NOS. 762/CHD/2009 / ASSESSMENT YEARS : 2006-07 THE ACIT, CIRCLE 2(1), CHANDIGARH M/S VTL INVESTMENT LTD., (FORMERLY KNOWN AS VARDHMAN THREADS LTD.,) VARDHMAN COMPLEX, CHANDIGARH ROAD ./PAN NO: AABCV7449L APPEAL AGAINST THE ORDER OF CIT(A ), CHANDIGARH DATED 01.05.2009 ./ ITA NOS. 550/CHD/2009 / ASSESSMENT YEARS : 2006-07 M/S VTL INVESTMENT LTD., (FORMERLY KNOWN AS VARDHMAN THREADS LTD.,) VARDHMAN COMPLEX, CHANDIGARH ROAD THE ACIT, RANGE-2, CHANDIGARH ./PAN NO: AABCV7449L APPEAL AGAINST THE ORDER OF CIT(A ), CHANDIGARH DATED 01.05.2009 & ./ ITA NOS. 539/CHD/2011 / ASSESSMENT YEARS : 2007-08 M/S VTL INVESTMENT LTD., (FORMERLY KNOWN AS VARDHMAN THREADS LTD.,) VARDHMAN COMPLEX, CHANDIGARH ROAD THE ACIT, RANGE-II, CHANDIGARH ./PAN NO: AABCV7449L 3.1.2011 APPEAL AGAINST THE ORDER OF CIT(A ), CHANDIGARH DATED 03.01.2011 / APPELLANT /RESPONDENT ! /ASSESSEE BY : SH. SUBHASH AGRAWAL, ADVOCATE ' ! / REVENUE BY : SH.G.S.PHANI, CIT DR ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 2 # $ % /DATE OF HEARING : 11.12.2018 &'() % / DATE OF PRONOUNCEMENT : 11.12. 2018 (*/ ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE CAPTIONED APPEALS HAVE BEEN PREFERRED BY THE AS SESSEE AND REVENUE AGAINST THE SEPARATE ORDERS OF THE COMMISSI ONER OF INCOME TAX (APPEALS), CHANDIGARH [HEREINAFTER REFERRED TO AS CIT(A)]. 2. FIRST, WE SHALL TAKE UP ASSESSEES APPEAL IN ITA NO. 550/CHD/2009 , WHEREIN, FOLLOWING GROUNDS OF APPEAL HAVE BEEN TAKE N: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS WHILE UPHOLDING THE ACTION OF THE ASSESSIN G OFFICER FOR ALLOCATING PROPORTIONATE SALARY , TRAVELING & CONVEYANCE, POSTAGE & TELEGRAM AND TELEPHONE & TELEX EXPENSES AMOUNTING TO RS. 270645 TO EXEMPTED DIVIDEND INCOME AND DISALLOWING THE SAME U/S 14A OF INCOME TAX ACT. 2. WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS WHILE UPHOLDING THE ACTION OF THE ASSESSING OFFICER FOR CALCULATING THE ALLOCABLE EXPENSES FOR EARNING DIVIDEND INCOME BY APPORTIONING THE EXPENSES IN THE RATIO OF DIVIDEND INCOME TO PROFITS OF THE UNDERTAKING INSTEAD OF DIVIDEND INCOME TO TOTAL RECEIPTS OF THE APPELLANT. 3. THAT THE LD. C1T (A) HAS ERRED IN LAW AND ON THE FACTS WHILE UPHOLDING THE ACTION OF THE ASSESSING OFFICER FOR EXCLUDING FOLLOWING RECEIPTS FROM THE ELIGIBLE PROFITS FOR DEDUCTION U/S 80-IC OF INCOME TAX ACT. PARTICULARS AMOUNT (RS.) SALE OF DEPB 224462 PROFITS ON SALE OF RAW MATERIAL 4330 ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 3 4. THAT THE LD. C1T (A) HAS ERRED IN LAW AND ON THE FACTS WHILE DIRECTING TO EXCLUDE INTEREST RECEIVED, PROVISION NO LONGER REQUIRED WRITTEN BACK, SUNDRY BALANCES WRITTEN BACK AND MISC. RECEIPTS FROM THE ELIGIBLE PROFITS FOR DEDUCTION U/S 80-IC OF INCOME TAX ACT. 5. THAT THE LD. CIT (A) HAS ERRED IN LAW AND ON THE FACTS WHILE NOT DIRECTING THE ASSESSING OFFICER TO OBSERVE CONSISTENCY IN APPROACH IN INCOME TAX PROCEEDINGS AGAINST THE APPELLANT WHILE ALLOWING DEDUCTION U/S 80-IC OF THE INCOME TAX ACT. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD / AMEND / ALTER ANY GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. IT IS PRAYED THAT APPEAL MAY KINDLY BE ALLOWED, NECESSARY RELIEFS AS PER AFORESAID GROUNDS MAY KIN DLY BE GRANTED AND/OR OTHER RELIEFS DEEMED FIT AND PROP ER UNDER THE CIRCUMSTANCES OF THE CASE MAY KINDLY BE GRANTED. 4. GROUND NOS.1 & 2 : VIDE THESE GROUNDS , THE ASSESSEE HAS AGITATED THE DISALLOWANCE OF RS. 2,70,645/- ON ACCOUNT OF AP PORTIONMENT AND THEREBY DISALLOWANCE OF EXPENDITURE RELATABLE TO TH E EARNING OF TAX EXEMPT DIVIDEND INCOME UNDER THE PROVISIONS OF SECTION 14 A OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). ADMITTEDLY, THE ASSESSMENT YEAR INVOLVED IN THIS AP PEAL IS ASSESSMENT YEAR 2006-07. THE ASSESSEE DID NOT OFFER ANY DISALL OWANCE U/S 14A OF THE ACT, WHEREAS, THE ASSESSING OFFICER MADE THE DISALL OWANCE OF RS. 2,70,645/-, HOWEVER, THE ASSESSEE HAS DISPUTED THE COMPUTATION MADE BY THE ASSESSING OFFICER. IT MAY BE OBSERVED THAT IN T HE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. 234 CTR 1 (BOM.) THE H ON'BLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D OF THE I.T. RULES R.W.S. 14A(2) OF THE I.T. ACT IS NOT ARBITRARY OR UNREASONABLE BUT CAN BE APPLIED ONLY IF THE ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 4 ASSESSEE'S METHOD IS NOT SATISFACTORY. IT HAS BEEN FURTHER HELD THAT RULE 8D IS NOT RETROSPECTIVE AND APPLIES FROM A.Y. 2008-09. FOR THE YEARS FOR WHICH RULE 8D IS NOT APPLICABLE AND IN THE EVENT OF THAT THE AO IS NOT SATISFIED WITH THE EXPLANATION/WORKING GIVEN BY THE ASSESSEE, DISALLOWANCE UNDER SECTION 14A HAS TO BE MADE ON A REASONABLE BASIS. A LMOST SIMILAR VIEW HAS BEEN EXPRESSED BY HON'BLE DELHI HIGH COURT IN THE C ASE OF 'MAXOPP INVESTMENT LTD, & OTHERS' VS. CIT (247 ITR 162). I N RESPECT OF CASES PRIOR TO ASSESSMENT YEAR 2008-09, THE DIFFERENT CO-ORDINA TE BENCHES OF THIS TRIBUNAL HAVE OBSERVED THAT CERTAIN PERCENTAGE OF E XEMPT INCOME CAN CONSTITUTE A REASONABLE ESTIMATE FOR MAKING DISALLO WANCE FOR THE YEARS EARLIER TO ASSESSMENT YEAR 2008-09. THE HON'BLE B OMBAY HIGH COURT IN THE CASE OF CIT VS. GODREJ AGROVET LTD., (ITA NO. 934/2011) DECIDED ON 8.1.2013 HAS UPHELD THE ORDER OF THE TRIBUNAL DIREC TING THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF 2% OF THE TOTAL EXEMPT INCOME EARNED BY THE ASSESSEE. THE COORDINATE MUMB AI BENCH OF THE TRIBUNAL IN THE CASE OF M/S CIBA INDIA LTD VS. DC IT ITA NO. 9128/2010 FOR ASSESSMENT YEAR 2006-07 VIDE ORDER DA TED 20.2.2015 WHILE RELYING UPON THE DECISION OF THE HON'BLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. GODREJ AGROVET LTD.,(SUPRA) TAKING INTO ACCOUNT THE CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THAT CA SE HAS HELD THAT THE EXPENDITURE EQUAL TO 4% OF THE EXEMPT INCOME EARNED BY THE ASSESSEE WOULD CONSTITUTE REASONABLE DISALLOWANCE U/S 14A AN D DIRECTED ACCORDINGLY. APPLYING THE ABOVE PROPOSITION AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR VIEW THE INTEREST OF JUSTICE WILL BE MET IF ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 5 THE DISALLOWANCE MADE U/S 14A OF THE ACT IS RESTR ICTED TO 5% OF THE TOTAL TAX EXEMPT EARNED INCOME . WE ORDER ACCORDINGLY. 5. GROUND NO.3: THIS HAS NOT BEEN PRESSED AND THE SAME IS DISMISSED AS NOT PRESSED. 6. GROUND NO.4 : VIDE GROUND NO.4, THE ASSESSEE HAS AGITATED THE ACTION OF THE LOWER AUTHORITIES IN EXCLUDING CERTAI N INCOME LIKE INTEREST RECEIVED, PROVISION WRITTEN BACK, SUNDRY BALANCES W RITTEN BACK AND MISC. RECEIPTS FROM THE ELIGIBLE PROFITS FOR DEDUCTION U/ S 80IC OF THE ACT. AS PER THE LOWER AUTHORITIES, SINCE THE AFORESAID RECEIPTS DID NOT CONSTITUTE INCOME FROM THE MANUFACTURING PROCESS, HENCE, THE SAME WAS NOT ALLOWABLE TO BE INCLUDIBLE FOR THE PURPOSE FOR ELIGIBLE INCOME FOR DEDUCTION U/S 80IC OF THE ACT. 7. SO FAR THE ISSUES RELATING TO THE NON-INCLUSION OF THE RECEIPTS, ON ACCOUNT OF INTEREST RECEIVED FROM CUSTOMERS ON ACCO UNT OF DELAYED PAYMENTS, THE PROVISION OF WRITTEN BACK AND SUNDRY BALANCES WRITTEN BACK ARE CONCERNED, THE LD. COUNSEL HAS INVITED OUR AT TENTION TO THE ORDER OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE, IN TH E EARLIER / CHANGED NAME OF THE ASSESSEE VARDHMAN YARN & THREADS LTD, IN ITA NO. 530/CHD/2012 & OTHERS VIDE ORDER DATED 13.7.2017 AN D HAS SUBMITTED THAT WHILE DECIDING REVENUES APPEAL BEARING NO. 569/CHD /2012, THE TRIBUNAL HAS DEALT WITH THE ISSUE TAKEN IN GROUND NO.3 OF TH E ASSESSEE WHICH HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE . WE HAVE AL SO EXAMINED THE DETAILS OF CLAIM IN RESPECT OF MISC. RECEIPTS WHICH CONSTIT UTE THE INSURANCE CLAIM OF RS. 1,89,394/- ON ACCOUNT OF DAMAGED STOCK, WHI CH IN OUR VIEW, IS A ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 6 LOSS COMPENSATED FOR THE DAMAGED STOCK AND THEREBY IT WILL HAVE EFFECT TO REDUCE THE LOSS / EXPENDITURE, HENCE ALLOWABLE FOR DEDUCTION U/S 80IC OF THE ACT. SO FAR AS THE RECEIPTS ON ACCOUNT OF INTER EST FROM CUSTOMERS, PROVISIONS WRITTEN BACK AND SUNDRY BALANCES WRITTEN BACK, THESE UNDISPUTEDLY RELATE TO THE BUSINESS ACTIVITY OF THE ASSESSEE AND FROM INCOME FROM THE UNIT OF THE ASSESSEE. SO FAR AS TH E DISCOUNT ON BROKERAGE OF OCEAN FREIGHT IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS EXPLAINED THAT IT IS DISCOUNT RECEIVED BY THE ASSES SEE ON PAYMENT OF BROKERAGE AND IT WILL HAVE RESULTED IN NETTING OF THE EXPENDITURE INCURRED ON ACCOUNT OF BROKERAGE AND THIS WILL GOES ON TO I NCREASE THE BUSINESS INCOME OF THE ASSESSEE. 8. IN VIEW OF THIS, IN THE LIGHT OF THE DECISION O F THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE BEARING ITA NO. 530/CHD/20 12 & OTHERS ORDER DATED 13.7.2017 (SUPRA) AND IN VIEW OF OUR ABOVE DI SCUSSION, THE INCOME FOR THE TIMES AS DISCUSSED ABOVE IS ELIGIBLE TO B E CONSIDERED AND INCLUDED IN THE INCOME THE ASSESSEE FOR THE PURPOSE OF DEDU CTION U/S 80IC OF THE ACT. HOWEVER, THE CLAIM OF DUTY DRAW BACK AMOUNTING TO RS. 427/- AND MISC. RECEIPTS OF RS. 1201/- IS NOT FOUND TENABLE AND THE SAID RECEIPTS ARE TO BE EXCLUDED FOR THE PURPOSE OF COMPUTING DEDUCT ION U/S 80IC OF THE ACT 9. GROUND NO.6 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPE CIFIC ADJUDICATION. THE APPEAL OF THE ASSESSEE STAND PARTLY ALLOWED. ITA NO.762/CHD/2009 10. NOW COMING TO THE APPEAL OF THE REVENUE IN ITA NO.762/CHD/2009. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 7 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED C.I.T. (APPEAL) IN APPEAL NO. 353/P/08-09 DATED 01.05.2009 HAS ERRED IN DELETING THE ADDITION OF RS. 56, 770/- ON ACCOUNT OF SHORTAGE OF FINISHED GOODS.. 2. THE LEARNED C.I.T. (APPEAL) HAS ERRED IN DELETING T HE ADDITION OF RS. 1,41,346/- ON ACCOUNT OF FREE SAMPL ES WITH REGARD TO CLOSING STOCK DETAILS WHICH THE ASSESSEE COULD NOT CLARIFY. 3. THE LEARNED C.I. T. (APPEAL) HAS ERRED IN DELETING THE ADDITION OF RS. 48,014/- MADE BY THE A. O. ON ACCOU NT OF EXCESS DEPRECIATIONS CLAIMED ON PRINTER. 4. THE LEARNED CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S 80IC OF THE INCOME TAX ACT, TO THE ASSESSEE ESPECIA LLY WHEN THE PROCESS UNDERTAKEN BY THE ASSESSEE IS NOT MANUFACTURING AS IT DOES NOT ENTAIL BRINGING INTO EXISTENCE A NEW AND DISTINCT PRODUCT AND NOR WAS TH E CHANGE IRREVERSIBLE. 5. THE LEARNED CIT(A) HAS ERRED IN DIRECTING TO WORK O UT PROFIT ON SALE OF RAW MATERIAL FOR DISALLOWING THE SAME FROM CLAIM OF DEDUCTION U/S 80IC WHEN THE ASSESSEE HAD ITSELF SHOWN THE SAME AS INCOME. 6. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT DEDUCT ION U/S 80IC WAS TO BE ALLOWED ON THE INCOME FROM WASTE AND SCRAP SALE WHEN THESE WERE NOT MANUFACTURING ACTIVI TY. 7. THE LEARNED CIT(A) HAS ERRED IN DIRECTING TO ALLOW DEDUCTION U/S 80IC ON PROCESSING WHICH IS NOT MANUFACTURING ACTIVITY. 8. THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON MADE BY THE A.O. ON ACCOUNT OF PURCHASE OF STEAM ON ARM LENGTH PRICING ESPECIALLY WHEN STEAM IS A FAST DEPL ETING COMMODITY AND CAN NOT POSSIBLY BE SOLD IN THE OPEN MARKET. 11. AT THE OUTSET, BOTH THE LD. REPRESENTATIVES OF THE PARTIES HAVE DRAWN OUR ATTENTION TO A CHART TO DEMONSTRATE THAT MOST O F THE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE EARLIER ORDERS OF THE TRIBUNAL. ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 8 12. GROUND NOS. 1 & 2: SO FAR AS GROUND NOS. 1 & 2 WHICH ARE RELATING TO THE ADDITION OF RS. 56,770/- ON ACCOUNT OF SHOR TAGE OF FURNISHED GOODS, THE SAME IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2003-04 BEARING ITA N O. 265/CHD/2007 DATED 23.12.2013, WHEREIN, IDENTICAL ISSUE IS DECID ED VIDE PARA 11 OF THE SAID ORDER FOR ASSESSMENT YEAR 2003-04, AND THE TR IBUNAL AFTER DISCUSSING THE FACTS OF THE CASE HAS OBSERVED THAT THE SHORTAG E IN THE FINISHED GOODS BEING VERY SMALL AND IS NORMALLY DUE TO WASTAGE ET C. AND ALSO CONSIDERING THE PLEA OF THE ASSESSEE THAT IT IS CUSTOMARY THAT SOME OF THE SAMPLES MAY BE DISTRIBUTED FOR PROMOTION OF THE PRODUCTS, HAD D ELETED THE ADDITION. 13. CONSIDERING THE ABOVE DECISION OF THE TRIBUNAL AND ALSO CONSIDERING MEAGER AMOUNT AS COMPARED TO THE LARGE STOCK OF THE ASSESSEE OF THE FINISHED GOODS, WE DO NOT FIND ANY MERITS IN THESE GROUNDS OF THE REVENUE AND THE ORDER OF THE CIT(A) IS UPHELD ON THESE ISS UES, 14. GROUND NO.3 IS RELATING TO THE CLAIM OF EXCESS DEPRECIATION ON PRINTER. AS PER THE ASSESSEE, THE SAME BEING A COM PUTER SOFTWARE ASSET, THE ASSESSEE WAS ENTITLED TO THE DEPRECIATION @ 60% WHI CH OTHERWISE IS UPHELD BY THE CIT(A). 15. HOWEVER, THE LD. DR HAS SUBMITTED THAT THE PRIN TER DOES NOT CONSTITUTE SOFTWARE WHICH IS DEPRECIABLE AND, HENCE , THE DEPRECIATION AT THE NORMAL RATE SHOULD HAVE BEEN ALLOWED. 16. WE HAVE HEARD THE RIVAL CONTENTIONS. THE ASSESS MENT YEAR INVOLVED IS ASSESSMENT YEAR 2006-07. EVEN IF THE DEPRECIATION I S ALLOWED AT A HIGHER OR ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 9 NORMAL RATE OF THE DEPRECIATION RATE, THE ENTIRE OF THE DEPRECIATION WILL BE GET ABSORBED / STANDS ALLOWED BY NOW I.E. I.E. IN THE ASSESSMENT YEAR 2019-2020. WE DO NOT SEE ANY MERIT AT THIS STAGE T O INTERFERE AS IT WILL NOT SERVE ANY PURPOSE AS THE SAME WILL ULTIMATELY HAVE NIL TAX EFFECT. HENCE, WITHOUT DELIBERATING UPON THE MERITS OF THE ISSUE, WE THINK THAT AT THIS STAGE, THE FINDINGS OF THE CIT(A) NEEDS NOT TO BE DISTURBED. THIS GROUND OF THE REVENUES APPEAL IS THEREFORE, STANDS DISMISSED . 17. GROUND NO.4 : VIDE GROUND NO.4 THE REVENUE HAS AGITATED THE ACT ION OF THE CIT(A) THAT AS TO WHETHER THE ACTIVITY CARR IED ON BY THE ASSESSEE CONSTITUTE THE MANUFACTURING PROCESS. THE ISSUE IS ADMITTEDLY COVERED BY THE DECISION OF THE TRIBUNAL IN ITA NO. 569/CHD/201 2 VIDE ORDER DATED 13.7.2017, WHEREIN, THE TRIBUNAL HAS DISCUSSED THI S ISSUE VIDE PARAS 13 TO 15 OF THE SAID ORDER. SINCE THE ISSUE HAS ALREADY B EEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE OWN CASE OF THE ASSESSEE IN EA RLIER ASSESSMENT YEAR AND NO CONTRARY DECISION HAS BEEN CITED BEFORE US, THIS GROUND OF THE REVENUE HAS NO MERIT AND THE SAME IS ACCORDINGLY DISMISSED. 18. GROUND NO.5: VIDE GROUND NO.5, THE REVENUE HAS AGITATED THE ACT ION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO WORK OUT THE PROFIT ON THE SALE OF RAW MATERIAL AND THEREAFTER DISALLOW THE SAME FOR THE ELIGIBLE PROFITS U/S 80IC OF THE ACT. THE LD. COUNSEL FOR TH E ASSESSEE HAS SUBMITTED THAT ADMITTEDLY THE SALE OF RAW MATERIAL CANNOT BE SAID TO BE AN ACTIVITY FROM THE MANUFACTURING UNIT OF THE ASSESSE E. HOWEVER, WHAT IS TO BE DISALLOWED IS THE PROFIT ON THE SALE OF THE RAW MATERIAL. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS IS SUE AND THE SAME IS UPHELD. ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 10 19. GROUND NO.6 : THE REVENUE VIDE THIS GROUND HAS AGITATED THE A CTION OF THE CIT(A) IN ALLOWING DEDUCTION U/S 80IC OF THE ACT ON THE INCOME FROM WASTE AND SCRAP SALE. THE PLEA OF THE ASSESSEE IS THAT THE WASTE AND SCRAP IS GENERATED OUT OF THE MANUFACTURING ACTIVIT Y OF THE ASSESSEE. THE LD. CIT(A) CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE HAS ALSO HELD SO. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS THEREFORE, DISMISSED. 20. GROUND NO.7 : VIDE GROUND NO.7, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFF ICER TO ALLOW DEDUCTION U/S 80IC OF THE ACT ON THE PROCESSING CHARGES REC EIVED BY THE ASSESSEE. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F BOTH THE PARTIES AND ALSO EXAMINING THE FACTS OF THE CASE HELD THAT THE SAME TO BE AN ACTIVITY CARRIED OUT BY THE ASSESSEE FOR THIRD PARTY AND HAS DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80IC OF THE ACT ON THE PROFITS EARNED FROM THE PROCESSING ACTIVITY OF THE ASSESSEE. 21. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE ALSO. THIS GROUND, THEREFORE, STANDS DISMISSED. 22. GROUND NO.8 : VIDE GROUND NO.8, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFF ICER TO DELETE THE ADDITION MADE BY HIM ON ACCOUNT OF PURCHASE OF STEA M ON ARM LENGTH PRICING FROM THE SISTER CONCERN. THE CASE OF THE A SSESSING OFFICER WAS THAT SINCE THE AFORESAID PRODUCT WAS A FAST DEPLETING CO MMODITY AND COULD NOT HAVE BEEN POSSIBLY SOLD IN THE MARKET, THE ASSESSEE DEVISED THE AFORESAID ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 11 METHOD OF SALE / PURCHASE FROM THE SISTER CONCERN, THEREFORE, THE SAID EXPENDITURE WAS NOT ALLOWABLE AS EXPENDITURE. THE L D. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALS O CONSIDERING THE FACT THAT ONLY A REASONABLE PROFIT @ 7.37& HAS BEEN PAID TO THE SISTER CONCERN, DELETED THE DISALLOWANCE OF THE EXPENDITURE. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AN D ALSO HAVE GONE THROUGH THE ORDER OF THE CIT(A) AND WE DO NOT FIND ANY INFIRMITY IN THE SAME. IN VIEW OF THIS, THERE IS NO MERIT IN THE GR OUND RAISED BY THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ITA NO. 539/CHD/2011 : 24. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. C1T(A) HAS ERRED IN LAW AND ON FACTS WHILE PASSING THE IMPUGNED APPELLATE ORDER ON THE FOLLOWING ISSUES. 2. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS WHILE UPHOLDING THE IMPUGNED ORDER OF THE LD.AO ON REGARDING EXCLUSION OF THE FOLLOWING RECEIPTS FROM ELIGIBLE PROFITS FOR DEDUCTION U/S 80IC OF THE INCO ME TAX ACT. 1961 : PARTICULARS AMOUNT(RS.) INTEREST FROM CUSTOMERS 10,72,909 INSURANCE CLAIMS 5,82,944 RAW MATERIAL SALE 27,84,591 DEPB 14,278 PROCESSING CHARGES 53,299,902 ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 12 3. THAT THE APPELLANT CRAVES LEAVE TO ADD/ALTER/AMEND ANY GROUND OF APPEAL ON OR BEFORE THE DUE DATE OF HEARI NG OF APPEAL. HENCE THE APPEAL MAY KINDLY BE ALLOWED, NECESSARY R ELIEFS AS PER AFORESAID GROUNDS MAY KINDLY BE GRANTED AND/ OR OTHER RELIEFS DEEMED FIT AND PROPER UNDER THE CIRCUMSTANC ES OF THE CASE MAY KINDLY BE GRANTED 25. A PERUSAL OF THE ABOVE GROUNDS OF APPEAL REVEAL S THAT ALL THE ISSUES TAKEN IN THIS APPEAL HAVE BEEN DISCUSSED IN THE EAR LIER PARAS OF THIS ORDER WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR A SSESSMENT YEAR 2006-07 IN ITA NO. 550/CHD/2009. 26. IN VIEW OF OUR OBSERVATIONS MADE ABOVE, THE REC EIPTS OF INTEREST FROM CUSTOMERS, INSURANCE CLAIMS AND PROFITS OF PROCESS ING CHARGES AS DIRECTED ABOVE ARE TO BE INCLUDED UNDER THE ELIGIBLE INCOME FOR THE PURPOSE OF DEDUCTION U/S 80IC OF THE ACT. HOWEVER, THE CLAIM OF THE ASSESSEE REGARDING DEPB HAS SINCE NOT BEEN PRESSED, IS REJEC TED. SO FAR AS THE RECEIPTS ON ACCOUNT OF RAW MATERIAL S ALE IS CONCERNED, AS OBSERVED ABOVE, ONLY THE PROFIT ELEMENT IN THE SALE / PURCHASE OF RAW MATERIAL IS TO BE EXCLUDED FOR DEDUCTION U/S 80IC O F THE ACT AS DIRECTED ABOVE, WHILE DECIDING GROUND NO.5 OF THE REVENUES APPEAL FOR ASSESSMENT YEAR 2006-07 AS ABOVE. 27. THERE IS AN ADDITIONAL GROUND MOVED BY THE ASS ESSEE IN THIS APPEAL IN RESPECT TO DISALLOWANCE U/S 14A READ WITH RULE 8D (2)(III) OF THE ACT AMOUNTING TO RS. 53,43,300/-. HOWEVER, DURING THE COURSE OF HEARING THE APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THIS GROUND, HENCE; THIS GROUND IS DISMISSED AS NOT PRESSED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREA TED AS PARTLY ALLOWED. ITA NOS. 762 & 550/CHD/2009 & 538/CHD/2011- M/S VTL INVESTMENT LTD. 13 ORDER DICTATED AND PRONOUNCED IN THE OPEN COURT IMM EDIATELY ON COMPLETION OF HEARING. SD/- SD/- ( $ % & '# / ANNAPURNA GUPTA) () / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 11.12.2018 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR