BRIGHT ENGINEERING WORKS, MUMBAI V. JTCIT 15(1), MUMBAI

ITA 7699/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8172 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 27-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: DR K SHIVRAAM
• Keywords: Cost of acquisition
• Section: 143(3); 10B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI AMIT SHUKLA , J M ITA NO. 7699 / MUM/20 1 2 ( ASSESSMENT YEAR : 200 8 - 09 ) M/S BRIGHT ENGINEERING WORKS, 5/32, 2 ND PANJRAPOLE LANE, C.P.TANK, MUMBAI - 400 004 VS. JCIT - 15(1), MUMBAI PAN/GIR NO. : A A A F B 2823 Q ( APPELLAN T ) .. ( RESPONDENT ) /ASSESSEE BY : DR. K. SHIVRAAM /REVENUE BY : SHRI PREMANAND J. DATE OF HEARING : 10 TH SEPT. 201 4 DATE OF PRONOUNCEMENT : 19 TH SEPT , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER CIT(A ) , DATED 18 - 10 - 2012 FOR ASSESSMENT YEAR 200 8 - 09 , IN THE MATTER OF ORDER PASSED U/S. 143(3) (II) OF THE I.T. ACT. 2. THE ONLY GRIEVANCE OF T HE ASSESSEE RELATES TO DISALLOWANCE OF CLAIM OF DEDUCTION U/S. 10B IN RESPECT OF SALES TAX REFUND OF RS.6,20, 091/ - . THE AO HAS DISALLOWED CLAIM OF DEDUCTION U/S. 10B ON THE PLEA THAT THE CST REFUND IS NOT ON ACCOUNT OF PROFITS AND GAINS DERIVED FROM EOU EXPO RT OF ARTICLES OR THINGS. 3 . LEARNED AR RELIED ON THE DECISION OF ITAT SPECIAL BENCH IN THE CASE OF MORAL OVERSEAS LIMITED VS. ADCIT, REPORTED IN (2012) 136 ITD ITA NO. 7699 /1 2 2 177(INDORE)( SB) AND ALSO ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MOTOROLA INDIA ELECTRONICS (P) LTD., (2014) 46 TAXMANN.COM 167(KARNATAKA) . 4 . WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE AO HAS DECLINED CLAIM OF DEDUCTION U/S. 10B IN RESPECT OF SALES TAX REFUND CREDITED IN THE PROFIT AND LOSS ACCOUNT. SUCH SALES TAX REFUND IS NOT A SEPARATE SOURCE OF INCOME, IT IS THE AMOUNT WHICH THE ASSESSEE GOT BACK ON ITS SALES TAX ASSESSMENT WHEN IT WAS FOUND THAT ASSESSEE HAS PAID EXCESS SALES TAX ON ITS PU RCHASES. SUCH PAYMENT OF SALES TAX ON THE COST OF GOODS SO PURCHASED AND DEBITED TO THE PROFIT AND LOSS ACCOUNT GO TO REDUCE THE PROFIT. IN CASE OF ASSESSEE GETS REFUND OF CERTAIN AMOUNT ON SUCH SALE TAX WHICH IS A PART OF PURCHASE COST, THE CORRESPONDING PROFIT OF ASSESSEE WILL GO TO INCREASE. IN THE INSTANT CASE AS PER CONTENTION OF LD. AR, IT APPEARS THAT ASSESSEE HAS ALREADY DEBITED THE AMOUNT PAID UNDER SALES TAX AS ITS EXPENSES FORMING PART OF COST OF GOODS PURCHASED FOR EXPORT, HOWEVER, SUBSEQUENTLY PART OF SUCH SALES TAX WAS REFUNDED WHICH GO TO REDUCE THE COST OF PURCHASES. THE CORRESPONDING INCREASE IN PROFIT DUE TO SUCH REFUND IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S. 10B. THE SALES TAX REFUND IS NOT A SEPARATE SOURCE OF INCOME NOR IT IS THE DUE TO A NY GOVERNMENT POLICY FOR PAYING ANY INCENTIVE. NEITHER IT IS EXPORT INCENTIVE NOR ANY PAYMENT UNDER SCHEME OF GOVERNMENT. THEREFORE, THE SOURCE OF RECEIPT CANNOT BE ATTRIBUTED TO SUCH SCHEME. IT IS SIMPLY REFUND OF EXCESS SALES TAX PAID WHICH HAS ALREADY F ORMED PART OF COST OF PURCHASES. WE ACCORDINGLY, DIRECT THE AO TO VERIFY AS TO WHETHER THE SALES TAX REFUND RECEIVED BY THE ASSESSEE ALREADY FORMED PART OF ITS COST OF PURCHASES ITA NO. 7699 /1 2 3 EITHER DURING THE YEAR UNDER CONSIDERATION OR IN EARLIER YEARS. ACCORDINGLY, A SSESSEE IS DIRECTED TO FURNISH DETAILS OF SUCH PAYMENT OF SALES TAX AND THE YEAR IN WHICH IT HAS FORMED PART OF ITS COST OF PURCHASE IN TRADING/P&L ACCOUNT. IF THE AO FINDS THAT SUCH SALES TAX HAVE ALREADY BEEN DEBITED IN THE TRADING/ PROFIT AND LOSS ACCOUN T AS A COST OF PURCHASES , ASSESSEE SHOULD BE GIVEN BENEFIT OF DEDUCTION U/S. 10B WITH RESPECT TO SUCH AMOUNT OF SALES TAX REFUND. WE DIRECT ACCORDINGLY. 5 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE O PEN COURT ON THIS 19 /09/ 201 4 . /09/ 2014 SD/ - SD/ - ( ) ( AMIT SHUKLA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER M UMBAI ; DATED 19 /09 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CI T 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//