M/s. Liquid Publishing Pvt. Ltd., Dehradun V. DCIT, Dehradun

ITA 818/DEL/2012

• Counselvise Citation: 81820114 RSA 2012
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 17-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS SURYAVANSHI
• Assessee Lawyers: VP BANSAL
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO. 1812/DEL/2012 ASSESSMENT YEAR: 2008-2009 ELYMER INTERNATIONAL (P) LTD., 303, COPIA CORPORATE SUITES, VS. DCIT, CIRCLE 11(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. V.P. BANSAL, CA RESPONDENT BY : SH. VIKAS SURYAVANSHI, SR. DR O R D E R PER S.V. MEHROTRA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. CIT(A) DATED 19.03.2012 FOR A.Y. 2008-09. 2. THE ASSESSEE COMPANY, IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF ELECTRONIC/STATIC METERS AND PCB ASSEMBLY. IT HAD FILED ITS RETURN O F INCOME SHOWING TOTAL INCOME OF RS. 15,43,32,820/- AFTER CLAIMING DEDUCTI ON U/S 80IA OF RS. 6,61,42,639/-. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD CLAIMED DEDUCTION U/S 80IA, INTER-ALIA, ON FOLLOWING INCOME S, WHICH FORMED PART OF OTHER INCOME: - I) INTEREST ON FDS AND SDS RS. 19,58,783/- II) FREIGHT & INSURANCE RS. 38,23,866/- ITA NO. 1812/D/2012 2 IN RESPONSE TO SHOW-CAUSE NOTICE, THE ASSESSEE SUBM ITTED THAT FDRS HAVE BEEN MADE TOWARDS MARGIN MONEY AGAINST BANK GUARANT EES, WHICH WAS FURNISHED AGAINST TENDERS/PERFORMANCE GUARANTEES. REGARDING FREIGHT AND INSURANCE, IT WAS SUBMITTED THAT THE SAME REPRESENT ED DIFFERENCE OF AMOUNT CHARGED FROM CUSTOMERS AND ACTUAL EXPENDITURE. 3. THE AO DENIED THE ASSESSEES CLAIM FOR THE FOLLO WING REASONS: - I) ONLY THE INCOME WHICH IS DERIVED FROM THE INDUST RIAL UNDERTAKING IS ELIGIBLE FOR DEDUCTION U/S 80IB OF T HE ACT; II) AS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF RITESH INDUSTRIES, THAT FOR APPLICATION OF THE WORDS DERI VED FROM THERE MUST BE A DIRECT NEXUS BETWEEN THE PROFITS A ND GAINS WITH THE INDUSTRIAL UNDERTAKING. III) IN RESPECT OF IMPUGNED ITEMS, THERE WAS NO DIR ECT NEXUS BUT ONLY THE INCOMES WERE INCIDENTAL TO ASSESSEES BUSI NESS. IV) FROM THE FOLLOWING DECISIONS, ALSO DIRECTLY ON THE ISSUE, RELATING TO INTEREST ON FDRS, IT CAN BE INFERRED TH AT INTEREST RECEIVED FROM FDRS HAD NO DIRECT NEXUS WITH THE BU SINESS OF INDUSTRIAL UNDERTAKING: - (I) PANDIAN CHEMICALS LTD. VS. CIT, 262 ITR 278 (SC) (II) CAMBAY ELECTRIC SUPPLY INDUSTRIAL COMPANY LTD. VS. CIT, 113 ITR 84 (SC) (III) SHRI RAM HONDA POWER EQUIPMENT 289 ITR 475 4. HE, THEREFORE, DISALLOWED THE ASSESSEES CLAIM O F DEDUCTION U/S 80IA IN RESPECT OF INTEREST ON FDRS AND FREIGHT AND INS URANCE. 5. LD. CIT(A) DISMISSED THE ASSESSEES APPEAL FOLLO WING THE DECISION OF ITAT FOR THE A.Y. 2004-05. ITA NO. 1812/D/2012 3 6. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS F AR AS FREIGHT INSURANCE IS CONCERNED, THE SAME FORM PART OF SALE PRICE. IN THIS REGARD HE REFERRED TO PAGE 5 OF THE PAPER BOOK, WHEREIN THE T ERMS AND CONDITIONS DATED 07/04/07 RELATING TO SUPPLY OF KWH ENERGY MET ERS ON THE AJMER VIDHUYUT VITRAN NIGAM LTD. IS CONTAINED. HE REFERR ED TO CLAUSE (7) DEALING WITH FREIGHT INSURANCE WHICH READS AS UNDER: - 7. FREIGHT & INSURANCE : THE UNIT EX-WORKS PRICE MENTIONED AT CLAUSE NO. 2 OF THE PURCHASE ORDER IS EXCLUSIVE OF FREIGHT & INSURANCE CHARGES. YOU SHALL BE PAID FREIGHT & TRANSIT PLUS 30 DAYS STORAGE INSURANCE CHARGES EXTRA AT THE FIXED RATE OF RS. 12.00 PER METER ALONG WITH METER BOX FOR SAFE DELIVERY OF THE MATERIAL AT DESTINATION STORES. THE STANDARD INSURANCE CLAUSE OF THE GENERAL CONDITIONS OF CONTRACT WILL HOLD GOOD. THE INSURANCE OF MATERIAL IS TO BE ARRANGED BY YOU. IN CASE WHERE MATERIAL IS SUPPLIED BY THE SUPPLIER IN GOOD CONDITION ON HIS RISK AT THE DESIGNATED STORES OF THE NIGAM WITHOUT INSURANCE COVER, PAYMENT IN LIEU OF NOT GETTING THE MATERIAL INSURED SHALL NOT HOWEVER, BE RECOVERED/DEDUCTED FROM THE BILL OF THE SUPPLIER. IN SUCH CASES, UTMO ST CARE SHALL BE TAKEN BY THE CONSIGNEE WHILE RECEIVING AND VERIFYING CONSIGNMENT BEFORE ENDORSING ACKNOWLEDGEMENT OF RECEIPT OF THE MATERIAL ON THE CHALLAN/BILLS. 7. WITH REFERENCE TO THIS CLAUSE, LD. COUNSEL SUBMI TTED THAT WHATEVER AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE HAS BEEN T REATED AS TRADING RECEIPT AND THE EXPENDITURE OF FREIGHT AND INSURANC E HAS BEEN CHARGED ON IN THE PROFIT AND LOSS ACCOUNT. THE NET CREDIT BAL ANCE IN THIS ACCOUNT IS PART OF TRADING RECEIPT AND HENCE DERIVED FROM INDUSTRIA L UNDERTAKING. AS REGARDS INTEREST ON FDR, LD. COUNSEL REITERATED THE SUBMISSIONS MADE ITA NO. 1812/D/2012 4 BEFORE LOWER REVENUE AUTHORITIES THAT THE INTEREST WAS EARNED ON THE FDRS PLACED AS MARGIN MONEY WITH THE BANK. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE RECORD OF THE CASE. 9. WE FIND THAT BOTH THE ISSUES ARE SQUARELY COVERE D AGAINST THE ASSESSEE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2004- 05 VIDE IT(DELHI) NO. 1325/D/08, WHEREIN AS REGARDS INTEREST ON FD AND SECURITY DEPOSIT, TRIBUNAL HAS OBSERVED AS UNDER: - 7. AS REGARDS INTEREST ON FIXED DEPOSITS AND SECU RITY DEPOSITS, THE CONTENTION OF THE ASSESSEE IS THAT FI XED DEPOSITS WERE OBTAINED FOR THE PURPOSES OF BUSINESS AND, THEREFORE, DEDUCTION SHOULD BE AVAILABLE ON INTERES T RECEIVED FROM FDRS. NO DOUBT, FDRS WERE TAKEN FOR THE PURPOSES OF BUSINESS, HOWEVER, THE INTEREST RECEIVE D CANNOT BE TREATED TO HAVE BEEN DERIVED FROM INDUSTR IAL UNDERTAKING FOR THE PURPOSES OF SECTION 80-IA OF TH E ACT. HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. (SUPRA) HELD THAT THE WORDS DERIVED FROM IN SECTION 80-HH OF THE INCOME-TAX ACT, 1961 MUST BE UNDERSTOOD AS SOMETHING WHICH HAS A DIRECT OR IMMEDIATE NEXUS WITH THE ASSESSEES INDUSTRIAL UNDERTAKING. ALTHOUGH ELECTRICITY MAY BE REQUIRED FOR THE PURPOSES OF INDUSTRIAL UNDERTAKING, THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING. IF THE FACTS O F THE CASE ARE EXAMINED IN THE LIGHT OF THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. (SUPRA) WE FIND THAT THE INTEREST RECEIVED FROM FDR S, CANNOT BE TREATED TO HAVE DIRECT NEXUS WITH THE BUS INESS OF INDUSTRIAL UNDERTAKING. ALSO HONBLE SUPREME CO URT IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO . LTD. VS. CIT 113 ITR PAGE 84 (SC) HAS HELD THAT THE EXPRESSION DERIVED FROM HAS NARROWER IMPORT THAN THE EXPRESSION ATTRIBUTABLE TO. HONBLE DELHI HIGH C OURT IN THE CASE OF SHREE RAM HONDA POWER EQUIP. [289 IT R 475 (DEL.)] HELD THAT THE INTEREST EARNED ON FDRS I S ASSESSABLE UNDER THE HEAD OTHER SOURCES. EXAMINE D IN THE LIGHT OF DECISIONS OF HONBLE SUPREME COURT IN THE ITA NO. 1812/D/2012 5 CASE OF PANDIAN CHEMICALS LTD. (SUPRA); CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. (SUPRA); AND TH E DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SHREE RAM HONDA POWER EQUIP. (SUPRA) THE INTEREST O N FIXED DEPOSITS CANNOT BE TREATED TO HAVE BEEN DERIV ED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING. ACCOR DINGLY, THE ASSESSEE WILL NOT BE ENTITLED FOR DEDUCTION U/S 80-IA OF THE ACT IN RESPECT OF INTEREST ON FIXED DEPOSITS AND SECURITY DEPOSITS. 10. AS REGARDS FREIGHT AND INSURANCE TRIBUNAL HAS O BSERVED IN PARA 9 ARE AS UNDER: - 9. AS REGARDS FREIGHT AND INSURANCE, THE AMOUNT REPRESENTS THE EXCESS MONEY COLLECTED BY THE ASSESSEE FROM PARTIES. ANY INDIRECT OR INCIDENTAL PROFIT CANNOT BE REGARDED AS PROFIT EARNED OUT OF THE MAIN BUSINESS ACTIVITY. IN THE CASE OF CIT VS. ALPINE SOLVES LTD. (2005) 144 TAXMAN 67/276 ITR 92 (MP) THE ASSESSEE CLAIMED DEDUCTION ON AN AMOUNT WHICH WAS ALLEGEDLY RECEIVED BY THE ASSESSEE FROM ITS SUPPLIER AND PURCHASER NOT AS A PRICE/VALUE OF THE GOODS BUT IN THE NATURE OF COMPENSATION/DAMAGES ON ACCOUNT OF BREACH ALLEGED TO HAVE BEEN COMMITTED BY THEM QUA THE ASSESSEE IN THE PERFORMANCE OF THE CONTRACT, THE DEDUCTION WAS NOT HELD TO BE ADMISSIBLE SINCE SUCH SUM COULD NOT BE EQUATED WITH ACTUAL PROFIT WHICH THE ASSESSEE EARNED BY SALE OF FINISHED GOODS. EXCESS FREIGHT AND INSURANCE ARE INCIDENTAL PROFITS AND ARE ATTRIBUTABLE TO THE BUSINESS CARRIED ON BY THE UNDERTAKING, BUT CANNOT BE SAID TO HAVE BEEN DERIVED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING. THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. (SUPRA) THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80-IA OF THE ACT. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(APPEALS) CONFIRMING THE DISALLOWANCE OF DEDUCTION U/S 80-IA OF THE ACT IN RESPECT OF FREIGHT AND INSURANCE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1812/D/2012 6 11. RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL (SUPRA) IN ASSESSEES OWN CASE, THE ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.06.2012 SD/- SD/- (A.D. JAIN) JUDICIAL MEMBER (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 21.06.2012 *KAVITA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER DEPUTY REGISTRAR