ASIA PACIFIC MARBLES P. LTD, MUMBAI V. ITO 8(1), MUMBAI

ITA 8182/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75827 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-01-2014
• Assessment Year: misc
• Appeal Filed On: 26-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: SANJUKTA CHOW DHURY
• Keywords: Business income; Principle of natural justice; Additional evidence
• Section: 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A , MUMBAI BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 8182/M/2010 ASSESSMENT YEAR: 2005 - 06 M/S. ASIA PACIFIC MARBLES PVT. LTD. CTS 1971/72, NEAR LAXM I NARAYAN TEMPLE, AIRPORT SIDE, SERVICE ROAD, WESTERN EXPRESS HIGHWAY, VILE - PARLE (E), MUMBAI 400 099 PAN: AACCA2066R VS. ITO - 8(1) MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : S/ SHRI PRAMOD KUM AR PARIDA & SANJUKTA CHOWDHURY REVENUE BY : SHRI M.L. PERUMAL, D.R. DATE OF HEARING : 22.01. 201 4 DATE OF PRONOUNCEMENT : 19.03.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] DATED 30.10.10. THE GROUNDS OF APPEAL ARE REPRODUCED AS UNDER: 1. DISALLOWANCE OF INTEREST U/S. 80IB - RS.17,51,196/ - I ) A) THE LD. CIT(A) ERRED IN DENYING THE CLAIM U/S. 80IB IN SPITE OF THE FACT THAT AFTER HAVING ACCEPTED THE BELATEDLY FILED AUDIT REPORT U/R. 46A AND CALLING FOR REMAND REPORT, HE HAS FAILED TO CONSIDER THE FACT THAT WHILE APPRECIATING AN INCENTIVE PROVISION, TECHNICAL INFIRMITIES NEED TO BE DISCOUNTED. THEREF ORE, DENYING A GENUINE CLAIM ON TECHNICAL GROUND IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE WHEN IN EARLIER YEARS AND IN LATER YEARS, THE SAME HAD BEEN ALLOWED TO YOUR APPELLANT. ITA NO. 8182/M/2010 M/S. ASIA PACIFIC MARBLES PVT. LTD . 2 B ) THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANTS ACCOUNTS W ERE AUDITED BY AN ACCOUNTANT AS PRESCRIBED U/S. 288(2) AND AS PER THE REQUIREMENT OF SEC.80IA(7). C ) WITHOUT PREJUDICE TO ABOVE, REMOVING TECHNICAL DEFICIENCY WHETHER AT ASSESSMENT STAGE OR AT REMAND STAGE, THE ASSESSING OFFICER OUGHT TO HAVE APPRECIATED T HE MERITS WHICH WAS ALSO IGNORED BY THE CIT(A). II ) THE LD. CIT(A) ERRED IN DISALLOWING THE FOLLOWING CLAIMS AS NOT BEING ELIGIBLE U/S.80IB WITHOUT APPRECIATING THAT THESE RECEIPTS HAD CLOSE NEXUS WITH THE MANUFACTURING ACTIVITY OF THE APPELLANT. IN TEREST INCOME - RS.6,82,045/ - RENT RECEIVED - RS.1,70,000/ - FOREIGN EXCHANGE RS.3,52,360/ - THEREFORE, THE SAME OUGHT TO HAVE BEEN CONSIDERED. 2. L EVY OF PENAL INTEREST THE APPELLANT, ON MERITS, DENIES ITS LIABILITY TO PENAL INTEREST. 3 . THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CUTTING AND POLISHING OF ROUGH MARBLE BLOCKS AND FINALLY SELLING THE FINIS HED MARBLES. THE ASSESSEE HAS ITS FACTORY AT SILVASSA WHICH IS A BACKWARD AREA. THE ASSESSEE THUS TREATING ITSELF TO BE A MANUFACTURER CLAIMED DEDUCTIONS UNDER SECTION 80IB. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS AO) HOWEVER FOUND THAT THE AC TIVITY CARRIED OUT ON BY THE ASSESSEE WAS NOT MANUFACTURING ACTIVITY. FURTHER THAT THE ASSESSEE HAD NOT COMPLIED WITH THE PROVISIONS OF SUB SECTION (7) OF SECTION 80IA. THE AO THUS DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IB. THE AO FURTHER DISALLOWED THE INTER E ST INCOME OF RS.6,82,045/ - , RENT RECEIVED OF RS.1,70,000/ - AND FOREIGN EXCHANGE RATE FLUCTUATION OF RS.3,52,360/ - TREATING THE SAME AS NOT ARISING OUT OF THE MANUFACTURING ACTIVITY OF THE ASSESSEE AND HENCE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. ITA NO. 8182/M/2010 M/S. ASIA PACIFIC MARBLES PVT. LTD . 3 3. IN APPEAL, THE LD. CIT(A) OBSERVED THAT SO FAR THE FINDING OF THE AO THAT THE ACTIVITY CARRIED ON BY THE ASSESSEE WAS NOT A MANUFACTURING ACTIVITY WAS NOT CORRECT IN VIEW OF THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF ARIHANT TILES AND MARBLES P. LTD. 320 ITR 79 (SC). THE ASSESSEE ALSO ADDUCED ADDITIONAL EVIDENCE BEFORE THE LD. CIT(A) IN THE FORM OF AUDIT REPORT IN FORM 10CCB AND WHICH WAS ADMITTED ON RECORD AS ADDITIONAL EVIDENCE. THEREAFTER THE LD. CIT(A) CALLED FOR THE RECORD FROM THE AO REGARDING THE SAID AUDIT REPORT. THE AO REPORTED THAT THE FURNISHING OF AUDIT REPORT WAS MANDATORY AND SINCE THE ASSESSEE HAD NOT FURNISHED THE SAME DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE SAME SHOULD NOT B E CONSIDERED DURING THE APPELLATE PROCEEDINGS. THE LD. CIT(A) THEREAFTER OBSERVED THAT THE ASSESSEE HAD BEEN CONTINUOUSLY CLAIMING THE DEDUCTION UNDER SECTION 80IB FROM 2003 - 04 ONWARDS AND THE CLAIM OF THE ASSESSEE HAD BEEN CONSISTENTLY ALLOWED BY THE APP ELLATE AUTHORITIES. FOR THIS YEAR , THE CLAIM OF THE ASSESSEE WAS DISALLOWED AS HE DID NOT SUBMIT THE AUDIT REPORT IN THE SPECIFIED FORMAT. THE ASSESSEE WAS REQUIRED TO SUBMIT THE SAME DURING THE ASSESSMENT PROCEEDINGS AND THE SAME COULD NOT BE FURNISHED DURING THE APPELLATE PROCEEDINGS. HE THEREFORE UPHELD THE ORDER OF THE AO DISALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB. THE LD. CIT(A) FURTHER RELYING UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT 317 ITR 218 (SC) ALSO DISALLOWED THE CLAIM OF THE ASSESSEE RELATING TO INTEREST INCOME, RENTAL INCOME AND FOREIGN EXCHANGE RATE FLUCTUATION BEING NOT DERIVED FROM INDUSTRIAL UNDERTAKING OF THE ASSESSEE. AGGRIEVED FROM THE ORDER OF THE LD. CIT(A) THE ASSESSEE IS THUS IN APPEAL BEFORE US. 4 . WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND ALSO HAVE GONE THROUGH THE RECORDS. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS BROUGHT OUR ATTENTION TO THE FACT THAT THE CLAIM OF THE ASSES SEE UNDER SECTION 80IB OF THE ACT HAS CONSISTENTLY BEEN ALLOWED BY THE TRIBUNAL IN THE PAST ITA NO. 8182/M/2010 M/S. ASIA PACIFIC MARBLES PVT. LTD . 4 TREATING THE ASSESSEE AS A MANUFACTURER. THE FINDING S OF THE TRIBUNAL IN THIS RESPECT HAVE BEEN FURTHER UPHELD BY THE HONBLE HIGH COURT VIDE ORDERS DATED 22.02.10 AND 21.04.10 PASSED IN ITA NOS.1202/09 AND 1090/08 RESPECTIVELY. SO FAR THE REJECTION OF THE CLAIM OF THE ASSESSEE FOR THIS YEAR ON THE GROUND OF NON FILING OF AUDIT REPORT BEFORE THE AO IS CONCERNED, THE FULL BENCH OF THE HONBLE PUNJAB & HARYANA HIGH C OURT IN THE CASE OF CIT VS. PUNJAB FINANCIAL CORPORATION 254 ITR 6 , WHILE INTERPRETING THE PROVISIONS OF SIMILARLY WORDED SECTION 32AB(5) OF THE ACT HAS HELD THAT THE SUBMISSION OF AUDIT REPORT ALONG WITH THE RETURN IS NOT MANDATORY. THE AO HAS DISCRETI ON TO ENTERTAIN THE SAME DURING THE ASSESSMENT PROCEEDINGS ALSO. THE HONBLE GUJ A RAT HIGH COURT IN THE CASE OF ZENITH PROCESSING MILLS VS. CIT 219 ITR 721 , WHILE ADJUDICATING THE ISSUE RELATING TO FURNISHING OF AUDIT REPORT ALONG WITH RETURN OF INCOME U NDER SECTION 80J(6A) OF THE ACT HAS HELD THAT WHERE THE ASSESSEE WAS NOT GRANTED OPPORTUNITY BY THE AO TO FILE THE AUDIT REPORT DURING ASSESSMENT PROCEEDINGS AND THE REQUIREMENT OF FURNISHING OF THE AUDIT REPORT WAS MADE KNOWN TO THE ASSESSEE DURING THE PROCEEDINGS U/S 263 OF THE ACT ONLY , THE COMMISSIONER SHOULD HAVE AFFORDED AN OPPORTUNITY TO THE ASSESSEE TO FURNISH THE AUDIT REPORT AND THEN TO EXAMINE THE ADMISSIBILITY OF THE CLAIM IN THE LIGHT OF THE PROOF. IN THE CASE IN HAND ALSO , THE CLAIM OF THE ASSESSEE HAD BEEN REJECTED ONLY ON THE GROUND THAT THE AUDIT REPORT WAS NOT FILED ALONG WITH RETURN OF INCOME. THE ASSESSEE WAS NOT AS K ED BY THE AO TO FURNISH THE AUDIT REPORT DURING ASSESSMENT PROCEEDINGS. T HE ASSESSEE HAD FURNISHED THE AUDIT REPORT U/S 10CCB OF THE ACT AS ADDITIONAL EVIDENCE UNDER RULE 46A OF THE I.T. RULES AND THE SAME WAS ADMITTED BY THE CIT (A) , AS PER HIS OBSERVATIONS MADE IN PARAS 2.3.2 & 2.3.3 OF THE IMPUGNED ORDER, ACCEPTING THE EXPLANATION OF THE ASSESSEE REGARDING ITS FAILURE T O SUBMIT THE SAME BEFORE THE AO AND THE REMAND REPORT WAS ALSO CALLED FROM THE AO. THE AO HAD NOT REPORTED ANY THING ADVERSE AGAINST THE PROOF SUBMITTED BY THE ASSESSEE I.E. THE AUDIT REPORT IN QUESTION. IN VIEW OF THE LAW LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE ITA NO. 8182/M/2010 M/S. ASIA PACIFIC MARBLES PVT. LTD . 5 CASE OF CIT VS. PUNJAB FINANCIAL CORPORATION(SUPRA) AND THE HONBLE GUJ A RAT HIGH COURT IN THE CASE OF ZENITH PROCESSING MILLS VS. CIT (SUPRA), THE OTHERWISE ADMISSIBLE CLAIM OF THE ASSESSEE CANNOT BE DEFEATED FOR THIS TECHNICA L REASON AND HENCE THE SAME IS ACCORDINGLY ALLOWED. 5. SO FAR THE REJECTION OF THE CLAIM OF INTEREST INCOME AND RENT RECEIVED IS CONCERNED, THE LD. A.R. HAS BEEN FAIR ENOUGH TO ADMIT THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE VIDE THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA). SO FAR THE ISSUE RELATING TO INCOME ON ACCOUNT OF FOREIGN EXCHANGE RATE FLUCTUATION IS CONCERNED, THE LD. A.R. HAS RELIED UPON ANOTHER AUTHORITY OF THE HONBLE SUPREME COURT IN THE CASE OF O IL AND NATURAL GAS CORPORATION VS. CIT 322 ITR 180 (SC) WHEREIN THE HONBLE SUPREME COURT HAS OBSERVED THAT LOSS ON ACCOUNT OF FLUCTUATION IN RATE OF FOREIGN EXCHANGE IS AN ALLOWABLE DEDUCTION. THIS DECISION, IN OUR VIEW, IS OF NO HELP TO THE ASSESSE E, BUT TO THE R EVENUE ONLY. IF THE LOSS ON FLUCTUATION IS TO BE TREATED AS REVENUE LOSS THEN APPLYING THE SAME PRINCIPLE VICE VERSA I.E. THE INCOME ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IS ALSO TO BE TREATED AS TAXABLE BUSINESS INCOME. MOREOVER THE IN COME FROM FOREIGN EXCHANGE MAY BE INCIDENTAL TO THE BUSINESS ACTIVITY OF THE ASSESSEE BUT THE SAME CANNOT BE SAID TO BE DERIVED FROM THE MANUFACTURING ACTIVITY OF THE ASSESSEE. THIS ISSUE IS ACCORDINGLY DECIDED AGAINST THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.03. 201 4 . SD/ - SD/ - ( D. KARUNAKARA RAO ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUM BAI, DATED: 19.03.2014 * KISHORE ITA NO. 8182/M/2010 M/S. ASIA PACIFIC MARBLES PVT. LTD . 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.