SEJAL GLASS LTD., MUMBAI V. A.C.I.T. - 9(3), MUMBAI

ITA 8422/MUM/2011

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0141 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 04-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 12-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Cost of acquisition; Capital receipt; Capital expenditure
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SH. P.K. BANSAL VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2032/MUM/2011 (ASSESSM ENT YEAR- 2007-08) M/S SEZAL GLASS LTD. 201/202, ABHILASHA, 2 ND FLOOR, S.V. ROAD, KANDIVALI(W), MUMBAI -400067 PAN: AADCS8659M VS. ACIT RANGE-9(3 ), AAYAKAR BHAVAN, MUMBAI. (APPELLANT) (RESPONDENT) ITA NO. 8422/MUM/2011 (ASSESSMEN T YEAR- 2008-09) M/S SEZAL GLASS LTD. 201/202, ABHILASHA, 2 ND FLOOR, S.V. ROAD, KANDIVALI(W), MUMBAI -400067 PAN: AADCS8659M VS. ACIT RANGE-9(3 ), AAYAKAR BHAVAN, MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE REPRESENTED BY : SHRI PRAYAG JHA (AR) REVENUE REPRESENTED BY : SH. V. JUSTINE (SR DR) DATE OF HEARING : 03.08.2017 DATE OF ORDER : 29.08.2017 ORDER UNDER SECTION 254(1) OF INCOME-TAX ACT PER PAWAN SINGH JUDICIAL MEMBER ; 1. THESE TWO APPEAL BY ASSESSEE UNDER SECTION 253 OF I NCOME-TAX ACT (ACT) ARE DIRECTED AGAINST THE ORDERS OF LD. COM MISSIONER (APPEALS)- 20, MUMBAI DATED 24.12.2010 AND 22.09.2011 FOR ASSE SSMENT YEAR (AY) 2007-08 & 2008-09 RESPECTIVELY. THE ASSESSEE IN BOT H THE APPEALS HAVE RAISED COMMON GROUNDS OF APPEAL THAT LD. CIT(A) ERR ED IN CONFIRMING THE DISALLOWANCE IN RESPECT OF DEDUCTION U/S 80IB OF TH E ACT WITHOUT ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 2 APPRECIATING THE FACT THAT INCOME UNDER THE HEAD I NCOME FROM OTHER SOURCES WERE INCOME DIRECTLY DERIVED FROM INDUSTRI AL UNDERTAKING. 2. THE ASSESSEE IN APPEAL FOR AY 2008-09 RAISED THE AD DITIONAL GROUNDS OF APPEAL VIDE APPLICATION DATED 08.11.2013.THE ASSESS EE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL: A) CLAIM FOR DAMAGES OF RS.2,26,41,430/- IS NOT INCOME AND REDUCED FROM RETURNED AND ASSESSED INCOME THE LEARNED AO AND COMMISSIONER OF INCOME-TAX (A) E RRED IN ASSESSING AMOUNT OF RS.2,26,41,430/- AS INCOME OF THE APPELLA NT WITHOUT APPRECIATING THE FACT THAT THE SAID AMOUNT WAS NOT INCOME OF THE APPELLANT AND WAS MERELY REDUCTION IN THE COST OF MACHINERY P URCHASED AND INCORRECTLY SHOWN AS INCOME UNDER THE HEAD MISC. IN COME IN THE PROFIT AND LOSS ACCOUNT AND FURTHER THE ENTRIES IN THE BOO KS OF ACCOUNT IS NOT DETERMINATIVE OF INCOME OR EXPENSES UNDER THE INCOM E-TAX ACT AND HENCE, THE RETURNED AND ASSESSED INCOME OF THE APPE LLANT OUGHT TO BE REDUCED BY THE AMOUNT OF RS.2,26,41,430/-. 2. THE LD. CIT(A) ERRED IN OBSERVING THAT THE CLAIM FOR DAMAGES WAS CAPITAL EXPENDITURE INSTEAD THE SAME WAS MERELY CLA IM PUT BEFORE THE SUPPLIER OF THE MACHINERY AND IF AT ALL, WAS IN THE NATURE OF CAPITAL RECEIPT AND HENCE, THE AMOUNT OF RS.2,26,41,430/- ASSESSED AS INCOME OF THE APPELLANT MAY BE DIRECTED TO BE REDUCED FROM THE RE TURNED AND ASSESSED INCOME OF THE APPELLANT. 3. FOR APPRECIATION OF FACT, FIRST WE ARE REFERRING TH E FACT FOR AY 2008-09. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF DIFFERENT KIND OF GLAS SES. THE INDUSTRIAL UNDERTAKING OF ASSESSEE IS SITUATED AT DAMAN. THE A SSESSEE FILED RETURN OF INCOME FOR RELEVANT AY ON 30.09.2008 AND CLAIMED DE DUCTION U/S 80IB AT RS. 3,74,86,262/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 30.12.2010. THE AO WHILE PASSING THE ASSESSMENT ORD ER DISALLOWED RS. 3,74,86,264/- DEDUCTION CLAIMED U/S 80IB OF THE ACT HOLDING THAT INCOME NOT QUALIFIED FOR DEDUCTION U/S 80IB OF THE ACT. ON APPEAL BEFORE THE LD. ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 3 CIT(A), THE DEDUCTION, ON ACCOUNT OF EXPENDITURE OF RS. 46,01,279/-, OTHER DISCOUNT OF RS. 26,800/- AND DISCOUNT OF FORE IGN BROKING OF RS.93,479/- WAS ALLOWED AND REST OF THE DISALLOWAN CE WERE CONFIRMED . FURTHER, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. SIMILARLY IN ITA NO. 8422/MUM/2011FOR AY 2007-08, T HE ASSESSING OFFICER (AO) NOT ALLOWED THE DEDUCTION OF RS. 1,45, 60,052/- U/S 80IB OF THE ACT. ON APPEAL BEFORE THE LD. CIT(A), THE ACTIO N OF AO WAS CONFIRMED IN TOTALITY. THUS, FOR BOTH THE AYS, THE APPEALS A RE FILED BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASS ESSEE ARGUED THAT THE ASSESSEE-COMPANY IS ENTITLED FOR DEDUCTION U/S 80IB AS AY 2007-08 WAS 5 TH YEAR AND AY 2008-09 WAS 6 TH YEAR IN SUCCESSION OF ITS CLAIM U/S 80IB OF THE ACT. THE ASSESSEE BIFURCATED ITS INCOME IN T WO PART I.E. SALES INCOME AND OTHER INCOME. THE OTHER INCOME OF THE A SSESSEE COMPRISES OF VARIOUS ITEM WHICH ARE DIRECTLY RELATING TO THE MANUFACTURING ACTIVITIES WHICH CONSISTS OF INTEREST, GAIN DUE TO FOREIGN EXC HANGE DIFFERENCE, MISCELLANEOUS INCOME, CONSULTANCY CHARGES, DISCOUNT RECEIVED, SUNDRY ADVANCES WRITTEN BACK, SUNDRY CREDIT BALANCE BACK, DISCOUNT ON FORWARD BOOKING AND CLAIM FOR DAMAGE AND DIVIDEND ON SALE. THE COMPLETE DETAILS ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 4 OF EACH ITEM WERE FURNISHED TO THE AO. THE AO SUMMA RILY REJECTED THE CONTENTION OF ASSESSEE. THE LD. CIT(A) CONFIRMED TH E ACTION OF AO ON THE SIMILAR GROUND. IN SUPPORT OF ADDITIONAL GROUND OF APPEAL RAISED FOR AY 2008-09, IT WAS ARGUED THAT ALL THE FACTS RELATED W ITH THE GROUND OF APPEAL ALREADY EXIST ON RECORD. THE LD AR FURTHER SUBMITS THAT THE CLAIMS OF ASSESSEE FOR WHICH THE DEDUCTION WAS CLAIMED ALREAD Y CONSIST OF THE RELIEF CLAIMED IN THE ADDITIONAL GROUND OF APPEAL FOR MAKI NG SPECIFIC CLAIM. THE INCOME EARNED BY ASSESSEE WAS DIRECT AND NOT TH E INCIDENTAL TO THE BUSINESS IN SUPPORT OF THE SUBMISSION, THE LD. AR O F THE ASSESSEE IS RELIED UPON THE DECISION OF TRIBUNAL IN ASSESSEES OWN CAS E FOR AY 2006-07 IN ITA NO. 1661/MUM/2010 DATED 23 RD SEPTEMBER 2011. ON THE OTHER HAND THE LEARNED DR FOR THE REVENUE SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. THE LD DR FURTHER ARGUED THAT THE ASSESSEE H AS CLAIMED THE DEDUCTION WHICH ARE NOT EARNED FROM THE ELIGIBLE BU SINESS ACTIVITIES OF THE ASSESSEE. THE ASSESSEE IS ELIGIBLE ONLY FOR THOSE D EDUCTIONS WHICH ARE DERIVED FROM THE BUSINESS ACTIVITIES OF THE ASSESSE E. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN ORDER T O CLAIM THE DEDUCTION IN RESPECT OF PROFIT AND GAINS DERIVED FROM THE BUSINE SS OF AN INDUSTRIAL UNDERTAKING, UNDER SECTION 80 IB, THE PROFIT AND GA INS SHOULD NOT GO BEYOND THE FIRST-DEGREE. IN OTHER WORDS THERE MUST BE A DIRECT NEXUS BETWEEN THE GENERATION OF PROFIT AND GAINS AND THE SOURCE OF PROFIT AND ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 5 GAIN, THE LATTER MUST DIRECTLY BEING DIRECTLY RELAT ABLE TO THE BUSINESS OF THE ASSESSEE. ON PERUSAL OF RECORD WE FIND THAT THE ASS ESSEE CLAIMED FOLLOWING CLAIM FOR DEDUCTION UNDER SECTION 80IB, W HICH WE HAVE SUMMARIZED IN THE FOLLOWING TABLE; NATURE OF INCOME AY-2007-08 DISALLOWED BY AO AY- 2008-09 DISALLOWED BY AO ALLOWED BY CIT(A) IN AY 2008-09 INTEREST RECEIVED RS.3,43,067/- RS. 8,72,943/- X GAIN DUE TO FOREIGN EXCHANGE DIFFERENCE RS. 11,7 8,421/- RS. 46,01,279/- YES MISCELLANEOUS INCOME RS. 65,80,656/- RS. 55,45,977/ X CENTRAL SALE TAX LIABILITY WRITTEN BACK RS.11,25,152/- ------- X CASH DISCOUNT RS. 2,76,497/- RS. 26,800/- YES CONSULTANCY CHARGES RS. 10,75,540/- RS. 22,70,159/- X ADMINISTRATIVE CHARGES RS. 32,00,000/- ------- X SUNDRY ADVANCES WRITTEN BACK RS. 7,13,846/- RS. 9,2 1,911/- X SUNDRY CREDIT BALANCE WRITTEN BACK RS. 51,873/- RS. 4,97,284/- X DISCOUNT ON FORWARD BOOKING -------- RS. 93,479/- Y ES DIVIDEND ON SHARES RS. 15,000/- RS. 15,000/- X CLAIM FOR DAMAGE -------- RS. 2264 1430/- 6. WHILE COMPARING THE CLAIM IN BOTH THE ASSESSMENT YE ARS, WE FIND THAT LEARNED COMMISSIONER (APPEALS) ALLOWED DEDUCTION IN RESPECT OF GAIN DUE TO FOREIGN EXCHANGE DIFFERENCE, OTHER DISCOUNT RECEIVED AND DISCOUNT ON FORWARD BOOKING IN ASSESSMENT YEAR 2008-09. HOWE VER, THE SIMILAR RELIEF WITH REGARD TO FOREIGN EXCHANGE DIFFERENCE A ND CASH DISCOUNT WAS DISALLOWED / SUSTAINED BY COMMISSIONER (APPEALS) FO R ASSESSMENT YEAR ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 6 2007-08 . THE ASSESSING OFFICER IN BOTH THE YEARS DISALLOWED THE DEDUCTION UNDER SECTION 80IB HOLDING THAT INCOME SHOULD DIREC TLY ARISE FROM THE INDUSTRIAL UNDERTAKING. THE INCOMES CLAIMED BY THE ASSESSEE ARE ONLY ATTRIBUTABLE TO THE INDUSTRIAL UNDERTAKING AND NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING ACTIVITY. FOR ASSESSMENT YEA R 2007-08 THE LEARNED COMMISSIONER(APPEALS) CONFIRMED ALL THE DISALLOWANC ES HOLDING THAT THE INTEREST IS NOT FROM MANUFACTURING ACTIVITIES AND T HAT NO MATERIAL HAVE BEEN PLACED BEFORE HIM TO SHOW WHETHER THE RECEIPTS OF VARIOUS CLAIM HAVE DIRECT NEXUS WITH THE MANUFACTURING ACTIVITIE S OR TURNOVER OF THE ELIGIBLE BUSINESS FOR THE YEAR UNDER CONSIDERATION. HOWEVER, FOR THE YEAR 2008-09 THE LEARNED COMMISSIONER (APPEALS) EXAMINED EACH AND EVERY CLAIM BEFORE ALLOWING OR CONFIRMING VARIOUS CLAIMS. AS WE HAVE ALREADY REFERRED THAT LEARNED COMMISSIONER (APPEALS) ALLOWE D DEDUCTION IN RESPECT OF GAIN DUE TO FOREIGN EXCHANGE DIFFERENCE, OTHER DISCOUNT RECEIVED AND DISCOUNT ON FORWARD BOOKING IN ASSESSM ENT YEAR 2008-09 AND REST OF THE DISALLOWANCES OF DEDUCTIONS WERE CO NFIRMED. THE REVENUE HAS NOT FILED ANY FURTHER APPEAL IN ALLOWING THE CL AIM RELATED WITH GAIN DUE TO FOREIGN EXCHANGE DIFFERENCE, OTHER DISCOUNT RECEIVED AND DISCOUNT ON FORWARD BOOKING IN ASSESSMENT YEAR 2008-09 THUS THE ORDER ATTAINS FINALITY. 7. CONSIDERING, THE FACT THAT THE ASSESSEE WAS ALLOWED BY LEARNED COMMISSIONER (APPEALS ) IN HIS ORDER DATED 22.09.20 11, THE GAIN DUE TO ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 7 FOREIGN EXCHANGE DIFFERENCE, OTHER DISCOUNT RECEIVE D AND DISCOUNT ON FORWARD BOOKING IN ASSESSMENT YEAR 2008-09, THE AS SESSEE IS ALLOWED GAIN DUE TO FOREIGN EXCHANGE DIFFERENCE OF RS.11,78 ,067/- OTHER DISCOUNT RECEIVED OF RS. 2,76,497/- FOR ASSESSMENT YEAR 2007-08. 8. WE HAVE ALSO SEEN THE ORDER OF COORDINATE BENCH OF THE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 IN ITA NO. 1661/M/ 2010 DATED 23.09.2011, WHEREIN VARIOUS DEDUCTIONS WERE NOT ALL OWED UNDER SECTION 80IB ACT. THE TRIBUNAL ALLOWED VARIOUS DEDUCTIONS U NDER SECTION 80IB OF HOLDING AS UNDER : 7. WE HAVE HEARD THE RIVAL SUBMISSION S. WE WILL DEAL WITH THE INDIVIDUAL ITEMS OF INCOME WHICH WERE HELD BY THE CIT(A) TO BE NOT I NCOME DERIVED FROM 4 ITA NO.1661/MUM/2010(A.Y. 2006-07) THE BUSINESS OF THE ELIGIBLE UNDERTAKING FOR COMPUTING DEDUCTION UNDER SECTION 8 0 IB OF THE ACT. (I) INSURANCE RECEIPT:- ACCORDING TO THE ASSESSEE, THE SUM OF RS.3,58,577 WAS INSURANCE IS IN FACT PART AND PARCEL OF THE SALES O F ITS MANUFACTURING ACTIVITY. THE STAND OF THE LD. COUNSEL FOR THE ASSESSEE BEFOR E US WAS THAT WHEN IT SELLS ITS PRODUCT THE SAME INCLUDES THE COST OF THE GLASS AS WELL AS THE INSURANCE ON THE GLASS SOLD TO THE CUSTOMERS. THE CUSTOMER PAYS THE COST OF THE GLASS PLUS THE INSURANCE PREMIUM PAID BY THE ASSESSEE AND FOR ACCOUNTING PURPOSES ASSESSEE SHOWS INSURANCE RECEIPTS SEPARATELY. ACCOR DING TO THE ASSESSEE THIS ALSO IS PART OF THE SALE PROCEEDS OF GLASS AND ELIG IBLE FOR DEDUCTION UNDER SECTION 80 IB OF THE ACT. THE ASSESSEE SUBMITS THAT THE AMOUNT IS CREDITED TO THIS SEPARATE ACCOUNT INSTEAD OF CONSIDERING THE SA ME AS PART OF ACTUAL SALES VALUE SINCE THE SAME ARE SEPARATELY CHARGED. THE AS SESSEE SUBMITS THAT THIS RECEIPT IS DIRECTLY RELATED TO THE MANUFACTURING AC TIVITY AND HENCE, DEDUCTION RIGHTLY CLAIMED U/S.8OLB OF THE ACT AND THE SAME MA Y BE ALLOWED. WITHOUT PREJUDICE, IT WAS SUBMITTED THAT THIS IS NOT INCOME AS SUCH BUT MERELY RECOUPMENT OF THE COST THAT THE APPELLANT INCURRED ON BEHALF OF THE CUSTOMERS AND THUS ENTITLED TO RELIEF U/S.801B OF THE ACT. WE ARE UNABLE TO ACCEPT THE STAND OF THE ASSESSEE IN THIS REGARD. THE INSURANCE PREMIUM PAID BY THE ASSESSEE WOULD BE SHOWN AS AN EXPENDITURE IN THE P& L ACCOUNT AND WHEN THIS EXPENSES ARE RECOUPED FROM THE CUSTOMER THE SAME IS SHOWN IN THE CREDIT SIDE OF THE P&L ACCOUNT. THUS THE INSURANCE RECEIPT CANN OT BE TREATED AS PART OF THE INCOME OF THE ELIGIBLE UNDERTAKING. THE ASSESSE E IS SILENT ON CLAIMING THE INSURANCE PREMIUM PAID AS EXPENSES. IT IS NOT THE C ASE OF THE ASSESSEE THAT IF THE INSURANCE RECEIPTS ARE NOT TREATED AS INCOME DE RIVED FROM THE UNDERTAKING, ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 8 THE CORRESPONDING DEBIT TO THE PROFIT AND LOSS ACCO UNT SHOULD BE IGNORED WHICH WILL GO TO INCREASE THE PROFITS FROM THE INDU STRIAL UNDERTAKING. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CLAIM OF THE ASSESSEE WAS RIGHTLY REJECTED BY THE REVENUE AUTHORITIES. (II) OCTROI RECEIPTS: THE ASSESS EE CLAIMED THAT A SUM OF RS.5,39,399 WAS CHARGED TO THE CUSTOMERS TOWARDS OCTROI AND WAS PAR T AND PARCEL OF THE SALES INVOICE RAISED ON THE CUSTOMERS. IT WAS CLAIMED BY THE ASSESSEE THAT THIS WAS VERY MUCH RELATED TO THE MANUFACTURING ACTIVITY OF THE ASSESSEE. THE ASSESSEE SUBMITS THAT UPON TRANSIT OF GLASS ARTICLES TO THE CUSTOMERS, WHATEVER OCTROI IS CHARGED OR PAID, THE SAME IS RECOVERED FROM THE CUS TOMERS AND HENCE, IS SEPARATELY SHOWN IN THE SALE INVOICE HOWEVER, THE S AME IS SHOWN IN A SEPARATE ACCOUNT AND NOT AS PART OF THE SALES VALUE. THE ASS ESSEE SUBMITS THAT THIS RECEIPT IS DIRECTLY RELATED TO THE MANUFACTURING AC TIVITY AND HENCE, DEDUCTION RIGHTLY CLAIMED U/S.801B OF THE ACT AND THE SAME MA Y BE ALLOWED. WITHOUT PREJUDICE, IT WAS CLAIMED THAT THIS IS NOT INCOME A S SUCH BUT MERELY RECOUPMENT OF THE COST THAT THE APPELLANT INCURRED ON BEHALF OF THE CUSTOMERS AND THUS ENTITLED TO RELIEF U/S.801B OF THE ACT. WE ARE OF THE VIEW THAT OCTROI RECEIPTS ALSO STAND ON THE SAME FOOTINGS AS THAT OF INSURANCE RECEIPTS DISCUSSED IN (I) ABOVE. IN RESPECT OF BOTH (I) & (I I) THERE CANNOT BE ANY ELEMENT OF INCOME. EVEN ASSUMING THE ASSESSEE EARNE D INCOME ON THE ABOVE TWO ACTIVITIES IT CANNOT BE CONSIDERED AS INCOME DE RIVED FROM THE BUSINESS OF MANUFACTURING AND SALE OF GLASS ARTICLES. (III) INSURANCE CLAIM OF RS.14,8 6,649 IS STATED TO BE THE SUM RECEIVED FROM THE INSURANCE COMPANY, AGAINST THE CLAIMS LODGED BY IT IN RESPECT OF THE BREAKAGES/DAMAGES THAT OCCUR WHILE THE GOODS ARE IN TRANSIT EITHER ON PURCHASE ACCOUNT OR ON SALE ACCOUNT. THE ASSESSEE S UBMITS THAT INSURANCE RECEIVED/RECEIVABLE IS DEFINITELY PART & PARCEL OF THE BUSINESS ACTIVITY OF THE UNDERTAKING AND HAS DIRECT BEARING ON THE INCOME OF THE UNDERTAKING. WITHOUT PREJUDICE, THE APPELLANT SUBMITS THAT THE AMOUNTS RECEIVED AGAINST BREAKAGES/DAMAGES WOULD GO TO REDUCE THE COST OF PU RCHASES OF MANUFACTURING OF THE GLASS ARTICLES AND., HENCE, HA S DIRECT CONNECTION WITH THE INCOME OF THE UNDERTAKING AND HENCE, THE SAME WOULD FORM PART OF ELIGIBLE PROFITS OF THE UNDERTAKING AND THUS, THE DEDUCTION OUGHT TO BE ALLOWED IN RESPECT OF THE SAME. AS FAR AS INSURANCE CLAIM RECEIV ED BY THE ASSESSEE ON ACCOUNT OF DAMAGE OF THE GOODS IN TRANSIT HAS TO BE CONSIDERED AS INCOME DERIVED FROM THE ELIGIBLE BUSINESS. THE DECISION OF THE HON'BLE BOMBAY HIGH C OURT IN THE CASE OF PFIZER LTD. 330 ITR 62 (BOM) AS WELL AS THE DECISIO N OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SPORTING INDIA LTD ., 324 ITR 283 HAVE TAKEN THE VIEW THAT AMOUNT RECEIVED FROM INSURANCE COMPANY FOR LOSS OF GOODS HAS TO BE CONSIDERED AS INCOME ELIGIBLE FOR D EDUCTION UNDER SECTION 80 IA/(80 HHC) OF THE ACT. FOLLOWING THE SAID DECISION THE CLAIM OF THE ASSESSEE IN THIS REGARD HAS TO BE ACCEPTED. (IV) MISCELLANEOUS INCOME OF RS.96,594 IS IN 2 PARTS I.E. RS.50,000 BEING ADVANCE AMOUNT RECEIVED FROM CUSTOMER M/S. THAKURDW AR JEWELLERS AND ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 9 FORFEITED SINCE THE ORDER WAS CANCELLED BY THEM AND THE ASSESSEE HAD ALREADY PROCESSED THE ORDER AS PER THEIR SPECIFICATION / RE QUIREMENT AND HENCE, THE SAME WOULD DEFINITELY BE FORMING PART OF THE INCOME OF THE UNDERTAKING. THE SECOND PART I.E. BALANCE AMOUNT OF RS.46,594 WAS AM OUNT OF INTEREST RECEIVED ON DELAYED PAYMENT RECEIVED FROM THE CUSTOMER M/S. S. P. FABRICATORS AND THE DELAYED PAYMENT FROM CUSTOMER IS ACTUALLY TO BE CONSIDERED AND TREATED AS PART AND PARCEL OF THE SALES CONSIDERATION AND THUS DEDUCTION U/S.801B OF THE ACT IS ALLOWABLE IN RESPECT OF THE TOTAL AMOUNT CRE DITED TO MISCELLANEOUS INCOME OF RS.96,594. WE HAVE CONSIDERED THE CLAIM OF THE ASSESSEE. THE FIRST PART IS A SUM OF RS. 50,000/- BEING AMOUNT RECEIVED FROM CUSTOMERS AS AD VANCE WHICH WAS FORFEITED BY THE ASSESSEE FOR CANCELLATION OF THE O RDER. THIS CANNOT BE CONSIDERED AS INCOME DERIVED FROM THE ELIGIBLE BUSI NESS AS IT HAS NO NEXUS WITH THE PROFIT GENERATED FROM MANUFACTURE OF ARTIC LE OR THING. THE SECOND PART IS A SUM OF RS. 46,594/-. THIS REPRESENTS INTE REST ON DELAYED PAYMENTS BY CUSTOMERS. THIS HAS TO BE CONSIDERED AS INCOME DERI VED FROM THE INDUSTRIAL UNDERTAKING. THE DECISION OF THE HON'BLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. GRINDWELL NORTON LTD ., 318 ITR 172(BOM) AND THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PATELA COTGIN INDUSTRIES PVT. LTD., VS. CIT , 303 ITR 411(P&H) SUPPORTS THE PLEA OF THE ASSESSE E THAT SUCH INCOME HAS TO BE CONSIDERED AS INCOME DERIVED FROM THE IND USTRIAL UNDERTAKING. THE CLAIM OF THE ASSESSEE IS THUS PARTLY ACCEPTED. (V) GAIN ON ACCOUNT OF FOREIGN EX CHANGE DIFFERENCE OF RS.6,53,804 IS STATED TO BE COMPRISING OF SMALL PETTY AMOUNTS RECEIVED/RE CEIVABLE FROM THE CUSTOMERS OR PAID/PAYABLE TO THE PARTIES ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IN THE CURRENCY EITHER WHILE MAKING ACT UAL PAYMENTS FOR PURCHASES OR ON ACTUAL RECEIPT FROM THE CUSTOMERS ON SALES MA DE TO THEM. THE ASSESSEE SUBMITS THAT THE AMOUNT IS DIRECTLY RELATED TO THE EARNING OF THE INCOME OF THE UNDERTAKING AND PART AND PARCEL OF THE SALES PROCEE DS AND / OR REDUCTION IN PURCHASE PRICE OF GLASS AND HENCE, THE DEDUCTION U/ S.8OLB IS ALLOWABLE IN RESPECT OF THE SAID AMOUNT. THE CLAIM OF THE ASSESSEE THAT TH IS WOULD BE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING BEING PART OF THE SALE PROCE EDS OF THE ELIGIBLE UNDERTAKING IS SUPPORTED BY THE DECISION OF THE HON 'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KAMPER INDUSTRIES INDIA LTD ., 326 ITR 455(BOM), WHEREIN IT WAS HELD THAT THEY ARE PART OF SALE PROC EEDS AND HAVE TO BE CONSIDERED AS INCOME DERIVED FROM THE ELIGIBLE BUSI NESS. THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION. (VI) CASH DISCOUNT RECEIVED OF RS.2,66,125 IS ON PURCHASES FROM ONE OF THE SUPPLIERS M/S. ASAHI INDIA LIMITED AND SINCE THE AS SESSEE MADE EARLY PAYMENT TO THE SAID PARTY, DISCOUNT WAS RECEIVED, W HICH IN EFFECT, WOULD GO TO REDUCE THE PURCHASE COST OF THE ASSESSEE AND HENCE, ELIGIBLE FOR DEDUCTION U/S.8OLB OF THE ACT. CASH DISCOUNT RECEIVED IS ALSO I NCOME DERIVED FROM THE ELIGIBLE BUSINESS AS THEY WOULD BE IN THE NATURE OF REDUCTION IN THE COS T OF GOODS SOLD BY THE ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 10 ASSESSEE. THE AO IS THEREFORE, DIRECTED TO ALLOW TH E CLAIM OF THE ASSESSEE FOR DEDUCTION IN THIS REGARD AS CLAIMED BY THE ASSESSEE . (VII) SUNDRY ADVANCES WRITTEN BACK OF RS.19,26,135 IS THE AGGREGATE OF VARIOUS AMOUNTS RECEIVED AS ADVANCE FROM VARIOUS CU STOMERS AGAINST ORDERS FOR PURCHASE OF GLASS MANUFACTURED BY IT BUT LATER CANCELLED BY THE CUSTOMERS WHEREUPON THE ASSESSEE DOES NOT REFUND THE ADVANCE AMOUNT. HENCE, THE WRITE BACK OF ADVANCES RECEIVED IS CLAIMED BY THE A SSESSEE TO BE PART AND PARCEL OF THE ACTIVITY OF THE UNDERTAKING AND HENCE , THE DEDUCTION IS RIGHTLY CLAIMED ULS.8OLB OF THE ACT AND THE SAME OUGHT TO B E ALLOWED. IN OTHER WORDS, IT WAS CLAIMED THAT THE ADVANCES WRITTEN BAC K COULD BE TREATED AND CONSIDERED AS PART OF SALE CONSIDERATION SINCE TO T HAT EXTENT IT CAN BE SAID THAT THE APPELLANT HAS SOLD THE GOODS. (VIII ) SUNDRY CREDIT BALANCES WRITTEN BACK OF RS.13,83,326 REPRESENT THE CREDITS ON ACCOUNT OF VARIOUS SUPPLIERS AS A RESULT OF SHORT PAYMENTS MADE TO THEM FOR QUALITY ISSUES, ETC. IT IS THE CLAIM OF TH E ASSESSEE THAT THESE ARE DIRECTLY RELATED TO THE BUSINESS OF THE UNDERTAKING AND IN FACT, WOULD GO TO REDUCE THE COST OF PURCHASES OF THE APPELLANT. THE ASSESSEE THEREFORE SUBMITS THAT THE SUNDRY CREDIT BALANCES WRITTEN BACK WOULD FORM PART AND PARCEL OF THE ELIGIBLE BUSINESS INCOME FOR THE PURPOSES OF DEDUCT ION U/S.801B OF THE ACT. WE HAVE CONSIDERED THE SUBMISSIO NS ON ITEMS (VII) AND (VIII) VIZ., SUNDRY ADVANCES WRITTEN BACK AND SUNDRY CREDIT BALANCES WR ITTEN BACK. AS FAR AS ADVANCES WRITTEN BACK IS CONCERNED THEY CANNOT BE C ONSIDERED AS INCOME DERIVED FROM THE ELIGIBLE BUSINESS AS THEY HAVE NO NEXUS WITH THE INCOME FROM THE INDUSTRIAL UNDERTAKING. IT IS WINDFALL WHI CH HAS NOTHING TO DO WITH THE INCOME FROM THE ELIGIBLE UNDERTAKING. AS FAR AS SUNDRY CREDIT BALANCES WRITTEN BACK IS CONCERNED THEY IN THE NATURE OF BUS INESS INCOME AND REPRESENT SHORT PAYMENTS MADE BY THE ASSESSEE TO ITS SUPPLIER S WHICH WOULD RESULT IN REDUCTION OF COST OF GOODS SOLD BY THE ASSESSEE. TH EREFORE, THEY HAVE TO BE CONSIDERED AS INCOME DERIVED FROM THE ELIGIBLE BUSI NESS. THUS THE CLAIM OF THE ASSESSEE ON ITEM (VIII) IS ALLOWED. (IX) ADMINISTRATIVE CHARGES OF RS.36,00,000 /- IS CLAIMED BY THE ASSESSEE TO BE IN THE NATURE OF REIMBURSEMENT OF THE EXPENSES D EBITED TO THE PROFIT AND LOSS ACCOUNT AND INCURRED ON BEHALF OF THE OTHER GR OUP CONCERN OF THE APPELLANT M/S. SEJAL FLOAT GLASS LTD. THE ASSESSEE SUBMITS THAT THE OTHER GROUP CONCERN HAS BEEN USING THE ADMINISTRATIVE FAC ILITIES AND OTHER SERVICES OF THE ASSESSEE AND HENCE, A MUTUAL UNDERSTANDING I S ARRIVED AT FOR CHARGING LUMP SUM AMOUNT IN RESPECT OF THE UTILIZATION OF VA RIOUS ADMINISTRATIVE FACILITIES OF THE APPELLANT. THE ASSESSEE CLAIMS TH AT THE ADMINISTRATIVE CHARGES RECOVERED FROM THE GROUP CONCERN IS BASICALLY IN TH E FORM OF REIMBURSEMENT OF THE VARIOUS EXPENSES INCURRED BY THE ASSESSEE AN D HENCE, WOULD GO TO REDUCE THE OVERALL EXPENSES OF THE APPELLANT AND TH EREBY INCREASE THE PROFITS OF THE ELIGIBLE UNDERTAKING. THE ASSESSEE SUBMITS T HAT THE AMOUNT RECOVERED FROM THE GROUP CONCERN IS PART AND PARCEL OF THE BU SINESS PROFITS ELIGIBLE FOR CLAIM OF DEDUCTION ULS.801B OF THE ACT AND HENCE, T HE ASSESSEE SHOULD BE ALLOWED THE DEDUCTION ACCORDINGLY . ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 11 WE HAVE CONSIDERED THE RIVAL SUB MISSIONS. IT IS THE CLAIM OF THE ASSESSEE THAT THE AMOUNT IN QUESTION IS REIMBURSEMENT OF EXPENSES BY THE GROUP CONCERN OF THE ASSESSEE OF EXPENSES INCURRED BY THE ASSESSEE O N BEHALF OF THE GROUP CONCERN. IN OUR VIEW THE CLAIM OF THE ASSESSEE NEED S TO BE EXAMINED BY THE AO AFRESH. FOR THIS PURPOSE THE MATTER IS REMANDED TO THE AO. IF THE ADMINISTRATIVE CHARGES INCURRED BY THE ASSESSEE ON BEHALF OF THE GROUP CONCERN IS DEBITED IN THE P&L ACCOUNT THEN TO THAT EXTENT THE DEBIT TO THE P&L ACCOUNT HAS TO BE REMOVED, WHICH WILL RESULT IN INCREASE IN INCOME OF THE ELIGIBLE INDUSTRIAL UNDERTAKING. IF ON VERIFICA TION, THE CLAIM OF THE ASSESSEE OF DEBIT OF THE IMPUGNED EXPENSES TO THE PROFIT AND LOSS ACCOUNT IS FOUND TO BE CORRECT THEN THE AO WILL ALLOW APPROPRIATE RELIE F TO THE ASSESSEE. (X) INTEREST OF RS.32,000 ON TRADE DEPOSITS REPRESENTS INTEREST ON SECURITY DEPOSIT WITH TWO OF ITS MAIN SUPPLIERS OF RAW MATER IAL I.E. MIS. ASAHI INDIA LTD. & MIS. SAINT GOBAIN. THE DEPOSITS HAVE BEEN TA KEN BY THE SUPPLIERS FOR SECURITY OF THE RAW MATERIAL SUPPLIED AS ALSO TIMEL Y PAYMENTS MADE TO THEM IN RESPECT OF THE RAW MATERIAL SUPPLIED. THE ASSESSEE SUBMITS THAT IT HAS RECEIVED INTEREST ON THE DEPOSITS SO MADE WITH THE SUPPLIERS AND THIS WOULD THUS GO TO REDUCE THE PURCHASE COST OF THE RAW MATE RIALS SINCE THE SECURITY DEPOSIT IS GIVEN TO THE SUPPLIERS OF THE RAW MATERI ALS. THE ASSESSEE THUS SUBMITS THAT THE SAID INCOME HAS DIRECT BEARING WIT H THE ACTIVITY OF THE INDUSTRIAL UNDERTAKING AND HENCE, ELIGIBLE FOR DEDU CTION UNDER SECTION 8OLB OF THE ACT. (XI) INTEREST OF RS.1,72,593 ON M ARGIN MONEY IS CLAIMED TO BE IN RELATION TO IMPORT OF RAW MATERIALS FOR WHICH IT HAD TO TAKE LE TTER OF CREDIT (LC) FACILITY FROM THE BANKS. FOR TAKING LC FACILITY, THE ASSESSE E WAS REQUIRED TO PLACE MARGIN MONEY WITH THE BANKS. IT IS ON THIS MARGIN M ONEY THAT THE BANK HAS PAID INTEREST TO THE ASSESSEE, WHICH ACCORDING TO T HE ASSESSEE IS NOTHING BUT ACTUALLY GOES TO REDUCE THE MANUFACTURING COST SINC E THE MARGIN MONEY IS LINKED WITH THE COST OF IMPORTS I.E. COST OF PURCHA SE OF RAW MATERIAL AND HENCE, THE SAME HAS DIRECT CONNECTION WITH THE ACTI VITY OF THE INDUSTRIAL UNDERTAKING. IN VIEW OF THE SAME, THE ASSESSE CLAIM S THAT THE INTEREST RECEIVED ON MARGIN MONEY FROM THE BANKS TOWARDS IMPORT OF RA W MATERIAL REDUCES THE PRODUCTION COST AND HENCE, ENTITLE TO DEDUCTION ULS .8OLB OF THE ACT. (XII) INTEREST OF RS.1,46,436 IS RECEIVED ON INTER-CORPORATE DEPOSIT PLACED WITH GROUP CONCERNS WITH WHICH THERE ARE BUSINESS D EALINGS AND THE SAME ACCORDING TO THE ASSESSEE IS PART OF THE EARNINGS R ELATED TO THE INDUSTRIAL UNDERTAKING AND HENCE, DEDUCTION IS ALLOWABLE U/S.8 OLB OF THE ACT IN RESPECT OF THE SAID INCOME. ON ITEMS (X) TO (XII) ABOVE, WE HOLD AS FOLLOWS: INTEREST ON TRADE DEPOSITS AND INTEREST ON MARGIN MONEY CANNOT BE CONSIDERED AS IN COME DERIVED ON ELIGIBLE BUSINESS AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA, 317 ITR 218(SC). FOR THE SAME REASONS GIVEN ABOVE INTEREST ON INTER CORPORATE DEPOSITS CANNOT BE CONSIDERED AS INCOME D ERIVED FROM THE ELIGIBLE BUSINESS. ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 12 (XIII) INTEREST OF RS.17,045 IS O N BILL OF EXCHANGE DRAWN ON CUSTOMERS AGAINST SALES REALIZED LATE. INTEREST IS CHARGED THEREON FO R DELAYED PAYMENT BY THE CUSTOMERS. THUS, THE ASSESSEE SUBMITS THAT THE INTE REST IS EARNED ON DELAYED PAYMENT FROM THE CUSTOMERS AND HENCE, PART AND PARC EL OF SALE PROCEEDS AND THEREBY DEDUCTION U/S.801B IS ALLOWABLE ON THE SAID AMOUNT AND THE SAME MAY BE THEREFORE ALLOWED. INTEREST PAID BY THE CUSTOMER F OR LATE PAYMENT AS WE HAVE ALREADY HELD SHOULD BE CONSIDERED AS INTEREST DERIVED FROM THE E LIGIBLE BUSINESS FOR ALLOWING DEDUCTION UNDER SECTION 80 IB OF THE ACT. (XIV) DIVIDEND OF RS.20,000 IS CLAIMED TO BE PART AND PARCEL OF THE BUSINESS ACTIVITY OF THE INDUSTRIAL UNDERTAKING FOR THE REAS ON THAT AS PER THE TERMS AND CONDITIONS OF SANCTIONING OF LOAN FROM THE BANK,, T HE COSMOS CO- OPERATIVE BANK LTD., IT IS ONE OF THE PRE-CONDITION TO PURCHA SE SHARES OF THE BANK. THUS THE SHARES ARE NOT PURCHASED AS INVESTMENT OUT OF S URPLUS FUNDS, BUT THE SAME IS PURCHASED AS A BUSINESS COMPULSION IN ORDER TO O BTAIN LOAN FACILITY FROM THE BANK. THUS, THE DIVIDEND INCOME FORMS PART OF THE I NCOME OF THE INDUSTRIAL UNDERTAKING AND HENCE, THE SAME IS ELIGIBLE FOR DED UCTION U/S.801B OF THE ACT. (XV) OTHER INTEREST OF RS.6,403 W AS CHARGED FROM THE ADVANCES GIVEN TO STAFF @13% AS PER THE INCOME TAX RULES. THE ASSESSEE SUBM ITS THAT THIS INTEREST IS FOR THE CARRYING OUT THE BUSINESS ACTIVITIES SMOOTH LY AND EFFICIENTLY BY GIVING ADVANCES TO THE STAFF IN NEED AND AT THE SAME TIME ALSO CHARGING INTEREST ON THE ADVANCES SO GIVEN. THE ASSESSEE THEREFORE SUBMI TS THAT THIS AMOUNT IS ALSO ELIGIBLE FOR DEDUCTION U/S.801B OF THE ACT. (XVI) PRIOR PERIOD INCOME OF RS. 475 IS BUSINESS INCOME EARNED IN THIS YEAR RELATING TO EARLIER PERIOD AND THE SAME IS BUSINESS INCOME AND HENCE, DEDUCTION U/S.801B OF THE ACT ALLOWABLE IN RESPECT OF THE SAME. ON ITEMS (XIV) TO (XVI), WE HOLD THAT THE DEDUCTION U/S.80-I B OF THE ACT ON ACCOUNT OF DIVIDEND, OTHER INTEREST AND PRIOR PERIOD INCOME CA NNOT BE CONSIDERED AS INCOME DERIVED FROM THE ELIGIBLE UNDERTAKING FOR AL LOWING DEDUCTION UNDER SECTION 80 IB OF THE ACT. IN OUR VIEW THE CIT(A) HAS APP LIED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA IN A GENERAL WAY WITHOUT CONSIDERING THE INDIVIDUAL ITEMS OF INCOME. THIS WAS NOT PROPER. TH E NATURE OF INCOME HAD TO BE SEEN INDIVIDUALLY. FOR THE REASONS GIVEN ABOVE, GROUND -A IS PARTLY ALLOWED. 9. THUS , CONSIDERING THE DECISION OF COORDINATE BENCH OF TRI BUNAL WHEREIN THE DEDUCTION IN RESPECT OF MISCELLANEOUS INCOME, S UNDRY ADVANCES WRITTEN BACK, SUNDRY CREDIT BALANCE WRITTEN BACK A ND DISCOUNT ON FORWARD BOOKING WAS ALLOWED IN FAVOUR OF ASSESSEE. THUS, CO NSIDERING THE ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 13 DECISION OF COORDINATE BENCH THE ASSESSEE IS ALLOWE D THE SIMILAR RELIEFS FOR BOTH THE ASSESSMENT YEAR I.E FOR AY 2007-08 AND 200 8-09. THE RELIEF RELATED WITH THE ADMINISTRATIVE CHARGES WAS RESTORE D BACK TO THE FILE OF ASSESSING OFFICER FOR EXAMINING IT AFRESH, WITH THE DIRECTION IF THE ADMINISTRATIVE CHARGES INCURRED BY THE ASSESSEE INC URRED ON ITS GROUP CONCERN IS DEBITED IN P&L ACCOUNT THEN TO THE EXTEN T THE DEBIT OF P&L ACCOUNT HAS TO BE REMOVED, WHICH WILL RESULT IN INC REASE IN INCOME OF THE ELIGIBLE UNDERTAKING. AND IN CASE ON VERIFICATION, THE CLAIM OF ASSESSEE OF DEBIT OF IMPUGNED EXPENSES TO THE PROFIT AND LOSS A CCOUNT TO BE FOUND TO BE CORRECT THE ASSESSING OFFICER WILL ALLOW APPROPR IATE RELIEF TO THE ASSESSEE. THUS, THIS CLAIM OF ASSESSEE IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER WITH SIMILAR DIRECTIONS. HENCE TH IS CLAIM IS ALLOWED FOR STATISTICAL PURPOSE. 10. WE HAVE SEEN THAT THE COORDINATE BENCH OF TRIBUNAL DECLINE TO ALLOW THE DEDUCTION IN RESPECT OF THE INTEREST INCOME . THE ASSESSEE HAS NOT EXPLAINED THAT THE FACTS OF THE YEARS UNDER CONSIDE RATION ARE DIFFERENT OR THE INTEREST INCOME IS DERIVED FROM THE ELIGIBLE BU SINESS, THUS, THE DISALLOWANCE OF THIS PART OF INCOME IS CONFIRMED FO R BOTH THE YEARS. 11. SO FAR AS THE DISALLOWANCE OF CONSULTANCY CHARGES, THIS IS CLAIMED FOR BOTH THE AYS UNDER CONSIDERATION. THE ASSESSEE EARNED C ONSULTANCY CHARGES/ INCOME FROM D-TECH, UAE. THIS INCOME/ RECEIPT EARNE D ON ACCOUNT OF SERVICES RENDERED AND NOT FOR MANUFACTURING ACTIVIT Y. WE HAVE SEEN THAT ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 14 THE LEARNED CIT(A) CONFIRMED THE DISALLOWANCE HOLDI NG THAT THE SOURCE OF INCOME IS NOT FROM THE FIRST DEGREE OF INCOME. IN O UR CONSIDERED VIEW THE OBSERVATION OF LEARNED CIT(A) IS CORRECT AND NEEDS NO INTERFERENCE. THUS, THIS GROUND OF APPEAL IS DISMISSED. 12. WE HAVE SEEN THAT THE ASSESSEE WAS ALLOWED DEDUCTIO N IN RESPECT OF DIVIDEND INCOME FOR ASSESSMENT YEAR 2006-07 BY COOR DINATE BENCH. HOWEVER, IN OUR VIEW THE DIVIDEND INCOME AND BY ASS ESSEE IS NOT DERIVED BY INDUSTRIAL/ BUSINESS ACTIVITIES CARRIED OUT BY ASSESSEE AND THAT THE SAME IS NOT A FIRST-DEGREE OR HAS NO DIRECT NEXUS WITH THE INCOME FROM DERIVED FROM ELIGIBLE ACTIVITY. THE HONBLE APEX COURT IN PANDIAN CHEMICAL LTD VS CIT (2003) 262 ITR 278 (SC) HELD THAT IN ORDER TO QUA LIFY FOR ELIGIBLE DEDUCTION UNDER SECTION 80IB, THE SOLE CRI TERIA IS THAT INCOME SHOULD BE DIRECT AND NOT INCIDENTAL TO THE BUSINESS . IN OUR CONSIDERED VIEW THE DIVIDEND INCOME EARNED BY THE ASSESSEE IS NOT D ERIVED FROM ELIGIBLE BUSINESS. THUS, THE FINDING OF LEARNED COMMISSIONER WITH REGARD TO DISALLOWANCE DEDUCTIONS RELATED WITH THE DIVIDEND I NCOME IS CONFIRMED FOR BOTH THE ASSESSMENT YEARS. 13. THE NEXT CLAIMED RELATES TO ADDITIONAL GROUND OF AP PEAL WITH REGARD TO DAMAGES OF RS. 2,26,41,430/- FOR ASSESSMENT YEAR 20 08-09 ONLY. THE ASSESSING OFFICER DISALLOWED THE DEDUCTION THAT CLA IM DOES NOT QUALIFY FOR THE DEDUCTION UNDER SECTION 80 IB. THE LANDED COMMI SSIONER APPEALS CONFIRMING THE ACTION OF ASSESSING OFFICER HOLDING THAT CLAIM IS YET TO BE ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 15 ESTABLISHED. IT WAS FURTHER HELD THAT THE SUPPLIER MAY REPLACE THE DAMAGED ARTICLES IN FUTURE AND ANY ADDITIONAL COST FOR THE PLACED MONEY IS LIKELY TO BE ADJUSTED AGAINST THE CLAIM. THE ASSESSEE HAD PLA CED ON RECORD THE COPY OF COMPLICATION FROM THE PURCHASER OF MATERIAL/MACH INERY DATED 19 TH MAY 2010. THE PURCHASES HAD CONFIRMED THE RECEIPT OF E- COMBINED VERTICAL WATERJET CUTTING EDGE, MODEL NO. WSL-50/25 VIDE EXP ORT INVOICES NO. SAGL/R-EXP/08-09/001 DATED 23/07/2008. THE PURCHASE R HAS SPECIFICALLY MENTIONED THAT THEY REQUIRED REPLACING THE ENTIRE MACHINERY AND EQUIPMENT WITH A NEW ONE. THE ASSESSEE HAS ALSO PLACED ON RECORD THE JOURNAL ENTRY OF COST OF THE MISSIONARY RS.2,26 ,41,430/-. CONSIDERING THE DOCUMENTARY EVIDENCES PLACED ON RECORD BEFORE T HE TRIBUNAL, WE ADMIT THIS GROUND OF APPEAL AND RESTORED THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO VERIFY THE FACT AND ALLOW THE CLAIM OF A SSESSEE IN ACCORDANCE WITH LAW. THUS THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 14. IN THE RESULT BOTH THE APPEAL OF THE ASSESSEE FOR A SSESSMENT YEAR 2007-08 AND 2008-09 ARE PARTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF AUGUST 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE-PRESIDENT JUDICIAL MEMBER MUMBAI; DATED 29/8/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. ITA NO.2032 & 84 22/M/2011 M/S SEZAL GLASS LTD. 16 BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/