Nrox Specialities, Mumbai V. The Income tax Officer,Vapi Ward-2, Vapi

ITA 855/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1412 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 25-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S L CHANDEL
• Assessee Lawyers: M K PATEL
• Keywords: Opportunity of being heard; Cost of acquisition
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER NROX SPECIALTIES, SANTOSHI TILE COMPOUND, SURVEY NO. 265/1, DEMNI ROAD, DADRA, UT OF DADRA & NAGAR HAVELI - 396230 PAN: AAEFN6151B (APPELLANT) VS THE ITO, VAPI WARD - 2, VAPI (RESPONDENT) REVENUE BY : S H RI S.L. CHANDE L , SR. D . R. ASSESSEE BY: S H RI M.K. PATEL , A.R. DATE OF HEARING : 10 - 03 - 2 016 DATE OF PRONOUNCEMENT : 09 - 06 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2006 - 07 , AR IS ES FROM ORDER OF THE CIT(A), VALSAD DATED 30 - 12 - 2012 IN APPEAL NO. CIT(A)/VLS/1 7 6/11 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 855 / A HD/20 13 A SSESSMENT YEAR 200 6 - 07 I.T.A NO. 855 /AHD/20 13 A.Y. 2006 - 07 PAGE NO NROX SPECIALTIES VS. ITO 2 2. THE REVENU E S SUBSTANTIVE GROUNDS RAISED IN THE INSTANT APPEAL READ AS UNDER: - 2. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER IN IS SUING THE ASSESSMENT ORDER WITHOUT GRANTING THE APPELLANT AN OPPORTUNITY OF BEING HEARD AND BEING NOT FRAMED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 143(3) AND OTHER APPLICABLE PROVISIONS OF THE ACT. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) IS CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW AND DESERVES TO BE DELETED. 3. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF T HE LEARNED ASSESSING OFFICER IN FRAMING AND ISSUING ASSESSMENT ORDER WITHOUT DISPOSING OFF THE OBJECTIONS FILED BY THE APPELLANT BY A SPEAKING ORDER AS PER THE LAW LAID DOWN BY THE HONORABLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. INC OME TAX OFFICER [2003] REPORTED IN 259 ITR19 AND HENCE THE RE - ASSESSMENT PROCEEDINGS DESERVES TO BE QUASHED IN TOTO. 4. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING T HE ACTION OF THE LEARNED ASSESSING OFFICER IN EXCLUDING OTHER INCOME OF RS. 3,00,295/ - FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S. 80IB OF THE ACT. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE FACTS AND CIRCUMSTANC ES OF THE CASE AND LAW AND DESERVES TO BE DELETED. 3. LEARNED AUTHORIZED R EPRESENTATIVE STATES THAT THE ASSESSEE DOES NOT PRESS ITS FORMER TWO GROUNDS CHALLENGING VALIDITY OF REOPENING. THIS LEAVES US WITH THE REMAINING ISSUE OF SECTION 80IB DEDUCTION D ISALLOWANCE OF RS. 3,00,295/ - MADE BY BOTH THE LOWER AUTHORITIES THEREBY TREATING THE SAME INCOME FROM OTHER SOURCES. I.T.A NO. 855 /AHD/20 13 A.Y. 2006 - 07 PAGE NO NROX SPECIALTIES VS. ITO 3 4. FACTS OF THE CASE ARE IN A NARROW COMPASS. THE ASSESSEE FIRM MANUFACTURES SPECIALTY CHEMICAL. THERE IS NO DISPUTE ABOUT IT BEING A LREADY ENTITLED FOR SECTION 80IB DEDUCTION. WE FIND THAT THE RELEVANT AMOUNT INVOLVED IS WRONGLY STATED AS RS. 3,00,2 95/ - INSTEAD OF THE CORRECT ONE COMING TO RS. 2,99,153/ - . THE ASSESSEE RECEIVED DISCOUNTS FROM ITS SUPPLIERS ON PURCHASES OF RAW MATERIAL S AND CONSUMABLES . THE ASSESSING OFFICER IN ASSESSMENT ORDER DATED 21 - 10 - 2011 HELD THAT THESE DISCOUNTS DID NOT QUALIFY SECTION 80IB DEDUCTION SINCE NOT DERIVED FROM THE ELIGIBLE INDUSTRIAL UNDERTAKING. HE TREATED THE CORRESPONDING DISCOUNT FIGURE AS IN COME FROM OTHER SOURCES. 5. THE CIT(A) CONFIRMS ASSESSING OFFICER S ACTION AS FOLLOWS: - 7.2 SUBMISSION BY THE APPELLANT: - THE APPELLANT SUBMITTED BEFORE ME THAT THE OTHER INCOME CONSISTS OF DI SCOUNT RECEIVED OF RS. 2,99,153/ - AND EXCHANGE RATE DIFFERENC E OF RS. 1,142/ - . THE APPELLANT IS ENGAGED IN MANUFACTURING OF SPECIALTY CHEMICALS AND HAS RECEIVED DISCOUNTS FROM ITS SUPPLIERS WHILE PURCHASING RAW MATERIALS AND CONSUMABLES. THEREFORE, THE SAID OTHER INCOME REDUCES THE PURCHASE COST OF RAW MATERIALS AND CONSUMABLES RESULTING IN INCREASE OF MANUFACTURING PROFITS AND QUALIFIES FOR DEDUCTION U/S. 80I B AS THEY ARE DIRECTLY DERIVED FROM THE INDUSTRIAL UNDERTAKING. COPIES OF LEDGER ACCOUNTS IN REGARD TO DISCOUNT RECEIVED FROM VARIOUS SUPPLIERS OF RAW MATERIALS AND CONSUMABLES USED FOR THE MANUFACTURING PURPOSE WERE SUBMITTED TO THE AO. THE APPELLANT SUBMITTED BEFORE, ME A COPY OF THE SUBMISSION MADE BEFORE THE AO ALONG WITH COPY OF LEDGER ACCOUNTS. IT WAS SUBMITTED THAT THE DISCOUNTS RECEIVED REDUCES THE MANUFA CTURING COST OF PRODUCTS SOLD AND HENCE IS DIRECTLY DERIVED FROM THE INDUSTRIAL UNDERTAKING. AS REGARDS EXCLUSION OF EXCHANGE RATE DIFFERENCE IT WAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOR OF THE APPELLANT IN VIEW OF THE DECISION OF GUJARAT H IGH COURT IN THE CASE OF CIT V/S. AMBA IMPEX REPORTED IN 282 ITR 0144. IT WAS I.T.A NO. 855 /AHD/20 13 A.Y. 2006 - 07 PAGE NO NROX SPECIALTIES VS. ITO 4 REQUESTED TO DIRECT THE AO NOT TO EXCLUDE THE OTHER INCOME TO THE TUNE OF RS. 3, 00, 295/ - WHI LE CALCULATING DEDUCTION U/S. 80 IB. DECISION: - I HAVE CAREFULLY PERUSED THE FACTS OF THE CASE AND THE SUBMISSION MADE BY THE APPELLANT ALONG WITH THE OBSERVATIONS MADE BY THE AO IN THE ASSESSMENT ORDER. THE JUDICIAL RULINGS ARE VERY CLEAR IN WHAT CONSTITUTES ALLOWABLE INCOME. THE HON'BLE SC IN THE CASE OF LIBERTY INDIA LTD. HAS CLEARLY BRO UGHT OUT THE RATIO THAT THE INCOME ELIGIBLE FOR DEDUCTION U/S. 8O IB MUST HAVE FIRST DEGREE DIRECT NEXUS WITH THE MANUFACTURING ACTIVITIES DURING THE RELEVANT YEAR. IN THE INSTANT CASE, THE APPELLANT HAS ACCOUNTED DI SCOUNT RECEIVED OF RS. 2,99,153/ - AS OTHE R SOURCE OF INCOME WHICH MEANS THERE IS NO RELATION TO THE MANUFACTURING ACTIVITIES THEREFORE, DOES NOT QUALIFY AS HAVING FIRST DEGREE NEXUS WITH THE MANUFACTURING ACTIVITIES DURING THIS YEAR THEREBY, IN MY OPINION, NOT ELIGIBLE FOR DEDUCTION U/S. 80 IB OF THE ACT. THIS PART IN THIS GROUND OF APPEAL IS DISMISSE D. 6. BOTH THE PARTIES REITERATE THEIR RESPECTIVE PLEADINGS AGAINST AND IN SUPPORT OF THEIR RESPECTIVE CA S ES. THERE IS NO QUARREL ABOUT TH E FAC T THAT THE ASSESSEE RECEIVED THE IMPUGNED PURCHASE DISC OUNT FROM RAW MATERIAL S /CONSUMABLES SUPPLIERS TO THE TUNE OF RS. 2,99,153/ - AS UTILIZED IN ITS ELIGIBLE BUSINESS OF MANUFACTURING OF SPECIALTY CHEMICALS WHOSE PROFITS ARE ALREADY ELIGIBLE FOR SECTION 80IB DEDUCTION. BOTH THE LD. LOWER AUTHORITIES DO NOT R EBUT ASSESSEE S BOOKS SPECIFICALLY STATING THE CRUCIAL LIVE NEXUS BETWEEN THE DISCOUNTED RAW MATERIAL S AND ITS MANUFACTURED SPECIALTY CHEMICALS. NET EFFECT THEREOF IS THAT ASSESSEE S ELIGIBLE PROFITS DERIVED FROM ITS MANUFACTURING ACTIVITIES HAVE SEEN INC REASED SINCE RAW MATERIAL COST S HAVE COME DOWN DUE TO THE IMPUGNED DISCOUNT FORMING INTEGRAL PART OF THE MANUFACTURING PROCESS. WE CONCLUDE IN THESE PECULIAR FACTS THAT THE AUTHORITIES BELOW HAVE WRONGLY EQUATED THESE FACTS WITH THOSE INVOLVED IN HON BLE APEX COURT DECISION IN LIBERTY INDIA VS. CIT (2009) 317 ITR I.T.A NO. 855 /AHD/20 13 A.Y. 2006 - 07 PAGE NO NROX SPECIALTIES VS. ITO 5 218 (SC) INVOLVING DEPB S ALES FIGURES. WE ACCEPT ASSESS EE S CONTENTIONS ON MERITS AND RE JECT THOSE RAISED AT REVENUE S BEH EST SUPPORTING THE IMPUGNED DISALLOWANCE. 7. THIS ASSESSEE S APPEAL IS PARTLY ACCEPTED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 09 - 06 - 201 6 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 09 /06 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,