ACIT, Amravati Circle, Amaravati V. M/s. Plasti Surge Industries pvt.Ltd., Amaravati

ITA 86/NAG/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9639 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 16-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR MILIND BHUSARI
• Keywords: Business income; Depreciation; Capital receipt
• Section: 80IB

Judgement Text

ITA NO. 78&80/NAG/2010 PLASTI SURGE INDUSTRIES PVT. LTD AMARAVATI IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH , NAGPUR BEFORE: SHRI P.K. BANSAL , ACCOUNTANT MEMBER AND SHRI D.T. GARASIA , JUDICIAL MEMBER ITA NO. 78 / NAG / 20 10 ASSESSMENT YEAR : 2005 - 06 PLASTI SURGE INDUSTRIES PVT. LTD. AMARAV ATI VS. ACIT, AMARAVATI RANGE AMARAVATI (APPELLANT) (RESPONDENT) PAN NO.AAACP 9678A ITA NO.86/NAG/2010 ASSESSMENT YEAR : 2005 - 06 ACIT, AMARAVATI RANGE AMARAVATI VS. PLASTI SURGE INDUSTRIES PVT. LTD. AMARAVATI (APPELLANT) (RESPONDENT) AP PELLANT BY: SHRI K.P. DEWANI, ADVOCATE RESPONDENT BY: DR. MILIND BHUSARI, CIT(DR) DATE OF HEARING: 11.10.12 DATE OF PRONOUNCEMENT: 19.10.12 ORDER PER P.K. BANSAL, ACCOUNTANT MEMBER: - THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) - II, NA GPUR DATED 25/2/2010 FOR ASSTT. YEAR 2005 - 06. THE ASSESSEE HAS SUBMITTED CONCISE REVISED GROUNDS OF APPEAL COPY OF WHICH IS PROVIDED TO CIT (DR). THE CONCISE REVISED GROUNDS OF APPEAL ARE AS UNDER: 1) THE LEARNED A.O. ERRED IN NOT REDUCING INTEREST PAID AT RS.2,66,289/ - OUT OF INTEREST RECEIVED AT RS.6,90,263/ - FOR COMPUTING THE DEDUCTION U/S 80IB. 2) THE LEARNED A.O. ERRED IN EXCLUDING RS.8,02,000/ - AS TRADING PROFIT FOR COMPUTING DEDUCTION U/S 80IB OF I.T. ACT 1961. 3) THE LEARNED CIT(A) ERRED IN DIREC TING TO EXCLUDE 19% OF RS.1,36,11,666/ - AS TRADING PROFIT AT PARA - 8.5 OF THE APPELLATE ORDER FOR ALLOWING DEDUCTION U/S 80IB OF I.T. ACT 1961. ITA NO.78&80/NAG/2010 PLASTI SURGE INDUSTRIES PVT. LTD AMARAVATI 2 4) THE LEARNED A.O. ERRED IN NOT ALLOWING THE DEPRECIATION AND EXPENDITURE OF RS.2,77,477/ - OF THAPODA UNIT. 5) THE LEARNED A.O. ERRED IN MAKING ADDITION OF RS.26,63,330/ - U/S 41(1) OF I.T. ACT 1961. 6) THE LEARNED A.O. ERRED IN HOLDING THAT SURPLUS ARISING ON SALE OF SHARES AT RS.8,43,643/ - IS ASSESSABLE AS BUSINESS INCOME AS AGAINST CLAIMED BY ASSESSEE TO B E ASSESSED AS CAPITAL GAINS. THE LEARNED A.O. ERRED IN MAKING ADDITION OF RS.8,43,643/ - WHICH IS ALREADY INCLUDED IN NET PROFIT TAKEN WHILE COMPUTING THE INCOME OF ASSESSEE RESULTING INTO DOUBLE ADDITION OF RS.8,43,643/ - . 2. IN GROUND NO.1 ASSESSEE HAS C HALLENGED THE EXCLUSION OF GROSS INTEREST FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80IB OF I.T. ACT 1961. THE ISSUE IN DISPUTE IS SIMILAR TO THAT IN ASSTT. YEAR 2006 - 07 IN ITA NO.79/NAG/2010 AT GROUND NO.1. WE HAVE DECIDED THE APPEAL OF ASSESSEE FOR ASSTT. YEAR 2006 - 07 AND FOLLOWING THE DECISION IN APPEAL IN ITA NO.79/NAG/2010 FOR ASSTT. YEAR 2006 - 07 WE DIRECT TO REDUCE THE INTEREST PAID AT RS.2,66,289/ - OUT OF INTEREST RECEIVED AT RS.6,90,263/ - FOR EXCLUDING THE SAME FOR GRANT OF DEDUCTION U/S 80IB OF I.T. ACT 1961. GROUND OF APPEAL IS ALLOWED. 3. IN GROUND NO.2 ASSESSEE HAS CHALLENGED THE TRADING PROFIT OF RS.8,02,000/ - FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80IB OF I.T. ACT 1961. THE ISSUE IN DISPUTE IS SIMILAR TO THAT IN A SSTT. YEAR 2006 - 07 IN ITA NO.79/NAG/2010 AT GROUND NO.3 & 4. WE HAVE DECIDED THE APPEAL OF ASSESSEE FOR ASSTT. YEAR 2006 - 07 AND FOLLOWING THE DECISION IN APPEAL IN ITA NO.79/NAG/2010 FOR ASSTT. YEAR 2006 - 07 WE DIRECT TO REDUCE THE TRADING PROFIT OF RS.8 ,02,000/ - FOR EXCLUDING THE SAME FOR GRANT OF DEDUCTION U/S 80IB OF I.T. ACT 1961. GROUND OF APPEAL IS ALLOWED. 4. IN GROUND NO.3 ASSESSEE HAS CHALLENGED THE TRADING PROFIT AT 19% OF RS.1,36,11,666/ - FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80IB OF I.T. ACT 1961. THE ISSUE IN DISPUTE IS SIMILAR TO THAT IN ASSTT. YEAR 2006 - 07 IN ITA NO.79/NAG/2010 AT GROUND NO.3 & 4. WE HAVE DECIDED THE APPEAL OF ASSESSEE FOR ASSTT. YEAR 2006 - 07 AND FOLLOWING THE DECISION IN APPEAL IN ITA NO.79/NAG/2010 FOR AS STT. YEAR 2006 - 07 WE DIRECT TO REDUCE THE TRADING PROFIT AT 19% OF ITA NO.78&80/NAG/2010 PLASTI SURGE INDUSTRIES PVT. LTD AMARAVATI 3 RS.1,36,11,666/ - FOR EXCLUDING THE SAME FOR GRANT OF DEDUCTION U/S 80IB OF I.T. ACT 1961. GROUND OF APPEAL IS ALLOWED. 5. IN GROUND NO.4 ASSESSEE HAS CHALLENGED DISALLOWANCE OF DEPRECIAT ION AND EXPENDITURE OF RS.2,77,477/ - OF THAPODA UNIT. THE ISSUE IN DISPUTE IS SIMILAR TO THAT IN ASSTT. YEAR 2006 - 07 IN ITA NO.79/NAG/2010 AT GROUND NO.5 & 6. WE HAVE DECIDED THE APPEAL OF ASSESSEE FOR ASSTT. YEAR 2006 - 07 AND FOLLOWING THE DECISION IN A PPEAL IN ITA NO.79/NAG/2010 FOR ASSTT. YEAR 2006 - 07. WE DIRECT TO REDUCE THE DISALLOWANCE OF DEPRECIATION AND EXPENDITURE OF RS.2,77,477/ - OF THAPODA UNIT. GROUND OF APPEAL IS ALLOWED. 6. IN GROUND NO. 5 ASSESSEE HAS CHALLENGED THE ADDITION MADE BY A.O . AT RS.26,63,330/ - U/S 41(1) OF I.T. ACT 1961. THE BRIEF FACTS IN THIS RESPECT ARE THAT ASSESSEE HAS AVAILED SALES TAX INCENTIVES UNDER THE PACKAGE SCHEME OF INCENTIVES OF GOVT. OF MAHARASHTRA UNDER SALES TAX DEFERRAL SCHEME. THE SALES TAX COLLECTED IS CONVERTED AS INTEREST FREE LOAN. THE INTEREST FREE LOAN HAS BEEN SHOWN IN BALANCE SHEET OF THE ASSESSEE OF EARLIER ASSESSMENT YEARS AS LOAN LIABILITY. AS PER INCENTIVE SCHEME INTEREST FREE SALES TAX LOAN IS TO BE REPAID AFTER SPECIFIED TIME. IN VIEW OF THE SCHEME OF GOVT. OF MAHARASHTRA ELIGIBLE UNITS WERE ALLOWED TO MAKE PREPAYMENT OF LOAN AT NET PRESENT VALUE (NPV) OF LOAN TO BE REPAID. ON MAKING REPAYMENT OF LOAN AT NPV ASSESSEE HAD SAVINGS OF SUM OF RS.26,63,330/ - ON ACCOUNT OF PRE - PAYMENT OF MATUR ITY AMOUNT ON ITS NPV. THE AFORESAID PRE - PAYMENT IS IN TERMS OF PROVISIONS OF BOMBAY SALES TAX ACT. THE A.O. HAS HELD THAT SAVINGS ON REPAYMENT OF LOAN IS REVENUE RECEIPT CHARGEABLE TO TAX AT THE HANDS OF ASSESSEE AND NOT CAPITAL RECEIPT AS CLAIMED IN TH E RETURN. CIT(A) HAS ALSO UPHELD THE ACTION OF A.O. AND DISMISSED THE APPEAL OF ASSESSEE. 6.1 IT IS SUBMITTED THAT ASSESSEE HAD SALES TAX DEFERRAL LOAN UNDER PACKAGE SCHEME OF INCENTIVES WHICH WAS REPAID AT NPV UNDER SCHEME OF GOVERNMENT OF MAHARASHTRA WHICH RESULTED INTO SAVINGS OF RS.26.63 LACS. A.O. AND CIT(A) HELD THAT ABOVE SUM IS ASSESSABLE U/S 41(1) OF I.T. ACT 1961. THE ADDITION MADE IS UNSUSTAINABLE AS SAVINGS IN LOAN ACCOUNT IS NOT EXIGIBLE TO TAX U/S 41(1) OF I.T. ACT ITA NO.78&80/NAG/2010 PLASTI SURGE INDUSTRIES PVT. LTD AMARAVATI 4 1961. RELIANCE FOR TH IS IS PLACED ON (2010) 47 DTR 329 (MUM.)(SB) SULZER INDIA LTD. VS. JCIT. THE LEARNED CIT (DR) HAS RELIED UPON ON THE ORDER OF LOWER AUTHORITIES. 6.2 WE HAVE CONSIDERED THE SUBMISSION AND PERUSED THE EVIDENCE ON RECORD. THE ISSUE IN DISPUTE WITH REGARD TO SAVINGS ON PRE - PAYMENT OF LOAN UNDER THE PACKAGE SCHEME OF INCENTIVES OF GOVT. OF MAHARASHTRA HAD COME UP FOR CONSIDERATION BEFORE SPL. BENCH, MUMBAI IN THE CASE OF SULZER INDIA LTD. VS JCIT REPORTED AT (2010) 47 DTR 329 (MUM.)(SB). THE SPL. B ENCH OF ITAT, MUMBAI IN AFORESAID CASE HAS HELD THAT SAVING ON ACCOUNT OF PRE - PAYMENT OF SALES TAX DEFERRAL LOAN IS CAPITAL RECEIPT AND NOT EXIGIBLE TO TAX U/S 41(1) OF I.T. ACT 1961. THE ISSUE IN DISPUTE IS THUS SQUARELY COVERED IN FAVOUR OF ASSESSEE B Y THE DECISION OF ITAT, SPECIAL BENCH, MUMBAI. THE ABOVE FACTUAL POSITION IS NOT IN DISPUTE. IN VIEW OF ABOVE RESPECTFULLY FOLLOWING THE DECISION OF ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF SULZER INDIA LTD. WE HAVE HOLD THAT SUM OF RS.26,63,330/ - IS N OT EXIGIBLE TO TAX AT THE HANDS OF ASSESSEE AS SAME BEING CAPITAL RECEIPT. THE ADDITION MADE BY A.O. AT RS.26,63,330/ - IS THEREFORE DIRECTED TO BE DELETED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 8 . IN GROUND NO.6 ASSESSE E HAS CHALLENGED THE SURPLUS ARISING ON SALE OF SHARES OF RS.8,43,643/ - ASSESSABLE AS BUSINESS INCOME INSTEAD OF ASSESSABLE AS CAPITAL GAIN. THE ISSUE IN DISPUTE IS SIMILAR TO THAT IN ASSTT. YEAR 2006 - 07 IN ITA NO.79/NAG/2010 AT GROUND NO.8. WE HAVE DECI DED THE APPEAL OF ASSESSEE FOR ASSTT. YEAR 2006 - 07 AND FOLLOWING THE DECISION IN APPEAL IN ITA NO.79/NAG/2010 FOR ASSTT. YEAR 2006 - 07. WE DIRECT TO CONSIDER SURPLUS ARISING ON SALE OF SHARES OF RS.8,43,643/ - AS CAPITAL GAIN AND NOT AS BUSINESS INCOME. G ROUND OF APPEAL IS ALLOWED. 9 . IN APPEAL FILED BY REVENUE HAS CHALLENGED DIRECTION OF CIT(A) - II TO ALLOW DEDUCTION U/S 80IB OF I.T. ACT 1961 IN RESPECT TO BUSINESS INCOME OF THAPODA UNIT AS ACTIVITY AT AMRAVATI MANUFACTURING FACILITIES. THE LEARNED CIT( DR) HAS SUBMITTED ITA NO.78&80/NAG/2010 PLASTI SURGE INDUSTRIES PVT. LTD AMARAVATI 5 THAT IT IS FOR ASSESSEE TO SHOW THAT INCOME EARNED BY ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF I.T. ACT 1961. THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF I.T. ACT 1961, IN VIEW OF ABO VE IT IS SUBMITTED THAT CIT(A) - II WAS NOT JUSTIFIED IN DIRECTING THE TRADING INCOME FROM THAPODA UNIT TO BE THAT OF AMRAVATI UNIT FOR THE PURPOSE OF GRANT OF DEDUCTION U/S 80IB OF I.T. ACT 1961. 9 .1 THE LEARNED COUNSEL OF ASSESSEE HAS SUBMITTED THAT CIT (A) - II DIRECTED TO ALLOW DEDUCTION U/S 80IB OF I.T. ACT 1961 IN RESPECT TO ACTIVITY SHOWN IN BOOKS AT THAPODA AS ACTIVITY AT AMRAVATI MANUFACTURING FACILITY. A.O. HAS ACCEPTED AT PAGE 9 & 10 OF ASSESSMENT ORDER OF ASSTT. YEAR 2006 - 07 THAT SALES AT THAPOD A ARE FOR GOODS MANUFACTURED AT AMRAVATI. THE ENTIRE SALES ARE IN RESPECT TO MANUFACTURED GOODS. THE A.O. WHILE ALLOWING DEDUCTION FROM SALES HAS REDUCED RAW MATERIAL CONSUMED/MANUFACTURING EXPENSES. THE FINDING OF A.O. THAT IT IS TRADING PROFIT IS CONTR ARY TO EVIDENCE ON RECORD AND FINDINGS RECORDED IN ASSESSMENT ORDER. A.O. HAS NOT DISPUTED THE BOOKS OF ACCOUNTS AND RESULTS THEREOF. 9 .2 WE HAVE CONSIDERED THE SUBMISSIONS MADE BEFORE US AND PERUSE THE EVIDENCE ON RECORD. IN THE CASE OF ASSESSEE ELIGIBI LITY OF DEDUCTION U/S 80IB OF I.T. ACT 1961 IS NOT IN DISPUTE. THE ASSESSEE HAD CLAIMED TO HAVE SET UP A SEPARATE UNIT AT THAPODA IN A.Y. 2004 - 05 WHICH WAS ELIGIBLE FOR BENEFIT OF DEDUCTION U/S 80IB OF I.T. ACT 1961 AT 100% OF PROFIT. IN RESPECT TO ACTI VITY OF AMRAVATI UNIT ASSESSEE WAS ELIGIBLE FOR BENEFIT OF 30% OF PROFIT OF THE INDUSTRIAL UNDERTAKING U/S 80IB OF I.T. ACT 1961. THE ASSESSEE AT THE INITIAL STAGES HAD CLAIMED THAT BOTH ACTIVITIES AT THAPODA AND AMRAVATI ARE IN RESPECT TO GOODS MANUFACTU RED BY ASSESSEE COMPANY AND ARE ELIGIBLE FOR DEDUCTION U/S 80IB OF I.T. ACT 1961 AT 100% AND 30% RESPECTIVELY. THE A.O. HOWEVER DID NOT ACCEPT THE CLAIM OF ASSESSEE AND AT PAGE 9 & 10 OF ASSESSMENT ORDER OF ASSTT. YEAR 2006 - 07 RECORDED FINDINGS THAT GOO DS MANUFACTURED AT AMRAVATI ARE SHOWN TO HAVE BEEN MANUFACTURED AT THAPODA. IN FACT A.O. AT PARA 9 & 10 OF ASSESSMENT ORDER OF ASSTT. YEAR 2006 - 07 IN CLEAR TERMS HAS RECORDED THAT ACTIVITY OF MANUFACTURING IS AT AMRAVATI AND FOR PACKING AND SEALING THE S AME ARE TRANSFERRED TO THAPODA. ON THE BASIS OF EVIDENCE ON RECORD IT ITA NO.78&80/NAG/2010 PLASTI SURGE INDUSTRIES PVT. LTD AMARAVATI 6 IS ACCEPTED THAT SALES ARE AT THAPODA INSPITE OF GOODS MANUFACTURED AT AMRAVATI. THE ASSESSEE BEFORE CIT(A) - II HAD RESTRICTED THE CLAIM OF ASSESSEE TO GET BENEFIT OF DEDUCTION U/S 80IB OF I.T. ACT 1961 AT 30% OF THE TOTAL INCOME DERIVED FROM INDUSTRIAL UNDERTAKING OF MANUFACTURE OF SURGICAL KITS. IT IS NOT DISPUTED THAT ASSESSEE IS HAVING MANUFACTURING FACILITIES AT AMRAVATI AND SALE SHOWN AT AMRAVATI AS WELL AS THAPODA ARE ONLY IN RES PECT TO GOODS MANUFACTURED AT AMRAVATI UNIT. THE ENTIRE SALES ARE IN RESPECT TO MANUFACTURED GOODS. ON ABOVE UNDISPUTED FACTUAL POSITION THE CONCLUSION DRAWN BY CIT(A) - II CAN NOT BE FAULTED. THE DECISION OF CIT(A) - II IS ON FAIR AND REASONABLE REASONING AS INDICATED IN APPELLATE ORDER. WE HAVE PERUSED THE VARIOUS REASONINGS AND FINDINGS AS RECORDED IN ORDER OF CIT(A) AND AGREE WITH THE SAME. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. WE FIND NO MERIT IN APPEAL OF REVENUE AND SAME IS DISMIS SED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19.10 .20 1 2 SD/ - SD/ - ( D.T. GARASIA ) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS NAGPUR DATED 19 TH OCTOBER , 20 1 2 COPY TO 1 PLASTI SURGE INDUSTRIES PVT. LTD., SIDHARTHA BHAVAN, MORSHI ROAD, AMARAVATI, C/O M/S. DEWANI BROS., ADVOCATES, 1 - AJANTA CHHINDWARA ROAD, NAGPUR - 440 013 2 ACIT, AMARAVATI RANGE, AMARAVATI 3 THE CIT - III , NAGPUR 4 THE CIT (A) , NAGPUR 5 THE DR, ITAT, NAGPUR 6 GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCO ME TAX APPELLATE TRIBUNAL NAGPUR