ITO, New Delhi V. M/s. Rajat Deep Overseas (P) Ltd, New Delhi

ITA 883/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86717 (ITAT-DELHI)
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 11-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI C.M. GARG, JM ITA NO.236/DEL/2013 ASSESSMENT YEAR : 2009-10 RAJATDEEP OVERSEAS PVT. LTD., 179-A, LIG FLATS, RAJOURI GARDEN, NEW DELHI. PAN: AABCR4099N VS. ITO, WARD 15(2), NEW DELHI. ITA NO.883/DEL/2013 ASSESSMENT YEAR : 2009-10 ITO, WARD 15(2), NEW DELHI. VS. RAJATDEEP OVERSEAS PVT. LTD., 179-A, LIG FLATS, RAJOURI GARDEN, NEW DELHI. PAN: AABCR4099N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, CA DEPARTMENT BY : SHRI VIKRAM SAHAY, SR. DR ORDER PER R.S. SYAL, AM: THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE ARISE OUT OF THE ORDER PASSED BY THE CIT( A) ON 09.11.2012 IN RELATION TO THE ASSESSMENT YEAR 2009-10. ITA NO.236/DEL/2013 ITA NO.883/DEL/2013 2 2. GROUND NOS. 2-4 OF THE ASSESSEES APPEAL AND ALL THE GROUNDS OF THE REVENUES APPEAL ARE AGAINST THE COMPUTATION OF DED UCTION U/S 80IC OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE A CT). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A MANUFACTURER OF AUTO PARTS AND ACCESSORIES HAVING E LIGIBLE UNIT IN HARIDWAR FOR THE PURPOSES OF SECTION 80-IC OF THE A CT. RETURN OF INCOME WAS FILED WITH GROSS TOTAL INCOME AT RS.2,69,85,125 /- ON TOTAL TURNOVER OF RS.11.13 CRORE. AN INCOME OF RS.2,69,25,260/- WAS C LAIMED AS DEDUCTIBLE U/S 80IC OF THE ACT, LEAVING ONLY A SUM OF RS.59,864/- AS TAXABLE INCOME. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE AO OBSERVED THAT THE POSITION ABOUT DEDUCTION U/S 80IC AND THE OTHER RELEVANT FACTS ON THIS ISSUE WERE SIMILAR TO THOSE FOR THE EARLIER YEAR. HE EVEN REPRODUCED THE ASSESSEES SUBMISSIONS RENDERED IN PROCEEDINGS FOR THE EARLIER YEAR IN THE EXTANT ASSESSMENT ORDER. AF TER CONSIDERING THE ASSESSEES SUBMISSIONS, THE AO HELD THAT: (I) 20% O F THE SALE VALUE OF THE PRODUCTS WAS ATTRIBUTABLE TO THE BRAND AND, HENCE , WAS NOT ELIGIBLE FOR ITA NO.236/DEL/2013 ITA NO.883/DEL/2013 3 DEDUCTION; (II) PROFIT TO THE EXTENT OF 5% OF TOTAL TURNOVER OF THE COMPANY WAS ATTRIBUTED TO THE PAST EXPERIENCE, EXPERTISE AN D KNOWLEDGE, ETC., OF THE RELATED AND CONNECTED PERSONS AND NOT TO THE EL IGIBLE UNIT; AND (III) ONLY 12% OF THE REMAINING INCOME, AFTER MAKING ADJU STMENTS AS PER (I) AND (II) ABOVE, WAS TO BE CONSIDERED AS ELIGIBLE FO R DEDUCTION U/S 80IC. THAT IS HOW THE AMOUNT OF DEDUCTION UNDER THIS SECT ION WAS COMPUTED BY THE AO AT RS.4,06,637/- AS AGAINST THE ASSESSEE S CLAIM OF DEDUCTION FOR A SUM OF RS.269.25 LAC. THE LD. CIT(A) APPROVE D THE ASSESSMENT ORDER ON (I) ABOVE, NAMELY, REDUCTION OF DEDUCTION DUE TO THE MARKET VALUE OF THE BRAND, BUT RESTRICTED IT TO 10% INSTEA D OF 20%. ON THE (II) ISSUE, THE STAND OF THE AO THAT 5% OF THE SALE VALU E DID NOT FORM PART OF THE ELIGIBLE PROFIT WAS OVERTURNED AND THE (III), N AMELY, RESTRICTING THE AMOUNT OF DEDUCTION TO 12% OF THE REMAINING PROFIT WAS ALSO NOT APPROVED. THAT IS HOW CROSS APPEALS HAVE BEEN FILE D ON THESE ISSUES. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE AO HAS REFERRED TO THE PROCEEDINGS FOR THE PRECEDING YEAR IN THE ASSESSMEN T ORDER. BOTH THE ITA NO.236/DEL/2013 ITA NO.883/DEL/2013 4 ASSESSEE AS WELL AS THE REVENUE PREFERRED RESPECTIV E APPEALS AGAINST THE ORDER OF CIT(A) FOR THE AY 2008-09. A COPY OF THE TRIBUNAL ORDER DATED 10.01.2014 FOR THE IMMEDIATELY PRECEDING ASSE SSMENT YEAR IS AVAILABLE ON RECORD. 5. IN SO FAR AS THE QUESTION OF REDUCTION OF THE EL IGIBLE PROFITS ON ACCOUNT OF BRAND VALUE IS CONCERNED, IT IS NOTICE D THAT THE AO ATTRIBUTED 20% OF PROFITS TO THE BRAND, WHICH THE LD. CIT(A ) RESTRICTED TO 10%. THE TRIBUNAL, ON SIMILAR FACTS AND CIRCUMSTANCES, H AS HELD THAT THERE CAN BE NO QUESTION OF RESTRICTING THE AMOUNT OF ELIGIBL E PROFIT ON ACCOUNT OF BRAND. IN THE ABSENCE OF ANY DISTINGUISHING FEAT URE HAVING BEEN BROUGHT TO OUR NOTICE IN THE FACTS FOR THE INSTANT YEAR, VIS--VIS THE PRECEDING YEAR, RESPECTFULLY FOLLOWING THE PRECEDEN T, WE DIRECT THAT NO DEDUCTION CAN BE MADE FROM THE ELIGIBLE PROFITS ON ACCOUNT OF BRAND. THE GROUND TAKEN BY THE ASSESSEE ON THIS SCORE IS A LLOWED AND THAT BY THE REVENUE IS DISMISSED. 6. THE SECOND ISSUE IS ABOUT THE VALUE OF PRODUCTS NOT ELIGIBLE UNIT TO THE TUNE OF RS.23,27,164/-. IT CAN BE SEEN THAT TH E AO HELD THAT PROFITS TO ITA NO.236/DEL/2013 ITA NO.883/DEL/2013 5 THE EXTENT OF 5% OF THE TURNOVER OF THE COMPANY WER E ATTRIBUTED TO THE PAST EXPERIENCE, EXPERTISE AND KNOWLEDGE, ETC., OF RELATED AND CONNECTED PERSONS AND NOT TO THE ELIGIBLE UNIT. THAT IS HOW, HE ALLOWED DEDUCTION FOR A SUM OF RS.32.40 LAC ON ACCOUNT OF SALARY PAID TO DIRECTORS AND, APART FROM THAT, HE ALSO ALLOWED A FURTHER DEDUCTIO N OF RS.23,27,164/-, BEING THE AMOUNT IN EXCESS OF SALARY PAID TO DIRECT ORS UP TO 5% OF TOTAL TURNOVER. THIS RESULTED INTO REDUCTION IN THE AMOU NT OF ELIGIBLE PROFIT TO THE EXTENT OF RS.23.27 LAC. THE TRIBUNAL, FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, HAS APPROVED THE VIEW TAKEN BY THE LD. CIT(A) IN NOT INCREASING THE DEDUCTION FOR EXPENSES UP TO 5% OF T HE SALE VALUE. RESPECTFULLY FOLLOWING THE PRECEDENT, WE APPROVE TH E VIEW TAKEN BY THE LD. CIT(A) ON THIS ISSUE. 7. AS REGARDS RESTRICTING THE AMOUNT OF DEDUCTION T O 12% OF THE REMAINING PROFITS, THE LD. DR VEHEMENTLY ARGUED THA T THE ASSESSEE ALSO EARNED INCOME FROM ITS BRANCHES AND HEAD OFFICE, WH ICH WAS NOT ELIGIBLE FOR ANY DEDUCTION U/S 80IC. THE SUM AND SUBSTANCE O F HIS CONTENTION, AND RIGHTLY SO, WAS THAT DEDUCTION CAN BE ALLOWED O NLY IN RESPECT OF ITA NO.236/DEL/2013 ITA NO.883/DEL/2013 6 INCOME FROM THE MANUFACTURING ACTIVITIES CARRIED OU T AT HARIDWAR UNIT. IT CAN BE SEEN FROM THE ASSESSMENT ORDER THAT THE A SSESSEE CATEGORICALLY STATED BEFORE THE AO THAT ALL THE SALES WERE MADE F ROM MANUFACTURING UNIT AT HARIDWAR AND THE BRANCH OFFICES ETC. WERE O NLY ENGAGED IN SALE PROMOTION AND RENDERING AFTER-SALES SERVICES FOR TH E WARRANTY PROVIDED ON THE PRODUCTS. EVEN COPY OF VAT RETURN IN SUPPOR T OF THE CLAIM THAT ALL THE SALES WERE MADE FROM HARIDWAR, WAS ALSO PL ACED BEFORE HIM. THIS FACT IS BRONE OUT FROM PAGE 5 OF THE ASSESSMEN T ORDER. SIMILAR CONTENTION WAS MADE BEFORE THE LD. CIT(A) AS WELL T O THE EFFECT THAT THE ENTIRE SALES WERE MADE FROM HARIDWAR UNIT AND NO IN COME PRODUCING ACTIVITY WAS CARRIED OUT FROM ANY PLACE OTHER THAN THE ELIGIBLE UNIT. THESE SUBMISSIONS HAVE NOT BEEN CONTROVERTED BY THE LD. DR WITH ANY CLINCHING EVIDENCE EXCEPT FOR MAKING A GENERAL STAT EMENT ABOUT THE OTHER BRANCHES ALSO CONTRIBUTING TO THE TOTAL INCOM E EARNED BY THE ASSESSEE. IT CAN BE SEEN FROM THE TRIBUNAL ORDER F OR THE PRECEDING YEAR THAT A CATEGORICAL FINDING HAS BEEN RECORDED TO THE EFFECT THAT THE ENTIRE INCOME PRODUCING ACTIVITY STEMMED ONLY FROM THE HAR IDWAR UNIT AND NO ITA NO.236/DEL/2013 ITA NO.883/DEL/2013 7 OTHER PLACE. IN THE ABSENCE OF ANY MATERIAL TO CON TROVERT THE ABOVE SUBMISSIONS, RESPECTFULLY FOLLOWING THE PRECEDENT, WE UPHOLD THE IMPUGNED ORDER IN NOT LIMITING THE AMOUNT OF ELIGIB LE DEDUCTION TO 12% OF THE TOTAL PROFITS. THESE GROUNDS ARE ACCORDINGL Y DISPOSED OF. 8. THE ONLY ISSUE WHICH SURVIVES IN THE ASSESSEES APPEAL IS AGAINST THE APPLICABILITY OF THE PROVISIONS OF SECTION 115J B TO THE ASSESSEE COMPANY. HERE AGAIN, WE FIND THAT SIMILAR ISSUE WA S RAISED IN THE ASSESSEES APPEAL FOR THE AY 2008-09 AND THE TRIBUN AL WAS PLEASED TO UPHOLD THE IMPUGNED ORDER ON THIS SCORE, THEREBY RE JECTING THE SIMILAR GROUND TAKEN BY THE ASSESSEE. RESPECTFULLY FOLLOWI NG THE PRECEDENT, WE DISMISS THIS GROUND OF APPEAL. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 12.02.201 5. SD/- SD/- [C.M. GARG] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 12 TH FEBRUARY, 2015. ITA NO.236/DEL/2013 ITA NO.883/DEL/2013 8 DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.