Deputy Commissioner of Income-tax, V. M/s. Finolex Cables Ltd., Pune

ITA 892/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1109 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 02-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Assessee Lawyers: J G PENDSE
• Keywords: Business income
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , ! '# , $% BEFORE SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM & / ITA NO. 892/PN/2014 ' ( )( / ASSESSMENT YEAR : 2006-07 DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(2), PUNE ....... / APPELLANT *' / V/S. M/S. FINOLEX CABLES LTD., 26/27, MUMBAI-PUNE ROAD, PIMPRI, PUNE-411018 PAN : AAACF2637D / RESPONDENT ASSESSEE BY : SHRI J.G. PENDSE REVENUE BY : SHRI DHEERAJ KUMAR JAIN / DATE OF HEARING : 30-09-2015 / DATE OF PRONOUNCEMENT : 30-09-2015 + / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 23-01- 2014 FOR THE ASSESSMENT YEAR 2006-07. THE REVENUE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING DEDUCTION U /S. 80IB OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) 2 ITA NO. 892/PN/2014, A.Y. 2006-07 IN RESPECT OF SALE OF SCRAP FROM THE GOA UNIT OF THE ASSES SEE COMPANY. THE CONTENTION OF THE DEPARTMENT IS, SALE OF SCRAP IS NEITH ER SALE OF MANUFACTURED PRODUCT NOR A BY-PRODUCT. THEREFORE, INCOM E FROM SALE OF SCRAP CANNOT BE TREATED AS INCOME FROM INDUSTRIAL UNDE RTAKING ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE : THE ASSESSEE COM PANY IS ENGAGED IN THE MANUFACTURING AND SALE OF VARIOUS TYPES OF CABLES , OPTIC FIBER CABLES, FOAM SHEETS ETC. THE ASSESSEE FILED ITS RETURN O F INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 20-11-2006 DECLARING TOTAL INCOME OF RS.26,19,14,271/-. DURING THE COURSE OF SCRUTINY ASSESSMEN T THE ASSESSING OFFICER MADE CERTAIN ADDITIONS/DISALLOWANCES INCLUDIN G DISALLOWANCE IN RESPECT OF DEDUCTION CLAIMED U/S. 80IB OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDER DATED 31-12-2008, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUG NED ORDER ALLOWED THE CLAIM OF ASSESSEE WITH RESPECT TO DEDUC TION U/S. 80IB ON INCOME FROM SALE OF SCRAP OF GOA UNIT. AGAINST THESE FIND INGS OF THE COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPE AL BEFORE THE TRIBUNAL. 3. SHRI J.G. PENDSE APPEARING ON BEHALF OF THE ASSESSEE SU BMITTED AT THE OUTSET, THAT THE ISSUE RAISED IN THE APPEAL BY THE DEPARTMENT HAS ALREADY BEEN DECIDED BY THE CO-ORDINATE BENCH OF THE TR IBUNAL IN THE EARLIER ASSESSMENT YEARS IN FAVOUR OF THE ASSESSEE. THE LD. AR PLACED ON RECORD A COPY OF THE ORDER IN ITA NO. 1975/PN/2013 FOR THE ASSESSMENT YEAR 2004-05 DECIDED ON 29-09-2014 AND A COPY OF O RDER IN ITA NOS. 564 & 565/PN/2014 FOR THE ASSESSMENT YEARS 2 005-06 AND 3 ITA NO. 892/PN/2014, A.Y. 2006-07 2007-08 DECIDED ON 31-08-2015. THE LD. AR PRAYED FOR DIS MISSING THE APPEAL OF THE DEPARTMENT. 4. SHRI DHEERAJ KUMAR JAIN REPRESENTING THE DEPARTMENT FAIRLY ADMITTED THAT THE ISSUE RAISED IN THE APPEAL HAS BEEN DE CIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN THE ASSESSMENT YEARS 2002- 03, 2004- 05, 2005-06 AND 2007-08. 5. BOTH SIDES HEARD. THE ISSUE OF ELIGIBILITY OF ASSESSEE TO CLAIM DEDUCTION U/S. 80IB ON INCOME FROM SALE OF SCRAP FROM GOA UNIT HAS BEEN SURFACING REGULARLY FROM THE ASSESSMENT YEARS 200 2-03 ONWARDS. WE FIND THAT THE TRIBUNAL HAS BEEN CONSISTENTLY ALLOWING T HE ASSESSEES CLAIM OF DEDUCTION U/S. 80IB. IN THE APPEAL BY THE DEPART MENT FOR ASSESSMENT YEAR 2005-06 AND 2007-08 DECIDED ON 31-08 -2015 THE ISSUE WAS CONSIDERED AND DECIDED BY THE CO-ORDINATE BENCH AS UN DER: 4. SHRI J.G. PENDSE APPEARING ON BEHALF OF THE ASS ESSEE SUBMITTED AT THE OUTSET, THAT THE ISSUE RELATING TO ELIGIBILITY OF THE ASSESSEE FOR CLAIMING DEDUCTION U/S. 80IB ON INCOME FROM SALE OF SCRAP AT GOA UNIT, IS SQUARELY COVERED BY THE DECISION OF TRIBUNAL IN ASS ESSEES OWN CASE IN ITA NO. 105/PN/2007 FOR THE ASSESSMENT YEAR 2002-03 . THE TRIBUNAL HELD THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDU CTION U/S. 80IB. THIS VIEW WAS SUBSEQUENTLY FOLLOWED BY THE CO-ORDINATE B ENCH OF TRIBUNAL IN ITA NO. 1975/PN/2013 FOR ASSESSMENT YEAR 2004-05. 5. SHRI RAJESH DAMOR REPRESENTING THE DEPARTMENT FA IRLY ADMITTED THAT THIS ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2002-03 AND 2004-05. HOWE VER, THE LD. DR SUPPORTED THE FINDINGS OF ASSESSING OFFICER ON THIS ISSUE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRES ENTATIVES OF BOTH THE SIDES AND HAVE EXAMINED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO PERUSED THE ORDERS OF CO-ORDINATE BENC H OF TRIBUNAL IN ITA NO. 105/PN/2007 FOR ASSESSMENT YEAR 2002-03 DECIDED ON 15-07-2011 AND ITA NO. 1975/PN/2013 FOR ASSESSMENT YEAR 2004-0 5 DECIDED ON 29-09-2014. WE FIND THAT THE TRIBUNAL HAS ACCEPTED THE CLAIM OF 4 ITA NO. 892/PN/2014, A.Y. 2006-07 ASSESSEE BY PLACING RELIANCE ON THE DECISION OF HON 'BLE MADRAS HIGH COURT IN THE CASE OF M/S. FENNER INDIA LTD. REPORTE D AS 241 ITR 803. THE RELEVANT EXTRACT OF THE ORDER OF TRIBUNAL IN ITA NO . 105/PN/2007 IS AS UNDER: 27. GROUND NO. 6 RELATES TO CIT(A)'S DIRECTION TO THE A.O TO ALLOW THE DEDUCTION U/S 80-IB OF THE ACT IN RESPECT OF SCRAP GENERATED OUT OF MANUFACTURING PROCESS TREATING THE SAME AS BUSINESS INCOME. THE A.O OBSERVED THAT THE SCRAP IS NOT A BYE PRODUCT OF THE ASSESSEE AND HENCE THE SALE OF THE SAME CANNOT BE TREATED AS THE BUSIN ESS INCOME OF THE UNIT AND HENCE NOT ELIGI9BLE FOR DEDUCTION U/S 80-IB OF THE ACT. AS REGARDS THE ALTERNATIVE GROUND OF THE ASSESSEE OF TAKING NET IN COME EARNED OUT OF THE SALE OF SCRAP, THE A.O. OBSERVED THAT THE SAME IS N OT ACCEPTABLE AS THE COST RELATING TO THE SALE OF SCRAP WAS ALREADY DEBI TED TO THE P & L A/C OF THE UNIT. THE A.O ALSO DID NOT GRANT DEDUCTION U/S 80-IB IN RESPECT OF MISCELLANEOUS INCOME AMOUNTING TO RS.56,32,480/- RE LYING ON THE JUDGMENTS OF APEX COURT IN THE CASE OF PANDIAN CHEM ICALS (233 ITR 497) AND STERLING FOODS LTD. (236 AITR 529). ON APPEAL, THE CIT(A) HAS CONFIRMED THE VIEW TAKEN BY THE A.O ON THIS ISSUE. 28. AT THE VERY OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE HAS MENTIONED THAT THE SAID ISSUE IS ALSO COVERED IN FA VOUR OF THE ASSESSEE BY VIRTUE OF .MADRAS HIGH COURT JUDGMENT IN THE CAS E OF M/S FENNER INDIA LTD (241 ITR 803) FOR THE PROPOSITION THAT TH E PROFIT ON SALE OF SCRAP MATERIAL SINCE HAD A DIRECT LINK OR NEXUS WITH THE INDUSTRIAL UNDERTAKING AND THEREFORE, IT IS ELIGIBLE FOR DEDUCTION U/S 80I B, CONSIDERING THE SIMILARITY IN LANGUAGE USED IN SECTIONS 80HH AND 80 IB OF THE ACT, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE SHOULD SUCCEED IN THIS REGARD ALSO. ACCORDINGLY, GROUND 3 OF THE REVENUE'S APPEAL IS DISMISSED. IN ASSESSMENT YEAR 2004-05, THE CO-ORDINATE BENCH B Y FOLLOWING THE DECISION RENDERED IN ASSESSEES OWN CASE IN ASS ESSMENT YEAR2002- 03 GRANTED RELIEF TO THE ASSESSEE. 7. THE REVENUE HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF THE TRIBUNAL ON THIS ISSUE. SINCE, THERE IS NO CHANGE IN FACTS AND CIRCUMSTANCES IN THE IMPUGNED ASSESSMENT YEARS, WE DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW. ACCORDINGLY, WE U PHOLD THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE A ND DISMISS BOTH THE APPEALS OF THE REVENUE. 6. THE IMPUGNED ASSESSMENT YEAR IS INTERVENING THE ASSE SSMENT YEARS 2005-06 AND 2007-08 WHEREIN THE ASSESSEE WAS G RANTED THE 5 ITA NO. 892/PN/2014, A.Y. 2006-07 BENEFIT OF DEDUCTION U/S. 80IB. THERE HAS BEEN NO CHANGE IN THE FACTS AND CIRCUMSTANCES IN THE IMPUGNED ASSESSMENT YEAR. WE RESPECTFULLY FOLLOW THE ORDER OF CO-ORDINATE BENCH AND DISMISS THE APPE AL OF THE REVENUE, BEING DEVOID OF MERIT. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON WEDNESDAY, THE 30 TH DAY OF SEPTEMBER, 2015 AT THE TIME OF HEARING. SD/- SD/- (PRADIP KUMAR KEDIA) (VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; !' / DATED : 30 TH SEPTEMBER, 2015 RK +,!-./)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. # # $ () / THE CIT(A)-V, PUNE 4. # # $ / THE CIT-V, PUNE 5. '() *+ , # *+ , , -./ , / DR, ITAT, A BENCH, PUNE. 6. )01 23 / GUARD FILE. // ' // TRUE COPY// #4 / BY ORDER, 5 */ / PRIVATE SECRETARY, # *+ , / ITAT, PUNE