ACIT, Chandigarh V. M/s Nalagarh Steel Rolling Mill (P) Ltd., Chandigarh

ITA 93/CHANDI/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68378 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Depreciation
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 93/CHD/2013 ASSESSMENT YEAR: 2008-09 THE ACIT, CIRCLE-2, VS. M/S NALAGARH STEEL ROLLI NG SECTOR 17-E MILL (P) LTD., INDUSTRIAL AREA CHANDIGARH PHASE I, CHANDIGARH PAN NO. AABCN5203C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.S. NAGAR RESPONDENT BY : SHRI JASPAL SHARMA DATE OF HEARING : 03/07/2013 DATE OF PRONOUNCEMENT : 02.08.2013 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A), CHANDIGARH, 21.11.2012. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L 1. THE LD. CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW IN DELETING THE DISALLOWANCE OF DEDUCTION U/S 80IC OF 2 INCOME TAX ACT, 1961 AS THE OTHER INCOME SHOWN UNDE R THE HEADS FREIGHT CHARGES, DISCOUNT AND LOADING & UNLOADING CHARGES WHICH DOES NOT RELATE TO THE MANUFACTURING ACTIVITIES OF THE ASSESSEE. 2. THE APPELLANT CRAVES TO ADD OR AMEND ANY GROUND / GROUNDS OF APPEALBEFORE THE APPEAL IS HEARD OR DISPOSED OFF. 3. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORES. 3. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASS ESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TWISTED STEEL BARS AND ROLLS. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80 IC. ACCORDING TO ASSESSIN G OFFICER, FOLLOWING ITEMS OF INCOME CANNOT BE SAID TO HAVE BEEN DERIVED FROM MANUFACTURING ACTIVITY. OTHER INCOME FREIGHT CHARGES RS. 16,14,883.00 DISCOUNT RECEIVED RS. 23,599.00 LOADING & UNLOADING CHARGES RS. 5,97,074.00 INTEREST RECEIVED 67,540.98 MISC. INCOME 78,188.00 RS. 23,81,284.98 THEREFORE, ON THE ABOVE ITEM DEDUCTIONS U/S 80IC WAS DENIED. 4. ON APPEAL BEFORE THE CIT(A), IT WAS MAINLY SUBMI TTED THAT ASSESSEE WAS OWNING TRUCKS WHICH WERE BEING USED FOR DELIVER Y OF MATERIAL TO THE 3 CUSTOMERS AND FREIGHT WAS BEING RECEIVED FROM SUCH CUSTOMERS. FREIGHT CHARGES WERE ONLY RS. 16,14,883/-. ON THIS, THE AS SESSEE HAD INCURRED EXPENSES AMOUNTING TO RS. 20,12,825/- CONSISTING OF REPAIR AND MAINTENANCE ETC., RS . 12,92,230/- AND DEPRECIATION OF RS. 7,20,595/- IF T HESE EXPENSES ARE CONSIDERED THEN THERE SHOULD BE NO INCOME FROM THE TRUCK, THEREFORE, THIS INCOME OF FREIGHT CHARGES COULD NOT BE EXCLUDED OUT OF THE BUSINESS PROFIT OF THE ASSESSEE. THE LD. CIT(A) ACCEPTED THIS CONTENT ION AND DIRECTED THE ASSESSING OFFICER NOT TO EXCLUDE THE TRUCK INCOME F ROM THE BUSINESS PROFIT FOR THE PURPOSE OF DISALLOWING DEDUCTION U/S 80IC. 5. BEFORE US LD. DR SUBMITTED THAT TRUCK INCOME CAN NOT BE SAID TO HAVE BEEN DERIVED FROM ELIGIBLE INDUSTRIAL UNDERTAKING A ND, THEREFORE, DEDUCTION U/S 80IC WAS RIGHTLY DENIED BY THE ASSESSING OFFICE R. 6. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THIS ISSUE HAS BEEN ADJUDICATED BY LD. CIT(A) IN PARA 3.2, WHICH I S AS UNDER:- 3.2 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COU NSEL. THE FREIGHT CHARGES SHOWN BY THE APPELLANT AS INCOM E ARE, IN FACT, FREIGHT REIMBURSEMENT AGAINST WHICH EXPENSES HAVE BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. FREIGH TS ARE IN 4 RELATION TO THE PURCHASE OF RAW MATERIALS AND SALE OF FINISHED GOODS AND IT IS SEEN THE FRIGHT CHARGES ARE INCLUDE D IN THE SALE BILL. ONLY BECAUSE THE REIMBURSEMENT HAVE BEEN SHOWN ON THE CREDIT SIDE OF THE PROFIT AND LOSS ACCOUNT, IT DOES NOT ALTER THE NATURE OF TRANSACTIONS. THE NET EFFECT OF FREIGHT CHARGES BEING EXPENDITURE, DISALLOWANCE U/S 80IC OF THE ACT SHOULD NOT HAVE BEEN MADE. HENCE, THE DISALLOWANCE OF DEDUCTION U/S 80IC OF THE ACT ON FREIGHT CHARGES IS DELETED. 8. THE ABOVE CLEARLY SHOWS THAT FREIGHT HAS BEEN EA RNED ON ACCOUNT OF CARRIAGE OF FINISHED GOODS AND RAW MATERIAL AND FRE IGHT HAS BEEN RECEIVED FORM CUSTOMERS. HOWEVER, THIS IS IN THE NATURE OF REIMBURSEMENT IF THE TOTAL EXPENDITURE ON TRUCK IS CONSIDERED WHICH HAS ALREAD Y BEEN DEBITED TO PROFIT AND LOSS ACCOUNT. IF SUCH EXPENDITURE IS CONSIDERED , THEN THERE IS NO INCOME ON ACCOUNT OF FREIGHT. WHEN THE TRUCK EXPENSES ARE DEBITED TO PROFIT AND LOSS THEY LEAD TO DECREASE IN PROFITS, THEREFORE, FREIGH T CHARGES WOULD COMPENSATE SUCH DECREASE. ACCORDINGLY IN OUR ONION, THE LD. CI T(A) HAS CORRECTLY ADJUDICATED THE ISSUE. 9. THE SECOND ITEMS ON WHICH DEDUCTION HAS BEEN DEN IED IS UNLOADING AND UNLOADING CHARGES. 10. HERE AGAIN, THE DEDUCTION WAS DENIED BECAUSE AC CORDING TO ASSESSING OFFICER THIS INCOME WAS NOT DERIVED FROM INDUSTRIAL UNDERTAKING WHEREAS ACCORDING TO CIT(A), THE ASSESSEE WAS RECEIVING THI S MONEY FROM CUSTOMERS AS LOADING AND UNLOADING CHARGES AND THE EXPENDITUR E ON THIS ACCOUNT WAS 5 DEBITED TO THE PROFIT AND LOSS ACCOUNT IN THE FORM OF WAGES AND SINCE THE NET EFFECT IS EXPENDITURE, THEREFORE, ASSESSING OFFICER WAS DIRECTED NOT TO EXCLUDE THIS ITEM FROM THE BUSINESS PROFIT. 11. BOTH THE PARTIES MADE SIMILAR CONTENTION IN RES PECT OF FIRST ITEM. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT THIS ISSUE HAS BEEN ADJUDICATED BY THE LD. CIT(A) ITA VIDE PARA 4. 2, WHICH READS AS UNDER:- 4.2 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL. THE NET EFFECT UNDER THE HEAD LOADING AND UNLOADING IS ACTUALLY EXPENDITURE AND, IN ANY CASE , THIS ACTIVITY IS DIRECTLY RELATED TO MANUFACTURING ACTIV ITY OF THE APPELLANT COMPANY BECAUSE THESE ARE IN RELATION TO THE SALE OF FINISHED GOODS AND ARE SHOWN IN THE SAL E BILLS ALSO. ONLY BY SHOWING THE REIMBURSEMENTS ON THE CRE DIT SIDE, IT WILL NOT ALTER THE NATURE OF TRANSACTION. IN ANY CASE, THE LOADING/UNLOADING CHARGES HAVE BEEN INCLU DED IN THE SALE BILL AND ARE PART OF SALE AMOUNT, MEANI NG THEREBY THAT THEY ARE RELATED TO MANUFACTURING. HEN CE, THE DISALLOWANCE OF DEDUCTION ON THIS AMOUNT IS DEL ETED. 13. THE ABOVE CLEARLY SHOWS THAT LOADING AND UNLOAD ING IS BASICALLY AN ITEM OF EXPENDITURE AND WHATEVER RECEIPTS WERE REIM BURSED BY THE CUSTOMERS HAVE BEEN SHOWN UNDER A SEPARATE HEAD, THEREFORE, O N THE SAME LOGIC AS IN THE CASE OF FIRST ITEM, THIS ITEM CANNOT BE EXCLUDED FR OM THE BUSINESS PROFIT AND ACCORDING WE CONFIRM THE ORDER OF LD. CIT(A). 6 14. THE DEDUCTION HAS BEEN DENIED IN RESPECT OF THE THIRD ITEM I.E. DISCOUNT RECEIVED ON CAR. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT IF THE DISCOUNT WAS NOT SHOWN IN THE CREDIT SIDE OF THE PR OFIT AND LOSS ACCOUNT AND WAS REDUCED FROM THE COST OF CAR THEN IT WOULD HAV E LEAD TO LOWER DEPRECIATION THEREBY INCREASING THE PROFIT AND LD. CIT(A) HAS ACCEPTED THIS CONTENTION. 15. HERE AGAIN, BOTH THE PARTIES MADE SIMILAR CONTE NTIONS. 16. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY FORCE IN THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE. THE DISCOUNT ON CAR SHOULD HAVE BEEN IDEALLY REDUCED FROM THE COST OF CAR BECA USE IT HAS NOTHING TO DO WITH ANY ITEM OF INCOME. IT CANNOT BE SAID TO HAV E BEEN DERIVED FROM THE INDUSTRIAL UNDERTAKING AND, THEREFORE, WE SET ASID E THE ORDER OF LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO EXCLUDE THE AMO UNT OF DISCOUNT FROM THE BUSINESS PROFITS FOR THE PURPOSE OF CALCULATING F D EDUCTION U/S 80HHC. 17. IN THE RESULT, REVENUES APPEALS IS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.08.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 2ND AUGUST, 2013 RKK 7 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR