DCIT, Ludhiana V. M/s Kanin India, Ludhiana

ITA 962/CHANDI/2014

• Counselvise Citation: 96221514 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-12-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJEEV SHARMA; GAGAN DEEP SINGH
• Keywords: Business income
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.962/CHD/2014 (ASSESSMENT YEAR : 2004-05) THE D.C.I.T., VS. M/S KANIN INDIA, CENTRAL CIRCLE II, B-XXX-6754, LUDHIANA. FOCAL POINT, LUDHIANA. PAN: AABFK2551P (APPELLANT) (RESPONDENT) APPELLANT BY : MS.CHANDER KANTA, DR RESPONDENT BY : S/SHRI RAJEEV SHARMA & GAGAN DEEP SINGH DATE OF HEARING : 07.12.2015 DATE OF PRONOUNCEMENT : 23.12.2015 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INC OME TAX (APPEALS)-I, LUDHIANA DATED 26.8.2014 FOR ASSESSMENT YEAR 2004-05. 2. THE GROUND NO.1 RAISED BY THE REVENUE READS AS UNDER : 1. WHETHER THE LD. COMMISSIONER OF INCOME-TAX(APP EAL) IS RIGHT IN IGNORING THE DECISION OF HON'BLE ITAT IN T HE CASE 2 OF M/S PARKER CYCLE INDUSTRIES VS. ITO(2004) 91 TTJ(CHD.)436 WHERE IN IT HAS BEEN HELD THAT THE SAL E OF SCRAP IS TO BE EXCLUDED FROM THE TOTAL TURNOVER FOR COMPUTATION OF DEDUCTION U/S 80HHC AND SIMILAR VIEW S TAKEN BY DELHI BENCH OF THE TRIBUNAL IN THE CASE OF BHARAT HEAVY ELECTRICALS LTD VS. DCIT(2005) 98 TTJ 585 AND CHENNAI BENCH OF THE TRIBUNAL IN THE CAS E OF RANGE BRAKE LINING LTD. VS. JCIT(2007)107TTJ(CHENNAI)475. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER RESTRICTED THE DEDUCTION UNDER SE CTION 80HHC OF THE INCOME TAX ACT, 1962 (IN SHORT THE AC T) CLAIMED BY THE ASSESSEE AT RS.1,34,01,370/- ON THE AMOUNT OF SCRAP ON WHICH THE DEDUCTION WAS CLAIMED BY THE ASSESSEE. THIS WAS HELD BY THE ASSESSING OFFIC ER RELYING ON THE JUDGMENT OF I.T.A.T., CHANDIGARH BEN CH IN THE CASE OF M/S PARKAR CYCLE INDUSTRIES, ITA NO.637/CHD/2005 AND M/S ALLIED ENGINEERS, ITA NO.638/CHD/2005 DATED 12.5.2006 FOR ASSESSMENT YEAR 2002-03.. FURTHER, A REFERENCE OF THE I.T.A.T., CH ANDIGARH BENCH ORDER IN ASSESSEES CASE FOR ASSESSMENT YEAR 2004- 05 IN ITA NO.792/CHD/2008 DATED 16.10.2009 WAS ALSO MADE IN THIS REGARD. 4. BEFORE THE LEARNED CIT (APPEALS), IT WAS CONTENDED BY THE ASSESSING OFFICER THAT THE ORDER F OR ASSESSMENT YEAR 2004-05, WAS PASSED ON THE CONCESSI ON, THEREFORE, IS NOT BINDING IN NATURE. FURTHER, THE ATTENTION OF THE LEARNED CIT (APPEALS) WAS DRAWN TO A LATEST JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT 3 VS. PUNJAB STAINLESS STEEL INDUSTRIES, CIVIL) PETIT ION NO.5592 OF 2008, WHEREBY IT HAS BEEN HELD THAT THE SALE OF SCRAP IS NOT A PART OF TOTAL TURNOVER. THE BENEFIT OF DEDUCTION UNDER SECTION 80HHC OF THE ACT IS TO BE A LLOWED TO THE ASSESSEE SINCE EITHER THE SCRAP SHOULD BE SH OWN SEPARATELY IN PROFIT & LOSS ACCOUNT OR MAY BE REDUC ED FROM THE COST OF RAW MATERIAL AS PER ACCOUNTING PRA CTICE. RELYING ON THIS JUDGMENT, THE LEARNED CIT (APPEALS) GAVE RELIEF TO THE ASSESSEE. 5. AGGRIEVED BY THIS ORDER, THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US. THE LEARNED D.R. RELI ED ON THE ORDER OF THE ASSESSING OFFICER AND ALSO THE ORD ER OF THE I.T.A.T., CHANDIGARH BENCH IN ASSESSEES OWN CASE F OR ASSESSMENT YEAR 2004-05 AND PRAYED THAT THE AMOUNT OF SALE OF SCRAP SHOULD BE EXCLUDED FROM THE TURNOVER FOR THE PURPOSES OF DEDUCTION UNDER SECTION 80HHC OF THE AC T. 6. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LEARNED CIT (APPEALS) AND FURTHER SUBMITTED THAT THE HON'BLE APEX COURT IN THE CASE O F PUNJAB STAINLESS STEEL INDUSTRIES (SUPRA) HAS HELD IN VERY CLEAR TERMS THAT EVEN IF THE SCRAP SALE IS NOT A PA RT OF TURNOVER, IT MAY BE REDUCED FROM THE COST OF RAW MA TERIAL. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. ON PERUSAL OF THE JUDGMENT OF THE HON'BLE SUPREME C OURT 4 IN THE CASE OF PUNJAB STAINLESS STEEL INDUSTRIES ( SUPRA), WE SEE THAT THE HON'BLE SUPREME COURT AFTER ANALYZI NG THE ISSUE IN DETAIL OBSERVED THAT THE WORD TURNOVER W OULD MEAN TOTAL SALES AND SALES DEFINITELY WOULD NOT I NCLUDE THE SCRAP MATERIAL AS THE ASSESSEE IS NOT DEALING I N SCRAP. HOWEVER, THE SALE OF SCRAP IS EITHER TO BE SHOWN SE PARATELY UNDER A DIFFERENT HEAD OR TO BE DEDUCTED FROM THE C OST OF RAW MATERIAL. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (APPEALS) AND HOLD THAT SINCE THE SALE OF SCRAP HAS TO BE DEDUCTED FROM THE COST OF RAW MATERIAL, IN ANY CASE, THE ASSESSEE HAS TO BE G IVEN BENEFIT OF DEDUCTION UNDER SECTION 80HHC OF THE ACT . THE GROUND NO.1 OF APPEAL IS DISMISSED. 8. THE GROUND NO.2 OF APPEAL RAISED BY REVENUE READS AS UNDER : 2. WHETHER THE LD. COMMISSIONER OF INCOME-TAX(APPE AL) IS RIGHT IN DELETING THE ADDITION MADE BY THE ASSESS ING OFFICER ON ACCOUNT OF THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE ON THE SALE OF DEPB FOR CALCULATING DEDUCT ION U/S 80HHC, BY IGNORING THE FACT THAT THE COST PRICE OF THE DEPB LICENSE WAS NIL, AS DISCUSSED IN THE ASSESSMENT ORDER. 9. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER TREATED THE ENTIRE AMOUNT RECEIVE D ON ACCOUNT OF SALE OF DEPB BY THE ASSESSEE AS PROFITS AND DID NOT ALLOW OF DEDUCTION UNDER SECTION 80HHC OF THE A CT, ON THE SAME HOLDING THAT THE DEPB IS NOT A PROFIT DERI VED FROM THE BUSINESS OF THE ASSESSEE. THE LEARNED CIT 5 (APPEALS) GAVE RELIEF RELYING ON THE JUDGMENT OF TH E HON'BLE APEX COURT IN THE CASE OF TOPMAN EXPORTS VS . CIT ( 2012) 342 ITR 49 (SC), WHEREBY IT HAS BEEN HELD THAT THE PROFIT ON SALE OF DEPB COULD BE ONLY AMOUNT REALIZE D OVER AND ABOVE THE FACE VALUE WHICH IS NEGATIVE FIGURE I N THE PRESENT CASE. IN THIS WAY, THE LEARNED CIT (APPEAL S) DELETED THE DISALLOWANCE ON THIS ACCOUNT. 10. BEFORE US, THE LEARNED D.R. RELIED ON THE ORDE R OF THE ASSESSING OFFICER, WHILE THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LEARNED CIT (AP PEALS) AS WELL AS THAT OF THE HON'BLE APEX COURT IN THE CA SE OF TOPMAN EXPORTS (SUPRA). 11. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. FROM THE PERUSAL OF THE ORDER OF THE LEARNED CIT (A PPEALS), WE SEE THAT THE LEARNED CIT (APPEALS) HAS DEALT WIT H THIS ISSUE AT PAGE 8, PARA 7, WHICH READS AS UNDER : 7. THE GROUNDS OF APPEAL AT SR. NO. 4 & 5 PERTAIN T O THE CLAIM OF THE APPELLANT THAT THE ASSESSING OFFICER HA S TREATED THE ENTIRE AMOUNT RECEIVED ON ACCOUNT OF SALE OF DE PB AS PROFITS WHEREAS THE PROFIT ON TRANSFER SHOULD HAVE BEEN ONLY THE AMOUNT OVER AND ABOVE THE FACE VALUE OF THE DEPB LI CENSES. THE APPELLANT HAS RELIED UPON THE JUDGMENT OF HON'BL E APEX COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT 342 ITR 49. THE JUDGMENT OF HON'BLE APEX COURT ON THE ISSUE IS CLEAR THAT THE PROFIT ON SALE OF DEPB COULD BE ONLY AMOUNT REALIZE O VER AND ABOVE THE FACE VALUE WHICH IS NEGATIVE FIGURE IN THI S CASE. 6 THEREFORE, THE ACTION OF THE ASSESSING OFFICER IN RE DUCING DEDUCTION U/S 80HHC IS DIRECTED TO BE DELETED. 12. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF T HE LEARNED CIT (APPEALS) SINCE THE LEARNED CIT (APPEAL S) HAS RELIED ON THE ORDER OF THE HON'BLE APEX COURT, WHER EBY IT HAS BEEN VERY CLEARLY HELD THAT THE ONLY AMOUNT REA LIZED OVER AND ABOVE THE FACE VALUE OF THE DEPB CAN BE CONSIDERED FOR DISALLOWANCE UNDER SECTION 80HHC OF THE ACT, AND IN VIEW OF THE FACT THAT FINDING RECORDED BY THE LEARNED CIT (APPEALS) IN THIS CASE THAT THE AMOUNT REALIZED OVER AND ABOVE THE FACE VALUE IS NEGATIVE , WHICH FACT HAS NOT BEEN CONTROVERTED BY ANY OF THE PARTIE S BEFORE US. WE CONFIRM THE ORDER OF THE LEARNED CIT (APPEA LS) IN THIS REGARD. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF DECEMBER, 2015. SD/- SD/- (H.L. KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 23 RD DECEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7