M/s Ansysco (Partnership Firm), Chandigarh V. ACIT, Chandigarh

ITA 976/CHANDI/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7049 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-08-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: RAJESH S ATHAVALE
• Keywords: Business income; Depreciation; Source of fund; Revenue expenditure; Capital expenditure
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 895/CHD/2012 ASSESSMENT YEAR:2009-10 M/S ANSYSCO, VS THE ADDL. CIT, SCO 74-75, RANGE 1, SECTOR 8-C, CHANDIGARH. CHANDIGARH. PAN NO.AACFA7228C & ITA NO. 910/CHD/2012 ASSESSMENT YEAR:2009-10 THE ACIT VS M/S ANSYSCO SUNRISE COMPLEX, CIRCLE 1(1), SCO 74-75, CHANDIGARH. SECTOR 8-C, CHANDIGARH. PAN NO.AACFA7228C & ITA NO. 976/CHD/2013 ASSESSMENT YEAR:2010-11 M/S ANSYSCO, VS THE ACIT, SCO 74-75, CIRCLE 1(1), SECTOR 8-C, CHANDIGARH. CHANDIGARH. PAN NO.AACFA7228C & ITA NO. 973/CHD/2013 ASSESSMENT YEAR:2010-11 THE ACIT VS M/SANSYSCO SUNRISE COMPLEX, CIRCLE 1(1), SCO 74-75, CHANDIGARH. SECTOR 8-C, CHANDIGARH. PAN NO.AACFA7228C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJESH S.A THAVALE DEPARTMENT BY: SHRI MANJIT SINGH DATE OF HEARING : 26.08.2014 DATE OF PRONOUNCEMENT : 15.09.2014 2 O R D E R PER SUSHMA CHOWLA, J.M. THE CAPTIONED CROSS APPEALS BY THE SAME ASSESSEE AN D THE REVENUE FOR ASSESSMENT YEARS 2009-10 AND 2010-11 HA VE BEEN FILED AGAINST SEPARATE ORDERS OF THE COMMISSIONER OF INCO ME TAX(APPEALS), CHANDIGARH DATED 14.06.2012 & 14.07.2013 RESPECTIVE LY AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. BOTH THE CROSS APPEALS ON SIMILAR FACTS AND ISSU ES WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO. 895/CHD/2012 (A.Y. 2009- 10) HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN LAW, THE LEARNED CIT(A) ERRE D IN CONFIRMING THE DENIAL OF DEDUCTION U/S 80IC IN RESPECT OF 'OTHER INCOME' OF RS. 5,36,385/-CONSISTING OF (I) INTEREST OF RS. 4,66,888/- RECEIVED ON REFUND O F EXCESS RECOVERY BY HIMUDA, (II) AWARD REED FROM GOVERNMENT RS. 20,000/ -, INTEREST ON IT REFUNDS RS. 14,065/- AND FOREIGN EXCHANGE FLUCTUATION GAIN RS. 35,432/-. LD. CIT(A) ERRED IN AGREEING WITH THE AO THAT THE S AID INCOME WAS NOT DERIVED FROM THE BUSINESS OF THE ELIGIBLE UNDERTAKI NG. HE OUGHT TO HAVE APPRECIATED THE FACT THAT THE SAID INCOME WAS NOT AN 'INDEPENDENT SOURCE OF INCOME' OF THE UNDERTAKING A ND HENCE COULD NOT HAVE BEEN EXCLUDED FOR DETERMINING THE DEDUCTION CLAIMED AND ALLOWABLE U/S 80IC. 4. THE REVENUE IN ITA NO. 910/CHD/2012 (A.Y. 2009-1 0), HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LD. CIT(A) HAS ERRED ON THE FACTS AND IN LAW IN ALLOWING THE ENTIRE DEDUCTION UNDER SECTION 80I(C) OF RS. 6 3,99,693- WHICH INCLUDES THE INCOME FROM JOB WORK OF RS. 28,64,53 6/- AND OTHER INCOME OF RS. 60,51,682/- 2. WITHOUT PREJUDICE TO RELIEF ALLOWED IN RESPECT OF E NTIRE DEDUCTION U/S 80IC, THE LD. CIT(A) HAS ERRED ON THE FACTS AND IN LAW IN ALLOWING THE DEDUCTION U/S 80IC IN RESPECT OF 'JOB WORK INCOME' OF RS. 28, 64,536/-. 3 3 WITHOUT PREJUDICE TO RELIEF ALLOWED IN RESPECT OF E NTIRE DEDUCTION U/S 80IC, THE LD. CIT(A) HAS ERRED ON THE FACTS AND IN LAW IN ALL OWING THE DEDUCTION U/S 80IC IN RESPECT OF 'OTHER INCOME' OF RS. 60,51,682/ - ACCRUED TO THE ASSESSEE ON ACCOUNT OF INCOME LIKE INTEREST RECEIVED FROM HOUSI NG BOARD, INTEREST INCOME FROM IT REFUND, MISCELLANEOUS INCOME, INSURANCE CLA IM AND INCOME FROM SALE OF SCRAP ETC., 4 THE LD. CIT(A) HAS ERRED ON THE FACTS AND IN LAW IN ALLOWING THE RELIEF TO THE ASSESSEE AND NOT APPRECIATING THE FACT THAT THE ASSESSEE IS ENGAGED ONLY IN 'MIXING OF CHEMICALS AND PACKING TH EREOF. 5. THE ASSESSEE IN ITA NO. 976/CHD/2013 (A.Y. 2010- 11) HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN LAW, THE LEARNED CIT(A) ERRED I N AGREEING WITH THE AO THAT THE EXPENDITURE INCURRED ON REPAIRS AND MAINTE NANCE OF INR 8,10,242 WERE IN THE NATURE OF CAPITAL EXPENDITURE AND DISALLOWED THE SAME. 2. ON THE FACTS AND IN LAW, THE LEARNED CIT(A) ERRED I N CONFIRMING THE DENIAL OF DEDUCTION U/S 80IC IN RESPECT OF 'OTHER INCOME' OF INR 2,167 CONSISTING OF INTEREST RECEIVED FROM LOAN GIVEN TO EMPLOYEE. LD. CIT(A) ERRED IN AGREEING WITH THE AO THAT THE S AID INCOME WAS NOT DERIVED FROM THE BUSINESS OF THE ELIGIBLE UNDERTAKING. HE O UGHT TO HAVE APPRECIATED THE FACT THAT THE SAID INCOME WAS NOT AN 'INDEPENDE NT SOURCE OF INCOME' OF THE UNDERTAKING AND HENCE COULD NOT HAVE BEEN EXCLUDED FOR DETERMINING THE DEDUCTION CLAIMED AND ALLOWABLE U/S 80IC. 6. THE REVENUE IN ITA NO. 973/CHD/2013 (A.Y. 2010-1 1), HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE LD. CIT (A) IS ERRONEOUS & CONTRAR Y TO FACTS & LAW. 2. IN VIEW OF THE FACTS AND THE CIRCUMSTANCES OF THE CASE WHETHER CIT (A) WAS CORRECT IN ALLOWING DEDUCTION U/S 80IC WITHOUT APPRECIATING THE FACT THAT. 2.1 THE ASSESSEE WAS SIMPLY UNDERTAKING PACKAGI NG OF DGX COMPOUND, STANDARDIZATION OF COOLANT AND FORMUL ATION OF PVC. 2.2 IN THE PROCESS UNDERTAKEN BY IT, THERE IS NO CHANGE IN THE PRODUCT AND THE ACTIVITY OF THE ASSESSEE DOES NOT F ALL WITHIN THE PARAMETER OF THE DEFINITION OF WORD 'MANUFACTUR E'. 3. IN VIEW OF THE FACTS AND THE CIRCUMSTANCE S OF THE CASE, WHETHER CIT (A) WAS CORRECT IN ALLOWING DEDUCTION U/S 80IC ON INCOME FROM JOBWORK MORE SO WHEN THE ACTIVITY BEING CARRIED OUT BY TH E ASSESSEE WAS NOTHING BUT PACKAGING. 4. IN VIEW OF THE FACTS AND THE CIRCUMSTANCES OF TH E CASE, WHETHER CIT (A) WAS CORRECT IN ALLOWING DEDUCTION U/S 80IC ON OTHER INCOME SUCH AS SCRAP SALE, AND INSURANCE CLAIM, WHEN THESE INCOME WERE N OT DERIVED, IN TRUE SENSE, FROM THE BUSINESS OF THE ELIGIBLE UNDERTAKIN G. 4 5. IN VIEW OF THE FACTS AND THE CIRCUMSTANCE S OF THE CASE, WHETHER CIT (A) WAS CORRECT IN DELETING THE DISALLO WANCE OF RS. 6,36,300/- MADE BY THE A.O. U/S 24(A) AND DIRECTING TO TREAT RECEIPTS OF RS. 21,21,000/- FROM M/S HANKEL TEROSON INDIA LTD., AS RENTAL INCOME IGNORING THAT. 5.1 THE ASSESSEE COMPANY AND M/S HANKEL TEROSON INDIA L TD., ARE HAVING BUSINESS RELATIONS AND DOING SAME BUSINE SS, USING SAME SERVICES AND PREMISE AND SHARING EXPENSES. 5.2 THE BUSINESS RECEIPTS HAS BEEN CAMOUFLAGED AS RENTA L INCOME FOR CLAIMING DEDUCTION U/S 24(A) OF THE I.T. ACT. ITA 910/CHD/2012 :: A.Y. 2009-10 :: REVENUES APPEA L 7. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE IN EARLIER YEARS STARTING FROM ASSESSMENT YEAR 2006-07 TO 2008-09. THE CLAIM OF THE ASSESSEE THAT THE DEDUCTION UNDER SECTION 80IC WAS ALLOWED TO THE ASSESSEE IN T HE EARLIER YEAR AND IS DULY ALLOWABLE IN THE YEAR UNDER CONSIDERATI ON. 8. THE LD. DR FOR THE REVENUE, HOWEVER PLACED RELI ANCE ON THE ORDER OF THE ASSESSING OFFICER. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE MANUFACTURE AND SALE OF COOLENT AND PVC COMPOUND AND CAR CARE PRODUCTS. THE MANUFACTURI NG UNIT OF THE ASSESSEE IS LOCATED AT PARWANOO, HIMACHAL PRADESH. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IC OF THE ACT ON ACCOUNT OF INCOME EARNED FROM CARRYING ON ITS MANUFACTURING AC TIVITIES AND ALSO FROM JOB WORK. THIS THE FIFTH YEAR OF CLAIM OF DED UCTION UNDER SECTION 80IC OF THE ACT. THE FIRST YEAR OF CLAIM O F THE ASSESSEE VIS- -VIS DEDUCTION UNDER SECTION 80IC OF THE ACT WAS A SSESSMENT YEAR 2005-06. THE ASSESSING OFFICER HAD ALLOWED THE CLA IM OF THE ASSESSEE BY HOLDING THE ASSESSEE TO BE ELIGIBLE FOR EXEMPTION UNDER SECTION 80IC OF THE ACT IN RELATION TO THE INCOME E ARNED FROM CARRYING ON ITS MANUFACTURING ACTIVITIES. HOWEVER, THE CLAIM OF THE 5 ASSESSEE VIS--VIS ON ACCOUNT OF UNDER SECTION 80IC OF THE ACT ON JOB WORK WAS DISALLOWED BY THE ASSESSING OFFICER, AGAIN ST WHICH THE ASSESSEE WENT IN APPEAL BEFORE THE TRIBUNAL. THE A PPEAL OF THE ASSESSEE IN ITA NO.883/CHD/2006 RELATING TO ASSESSM ENT YEAR 2005- 06 WAS ALLOWED BY THE TRIBUNAL VIDE ORDER DATED 17. 9.2009 UNDER WHICH THE MANUFACTURING PROCESS UNDERTAKEN BY THE A SSESSEE WAS CONSIDERED IN PARAS 11 AND 12 AND VIDE PARA 13 IT W AS HELD THAT THE ACTIVITY IN RELATION TO DGX AMOUNTS TO MANUFACTURIN G AND THEREFORE, THE RESULTANT INCOME EARNED BY THE ASSESSEE WAS ELI GIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT. THE TRIBU NAL ALSO VIDE PARA 6 OBSERVED THAT THE ASSESSEE HAD CLARIFIED THAT THE CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT IN RESPECT OF MANUFAC TURING ACTIVITIES CARRIED ON BY THE ASSESSEE. THE CLAIM OF THE ASSES SEE OF DEDUCTION UNDER SECTION 80IC OF THE ACT IN RELATION TO INCOME EARNED FROM UNDERTAKING JOB WORK FOR SUPPLYING DGX CARTRIDGE WA S HELD TO BE ALLOWABLE. FURTHER THE TRIBUNAL IN ITA NO.120/CHD /2011 AND ITA NO.255/CHD/2011 RELATING TO ASSESSMENT YEAR 2007-08 IN CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE, VIDE ORD ER DATED 21.6.2011 HAD ALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT BOTH ON JOB WORK CHARGES AND PART OF OTHER INCOME. THE TRIBUNAL IN ITA NO. 532/CHD/2012 RELATING TO ASSESS MENT YEAR 2008- 09 VIDE ORDER DATED 30.07.2012 IN THE APPEAL FILED BY THE REVENUE HAD FURTHER ALLOWED THE CLAIM OF DEDUCTION UNDER SECTIO N 80IC OF THE ACT BOTH ON MANUFACTURING, JOB WORK CHARGES AND PART OF OTHER INCOME. 10. WE FIND THAT IN THE PRESENT APPEAL BEFORE US TH E FIRST ISSUE RAISED BY THE ASSESSING OFFICER WAS IN RESPECT OF D EDUCTION UNDER SECTION 80IC OF THE ACT ON THE PROFITS EARNED BY TH E ASSESSEE FROM CARRYING ON ITS MANUFACTURING ACTIVITIES. IN VIEW OF THE CLAIM OF THE ASSESSEE BEING ALLOWED FROM YEAR TO YEAR WE FIND NO MERIT IN THE 6 STAND OF THE ASSESSING OFFICER IN THE PRESENT YEAR IN THE ABSENCE OF ANY CHANGE IN THE FACT SITUATION. WE ARE IN AGREEM ENT WITH THE ORDER OF THE CIT (APPEALS) IN THIS REGARD. 11. THE SECOND ASPECT OF THE ISSUE UNDER SECTION 80 IC OF THE ACT IS DEDUCTION ALLOWABLE ON THE PROFITS EARNED FROM THE MANUFACTURING ACTIVITIES CARRIED ON JOB WORK BASIS. FOLLOWING TH E ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF IN THE EARL IER YEARS RELATING TO ASSESSMENT YEARS 2005-06 TO 2008-09, WE FIND NO INF IRMITY IN THE ORDER OF THE CIT (APPEALS). 12. THE THIRD ASPECT OF DEDUCTION CLAIMED UNDER SECTION 80IC OF THE ACT IS IN RESPECT OF OTHER INCOME TOTALING RS.5,36, 385/-. THE CIT (APPEALS) VIDE PARA 5.1 FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEE HELD THE ASSESSEE TO BE ELIGIBLE F OR DEDUCTION UNDER SECTION 80IC OF THE ACT ON INCOME FROM WRITING BACK THE CREDIT BALANCES OF THE PARTIES, INSURANCE CLAIM RECEIVED A ND INCOME FROM SALE OF SCRAP. WE FIND THAT SIMILAR ISSUE AROSE BE FORE THE TRIBUNAL IN ASSESSMENT YEARS 2006-07 AND 2008-09 AND THE CLAIM OF THE ASSESSEE VIS--VIS DEDUCTION UNDER SECTION 80IC OF THE ACT O N THE AFORESAID INCOME HAS BEEN ALLOWED TO THE ASSESSEE. FOLLOWING THE SAME WE UPHOLD THE ORDER OF THE CIT (APPEALS). HOWEVER , WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAD ONLY ALLOW ED THE CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT ON OTHER IN COME I.E. MISCELLANEOUS INCOME, INCOME FROM SALE OF SCRAP AND INSURANCE CLAIM AND NOT ON THE INTEREST INCOME RECEIVED FROM HOUSIN G BOARD AND IT REFUNDS. THE GROUNDS OF APPEAL RAISED BY THE REVEN UE IN THIS REGARD ARE THUS MISPLACED AND WE UPHOLD THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) IN ALLOWING THE CLAIM OF DEDUC TION UNDER SECTION 80IC OF THE ACT ON MISCELLANEOUS INCOME, IN SURANCE CLAIM 7 RECEIVED AND INCOME FROM SALE OF SCRAP. THE GROUNDS OF APPEAL RAISED BY REVENUE ARE THUS, DISMISSED. ITA NO. 973/CHD/2013 :: A.Y. 2010-11 :: REVENUES APPEAL 13. THE ISSUE VIDE GROUNDS OF APPEAL NO. 1 TO 4 IN ITA NO. 973/CHD/2013 ARE IDENTICAL TO THE ISSUE RAISED VIDE GROUND OF APPEAL NOS. 1 TO 4 IN ITA NO. 910/CHD/2012 AND OUR DECISIO N IN ITA NO. 910/CHD/2012 SHALL APPLY MUTATIS-MUTANDIS TO ITA NO . 973/CHD/2013 ALSO. 14. NOW COMING TO GROUND OF APPEAL NO. 5 RAISED BY THE REVENUE WHICH IS AGAINST THE ORDER OF COMMISSIONER OF INCOM E TAX (APPEALS) IN TREATING THE RECEIPTS OF RS. 21,21,000/- FROM M/ S HANKEL TEROSON INDIA LTD. AS RENTAL INCOME AND IN NOT ALLOWING THE STATUTORY DEDUCTION THEREON. 15. THE BRIEF FACTS OF THE ISSUE ARE THAT THE ASSES SEE HAD LEASED OUT PART OF THE FACTORY BUILDING TO M/S HANKEL TEROSON INDIA LTD. AND HAD DECLARED RENTAL INCOME OF RS. 21,21,000/-. AS PER THE ASSESSING OFFICER, SINCE THE ASSESSEE IN THE SAID RETURN WAS SHARING CERTAIN EXPENSES AND BOTH THE CONCERNS WERE LOCATED IN THE SAME PREMISES, SO LETTING OF THE PREMISES WAS NOTHING BUT BUSINESS AR RANGEMENT. HENCE, THE ASSESSING OFFICER TREATED THE SAID RECEI PTS RECEIVED FROM M/S HANKEL TEROSON INDIA LTD. AS BUSINESS RECEIPTS AND DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 24(A) OF THE A CT AT RS. 6,36,300/-. 16. BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) , THE ASSESSEE POINTED OUT THAT RENTAL INCOME HAD BEEN DECLARED BY THE ASSESSEE RIGHT FROM ASSESSMENT YEAR 2003-04 AND THE SHARING OF COMMON EXPENSES WAS THE MUTUAL UNDERSTANDING BETWEEN THE P ARTIES THAT DOES 8 NOT CHANGE THE NATURE OF INCOME/PROFIT. THE COMMIS SIONER OF INCOME TAX (APPEALS) VIDE PARA 4.3 OBSERVED AS UNDER : 4.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COU NSEL. THE INCOME FROM LETTING OUT OF PREMISES IN THE CASE OF THE APPELLANT HAS BEEN ASSESSED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' RIGHT FROM A.Y. 2003-04. 1 AM ENTIR ELY IN AGREEMENT WITH THE LD. COUNSEL FOR THE APPELLANT TH AT SHARING OF COMMON EXPENSES HAS NOTHING TO DO WITH T HE LETTING OUT OF THE PREMISES, SINCE THESE TWO ARE DIFFERENT AREAS. THE APPELLANT HAS NOT BEEN CLAIMING DEPRECIATION ON THE SAID PREMISES OVER THE PAST SO MANY YEARS AND FOR THIS R EASON ALSO IT WOULD NOT BE APPROPRIATE TO DISTURB THE HEA D UNDER WHICH THE IMPUGNED INCOME SHOULD BE ASSESSED. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ACCOR DINGLY DELETED. GROUND OF APPEAL NO. 4 IS ALLOWED. 17. THE LD. DR FOR THE REVENUE FAILED TO CONTROVERT THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND IN VIE W THEREOF, WE FIND NO MERIT IN THE GROUND OF APPEAL NO. 5 RAISED BY THE REVENUE. ITA NO. 895/CHD/2012 :: A.Y. 2009-10 :: ASSESSEE'S APPEAL 18. THE ASSESSEE IS AGGRIEVED BY THE DENIAL OF DEDU CTION UNDER SECTION 80IC OF THE ACT ON INTEREST INCOME OF RS. 4,66,888/- RECEIVED ON REFUND OF EXCESS RECOVERY BY HIMUDA, AW ARD RECEIPT FROM GOVERNMENT OF RS. 20,000/-, INTEREST ON INCOME TAX REFUND OF RS. 14,065/- AND FOREIGN EXCHANGE FLUCTUATION GAIN OF RS.35,432/-. BOTH THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THE SAID RECEIPTS TO BE NOT DIRECTLY LINKED TO THE BUSINESS OF THE ASSESSEE AND HENCE, NOT ELIGIBLE FO R DEDUCTION UNDER SECTION 80IC OF THE ACT. 19. WE FIND THAT SIMILAR CLAIM OF DEDUCTION UNDER S ECTION 80IC OF THE ACT ON VARIOUS INCOMES BOOKED UNDER THE HEAD O THER INCOME AROSE BEFORE THE TRIBUNAL IN ASSESSEE'S OWN CASE R ELATING TO ASSESSMENT YEAR 2007-08 (SUPRA) AND VIDE PARA 10 TO 13, IT WAS 9 OBSERVED AS UNDER : 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE OTHER INCOME TOTALING RS.14,36 LAC S WAS RECEIVED BY THE ASSESSEE AND THE ASSESSEE HAD CLAIMED DEDUCTION UND ER SECTION 80IC OF THE ACT ON THE SAID OTHER INCOME. THE AUTHORITIE S BELOW HELD THE ASSESSEE NOT ELIGIBLE FOR THE SAID DEDUCTION AVAIL ABLE UNDER SECTION 80IC OF THE ACT. THE CIT(A) PLACED RELIANCE ON TH E RATIO LAID DOWN IN LIBERTY INDIA VS. CIT (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE WORDS 'DERIVED FROM' ARE NARROWER IN CONNOTATION AS COMPA RED TO THE WORDS 'ATTRIBUTABLE TO'. IN OTHER WORDS, BY USING T HE EXPRESSION 'DERIVED FROM', PARLIAMENT INTENDED TO COVER SOURCES, N OT BEYOND THE FIRST DEGREE. 11. CORNING TO THE NATURE OF OTHER INCOME EARNED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION THE LEAR NED A.R. POINTED OUT THAT THE INSURANCE CLAIM OF R.S.33,310/- REPRESENTED REC OVERY OF MATERIAL COST AND OTHER REPAIRS AND CLAIMED FOR DAMAGE TO MACHINE RY. THE INCOME FROM SCRAP SALE WAS ATTRIBUTABLE TO THE SCRAP OF PA CKING MATERIAL IN WHICH THE RAW MATERIAL WAS RECEIVED, FURTHE R THE INCOME FROM SUPPLIER BALANCE WRITTEN BACK AT RS. 1 1,51 ,537/- WAS ON ACCOUNT OF LIABILITY INCURRED FOR MATERIAL PURCHASE D. MISC. INCOME OF RS.5000/- WAS RECOVERY OF SECURITY DEPOSIT FOR TEND ER OF MSRTC WRITTEN OFF IN EARLIER YEARS. THE INTEREST AMOUNT WAS ON ACCOUNT OF INTEREST EARNED ON FDRS AND EMPLOYEES LOANS. AS PER THE RATI O LAID DOWN BY THE HON'BLE SUPREME COURT IN LIBERTY INDIA VS. CIT (SUP RA), BEFORE HOLDING THE ASSESSEE TO BE ELIGIBLE FOR DEDUCTION UNDER SEC TION 80IC OF THE ACT, IT IS TO BE DETERMINED WHETHER THE INCOME EARNED BY THE ASSESSEE IS DERIVED FROM MANUFACTURING BUSINESS CARRIED ON BY T HE ASSESSEE. 12. THE AHMEDABAD BENCH OF TRIBUNAL IN ARVIND FASHIONS LTD. VS. ACIT (SUPRA) HAS CONSIDERED THE ELIGIBILIT Y OF VARIOUS ITEMS OF OTHER INCOME BEING DERIVED FROM THE ' BUSINESS OF THE ELIGIBLE INDUSTRIAL UNDERTAKING ON WHICH DEDUCTION UNDER SECTION 80IB O F THE ACT WAS CLAIMED BY THE ASSESSEE AND HELD AS UNDER : I) INTEREST INCOME ON BANK DEPOSIT IS NOT TO BE TREATE D AS DERIVED FROM INDUSTRIAL UNIT. II) DUTY DRAWBACK WAS ALSO HELD TO BE NOT DERIVED FROM THE INDUSTRIAL UNIT IN VIEW OF THE RATIO LAID DOWN IN L IBERTY INDIA (SUPRA). III) INCOME FROM SALE OF SCRAP WAS HELD TO BE GENERATED OUT OF THE MANUFACTURING ACTIVITIES OF INDUSTRIAL UNIT . RELIANCE WAS PLACED ON THE DECISION OF HON'BLE GUJRAT HIGH COURT IN DC IT VS. HARJIVANDAS JVTHAHHAI ZAVERT, 25 8 ITR 785 (GUJ) WHEREIN IT WAS HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE FOR JOB WORK, EMPTY SODA A SH, BARDANA, EMPTY BARRELS, PLASTIC WASTES ETC. WERE EL IGIBLE FOR CONSIDERATION OF DEDUCTION UNDER SECTION 801A O F THE ACT. IV) SALE OF EXPORT QUOTA WAS NOT ELIGIBLE FOR DEDUCTIO N. V) THE STOCK ADJUSTMENT AMOUNT ON ACCOUNT OF ADJUSTMENT OF SHORTAGE OF GOODS AND MATERIAL W AS HELD TO BE GENERATED DIRECTLY FROM BUSINESS TURNOVER OF THE STOCK AND MATERIAL BY THE ASSESSEE IN ITS REGULAR 10 ACTIVITIES AND WAS HELD TO BE DIRECT INCOME GENERAT ED OF THE ELIGIBLE INDUSTRIAL UNIT. CERTAIN OTHER SOURCES OF INCOME WERE ALSO, CONSIDER ED BY THE AHMEDABAD BENCH OF THE TRIBUNAL WHICH ARE NOT RELEV ANT TO THE ISSUE BEFORE US. 13. COMING TO THE FACTS BEFORE US AND FOLLOWING THE RATIO LAID DOWN BY THE AHMEDABAD BENCH OF THE TRIBUNAL IN ARVI ND FASHIONS LTD. VS. ACIT (SUPRA) WE HOLD THAT THE INTEREST INC OME RECEIVED BY THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT. HOWEVER, THE AMOUNT RECEIVED ON SC RAP SALE. THE CREDIT BALANCE WRITTEN OFF OF PARTIES, INSURANCE CL AIM RECEIVED TOWARDS MATERIAL DAMAGE DURING TRANSIT IS DIRECTLY ATTRIBUTABLE TO THE ACTIVITIES OF THE INDUSTRIAL UNIT AND* HENCE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT. HOWEVER, T HE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION CLAIMED UNDER SECT ION 80IC OF THE ACT ON THE MISC. INCOME RECEIVED BEING REFUND O F SECURITY DEPOSIT AND THE INSURANCE CLAIM ON MACHINERY REPAIR S. IN VIEW THEREOF WE DIRECT THE ASSESSING OFFICER TO RECOMPUT E THE DEDUCTION ALLOWABLE UNDER SECTION 80IG OF THE ACT'. THE GROUND NO. I RAISED BY THE ASSESSEE IS PARTLY ALLOW ED. 20. THE TRIBUNAL IN ASSESSMENT YEAR 2007-08 HAD HEL D THAT THE INTEREST INCOME RECEIVED BY THE ASSESSEE WAS NOT EL IGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT AND FURTHER , THE MISCELLANEOUS INCOME RECEIVED ON ACCOUNT OF REFUND OF SECURITY OF DEPOSIT AND INSURANCE CLAIM OF MACHINERY REPAIRS WA S ALSO NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE AC T. HOWEVER, THE CLAIM OF THE ASSESSEE WAS ALLOWED ON THE AMOUNT REC EIVED ON SCRAP SALES, CREDIT BALANCES WRITTEN-OFF OF THE PARTIES A ND INSURANCE CLAIM RECEIVED TOWARDS MATERIAL DAMAGE. WE HAVE ALREADY IN THE PARAS HEREIN ABOVE, WHILE DECIDING APPEAL OF THE REVENUE UPHELD THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING DEDUCTION UNDER SECTION 80IC OF THE ACT ON MISCELLANEOUS INCO ME, INSURANCE CLAIM AND INCOME FROM SALE OF SCRAP. HOWEVER, FOLL OWING THE PARITY OF REASONING AS IN THE EARLIER YEAR, WE FIND NO MER IT IN THE CLAIM OF THE ASSESSEE VIS--VIS DEDUCTION UNDER SECTION 80IC OF THE ACT IN RESPECT OF THE INTEREST RECEIVED FROM HIMUDA, INTER EST ON IT REFUNDS AND AWARD RECEIVED FROM GOVERNMENT. HOWEVER, IN RE SPECT OF FOREIGN EXCHANGE FLUCTUATION GAIN OF RS. 35,432/-, WE HOLD THAT THE 11 SAME IS DIRECTLY LINKED TO THE BUSINESS ACTIVITY AN D CONSEQUENTLY, THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION UNDE R SECTION 80IC OF THE ACT. THE GROUND OF APPEAL RAISED BY THE ASSESS EE IS, THUS PARTLY ALLOWED. ITA NO. 976/CHD/2013 :: A.Y. 2010-11 :: ASSESSEE'S APPEAL 21. THE ISSUE IN GROUND NO. 1 RAISED BY THE ASSESSE E IS IN RELATION TO TREATMENT OF EXPENDITURE BEING CAPITAL OR REVENU E IN NATURE. 22. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAD CLAIMED AN EXPENDITURE OF RS. 8,10,242/- UNDER THE HEAD 'REPAI R AND MAINTENANCE EXPENSES'. THE AMOUNT WAS SPENT TOWARDS PU COATING ON FLOOR. THE ASSESSING OFFICER TREATED THIS EXPENDITURE AS CAPIT AL EXPENDITURE ON THE GROUND THAT IT WAS SPENT TO INCREASE THE VALUE AND LIFE OF THE BUILDING, WHICH WAS OF ENDURING BENEFIT. THE ASSESS ING OFFICER DISALLOWED AN AMOUNT OF RS. 7,49,474/- AFTER ALLOWI NG DEPRECIATION OF RS. 60,768/-. THE COMMISSIONER OF INCOME TAX (APPE ALS) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER AND THE ASSESSEE IS IN APPEAL BEFORE US. 23. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT TH E EXPENDITURE INCURRED WAS IN THE NATURE OF REPAIR AND WAS DULY A LLOWABLE AS REVENUE EXPENDITURE. 24. THE LD. DR FOR THE REVENUE, ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER OF THE PARTIES BELOW. 25. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LIMITED ISSUE RAISED BY THIS GROUND IS IN RESPE CT OF THE EXPENDITURE INCURRED ON LAYING DOWN OF PU COATING O N FLOOR WHICH ADMITTEDLY HAS A SHORT LIFE SPAN AND THE SAME CANNO T BE HELD TO INCREASE THE LIFE SPAN OF THE BUILDING. WE FIND NO MERIT IN THE ORDERS 12 OF THE AUTHORITIES BELOW AND REVERSING THE SAME, WE HOLD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS DULY ALLOWA BLE AS REVENUE EXPENDITURE. THE GROUND OF APPEAL NO. 1 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 26. THE GROUND OF APPEAL NO. 2 RAISED BY THE ASSESS EE IS AGAINST DENIAL OF DEDUCTION UNDER SECTION 80IC OF THE ACT O N INTEREST RECEIVED ON LOANS GIVEN TO EMPLOYEES. 27. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRI BUNAL IN ASSESSMENT YEAR 2007-08 IN ASSESSEE'S OWN CASE AND SIMILAR CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT HAS BEEN DE NIED TO THE ASSESSEE. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT ASSESSEE IS NOT ENTITLED TO CLAIM OF DEDUCTION UNDE R SECTION 80IC OF THE ACT. THE GROUND OF APPEAL NO. 2 RAISED BY THE A SSESSEE IS DISMISSED. 28. IN THE RESULT, APPEALS OF THE REVENUE IN ITA NO . 910/CHD/2012 AND ITA NO.973/CHD/2013 ARE DISMISSED AND APPEALS O F ASSESSEE IN ITA NO. 895/CHD/2012 AND ITA NO. 976/CHD/2013 ARE P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF SEPTEMBER, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 15 TH SEPTEMBER,2014 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH