Trishul Hi-Tech Industries, Kolkata V. DCIT, Central Circle - XI, Kolkata, Kolkata

ITSSA 87/KOL/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0353 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 04-05-2011
• Court: TRIBUNAL
• Department Lawyers: SWETABH SUMAN
• Keywords: Question of law
• Section: 143(3); 260A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE S RI SHAMIM YAHYA, AM ] IT(SS)A NOS.87& 88/KOL/2011 ASSESSMENT YEARS : 2007-08 & 2008-09 ( APPELLANT ) (RESPONDENT) TRISHUL HI-TECH INDUSTRIES -VS- D.C.I.T., CENTRA L-XI, KOLKATA KOLKATA (PAN:AACFT 3457 G) FOR THE APPELLANT SHRI SOMNATH GHOSH, ADVOCATE FOR THE RESPONDENT SHRI SWETABH SUMAN, CIT(DR) DATE OF HEARING : 27.08.2014 DATE OF PRONOUNCEMENT : 24. 09.2014. ORDER PER SHRI SHAMIM YAHYA, AM THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AG AINST ORDER OF LD. C.I.T.(A)- CENTRAL-I, KOLKATA FOR ASSESSMENT YEARS 2007-08 AN D 2008-09 RESPECTIVELY. SINCE THE ISSUES ARE COMMON AND THE APPEALS WERE HEARD TOGETH ER THESE ARE BEING DISPOSED OFF BY A COMMON ORDER. 2. THE COMMON ISSUES RAISED IN THESE APPEALS ARE A S UNDER :- (A) THE FIRST ISSUE RAISED IS THAT NONE OF THE COND ITIONS PRECEDENT EXISTED FOR ASSUMING JURISDICTION U/S 153C OF THE ACT INSTEAD OF 143(3) OF THE ACT AND HENCE THE FINDINGS ARE VOID AB INITIO. (B) THE SECOND ISSUE RAISED IS THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF AO WHEREBY THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IC OF THE ACT ON ACCOUNT OF TRANSPORT SUBSIDY, EXCISE DUTY REFUND, CENTRAL INTEREST SUBSI DY, POWER TARIFF SUBSIDY AND TERM LOAN INTEREST SUBSIDY (RS.7,55,69,642/- FOR A.YR.20 07-2008 AND R.3,44,04,443/- FOR A.YR.2008-09) WAS DENIED ON THE GROUND THAT THE SAM E WAS NOT DERIVED FROM MANUFACTURING ACTIVITY. IT(SS)A.87&88/KOL/2011 T RISHUL HI-TECH INDUSTRIES A .YRS.2007-08 & 2008-09 2 3. WE HAVE HEARD BOTH THE COUNSEL AND CAREFULLY PER USED THE RECORDS. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED T HAT ON MERITS THE ISSUES RAISED IN THIS CASE ARE FULLY COVERED BY THE DECISION OF THE HONB LE HIGH COURTS. AS REGARDS DEDUCTION U/S 80IB OF THE ACT FOR THE TRANSPORT SUB SIDY, EXCISE DUTY REFUND, CENTRAL INTEREST SUBSIDY, AND TERM LOAN INTEREST SUBSIDY HE RELIED UPON THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS ME GHALAYA STEELS LTD. 217 TAXMANN 184. AS REGARDS DEDUCTION U/S 80IB FOR REFU ND OF EXCISE DUTY THE LD. COUNSEL OF THE ASSESSEE RELIED UPON THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS DHARAMPAL PREMCHAND 317 ITR 353. THE LD. DR COULD NOT CONTROVERT THE SUBMISSION. WE FIND THAT IDENTICAL ISSUES WERE UNDE R CONSIDERATION BY THE HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS MEGHALAYA STEELS LTD. 217 TAXMANN. 184. IN THIS CASE THE FACTS IN BRIEF ARE AS UNDER (HEAD NOTES ONLY):- THE ASSESSEE WAS AN INDUSTRIAL UNDERTAKING ENGAGED IN THE BUSINESS OF MANUFACTURE OF STEEL AND FERRO SILICON. THE ASSESSEE FILED ITS RETURN CLAIMING DED UCTION UNDER SECTION 80-IB IN RESPECT OF TRANSPORT SUBSIDY, INTEREST SUBSIDY, POWER SUBSIDY AND INSURANCE SUBSIDY. THE ASSESSING OFFICER HELD THAT THE AMOUNT , RECEIVED BY THE ASSESSEE AS SUBSIDIES WAS REVENUE RECEIPTS IN NATURE AND, THUS, SAID AMOU NT DID NOT QUALIFY FOR DEDUCTION UNDER SECTION 80-IB(4). THE COMMISSIONER (APPEALS) UPHELD THE ORDE R OF ASSESSING OFFICER. THE TRIBUNAL, HOWEVER, HELD THAT ALL THE S UBSIDIES WERE INTER-LINKED, INTER-LACED AND HAD DIRECT NEXUS WITH THE MANUFACTURING ACTIVIT IES OF THE ASSESSEE INDUSTRIAL UNDERTAKING. ACCORDINGLY, THE TRIBUNAL ALLOWED ASSE SSEES CLAIM. 4.1. ON REVENUES APPEAL THE HONBLE HIGH COURT HAS EXPOUNDED AS UNDER (HEAD NOTES ONLY): IN ORDER TO CLAIM DEDUCTION EITHER UNDER SECTION 8 0-IB OR UNDER SECTION 80-IC, AN ASSESSEE HAS TO ESTABLISH THAT THERE IS A DIRECT, I NTRINSIC AND FIRST DEGREE NEXUS BETWEEN A SUBSIDY, ON THE ONE HAND, AND THE PROFITS AND GAINS , ON THE OTHER, DERIVED FROM, OR DERIVED BY, THE INDUSTRIAL UNDERTAKING CONCERNED. THERE IS ALSO NO DISPUTE THAT IF ANY OF THE SUBSIDIES, IN QUESTION, GOES ON TO REDUCE THE COST OF PRODUCTION OF AN INDUSTRIAL UNDE RTAKING, THE RESULTANT PROFITS AND GAINS ARE DEDUCTIBLE UNDER THE PROVISIONS OF SECTION 80-I B OR SECTION 80-IC, AS THE CASE MAY BE. SURFACING FROM BENEATH THIS STATUTORY RE QUIREMENT, THE LEGAL PROPOSITION IS THAT IF THE SUBSIDY IS NON-OPERATIONAL IN NATURE, THERE WIL L BE NO ENTITLEMENT OF DEDUCTION; BUT THE SUBSIDY, IF OPERATIONAL, WOULD ENTITLE AN ASSES SEE TO CLAIM DEDUCTION [PARA 62] THERE IS NO DISPUTE THAT THE SUBSIDIES IN VOLVED ARE REVENUE RECEIPTS. THE QUESTION, HOWEVER, IS: THESE REVENUE RECEIPTS, IF HELP AN IND USTRIAL UNDERTAKING IN EARNING PROFIT AND MAKING GAINS, WHETHER THE UNDERTAKING IS ENTITL ED TO SEEK DEDUCTION IF THE IT(SS)A.87&88/KOL/2011 T RISHUL HI-TECH INDUSTRIES A .YRS.2007-08 & 2008-09 3 UNDERTAKING SATISFIES, OTHERWISE, THE CONDITIONS PR ESCRIBED BY SECTION 80-IB OR SECTION 80-IC, AS THE CASE MAY BE [PARA 63]. THE EXPRESSION DERIVED FROM, OCCURRIN G IN SECTION 80-IB, IMPLIES THAT THE PROFITS AND GAINS HAVE TO BE DERIVED FROM THE ACTIV ITIES OF THE INDUSTRIAL UNDERTAKING. IN OTHER WORDS, WHEN THE EXPRESSION, DERIVED FROM, H AS BEEN USED IN SECTION 80-IB, IT MEANS THAT IT IS THE BUSINESS OF THE UNDERTAKING, W HICH IS THE DIRECT SOURCE FROM WHICH THE PROFITS AND GAINS ARE DERIVED. IN THE CASE OF A SUBSIDY, THE EXPRESSIO N, DERIVED FROM, APPEARING IN SECTION 80- IB, MEANS THAT THE SUBSIDY, PROVIDED BY THE STATE, DIRECTLY AFFECTS THE BUSINESS ACTIVITY OF THE INDUSTRIAL UNDERTAKING. IN THE CASE AT HAND, THE ASSESSEE CONTENDS THAT THE SUBSIDIES, PROVIDED TO THEM, GO ON TO REDUCE THE CO ST OF PRODUCTION OF THE INDUSTRIAL UNDERTAKINGS CONCERNED AND THE RESULTANT EFFECT IS GENERATION OF MORE MONEY RESULTING INTO HIGHER PROFITS. IN THE CASE OF SECTION 80-IC, HOWEVER, ONE HAS TO SHOW THAT IT IS THE INDUSTRIAL UNDERTAKING, WHICH IS THE RECIPIENT OF PROFITS AND GAINS ARISING FROM A SUBSIDY, WHICH THE INDUSTRIAL UNDERTAKING HAS RECEIVED. IT IS IMMATERI AL AS TO WHAT SECTION HAS BEEN INVOKED BY AN ASSESSEE FOR THE PURPOSE OF CLAIMING DEDUCTIO N SO LONG AS AN ASSESSEE IS ENTITLED TO STATUTORY DEDUCTION. CONSEQUENTLY, THE DEDUCTION MU ST BE ALLOWED EVEN IF AN ASSESSEE REFERS TO AN INCORRECT STATUTORY PROVISION FOR CLAI MING DEDUCTION. [PARA 64]. THE FACT OF THE MATTER REMAINS THAT, IN THE CASE AT HAND, SINCE THE SUBSIDIES, IN QUESTION, ARE CLAIMED TO HAVE HELPED THE UNDERTAKIN GS IN GENERATING PROFITS AND MAKING GAINS BY REDUCING THE OPERATIONAL COST OF THE ACTIV ITIES OF THE INDUSTRIAL UNDERTAKING CONCERNED, THE STATUTORY PROVISION FOR DEDUCTION, A PPOSITE TO A CASE OF PRESENT NATURE, IS SECTION 80-IC INASMUCH AS THE RECIPIENT OF THE PROF ITS AND GAINS, ARISING OUT OF THE SUBSIDIES, IS, EVENTUALLY, AN INDUSTRIAL UNDERTAKIN G.[PARA 65]. WHAT IS, THEREFORE, REQUIRED TO BE DECID ED, IN THE PRESENT SET OF APPEALS, IS AS TO WHETHER THERE IS DIRECT NEXUS BETWEEN THE SUBSIDIES , ON THE ONE HAND, AND THE MANUFACTURING ACTIVITIES OF THE INDUSTRIAL UNDERTAK ING, ON THE OTHER. IF THERE IS A DIRECT NEXUS BETWEEN THE TWO, THEN, THE INDUSTRIAL UNDERTA KING IS, UNDISPUTEDLY, ENTITLED TO CLAIM DEDUCTION IN RESPECT OF THE PROFITS AND GAINS , IF ANY, MADE BY THE INDUSTRIAL UNDERTAKING.[PARA 66] THE MOOT QUESTION, WHICH, THEREFORE, FA LLS FOR DETERMINATION IN THE PRESENT SET OF APPEALS IS : WHETHER THERE IS DIRECT AND FIRST DEGR EE NEXUS BETWEEN THE SUBSIDIES, ON THE ONE HAND, AND THE PROFIT AND GAINS, ON THE OTHER, O F THE INDUSTRIAL UNDERTAKINGS CONCERNED [PARA 68] WHILE ANSWERING THE QUESTION, ONE HAS TO BEAR IN MIND, THAT THERE ARE FOUR DISTINCT SUBSIDIES, NAMELY, TRANSPORT SUBSIDY, INTE REST SUBSIDY, POWER SUBSIDY AND INSURANCE SUBSIDY, WHICH ARE INVOLVED HEREIN. [PARA 69] 4.2. THEREAFTER THE HONBLE HIGH COURT HAD EXAMINED THE ISSUE OF SCHEME OF TRANSPORT SUBSIDY, POWER SUBSIDY, INTEREST SUBSIDY, INSURANCE SUBSIDY. THE HONBLE HIGH COURT HAS HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80IB AND 80IC OF THE ACT ON ACCOUNT OF SUBSIDIES. 4.3. THE DECISION OF THE HONBLE HIGH COURT IS SUMM ARIZED AS UNDER :- IT(SS)A.87&88/KOL/2011 T RISHUL HI-TECH INDUSTRIES A .YRS.2007-08 & 2008-09 4 WHAT CRYSTALLIZES FROM THE ABOVE DISCUSSION IS THA T THE ASSESSEES INCOME, WITH THE COST OF PRODUCTION BEING REDUCED, BECAUSE OF THE SUBSIDI ES RECEIVED, WOULD OBVIOUSLY RISE AND, IN CONSEQUENCE THEREOF, THE PROFITS EARNED, AN D THE GAINS MADE, BY THE INDUSTRIAL UNDERTAKING CONCERNED WOULD ALSO INCREASE. THE PROF ITS, SO INCREASED, WOULD BE PART OF THE GROSS TOTAL INCOME OF THE ASSESSEE AS DEFINED U NDER SECTION 80-B SUBJECT TO DEDUCTIONS, AS PROVIDED UNDER CHAPTER VIA, WHICH IN CLUDES DEDUCTIONS UNDER 80B AS WELL AS SECTION 80C. IF AN ASSESSEE BECOMES ELIGIBLE FOR DED UCTION UNDER SECTION 80-IB OR 80-IC, HE WILL NOT BE LIABLE TO PAY TAX ON THE INCREASED PROF IT. CONVERSELY PUT, THE SUBSIDIES SERVE NO PURPOSE IF HE HAS TO PAY INCREASED TAX ON THE PR OFITS, WHICH HE HAS MADE, BECAUSE OF THE OPERATIONAL SUBSIDIES RECEIVED BY HIM. [PARA 13 8] THUS, THERE CAN BE NO ESCAPE FROM THE CO NCLUSION THAT THE SUBSIDIES, IN QUESTION, BEING OPERATIONAL IN NATURE, HELP THE ASSESSEE CONC ERNED EARN PROFITS AND THE PROFITS, SO EARNED, BECAUSE OF THE SUBSIDIES, IN QUESTION, ARE DEDUCTIBLE IN TERMS OF THE PROVISIONS OF SECTION 80-IB. [PARA 139] IN THE CASES AT HAND, IT IS THE CLEAR FIN DING OF THE TRIBUNAL THAT THERE IS A DIRECT NEXUS BETWEEN THE SUBSIDIES, IN QUESTION, ON THE ON E HAND, AND THE PROFITS AND GAINS DERIVED BY, OR DERIVED FROM, THE INDUSTRIAL UNDERTA KINGS CONCERNED. THIS FINDING IS A FINDING, WHICH IS NOT PURELY A FINDING OF FACT INAS MUCH AS THIS FINDING HAS BEEN REACHED ON THE INTERPRETATION OF THE SCHEMES OF SUBSIDIES, IN QUESTION, AND THE QUESTION OF LAW, WHICH WERE RAISED IN THE TRIBUNAL. IN OTHER WORDS, THE FINDING HAS BEEN ARRI VED AT BY THE TRIBUNAL BY TAKING INTO ACCOUNT THE RELEVANT SCHEMES OF SUBSIDIES IN LIGHT OF THE QUESTIONS OF LAW RAISED IN THE TRIBUNAL. [PARA 151]. SITUATED THUS, IT IS CLEAR THAT THE FINDING , WHICH THE TRIBUNAL HAS REACHED TO THE EFFECT THAT THERE IS A DIRECT NEXUS BETWEEN THE SUB SIDIES, IN QUESTION, ON THE ONE HAND, AND THE PROFITS AND GAINS DERIVED BY, OR DERIVED FR OM, THE INDUSTRIAL UNDERTAKINGS CONCERNED, IS NOT A FINDING ON PURE FACTS BUT IS FI NDING BASED ON FACTS AND LAW. SUCH A FINDING CAN BE INTERFERED WITH, IN AN APPEAL UNDER SECTION 260A EVEN IF SUCH A FINDING IS NOT ALLEGED AS PERVERSE PROVIDED THAT THE FINDING CAN BE SHOWN TO HAVE BEEN REACHED BY WRONGLY APPLYING THE LAW OR BY RESORTING TO INCORRECT INTERPRETATION OF LAW. [152] IN THE LIGHT OF THE DISCUSSIONS ABOVE, THE I MPUGNED DECISION OF THE TRIBUNAL DOES NOT SUFFER FROM ANY INFIRMITY, LEGAL OR FACTUAL, AND , HENCE, NO QUESTION OF LAW, FAR LESS SUBSTANTIAL QUESTIONS OF LAW, CAN BE SAID TO HAVE B EEN ARISEN IN ANY OF THE PRESENT APPEAL.[PARA 154] IN THE RESULT, THE APPEAL FAILS AND IS ACCORD INGLY DISMISSED.[PARA 156] 4.4. AGAIN THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS DHARAMPAL PREMCHAND (SUPRA) HAD HELD THAT THE REFUND OF EXCIS E DUTY WAS PIVOTED ON THE MANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE A ND THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80IB OF THE ACT. 4.5. WE FIND THAT THE ISSUES IN THE PRESENT CASE AR E ANALOGICAL TO THE ONE CONSIDERED BY THE HONBLE HIGH COURTS. THE FACTS ARE IDENTICAL . ACCORDINGLY RESPECTFULLY IT(SS)A.87&88/KOL/2011 T RISHUL HI-TECH INDUSTRIES A .YRS.2007-08 & 2008-09 5 FOLLOWING THE PRECEDENTS WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND WE HOLD THAT THE ASSESSEE WILL BE ENTITLED TO DEDUCTION U/S 80IC ON ACCOUNT OF TRANSPORT SUBSIDY, EXCISE DUTY REFUND, CENTRAL INTEREST SUBSI DY AND TERM LOAN INTEREST SUBSIDY. 5. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE COURT ON 24.09.2014. SD/- SD/- [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 24.09.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. TRISHUL HI-TECH INDUSTRIES, C/O SOMNATH GHOSH, ADVO CATE, 2 GARSTIN PLACE, 2 ND FLOOR, KOLKATA-700001. 2 D.C.I.T., CENTRAL-XI, KOLKATA. 3 . CIT(A)-CENTRAL-I, KOLKATA. 4. CIT - KOLKATA. 5. CIT-DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES