ITO, Nahan V. Sh. Sunil Gupta, Sirmour

MA 58/CHANDI/2012

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1348 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 1 month(s) 2 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-07-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 27-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER MISC. APPLICATION NO. 58/CHD/2012 IN ITA NO. 977/CHD/2007 ASSESSMENT YEAR : 2004-05 I.T.O. NAHAN (HP) VS. SUNIL GUPTA PROP M/S SIRMOUR MINERALS & CHEMICALS, PAONTA SAHIB (APPELLANT) (RESPONDENT) APPELLANT BY SHRI AKH ILESH GUPTA RESPONDENT BY: NONE DATE OF HEARING 10.1.2014 DATE OF PRONOUNCEMENT 29.1.2014 O R D E R PER T.R.SOOD, A.M THIS CASE WAS FIXED FOR HEARING ON VARIOUS OCCASIO NS BUT NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOT ICE, THEREFORE REVENUE WAS SPECIFICALLY ASKED TO SERVE T HE NOTICE WHICH HAS BEEN SERVED. A COPY OF THE SERVICE REPOR T DATED 6.1.2014 HAS BEEN FILED BEFORE US SHOWING SERVICE O F NOTICE TO THE ASSESSEE-RESPONDENT. DESPITE THIS SERVICE NONE HAS APPEARED ON BEHALF OF THE ASSESSEE. SINCE THE ISSUE WAS COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL H IGH COURT, WE PROCEEDED TO DECIDE THE APPEAL ON EX-PARTE BASIS . 2 THROUGH THIS MISC. APPLICATION THE REVENUE HAS SO UGHT RECTIFICATION OF THE MISTAKE WHICH HAS CREPT INTO T HE ORDER OF THE TRIBUNAL. THE LD. D.R. FOR THE REVENUE REFERRED TO THE MISC 2 APPLICATION AND SUBMITTED THAT IN THIS CASE IT WAS HELD THAT FREIGHT SUBSIDY IS NO ELIGIBLE TO DEDUCTION U/S 80I A OF INCOME - TAX ACT, 1961. HOWEVER, THE FREIGHT EXPENDITURE W AS SET OFF AGAINST THE FREIGHT SUBSIDY. HE FURTHER SUBMITTED THAT LATER ON A DECISION HAS BEEN RENDERED BY HON'BLE HIMACHAL PR ADESH HIGH COURT IN CASE OF CIT V. KIRAN ENTERPRISES, 327 ITR 520 IN WHICH IT WAS HELD THAT FREIGHT SUBSIDY CANNOT BE SA ID TO HAVE BEEN DERIVED FROM INDUSTRIAL UNDERTAKING AND THEREF ORE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. HE ALS O SUBMITTED THAT THE HON'BLE SUPREME COURT IN CASE OF ACIT V. S AURASHTRA KUTCH STOCK EXCHANGE LTD., 305 ITR 227 (S.C) HAS HE LD THAT THE TRIBUNAL IS DUTY BOUND TO RECTIFY THE MISTAKE W HEN A JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IS BROUGHT TO THE NOTICE OF THE TRIBUNAL. 3 WE HAVE GONE THROUGH THE SUBMISSIONS OF LD. D.R. FOR THE REVENUE CAREFULLY AND THE RELEVANT MATERIAL ON RECO RD. WE FIND THAT THIS ISSUE WAS ADJUDICATED BY THE TRIBUNAL VID E ORDER DATED 19.6.2008 VIDE PARA NO. 4 TO 6 WHICH ARE AS UNDER: 4 GROUND NOS. 2 TO 4 ARE IN RELATION TO THE ALLOWA BILITY OF DEDUCTIONS U/S 80IA/80IB OF THE INCOME -TAX ACT, 19 61 IN RELATION TO THE FREIGHT SUBSIDY. ALTHOUGH IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS CHALLENGED THE DENIAL OF DEDUCTION UND ER SECTIONS 80IA/80IB IN ITS ENTIRETY, AT THE TIME OF THE HEARI NG ONLY GRIEVANCE ARTICULATED BY THE LD. COUNSEL FOR THE ASSESSEE REL ATED TO COMPUTING THE DISALLOWANCE AFTER CONSIDERING THE EX PENDITURES INCURRED FOR EARNING THE FREIGHT SUBSIDY. THE LD. C OUNSEL FOR THE ASSESSEE, IN THIS REGARD, HAS SOUGHT RELIEF BASED O NLY ON THE DECISION OF THE CHANDIGARH BENCH-A IN THE CASE OF D INESH KUMAR, PROP: M/S BHAGWATI CHEMICALS, SIRMOUR (ITA NOS. 974 TO 976/CHANDI/2007 DATED 30.05.2008), A COPY OF WHICH HAS BEEN PLACED ON RECORD. THE TRIBUNAL IN THE SAID DECISION CONCLUDED AS UNDER:- WE, THEREFORE, CONSIDERING THE VIEW TAKEN IN THE A FORESAID REFERRED TO CASES CONFIRM THE ACTION OF LD. CIT(A) FOR NOT ALLOWING DEDUCTION U/S 80IA ON FREIGHT SUBSIDY. HOW EVER, CONSIDERING THAT IT IS REVENUE IN NATURE, DIRECT TH E ASSESSING OFFICER TO SET OFF THE EXPENSES TO WHICH THE FREIGH T SUBSIDY IS DIRECTLY LINKED. THE SAME VIEW HAS BEEN TAKEN FO R THE ASSESSMENT YEAR 2001-02 IN ASSESSEES OWN CASE ITA NO.1129/CHANDI/2005 ORDER DATED 4.5.2006. 3 5. ON THE OTHER HAND, THE LD. D. R. DID NOT HAVE A NY SERIOUS OBJECTION TO THE LIMITED PLEAS OF THE ASSES SEE BASED ON THE STATED PRECEDENT. 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND THE PRECEDENT RELIED UPON BY THE ASSESSEE, WE DIRECT TH E ASSESSING OFFICER TO RE-COMPUTE THE DEDUCTION UNDER SECTION 8 0IA/80IB BY EXCLUDING THE SUM OF FREIGHT SUBSIDY CALCULATED AFT ER SETTING OFF THE EXPENSES WHICH ARE DIRECTLY LINKED TO IT. SINCE THE ASSESSEE HAS NOT SOUGHT ANY OTHER RELIEF ON THIS ASPECT, THE GRO UNDS OF APPEAL NOS. 2 TO 4 ARE TREATED AS PARTLY ALLOWED. LATER ON A DECISION HAS BEEN RENDERED BY HON'BLE HI MACHAL PRADESH HIGH COURT WHICH IS JURISDICTIONAL HIGH COU RT IN CASE OF THE ASSESSEE BECAUSE THE ASSESSEE IS RESIDING I N NAHAN IN HP. IN THIS DECISION HON'BLE HIGH COURT HAS CLEAR LY OBSERVED AS UNDER: IT IS EVIDENT THAT SECTION 80-IB OF THE INCOME-TAX ACT, 1961, PROVIDE FOR DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED F ROM THE ELIGIBLE BUSINESS. THE WORDS DERIVED FROM ARE NARROWER IN CONNOTATION AS COMPARED TO THE WORDS ATTRIBUTABLE TO. IN OTHER W ORDS, BY USING THE EXPRESSION DERIVED FROM, PARLIAMENT INTENDED TO C OVER SOURCES NOT BEYOND THE FIRST DEGREE. IT IS ONLY THE PROFITS GEN ERATED I.E., OPERATIONAL PROFITS WHICH ARE ENTITLED TO THE BENEFIT UNDER SEC TION 80-IA. IN STERLING FOODS [1999] 237 ITR 579 THE SUPREME COURT HAS ALSO LAID DOWN A TEST AS TO WHAT IS THE SOURCE OF INCOME. IN THE STATE OF HIMACHAL PRADESH, THERE WAS SCARCIT Y OF RAIL NETWORK. A SCHEME HAD BEEN FRAMED BY CENTRAL GOVERNMENT WHEREB Y FREIGHT/TRANSPORT SUBSIDY WAS PROVIDED TO INDUSTRIE S SET UP IN REMOTE AREAS WHERE RAIL FACILITIES WERE NOT AVAILABLE AND SOME PERCENTAGE OF THE TRANSPORT EXPENSES INCURRED BY THE INDUSTRIAL UNDER TAKINGS TO TRANSPORT RAW MATERIAL TO THE FACTORY AND TO TRANSPORT FINISH ED GOODS FROM THEIR INDUSTRIES WAS SUBSIDIZED BY THE CENTRAL GOVERNMENT . THE TRIBUNAL HELD THAT THE FREIGHT SUBSIDY HAD TO BE INCLUDED AS PROF ITS DERIVED FROM THE INDUSTRIAL UNDERTAKING. ON THE ABOVE ISSUE IT WAS HELD AS UNDER: HELD, ALLOWING THE APPEAL, THAT THE TRANSPORT SUBSI DY RECEIVED BY THE ASSESSEE WAS NOT A PROFIT DERIVED FROM BUSINESS SIN CE IT WAS NOT AN OPERATIONAL PROFIT. THE SOURCE OF THE SUBSIDY WAS N OT THE BUSINESS OF THE ASSESSEE BUT THE SCHEME OF THE CENTRAL GOVERNMENT. IT COULD NOT BE TREATED AS PROFITS OF THE UNDERTAKING FOR PURPOSES OF SECTION 80-IA. IT IS CLEAR THAT TRANSPORT SUBSIDY CANNOT BE CONSID ERED FOR THE PURPOSE OF DEDUCTION U/S 80IA/80IB BECAUSE THE SAME IS NOT DERIVED FROM INDUSTRIAL UNDERTAKING. THEREFORE WE RECALL OUR DECISION IN RESPECT OF GROUND NO. 2 TO 4 WHICH WAS DECIDED 4 VIDE PARA 4 TO 6 BY THE TRIBUNAL. PARA 4 TO 6 OF T HE ORDER IN ITA NO. 977/CHD/2007 ARE SUBSTITUTED VIDE FOLLOWING PARA: WE FIND THAT HON'BLE HIMACHAL PRADESH HIGH COURT IN RESPECT OF FREIGHT SUBSIDY HAS HELD IN CASE OF 327 AS UNDER: HELD, ALLOWING THE APPEAL, THAT THE TRANSPORT SUBSI DY RECEIVED BY THE ASSESSEE WAS NOT A PROFIT DERIVED FROM BUSINESS SINCE IT WAS NOT AN OPERATIONAL PROFIT. THE SOURCE OF THE SUBSID Y WAS NOT THE BUSINESS OF THE ASSESSEE BUT THE SCHEME OF THE CENT RAL GOVERNMENT. IT COULD NOT BE TREATED AS PROFITS OF T HE UNDERTAKING FOR PURPOSES OF SECTION 80-IA. FOLLOWING THE ABOVE WE HOLD THAT FREIGHT SUBSIDY IS NOT ENTITLED FOR DEDUCTION U/S 80IA/80IB AND ACCORDINGL Y GROUND NO. 2 TO 4 ARE DISMISSED. IN VIEW OF ABOVE, MISC APPLICATION OF THE REVENUE I S ALLOWED. 4 IN THE RESULT, MISC. APPLICATION OF THE REVENUE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.1.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29.1.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR