ACIT CORPORATE CIRCLE 6(1), CHENNAI vs. SAMCO METALS & ALLOYS PVT. LTD., CHENNAI

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ITA 1782/CHNY/2019Status: DisposedITAT Chennai20 February 2023AY 2004-053 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that testing charges are part of business profits linked to manufacturing and export sales. Therefore, they should not be deducted for the purpose of computing the deduction under Section 80HHC.

What were the facts?

The Revenue appealed against the CIT(A)'s order allowing testing charges to be included in turnover for Section 80HHC deduction. The assessee claimed that testing charges were part of manufacturing and export sales, not commission or service charges.

What were the issues?

Whether testing charges received by the assessee should be treated as part of turnover for the purpose of Section 80HHC deduction.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 80HHC(4C)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘D/SMC’ BENCH, CHENNAI

Before: SHRI MANOJ KUMAR AGGARWAL, AM

आयकर अपील सं./ (िनधा?रण वष? / Assessment Year: 2004-05) DCIT M/s. Samco Metals & Alloys Pvt. Ltd. बनाम No.29, 3rd Cross Street, VGP Murthy Square Corporate Circle-6(1) / Vs. Chennai. St. Thomas Mount, Chennai-600 016. �थायी लेखा सं./जीआइ आर सं./PAN/GIR No. AAACS-3109-F (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ� की ओरसे/ Assessee by : None ��थ� की ओरसे/Revenue by : Shri Sanat Kumar Raha (Addl. CIT)-Ld. DR सुनवाई की तारीख/Date of Hearing : 20-02-2023 घोषणा की तारीख /Date of Pronouncement : 20-02-2023 आदेश / O R D E R

1.

Aforesaid appeal by Revenue for Assessment Year (AY) 2004-05 arises out of the order of learned Commissioner of Income Tax (Appeals)-15, Chennai [CIT(A)] dated 29-03-2019 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s 147 of the Act on 30-12-2010. None has appeared for assessee. Accordingly, the appeal is proceeded with after hearing Ld. Sr. DR who pleaded for restoration of assessment as framed by Ld. AO. The sole issue that arises for adjudication is whether testing charges as received by the assessee should be treated as part of turnover and deduction u/s 80HHC attributable to this amount should be allowed or not?

2 - 2. From case records, it emerges that the assessee claimed deduction u/s 80HHC for Rs.6.99 Lacs. However, while computing the deduction, the assessee did not deduct 90% of testing charges for Rs.66.79 Lacs in terms of 80HHC(4C), Explanation baa(1). The assessee submitted that testing charges form part of sales and manufacturing activity and could not be equated with commission, service charge etc. as enumerated in Explanation baa(1). However, Ld. AO denied the deduction. Upon further appeal, Ld. CIT(A) following first appellate order for AY 2003-04 as well as the decision of Hon’ble High Court of Bombay in CIT vs. Bengluru Clothing Company (260 ITR 371) held that testing charges were part of operational income. The same should be considered as linked to manufacturing activity and export sales. Therefore, the same could not be excluded from business profits while computing impugned deduction. Aggrieved, the revenue is in further appeal before me.

3.

I find that the findings rendered by Ld. CIT(A) remain undisputed before me. The testing charges form part of manufacturing activity and export sales of the assessee. Therefore, the same would partake the character of business profits and hence, not to be deducted for the purpose of Sec.80HHC. The same is not akin to incomes such as commission, service charge etc. mentioned in in explanation baa(1) to Sec.80HHC(4C). The case law of Hon’ble High Court of Bombay clearly supports the case of the assessee. Therefore, finding no reason to interfere in the impugned order, the appeal stand dismissed.

4.

The appeal stand dismissed. Order pronounced on 20th February, 2023.

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