M/S FRIENDS CASTINGS (P) LTD. vs. CIT, AAYAKAR BHAWAN, JALANDHAR.

ITA/456/2010HC Punjab & HaryanaPHHC01093391201020 September 2010Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL9 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s Friends Castings (P) Ltd., filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 2000-01. The appeal challenged the Tribunal's decision upholding the exclusion of job work charges from eligible profits for deduction under Section 80-IA/80-IB and the method of calculating deduction under Section 80HHC after allowing deduction under Section 80-IA. The Assessing Officer had reduced the deduction by excluding job work charges, interest on fixed deposit, sale of incentives, and interest on income tax refund. The CIT(A) and the Tribunal upheld the exclusion of job work charges, stating that the assessee had not provided evidence that these charges were for manufacturing or producing articles or things. Regarding the deduction under Section 80HHC, the authorities held that it should be computed after reducing the deduction allowed under Section 80-IA.

What did the High Court hold?

The High Court held that questions (i) and (v) were general in nature and not substantial questions of law. Regarding question (ii), the Court found that the assessee had not led evidence to show that job work charges were received for manufacturing or producing articles or things, and thus upheld the exclusion of these charges from eligible profits for deduction under Section 80-IA/80-IB. The Court noted that the assessee was unable to advance arguments to dispel the findings of the CIT(A) and the Tribunal on this point, and therefore, question (ii) was not a substantial question of law. For question (iv), the Court rejected the assessee's submission that Section 80-IA(9) only restricts the total deduction to profits and gains. The Court held that Section 80-IA(9) contains a further restriction, barring deduction under any other provision of the Chapter if deduction is allowed under Section 80-IA or 80-IB. The Court respectfully followed the decision of the ITAT Special Bench in ACIT, Moradabad v. M/s Hindustan Mint & Agro Products Pvt. Ltd., which held that deduction under any other provision of Chapter VI-A should be reduced by the amount of deduction allowed under Section 80-IB/80-IA. Consequently, the Court held that no substantial question of law arose in the appeals, and the appeals were dismissed. Question (iii) was not pressed by the assessee.

What were the issues?

1. Whether the order of the Tribunal was non-specific and non-speaking, thus liable to be set aside? (Question of law) 2. Whether job work charges, derived from industrial activity, could be excluded from eligible profits for computing deduction under Section 80-IA/80-IB? (Question of mixed law and fact, turning on Section 80-IA/80-IB) 3. Whether job work charges, being part of business profits, could be considered at par with brokerage, commission, interest, rent, and other charges under clause (baa) to Section 80HHC(4C), so as to exclude 90% of the same from business profits for computing deduction under Section 80HHC? (Question of mixed law and fact, turning on Section 80HHC) 4. Whether, when two deductions under Section 80HHC and Section 80-IB are available, the deduction computed under Section 80-IB should be reduced from business profits to compute the deduction under Section 80HHC on the resultant profits, as per Section 80-IA(9)? (Question of law, turning on Section 80-IA(9)) 5. Whether the order of the Tribunal was legally unsustainable, bad in law, and perverse? (Question of law) Assessee's contentions: The assessee argued that job work charges derived from industrial activity should not be excluded from eligible profits for Section 80-IA/80-IB deduction. For question (iii), the assessee initially sought to press it but later conceded it could not be pressed in view of the High Court's judgment in Liberty India v. Commissioner of Income Tax. For question (iv), the assessee contended that Section 80AB is clarificatory and supersedes Section 80-IA(9), and that the deduction under Section 80HHC is independent of Section 80-IA. The assessee also argued that the restriction under Section 80-IA(9) should be read in light of the condition that deduction should not exceed total profits and gains. Revenue's contentions: The revenue contended that job work charges were rightly excluded as the assessee failed to prove they were for manufacturing or producing articles or things. The revenue supported the view that deduction under Section 80HHC should be computed after reducing the deduction allowed under Section 80-IA, citing ITAT Special Bench decisions in ACIT v. Rogini Garments and ACIT, Moradabad v. M/s Hindustan Mint & Agro Products Pvt. Ltd.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80-IA,Section 80-IB,Section 80HHC,Section 80AB,Section 80HHC(4C)

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 20.9.2010 M/s Friends Castings (P) Ltd. ....Appellant. Versus Commissioner of Income Tax ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Jorawar Singh Bhasin, Advocate for the appellant. ADARSH KUMAR GOEL, J.

1.

This order will dispose of ITA Nos. 455 and 456 of 2010 as both involve common questions.

2.

ITA No. 456 of 2010 is an appeal by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order of the Income Tax Appellate Tribunal, Amritsar Bench (hereinafter referred to as “the Tribunal) in ITA No. 68 (ASR)2009 dated 9.10.2009, for the assessment year 2000-01, proposing following substantial questions of law:- “i) Whether the order of the Tribunal, apparently being non-specific and non-speaking, is liable to be set aside as such? ii) Whether in the facts and in the circumstances -2- of the case, the Tribunal was justified in upholding the findings of the ld. CIT (A) that job work charges, derived from industrial activity, could be exclude

The order continues below.

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