MUKESH OIL MILLS PVT LTD vs. I T A T JAIPUR and ORS

PDF · subscribers
ITA/1/2008HC RajasthanRJHC02003553200726 August 20175 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the issues are answered in favour of the department and against the assessee. The reasoning provided indicates that the amounts in dispute, particularly insurance charges and surplus interest, were not considered business income. Instead, they were viewed as income collected against apprehended expenses that were not incurred, or as income derived from sources other than the core business operations. The court referenced the Supreme Court's observations in cases like CIT vs. Meghalaya Steels Ltd., implying that such receipts, when not directly tied to the business's profit and gains or when representing reimbursement of costs not actually incurred, would fall under 'income from other sources' rather than 'profits and gains of business or profession'. The court also noted the concurrent findings of the lower authorities. Consequently, the benefit of deduction under Section 80IA and 80IB was denied for these receipts. The appeals were dismissed.

What were the facts?

These appeals by Mukesh Oil Mill Private Limited (ITA No. 1/2008) and Krishna Murari Agarwal (ITA No. 56/2008) challenge the judgment of the Income Tax Appellate Tribunal (ITAT) which dismissed their appeals and confirmed the orders of the Assessing Officer (AO). The ITAT had disallowed claims under Section 80IA and 80IB respectively, concerning receipts under the head 'Insurance charges', 'postage', 'FDR Interest', and 'interest on IT refund' for Mukesh Oil Mill, and 'insurance charges' and 'surplus of interest account' for Krishna Murari Agarwal. The appeals were admitted by the High Court on substantial questions of law. ITA No. 1/2008 was initially dismissed but was re-heard following a review application.

What were the issues?

1. Whether the Appellate Tribunal correctly interpreted Section 80IA to disallow the appellant company's claim for receipts under 'Insurance charges', 'postage', 'FDR Interest', and 'interest on IT refund'? (Question of law) 2. Whether the Appellate Tribunal correctly interpreted Section 80IB to disallow the appellant company's claim for receipts on account of 'insurance charges' and 'surplus of interest account'? (Question of law) Assessee's contentions: - The bills for insurance and excess amounts are part of the income. (Mukesh Oil Mill) - Relied on Gujarat High Court's decision in CIT vs. Metrochem Industries Ltd. (2016) and Rajasthan High Court's decision in CIT Jaipur vs. Suresh Kumar Bajoria (D.B. ITA No.294/2008). - Cited Supreme Court's decision in CIT vs. Meghalaya Steels Ltd. (2016) regarding subsidies being reimbursement of costs and includible under 'profits and gains of business or profession'. - Income from insurance recovered from the purchaser is part of the income. Revenue's contentions: - For the amount claimed by the insurer, the insurer has already been given a benefit. - The excess amount claimed is not business expense but received against apprehended expenses. - The contentions of the respondent (revenue) are required to be accepted. - The amount shown in the bills of the insurer under 80I, and the excess amount claimed, cannot be given benefit in view of Supreme Court observations. - In the present facts, this is not business income but income collected against apprehended expenses which were not incurred, hence it cannot be treated as business income and can be treated as income under the head 'other income'. - There is a concurrent finding by the authorities.

Which sections of the Income-tax Act were involved?

Section 80IA,Section 80IB,Section 56,Section 14,Section 28(iii)(b)

AI-generated summary — verify with the full judgment below

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 1 / 2008 Mukesh Oil Mill Private Limited, Having Its Office At E-59, Industrial Area, Khairthal District Alwar Rajasthan Through Its Director Shri Anmol Gupta ----Appellant Versus 1. Income Tax Appellate Tribunal Jaipur Bench Jaipur 2. Commissioner of Income Tax (Appeals) Alwar 3. Assistant Commissioner of Income Tax, Circle-1 Alwar. ----Respondents Connected With D.B. Income Tax Appeal No. 56 / 2008 Krishna Murari Agarwal Proprietor M/s. Shakuntala Oll Products Having Its Office ITI Road, Old Industrial Area, Alwar (Rajasthan) ----Appellant Versus 1. Union of India, Through Finance Secretary, Ministry of Finance Government of India, New Delhi. 2. Commissioner of Income Tax, Moti Doongri, Alwar 3. Assistant Commissioner of Income Tax, Range-I, Alwar ----Respondents _____________________________________________________ For Appellant(s) : Mr. Anant Kasliwal with Ms. Charu Pareek For Respondent(s) : Mrs. Parinitoo Jain with Ms. Shiva Goyal _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 26/08/2017

(2 of 5) [ITA-1/2008]

1.

In both these appeals, common question of law and facts are involved hence they are decided by this common judgment. 2. By way of these appeals, the appellants have assailed the judgment and order of the Tribunal whereby Tribunal has dismissed the appeal of the assessee and confirmed the order of the AO. 3. This court while admitting the appeals framed following substantial question of law:- 3.1 Appeal No.1/2008 admitted on 23.1.2008 “Whether the Appellate Tribunal has correctly interpreted the provision of Section 80IA to disallow the appellant company’s claim there under in respect of the its receipt under the head Insurance charges, postage, FDR Interest and interest on IT refund?” 3.2 Appeal No.56/2008 admitted on 22.5.2012 “Whether the Appellate Tribunal has correctly interpreted the provision of Section 80IB to disallow the appellant company’s claim there under in respect of its receipts on account of insurance charges and surplus of interest account?” 4. The appeal (1/2008) was earlier heard on 12.4.2017 which came to be dismissed however subsequently review application no.31/2017 was heard and in view of the decision of Supreme Court, matter was heard. 4.1 Counsel for the appellant contended that the bills which are part of the papers at Annexure-2A, amount which has been claimed for insurance and excess amount is part of the income.

(3 of 5) [ITA-1/2008]

4.2 Counsel for the appellant has relied upon the two decisions one by Gujarat High Court in CIT vs. Metrochem Industries Ltd. (2016) 389 ITR 181 (Guj.) and other decision of this court in D.B. ITA No.294/2008 in CIT Jaipur vs. Suresh Kumar Bajoria decided on 18.5.2017. 4.3 He further contended that in view of the observations made by the Supreme Court in case of CIT vs. Meghalaya Steels Ltd. (2016) 383 ITR 217 (SC) wherein it has been held as under:- “20. Liberty India being the fourth judgment in this line also does not help Revenue. What this Court was concerned with was an export incentive, which is very far removed from reimbursement of an element of cost. A DEPB drawback scheme is not related to the business of an industrial undertaking for manufacturing or selling its products. DEPB entitlement arises only when the undertaking goes on to export the said product, that is after it manufactures or produces the same. Pithily put, if there is no export, there is no DEPB entitlement, and therefore its relation to manufacture of a product and/or sale within India is not proximate or direct but is one step removed. Also, the object behind DEPB entitlement, as has been held by this Court, is to neutralize the incidence of customs duty payment on the import content of the export product which is provided for by credit to customs duty against the export product. In such a scenario, it cannot be said that such duty exemption scheme is derived from profits and gains made by the industrial undertaking or business itself. 28. It only remains to consider one further argument by Shri Radhakrishnan. He has argued that as the subsidies that are received by the Respondent, would be income from other sources referable to Section 56 of the Income Tax Act, any deduction that is to be made, can only be made from income from other sources and not from profits and gains of business, which is a separate and distinct head as recognised by Section 14 of the Income Tax Act. Shri Radhakrishnan is not correct in his submission

(4 of 5) [ITA-1/2008]

that assistance by way of subsidies which are reimbursed on the incurring of costs relatable to a business, are under the head "income from other sources", which is a residuary head of income that can be availed only if income does not fall under any of the other four heads of income. Section 28(iii)(b) specifically states that income from cash assistance, by whatever name called, received or receivable by any person against exports under any scheme of the Government of India, will be income chargeable to income tax under the head "profits and gains of business or profession". If cash assistance received or receivable against exports schemes are included as being income under the head "profits and gains of business or profession", it is obvious that subsidies which go to reimbursement of cost in the production of goods of a particular business would also have to be included under the head "profits and gains of business or profession", and not under the head "income from other sources". 4.4 The income of the insurance which is recovered from the purchaser is part of the income. 5. Counsel for the respondent contended that for the amount, the insurer is already given benefit, the excess amount claimed is not their business expenses which are received against apprehended expenses. 5.1 The contentions raised by the counsel for the respondent is required to be accepted. The amount which has been shown in the bills of the insurer under 80I, excess amount claimed by the insurer, benefit cannot be given in view of the observations which are made by the Supreme Court in above cases. 5.2 In the facts of the present case, where this is not a business income rather this income is collected against apprehended

(5 of 5) [ITA-1/2008]

expenses which is not incurred, therefore, it cannot be treated as business income, it can be treated as income under the head of other income. Otherwise also, there is concurrent finding by the authorities. 6. Therefore, the issues are answered in favour of the department and against the assessee. 7. The appeals stand dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Brijesh 28-29.

More judgments on Section 80IA

All 1,796 judgments and leading authorities on Section 80IA →

Recent GST High Court judgments

Search GST case law →