KIRBY BUILDING SYSTEMS INDIA (UTTARANCHAL) PVT. LTD.,HARIDWAR vs. DCIT, HARIDWAR

2. Assessee has filed a cross-appeal bearing No. 315/Del/2015 on an addition upheld by the CIT(Appeals) Dehradun relating to the same Page | 2 DCIT Vs. Kirby Building Systems India (Uttaranchal) Pvt. Ltd and 208/Del/2015 and 315 and 316/Del/2015 CO Nos. 250 and 251 /Del/2015 Assessment Year 2010-11 and 2011-12 asst. year; hence the assessee prays for clubbing of both appeals in order to arrive at a clear decision on the matters raised by the AO in his original order dt 29.01.2013.”

2. Because on facts and in circumstances of the case, the CIT(A)-1 Dehradun has erred by not appreciating the submissions made by the assessee as well as brushing aside the various court pronouncements & material made available to him.

3. That the assessee reserves the right to introduce any other ground of appeal and new facts with the kind permission of your honours.”

5. For the Assessment Year the assessee company is engaged in manufacture of pre-engineered buildings. Assessee is claiming deduction u/s 80IC since AY 2007-08. Assessee filed its return of income on 14.08.2010 showing total income of Rs. Nil. The assessee claimed deduction u/s 80IC of Rs. 173087243/-. The ld Assessing Officer passed an assessment order wherein, he held that assessee is not eligible deduction u/s 80IC on foreign exchange of Rs. 28559697/-, miscellaneous income, customer’s advance written back etc. Consequently, the total income of the assessee was assessed at Rs. 71371250/-. The assessee challenged the same before the ld CIT(A). The ld CIT(A) held that assessee is eligible for deduction u/s 80IC on foreign exchange fluctuation. He further held so for sale of scrap, sundry balance and customer advance written back. However, he held that on misc income assessee is not eligible for deduction. Therefore, assessee and AO both are in appeal before us.

DCIT Vs. Kirby Building Systems India (Uttaranchal) Pvt. Ltd and 208/Del/2015 and 315 and 316/Del/2015 CO Nos. 250 and 251 /Del/2015 Assessment Year 2010-11 and 2011-12 6. Vide ground No. 1 the revenue has challenged that foreign exchange fluctuation amounting to Rs. 28559697/- is not eligible for deduction u/s 80IC.

of revenue is against holding that customer advances written back is also income derived from industrial undertaking.

11. The ld Departmental Representative relied upon the order of the ld Assessing Officer whereas, the ld AR relied upon the order of the ld CIT(A).

12. We have carefully considered the rival contentions as well as perused the orders of the lower authorities. The customer advances are in the nature of advances against the various orders. When such jobs are cancelled by Page | 4 DCIT Vs. Kirby Building Systems India (Uttaranchal) Pvt. Ltd and 208/Del/2015 and 315 and 316/Del/2015 CO Nos. 250 and 251 /Del/2015 Assessment Year 2010-11 and 2011-12 the customer the assessee recovers the cost of material and consumable supply to the customer from the advance received and shows it as advances written back. Therefore, this partakes the character of sale and hence is income derived from industrial undertaking. The ld CIT(A) has also given these reasons for deciding the issue in favour of the assessee. The ld Departmental Representative could not show us any reason that why above sum cannot be income derived from industrial undertaking. In view of this we do not find any infirmity in the order of the ld CIT(A) in holding that customer advances written back is income derived from the industrial undertaking as it has direct nexus with it, hence, eligible for deduction u/s 80IC of the Act. Ground No. 2 of the appeal is dismissed.

13. Ground No. 3 of the appeal is against the order of the ld CIT(A) holding that sundry balances of provisions written back amounting to Rs. 3074769/- is income derived from industrial undertaking and eligible for deduction u/s 80IC of the Act. The assessee submitted that this amount was debited to the profit and loss account of Assessment Year 2009-10 as business expenditure. Therefore, it has gone to reduce the income of the assessee in earlier previous year and now same is written back and therefore, it is going to swell the profit of the industrial undertaking during the year. It was stated by ld Assessing Officer that it does not have a first degree nexus with the eligible business of the assessee. Hence, he denied deduction thereon. The ld CIT(A) decided the issue in favour of the assessee. As the provision made was considered as reduction in eligible profit its reversal should be considered as income of undertaking.

14. We do not find any infirmity in the order of the ld CIT(A), hence ground No. 3 is dismissed.

Assessment Year 2011-12 20. For Assessment Year 2011-12 the order of the ld CIT(A)-I, Dehradun dated 10.02.2014 is challenged by revenue raising solitary ground of appeal in “1. The ld CIT(A) has erred in law and on facts in holding that customer advances written back amount to sale and can be said to be derived from the eligible business u/s 80IC ignoring the ration establishes by the Hon'ble Supreme Court in the case of Liberty India Vs. CIT 183 Taxmann 349 (2009) as per which the “income derived from industrial undertaking” has been held to be eligible for the said deduction and not the income attributable to industrial undertaking.”

21. The assessee has also challenged by filing a CO No. 251/Del/2015 for the Assessment Year 2011-12 raising following grounds of appeal:- “1. Respondent (assessee) wishes to affirm that we have filed detailed submissions before the Hon'ble CIT(Appeals) Dehradun in support of our appeal against the order of AO, the same have been deliberated upon in detail and CIT(Appeals) Dehradun has passed his order on merits of the case. Assesee thus wishes to be present during the hearing of the case in order to re-present his contention if necessary. Page | 6 DCIT Vs. Kirby Building Systems India (Uttaranchal) Pvt. Ltd ITA Nos. 207 and 208/Del/2015 and 315 and 316/Del/2015 CO Nos. 250 and 251 /Del/2015 Assessment Year 2010-11 and 2011-12

2. Assessee has filed a cross-appeal bearing No. 316/Del/2015 on an addition upheld by the CIT(Appeals) Dehradun relating to the same asst. year; hence the assessee prays for clubbing of both appeals in order to arrive at a clear decision on the matters raised by the AO in his original order dt 05.02.2014.”

“1. BECAUSE ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE CIT (A) 1 DEHRADUN HAS ERRED IN NOT ALLOWING THE BENEFIT OF DEDUCTION U/S 80-IC ON THE MISCELLANEOUS RECEIPTS RECOVERED FROM CUSTOMERS ON ACCOUNT OF BUSINESS EXPENSES AND RELATED COSTS, DESPITE THE SAME BEING ELIGIBLE TO DEDUCTION.

3. THAT THE ASSESEE RESERVES THE RIGHT TO INTRODUCE ANY OTHER GROUND OF APPEAL

AND NEW FACTS WITH THE KIND PERMISSION OF YOUR HONOURS.”

23. At the time of hearing the ld Authorised Representative submitted that in appeal of the revenue the solitary ground raised is against the order of the ld CIT(A) where the customer’s advance returned of Rs. 1439750/- held by the ld Assessing Officer that same is not income derived from industrial undertaking and therefore, not eligible for deduction u/s 80IC of the Act was reversed. The ld CIT(A) held that such income is income derived from industrial undertaking following the order of his predecessor for Assessment Year 2009-10. It was stated that the tax effect involved in the appeal is Rs. 478249/- and therefore, it is covered by Circular No. 3/2018 dated 11.07.2018.

24. The ld Departmental Representative also agreed with the same.

DCIT Vs. Kirby Building Systems India (Uttaranchal) Pvt. Ltd and 208/Del/2015 and 315 and 316/Del/2015 CO Nos. 250 and 251 /Del/2015 Assessment Year 2010-11 and 2011-12 25. At the outset of the hearing itself, the ld. DR brought to our attention that CBDT vide Circular No.03/2018 dated 11TH July 2018 has decided that the revenue would not prefer an appeal before the Tribunal if the tax effect is less than Rs.20 lakhs. Therefore, he pleaded that the appeal of the revenue be decided as per the instruction of the CBDT. Ld AR also reiterated same facts.