Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
ORDER Per Shri A.T.Varkey, JM This is an appeal filed by the revenue against the order of Ld. CIT(A)-I, Kolkata dated 20.10.2014 for AY 2006-07.
The only issue to decide in this appeal is as to whether the Ld. CIT(A) was justified in directing the AO to grant deduction u/s. 80IC of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) towards transport charges of Rs.7,79,81,935/- and transport subsidy of Rs.11,76,80,209/- and whether the same could be the subject matter of rectification proceeding u/s. 154 of the Act, in the facts and circumstances of the cases.
Brief facts of the case are that the assessee is a Limited Company engaged in the manufacture of Lam Coke and Breeze Coke. It is not in dispute that the assessee is entitled to claim deduction u/s. 80IC of the Act. U/s. 80IC of the Act where the gross income of the assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2), there shall, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as is specified in sub- section (3) of sec. 80IC of the Act. The assessee claimed deduction u/s. 80IC of the Act on the entire net profit of Rs.14,04,35,546/- which was allowed by the AO in the assessment framed u/s. 143(3) of the Act. Later, the AO sought to invoke proceedings u/s. 154 of the Act on the ground that deduction u/s. 80IC of the Act has been erroneously granted in respect of income which included transport charges of Rs.7,79,81,935/- and transport subsidy of Rs.11,76,80,209/-. The AO placed reliance on the decision of Hon’ble Gauhati High Court in the case of CIT Vs. Meghalaya Steels Ltd. reported in 332 ITR 91 (Gau) wherein it has been held the transport subsidy is not eligible for deduction u/s. 80HH or 80IB of the Act. He also further observed that income from transport charges on finished goods of Rs.7,79,81,935/- would not constitute profit derived from the business by an undertaking as per sec. 80IC of the Act. Accordingly, these two adjustments were carried out in computing the deduction u/s. 80IC of the Act in the proceedings u/s. 154 of the Act dated 04.03.2013.
The Ld. CIT(A) by placing reliance on the decision of Hon’ble Supreme Court in MEPCO Industries Ltd. Vs. CIT reported in 319 ITR 208 held that the issue of transport charges and the transport subsidy being eligible for deduction u/s. 80IC of the Act, is a debatable issue and hence, the same cannot be subject matter of rectification proceedings u/s. 154 of the Act. Aggrieved, the revenue preferred an appeal before us on the following ground:
“1. On the facts and in the circumstances of the case the Ld. CIT(A) was not justified in holding that withdrawal of deduction u/s. 80IC on transport charges & transport subsidy of Rs.7,79,81,935/- and Rs.11,76,80,209/- respectively cannot be considered as mistake apparent from record in terms of section 154 and cannot be rectified u/s. 154.”
We have heard rival submissions and have gone through the case records carefully. We find that the similar issue had arisen in the case of assessee for the AY 2005-06 on the very same ground except with variance in figures before this Tribunal in dated 01.06.2016 wherein it was held as under:
“8. We have heard the rival submissions. The ld. DR relied on the observations of the AO in the order passed u/s 154 of the Act. The ld. Counsel for the assessee relied on the order of CIT(A). He further brought to our notice the decision of the Hon’ble Supreme Court in the case of CIT vs Meghalaya Steel Ltd. Civil No.7622 of 2014 judgment dated 09.03.2016 wherein the Hon’ble Supreme Court considered the question as to whether identical transport subsidy is eligible for deduction u/s 80IC of the Act. The Hon’ble Supreme Court held that transport subsidy had to be recorded as part of the eligible business u/s 80IC of the Act has to be allowed. In view of the aforesaid decision we are of the view that order of CIT(A) has to be upheld. As far as the transport charges on finished goods of Rs.8,70,91,329/- is concerned, we find that the assessee has been accounting for the transport charges which it had incurred for transportation of finished goods to its customer as part of the selling and distribution expenses. This is clear from the Schedule-B to the profit and loss account which contains expenditure of Rs.8,43,77,509/- which the transport expenses incurred by the Assessee. The transport charges which the assessee receives from the customers for transporting finished goods is shown as income in the profit and loss account as a sum of Rs.8,70,91,329/- . The first aspect which we notice is that if transportation charges are excluded from the business profits on which the deduction u/s 80IC of the Act is to be allowed then the corresponding expenses will also have to be excluded in which case profits of the business will get reduced to the extent of difference between the transportation charges received by the assessee namely Rs.8,70,91,329/- and the transport charges incurred by the assessee namely Rs.8,43,77,509/-. It is not possible for the AO to exclude the entire receipts on account of transport charges only from the profits eligible for deduction u/s 80IC of the Act. We are of the view that the question as to whether the transport chares on finished goods could be considered as profits derived from an undertaking u/s 80IC of the Act and what is to be excluded as to whether the gross transport charges received or the net transport charges received are highly debatable issues which cannot be resolved in the proceedings u/s 154 of the Act. The CIT(A) has taken note of this principle has followed the decision of the Hon’ble Supreme Court in the case of M/s. Mepco Industries Limited vs CIT Civil No.7662 and 7663 of 2009 judgment dated 19.11.2009 wherein the principle that debatable issues cannot be the subject matter of proceedings u/s 154 of the Act has been reiterated. In the light of the judicial pronouncements referred to above we are of the view that CIT(A) was fully justified in cancelling the order u/s 154 of the Act. Order of CIT(A) is accordingly upheld and this appeal of the revenue is dismissed.”
In the instant case the assessee had incurred transportation charges of Rs.20,42,54,172/- and had claimed reimbursement from parties to the tune of Rs.7,79,81,935/-. Hence, it would be illogical to deny deduction u/s. 80IC of the Act in respect of transport charges reimbursed from the parties by the assessee and shown as income. We find that the ratio laid down in assessee’s own case for AY 2005-06, supra is squarely applicable for the year under appeal also. We also find that similar issue had been decided in favour of the assessee by the Hon’ble Calcutta High Court in of 2007 in assessee’s own case dated 02.04.2007 dismissing the revenue’s appeal on the ground that no substantial question of law is involved in this matter. Respectfully following the aforesaid judicial precedents, we dismiss the appeal of the revenue.
In the result, appeal of revenue is dismissed.
Order is pronounced in the open court on 11.08.2017
Sd/- Sd/- (M. Balaganesh) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 11th August, 2017 Jd.(Sr.P.S.) Copy of the order forwarded to: Appellant – DCIT, circle-1(2), Kolkata 1. Respondent –M/s. SKJ Coke Industries Limited, 1/1A, Biplabi Anukul 2 Chandra Street, Kolkata-700 072. The CIT(A), Kolkata 3. 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order,
Sr. Pvt. Secretary