Loading judgment…
No AI summary yet for this case.
Order under section 254(1) of Income Tax Act PER PAWAN SINGH JUDICIAL MEMBER: 1. These cross appeals by assessee and the revenue are directed against the order of Commissioner (Appeals) 20, Mumbai, dated 22 October 2014 for assessment year 2010-11. As both the appeals are filed against the same order the parties, thus clubbed, heard together and are decided by common order, to avoid the conflicting opinion. The assessee has basically raised four grounds of appeal:
(i) The ld CIT(A) erred in confirming the action of AO and reducing the income while computing deduction under section 80IC which is not a first-degree or approximate profit of business in respect of interest income, scrap sales, transport claim of depot transport. (ii) The ld CIT (A) erred in upholding the addition of Rs. 3,19,03,450/- on account of excess consumption of the material. (iii) The ld CIT (A) erred in confirming the disallowance under section 14A read with rule 8D. (iv) The ld CIT(A) erred in not granting correct TDS credit of Rs. 40,98,401/- based on the original TDS certificates as per return of income.
The revenue has raised following grounds of appeal;
(i) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) was correct in holding that “the income of Rs.1,32,23,899/- received on waste generated from manufacturing process is to be included in “Business Income” instead of “Income from Other Sources” for the purpose of deduction under section 80 IC?”
We have heard ld AR of the assessee and the ld DR for revenue and gone through the material placed before us. The learned AR of assessee filed a chart/ tabulation of grounds decided in earlier years and would submit that all the grounds raised by assessee as well as by revenue in the present appeals are covered either in favour or against the assessee by various decisions in assessee’s own case in earlier years. The learned and AR of the assessee has also placed on record the decisions of ITAT Mumbai, in assessee’s own case for various assessment years. The ld departmental representative not disputed the factual position of various decisions placed on record by ld AR of assessee.
(Assessee’s appeal) 4. Ground No.1 relates to reducing the other income while computing the deduction under section 80 IC to the extent of Rs. 52,21,889/- which consist of interest on bank deposits, government securities, security deposits and loans to employees of Rs. 530030/-, sales of prescription of Rs. 19,13,349/- and transport claim of depot transport of Rs. 27,78,510/-.
We have seen that similar issues arose for assessment 2008-09 and assessment year 2009-10 and the same with considered by Tribunal vide wherein similar claims of interest income on bank deposits and transport claim was decided against the assessee and claim related with scrape sale was decided in favour of assessee holding as under:
“8. We have considered the rival submissions and perused the orders of the lower authorities. Undoubtedly the assessee may have some arrangement with its bank which the amount exceeding a certain limit would automatically be converted into flexible deposit receipts. But nevertheless the nature of income is interest on bank deposits. Therefore we do not find any reason to tinker with the finding of ld CIT(A).
The second item relates to scrap sales of drum, the bags etc. The details of which were provided to the AO and the same have been exhibited at page 77 of the paper book. The AO was of the opinion that such a scrap sale has no direct link with the profit and gains derived from an industrial undertaking making it eligible for deduction under section 80 IC of the Act and profits from such undertaking has to be distinguished as to whether they belong to the category of “first-degree profit ”or ‘auxiliary profit’. The AO concluded that it cannot be said that scrap that has been generated is the first-degree approximate profit of business of the assessee. The business of the assessee is to make item of confectionery etc, and does not earn income by sale of such a scrap and accordingly excluded the entire sale of a scrap to the tune of Rs. 74,08,714/-from the eligible profit.
10. Before the ld CIT (A), the assessee once again furnished the details and submitted that out of the total scrap sales amounting to Rs. 74,08,714/-, Rs.27,14,604/- belonged to the waste occurred during biscuit manufacturing process and therefore it cannot be said that such a scrap sale has no direct nexus with the manufacturing activity of the assessee. The ld CIT(A) was convinced to this extent that waste occurred during biscuit manufacturing process are part of the manufacturing process and therefore are eligible for including deduction under section 80 IC. So far as the balance amount of Rs.46,94,110/- is concerned the ld CIT(A) agreed with the AO.
Before us, the learned counsel for the assessee drew our attention to pay 77 of the paper book and submitted that AO and the learned CIT(A) both have erred in not considering the sale of a scrap so far as part-B of the details is concerned.
We have carefully perused the details as exhibited at page 77 of the paper book . We find that there are few items which are part of plant and machinery is used in the manufacturing process. That being so, in our humble opinion, these items are part of capital asset and any sale of scrap would go to reduce the written down value of the asset. To this extent we have no hesitation to confirm the finding of the lower authorities. We find that the total of these items comes to Rs. 11,36,173/-. We accordingly direct the AO to restrict the exclusion from the eligibility profit under section 80 IC to the extent of Rs. 1136173/-only. Therefore assessee gets eligibility for deduction at Rs. 3557937/-under section 80 IC of the Act.
The next item relates to transport claim of depot transport to the tune of Rs. 15,34,970/-. It appears that this amount is included in the total miscellaneous receipt of Rs. 15,67,986/-. Details of which have been exhibited from pages 78 to 89 of the paper book. As the AO has excluded the entire miscellaneous receipt from the eligibility of the deduction under section 80 IC of the Act, he has not discussed the transport claim separately.
Before the ld CIT(A), the assessee retreated its submission but without any success.
Before us, the learned counsel for the assessee drawing our attention to pages 78 to 89 of the paper book submitted that these claims are made from the transporters for delay in transportation of goods to the parties. As per the agreement, if the transporters failed to transport the goods on the time, nominal charge was deducted from the transport payment. These charges being part of the business of the assessee therefore these should be allowed to be eligible for the claim of deduction under section 80 IC of the Act.
Per contra, the learned Department Representative strongly relied upon the order of lower authorities..
We have carefully persued the details as exhibited from pages 78 to 89 of the paper book. We find that these claims have been made by the assessee for delay in services of goods. However, we find that the transportation expenses have been charged to profit and loss account by the assessee. Therefore, any recovery from the transporter for improper service would not, ipso facto, make it eligible for deduction under section 80IC of the Act as it is clear from the details, the claim of Rs. 15,34,970/- his income from other sources and the revenue authorities have rightly excluded this amount from the eligibility of section 80 IC of the Act.
To sum up the entire grievances of the assessee raised as per ground No.1, the assessee gets eligibility for deduction under section 80 IC to the extent of Rs. 355797/-. Ground No1 is partly allowed.”
Thus respectfully following the decision of coordinate bench for AY 2008-09 the ground No.1 raised in the present appeal is decided with similar directions.
Ground No. 2 relates to excess consumption of raw material. We have seen that similar disallowance was made for assessment year 2006-07 and in earlier years as well. The assessee carried the matter before this tribunal and the issue was restored to the file of AO for deciding the same holding as under:
5. As held by the tribunal in assessee’s own case for assessment years 2000- 01 to 2003-04, if formula of 108.190 is to be applied for the CMU’s then it is necessary that adjustments which are allowed in case of own manufacturing units of the assessee should also be allowed in case of the CMU’s. The issue accordingly was restored by the terminal to the file of AO to allow such adjustment after making necessary verification. As the issue involved in the year under consideration as well as the material facts relevant thereto are similar to that of assessment year 2000-01 to 2003 -04, we respectfully follow the order of the tribunal for the CIT at and restored this issue to the file of AO for deciding the same afresh as per the same direction as given in assessment year 2000-01 to 2003-04. Ground No.1 of the assessee’s appeal is accordingly treated as allowed for statistical purposes.
Thus we respectfully following the order of coordinate bench in assessee’s own case in dated 11.04.2014, for assessment year 2006-07 restored this issue to the file of AO for fresh consideration in accordance with the same direction. Accordingly this ground is allowed for statistical purposes.
9. Ground No.3 relates to the disallowance made under section 14 A of the Act. We have seen that similar grounds of appeal came up consideration before the Tribunal in assessee’s own case for assessment year 2008-09 and in 2009-10. The coordinate bench of this Tribunal in assessee’s own case in ITA No. 6661/M/2012 passed the following order:
7. The third grievance relates to the disallowance under section 14B amounting to Rs 38,12,000/-. The similar issue was considered by the Tribunal in AY 2008-09 qua ground No2. In and at para 24 the Tribunal held that disallowance of Rs. 100,000/- would meet the end of justice considering the balance-sheet of the assessee in totality. In our considered opinion and respectfully following the decision of coordinate bench, a disallowance of Rs. 1,00,000/- would meet the end of justice. We, accordingly direct the AO to restrict the disallowance of Rs,100,000/-. Ground No.1 is partly allowed.
Thus we respectfully following the order of coordinate bench in assessee’s own case in ITA No. 6661/M/2012 dated 20.05.2015 , for assessment year 2009-10 the disallowance under section 14 A is restricted to Rs. 100,000/-. Accordingly this ground of appeal
is partly allowed.
11. In the result appeal of the assessee is partly allowed.