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Income Tax Appellate Tribunal, DELHI BENCH ‘DB’, NEW DELHI
Before: SH. R. K PANDA & SH. ANUBHAV SHARMA
PER R.K PANDA, AM:
This appeal filed by the assessee is directed against the order dated 29.02.2012 of the CIT(A)-1, Dehradun for A.Y. 2009- 10. 2. Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing of vibration testing system for defence, aerospace and automobiles. It filed its return of income on 28.09.2009 declaring total income of
Rs.5,22,350/- and book profit of Rs.81,10,159/-. It had claimed deduction u/s. 80IC amounting to Rs.76,27,247/-.
2.1 During the course of assessment proceedings the AO noted that the assessee has claimed deduction u/s. 80 IC of the IT Act which is the 5th year of its claim. From the various details furnished by the assessee he noted that the assessee has claimed deduction u/s. 80IC in respect of the following indirect income :-
AMC & Repair charges Rs.1,04,49,805/- Duty draw back Rs.3,03,313/- Interest on FDR Rs.35,30,000/- Job Work (Income) Rs.4,81,104/- 3. According to the AO in view of various decisions the income shown as AMC & repair charge, duty draw back, job work, misc income, profit on sale of assets and rent charges are to be considered out of the purview of deduction u/s 80IC of the IT Act, 1961 and has to be considered as income arising out ancillary activity of the assessee which is independent source of income beyond the first degree of nexus between profit and eligible business of industrial undertaking within the meaning of section 80IC(2) of the IT Act. Therefore, deduction u/s 80IC of the IT Act is not allowable on this income.
However, he noted that some expenses are incurred in connection with earning income from AMC and repair charges
and Job work. He asked the assessee to furnish the details of expenses incurred in connection with AMC and repair charges and Job Work. In absence of any details furnished by the assessee the AO examined the various details as per the P & L account and made addition of Rs.1,31,362/- by rejecting the claim of deduction u/s. 80IC on the above amount by observing as under :- “However, this is also observed that some expenses income from AMC & Repair Charges and Job Work. The assessee was asked to furnish the details of expenses incurred in connection with the above income. The assessee has not done that. Therefore, the expenses to be allowed are being determined on the basis of information available records. Looking into the nature of work, the expense claimed under the head salary & wages amounting to Rs.61,61,454/-, travelling expenses amounting to Rs.42,44,689/- rental expenses amounting to Rs.9,66,500/- and after sale service amounting to Rs. 17,45,895/- is allowed proportionately from the above income. The total of above expenses comes to Rs.l,31,18,538/-. The expenses are allowed only on job work and AMC & Repair charges. The total of AMC & repair charges and job work comes to Rs. 1,39,79,805/-. By applying the ratio of AMC & repair charges and job work with sales the deduction on account of expenses to be allowed comes to Rs.25,91,772/-. Thus the net income to be added on account of AMC & Repair charges and job work comes to Rs.l,13,88,033/-. To this, income on account of Duty draw back Rs.3,03,313/-, Misc. Income Rs.4,81,104/-, Profit on sale of fixed assets Rs.4,82,9(12/- and Rent charges Rs.5,40,000/-
are added on which no expenses is allowed. The total of such income comes to Rs.l,31,95,362/-. This is found to be the net income from above activities. As discussed above, deduction u/s 80IC is not allowable on this. Accordingly, this amount of Rs. 1,31,95,362/- is being added to the total income of the assessee. (Penalty proceedings u/s 271(l)(c) are being initiated separately for furnishing inaccurate particulars of income| thereby concealing his income.)
(Addition 1,31,95,362/-) 5. In appeal the Ld. CIT(A) upheld the action of the AO in denying the deduction u/s. 80IC in respect of AMC and repair charges, Job work, duty draw back interest and miscellaneous income. 6. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal : -
On the facts and in the circumstances of the case and in law the CIT (Appeal) was incorrect and unjustified in not allowing deduction u/s 80 1C in respect of AMC and Repair Charges and Job Work Income. 2. On the facts and in the circumstances of the case and in law the CIT (Appeal) was incorrect and unjustified in not allowing deduction u/s 80 1C in respect of duty drawback, interest and miscellaneous income. 3. On the facts and in the circumstances of the case and in law the CIT (Appeal) was incorrect and unjustified in holding that all the income of the enterprise was not entitled for 80IC deduction.
On the facts and in the circumstances of the case and in law the CIT (Appeal) was incorrect and unjustified in holding that AMC and job work does not constitute the eligible business. 7. We have heard the rival arguments made by both the sides, perused the orders of the AO and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We find identical issue had come up before the Tribunal in assessee’s own case for the preceding and subsequent assessment years. We find the Tribunal vide ITA No.84 and 847 /Del/2017 order dated 21.03.2022 has decided the issue partially in favour of the assessee by observing as under :- 7. Coming to the common ground No. 1(b) [for assessment year 2011-12] and 1(c) [for assessment year 2012-13] in both these appeals, is with respect to deduction under Section 80 IC of the Act on AMC charges, duty draw back, interest on FDRs, other interest and interest on refund. 8. The Id. Counsel for the assessee fairly submitted that the Tribunal while disposing of the appeal for assessment years 2006- 07 and 2007-08 in ITA. Nos. 1563 and 4376/Del/2011 dated 26.05.2017 held that assessee is entitled for deduction under Section 80 IC of the Act on the AMC charges. The Id. Counsel for the assessee further submits that for the assessment year 2012-13 the assessee claimed deduction only at 30%, but the Id. Assessing Officer disallowed 100% of the AMC charges, duty draw back, interest on FDR, other interest etc. Therefore, he submits that, if at all, any disallowance to be made it should be out of 30% deduction claimed by the assessee, but not 100%. 9. The Id. DR strongly placed reliance on the orders of the authorities below.
Heard the rival submissions, perused the orders of the authorities below and the decision of the Tribunal in assessee’s own case. On perusal of the order of the Tribunal in assessee’s own case for assessment years 2006-07 and 2007-08, we find that the Tribunal held that AMC charges is income derived from business of the assessee entitled for deduction under Section 80 IC of the Act. Following the said decision, we direct the Assessing Officer to allow deduction under Section 80 IC of the Act in respect of AMC charges received by the assessee. In so far as the duty draw-back, interest on FDR, other interest are concerned, these incomes are not derived from business of the assessee. Hence, we hold that these incomes are not entitled for deduction under Section 80 IC of the Act.”
Respectfully following the order of the Tribunal in assesee’s own case for A.Y.2011-12 and 2012-13 cited (supra) we hold that the assessee is entitled to deduction u/s. 80 IC in respect of AMC charges. 9. So far as the other items are concerned i.e. duty draw back, interest on FDR and other interest, these incomes are not drived from business of the assessee as held by the Tribunal. Therefore, we hold that these incomes are not eligible for deduction u/s. 80 IC of the Act. 9.1 So far as the income from job work is concerned, it is a fact that the assessee has not given the details before the AO, despite being asked to do so. Since this issue is coming up for the first time before the Tribunal and the assessee has not given full details before the lower authorities, therefore, we deem it proper to restore the issue to the file of the AO with a direction to grant
one more opportunity to the assessee to furnish full details regarding the nature of Job Work and explain as to how the assessee is entitled to deduction u/s. 80IC on such Job Work. Needles to say that AO shall decide the issue as per fact and law after giving the opportunity of being heard to the assesee. The issue regarding deduction u/s. 80IC on Job work is accordingly allowed for statistical purpose. 10. In the result, the appeal filed by the assesee is partly allowed for statistical purpose. Order pronounced in the open court on 31.03.2022
Sd/- Sd/- (ANUBHAV SHARMA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* Date:- 31.03.2022 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI
Date of dictation 24.03.2022 Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for Pronouncement Date on which the fair order comes back to the Sr. PS/ PS 31.03.2022 Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which file goes to the Head Clerk. The date on which file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order