The DCIT, Circle-4,, Ahmedabad v. Lubi Submersible Ltd.,, Ahmedabad

ITA 1179/AHD/2007 | 2004-2005
Pronouncement Date: 26-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 117920514 RSA 2007
Assessee PAN HEISO9000E
Bench Ahmedabad
Appeal Number ITA 1179/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 7 day(s)
Appellant The DCIT, Circle-4,, Ahmedabad
Respondent Lubi Submersible Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 26-02-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 26-02-2010
Date Of Final Hearing 25-02-2010
Next Hearing Date 25-02-2010
Assessment Year 2004-2005
Appeal Filed On 19-03-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' (BEFORE S/SHRI N S SAINI AND MAHAVIR SINGH) ITA NO.1179/AHD/2007 (ASSESSMENT YEAR:- 2004-05) THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-4 AHMEDABAD V/S LUBI SUBMERSIBLE LIMITED NEAR KALYAN MILLS NARODA ROAD AHMEDABAD [PETITIONER] [RESPONDENT] PETITIONER BY :- SHRI M C PANDIT SENIOR DR RESPONDENT BY:- SMT. URVASHI SHODHAN O R D E R PER N S SAINI (ACCOUNTANT MEMBER) : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME-TAX (APPEALS) DATED 27-12-2006 FOR ASSESSMEN T YEAR 2004-05. 2 GROUND NO.1 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) DI RECTING THE AO TO EXCLUDE SALES-TAX AND EXCISED DUTY FROM THE T OTAL TURNOVER IN COMPUTING THE DEDUCTION U/S 80HHC AND 80HHE OF T HE ACT. 3 DURING THE COURSE OF HEARING BOTH THE PARTIES AG REED THAT THE ISSUE AT HAND IS COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LAKSHMI MACHIN E WORKS (2007) 290 ITR 667 (SC). WHEREIN IT WAS HELD THAT THE EXCISE DUTY AND SALES TAX COULD NOT FORM PART OF THE TOTAL TURN OVER U/S 80HHC(3) OF THE IT ACT 1961. THEREFORE THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 4 GROUND NO.2 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) NO T TO EXCLUDE 2 90% OF OTHER INCOME OF RS.5 15 596/- COMPRISING OF MISCELLANEOUS INCOME OF RS.3 12 184/- PACKING AND FORWARDING EXP ENSES OF RS.2 03 412 FOR COMPUTING THE DEDUCTION U/S 80HHC O F THE ACT. 5 THE BRIEF FACTS OF THE CASE ARE THAT THE AO OBSER VED THAT IN VIEW OF THE EXPLANATION (BAA) TO SECTION 80HHC THE MISCELLANEOUS INCOME AND PACKING AND FORWARDING CHARGES ARE OF NA TURE OF CHARGES OR ANY OTHER RECEIPTS AND THEREFORE THEY HA VE TO BE EXCLUDED FROM THE PROFITS OF THE BUSINESS FOR THE P URPOSE OF DEDUCTION U/S 80HHC OF THE ACT. THEREFORE HE EXCL UDED 90% OF OTHER INCOME OF RS.5 15 596/- WHICH WORKED OUT TO R S.4 64 036/- WHILE COMPUTING THE PROFITS OF THE BUSINESS FOR DED UCTION U/S 80HHC OF THE ACT. 6 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OBSERVED THAT AS REGARDS ELIMINATION OF 90% OF MISC ELLANEOUS INCOME IN HIS VIEW THE SAID RECEIPTS AROSE FROM TH E MAIN ACTIVITIES OF THE APPELLANTS BUSINESS LIKE PACKING AND FORWARDING IN RESPECT OF WHICH THE RELEVANT EXPENSES HAVE BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT AND ALSO OTHER RECEIPTS LIK E SALES COMMISSION THERE IS NOTHING SPECIFIC ON RECORD TO SHOW THAT SAID RECEIPTS WERE FAR REMOVED FROM THE MAIN ACTIVITY OF THE APPELLANTS BUSINESS. AS A MATTER OF FACT THE APPE LLANT IN FORM NO.10CCAC EXCLUDED 90% OF OTHER INCOME TOTALING TO RS.68 53 471/- IN THE NATURE OF INTEREST RENT RE FUND OF SALES-TAX REWINDING CHARGES ETC. VIEWED FROM THIS ANGLE NEC ESSARY ADJUSTMENTS HAVE ALREADY BEEN CARRIED OUT AND NOTHI NG MORE IS TO BE EXCLUDED. THE AO IS DIRECTED NOT TO EXCLUDE 90% OF OTHER INCOME AS HAS BEEN DONE BY HIM IN HIS ORDER AND ACC ORDINGLY HE ALLOWED THIS GROUND. 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABL E ON RECORD. WE 3 FIND THAT IN THE INSTANT CASE WHILE COMPUTING THE B USINESS PROFITS FOR CALCULATING DEDUCTION U/S 80HHC THE LEARNED AS SESSING OFFICER EXCLUDED MISCELLANEOUS INCOME OF RS.3 12 18 4/- AND PACKING AND FORWARDING CHARGES OF RS.2 03 412/- IN VIEW OF EXPLANATION (BAA) TO SEC. 80HHC OF THE ACT AS THEY HAVE NO DIRECT OR IMMEDIATE NEXUS WITH EXPORT BUSINESS AND THEREFO RE ARE NOT DERIVED FROM EXPORT BUSINESS. THE LEARNED COMMISSIO NER OF INCOME-TAX (APPEALS) OBSERVED THAT SAID RECEIPTS AR OSE FROM THE MAIN ACTIVITIES OF THE ASSESSEES BUSINESS LIKE PAC KING AND FORWARDING IN RESPECT OF WHICH THE RELEVANT EXPENSE S HAVE BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT AND ALSO OTHER RECEIPTS LIKE SALES COMMISSION THERE IS NOTHING SPECIFIC ON RECO RD TO SHOW THAT SAID RECEIPTS WERE FAR REMOVED FROM THE MAIN ACTIVI TY OF THE ASSESSEES BUSINESS. WE FIND THAT RS.2 03 412/- WAS CREDITED UNDER THE HEAD PACKING AND FORWARDING CHARGES. THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) HAD OBSERVED TH AT THE PACKING AND FORWARDING CHARGES WERE RELATING TO THE MAIN BUSINESS OF THE ASSESSEE AND EXPENDITURE INCURRED BY THE ASS ESSEE IN RESPECT OF THE SAME WAS DEBITED IN ITS PROFITS AND LOSS ACC OUNT. WE AGREE WITH THESE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THAT ON THIS PART THE LEARNED ASSESSI NG OFFICER WAS NOT JUSTIFIED IN EXCLUDING 90% OF PACKING AND FORWA RDING CHARGES OF RS.2 03 412/- BY INVOKING PROVISIONS OF EXPLANAT ION (BAA) OF SECTION 80HHC OF THE ACT. HOWEVER REGARDING MISCE LLANEOUS INCOME OF RS.3 12 184/- WE FIND THAT THE FINDING O F THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS THAT THE SA ME IS IN THE NATURE OF INCOME LIKE SALES COMMISSION AND THE LEAR NED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVED THAT T HE SAME ALSO RELATES TO THE MAIN BUSINESS OF THE ASSESSEE A ND THEREFORE 90% OF SUCH RECEIPT IS NOT EXCLUDIBLE UNDER EXPLANA TION (BAA). WE FIND THAT THE FULL DETAILS AND TRUE NATURE OF MISCE LLANEOUS INCOME OF RS.3 12 184/- WAS NOT EXAMINED IN DETAIL BY BOTH THE LOWER AUTHORITY AND FULL FACTS RELATING TO THE SAME WAS B ROUGHT ON 4 RECORD. EVEN DURING THE COURSE OF HEARING BEFORE U S BOTH THE PARTIES COULD NOT PROVIDE THE FULL DETAILS OF THE N ATURE OF THIS INCOME. IN OUR CONSIDERED OPINION THE COMMISSION I NCOME EARNED BY THE ASSESSEE IS COVERED BY THE PROVISIONS OF EXP LANATION (BAA) OF SECTION 80HHC OF THE ACT AND 90% OF SUCH RECEIPT ARE TO BE EXCLUDED. HOWEVER AS STATED EARLIER AS FULL DETAI LS OF THE NATURE OF MISCELLANEOUS INCOME OF RS.3 12 184/- IS NOT AVA ILABLE BEFORE US IN OUR CONSIDERED OPINION IT SHALL BE IN THE I NTEREST OF THE JUSTICE TO SET ASIDE THIS PART OF THE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR PROPER VERIFICATION O F THE NATURE OF INCOME AND THEN TO DECIDE THE ISSUE AFRESH IN ACCOR DANCE WITH LAW. THE ASSESSEE IS ALSO DIRECTED TO FURNISH THE FULL D ETAILS OF MISCELLANEOUS INCOME OF RS.3 12 184/- WITH SUPPORTI NG EVIDENCES BEFORE THE LEARNED ASSESSING OFFICER WHEN CALLED UP ON TO DO SO. NEEDLESS TO MENTION THAT BEFORE DECIDING THE ISSUE AFRESH THE LEARNED ASSESSING OFFICER SHALL ALLOW PROPER AND RE ASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THIS GROUND OF APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PU RPOSES. 8 GROUND NO.3 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN DIRECTING THE LEARNED ASSESSING OFFICER TO ALLOW THE ISO 9000 EXPENSES OF RS.58 305/- AS REGULAR BUSINESS EXPENDITURE AFTER WITHDRAWING THE DEPRECIATION ALLOWED. 9 AT THE TIME OF HEARING BOTH THE PARTIES AGREED TH AT THE ISSUE AT HAND IS COVERED BY THE DECISION OF THE CHANDIGAR H BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. UPPER INDIA STEEL MFG. & ENGG. CO. 150 TAXMAN 51 WHEREIN THE TRIBUNAL HELD THAT T HIS IS A BUSINESS EXPENDITURE ALLOWABLE UNDER SEC. 37(1) OF THE ACT. THIS DECISION WAS FOLLOWED BY THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF JT. CIT VS. M/S PLASTICCHEMIX INDUSTRIE S IN ITA 5 NO.1717/AHD/2001 ORDER DATED 9-3-2007. THEREFORE FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 10 GROUND NO.4 OF THE APPEAL OF THE REVENUE IS DIRE CTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS) IN DELETING THE ADDITION OF RS.21 89 968/ - MADE ON ACCOUNT OF UNUTILIZED CENVAT CREDIT. 11 THE FACTS OF THE CASE ARE THAT THE LEARNED ASSES SING OFFICER OBSERVED FROM THE TAX AUDIT REPORT THAT RS.21 89 90 0/- HAS BEEN SHOWN AS UN-AVAILED CENVAT CREDIT BY THE ASSESSEE A S UNUTILIZED MODVAT CREDIT AS AT THE END OF THE YEAR. THE LEARNE D ASSESSING OFFICER OBSERVING THAT HON'BLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU P. LTD. 87 ITR 542 AND SI NCLAIRMURRAY & CO. PVT. LTD. 97 ITR 615 HAS HELD THAT EXCISE DU TY AND SALES TAX ARE PART OF TRADING RECEIPTS AND FURTHER SECTIO N 145A OF THE ACT HAS BEEN AMENDED FROM 1-4-1999 WHICH PROVIDES THAT EXCISE DUTY HAS TO BE INCLUDED IN THE VALUATION OF PURCHASE AND SALE OF GOODS AND CLOSING STOCK. THEREFORE THE LEARNED ASSESSING OFFICER WAS OF THE OPINION THAT SURPLUS OF EXCISE DUTY PAYABLE ACCOUNT IS TO BE ADDED TO THE INCOME OF THE ASSESSEE AND INCLUDED TH E SAME IN THE INCOME OF THE ASSESSEE. 12 IN APPEAL THE LEARNED COMMISSIONER OF INCOME-TA X (APPEALS) OBSERVED THAT IT IS OBVIOUS FROM RECORDS THAT THE ASSESSEE CHARGED TO PROFIT & LOSS ACCOUNT THE COST OF RAW MATERIALS EXCLUDING EXCISE DUTY COMPONENT AND THE E XCISE DUTY ELEMENT WAS DEBITED TO RECEIVABLE ACCOUNT AND THE D UTY COLLECTED IS ADJUSTED AND THE BALANCE IF ANY IS UTILISED TO CLEAR THE LIABILITY OF EXCISE DUTY. THUS IT IS A CHARGEABLE EXPENDITUR E APPEARING AS CURRENT ASSET AND DOES NOT REPRESENT CHARGEABLE INC OME. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FURTHE R OBSERVED 6 THAT IT IS AN IRREVERSIBLE ENTRY AS HELD BY THE HON 'BLE SUPREME COURT IN THE CASE OF CASE OF CIT VS. INDO NIPPON CH EMICALS CO. 261 ITR 275 (SC) AND THE FACTS OF THE ASSESSEES CA SE ARE SQUARELY COVERED AND THE DEBIT BALANCE BEING AN EXPENDITURE INCURRED TO BE ADJUSTED AGAINST FUTURE EXCISE DUTY LIABILITY DOES NOT REPRESENT INCOME AND MUCH LESS PARTAKE THE CHARACTER OF TURNO VER OR TRADING RECEIPT AND DIRECTED THE LEARNED ASSESSING OFFICER TO DELETE THE SAME. 13 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABL E ON RECORD. WE FIND THAT THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS) HAS OBSERVED THAT MODVAT CREDIT RECEIVABLE OF RS.21 89 968/- WAS APPEARING AS A CURRENT ASSET IN THE BALANCE SHEET O F THE ASSESSEE. THE ABOVE FACT COULD NOT BE DISPUTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE BEFORE US BY BRINGING ANY RELEVANT M ATERIAL. ON THE ABOVE UNDISPUTED FACT WE FIND THAT THE LEARNED ASS ESSING OFFICER WAS NOT JUSTIFIED IN OBSERVING THAT THE ABOVE AMOUN T WAS SURPLUS OF EXCISE DUTY PAYABLE ACCOUNT. THE AMOUNT BEING NO T A LIABILITY BUT BEING AN ASSET THE LEARNED ASSESSING OFFICER A DDED THE SAME TO THE INCOME OF THE ASSESSEE ON AN ERRONEOUS APPRE CIATION OF FACT. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT P OINT OUT ANY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) AND THEREFORE WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE SAME AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 14 IN THE RESULT THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 26-02-2010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (N S SAINI) ACCOUNTANT MEMBER DATE : 26-02-2010 7 COPY OF THE ORDER FORWARDED TO : 1. LUBI SUBMERSIBLE LIMITED NEAR KALYAN MILLS NAR ODA ROAD AHMEDABAD 2. THE DCIT CIRCLE-4 AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VIII AHMEDABAD 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD