The ACIT, Bhopal v. Shri Ajay Kumar Arora,, Bhopal

ITA 509/IND/2009 | 1993-1994
Pronouncement Date: 31-05-2010 | Result: Dismissed

Appeal Details

RSA Number 50922714 RSA 2009
Assessee PAN AAPPA8542A
Bench Indore
Appeal Number ITA 509/IND/2009
Duration Of Justice 6 month(s) 27 day(s)
Appellant The ACIT, Bhopal
Respondent Shri Ajay Kumar Arora,, Bhopal
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 31-05-2010
Assessment Year 1993-1994
Appeal Filed On 03-11-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER ITA NO.509/IND/09 A.YS. 1993-94 ASSTT. COMMISSIONER OF INCOME TAX 1(2) BHOPAL APPELLANT VS AJAY KUMAR ARORA BHOPAL PAN AAPPA8542A RESPONDENT APPELLANT BY : SMT. APARNA KARAN SR. DR RESPONDENT BY : SHRI R.N. GUPTA CA O R D E R PER JOGINDER SINGH JM THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 18.8.2009 ON THE GROUND THAT THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN CANCELLIN G THE PENALTY OF RS. 3 21 000/- MADE ON ACCOUNT OF INVESTMENT IN AGR ICULTURAL LAND. 2. DURING HEARING OF THIS APPEAL THE SENIOR DEPARTM ENTAL REPRESENTATIVE MRS. APARNA KARAN DEFENDED THE IMPO SITION OF PENALTY WHEREAS THE LD. COUNSEL FOR THE ASSESSEE SHRI RN GU PTA CONTENDED THAT 2 IN QUANTUM APPEAL THE ADDITION HAS BEEN DELETED BY THE TRIBUNAL ON THE BASIS OF WHICH PENALTY WAS LEVIED BY THE ASSESSING OFFICER. IN NUTSHELL THE IMPUGNED ORDER WAS DEFENDED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. THE ASSERTION OF THE LD. COUNSEL FOR THE AS SESSEE THAT IN QUANTUM APPEAL THE ADDITION WAS DELETED WAS NOT CON TROVERTED BY THE REVENUE. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) VIDE PARA 5 (PAGE 2) ALSO MENTIONED THAT THE TRIBUNAL VIDE OR DER DATED 20.7.2007 (ITA NO. 357/IND/2004) DELETED THE ADDITION VIDE PA RAS 20 AND 27 RESPECTIVELY THEREFORE THE DECISION OF THE TRIBUN AL IN THE CASE OF FLEXITUFF INTERNATIONAL (ITA NO. 30/IND/2009) ORDER DATED 4 TH MAY 2010 SUPPORTS THE CASE OF THE ASSESSEE. THE RELEVANT PO RTION OF THE SAME IS REPRODUCED HEREUNDER :- THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 31.12.2008 ON THE GROUND THAT LD. FIRST APPELLATE AUTHORITY ERRED IN CONFIRMING THE PENALTY OF RS.14 53 000/- IMPOSED U/S 271(1)(C) OF THE ACT. 2. DURING HEARING THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE QUANTUM ADDITION HAS BEEN DELETED BY THE TRIBUNAL THEREFORE THE PENALTY DOES NOT SURVIVE. OUR ATTENTION WAS INVITED TO THE ORDER OF THE TRIBUNAL DATED 20 TH MARCH 2009 (ITA NO. 515/IND/2006). THIS FACTUAL ASSERTION WAS NOT CONTROVERTED BY THE REVENUE. 3. ON CONSIDERATION OF RIVAL SUBMISSIONS AND THE ASSERTION MADE BY THE LD. COUNSEL FOR THE ASSESSEE NOT CONTROVERTED BY THE REVENUE WE ARE 3 REPRODUCING HEREUNDER THE AFORESAID ORDER DATED 20.3.2009 :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-I INDORE DATE D 15 TH MAY 2006 FOR THE A.Y.2003-04 CHALLENGING THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE ADDIT ION OF RS. 39 51 765/- ON ACCOUNT OF DEDUCTION U/S 80IB OF THE INCOMETAX ACT 1961. 2. THE ASSESSEE HAS CLAIMED IN THE COMPUTATION OF INCOME DEDUCTION U/S 80IB BEING 30% OF THE GTI BEIN G RS.1 31 72 551/-. THUS THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.39 51 765/- AS DEDUCTION U/S 88IB. TH E AO FOUND THAT THE ASSESSEE HAD RECEIVED EXPORT INCENTIVES IN THE FORM OF DUTY DRAW BACK AMOUNTING TO RS.2 21 50 722/-. THIS DUTY DRAW BACK RECEIVED FORM PART OF NET PROFITS AS PER PROFIT AND LOSS ACCOUNT WHICH INCLUDES THE ABOVE AMOUNT. THE AO NOTED THAT IF THI S AMOUNT IS EXCLUDED THERE SHALL BE NO POSITIVE GTI FROM WHICH ANY DEDUCTION U/S 80IB COULD BE CLAIMED BY TH E ASSESSEE. THE AO CONFRONTED THE ASSESSEE WITH THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T V. STERLING FOODS LIMITED; 237 ITR 579 AS TO WHY TH E DEDUCTION U/S 80IB BE NOT DENIED TO THE ASSESSEE A S THE LATTER WERE NOT INCOME DERIVED FROM MANUFACTURING ACTIVITY AND THE DEDUCTION U/S 80IB WAS ALLOWABLE O NLY ON INCOME DERIVED FROM MANUFACTURING ACTIVITY. THE ASSESSEE SUBMITTED THAT SINCE THE ASSESSEE COMPANY WAS A MANUFACTURING COMPANY IT IS ENTITLED TO DEDUCTIO N. THE AO HOWEVER DENIED BENEFIT U/S 80IB TO THE ASSESSEE BY FOLLOWING THE DECISION IN THE CASE OF STERLING FOODS AS WELL AS RELYING UPON THE DECISION S IN THE CASES OF PANDIAN CHAMICALS LIMITED; 233 ITR 497 AND 262 ITR 271 (SUPREME COURT) AND IN THE CASE OF CIT V. PARAS OIL EXTRACTION LIMITED; 230 ITR 266 (M P) AND IN THE CASE OF INDIAN POULTRY VS. CIT; 230 ITR 209 AND OTHER DECISION OF ITAT INDORE BENCH IN THE CA SE OF DCIT V. ALPINE SOLVEX LIMITED DATED 29 TH AUGUST 2003. THE ADDITION WAS CHALLENGED BEFORE THE CIT(A) AND I T WAS SUBMITTED THAT THE DECISION IN THE CASE OF STER LING FOODS (SUPRA) DID NOT APPLY TO THE FACTS OF THE CAS E. THE DUTY DRAW BACK REDUCED THE COST OF PRODUCTION A S IT IS REIMBURSEMENT OF THE EXCISE DUTY PAID ON DOMESTICALLY PRODUCED INPUTS. IT IS INTEGRAL PART OF 4 PRICE OF GOODS AND THEREFORE PART OF THE COST OF PRODUCTION OF THE INDUSTRIAL UNDERTAKING AND HENCE THE DUTY DRAW BACK HAS TO BE TREATED AS INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. THE ASSESSEE RELIED U PON THE DECISIONS OF THE TRIBUNAL IN THE CASES OF ANIL SHAH; 95 TTJ (MUM) 216 DCIT V. METRO TYRES LIMITED; 79 ITD 557 (DEL) AND ANDHRA PRADESH INDUSTRIAL COMPONENTS LIMITED; 74 TTJ (HYD) 272. THE LD.CIT(A) HOWEVER REJECTED THE CONTENTION OF THE ASSESSEE AN D CONFIRMED THE ORDER OF THE AO. 3. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND RELIED UPON THE ORDER OF ITAT INDORE BENCH IN THE CASE OF ACIT V. M/S NEO SACK PRIVATE LIMITED; 9 ITJ 686 AND THE DECISION OF DELHI HIGH COURT IN THE CAS E OF CIT V. ELTEK SGS (PVT.) LTD.; 169 TAXMAN 283. ON TH E OTHER HAND THE LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW AND READ OUT THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT IF THE AMOUNT OF DUTY DRAW BACK IS EXCLUDED THERE WAS A LOSS AND AS SUCH THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 80IB OF THE ACT. THE LD.DR IN SUPPORT OF THE CONTENTION REFERRED TO PB 54 WHICH IS COMPUTATION OF INCOME FI LED BY THE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. SECTION 80IB (1 ) OF THE IT ACT PROVIDES WHERE THE GROSS TOTAL INCOME O F THE ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FRO M ANY BUSINESS REFERRED TO IN SUB-SECTION (3) TO (11) (11A) AND (11B) SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS THERE SHALL IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE A DEDUCTION FROM SUCH PROFITS AND GAI NS OF AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS PRESCRIBED IN THIS SECTION. ACCORDING TO SEC. 28 (IIIC) OF THE IT A CT THE EXPORT INCENTIVE IN THE FORM OF DUTY DRAWBACK IS TA XABLE AS BUSINESS INCOME AS PER AMENDMENT IN THE ACT W.E. F. 1.4.1972. THIS PROVISION IS THEREFORE APPLICABLE TO THE CASE OF THE ASSESSEE UNDER APPEAL. ITAT INDORE BEN CH IN THE CASE OF ACIT VS. M/S. NEO SACK P. LTD. (SUPR A) CONSIDERED THE IDENTICAL QUESTION AND DECIDED THE I SSUE 5 IN FAVOUR OF THE ASSESSEE BY DISMISSING THE DEPARTM ENTAL APPEAL. THE SUBMISSIONS OF BOTH THE PARTIES AND THE DECISION THEREON IS REPRODUCED AS UNDER: 7. LD. DR RELIED UPON ORDER OF THE AO AND SUBMITTED THAT NEGATIVE INCOME WOULD NOT BE ELIGIBL E FOR DEDUCTION U/S 80 I A. HE HAS FURTHER SUBMITTED THAT NO CLAIM U/S. 80 I A COULD BE MADE UNLESS THE PROFIT AND GAINS ARE DERIVED FROM INDUSTRIAL UNDERTAKING. LD. DR FURTHER SUBMITTED THAT EVEN IF PROVISIONS OF SECTIO N 80 I B(1) ARE APPLIED THE ASSESSEE SHALL HAVE TO PROVE THAT THE PROFIT AND GAINS ARE DERIVED FROM INDUSTRI AL UNDERTAKING. LD. DR SUBMITTED THAT SLIGHT CHANGE IN THE LANGUAGE OF THE AFORESAID SECTION WOULD NOT CHANGE THE ORIGINAL SECTION THAT DEDUCTION IS ALLOW ABLE IN RESPECT OF INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. LD. DR FURTHER SUBMITTED THAT SINCE ASSESSEE DID NOT COMPLY WITH ALL THE CONDITIONS THEREFORE THE AO WAS JUSTIFIED IN NOT ALLOWING DEDUCTION TO THE ASSESSEE. LD. DR SUBMITTED THAT ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF PLA STIC BAGS AND REFER TO CIRCULAR NO. 621 DATED 19.12.1999 EXPLAINING IN PARA 35.1 THAT THE SCOPE OF CONCESSIO N U/S 80 I HAS BEEN EXTENDED IN NEW SECTION 80 I A. LD. DR RELIED UPON FOLLOWING DECISIONS: 1. 259 ITR 719 IN THE CASE OF CIT VS. ALPINE SOLVEX LTD. (SC) IN WHICH DECISION OF M.P. HIGH COURT MENTIONED BELOW WAS CONFIRMED. 2. 3 ITJ 223 (NO RELEVANT CASE LAW) 3. 270 ITR 448 IN THE CASE OF PANDIAN CHEMICALS LTD. VS. CIT IN WHICH IT WAS HELD THAT THE AMOUNT IN EXCESS OF VALUE OF GOODS RECEIVED FROM INSURER IS N OT INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. NOT ENTITLED FOR DEDUCTION U/S 80HH. 4. 272 ITR 118 IN THE CASE OF D.P. AGRAWAL VS. CIT IN WHICH M.P. HIGH COURT HELD THAT INCOME FROM BRAS S SCRAP AND REROLLING OF IRON AND STEEL IS NOT INCOME FROM INDUSTRIAL UNDERTAKING AND NOT ENTITLED TO DEDUCTIO N U/S 80HH AND 80I. 5. 261 ITR 737 CIT VS. VISHWANATHAN & CO. IN WHICH MADRAS HIGH COURT HELD THAT DEDUCTION U/S 80H H CASH ASSISTANCE DUTY DRAW BACK CANNOT BE TREAT ED AS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING. 6 6. 274 ITR 324 CIT VS. RITESH INDUSTRIES LTD. IN WHICH HON'BLE DELHI HIGH COURT HELD THAT DEDUCTION U/S 80 I DUTY DRAW BACK MAY CONSTITUTE PROFIT AND GAINS OF BUSINESS U/S 28 BUT IT CANNOT BE CONSTRUED AS PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING. 7. 286 ITR 603 CIT VS. J.B. EXPORTS LTD. IN WHICH DEDUCTION U/S. 80 I WAS CONSIDERED AND HELD THAT DEDUCTION U/S 80 I IS NOT ALLOWABLE ON THE AMOUNT OF DUTY DRAW BACK. 8. 246 ITR 97 CIT VS. JAMIL LEATHERS AND UPPERS IN WHICH MADRAS HIGH COURT HELD THAT DEDUCTION U/S 80H H AND 80J ON CASH ASSISTANCE DUTY DRAW BACK AND IMPORT LICENSE CANNOT BE SAID TO BE PROFIT AND GAIN S DERIVED FROM BUSINESS OF INDUSTRIAL UNDERTAKING. 9. 135 CTR 104 BHARATH SEA FOODS VS. CIT IN WHICH DEDUCTION U/S 80HH WAS CONSIDERED AND HELD THAT PROFITS FROM SALE OF IMPORT ENTITLEMENT CANNOT BE SAID TO BE DERIVED FROM INDUSTRIAL UNDERTAKING AND AS SUCH DO NOT QUALIFY FOR RELIEF U/S 80HH. 10. 239 ITR 480 FENNER (INDIA) LTD. VS. CIT IN WHI CH MADRAS HIGH COURT HELD DEDUCTION U/S 80HH CANNOT BE ALLOWED ON CASH ASSISTANCE RECEIVED FROM THE GOVERNMENT FOR EXPORT OF GOODS BECAUSE SAME CANNOT BE TREATED AS PROFIT OR GAINS DERIVED FROM INDUSTRI AL UNDERTAKING FOR THE PURPOSE OF SECTION 80HH. 11. 288 ITR 494 NAHAR EXPORTS LTD. VS. CIT IN WHIC H PUNJAB & HARYANA HIGH COURT HELD THAT DEDUCTION U/S 80 I A CANNOT BE GRANTED ON THE INTEREST AND INCOME FROM SALE OF IMPORT LICENSE (IT IS A CASE OF ASSESS MENT YEAR 1998-99). 12. 276 ITR 92 CIT VS. ALPINE SOLVEX LTD. IN WHICH M.P. HIGH COURT HELD THAT DEDUCTION U/S 80HH AND 80 I A CANNOT BE ALLOWED ON LIQUIDATED DAMAGES BECAUSE THE SAME ARE NOT DERIVED FROM INDUSTRIAL UNDERTAKING. 13. 237 ITR 867 CIT VS A. MOOSA IN WHICH KERALA HIGH COURT HELD THAT DEDUCTION U/S 80HH IS NOT ELIG IBLE ON INCOME FROM SALE OF IMPORT LICENSE EXPORT HOUSE PREMIUM AND CUSTOMS DRAW BACK. 14. 242 ITR 204 CIT VS. ANDAMAN TIMBER INDUSTRIES IN WHICH CALCUTTA HELD THAT DEDUCTION U/S 80HH CANN OT BE ALLOWED ON TRANSPORT SUBSIDY BECAUSE THE SAME IS NOT DERIVED FORM INDUSTRIAL UNDERTAKING. 7 8. ON THE OTHER HAND LD. COUNSEL FOR ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT U/S 80 I (1) THE LANGUAGE USED IS WHERE THE GROSS TOTAL INCOME OF THE ASSESSEE INCLUDES ANY PROFIT AND GAINS DERIVED FROM INDUSTRI AL UNDERTAKING - - - - - - - BE ALLOWED IN COMPUTING THE TOTAL INCOME OF ASSESSEE A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO 20 PERCENT THEREOF. HE HAS FURTHER SUBMITTED THAT THE ABOVE PROVISION WAS AMENDED BY INSERTING PROVISIONS CONTAINED U/S 80 I A WHICH WAS FURTHER AMENDED BY INSERTING SECTION 80 I A AND 80 I B SUBSTITUTED FOR SECTION 80 I A BY THE FINANCE ACT 1999 W.E.F. 01.04.2000 WHICH I S APPLICABLE TO THE ASSESSMENT YEAR UNDER APPEAL IN WHICH IN SECTION 80 I A(1) THE LANGUAGE USED IS WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISES FROM ANY BUSINESS REFERRED TO IN SUB SECTION 4 THERE SHALL BE IN ACCORDANCE WITH THE AB OVE PROVISION DEDUCTION TO BE ALLOWED EQUAL TO 100% FOR 10 CONSECUTIVE ASSESSMENT YEARS. IN SECTION 80 I B(1) IT IS PROVIDED WHERE THE GROSS TOTAL INCOME OF AN ASSESS EE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFER TO IN SUBSECTION 3 TO 11 THERE SHALL IN ACCORDANCE WITH THE AND SUBJECT TO THE PROVISIONS O F THIS SECTION BE ALLOWED IN COMPUTING THE TOTAL IN COME OF THE ASSESSEE A DEDUCTION FROM SUCH PROFIT AND GAINS OF AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THE SECTION. FROM THE READING THE ABOVE PROVISION IT WILL BE SEE N THAT THE LANGUAGE OF SECTION 80 I A AND 80 I B ARE MUCH WIDER TO THAT OF SECTION 80 I WHERE THE INCOME SHOULD BE DERIVED DIRECTLY FROM INDUSTRIAL UNDERTAKING HOWEVER AS PER SECTION 80 I B APPLICABLE TO THE ASSESSMENT YEAR IN APPEAL IT APPLIES TO ALL INCOME DERIVED FROM ANY BUSINESS INCLUDING THAT FROM INDUSTRIAL UNDERTAKING. HE HAS RELIED UPON DECISION OF ITAT MUMBAI BENCH IN THE CASE OF JCIT VS. SUDITI INDUSTRIES LTD. (ITA NO. 3490/ MUMBAI/ 2000 ASSESSMENT YEAR 1996-97 DATED 11.04.2005) REPORTED IN 39 BCAJ 654 IN WHICH IDENTICAL QUESTION WAS CONSIDERED AND THE TRIBUNAL HELD IN PARA 6 AND 7 AS UNDER: 6. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISS IONS AND THE CASE LAWS RELIED ON BY THE ASSESSEE WE FI ND FORCE IN THE CONTENTIONS OF THE ASSESSEE THAT THE S COPE OF DEDUCTION UNDER SECTION 80 I A HAS BEEN ENLARGED ON 8 ACCOUNT OF CHANGE OF WORDINGS IN THE SECTIONS. UNDE R SEC. 80 I DEDUCTION IS ELIGIBLE ONLY WITH RESPECT TO THE INCOME ONLY WITH RESPECT TO THE PROFIT AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKINGS AND IN THAT CASE A DIRECT NEXUS IS REQUIRED TO BE PROVED BETWEE N THE INDUSTRIAL ACTIVITIES AND THE INCOME EARNED BY THE ASSESSEE. THE WORD DERIVED AND ATTRIBUTABLE TO WERE REPEATEDLY EXAMINED BY THE VARIOUS HIGH COURT AND APEX COURT AND FINALLY IT WAS EXAMINED IN THE CASE OF STERLING FOODS (237 ITR 579) AND PANDIAN CHEMICALS (262 ITR 278) IN WHICH IT HAS BEEN SPECIFICALLY HEL D THAT ONLY INCOME DERIVED FROM AN INDUSTRIAL UNDERTAKING IS ELIGIBLE FOR DEDUCTION UNDER SEC. 80 I OR 80HH OF THE INCOME-TAX ACT AND NONE ELSE. ON ACCOUNT OF CHANGE OF WORDINGS IN SEC. 80 I A THE RATIO LAID DOWN BY THE APEX COURT IN THE SAID CASES OF PANDIAN CHEMICALS O R STERLING FOODS CANNOT BE APPLIED WHILE DEALING WITH THE ISSUES OF DEDUCTIONS CLAIMED UNDER SECTION 80 I A OF THE INCOME-TAX ACT AS THE LEGISLATURE ITSELF HAS CHANGED THE SCOPE OF DEDUCTION UNDER THIS SECTION. WE ALSO CAREFULLY EXAMINED THE JUDGEMENTS IN THE AFORESAID ORDERS OF THE TRIBUNAL IN THE AFORE MENTI ONED CASES AND WE FIND THAT THE TRIBUNAL HAS TAKEN A CONSISTENT VIEW THAT THE DEDUCTION UNDER SEC. 80 I A IS AVAILABLE ON THE PROFIT AND GAINS OF THE BUSINESS O F INDUSTRIAL UNDERTAKINGS IRRESPECTIVE OF THE FACT TH AT A PARTICULAR INCOME MAY NOT BE DERIVED FROM THE INDUSTRIAL ACTIVITIES OF THE ASSESSEE. THE ONLY FAC TOR WHICH IS REQUIRED TO BE EXAMINED IS THAT THE PROFIT AND GAINS MUST BE DERIVED FROM ANY SOURCE OF BUSINESS O F INDUSTRIAL UNDERTAKINGS. IN THE CASE OF ITO VS. K IRAN ENTERPRISES (SUPRA) THE TRIBUNAL HAS HELD THAT TRANSPORT SUBSIDY RECEIVED BY ASSESSEE FROM GOVERNMENT BASED ON EXPENDITURE INCURRED BY ASSESSEE AND THE SUBSIDY WAS GRANTED WITH A VIEW TO RUN THE UNIT PROFITABLY AND AS SUCH THE SAME IS NO T SEPARABLE FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING HENCE ELIGIBLE FOR DEDUCTION UNDER SEC . 80 I A OF THE INCOME-TAX ACT. IN THE CASE OF DCIT VS. CHAMANLAL & SONS THE TRIBUNAL HAS HELD THAT PROFIT IN RESPECT OF TRADING OPERATIONS CARRIED ON BY THE INDUSTRIAL UNDERTAKINGS IS ALSO ELIGIBLE FOR DEDUC TION UNDER SEC. 80 I A OF THE INCOME-TAX ACT. UNDISPUTEDLY THE EXPORT INCENTIVES ARE THE PART OF PROFIT AND GA INS OF BUSINESS OF THE INDUSTRIAL UNDERTAKINGS IN VIEW OF THE PROVISIONS OF SEC.28(IIIA)(IIIB) AND (IIIC) OF THE ACT. AS SUCH THE SAME ARE ELIGIBLE FOR DEDUCTION UNDER SEC . 80 I A OF THE INCOME-TAX ACT. 9 7. IN THIS BACK GROUND WE HAVE EXAMINED THE ORDER OF THE CIT (A) AND WE FIND THAT CIT (A) HAS PROPERL Y ADJUDICATED THE IMPUGNED ISSUES AND NO INFIRMITY IS NOTICED THERE FROM. WE THEREFORE CONFIRM HIS ORDE R. 9. LD. COUNSEL FOR ASSESSEE FURTHER SUBMITTED THAT AS REGARDS EXCISE DUTY REFUND THE ISSUE WAS CONSIDERED BY ITAT INDORE BENCH IN THE CASE OF THE ASSESSEE ITSELF IN ASSESSMENT YEAR 1993-94 TO 1996- 97 AND VIDE ORDER DATED 30.03.2001. IT WAS HELD IN PAR A 34 OF THE ORDER KEEPING IN VIEW THE TOTALITY OF THE F ACT AND CIRCUMSTANCES OF THE CASE WE ARE OF THE CONSIDERED OPINION THAT THE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING OF THOSE YEARS SHOULD BE EFFECTED FOR T HE PURPOSE OF DEDUCTION U/S 80HH AND 80 I OF THE ACT IN WHICH EXCISE DUTY REFUND IS GRANTED OTHERWISE THE ASSESSEE WILL BE LOST IN THE LABYRANTH OF PROVISION S OF THE ACT. WE THEREFORE SET ASIDE THE ORDER OF THE CI T (A) AND DIRECT THE AO TO TREAT THE EXCISE DUTY REFUND A S PROFIT DERIVED FROM INDUSTRIAL ACTIVITY AND ALLOW DEDUCTION THEREON U/S 80HH AND 80 I OF THE ACT. LD. COUNSEL FOR ASSESSEE ACCORDINGLY SUBMITTED THAT THE CASE OF THE ASSESSEE IS CLEARLY DISTINGUISHABLE FRO M THE DECISIONS REFERRED TO BY LD. DR. LD. COUNSEL FO R ASSESSEE FURTHER SUBMITTED THAT IN RESPECT OF DUTY DRAW BACK ITAT DELHI BENCH (SMC) IN THE CASE OF ITO VS. M/S FIVE STAR DRUGS VIDE ORDER DATED 03.11.2005 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE NOTICIN G THE PHRASEOLOGY OF SECTION 80 I AND 80 I B OF THE ACT IN WHICH IT WAS HELD THAT PROVISIONS OF 80 I B ARE WIDER THAN THE CONCEPT OF PROFIT ENVISAGED IN SECTION 80 I . 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIAL AVAILABLE ON RECORD AND ALSO PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. HOWEVER WE DO NO T FIND IT TO BE A FIT CASE OF INTERFERENCE IN THE ORD ER OF THE LD. CIT (A). THE ASSESSMENT YEAR IN APPEAL IS ASSESSMENT YEAR 2001-2002. THE AMENDED PROVISIONS OF SECTION 80 I A AND 80 I B NOTED ABOVE ARE DIRECTLY APPLICABLE TO THIS CASE AS AGAINST LANGUAGE USED IN SECTION 80HH AND 80 I . THE LANGUAGE USED IN AMENDED PROVISIONS CONTAINED U/S 80 I A AND 80 I B ARE WIDER THAN THE PROVISIONS CONTAINED IN SECTION 80HH AND 80 I . UNDER SECTION 80 I AND 80HH DEDUCTION IS ELIGIBLE ONLY ON PROFITS AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKING OR SHIP OR BUSINESS OF HOTELS BUT IN TH E CASES OF DEDUCTION U/S 80 I A AND 80 I B DEDUCTION IS AVAILABLE ON THE PROFIT AND GAINS FROM ANY BUSINESS OF ANY INDUSTRIAL UNDERTAKING OR HOTELS OR OPERATION O F 10 SHIPS ETC. THEREFORE THE SCOPE OF 80 I A AND 80 I B HAVE BEEN ENLARGED BY THE LEGISLATION TO MAKE THE OTHER INCOME OF THE INDUSTRIAL UNDERTAKINGS ELIGIBLE FOR DEDUCTIONS. THE ITAT MUMBAI BENCH IN THE CASE OF JCIT VS. M/S SUDITI INDUSTRIES LTD. (SUPRA) HAS CONSIDERED THE IDENTICAL QUESTION AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THIS DECISION IS DIRECTLY APPLICABLE TO THE CASE OF ASSESSEE. THE DECISIONS REFERRED TO BY LD. DR ARE MAINLY ON THE SECTIONS 80HH AND 80 I OR THE EARLIER PROVISION CONTAINED IN SECTION 80 I A THEREFORE THE SAME ARE CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE CASE BECAUSE SAME ARE BASED ON THEIR OWN FACTS AND INTERPRETATION OF SECTION 80HH AND 80 I WHICH IS ALTOGETHER DIFFERENT FROM AMENDED PROVISIONS OF 80 I A AND 80 I B NOTED ABOVE. THE ISSUE AS REGARDS EXCISE REFUND HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT INDORE BENCH IN T HE CASE OF THE SAME ASSESSEE VIDE ORDER DATED 30.03.2001. THE ASSESSEE HAS BEEN CLAIMING THAT THE EXPORT INCENTIVES WERE NOT SOLD BY IT BUT UTILIZED FOR PURCHASE OF THE RAW MATERIAL WHICH ARE USED IN THE ACTIVITIES OF INDUSTRIAL UNDERTAKING OF THE ASSESSE E THEREFORE IT IS NOT A CASE OF SALE OF IMPORT LICENS E OR INCENTIVES OR RECEIVING THE CASH ASSISTANCE. WE ACCORDINGLY DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) BECAUSE THE CASE OF THE ASSESSEE IS SQUAREL Y COVERED BY THE ORDER IN THE CASE OF M/S SUDITI INDUSTRIES LTD. (SUPRA) AND THE DECISION IN THE CAS E OF THE ASSESSEE IN EARLIER YEARS MENTIONED ABOVE. WE THEREFORE DISMISS THE APPEAL OF THE REVENUE ON THIS ISSUE. AS RESULT THE DEPARTMENTAL APPEAL IS DISMISS ED ON GROUND NO. (I). 5. HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ELTEK SGS PVT.LTD. (SUPRA) CONSIDERED THE IDENTICAL QUESTION AND HELD AS UNDER :- 20. IT IS CRUCIAL TO APPRECIATE THAT DIFFRENECE I N LANGUAGE IN SECTION 80HH SECTION 80-I AND SECTION 80-IB OF THE ACT. WHILE THE LANGUAGE USED IN SECTIO N 80HH OF THE ACT AND IN SECTION 80-I OF THE ACT IS SIMILAR THERE IS A CLEAR DEPARTURE LIN THE LANGUAG E USED IN SECTION 80-IB OF THE ACT AND IT IS THIS CHO ICE OF WORDS THAT MAKES ALL THE DIFFERENCE THAT WE ARE CONCERNED WITH. 21. WE ARE OF THE OPINION THAT IT IS NOT NECESSARY FOR US TO GO AS FAR AS THE GUJARAT HIGH COURT HAS DONE IN COMING TO THE CONCLUSION THAT DUTY DRAWBACK IS PROF IT 11 OR GAIN DERIVED FROM AN INDUSTRIAL UNDERTAKING. IT IS SUFFICIENT IF WE STICK TO THE LANGUAGE USED IN SECT ION 80-IB OF THE ACT AND COME TO THE CONCLUSION THAT DU TY DRAWBACK IS PROFIT OR GAIN DERIVED FROM THE BUSINES S OF AN INDUSTRIAL UNDERTAKING. THE LANGUAGE USED IN SECTION 80-IB OF THE ACT IS NOT AS BROAD AS THE EXPRESSION ATTRIBUTABLE TO REFERRED TO BY THE SUP REME COURT IN STERLING FOODS CASE(SUPRA) AND CAMBAY ELECTRICAL SUPPLY INDUSTRIAL CO. LTD.S CASE (SUPRA ) NOR IS IT AS NARROW AS THE EXPRESSION DERIVED FROM . THE EXPRESSION DERIVED FROM THE BUSINESS OF AN INDUSTRIAL UNDERTAKING IS SOMEWHERE IN BETWEEN. 22. CONSEQEUNTLY WE ARE OF THE VIEW THAT THE SOURC E OF THE DUTY DRAWBACK IS THE BUSINESS OF THE INDUSTR IAL UNDERTAKING WHICH IS TO MANUFACTURE AND EXPORT GOODS OUT OF RAW MATERIAL THAT IS IMPORTED AND ON WHICH CUSTOMS DUTY IS PAID. THE ENTITLEMENT FOR DUT Y DRAWBACK ARISES FROM SECTION 75(1) OF THE CUSTOMS ACT 1962 READ WITH THE RELEVANT NOTIFICATION ISSU ED BY THE CENTRAL GOVERNMENT IN THAT REGARD. 23. LEARNED COUNSEL FOR THE REVENUE ALSO DREW OUR ATTENTION TO PANDIAN CHEMICALS LTD. V.CIT (2003) 26 2 ITR 278 (SC). HOWEVER ON A READING OF THE JUDGMENT WE FIND THAT IT ALSO DEALS WITH SECTION 80HH OF THE ACT AND DOES NOT LAY DOWN ANY PRINCIPLE DIFFERENT FROM STERLING FOODSCASE (SUPRA). IN FACT IN PANDIAN CHEMICALS LTD.S CASE(SUPRA) RELIANCE HAS BEEN PLACED ON CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD.S CASE (SUPRA) AND THE DECISION SEEMS TO SUGGE ST AS WE HAVE HELD ABOVE THAT THE EXPRESSION DERIVED FROM AN INDUSTRIAL UNDERTAKING IS A STEP REMOVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. 24. IN VIEW OF THE LAW LAID DOWN AND EXPLAINED BY VARIOUS DECISIONS IN OUR OPINION NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION. 25. THE APPEAL IS DISMISSED. WE ASSESS COUNSELS FE E AT RS.10 000. THE REVENUE WILL DEPOSIT THIS AMOUNT BY A CHEQUE DRAWN IN FAVOUR OF THE REGISTRAR-GENERAL O F THIS COURT WITHIN FOUR WEEKS FROM TODAY. 6. CONSIDERING THE ABOVE DISCUSSION WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UND ER SECTION 80-IB OF THE ACT ON THE AMOUNT OF DUTY DRAWBACK. THE ISSUE IS SQUARELY COVERED IN FAVOUR O F 12 THE ASSESSEE BY OUR EARLIER ORDER IN THE CASE OF M/ S NEO SACK PRIVATE LIMITED(SUPRA) AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ELTEK SGS P VT. LTD. (SUPRA). THE DECISIONS RELIED UPON BY THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER HAVE ALREADY BEEN T AKEN INTO CONSIDERATION IN THE ABOVE CASES. THE LD. DR H AS NOT CITED ANY OTHER DECISION IN FAVOUR OF THE REVEN UE. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW AND ALLOW THE APPEAL OF THE ASSESSEE. 7. AS A RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 20TH MARCH 2009. IN THE LIGHT OF THE ABOVE WHEN THE BASIS ON WHICH PENALTY WAS IMPOSED IS NO MORE IN EXISTENCE (AS DELETED BY THE TRIBUNAL) AND NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE THEREFORE NO PENALTY U/S 271(1) IS EXIGIBLE. RELIANCE CAN BE PLACED UPON THE DECISION FROM THE HONBLE APEX COURT IN KC BUILDERS VS. ACIT;( 265 ITR 562) (SC). EVEN IF IT IS PRESUMED THAT THE ISSUE WAS DEBATABLE AS CONTRA DECISIONS WERE AVAILABLE AT THE RELEVANT TIME STILL NO PENALTY CAN BE IMPOSED U/S 271(1)(C) OF THE ACT. FOR IMPOSING PENALTY U/S 271(1) THERE MUST BE DEFINITE FINDING THAT EITHER THERE MUST BE CONCEALMENT OR INACCURATE PARTICULARS WERE FURNISHED BY THE ASSESSEE. THE DISALLOWANCE OF EXPENSES WILL NOT PER SE AMOUNT TO FURNISHING OF INACCURATE PARTICULARS FOR WHICH RELIANCE CAN BE PLACED ON CIT V. AJAIB SINGH & COMPANY; 253 ITR 630 (P&H). A GLANCE AT THE PROVISIONS OF SECTION 271(1) OF THE ACT SUGGESTS THAT THE WORD PARTICULARS USED IN SECTION WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. TO ATTRACT PENALTY THE DETAILS SUPPLIED IN THE RETURN MUST NO T BE ACCURATE NOT EXACT OR CORRECT NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR FALSE THERE IS NO QUESTION OF LEVYING THE PENALTY U/S 271(1) OF 13 THE ACT. A MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IT IS PERTINENT TO MENTION HERE THAT IN THE LATEST DECISION DATED 17 TH MARCH 2010 THE HONBLE APEX COURT IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS PRIVATE LIMITED (2010) 322 ITR 158 (SC) EVEN AFTER CONSIDERING THE OFF QUOTED DECISIONS LIKE DILIP & SHROFF VS. JCIT; 291 ITR 519 (SC) UNION OF INDIAN V. DHARMENDRA TEXTILES PROCESSORS; 306 ITR 277 (SC) AND VARIOUS OTHER DECISIONS AS MENTIONED AT PAGE 159 OF THE ORDER AFFIRMED THE DECISION OF THE HONBLE GUJARAT HIGH COURT DATED 23.10.2007 (TAX APPEAL NO. 4419/2007). IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION MAKING AN INCORRECT CLAIM DOES NOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. IN VIEW OF THESE FACTS AND JUDICIAL PRONOUNCEMENTS THIS APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 4TH MAY 2010. IN THE AFORESAID ORDER THE TRIBUNAL HAS ALREADY CON SIDERED VARIOUS DECISIONS FROM VARIOUS HONBLE HIGH COURTS AND ALSO FROM HONBLE APEX COURT WHICH ARE NOT BEING REPEATED FOR THE SAKE OF BREVITY SINCE WE HAVE ALREADY REPRODUCED THE SAME ABOVE. THE DECISION FRO M THE HONBLE APEX COURT IN K.C. BUILDERS V. ACIT (265 ITR 562) W HEREIN IT WAS HELD THAT WHEN THE QUANTUM ADDITION ON THE BASIS OF WHIC H PENALTY WAS LEVIED ITSELF HAS BEEN DELETED THEREFORE THERE IS NO QUE STION OF IMPOSING PENALTY SUPPORTS THE CASE OF THE ASSESSEE. RESPE CTFULLY FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL WE DO NOT FIND ANY INFIRMITY IN THE ORDER 14 OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) . FINALLY THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF HEARING ON 31 ST MAY 2010. SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MAY 31 2010 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE *DN/