GUJARAT RECLAIM & RUBBER PRODUCTS LTD, MUMBAI v. DCIT 10(2), MUMBAI

ITA 1272/MUM/2010 | 2004-2005
Pronouncement Date: 10-12-2010 | Result: Allowed

Appeal Details

RSA Number 127219914 RSA 2010
Assessee PAN AAACG1890M
Bench Mumbai
Appeal Number ITA 1272/MUM/2010
Duration Of Justice 9 month(s) 24 day(s)
Appellant GUJARAT RECLAIM & RUBBER PRODUCTS LTD, MUMBAI
Respondent DCIT 10(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 10-12-2010
Date Of Final Hearing 02-12-2010
Next Hearing Date 02-12-2010
Assessment Year 2004-2005
Appeal Filed On 16-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 1272/MUM/2010 (ASSESSMENT YEAR: 2004-05) GUJARAT RECLAIM & RUBBER PRODUCTS LTD. DCIT - 10(2) ASHOK MILLS COMPOUND AAYAKAR BHAVAN M.K. ROAD 202 L. B.S. MARG GHATKOPAR (W) VS. MUMBAI 400020 MUMBAI 400086 PAN - AAACG 1890 M APPELLANT RESPONDENT APPELLANT BY: SHRI F.V. IRANI RESPONDENT BY: SHRI AARSI PRASAD O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XXI MUMBAI DATED 21.12.2009 IN WHICH THE ASSESSEE HAS RAISED THE FOLLOWING THREE GROUNDS: - 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE COMMISSIONER OF INCOME TAX (A) ERRED IN NOT CONSIDE RING MISCELLANEOUS INCOME OF RS.1 11 327/- OUT OF RS.1 5 1 637/- AND INTEREST INCOME OF RS.4 80 606/- OUT OF RS.4 83 516 /- AS PART OF THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF CALCULATI NG DEDUCTION UNDER SECTION 80HHC. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE ALLOWE D DEDUCTION U/S 80HHC ON SALE OF DEPB LICENCE OF RS.22 72 494 W ITHOUT CONSIDERING THAT THE THIRD PROVISO TO SECTION 80HHC (3) PROVIDES FOR DEDUCTION IN RESPECT OF EXPORT INCENTIVES EVEN IF TURNOVER EXCEEDS RS.10 CRORES AS THE CONDITIONS HAVE BEEN FULFILLED BY THE APPELLANT. 3. WITHOUT PREJUDICE TO ABOVE AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE ALLOWED PROFIT ON SALE OF DEPB LICENCE AS THE CONDITIONS OF SECTION 80HHC(3) HAVE BEEN FULFILLED BY THE APPELLA NT. 2. WITH REFERENCE TO GROUND NO. 1 THE A.O. TREATED THE FOLLOWING MISCELLANEOUS INCOME AND INTEREST INCOME NOT COMING UNDER THE PURVIEW OF BUSINESS AND EXCLUDED 90% FROM COMPUTATION UNDER SE CTION 80HHC: - ITA NO. 1272/MUM/2010 GUJARAT RECLAIM & RUBBER PRODUCTS LTD. 2 MISCELLANEOUS INCOME OLD SUNDRY CREDITORS BALANCES WRITTEN OFF ` 40 310 SCRAP SALE OF CONSUMABLE STORES ` 81 481 SCRAP SALE OF RAW MATERIAL ` 21 846 TOTAL ` 1 51 637 INTEREST INCOME INTEREST ON DEPOSITS WITH MSEB POWER SUPPLY ` 44 847 INTEREST ON BILLS PURCHASED AT DISCOUNT ` 2 649 INTEREST ON DEPOSIT WITH BANK ` 4 33 070 INTEREST ON OVERDUE BILLS FROM CUSTOMER ` 2 950 TOTAL ` 4 83 516 THE CIT(A) TREATED THE OLD SUNDRY BALANCE WRITTEN O FF AS PROFITS OF THE BUSINESS WHILE UPHOLDING THE ACTION WITH REFERENCE TO SCRAP SALE AND INTEREST INCOME. 3. THE LEARNED COUNSEL IN THE COURSE OF ARGUMENT SUBMI TTED THAT THE SCRAP ARISE OUT OF ASSESSEES MANUFACTURING ACTIVIT Y OF RUBBER PRODUCTS AND SCRAP SALE OF RAW MATERIAL IS ALSO PERTAINING TO TH E MANUFACTURING ACTIVITY AS THE ASSESSEE PURCHASES OLD AND RECLAIMED RUBBER IN ITS MANUFACTURING ACTIVITY. HE RELIED ON THE PRINCIPLES ESTABLISHED B Y THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PFIZER LTD. 233 CTR 52 1 TO SUBMIT THAT THE RECEIPTS ON SCRAP SALE SHOULD STAND IN THE SAME FOO TING AS INCOME OF THE BUSINESS HAVING BEEN REALISED ON THE SALE OF RAW MA TERIAL/CONSUMABLE STORE DURING MANUFACTURING ACTIVITY. 4. WE HAVE CONSIDERED THE ISSUE. OBVIOUSLY THE ASSESSE E IS A MANUFACTURING COMPANY AND MANUFACTURES RECLAIMED RU BBER FROM SCRAP RUBBER. IN THE PROCESS SCRAP GENERATES AND THIS SCR AP IS INDISPENSABLE WITH THE MANUFACTURING ACTIVITY. IN VIEW OF THIS W E ARE OF THE OPINION THAT THE RECEIPTS BY WAY OF SCRAP SALES WHICH COULD HAV E GONE TO REDUCE THE COST OF PRODUCTION WAS TO BE TREATED AS PROFITS OF THE BUSINESS FOR THE PURPOSE OF 80HHC. CONSEQUENTLY THE A.O. IS DIRECTED TO CONSIDER THIS AS PART OF PROFITS OF BUSINESS AND WORKOUT THE DEDUCTI ON UNDER SECTION 80HHC ACCORDINGLY. ITA NO. 1272/MUM/2010 GUJARAT RECLAIM & RUBBER PRODUCTS LTD. 3 5. THE SECOND PART OF THE GROUND IS WITH REFERENCE TO INTEREST INCOME WHICH WAS EXCLUDED FROM COMPUTATION UNDER SECTION 8 0HHC. THE A.O. TREATED PART OF PROFIT OF THE BUSINESS BUT EXCLUDED 90% OF THE SAME WHILE COMPUTING DEDUCTION. THE CIT(A) CONFIRMED THE SAME ON EXAMINING THE MERITS OF RECEIPTS OF THE AMOUNTS. 6. THE LEARNED COUNSEL FAIRLY ADMITTED THAT THIS ISSUE IS TO BE DECIDED AGAINST THE ASSESSEE FOLLOWING THE HON'BLE BOMBAY H IGH COURT JUDGEMENT IN THE CASE OF DRESSER RAND INDIA P LTD 323 ITR 429. H OWEVER HIS CONTENTION WAS THAT THE INTEREST PAID SHOULD BE NETTED OFF IN TREATING THE GROSS INTEREST. WE FIND THAT NO SUCH CLAIM WAS MADE EITHER BEFORE T HE A.O. OR BEFORE THE CIT(A) NOR THERE ANY CLAIM FOR NETTING OF THE AMOUN T. EVEN OTHERWISE THE ISSUE OF NETTING WAS CONSIDERED BY THE HON'BLE BOMB AY HIGH COURT IN THE CASE OF ASIAN STAR CO. LTD. 326 ITR 56 AND ACCORDIN GLY THE GROSS INTEREST IS TO BE CONSIDERED. BOTH ON FACTS AS WELL AS ON LEGAL PRINCIPLES THE ACTION OF THE A.O. IS TO BE SUSTAINED. ACCORDINGLY SECOND PAR T OF GROUND NO. 1 PERTAINING TO INTEREST INCOME IS HELD AGAINST THE A SSESSEE. GROUND IS PARTLY ALLOWED. 7. GROUND NOS. 2 & 3 PERTAIN TO THE ISSUE OF TREATMENT OF SALE OF DEPB LICENCE OF ` 22 72 494/- UNDER SECTION 80HHC(3). THE LEARNED COU NSEL AS WELL AS THE LEARNED D.R. FAIRLY ADMITTED THAT THIS ISSUE IS TO BE RE-EXAMINED BY THE A.O. FOLLOWING THE PRINCIPLES ESTABLISHED BY TH E HON'BLE BOMBAY HIGH COURT IN THE CASE OF KALPATARU COLOURS AND CHEMICAL S 328 ITR 451. ACCORDINGLY THIS ISSUE IS RESTORED TO THE FILE OF T HE A.O. TO RECALCULATE THE DEDUCTION UNDER SECTION 80HHC KEEPING IN VIEW THE P RINCIPLES ESTABLISHED BY THE HON'BLE BOMBAY HIGH COURT JUDGMENT. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS CONSIDERED PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH DECEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 10 TH DECEMBER 2010 ITA NO. 1272/MUM/2010 GUJARAT RECLAIM & RUBBER PRODUCTS LTD. 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXI MUMBAI 4. THE CIT X MUMBAI CITY 5. THE DR G BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.