M/s. Rieter LMW Machinery Ltd., Coimbatore v. ACIT, Coimbatore

ITA 1896/CHNY/2007 | 2002-2003
Pronouncement Date: 31-07-2012 | Result: Partly Allowed

Appeal Details

RSA Number 189621714 RSA 2007
Assessee PAN AABCR0309M
Bench Chennai
Appeal Number ITA 1896/CHNY/2007
Duration Of Justice 5 year(s) 4 day(s)
Appellant M/s. Rieter LMW Machinery Ltd., Coimbatore
Respondent ACIT, Coimbatore
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 31-07-2012
Date Of Final Hearing 31-07-2012
Next Hearing Date 31-07-2012
Assessment Year 2002-2003
Appeal Filed On 27-07-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI SATBEER SINGH GODARA JUDICIAL MEMBER] I.T.A.NOS.1776 AND 1896/MDS/2007 ASSESSMENT YEARS : 2001-02 AND 2002-03 M/S RIETER-LMW MACHINERY LTD SULUR RAILWAY FEEDER ROAD MUTHUGOUNDENPUDUR COIMBATORE 641 406 VS THE ACIT COMPANY CIRCLE IV(2) COIMBATORE [PAN AABCR 0309M] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.VIJAYARAGHAVAN ADVOCATE RESPONDENT BY : SHRI SHAJI P. JACOB ADDL. CIT DATE OF HEARING : 31-07-2012 DATE OF PRONOUNCEMENT : 31-07-2012 O R D E R PER N.S. SAINI ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE ASS ESSEE AGAINST THE ORDERS OF THE CIT(A) DATED 17.4.2007 AND 18.5.2007 FOR ASSESSMENT YEARS 2001-02 AND 2002-03 RESPECTIVELY. 2. THE ONLY ISSUE INVOLVED IN ASSESSMENT YEAR 2001-02 AND THE ISSUE INVOLVED IN GROUND NOS. 2 TO 5 IN ASSESSMENT YEAR 2002-03 IS THAT THE CIT(A) ERRED IN NOT ALLOWING DEDUCTION TO THE ASSESSEE ON THE I.T.A.NO.1776 AND 1896/07 :- 2 -: ENTIRE DOMESTIC SALE OF SCRAP OF ` 23 76 390/- IN ASSESSMENT YEAR 2001-02 AND ` 21 91 984/- IN ASSESSMENT YEAR 2002-03. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING ASSESS MENT YEAR 2001-02 THE ASSESSEE HAD SHOWN EXPORT SALES OF ` 74 57 18 839/- AND DOMESTIC SALE OF SCRAP OF ` 23 76 390/-. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFICER THAT AS PER SECOND PRO VISO TO SECTION 10B(1) ANY PROFITS AND GAINS DERIVED FROM DOMESTIC SALES OF ARTICLES OF THINGS OR COMPUTER SOFTWARE WHICH DID NOT EXCEED 25 PERCENT OF THE TOTAL SALES SHALL BE DEEMED TO BE THE PROFITS AND G AINS DERIVED FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWA RE. IT IS THE CONTENTION OF THE ASSESSEE THAT OUT OF THE TOTAL T URNOVER EXPORT TURNOVER IS 99.68 PERCENT AND THE DOMESTIC TURNOVE R IS 0.32 PERCENT AND THEREFORE THE ASSESSEE WAS ENTITLED TO DEDUCT ION OF THE ENTIRE INCOME FROM ITS BUSINESS OF ` 8 60 20 343/- AS DEDUCTION U/S 80B OF THE ACT. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE PROCEEDS OF SCRAP S ALES ARE NOT REALIZED IN CONVERTIBLE FOREIGN EXCHANGE BY THE AS SESSEE AND IN VIEW OF THE PROVISIONS OF SECTION 10(3) DEDUCTION U/S 1 0B CANNOT BE ALLOWED IN RESPECT OF SALES OF SCRAP. 4. THE ORDER OF THE ASSESSING OFFICER WAS CONFIRMED I N APPEAL BY THE CIT(A). I.T.A.NO.1776 AND 1896/07 :- 3 -: 5. THE DR SUPPORTED THE ORDER OF THE LOWER AUTHORITIES . 6. THE A.R OF THE ASSESSEE FILED BEFORE US A COPY OF THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF CIT VS SAVVY SYSTEMS (INDIA) LTD [2007] 291 ITR 105(MAD) AND SU BMITTED THAT THE HON'BLE MADRAS HIGH COURT HAS HELD THAT WHERE THE D OMESTIC TURNOVER OF THE SALES DID NOT EXCEED 25 PERCENT OF THE TOTA L SALES AND IT WAS NOT IN DISPUTE THAT THE DOMESTIC TURNOVER WAS LESS THAN 25 PERCENT OF THE TOTAL SALES THUS FULLY SATISFYING THE REQUIREMENT S AS PROVIDED IN THE SECOND PROVISO TO SUB-SECTION (1) OF SECTION 10B AT THE RELEVANT PERIOD OF TIME. THE TRIBUNAL WAS RIGHT IN HOLDING THAT FO R THE PURPOSE OF THE DEDUCTION UNDER SECTION 10B THE DOMESTIC TURNOVER F ORMED PART OF THE EXPORT TURNOVER. IT WAS THEREFORE HIS SUBMISSION THAT IN VIEW OF THE ABOVE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT THE APPEAL OF THE ASSESSEE SHOULD BE ALLOWED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE PRESENT APPEAL FOR ASSESSMENT YEAR 2001-02 BEFORE US THE UNDISPUTED FACTS ARE THAT THE TOTAL EXPORT TURNOVER OF THE ASSESSEE IN THE YEAR WAS ` 74 57 18 839/- WHICH WAS 99.68 PERCENT OF THE TOTA L TURNOVER AND THE DOMESTIC SALES OF SCRAP WAS ` 23 76 390/- WHICH WAS 0.32 PERCENT OF THE TOTAL TURNOVER AND THE INCOME FROM THE BUSINESS OF THE ASSESSEE WAS ` 8 60 20 343/-. THUS THE DOMESTIC TURNOVER OF I.T.A.NO.1776 AND 1896/07 :- 4 -: THE SALES OF THE ASSESSEE IN THE YEAR UNDER CONSID ERATION DID NOT EXCEED 25 PERCENT OF THE TOTAL SALES AND IT IS NOT IN DISPUTE THAT THE DOMESTIC TURNOVER WAS LESS THAN 25 PERCENT OF THE T OTAL SALES OF THE ASSESSEE AND THEREFORE THE CONDITIONS OF THE SECON D PROVISO TO SUB- SECTION (1) OF SECTION 10B ARE FULLY SATISFIED IN T HE PRESENT YEAR OF APPEAL. THEREFORE RESPECTFULLY FOLLOWING THE DECI SION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SA VVY SYSTEMS (INDIA) LTD (SUPRA) WE HOLD THAT THE ASSESSEE WAS ENTITL ED TO DEDUCTION OF THE ENTIRE INCOME OF ` 8 60 20 343/- AS DEDUCTION U/S 10B OF THE ACT. THUS THE GROUNDS OF APPEAL OF THE ASSESSEE ARE AL LOWED IN ASSESSMENT YEAR 2001-02. 8. IN ASSESSMENT YEAR 2002-03 IT IS OBSERVED THAT THE SCRAP SALE OF THE ASSESSEE WAS ` 21 91 984/-. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10B OF THE ACT ON ` 21 91 984/- ALSO. THE ASSESSING OFFICER HAS DISALLOWED THE DEDUCTION U/S 10B OF TH E ACT ON THE GROUND THAT THE SALE OF SCRAP WAS MADE IN INDIA AND THE SA LE PROCEEDS OF SCRAP WERE NOT REALIZED IN CONVERTIBLE FOREIGN EXCH ANGE BY THE ASSESSEE. THE ASSESSING OFFICER THEREFORE HELD T HAT IT WAS INCOME FROM OTHER SOURCES WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE AND DISALLOWED DEDUCTION U/S 10B OF THE ACT ON SC RAP SALES. 9. ON APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. I.T.A.NO.1776 AND 1896/07 :- 5 -: 10. THE A.R OF THE ASSESSEE ARGUED THAT THIS SCRAP WAS GENERATED DURING THE MANUFACTURE OF TEXTILE MACHINE RY THEREFORE THE SALE OF SCRAP WAS PART OF THE TRADING RECEIPTS OF T HE ASSESSEE. HE SUBMITTED THAT THE SALE OF SCRAP CANNOT BE EQUATED AS INCOME FROM OTHER SOURCES OF THE ASSESSEE. IT WAS HIS SUBMISS ION THAT AFTER OMISSION OF THE SECOND PROVISO TO SUB-SECTION (1) O F SECTION 10B OF THE ACT FROM ASSESSMENT YEAR 2002-03 AND ONWARDS THE ASSESSEE WILL GET DEDUCTION FOR EXPORT SALES ON PROPORTIONATE BASIS. HE SUBMITTED THAT THE SCRAP SALES WOULD FORM PART OF THE TOTAL TURNOV ER OF THE ASSESSEE IN THE FORMULA FOR COMPUTING THE ELIGIBLE DEDUCTION U/S 10B OF THE ACT. HE SUBMITTED THAT THE SALE PROCEEDS OF SCRAP CANNOT BE REDUCED FROM THE ELIGIBLE PROFITS OF THE BUSINESS OF THE ASSESS EE. 11. THE DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE REALIZED SCRAP SALES OF ` 21 91 984/- DURING THE YEAR UNDER CONSIDERATION AN D INCLUDED THE SAME IN THE TOTAL TURNOVER OF THE ASSESSEE FOR WOR KING OUT DEDUCTION U/S 10B OF THE ACT. THE ASSESSING OFFICER REDUCED THE RECEIPT FROM SCRAP SALES OF ` 21 91 984/- FROM THE BUSINESS PROFITS OF THE ASSE SSEE AND TREATED IT AS INCOME FROM OTHER SOURCES OF THE ASSESSEE WHILE I.T.A.NO.1776 AND 1896/07 :- 6 -: COMPUTING THE INCOME OF THE ASSESSEE. THE SAME WA S CONFIRMED IN APPEAL BY THE CIT(A). 13. WE FIND THAT IT IS NOT THE CASE OF THE REVENUE THAT THE SCRAP WAS NOT GENERATED DURING THE MANUFACTURING OF TEXTI LE MACHINERY BY THE ASSESSEE. THUS THE SALE OF SCRAP IS PART AND PARCEL OF THE BUSINESS RECEIPT OF THE ASSESSEE. THAT BEING SO IT HAS TO BE INCLUDED IN THE TOTAL TURNOVER OF THE ASSESSEE AND CANNOT BE REDUCED FROM THE BUSINESS PROFITS OF THE ASSESSEE WHILE COMPUTING T HE DEDUCTION U/S 10B OF THE ACT. WE THEREFORE SET ASIDE THE ORDER S OF THE LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO REC OMPUTE THE DEDUCTION U/S 10B OF THE ACT AFTER INCLUDING THE SALE PROCEED S OF SCRAP IN THE TOTAL TURNOVER OF THE ASSESSEE AND INCLUDING THE S AME IN THE BUSINESS INCOME OF THE ASSESSEE. THEREFORE GROUND NOS.2 T O 5 OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 ARE AL LOWED. 14. GROUND NO.1 OF THE APPEAL RELATES TO SUSTAINING THE PROCEEDINGS U/S 147 OF THE ACT BY THE CIT(A). 15. AT THE TIME OF HEARING NO ARGUMENTS WERE MADE BY T HE A.R OF THE ASSESSEE ON THIS GROUND OF APPEAL HENCE TH E SAME IS DISMISSED FOR WANT OF PROSECUTION. 16. GROUND NO.6 OF THE APPEAL IS GENERAL IN NATURE HEN CE REQUIRES NO SEPARATE ADJUDICATION BY US. I.T.A.NO.1776 AND 1896/07 :- 7 -: 17. IN THE RESULT APPEAL OF THE ASSESSEE FOR ASSESSME NT YEAR 2001-02 IS ALLOWED AND THAT OF ASSESSMENT YEAR 2002 -03 IS PARTLY ALLOWED. ORDER PRONOUNCED ON TUESDAY THE 31 ST OF JULY 2012 AT CHENNAI. SD/- SD/- (SATBEER SINGH GODARA) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 31 ST JULY 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR