The ITO,Vapi Ward-4,, Nani Daman v. M/s. R.S. Industries, Nani Daman

ITA 2089/AHD/2008 | 2005-2006
Pronouncement Date: 22-10-2010 | Result: Dismissed

Appeal Details

RSA Number 208920514 RSA 2008
Assessee PAN AAHFR7724F
Bench Ahmedabad
Appeal Number ITA 2089/AHD/2008
Duration Of Justice 2 year(s) 4 month(s) 23 day(s)
Appellant The ITO,Vapi Ward-4,, Nani Daman
Respondent M/s. R.S. Industries, Nani Daman
Appeal Type Income Tax Appeal
Pronouncement Date 22-10-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 22-10-2010
Date Of Final Hearing 20-10-2010
Next Hearing Date 20-10-2010
Assessment Year 2005-2006
Appeal Filed On 30-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE S/SHRI BHAVNESH JUDICIAL MEMBER AND SAINI N. S. SAINI ACCOUNTANT MEMBER ITA. NO.2089 /AHD/2008 ASSESSMENT YEAR :2005-06 INCOME TAX OFFICER VAPI-WARD-4 DR. JEEVANJI HOTEL BUILDING DEVKA ROAD KATHIRIA NANI DAMAN. VS. M/S. R. S. INDUSTRIES 2 ND FLOOR PLOT NO.78/82 SILVER INDUSTRIAL ESTATE BHIMPORE NANI DAMAN. APPELLANT RESPONDENT. PAN NO: AAHFR 7724 F APPELLANT BY : SHRI R. K. DHANESTA D.R. RESPONDENT BY : SHRI S.N.L. AGARWALA. ORDER PER SHRI N.S. SAINI ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORD ER OF THE LEARNED C.I.T.(A)-VALSAD DATED 28-2-2008 BY TAKING THE FOLLOWING GROUND OF APPEAL. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED TO ALLOW THE DEDUCTION U/S. 80 IB OF THE I. T. ACT WHICH IS A TECHNICAL DISALLOWANCE DOES NOT REPR ESENT PROFIT FROM MANUFACTURING ACTIVITY ON DISALLOWANCE OF ` .31 19 768/- UNDER SECTION 40(A) (IA) OF THE I. T. ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS IN THE BUSINESS OF MANUFACTURING OF CORRUGATED BOXES IN THE UNION T ERRITORY OF DAMAN AND DIU A NOTIFIED BACKWARD AREA. DURING THE YEAR U NDER CONSIDERATION THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB O F ` .6 03 096/- BEING THE PROFIT DERIVED FROM THE ELIGIBLE INDUSTRIAL UND ERTAKING. THE ASSESSING OFFICER DISALLOWED DEDUCTION FOR FREIGHT CHARGES ` .1 66 742/- AND ITA.2089/AHD/2008 ASSESSMENT YEAR 2005-06 2 ` .16 61 129/- TOTALING TO ` .18 27 871/- AND DEDUCTION FOR PRINTING CHARGES OF ` .12 91 897/- ON THE GROUND THAT THE ASSESSEE HAS FA ILED TO DEDUCT ITDS FROM THE SAID PAYMENTS. IN THIS WAY HE DISALLO WED TOTAL EXPENSES OF ` .31 19 768/-. WHILE ALLOWING DEDUCTION UNDER SECTIO N 80IB TO THE ASSESSEE THE ASSESSING OFFICER DID NOT INCLUDE THIS AMOUNT OF ` .31 19 768/- IN THE ELIGIBLE PROFIT FROM THE INDUST RIAL UNDERTAKING. 3. BEING AGGRIEVED BY THIS ORDER OF THE ASSESSING O FFICER THE ASSESSEE FILED APPEAL BEFORE THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS). THE ASSESSEE CONTENDED THAT THAT EXPENSE S OF ` .31 19 768/- DISALLOWED BY THE ASSESSING OFFICER WAS A PART OF T HE PROFIT DERIVED FROM THE INDUSTRIAL UNDERTAKING AND WAS ACCORDINGLY ELIG IBLE FOR DEDUCTION UNDER SECTION 80IB. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT AFTER DISALLO WING EXPENSES OF ` .31 19 768/- DEBITED IN THE PROFIT AND LOSS ACCOUNT THE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING WAS INCREASED TO THAT E XTENT AND ACCORDINGLY FOUND MERIT IN THE CONTENTION OF THE ASSESSEE. HE H ELD THAT THE CONTENTION OF THE ASSESSING OFFICER THAT DISALLOWANCE MADE ON TECHNICAL GROUND OF NON DEDUCTION OF TDS CANNOT BE THE PROFIT DERIVED F ROM THE ELIGIBLE UNIT WAS NOT ACCEPTABLE AND ACCORDINGLY DIRECTED THE ASS ESSING OFFICER TO TREAT ` .31 19 768/- AS ENTITLED FOR DEDUCTION UNDER SECTIO N 80IB OF THE ACT. 5. BEING AGGRIEVED BY THIS ORDER OF THE COMMISSIONE R OF INCOME TAX (APPEALS) THE REVENUE IS IN APPEAL BEFORE US BY TA KING THE ABOVE GROUND OF APPEAL. 6. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ISSUE TO BE DECIDED BY US IS THAT WHETHER THE EXPENDITURE INCURRED BY T HE ASSESSEE DURING THE COURSE OF THE BUSINESS OF THE ELIGIBLE INDUSTRIAL U NDERTAKING WHICH WAS DISALLOWED FOR NON DEDUCTION OF ITDS BY THE ASSESSE E WOULD INCREASE THE PROFIT FROM THE ELIGIBLE UNIT OF THE ASSESSEE FOR C OMPUTING DEDUCTION UNDER SECTION 80IB OR NOT. WE FIND THAT A SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN THE CASE OF CHIRAG PLAST VS. ITO VAPI W ARD-4 NANI DAMAN FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO.2196/AHD/2009 AND THE TRIBUNAL ITA.2089/AHD/2008 ASSESSMENT YEAR 2005-06 3 VIDE ORDER DATED 18-9-2009 ALLOWED THE APPEAL OF TH E ASSESSEE HOLDING THAT ANY DISALLOWANCE OF BUSINESS EXPENDITURE OF TH E ELIGIBLE UNIT WILL LOGICALLY RESULT IN ENHANCEMENT OF DEDUCTION ALLOWA BLE UNDER SECTION 80IB OF THE ACT. THE RELEVANT OBSERVATION OF THE TRIBUNA L READS AS UNDER:- WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT THE ASSESSE E IS ELIGIBLE FOR DEDUCTION OF 100% OF THE PROFITS AND GAINS DERIVED FROM ITS INDUSTRIAL UNDERTAKING. THE LEARNED ASSESSING OFFIC ER FOUND THAT A SUM OF ` .1 25 073/- IS NOT ALLOWABLE AS BUSINESS EXPENDITUR E OF THE YEAR UNDER CONSIDERATION BECAUSE OF THE PROVISIONS OF SECTION 40(A)(IA) ARE THAT DEDUCTION IN RESPECT OF THIS BUS INESS EXPENDITURE WILL BE ALLOWED TO THE ASSESSEE IN THE SUBSEQUENT Y EAR WHEN TDS IN RESPECT OF THIS EXPENDITURE IS DEPOSITED BY THE ASSESSEE. HOWEVER THE LEARNED ASSESSING OFFICER HAS TREATED THIS AMOUNT OF DISALLOWABLE EXPENDITURE AS INCOME FROM OTHER SO URCES AND THEREBY NOT ALLOWED DEDUCTION UNDER SECTION 80IB IN RESPECT OF THAT AMOUNT. THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ALSO CONFIRMED THE ABOVE ACTION OF THE LEARNED ASSESSING OFFICER ON THE GROUND THAT ALLOWANCE OF DEDUCTION UNDER SECTIO N 80IB IN THE YEAR WILL TANTAMOUNT TO DOUBLE DEDUCTION TO THE ASS ESSEE. WE FIND THAT THE UNDISPUTED FACTS OF THE CASE ARE THAT BUSI NESS EXPENDITURE OF ELIGIBLE UNIT STANDS DISALLOW IN THE YEAR UNDER CONSIDERATION DUE TO APPLICATION OF PROVISIONS OF SECTION 40(A)(IA). THUS IN OTHER WORDS THE SAID AMOUNT IS DEEMED AS EXPENDITURE NOT INCURRED BY THE ASSESSEE FOR COMPUTING ITS BUSINESS INCOME. THU S AS THE EXPENDITURE OF ELIGIBLE UNIT STANDS DISALLOWED CONS EQUENTLY THE SAME RESULTS IN INCREASE OF THE PROFIT OF THE ELIGI BLE UNIT. THE DEDUCTION UNDER SECTION 80IB IS ALLOWABLE IN RESPEC T OF PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING. SUCH PROFITS AND GAINS ARE TO BE COMPUTED IN ACCORDANCE WITH THE PRO VISIONS OF SECTION 28 TO 44AC WHICH INCLUDES SECTION 40(A)(IA) ALSO. THEREFORE ANY DISALLOWANCE OF BUSINESS EXPENDITURE OF THE ELIGIBLE UNIT WILL LOGICALLY RESULT IN ENHANCEMENT OF DEDUCT ION ALLOWABLE UNDER SECTION 80IB OF THE ACT. THE FEAR EXPRESSED B Y THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN OUR CONSIDER ED OPINION IS UNFOUNDED AND BASELESS. DURING THE YEAR AS THE E XPENDITURE OF THE ELIGIBLE BUSINESS IS DISALLOWED THE ASSESSEES BUSINESS INCOME DERIVED FROM THE ELIGIBLE BUSINESS OF THE INDUSTRIA L UNDERTAKING STANDS AT INCREASED FIGURE AND THEREFORE THE ASSES SEE WILL BE ELIGIBLE FOR DEDUCTION OF ENHANCED AMOUNT UNDER SEC TION 80IB OF THE ACT. HOWEVER IN THE SUBSEQUENT YEAR IN WHICH T DS IS PAID BY ITA.2089/AHD/2008 ASSESSMENT YEAR 2005-06 4 THE ASSESSEE THE EXPENDITURE WILL BE ALLOWED AS DE DUCTION FROM THE ELIGIBLE PROFITS OF THE SUBSEQUENT YEAR AND THE REBY THE ELIGIBLE PROFIT OF THE INDUSTRIAL UNDERTAKING WILL BE REDUCE D IN THE SUBSEQUENT YEAR AND CONSEQUENTLY THE ASSESSEE WILL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB AT THE REDUCED AMOUNT ONLY. THUS THERE CANNOT BE A DOUBLE DEDUCTION TO THE ASSESSEE. IN VIEW OF THE ABOVE WE SET ASIDE THE ORDERS OF THE LOWER AUTHORI TIES AND DIRECT THE LEARNED ASSESSING OFFICER TO ALLOW DEDUCTION UN DER SECTION 80IB IN RESPECT OF ENTIRE PROFIT DERIVED FROM INDUS TRIAL UNDERTAKING AFTER TAKING INTO CONSIDERATION THE PROVISIONS UNDE R SECTION 40(A)(IA). THUS THE GROUND OF APPEAL OF ASSESSEE I S ALLOWED. 6. IN THE PRESENT APPEAL BEFORE US THE UNDISPUTED FACTS OF THE CASE ARE THAT THE EXPENDITURE FOR FREIGHT CHARGES AND PR INTING CHARGES TOTALING TO ` . 31 19 768/- DISALLOWED BY THE ASSESSING OFFICER F OR NON DEDUCTION OF TDS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) WAS INCURRED BY THE ASSESSEE IN CONNECTION WITH THE BUSINESS OF THE ELI GIBLE UNIT. THEREFORE THE ABOVE QUOTED DECISION OF THE TRIBUNAL IS SQUARE LY APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. RESPECTFULLY FO LLOWING THE SAME WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISS THE APPEAL OF THE REVENUE. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 22 ND DAY OF OCTOBER 2010. SD/- SD/- (BHAVNESH SAINI) (N.S. SAINI) JUDICIAL MEMBER ACCOUN TANT MEMBER. AHMEDABAD: ON THIS 22 ND DAY OF OCTOBER 2010. COMPILED AND PREPARED BY : PATKI. COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT 3. THE CIT CONCERNED. 4. THE LD. CIT(A)-VALSAD. 5. THE D. R. AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER. (DY./ASSISTANT REGISTRAR) ITAT AHMEDABAD. ITA.2089/AHD/2008 ASSESSMENT YEAR 2005-06 5 DATE. INITIALS. 1. DRAFTED DICTATED ON 2 0-10-2010 2. DRAFT PLACED BEFORE AUTHORITY. 20-10- 2010 3. DRAFT PROPOSED & PLACED BEFORE SECOND MEMBER. 20-10- 2010 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 21-1 0-2010 5. APPROVED DRAFT COMES TO P.S. 22-10-2010 6. KEPT FOR PRONOUNCEMENT ON 22-10-201 0 7. FILE SENT TO THE BENCH CLERK. 22-10- 2010 8. DATE ON WHICH FILE GOES TO AR 9. DATE OF DISPATCH OF ORDER.