Vibrant Greentech India P. Ltd. (formerly Hyderabad Chemicals Ltd), Hyd, Hyderabad v. ACIT, Cirlce-2(2), Hyd, Hyderabad

ITA 264/HYD/2016 | 2009-2010
Pronouncement Date: 30-09-2016

Appeal Details

RSA Number 26422514 RSA 2016
Assessee PAN AABCH1014K
Bench Hyderabad
Appeal Number ITA 264/HYD/2016
Duration Of Justice 6 month(s) 22 day(s)
Appellant Vibrant Greentech India P. Ltd. (formerly Hyderabad Chemicals Ltd), Hyd, Hyderabad
Respondent ACIT, Cirlce-2(2), Hyd, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Bench Allotted B
Tribunal Order Date 30-09-2016
Date Of Final Hearing 26-09-2016
Next Hearing Date 26-09-2016
Assessment Year 2009-2010
Appeal Filed On 08-03-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A HYDERABAD BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 263/HYD/2016 2008-09 M/S. VIBRANT GREENTECH INDIA PRIVATE LTD. (FORMERLY KNOWN AS M/S. HYDERABAD CHEMICALS LIMITED) HYDERABAD [PAN: AABCH1014K] ASST. COMMISSIONER OF INCOME TAX CIRCLE-2(2) [NOW WITH DCIT CIR. 17(2)] HYDERABAD 264/HYD/2016 2009-10 DY. COMMISSIONER OF INCOME TAX CIRCLE-2(2) [NOW WITH DCIT CIR. 17(2)] HYDERABAD FOR ASSESSEE : SHRI A.V. RAGHU RAM AR FOR REVENUE : SHRI S.V.S.S. PRASAD DR DATE OF HEARING : 26-09-2016 DATE OF PRONOUNCEMENT : 30-09-2016 O R D E R PER B. RAMAKOTAIAH A.M. : THESE TWO APPEALS ARISE OUT OF THE COMMON ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-5 HYDERABAD D ATED 28-01-2016 FOR AYS. 2008-09 & 2009-10. THE ISSUE I NVOLVED IN THESE TWO APPEALS IS WITH REFERENCE TO DEDUCTION U/S. 80-IB OF THE INCOME TAX ACT [ACT] AND QUANTIFICATION THEREON. ASSES SEE RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-5 HYDERABAD ALLOWING THE APPEAL OF THE APPELLANT ONL Y IN PART IS ERRONEOUS ILLEGAL AND UNSUSTAINABLE IN LAW. THE C OMMISSIONER (APPEALS) OUGHT TO HAVE ALLOWED THE APPEAL IN ENTIR ETY AND AS PRAYED FOR. I.T.A. NOS. 263 & 264/HYD/2016 M/S. VIBRANT GREENTECH INDIA PRIVATE LIMITED (FORMERLY KNOWN AS M/S. HYDERABAD CHEMICALS LIMITED ) :- 2 -: 2. THE COMMISSIONER (APPEALS) ERRED IN NOT ALLOCATI NG THE INDIRECT EXPENSES AS CLAIMED BY THE APPELLANT. THE BASIS ON WHICH THE COMMISSIONER OF INCOME TAX (APPEALS) DECLINED T O FOLLOW THE ALLOCATION OF INDIRECT EXPENSES MADE BY THE APPELLA NT IS INCORRECT AND UNSUSTAINABLE ON FACTS AND IN LAW. 3. THE COMMISSIONER (APPEALS) WITHOUT POINTING OUT COGENT REASONS ERRED IN DEVIATING FROM THE METHOD FOLLOWED BY THE APPELLANT FOR ALLOCATING THE INDIRECT EXPENDITURE B ETWEEN TWO UNITS. 4. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING T HE ORDER OF THE ASSESSING OFFICER IN HOLDING THAT REFUND OF EXCISE DUTY IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE AC T. THE COMMISSIONER (APPEALS) FAILED TO NOTICE THE BINDING DECISION OF JURISDICTIONAL TRIBUNAL IN THE CASE OF M/S. COROMAN DEL INTERNATIONAL LIMITED IN THE REGARD. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THE NAT URE OF REFUND OF EXCISE DUTY AND IN RELYING ON THE JUDGEMENTS WHICH ARE NOT APPLICABLE TO THE FACTS OF THE APPELLANTS CASE. 2. THERE ARE CROSS-APPEALS FOR THE SAME ASSESSMENT YEARS BY THE REVENUE BUT BOTH DR AND LD. COUNSEL AGREED THA T THE ISSUES ARE ENTIRELY DIFFERENT. LD. COUNSEL SUBMITTED THAT THE ISSUES IN ASSESSEE APPEALS ARE COVERED AND THEREFORE THESE APPEALS CAN BE HEARD. ASSESSEE APPEALS IN THESE TWO YEARS ARE D EALT WITH AFTER HEARING LD. DR AND LD. COUNSEL. 3. BRIEFLY STATED ASSESSEE IS ENGAGED IN THE BUSINES S OF MANUFACTURE AND SALE OF CHEMICALS AND PESTICIDES. I T HAS SET UP A UNIT AT BALANGAR HYDERABAD IN 1954 WHICH IS NOT ELIG IBLE FOR TAX EXEMPTIONS NOW. IT HAS SET UP A SECOND UNIT AT JAMMU AN D CLAIMED DEDUCTION U/S. 80-IB FOR THE FIRST TIME IN THE AY. 2007-08. AO CONSIDERED THAT JAMMU UNIT WAS SET UP BY SPLITTING UP AS WELL AS RE-CONSTRUCTION OF EXISTING UNIT AT BALANAGAR AND TR ANSFERRING MACHINERY AND PLANT OF THE EXISTING UNIT THEREFORE THE DEDUCTION I.T.A. NOS. 263 & 264/HYD/2016 M/S. VIBRANT GREENTECH INDIA PRIVATE LIMITED (FORMERLY KNOWN AS M/S. HYDERABAD CHEMICALS LIMITED ) :- 3 -: U/S. 80-IB IS NOT ELIGIBLE TO THAT UNIT. CLAIM FOR DEDU CTION U/S. 80- IB IN THE IMPUGNED ASSESSMENT YEARS WAS REJECTED BY THE AO FOR THE SAME REASONS. IN AY. 2007-08 THE LD. CIT(A) GAV E THE BENEFIT IN FAVOUR OF ASSESSEE AND DIRECTED THE AO TO ALLOW THE DEDUCTION FOR JAMMU UNIT BASED ON THE BOOKS OF ACCOUNT SEPARATELY M AINTAINED. HOWEVER IN THE IMPUGNED ASSESSMENT YEARS THE LD. CI T(A) DIFFERED FROM THE STAND TAKEN BY HIS PREDECESSOR AND C ONFIRMED THE AOS STAND THAT JAMMU UNIT WAS NOT ELIGIBLE FOR DEDUC TION. SINCE THE ENTIRE DEDUCTION WAS NOT ALLOWED THE QUANTIFICATION O F PROFITS FOR DEDUCTION WAS NOT ADJUDICATED BY THE LD. CIT(A) IN THESE IMPUGNED YEARS. ALL THE APPEALS FOR AY. 2007-08 TO 2009-10 WERE CONSIDERED BY THE ITAT AND ITAT VIDE ITS ORDER DT. 11- 03-2015 IN ITA NOS. 344 & 499/HYD/2012 AND 561 & 562/HYD/2013 HAS DECIDED THAT ASSESSEES JAMMU UNIT IS ELIGIBLE FOR DE DUCTION U/S. 80-IB. SINCE QUANTIFICATION OF PROFITS WAS NOT DETERM INED BY THE CIT(A) THE MATTER WAS RESTORED TO THE FILE OF AO TO DET ERMINE THE QUANTUM OF PROFITS ELIGIBLE FOR DEDUCTION IN THESE Y EARS. AO QUANTIFIED THE DEDUCTIONS ALLOCATING EXPENDITURE BASED ON THE TURNOVER OF EACH UNIT. LD. CIT(A) HOWEVER CONSIDER ING HIS PREDECESSORS ORDER DIRECTED THE AO TO CONSIDER THE DIRECT EXPENSES AS PER THE BOOKS OF ACCOUNT BUT INDIRECT EXP ENSES ON THE PROPORTION OF TURNOVERS. 3.1. ONE MORE ISSUE FOR CONSIDERATION WAS THE ISSUE WHETHER EXCISE DUTY REFUND RECEIVED IS ELIGIBLE FOR DEDUCTIO N U/S. 80-IB. AO WAS OF THE OPINION THAT THE EXCISE DUTY REFUND IS NOT A PROFIT DERIVED FROM JAMMU UNIT ACCORDINGLY THE SAME WAS NO T ELIGIBLE FOR DEDUCTION U/S. 80-IB. ASSESSEE CONTENDED THAT EXCI SE DUTY REFUND IS NOTHING BUT REIMBURSEMENT OF THE EXCISE DUTY PAID I.T.A. NOS. 263 & 264/HYD/2016 M/S. VIBRANT GREENTECH INDIA PRIVATE LIMITED (FORMERLY KNOWN AS M/S. HYDERABAD CHEMICALS LIMITED ) :- 4 -: WHICH HAS A BEARING ON THE PROFITS OF THE UNIT AND ACCO RDINGLY THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S. LIBERTY INDIA VS. CIT (ARRIVING OUT OF SLP(C) N O. 582/07 IS NOT APPLICABLE. LD. CIT(A) HOWEVER DID NOT AGREE AND CONFIRMED THE ACTION OF THE AO. BOTH THE PARTIES ARE IN APPEAL BUT W E ARE ADJUDICATING ONLY ASSESSEES CONTENTIONS NOW IN THESE APPEALS. 4. EVEN THOUGH ASSESSEE CONTESTED THE ISSUE OF QUANTIFICATION OF PROFITS AND APPORTIONMENT OF DIRECT AND INDIRECT EXPENDITURE IN THE COURSE OF PRESENT ARGUMENTS LD. CO UNSEL DID NOT PRESS THE GROUNDS. ACCORDINGLY THESE TWO GROUND S ARE TREATED AS WITHDRAWN. HOWEVER THIS ORDER WOULD NOT CURTAIL THE RIGHTS OF THE REVENUE IN CONTESTING THE ALLOCATION OF EXPENDITURE BETWEEN THE ELIGIBLE AND NON-ELIGIBLE UNITS WHICH HAS TO BE AD JUDICATED IN REVENUE APPEALS SEPARATELY. 5. THE ONLY ISSUE FOR CONSIDERATION IN ASSESSEES A PPEALS IN BOTH THE YEARS IS THE ELIGIBILITY OF REFUND OF EXCIS E DUTY FOR DEDUCTION U/S. 80-IB. ASSESSEE HAS OBTAINED REFUND O F EXCISE DUTY PAID AND REDUCED THE SAME FROM EXCISE DUTY ACCO UNT AND ONLY NET AMOUNT WAS CLAIMED IN P&L ACCOUNT IN COMPUTIN G THE PROFITS OF THE UNIT. AO EXCLUDED THE AMOUNT OF RS. 5 .65 CRORES WHICH WAS DEDUCTED FROM THE EXCISE DUTY PAID ACCOUNT IN AY. 2008-09 AND AN AMOUNT OF RS. 3.27 CRORES IN AY. 2009 -10. IT WAS THE CASE OF ASSESSEE THAT THE COST OF RAW-MATERIAL INCLUD ES EXCISE DUTY PAID AND REFUND OF EXCISE DUTY WILL REDUCE THE COST OF RAW- MATERIAL AND ACCORDINGLY ASSESSEE HAS REDUCED THE A MOUNTS FROM THE COST OF MATERIAL IN THE MANUFACTURING ACTIVITY. AO IS OF THE OPINION THAT EXCISE DUTY REFUND IS MAINLY ATTRIBUTABLE TO THE I.T.A. NOS. 263 & 264/HYD/2016 M/S. VIBRANT GREENTECH INDIA PRIVATE LIMITED (FORMERLY KNOWN AS M/S. HYDERABAD CHEMICALS LIMITED ) :- 5 -: UNDERTAKING BUT NOT DERIVED FROM THE UNDERTAKING. HE RELIED UPON THE CASES OF CIT VS. INDIA GELATIN AND CHEMICALS LTD. [275 ITR 284] (GUJ) CIT VS. INDIA REITESH INDUSTRIES LTD. [274 ITR 324] (DEL) AND STERLING FOODS [237 ITR 579] (SC) AND OTHER CASES. IT WAS CONTENDED THAT IN ALL THESE JUDICIAL DECISIONS IT WAS H ELD THAT CONCESSIONS OR RELIEFS MAY BE INCIDENTAL OR ATTRIBUTAB LE TO THE UNDERTAKING BUT NOT IMMEDIATE SOURCE THEREFORE NOT D ERIVED FROM THE UNDERTAKING. IT WAS CONTENDED BY ASSESSEE BEFORE TH E CIT(A) THAT ISSUES COVERED IN ITS FAVOUR BY THE DECISION OF TH E ITAT IN THE CASE OF DCIT VS. M/S. COROMANDEL INTERNATIONAL LTD. HYDERABAD IN ITA NO. 1147 AND 1157/HYD/2014 DT. 21-11-2014 WHI CH ARE ON SIMILAR FACTS. LD. CIT(A) HOWEVER DID NOT AGREE AND HELD THAT THIS MAY BE BUSINESS INCOME OF ASSESSEE BUT IT IS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING SO AS TO BE ELIGIBLE FOR DEDUC TION U/S 80IB. HE AFFIRMED THE ACTION OF AO AND DIRECTED TO RE-COMPUT E DEDUCTION BY EXCLUDING THE REFUND OF EXCISE DUTY FROM THE COMP UTATION. ASSESSEE IS AGGRIEVED AND RAISED GROUND NOS. 4 & 5 IN BOTH THE YEARS WHICH ARE SIMILAR. 6. AFTER CONSIDERING THE RIVAL CONTENTIONS WE ARE OF THE OPINION THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION ON THE EXCISE DUTY. WHEN EXCISE DUTY IS PAID IT INCREASES THE COST OF RAW -MATERIAL OR MATERIAL CONSUMPTION AND WHEN THE SAME WAS REFUNDED THE SAME WILL SET OFF THE COST. THIS ISSUE WAS CONSIDERED BY TH E CO-ORDINATE BENCH IN THE CASE OF DCIT VS. M/S. COROMANDEL INTERN ATIONAL LTD. HYDERABAD IN ITA NO. 1147 AND 1157/HYD/2014 DT. 21-1 1-2014 (SUPRA) WHEREIN AFTER CONSIDERING ASSESSEES SUBMI SSIONS HAVE HELD AS UNDER: 8. HAVING CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON R ECORD AND AFTER HAVING I.T.A. NOS. 263 & 264/HYD/2016 M/S. VIBRANT GREENTECH INDIA PRIVATE LIMITED (FORMERLY KNOWN AS M/S. HYDERABAD CHEMICALS LIMITED ) :- 6 -: APPLIED OUR MIND TO THE DECISIONS RELIED UPON BY TH E PARTIES WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) IN AL LOWING BENEFIT U/S 80IB TO ASSESSEE ON EXCISE DUTY REFUND FOR THE FOLLOWING RE ASONS. 9. IT IS CLEAR FROM THE ASSESSMENT ORDER THAT AO HA S DENIED 80IB DEDUCTION ON EXCISE DUTY REFUND FOR THE SOLE REASON THAT IT CANNOT BE TREATED AS INCOME DERIVED FROM ELIGIBLE BUSINESS OF THE UNDERTAKING. HOWEVER AS CAN BE SEEN FROM THE FACTS BROUGHT ON R ECORD THERE IS NO DISPUTE THAT ASSESSEE HAS PAID THE EXCISE DUTY ON T HE GOODS MANUFACTURED AND SOLD AND AS SUCH IT FORMS PART OF THE SALE PRICE OF ASSESSEE. THEREFORE PAYMENT OF CENTRAL EXCISE DUTY IS INTEGRALLY CONNECTED WITH THE MANUFACTURING AND SALE OF GOODS PRODUCED BY ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT AS PER THE INDUSTRIAL POLICY RESOLUTION DECLARED FOR THE STATE OF J&K AND CONSEQ UENT TO CENTRAL EXCISE DEPARTMENT NOTIFICATION ASSESSEE BECAME ELIGIBLE F OR REFUND OF EXCISE DUTY PAID AFTER SET OFF OF CENVAT CREDIT. THEREFORE IN SUM AND SUBSTANCE IT IS ONLY A REFUND OF AN AMOUNT ALREADY PAID BY AS SESSEE AND REDUCED FROM THE SALE PRICE WHILE COMPUTING THE PROFIT. TH EREFORE WHEN ASSESSEE GETS REFUND OF AN EXPENDITURE ALREADY INCURRED THE SAME HAS TO BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR P ROFESSION CARRIED ON BY ASSESSEE IN TERMS OF SECTION 41(1)(A) OF THE ACT. I N THAT VIEW OF THE AFTER EXCISE DUTY REFUND RECEIVED BY ASSESSEE HAS TO BE T REATED AS PART OF THE BUSINESS PROFIT HENCE ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. OTHERWISE ALSO AS PAYMENT OF EXCISE DUTY IS DIREC TLY LINKED WITH THE MANUFACTURING OF GOODS REFUND OF EXCISE DUTY HAS T O BE TREATED AS INCOME DERIVED FROM ELIGIBLE BUSINESS AS PROVIDED U/S 80IB . IN THE AFORESAID VIEW OF THE MATTER ASSESSEE WILL BE ELIGIBLE TO C LAIM DEDUCTION U/S 80IB ON THE INCOME ACCRUING FROM REFUND OF EXCISE DUTY. SO FAR AS THE RATIO IN CASE OF LIBERTY INDIA VS. CIT (SUPRA) THE FACTS AR E CLEARLY DISTINGUISHABLE AND DO NOT APPLY TO THE FACTS OF THE PRESENT CASE. IN CASE OF LIBERTY INDIA THE HON'BLE SUPREME COURT WAS CONSIDERING THE PROFI TS DERIVED FROM SALE/TRANSFER OF DEPB/DUTY DRAW SACK BENEFITS. DEPB /DUTY DRAW BACK BENEFITS IS GIVEN UNDER A SCHEME FRAMED UNDER THE CUSTOMS ACT AND IT IS TRANSFERABLE IN OTHER WORDS IT IS A MARKETABLE CO MMODITY EXCISE DUTY REFUND BY ASSESSEE IN THE PRESENT CASE IS NEITHER A MARKETABLE COMMODITY NOR TRANSFERABLE. IT IS ONLY A REFUND OF EXPENDITUR E ALREADY INCURRED BY ASSESSEE HENCE THE DECISION OF THE HON'BLE SUPREME COURT IN CASE OF LIBERTY INDIA (SUPRA) WILL NOT APPLY. IN THE AFORES AID VIEW OF THE MATTER WE UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING GROUND S RAISED. 6.1. RESPECTFULLY FOLLOWING THE SAME SINCE THE FACTS ARE SIMILAR WE DIRECT THE AO TO RE-COMPUTE THE DEDUCTION BY TAKING INTO CONSIDERATION THE EXCISE DUTY COMPONENT IN THE CO ST OF I.T.A. NOS. 263 & 264/HYD/2016 M/S. VIBRANT GREENTECH INDIA PRIVATE LIMITED (FORMERLY KNOWN AS M/S. HYDERABAD CHEMICALS LIMITED ) :- 7 -: CONSUMPTION OF RAW-MATERIAL. THE GROUNDS OF ASSESSEE ON THIS ISSUE ARE ACCORDINGLY ALLOWED. 7. IN THE RESULT BOTH THE APPEALS OF ASSESSEE ARE ALLO WED. ORDER PRONOUNCED IN THE COURT ON 30 TH SEPTEMBER 2016 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD DATED 30 TH SEPTEMBER 2016 TNMM COPY TO : 1. M/S. VIBRANT GREENTECH INDIA PRIVATE LIMITED ( FORMERLY KNOWN AS M/S. HYDERABAD CHEMICALS LIMITED) C/O. A.V. RAGHU RAM P. VINOD & M. NEELIMA DEVI ADVOCATES 6 10 BABUKHAN ESTATE BASHEERBAGH HYDERABAD. 2. DY. COMMISSIONER OF INCOME TAX CIRCLE-2(2) [NO W WITH DCIT CIR. 17(2)] HYDERABAD. 3. ASST. COMMISSIONER OF INCOME TAX CIRCLE-2(2) [ NOW WITH DCIT CIR. 17(2)] HYDERABAD. 4. CIT (APPEALS)-5 HYDERABAD. 5. PR.CIT-5 HYDERABAD. 6. D.R. ITAT HYDERABAD. 7. GUARD FILE.