Chitale Foods, v. ACIT, Cir-1, Sangli,

ITA 319/PUN/2008 | 2005-2006
Pronouncement Date: 23-12-2010

Appeal Details

RSA Number 31924514 RSA 2008
Assessee PAN AACFC2718B
Bench Pune
Appeal Number ITA 319/PUN/2008
Duration Of Justice 2 year(s) 10 month(s) 1 day(s)
Appellant Chitale Foods,
Respondent ACIT, Cir-1, Sangli,
Appeal Type Income Tax Appeal
Pronouncement Date 23-12-2010
Appeal Filed By Assessee
Bench Allotted B
Tribunal Order Date 23-12-2010
Assessment Year 2005-2006
Appeal Filed On 21-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI SHAILENDRAKUMAR YADAV AND SHRI D. KARUNAKARA RAO ITA NO. 319/PN/08 711/PN/09 & 737/PN/10 (ASSTT. YEAR 2005-06 TO 2007-08) M/S. CHITALE FOODS A/P- BHILAWADI STATION TAL. PALUS DIST. SANGLI 416303 PAN NO. AACFC2718B .... APPELLANT VS. ACIT CIR-1 SANGLI . RESPONDENT APPELLANT BY : SHRI C.H. NANIWADEKAR RESPONDENT BY : SHRI SANGRAM GAIKWAD ADDL. DIT ORDER PER BENCH: THERE ARE THREE APPEALS UNDER CONSIDERATION AND THEY A RE FILED BY THE ASSESSEE AGAINST THREE DIFFERENT ORDERS OF THE CIT(A) KOLHAPUR. 2. DURING THE PROCEEDINGS LD. COUNSEL MENTIONED THAT ISSUES RAISED IN ALL THESE THREE APPEALS ARE OVERLAPPING AND THEREFORE HE PRE FERRED FOR CONSOLIDATION OF THESE APPEALS AND PASSING OF A COMPOSITE ORDER. WE CONSIDERED THE SAME AND ACCORDINGLY THE PRESENT ORDER IS THE OUTCOME OF THE SA ID DECISION. WE SHALL NOW PROCEED TO PROVIDE THE APPEAL WISE ADJUDICATION. ITA NO. 319/PN/08 FOR THE SAKE OF CONVENIENCE AND REFERENCE THE GROUNDS FOR THE A.Y 2005-06 VIDE ITA NO. 319/PN/08 ARE REPRODUCED AS UNDER:- 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT FOLLOWING AMOUNTS DO NOT AMOUNT TO PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF DEDUCTION U/S. 80IB. A) BENEFIT DERIVED ON EARLY REPAYMENT OF SALES TAX DEFERRAL LOAN RS. 18 98 514/- B) SALES TAX REFUND OF RS. 2 22 800/- ITA NO. 319/PN/08 711/PN/099 & 737/PN/10 A.Y 2005-06 TO 2007-08 PAGE 2 OF 5 C) INTEREST ON BANK DEPOSITS KEPT IN ORDER TO AVAI L OVERDRAFT FACILITY RS. 4 13 806/- D) INTEREST ON SALES TAX REFUND RS. 40 104/- 3. IN ADDITION TO THE ABOVE LD. COUNSEL MENTIONED THAT THE ASSESSEE RAISED AN ADDITIONAL GROUND BEFORE THE BENCH AND IT IS INCIDENTAL TO GROU ND 1(A) OF THE ORIGINAL GROUNDS ABOVE. THE SAID ADDITIONAL GROUND REP RODUCED AS FOLLOWS:- WITHOUT PREJUDICE TO OTHER GROUNDS THE LEARNED CI T(A) OUGHT TO HAVE HELD THAT IRRESPECTIVE OF THE STAND TAKEN BY THE AS SESSEE AND THE ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE THE BEN EFIT OF RS. 18 98 514 DERIVED BY THE ASSESSEE ON EARLY REPAYMENT OF SALES TAX DEFERRAL LOAN IS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX AT ALL. 4. AT THE OUTSET DURING THE PROCEEDINGS BEFORE US LD . COUNSEL FOR THE ASSESSEE MENTIONED THAT GROUND 1(D) DESCRIBED ABOVE I S NOT PRESSED. ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 5. REFERRING TO ADDITIONAL GROUND AND THE GROUND RAISED 1(A) ABOVE BOTH THE PARTIES MENTIONED THAT THIS ISSUE HAS TO REVISIT THE FILES OF THE A.O FOR ADJUDICATION. IN THIS REGARD LD COUNSEL FILED A COPY OF SPECIAL BENCH DECISION IN THE CASE OF SULZER INDIA LTD . VS. JT. CIT 134 TTJ (MUMBAI) (SB) 385. REFERRING TO THE SAID DECISION LD. COUNSEL PLEADED FOR DIRECTI NG THE A.O TO DECIDE THE ISSUE IN THE LIGHT OF THE RATIO LAID DOWN BY THE SAID SPEC IAL BENCH DECISION IN THE CASE OF SULZER INDIA LTD. (SUPRA). WE FIND NO REASON TO DE NY THE REQUEST OF THE ASSESSEES COUNSEL. ACCORDINGLY ADDITIONAL GROUND A ND THE GROUND 1(A) RAISED IN THE APPEAL ARE SET ASIDE TO THE FILES OF THE A.O. A .O SHALL EXAMINE THE FACTS OF THE CASE AND ISSUE IN THE LIGHT OF THE SAID SPECIAL BENCHS DECISION IN THE CASE OF SULZER INDIA LTD (SUPRA) AND DECIDE THE ISSUE AFRESH A FTER GRANTING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDING LY THE ABOVE REFERRED GROUND 1(A) AND THE ADDITIONAL GROUND ARE SET ASIDE TO THE FILES OF THE A.O. 6. REGARDING GROUND 1(B) LD. COUNSEL MENTIONED THAT THE ISSUE RELATES TO SALES TAX REFUND WHETHER SUCH RECEIPT ARE ELIGIBLE PROFITS FOR THE PURPOSE OF DEDUCTION U/S. 80IB OF THE INCOME TAX ACT. FOR SUPPO RTING THE SAME THAT IT IS AN ELIGIBLE PROFIT LD. COUNSEL NARRATED THE FACTS OF THI S CASE AND STATED THAT THE SALES TAX REFUND IS AKIN TO THE EXCISE DUTY REFUND. F URTHER REFERRING TO THE DELHI HIGH COURT DECISION IN THE CASE OF DHARAM PAL PREM CH AND LTD. 180 TAXMAN 557 (DEL.) THE COUNSEL STATED THAT EXCISE DUTY REFUND WHICH IS AKIN TO THE SALES ITA NO. 319/PN/08 711/PN/099 & 737/PN/10 A.Y 2005-06 TO 2007-08 PAGE 3 OF 5 TAX REFUND WAS HELD TO BE ELIGIBLE PROFIT AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKING U/S. 80IB OF THE ACT. ON THE OTHER HAND LD. DR FOR THE REVENUE MERELY RELIED ON THE ORDERS OF THE REVENUE. 7. WE PERUSED THE FACTS OF THE CASE AND ISSUES RAISED BY THE PARTIES BEFORE US. ON UNDERSTANDING THE ISSUE WE FIND THAT THE ORD ERS DO NOT SPEAK OF THE BASIC FINDINGS RELEVANT FOR ADJUDICATION OF THIS TAX REFUND AND IF IT CONSTITUTES AN ELIGIBLE PROFIT OR INELIGIBLE ANCILLARY PROFIT IN VIEW OF THE SUPREME COURT DECISION IN THE CASE OF LIBERTY INDIA 217 ITR 218. IT IS ALSO EV IDENT THAT THE DELHI HIGH COURT DID NOT HAVE THE BENEFIT OF THE DECISION OF THE APE X COURT IN THE CASE OF LIBERTY INDIA (SUPRA) WHICH IS DATED AUGUST 2009. WE HAVE A LSO PERUSED THE OPERATIONAL PORTION OF THE SAID DECISION GIVEN ON PAGE 219 OF TH E REPORTED SAID ITR WHICH READS AS FOLLOWS:- INCENTIVE PROFITS ARE NOT PROFITS DERIVED FROM ELI GIBLE BUSINESS UNDER SECTION 80-IB: THEY BELONG TO THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERTAKING. PROFITS DERIVED BY WAY OF INCENTIVES SUCH AS DEPB/ DUTY DRAWBACK CANNOT BE CREDITED AGAI NST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PROFIT AND LOSS ACCOUNT AND THEY DO NOT FALL WITHIN THE EXPRESSION PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING UNDER SECTION 80-IB. 8. FROM THE ABOVE IT IS EVIDENT THAT EACH AND EVERY RECEIPT OF AN INDUSTRIAL UNDERTAKING IS NOT AN ELIGIBLE PROFITS DERIVED FROM THE SAID UNDERTAKING. WITH THE CATEGORIZATION DONE BY THE SUPREME COURT BASED ON A LO GIC IE ELIGIBLE PROFITS AND INELIGIBLE ANCILLARY PROFITS THE SAID DISTINCTION HA S TO BE LOOKED INTO BY THE AO WHILE ADJUDICATING THE ISSUE. ACCORDINGLY THE A.O I S DIRECTED TO GATHER THE RELEVANT FACTS AND DECIDE THE ISSUE AFRESH AFTER GRANTI NG REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY THIS PART OF THE GROUND IS SET ASIDE. 9. GROUND 1(C) RELATES TO THE DECISION OF THE REVENUE AUTHORITIES AND HELD THAT INTEREST ON BANK DEPOSITS KEPT WITH THE BANK IN ORDER TO AVAIL THE OVERDRAFT FACILITY IS NOT ENTITLED FOR DEDUCTION U/S . 80IB OF THE ACT. LD. COUNSEL FILED A PUNE BENCHS DECISION IN THE CASE OF ASSOCI ATED FLEXIBLES & WIRES (P) LTD. 70 ITD 374 FOR THE PROPOSITION THAT THE INTEREST EARNE D UNDER BANK DEPOSITS IS ELIGIBLE FOR RELIEF U/S. 80HHA AND 80I. ON THE OTHER H AND LD. DR FOR THE REVENUE STATED THAT THE SAID INTEREST AND FDS ARE THE INCOM E FROM OTHER SOURCES. IN THIS REGARD DR RELIED ON THE CONTENTS OF ORDER OF THE C IT(A) GIVEN AT PARA 9 TO 13 OF THE IMPUGNED ORDER. ITA NO. 319/PN/08 711/PN/099 & 737/PN/10 A.Y 2005-06 TO 2007-08 PAGE 4 OF 5 10. ON HEARING THE PARTIES WE FIND THAT ISSUE ALSO HA S TO BE SENT TO THE FILES OF THE A.O CONSIDERING THE RATIO DECIDENDI SET BY THE SUPREME COURT IN THE CASE OF LIBERTY INDIA (317 ITR 218) WHICH IN FACT DEALS WITH THE DEPB ISSUES BUT THIS JUDGEMENT HAS DETAILED ON THE EXPRESSION DERIVED FOR THE PURPOSE OF SEC. 80IB AND OTHERS. RECEIPTS SUCH AS DEPB ARE HELD TO BE BELONGING TO THE CATEGORY OF ANCILLARY PROFITS AND SUCH PROFITS DO NOT FALL WI THIN EXPRESSION PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING MENTIONED U/S. 80IB OF THE ACT. THESE ARE THE ANCILLARY PROFITS. IN THE LIGHT OF THE ABOVE L EGAL PHILOSOPHY IT HAS TO BE EXAMINED WHETHER INTEREST DERIVED FROM THE DEPOSITS WI TH BANK CONSTITUTES AN ELIGIBLE PROFITS OR INELIGIBLE ANCILLARY PROFITS. PUNE BENCH DID NOT HAVE THE BENEFIT OF ABOVE JUDGEMENT OF THE APEX COURT. FOR THIS PURPOS E THE ISSUE IS SET ASIDE TO THE FILES OF THE A.O FOR READJUDICATION AFTER GRANTING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 711/PN/09 12. REFERRING TO GROUND 1(B) AND THE ADDITIONAL GROUND FILED IN THIS REGARD LD. COUNSEL MENTIONED THAT THE ISSUES HAS TO BE SET AS IDE WHILE DEALING WITH GROUND 1(A) AND THE ADDITIONAL GROUND OF THE APPEAL OF THE ASSESSEE VIDE ITA NO. 319/PN/08. ACCORDINGLY SAID GROUNDS ARE SET ASIDE . REFERRING TO THE GROUND 1(D) LD. COUNSEL MENTIONED THAT THE SAME IS NOT PRE SSED. DR HAS NO OBJECTION FOR SAME ACCORDINGLY GROUND 1(D) IS DISMISSED AS NOT PRESSED . REGARDING GROUND 1(B) AND 1(C) LD. COUNSEL MENTIONED THAT THES E ISSUES ARE IDENTICAL OR AKIN TO THE GROUND 1(B) AND 1(C) PF THE ITA NO. 319/ PN/08 WHICH WAS ADJUDICATED BY US IN THE PRECEDING PARAS. CONSIDERING THE COMMONALITY OF THE ISSUES WE WE DECIDE TO SET ASIDE THE SAME TO THE FILES OF THE A.O. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 737/PN/10 14. DURING THE PROCEEDINGS LD. COUNSEL MENTIONED THA T THE ISSUE RELATING TO INTEREST RECEIVED ON BANK DEPOSITS HAS TO BE DECIDED IN THE LIGHT OF THE SIMILAR GROUNDS DECIDED BY US IN THE ITA NO. 319/PN/08. WE S ET ASIDE THESE GROUNDS TO THE FILES OF THE A.O WITH THE SIMILAR DIRECTIONS GIVE N IN THE PRECEDING PARAGRAPHS DEALING WITH IDENTICAL ISSUE WITH THE OTHER APPEALS OF THE GROUP. A.O IS DIRECTED ITA NO. 319/PN/08 711/PN/099 & 737/PN/10 A.Y 2005-06 TO 2007-08 PAGE 5 OF 5 TO GIVE AN OPPORTUNITY OF BEING HEARD AND DECIDE THE ISSUE AS PER THE LAW. ACCORDINGLY GROUND 1(B) IS SET ASIDE. 15. REGARDING GROUND 1(A) WE FIND THAT IT IS A NEW I SSUE IN THIS APPEAL LD. COUNSEL MENTIONED THAT THE REVENUE FAILED TO GRANT DEDUCTION U/S. 80IB OF THE ACT IN RESPECT OF THE SALES TAX SET OFF. IN THIS REGA RD LD. COUNSEL FILED A DECISION OF THIS BENCH IN THE CASE OF CYBERNETIK TECHNOLOGIES PVT. LTD. ITA NO. 608/PN/02 A.Y 1998-99 FOR THE PROPOSITION THAT THE SALES TAX SET OFF CREDITED TO P & L ACCOUNT IS A ELIGIBLE INCOME FOR DEDUCTION U/S. 80IB OF THE ACT. WE FIND THIS ORDER WAS PASSED IN THE YEAR 2003 AND THE TRIBUNAL DID NOT HAVE THE BENEFIT OF THE SUPREME COURT JUDGEMENT IN THE CASE OF LIBERTY IND IA (SUPRA). CONSIDERING THE BINDING NATURE OF THE SUPREME COURT DECISION WITH RETROSPECTIVE EFFECT WE ARE OF THE OPINION THIS ISSUE SHOULD ALSO BE SENT TO THE FILES OF THE A.O FOR DECIDING SUCH SALES TAX SET OFF CREDITED TO THE P & L ACCOUNT CONSTITUTES ELIGIBLE PROFITS OR INELIGIBLE ANCILLARY PROFITS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80IB OF THE INCOME TAX ACT. ACCORDINGLY GROUND 1(A) IS SET ASIDE. 16. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 17. IN THE RESULT ALL THE THREE APPEALS OF THE ASSESSEE ARE DECIDED AS INDICATED ABOVE. ORDER PRONOUNCED ON 23 RD DECEMBER 2010. SD/- SD/- (SHAILENDRAKUMAR YADAV) (D.KARUNAKAR A RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 23 RD DECEMBER 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ACIT CIR-1 SANGLI 3. CIT(A) KOLHAPUR 4. CIT-I KOLHAPUR 5. D.R. ITAT B BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE