CIRON DRUGS & PHARMACEUTICALS P. LTD, MUMBAI v. ACIT (OSD) -8(3), MUMBAI

ITA 5088/MUM/2009 | 2006-2007
Pronouncement Date: 21-05-2010 | Result: Dismissed

Appeal Details

RSA Number 508819914 RSA 2009
Assessee PAN AABCC0873D
Bench Mumbai
Appeal Number ITA 5088/MUM/2009
Duration Of Justice 8 month(s) 13 day(s)
Appellant CIRON DRUGS & PHARMACEUTICALS P. LTD, MUMBAI
Respondent ACIT (OSD) -8(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 21-05-2010
Assessment Year 2006-2007
Appeal Filed On 07-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI D.K. AGARWAL JM AND SHRI T.R. SOOD AM I.T.A.NO. 5088/MUM/2009 ASSESSMENT YEAR : 2006-07 M/S. CIRON DRUGS & PHARMACEUTICALS PVT. LTD. ALPHA APARTMENTS M.G. RD. VILE PARLE (E) MUMBAI 400 057. PAN: AABCC 0873 D VS. THE ASST. COMMISSIONER OF INCOME- TAX (OSD)-8(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : WRITTEN SUBMISSIONS RESPONDENT BY : SHRI K. SINGH O R D E R PER T.R. SOOD AM: IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWI NG TWO GROUNDS: 1. THE LEARNED CIT(A) MUMBAI ERRED IN CONFIRMING THE DISALLOWANCE MADE BY ACIT AS REGARDS CLAIM OF DEDUCTION U/S.80-IB IN CALCULATING BUSINESS PROFIT FOR CLAIMING ALLOWABLE DEDUCTION U/S.80-IB A FTER REDUCING OTHER INCOME I.E. DUTY DRAWBACK AT RS. 17 39 084/- DPB SALE AT RS. 12 54 889/- INTEREST AT RS. 1 46 824/- DIVIDEND AT RS. 1 800/- 2. THE LEARNED CIT(A) MUMBAI FAILED TO UNDERSTAND THAT INSTEAD OF CONSIDERING 80-IB DEDUCTION AT 15% ASSESSEE HAS CO NSIDERED THE SAME AT 12.5% AS NO SEPARATE BOOKS OF ACCOUNT ARE M AINTAINED FOR TRADING OF FINISHED GOODS. THE ASSESSEE OFFICE HAS ALLOWED DEDUCTION @ 10%. 2. THE ASSESSEE-COMPANY HAS FILED WRITTEN SUBMISSIO NS AND THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS HEARD. 3. AS FAR AS GROUND NO. 1 REGARDING DEDUCTION UNDER SECTION 80-IB IN RESPECT DUTY DRAW BACK AND DEPB SALE IS CONCERNED LARGE NU MBER CASE LAWS HAVE BEEN RELIED ON BY THE ASSESSEE IN ITS WRITTEN SUBMISSION S. HOWEVER AS POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THE ISSUE HAS NOW BEEN FINALLY CONCLUDED BY THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF LIBERTY INDIA VS. CIT (2009) 317 ITR 218. IN THIS CASE IT WAS HELD AS UNDER: ITA NO.5088/M/09 M/S. CIRON DRUGS & PHARMACEUTICALS P.LTD. . 2 SECTION 80-I 80-IA AND 80-IB PROVIDE FOR INCENTIV ES IN THE FROM O F DEDUCTIONS WHICH ARE LINKED TO PROFITS AND NO INVES TMENT. ON ANALYSIS OF SECTIONS 80-IA AND 80-IB IT BECOMES CLEAR THAT ANY INDUSTRIAL UNDERTAKING WHICH BECOME ELIGIBLE ON SATISFYING SUB-SECTION (2) WOULD BE ENTITLED TO DEDUCTION UNDER SUB-SECTION (1) ONLY TO THE EXTENT OF PROFIT DERIVED FROM SUCH INDUSTRIAL UNDERTAKING AFTER THE SPECIFIED DAT E. APART FROM ELIGIBILITY SUB-SECTION (1) PURPORTS TO RESTRICT THE QUANTUM OF DEDUCTION TO A SPECIFIED PERCENTAGE OF THE PROFITS. THIS IS THE IMPORTANCE O F THE WORDS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS AGAINST PROFITS ATTRIBUTABLE TO AN INDUSTRIAL UNDERTAKING. DEPB/DUTY DRAWBACK ARE INCENTIVES WHICH FLOW FROM T HE SCHEMES FRAMED BY THE CENTRAL GOVERNMENT OR FROM SECTION 75 OF THE CUSTOMS ACT 1962. INCENTIVE PROFITS ARE NOT PROFITS DERIVED FROM ELIG IBLE BUSINESS UNDER SECTION 80-IB: THEY BELONG TO THE CATEGORY OF ANCILLARY PRO FITS OF SUCH UNDERTAKING. PROFITS DERIVED BY WAY OF INCENTIVES SUCH AS DEPB/D UTY DRAWBACK CANNOT BE CREDITED AGAINST THE COST OF MANUFACTURE OF GOOD S DEBITED IN THE PROFIT AND LOSS ACCOUNT AND THEY DO NOT FALL WITHIN THE EX PRESSION PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING UNDER SECTION 80-IB. 4. THEREFORE RESPECTFULLY FOLLOWING THE DECISION O F THE HONBLE SUPREME COURT WE DECIDE THIS ISSUE AGAINST THE ASSESSEE BY HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S.80-IB IN RESPECT OF D EPB AND DUTY DRAW-BACK. 5. AS FAR AS INTEREST AND DIVIDEND IS CONCERNED TH IS ISSUE IS ALSO COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. VS CIT (262 ITR 278) WHEREI N IT WAS HELD THAT INTEREST INCOME EARNED ON SECURITY DEPOSIT CANNOT BE SAID TO HAVE BEEN DERIVED FROM INDUSTRIAL UNDERTAKING. THE SAME PRINCIPLE WILL AP PLY TO THE DIVIDEND INCOME ALSO. THEREFORE THE ISSUE REGARDING DEDUCTION U/S.80-IB IN RESPECT OF INTEREST AND DIVIDEND INCOME IS ALSO DECIDED AS THE INCOME OF TH E ASSESSEE BY RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. (SUPRA). 6. AS FAR AS GROUND NO.2 IS CONCERNED AFTER CONSID ERING THE RELEVANT MATERIAL ON RECORD AND WRITTEN SUBMISSIONS OF THE A SSESSEE AND ARGUMENTS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE WE FIND THAT T HE ASSESSING OFFICER HAD ADJUDICATED THIS ISSUE VIDE PARA 5.6 WHICH READS A S UNDER: ACCORDINGLY FOR COMPUTING THE DEDUCTION U/S.80-IB OF THE ACT OTHER INCOME HAS BEEN EXCLUDED FROM THE PROFIT OF THE IND USTRIAL UNDERTAKING. IT IS SEEN FROM THE DETAILS OF PURCHASES THAT THE PURC HASES INCLUDES PURCHASE ITA NO.5088/M/09 M/S. CIRON DRUGS & PHARMACEUTICALS P.LTD. . 3 OF FINISHED GOODS RS.70 85 838/-. DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE PROFIT ON SALES OF FINISHED GOODS SHOULD NOT BE EXCLUDED FOR COMPUTING THE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING. FURTHER THE ASSESSEE W AS ASKED TO SUBMIT THE PROFIT GAINED FROM TRADING OF FINISHED GOODS. HOWE VER THE ASSESSEE HAS NOT SUBMITTED ANY EXPLANATION OR DETAILS OF TRADIN G PROFIT. IN THE ABSENCE OF ANY DETAILS THE DEDUCTION U/S.80-IB IS ALLOWED @ 10% AS AGAINST 12.5% CLAIMED BY THE ASSESSEE. 7. ON APPEAL THE LEARNED CIT(A) DECIDED THIS ISSUE AGAINST THE ASSESSEE BECAUSE NO BASIS WAS GIVEN BEFORE HIM FOR CLAIMING DEDUCTION U/S.80-IB AT THE RATE OF 12.5%. EVEN IN THE WRITTEN SUBMISSIONS NOTHING H AS BEEN GIVEN ON WHY DEDUCTION SHOULD BE ALLOWED @ 12.5% AND THEREFORE WE FIND NOTHING WRONG WITH THE ORDER OF THE LEARNED CIT(A) AND CONFIRM THE SAM E. 8. IN THE RESULT THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF MAY 2010. SD. SD. (D.K. AGARWAL) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 21ST MAY 2010. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT-VIII MUMBAI 4. THE CIT(A)-XXIX MUMBAI 5. THE DR C BENCH MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR ITAT MUMBAI