M/s Chayagraphics (India) Pvt. Ltd.,, Bangalore v. CIT, Bangalore

ITA 7/BANG/2014 | 2007-2008
Pronouncement Date: 17-10-2016 | Result: Allowed

Appeal Details

RSA Number 721114 RSA 2014
Assessee PAN AAACC5904E
Bench Bangalore
Appeal Number ITA 7/BANG/2014
Duration Of Justice 2 year(s) 9 month(s) 14 day(s)
Appellant M/s Chayagraphics (India) Pvt. Ltd.,, Bangalore
Respondent CIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 17-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 17-10-2016
Date Of Final Hearing 29-08-2016
Next Hearing Date 29-08-2016
Assessment Year 2007-2008
Appeal Filed On 03-01-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BANGALORE BEFORE SHRI S.K.YADAV JUDICIAL MEMBER AND SHRI A. K. GARODIA ACCOUNTANT MEMBER ITA NOS.77 (BANG) 2012 & 7 (BANG) 2014 (ASSESSMENT YEARS : 2007 08) M/S CHAYAGRAPHICS (INDIA) PVT. LTD. NO.249 4 TH MAIN ROAD NEAR KANNADA SAHITYA PARISHAD CHAMARAJPET BANGALORE 560018 PAN: AAACC5904E APPELLANT VS COMMISSIONER OF INCOME TAX BANGALORE - 1 BANGALORE RESPONDENT ITA NO.1789(BANG) 2013 (ASSESSMENT YEARS : 2007 08) DY. COMMISSIONER OF INCOME TAX CIRCLE 11 (2) BANGALORE APPELLANT VS M/S CHAYAGRAPHICS (INDIA) PVT. LTD. NO.249 4 TH MAIN ROAD NEAR KANNADA SAHITYA PARISHAD CHAMARAJPET BANGALORE 560018 RESPONDENT PAN: AAACC5904E ASSESSEE BY : SHRI V. CHANDRASHEKAR ADVOCATE REVENUE BY : MS. NEERA MALHOTRA CIT DR & SHRI A.R.V. SREENIVASAN JCIT(DR) DATE OF HEARING : 29-08-2016 DATE OF PRONOUNCEMENT: 17-10-2016 ITA NOS.77/B/2012 1789/B/2013 & 7/B/2014 2 O R D E R PER A. K. GARODIA A. M.: ALL THESE THREE APPEALS ARE FOR THE SAME ASSESSMEN T YEAR I.E. A. Y. 2007 08. OUT OF THESE TWO APPEALS ARE FILED BY T HE ASSESSEE INCLUDING ONE APPEAL IN COURSE OF PROCEEDINGS U/S 263 AND THE SEC OND APPEAL OF THE ASSESSEE IS IN COURSE OF PROCEEDINGS U/S 143 (3) R .W.S. 263 OF I. T. ACT. THE APPEAL OF THE REVENUE IS IN COURSE OF PROCEEDINGS U /S 143 (3) R.W.S. 263 OF THE ACT. 2. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. FIRST WE TAKE UP THE ASSESSEES APPEAL IN SECTIO N 263 PROCEEDINGS I.E. ITA 77/BANG/2012. 4. LEARNED AR OF THE ASSESSEE MADE VARIOUS ARGUMENT S IN WHICH HE CONTENDED THAT THE ASSESSMENT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HENCE THE ORDER PASSED BY CIT U/S 263 IS WITHOUT JURISDICTION. LEARNED DR OF THE REVENUE SUP PORTED THE ORDER OF CIT PASSED U/S 263. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT MAIN OBJECTION OF CIT IS THIS THAT THE A.O. IN THE ASSES SMENT ORDER ALLOWED DEDUCTION U/S SECTION 80 IB ON OTHER INCOMES LIKE SERVICE INCOME DUTY DRAWBACK OCTROI INTEREST AND MISC INCOME ETC. THI S IS A SETTLED POSITION THAT DEDUCTION U/S 80IB IS ALLOWABLE FOR THOSE INCO MES ONLY WHICH ARE DERIVE4D FROM ELIGIBLE INDUSTRIAL UNDERTAKING AND D UTY DRAWBACK IS NOT ELIGIBLE FOR THIS DEDUCTION AS PER THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA VS. CIT AS RE PORTED IN 317 ITR 218. THIS JUDGMENT OF HONBLE APEX COURT IS DATED 31.08.2009 BUT COURTS DO NOT MAKE LAW AND IT ONLY DECLARES WHAT IS LAW AND THEREFORE IT HAS TO BE ACCEPTED THAT ITA NOS.77/B/2012 1789/B/2013 & 7/B/2014 3 BEFORE THIS JUDGMENT ALSO GRANTING OF DEDUCTION U/ S 80IB FOR DUTY DRAWBACK MAKES THE ASSESSMENT ORDER ERRONEOUS. HENC E WE FIND NO INFIRMITY IN THE IMPUGNED OF CIT PASSED U/S 263. 6. IN THE RESULT THIS APPEAL OF THE ASSESSEE IS DI SMISSED. 7. NOW WE TAKE UP THE CROSS APPEALS IN COURSE OF P ROCEEDINGS U/S 143 (3) R.W.S. 263 OF I. T. ACT. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER IN ITA NO. 7/B/2014. 1. THE ORDER OF THE HON'BLE CIT ARE OPPOSED TO L AW WEIGHT OF EVIDENCE NATURAL JUSTICE PROBABILITIES FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE HON'BLE CIT(A) HAS ERRED IN PARTIALLY UPHOL DING THE ADDITION MADE AO ON ACCOUNT OF 'OTHER INCOMES' WHICH ARE VER Y MUCH INTEGRAL PART OF INDUSTRIAL UNDERTAKING AND ARE ELIGIBLE FOR DEDUCTION U/S 80IB. THE HON'BLE CIT(A) HAS FAILED TO APPRECIATE THE FACT TH AT THE INCOME REFLECTED AS 'OTHER INCOME' IS IN FACT INTEGRAL PART OF THE M ANUFACTURING ACTIVITY OF THE APPELLANT. THE DEDUCTION PROVIDED UNDER SECTION 80IB IS FOR THE PROFITS AND GAINS OF ANY BUSINESS UNDERTAKEN BY THE NEW IND USTRIAL UNIT AND THE ITEM OF INCOME REFLECTED UNDER 'OTHER INCOMES' FORM S PART OF THE INTEGRAL ACTIVITY OF THE UNDERTAKING. THEREFORE THE CONCLUSI ON TO RESTRICT THE ACTUAL DEDUCTION U/S 80 IB IS BAD IN LAW AND OPPOSED TO T HE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE HON'BLE CIT(A) HAS GROSSLY ERRED TO APPRECI ATE THE CONTENTS AND MEANING OF THE ACTUAL WORDINGS USED IN THE LAW. IN AS MUCH AS THE EMPHASIS IN THE SAID SECTION 80 IB IS ON THE PROFIT S AND GAINS OF THE 'BUSINESS OF THE NEW INDUSTRIAL UNDERTAKING' AND IT IS A SETTLED POSITION OF LAW THAT THE TERM 'BUSINESS IS WIDE ENOUGH TO ENCOM PASS ALL RELATED ACTIVITIES WHICH ARE INTEGRAL PART OF THE MANUFACTU RING ACTIVITY. 4. THE ABOVE POSITION OF LAW HAS NOT BEEN PROPERLY INTERPRETED BY THE LEARNED RESPONDENT AND DUE TO HIS THE APPELLANT IS NOW SADDLED WITH HUGE TAX LIABILITY. HENCE THE ORDER OF THE RESPONDENT DE SERVES TO BE SET ASIDE. 5. THE APPELLANT CRAVES LEAVE TO ADD DELETE ALTE R OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 6. IN VIEW OF THE ABOVE FACTS AND PLEADINGS AND SUBMISSIO N THE APPELLANT HUMBLY PRAYS THAT: I) THE ASSESSMENT ORDER IS BAD IN LAW AS THE DEDUCTION U/S 80 IB CLAIMED BY THE APPELLANT IS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 80IB AND DESERVES TO BE ALLOWED; ITA NOS.77/B/2012 1789/B/2013 & 7/B/2014 4 II) THE LEVY OF INTEREST UNDER SECTION 234B AND 234C ARE NOT IN ACCORDANCE WITH THE LAW UNDER THE FACTS AND CIRCUMS TANCES OF THE APPELLANT'S CASE AND NEEDS TO BE CANCELLED; III) GRANT OTHER SUCH RELIEF AND BENEFITS AS APPLI CABLE TO THE APPELLANT IN ACCORDANCE WITH LAW. 7. IN VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL YOUR APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF JUSTICE AND EQUITY. 8. SIMILARLY THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER IN ITA NO. 1789/B/2013. 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS OPPO SED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) ERRED IN DIRECTING THE AO TO WORKOUT THE EXPENSES INCURRED FOR EARNING OTHER INCOMES AND ALLOW DEDUCT ION U/S 80IB AFTER GIVING OPPORTUNITY TO THE APPELLANT WITHOUT A PPRECIATING THE FACT THAT THE DIRECTIONS ISSUED ARE BEYOND THE MAND ATE OF THE PROVISIONS OF SEC. 251(1)(A) OF THE IT ACT WHICH DO ES NOT EMPOWER THE CIT(A) TO SET ASIDE THE ISSUE AND NOT APPRECIAT ING THAT HIS POWERS ARE COTERMINOUS WITH THAT OF THE AO. 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLATE CRAVES LEAVE TO ADD TO ALTER TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARIN G OF THE APPEAL. 9. IT WAS SUBMITTED BY THE LEARNED AR THAT ALTHOUGH THE INCOME FROM THESE ACTIVITIES OF RENDERING OF SERVICE AND EARNIN G SERVICE INCOME ETC IS ELIGIBLE FOR DEDUCTION U/S 80IB BUT EVEN IF THESE A RE TO BE EXCLUDED THEN ALSO NOT THE GROSS RECEIPTS BUT NET INCOME THEREFRO M SHOULD BE REDUCED FROM BUSINESS PROFIT OF THE ASSESSEE FOR COMPUTING DEDUC TION ALLOWABLE TO THE ASSESSEE U/S 80IB. LEARNED DR OF THE REVENUE SUPPOR TED THE ASSESSMENT ORDER. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE DO NOT FIND ANY MERIT IN THIS CONTENTION OF THE LEARNED AR OF THE ASSESSEE T HAT ACTIVITIES OF RENDERING ITA NOS.77/B/2012 1789/B/2013 & 7/B/2014 5 OF SERVICE AND EARNING SERVICE INCOME ETC. IS ELIGI BLE FOR DEDUCTION U/S 80IB BUT WE FIND FORCE IN THIS CONTENTION OF THE LEARNED AR OF THE ASSESSEE THAT IF THE ASSESSEE CAN ESTABLISH THAT ANY EXPENSES WAS IN CURRED BY THE ASSESSEE FOR THESE INCOMES THEN THE AMOUNT TO BE REDUCED FRO M BUSINESS PROFIT OF THE ASSESSEE FOR COMPUTING DEDUCTION ALLOWABLE TO THE A SSESSEE U/S 80IB SHOULD BE NOT GROSS RECEIPTS BUT NET INCOME AFTER REDUCING THOSE EXPENSES FROM THESE INCOMES. ALTHOUGH THE DIRECTION OF CIT (A) TO THE A.O. IS ON SIMILAR LINE BUT LEARNED CIT(A) IS NOT EMPOWERED TO SET ASIDE TH E MATTER TO A.O. HENCE WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MA TTER BACK TO A.O. FOR A FRESH DECISION WITH THE DIRECTION THAT IF THE ASSES SEE ESTABLISHES THAT ANY EXPENSES DEBITED TO P & L ACCOUNT WAS INCURRED FOR EARNING SERVICE INCOME ETC. INCLUDED IN OTHER INCOMES THEN SUCH EXPENSES SHOULD BE REDUCED FROM OTHER INCOMES AND ONLY SUCH NET OTHER INCOMES SHOUL D BE REDUCED FROM BUSINESS INCOME OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80IB. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE AND R EVENUE IN COURSE OF PROCEEDINGS U/S 143 (3) R.W.S. 263 OF I. T. ACT ARE ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE COMBINED RESULT THE APPEAL OF THE ASSES SEE IN PROCEEDINGS U/S 263 IS DISMISSED AND CROSS APPEALS IN COURSE OF PRO CEEDINGS U/S 143 (3) R.W.S. 263 OF I. T. ACT ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MEN TIONED ON THE CAPTION PAGE. SD/- (SUNIL KUMAR YADAV) SD/- (A.K. GARODIA) JUDICAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE: D A T E D : 17.10.2016 AM / DS / ITA NOS.77/B/2012 1789/B/2013 & 7/B/2014 6 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) - II BANGALORE 4 CIT 5 DR ITAT B ANGALORE. 6 GUARD FILE BY ORDER AR ITAT BANGALORE