Income Tax Appellate Tribunal - Chandigarh
Sh. Sunil Gupta, Nahan vs Department Of Income Tax on 6 January, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIG ARH BENCH 'B', CHANDIG ARH
BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND
Ms. SUSHMA CHOWLA, JUDICI AL MEMBER
Misc. Application No. 58/Chd/2012
In ITA No. 977/Chd/2007
Assessment Year : 2004-05
I.T.O. Nahan (HP) Vs. Sunil Gupta Prop
M/S Sirmour Minerals &
Chemicals, Paonta Sahib
(Appellant) (Respondent)
Appellant by Shri Akhilesh Gupta
Respondent by: None
Date of hearing 10.1.2014
Date of Pronouncement 29.1.2014
O R D E R
PER T.R.SOOD, A.M
This case was fixed for hearing on various occasions but none appeared on behalf of the assessee despite notice, therefore Revenue was specifically asked to serve the notice which has been served. A copy of the service report dated 6.1.2014 has been filed before us showing service of notice to the assessee-respondent. Despite this service none has appeared on behalf of the assessee. Since the issue was covered by the decision of Hon'ble Jurisdictional High Court, we proceeded to decide the appeal on ex-parte basis. 2 Through this Misc. Application the Revenue has sought rectification of the mistake which has crept into the order of the Tribunal. The Ld. D.R. for the Revenue referred to the Misc 2 application and submitted that in this case it was held that freight subsidy is no eligible to deduction u/s 80IA of Income - tax Act, 1961. However, the freight expenditure was set off against the freight subsidy. He further submitted that later on a decision has been rendered by Hon'ble Himachal Pradesh High Court in case of CIT V. Kiran Enterprises, 327 ITR 520 in which it was held that freight subsidy cannot be said to have been derived from industrial undertaking and therefore is not eligible for deduction u/s 80IB of the Act. He also submitted that the Hon'ble Supreme Court in case of ACIT V. Saurashtra Kutch Stock Exchange Ltd., 305 ITR 227 (S.C) has held that the Tribunal is duty bound to rectify the mistake when a judgment of the Hon'ble Jurisdictional High Court is brought to the notice of the Tribunal.
3 W e have gone through the submissions of Ld. D.R. for the Revenue carefully and the relevant material on record. W e find that this issue was adjudicated by the Tribunal vide order dated 19.6.2008 vide para No. 4 to 6 which are as under:
"4 Ground Nos. 2 to 4 are in relation to the allowability of deductions u/s 80IA/80IB of the Income -tax Act, 1961 in relation to the freight subsidy. Although in the grounds of appeal, the assessee has challenged the denial of deduction under sections 80IA/80IB in its entirety, at the time of the hearing only grievance articulated by the Ld. Counsel for the assessee related to computing the disallowance after considering the expenditures incurred for earning the freight subsidy. The Ld. Counsel for the assessee, in this regard, has sought relief based only on the decision of the Chandigarh Bench-A in the case of Dinesh Kumar, Prop: M/s Bhagwati Chemicals, Sirmour (ITA Nos. 974 to 976/Chandi/2007 dated 30.05.2008), a copy of which has been placed on record. The Tribunal in the said decision concluded as under:-
"We, therefore, considering the view taken in the aforesaid referred to cases confirm the action of Ld. CIT(A) for not allowing deduction u/s 80IA on freight subsidy. However, considering that it is revenue in nature, direct the Assessing Officer to set off the expenses to which the freight subsidy is directly linked. The same view has been taken for the assessment year 2001-02 in assessee 's own case ITA No.1129/Chandi/2005 order dated 4.5.2006.3
5. On the other hand, the Ld. D. R. did not have any serious objection to the limited pleas of the assessee based on the stated precedent.
6. Having considered the rival submissions and the precedent relied upon by the assessee, we direct the Assessing Officer to re-compute the deduction under section 80IA/80IB by excluding the sum of freight subsidy calculated after setting off the expenses which are directly linked to it. Since the assessee has not sought any other relief on this aspect, the Grounds of appeal Nos. 2 to 4 are treated as partly allowed."
Later on a decision has been rendered by Hon'ble Himachal Pradesh High Court which is jurisdictional High Court in case of the assessee because the assessee is residing in Nahan in HP. In this decision Hon'ble High Court has clearly observed as under:
" It is ev i de nt t h at s ec t i on 8 0- IB o f th e I nc o m e- t ax Ac t, 1 9 61 , pr ov i de f or de d uc t i on i n r es pec t of pr of i ts an d g a i n s der iv ed fr o m t he e li g i bl e bus i n es s . Th e wor ds " d er iv e d fr o m " ar e nar r o we r in c o n no ta t i on as c om p ar ed to th e w or ds " a ttr i b ut ab l e t o ". I n o th er w or ds , by us i ng th e ex pr es s i on " d er iv e d f r o m ", P ar li a m en t in te nd e d t o c ov er s o ur c es n o t bey o nd th e f ir s t d egr e e. I t is on ly t h e pr of i t s ge ne r a te d i. e. , o pe r at i on a l pr o f its wh ic h ar e e nt i t l ed t o t h e b en e fi t u n d er s ec t io n 8 0- IA . I n S ter l i ng Fo ods [ 1 99 9] 2 3 7 ITR 5 79 t h e S upr e me C o ur t h as a ls o la i d d ow n a t es t as to w h at is th e s o ur c e of inc o me .
In t he S t at e of H im ac ha l Pr a des h , t h er e w a s s c ar c ity o f r a il n et w or k . A s c he m e h ad b e en fr am e d by Ce nt r a l G ov e r n m en t w her e by fr e i gh t/ tr ans p or t s u bs i dy w as pr ov i de d t o i nd us tr i es s et up i n r em o te ar e as w h er e r a i l fac i l it i es wer e n o t av ai l a b le an d s o me pe r c e nt a ge of t he tr a ns por t ex p e ns es i n c ur r ed by t h e i n dus tr i a l u n der tak i n gs t o tr a ns p or t r aw m at er i al t o t h e f ac t or y an d to tr ans p o r t f i n is h e d g o ods fr o m t h e ir i nd us tr i es w as s ubs i d i ze d by t h e Ce n tr a l G o v er n m e nt . T h e Tr i b un a l he l d th at t h e fr e i g ht s u bs i dy ha d t o b e inc l u de d as pr of its der iv e d f r o m t h e i nd us tr i a l u nd er tak i n g. "
On the above issue it was held as under:
" He l d, a l lo w in g t he a pp e a l, t ha t t h e tr a ns p or t s u bs idy r ec e iv ed by the as s es s e e w as n ot a pr o f it der iv e d fr om b us in es s s i nc e i t w as no t an op er at i o na l pr o fi t. T h e s our c e o f th e s u bs idy was n ot t h e b us in es s of t he as s es s e e b ut t he s c h em e o f th e C en tr al G ov er n m en t. I t c o ul d n ot be tr e at e d as pr of i ts of t h e u nd er t ak i ng f or p ur p os es of s ec t io n 8 0- I A . "
It is clear that transport subsidy cannot be considered for the purpose of deduction u/s 80IA/80IB because the same is not derived from industrial undertaking. Therefore we recall our decision in respect of ground no. 2 to 4 which was decided 4 vide para 4 to 6 by the Tribunal. Para 4 to 6 of the order in ITA No. 977/Chd/2007 are substituted vide following para: "We find that Hon'ble Himachal Pradesh High Court in respect of freight subsidy has held in case of 327 as under:
" He l d, a ll o w in g t h e ap pe a l, t ha t t h e tr a ns p or t s u bs idy r ec e iv e d by th e as s es s e e w as n ot a pr o f it d er iv e d fr o m bus i n es s s inc e it w as no t a n op er at i on a l pr of i t. Th e s o ur c e o f th e s ubs i dy was n o t t h e bus i n es s o f t he as s es s e e bu t t he s c h em e of t h e C en tr a l G ov er n m en t. It c o u ld no t be tr ea te d as pr o f its o f t h e u n der t ak i n g for p ur p os es o f s ec ti o n 8 0- I A . "
Following the above we hold that freight subsidy is not entitled for deduction u/s 80IA/80IB and accordingly ground no. 2 to 4 are dismissed."
In view of above, Misc application of the Revenue is allowed. 4 In the result, Misc. Application of the Revenue is allowed.
Order pronounced in the open court on 29.1.2014 Sd/- Sd/-
(SUSHMA CHOWLA) (T.R. SOOD)
JUDICI AL MEMBER ACCOUNTANT MEMBER
Dated : 29.1.2014
SURESH
Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/The DR