Income Tax Appellate Tribunal - Chandigarh
Dcit, Chandigarh vs Ansysco, Chandigarh on 16 December, 2016
1
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.486/Chd/2016
(Assessment Year : 2012-13)
The D.C.I.T., Vs. M/s Ansysco, Sunrise Complex,
Circle I(1), SCO 74-75, Sector 8-C
Chandigarh. Chandigarh.
PAN: AACFA7228C
(Appellant) (Respondent)
Appellant by : Shri S.K. Mittal, DR
Respondent by : S/Shri Hardayal Singh
& Rohit Gupta
Date of hearing : 16.11.2016
Date of Pronouncement : 16.12.2016
O R D E R
PER ANNAPURNA GUPTA, A.M. :
This appeal has been filed by the Revenue against the order of learned Commissioner of Income Tax (Appeals)-I, Chandigarh dated 29.2.2016 for assessment year 2012-13.
2. Ground No.1 raised ,being General in nature needs no adjudication.
3. Ground No. 2 raised by the revenue reads as under:
1. On the facts and in the circumstances of the case and 2 in law, the Ld.CIT(A) has erred in allowing deduction u/s 80IC without appreciating the fact that-
a) The assessee has simply undertaken packaging of DGX Compound, Standardization, of coolant and formulating of PVC.
b) In the process undertaken by the assessee, there is no change in the product and the activity of the assessee does not fall within the parameters of the definition of word 'manufacture'.
5. In this ground the revenue has challenged the allowance of deduction under section 80IC of the Act by the CIT(A),to the assessee on the manufacturing activity undertaken by it.
6. Brief facts relating to the issue are that the assessee is engaged in the business of manufacturing and selling of Coolant, PVC compound, and Expansion Bottle Kits. The manufacturing facility of the assessee is located at Parwanoo and the assessee was entitled to benefits under section 80IA of the Income Tax Act, 1961, from assessment year 1996-97 onwards in respect of profits from the business of manufacturing Coolant, PVC compound and Sealants. In the year 2003 the assessee undertook substantial expansion of its manufacturing facilities making it eligible to claim deduction under section 80IC of the Act. This is the 9th year of claim of the assessee. During assessment proceedings the AO discussed the manufacturing activities in respect of the 3 various products made by the assessee and disallowed the entire deduction under section 80IC claimed by the assessee by holding that the assessee was not engaged in any manufacturing activity. The relevant findings of the AO are at para 5-5.4 for of his order. Ld.CIT (Appeals) allowed the assessee's appeal by following the decision of the ITAT in the assessee's own case in the preceding year, i.e. assessment year 2011-12.
7. Aggrieved by the same the revenue filed the present appeal before us.
8. Before us Ld.AR argued that in all earlier years the claim of the assessee had been allowed either by the AO or the CIT(A) and further upheld by the ITAT. Ld. AR stated that in the first year of claim i.e. A.Y. 2004-2005, the claim was duly accepted by the Assessing Officer. Ld.AR thereafter stated that from assessment year 2008- 09 to assessment year 2011-12 the claim under section 80IC had been denied to the assessee but in all the years the issue had been decided in assessee's favour both by the CIT (Appeals) and the Hon'ble ITAT. Ld.AR therefore stated that there was no basis for making the disallowance in the impugned year.
9. Ld.DR on the other hand relied upon the order of the Assessing Officer.
4
10. We have heard the rival submissions and perused the orders of the authorities below as also the documents placed before us.
11. We find no infirmity in the order of the CIT (Appeals) upholding the assessees claim to deduction under section 80IC of the Act, since the assessee's claim has been allowed from year to year. The ITAT while deciding the issue in the preceding assessment year i.e. assessment year 2011-12 had held that the claim of the assessee having been allowed from year to year and no change in the fact situation having been brought to light by the revenue there was no reason to disallow the claim in the present year also. The relevant findings of the ITAT at paragraph 13 of its order is as under:
"13. We find that this issue has already been decided by the Hon'ble I.T.A.T. in favour of the assessee in AY 2008-09, 2009-10 and 2010-11. The Hon'ble ITAT in its order for AY 2009-10 in the assessees case in ITAT No.910/Chd/2012, held as follows in para 9-10 of its order:
9. We hove heard the rival contentions and perused the record. The assessee is engaged in the manufacture and sale of coolent and PVC compound and car care products. The manufacturing unit of the assessee is located at Parwanoo, Himachal Pradesh. The assessee had claimed deduction under section 80IC of the Act on account of income earned from carrying on its manufacturing activities 5 and also from job work. This the fifth year of claim of deduction under section 80IC of the Act. The first year of claim of the assessee vis-a vis deduction under section 80IC of the Act was assessment year, 2005-06, The Assessing Officer had allowed the claim of the assessee by holding the assessee to be eligible for exemption under section 80IC of the Act in relation to the income earned from carrying on its manufacturing activities. However, the claim of the assessee vis-a-vis on account of under section 80IC of the Act on job work was disallowed by the Assessing Officer, against which the assessee went in appeal before the Tribunal. The appeal of the assessee in ITA No.883/Chd/2006 relating to assessment year 2005-06 was allowed by the Tribunal vide order dated 17.9.2009 under which the manufacturing process undertaken by the assessee was considered in paras 11 and 12 and vide para 13 it was held that the activity in relation to DGX amounts to manufacturing and therefore, the resultant income earned by the assessee was eligible for deduction under section 80IC of the Act. The Tribunal also vide para 6 observed that the assessee had clarified that the claim of deduction under section 80IC of the Act in respect of manufacturing activities carried on by the assessee. The claim of the assessee of deduction under section 80IC of the Act in relation to income earned from undertaking job work for supplying DGX cartridge was held to be allowable. Further the 6 Tribunal in ITA No No.120/Chd/2011 and ITA No. 255/Chd/201I relating to assessment year 2007-08 in cross appeals filed by the assessee and Revenue, vide order dated 2 1 . 6 . 2 0 1 1 had allowed the claim of deduction under section 80IC of the Act both on job work charges and part of other income. The Tribunal in ITA No. 532/Chd/2012 relating to assessment year 2008-09 vide order dated 30.07.2012 in the appeal filed by the revenue had further allowed the claim of deduction under section 80IC of the Act both on manufacturing, job work charges and part of other income.
10. We find that in the present appeal before us the first issue raised by the Assessing Officer was in respect of deduction under section 80IC of the Act on the profits earned by the assessee from carrying on its manufacturing activities. In view of the claim of the assessee being allowed from year to year we find no merit in the stand of the Assessing Officer in the present year in the absence of any change in the fact situation. We are in agreement with the order of the CIT (Appeals) in this regard.
In view of the claim of the assessee having been allowed from year to year we find no merit in the appeal filed by the Revenue in the absence of any change in the fact situation."
12. In view of the above and in view of the fact that no change in the fact situation has been brought to our notice by the revenue we are an agreement with the order 7 of the CIT( appeal) in this regard, and uphold the assessee's claim to deduction under section 80 IC on the manufacturing activity carried out by it in this year also. This ground of appeal raised by the revenue is therefore dismissed.
13. Ground No. 3 raised by the revenue reads as under:
"3. O n t h e f a c t s a n d i n t h e c i r c u ms t a n c e s o f t h e c a s e a n d i n l a w t h e L d . C IT ( A ) h a s e r r e d i n a l l o wi n g d e d u c t i o n u n d e r s e c t i o n 8 0 I C o n i n c o me from job wo r k mo r e so wh e n the activity been carried out by the assessee was nothing but packaging.
14. In this ground the revenue has challenged the allowance of deduction under section 80IC on income from job work earned by the assessee.
15. Brief facts relating to the issue are that the AO denied the assessee deduction under section 80 IC on the job work income earned, by holding that it did not involve any manufacturing activity as no new article or thing was produced and as was held in the previous years also. The AO also observed that since Revenue had preferred appeal before the Hon'ble Punjab and Haryana High Court on this issue for the assessment year 2007-08 and assessment year 2008-09, to keep consistency on this issue, addition was made in the impugned year also. The relevant findings of the AO are there at para 3.2 to 3.11 of the Assessment 8 Order. Ld. CIT(A) allowed the claim of the assessee following the decision of the ITAT for assessment year 2011-12 which in turn had based its decision on its earlier decisions for assessment year 2007-2008 and assessment year 2008 2009.
16. Aggrieved by the same the revenue filed the present appeal before us.
17. Before us Ld. AR contended that this issue had been decided in favour of the assessee in earlier years by the Hon'ble ITAT in assessee's own case.
18. Ld.DR on the other hand relied upon the order of the AO.
19. We have heard the rival submissions and carefully perused the material available on record.
20. We find that this issue has been decided by the ITAT in favour of the assessee in assessment year 2005- 2006, 2007-2008 , 2008-2009 and 2011-2012. The Hon'ble ITAT in its order for assessment year 2011-2012 in the assessees' case in ITA No. 1106/CHD/2014 held at para 21 & 22 of its order as follows:
"21. We find that disallowance of deduction u/s 80IC on job work income was for the first time made in Assessment year 2005-06 which was allowed in appeal before the Tribunal in ITA No. 883/Chd/2006 vide order dt. 17/09/2009. In the impugned order the manufacturing process undertaken by the assessee was considered in 9 para 11&12 and vide para 13 it was held that the activity in relation to DGX amounts to manufacturing and therefore the resultant income earned by the assessee was eligible for deduction under section 80IC of the Act. Further the Tribunal in ITA No.l20/Chd/2011 and ITA No.255/Chd/2011 relating to assessment year 2007-08 in cross appeals filed by the assessee and Revenue, vide order dated 21.6.2011 had allowed the claim of deduction under section 80IC of the Act on job work charges. Further deduction u/s 80IC was also allowed on insurance claim received and scrap sale, holding the same to be directly attributable to the activities of the business unit. Further The Tribunal in ITA No. 532/Chd/2012 relating to assessment year 2008-09 vide order dated 30.07.2012 in the appeal filed by the revenue allowed the claim of deduction under section 80IC of the Act both on manufacturing, job work charges, insurance claim and scrap sale.
22. In view of the claim of the assessee having been allowed from year to year we find no merit in the appeal filed by the Revenue."
21. In view of the claim of the assessee having been allowed from year to year and in view of the fact that no change in the fact situation has been brought to our notice by the Revenue we find no merit in the present ground raised by the Revenue.
22. This ground of appeal raised by the Revenue is therefore dismissed.
23. Ground No. 4 raised by the revenue reads as under:
10
" 4 . O n t h e f ac t s a n d i n t h e c i r c u ms t a n c e s o f t h e c a s e a n d i n l a w , L d . C IT ( A ) h a s e r r e d i n a l l o wi n g d e d u c t i o n u n d e r s e c t i o n 8 0 I C o n o t h e r i n c o me such as scrap sale, insurance claim, f oreign exchange f luctuation and credit balance wh e n t h e s e i n c o me s we r e n o t d e r i v e d i n t r u e s e n s e from the business of the eligible undertaking.
24. In this ground the revenue has challenged the allowance of deduction under section 80IC on scrap sale, insurance claim, foreign exchange fluctuations and credit balance written back. Brief facts relating to the issue are that the assessee claimed deduction u/s 80IC on other income which included scrap sale, insurance claim, foreign exchange fluctuations and credit balance written back. The Assessing Officer denied the same holding that they could not said to be derived from industrial undertaking of the assessee. The AO held that similar additions had been made in the previous year also and since revenue had preferred appeal before the Hon'ble Punjab and Haryana High Court on this issue for the assessment year 2007-2008 and assessment year 2008- 2009, to keep consistency, the addition was made in this year also. Ld. CIT(A) allowed the assessee's claim for deduction under section 80IC on scrap sales and insurance claim, following the decision of the ITAT in the assessee's own case for assessment year 2011-2012. As for the assessee's claim for deduction under section 80IC on foreign exchange fluctuation the Ld. CIT(A) allowed the same following the decision of the ITAT Chandigarh bench 11 in the case of JCBL India Pvt. Ltd in ITA No. 368/CHD/2012 dated 15.06.2015. The credit balance of parties written back was allowed by the Ld.CIT(A) following the order of the ITAT in the assessee's own case for assessment year 2007-2008 in ITA No. 120 and 255/CHD/2011.
25. Aggrieved by the same the Revenue file the present appeal before us.
26. Before us Ld.AR relied on the order of the CIT(A) while the Ld.DR relied on the order of the Assessing Officer.
27. We have heard the rival contentions and perused the orders of the authorities below as also the documents placed before us. We find no infirmity in the order of the Ld.CIT(A). The claim of the assessee for deduction under section 80 IC with regards to scrap sales, insurance claim and credit balance written back has been allowed from year to year and since no change in the fact situation has been brought to our notice by the Ld.DR there is no reason to disturb the findings of the Ld.CIT(A) in this regard. The assessee's claim for deduction under section 80IC on insurance claim and scrap sales has been allowed by the ITAT in assessment year 2007-2008, assessment 2008-2009 and in A.Y. 2011-2012. The relevant findings of the ITAT in assessment year 2011-12 at para 21 of its order are as under:
12
"21. We find that disallowance of deduction u/s 80IC on job work income was for the first time made in Assessment year 2005-06 which was allowed in appeal before the Tribunal in ITA No. 883/Chd/2006 vide order dt. 17/09/2009. In the impugned order the manufacturing process undertaken by the assessee was considered in para 11&12 and vide para 13 it was held that the activity in relation to DGX amounts to manufacturing and therefore the resultant income earned by the assessee was eligible for deduction under section 80IC of the Act. Further the Tribunal in ITA No.l20/Chd/2011 and ITA No.255/Chd/2011 relating to assessment year 2007-08 in cross appeals filed by the assessee and Revenue, vide order dated 21.6.2011 had allowed the claim of deduction under section 80IC of the Act on job work charges. Further deduction u/s 80IC was also allowed on insurance claim received and scrap sale, holding the same to be directly attributable to the activities of the business unit. Further The Tribunal in ITA No. 532/Chd/2012 relating to assessment year 2008-09 vide order dated 30.07.2012 in the appeal filed by the revenue allowed the claim of deduction under section 80IC of the Act both on manufacturing, job work charges, insurance claim and scrap sale."
28. Following the same we hold that the assessee's claim having been allowed from year to year there is no merit in the present ground raised by the revenue vis a vis claim of deduction under section 80IC on scrap sales and insurance claim received by the assessee.
29. With regards to claim of deduction under section 80IC on credit balance written off we find that identical claim was allowed by the ITAT in the assessee's own case in assessment year 2007-2008 wherein at para 13 of the order the ITAT held as follows:
13
"13. Coming to the facts before us and following the ratio laid down by the Ahmedabad Bench of the Tribunal in Arvind Fashions Ltd. Vs. ACIT (supra) we hold that the interest income received by the assessee is not eligible for deduction under section 80IC of the Act. However, the amount received on scrap sale, the credit balance written off of parties, insurance claim received towards material damage during transit is directly attributable to the activities of the industrial unit and hence eligible for deduction under section 80IC of the Act. However, the assessee is not entitled to the deduction claimed under section 80IC of the Act on the misc. income received being refund of security deposit and the insurance claim on machinery repairs. In view thereof we direct the Assessing Officer to recompute the deduction allowable under section 80IC of the Act. The ground No.1 raised by the assessee is partly allowed."
30. Following the same we allow the claim of the assessee for the current year also since no change in the fact situation has been brought to our notice by the Ld.DR.
31. As for the assessee's claim for deduction under section 80 IC on foreign exchange fluctuation received we find that the CIT(A) allowed the assessee's claim following the decision of the ITAT in the case of JCBL Ltd in ITA No. 368/CHD/2012 dated 15.06.2015 wherein following the decision of the Bombay High Court in the case of CIT vs Rachna Udyog ( 2010) 230 CTR 72 the issue was decided in favour of the assessee. The relevant findings of the ITAT in the case of JCBL India Ltd at para 8 to 12 of the order are as under:
14
"8. Ground No.3 reads as under :
"3. That the Learned C.I.T.(A) has erred in s u s t a i n i n g t h e d i s a l l o wa n c e o f r e b a t e u / s 80IC Rs.8,22,196/- on account of Exchange Rate Fluctuations."
9. The assessee has claimed income of Rs.8,00,196/- on account of foreign exchange fluctuation. T he Assessing Off icer did not allo w d e d u c t i o n u n d e r s e c t i o n 8 0 I C o f t h e I n c o me T a x A c t , 1 9 6 1 ( i n s h o r t ' t h e A c t ' ) o n t h e i n c o me o n account of f oreign exchange f luctuation and the s a me wa s a d d e d t o t h e t a x a b l e i n c o me o f t h e assessee.
10. O n a p p e a l , t h e l e a r n e d C IT ( A p p e a l s ) upheld the order of the Assessing Off icer and hence, the assessee is in appeal bef ore the Tribunal.
11. I have heard the rival submissions. The issue in hand is squarely covered in f avour of the assessee and against the Revenue by the d e c i s i o n o f t h e H o n ' b l e B o mb a y H i g h C o u r t i n t h e case of C IT V s . R a c h n a U d y o g ( 2 0 1 0 ) 2 3 0 C T R ( B o m ) 7 2 wh e r e i n t h e H o n ' b l e H i g h C o u r t h e l d a s under :
"5. Having heard the learned counsel appearing on behalf of the appellant and learned c o u n s e l a p p e a r i n g f o r t h e a s s e s s e e , we a r e of the vie w th at the d if f erence on account of exchange rate fluctuation is liable to be a l l o we d u n d e r s . 8 0 - I B . The exchange rate fluctuation arises out of and is directly related to the sale transaction involving the export of goods of the industrial 15 undertaking. The exchange rate f luctuation b e t we e n t h e r u p e e e q u i v a l e n t o f t h e v a l u e o f the goods exported and the actual receipts wh i c h a r e r e a l i z e d a r i s e s o n a c c o u n t o f t h e sale transaction. The diff erence arises purely as a result of a f luctuation in the rate o f e x c h a n g e b e t we e n t h e d a t e o f e x p o r t a n d the date of receipt of proceeds, since there is no variation in the sale price under the contract. T h e v i e w wh i c h we h a v e t a k e n i s also consistent with the vie w taken by a Division Bench of this Court on 15th Dec., 2009 in the case of Syntel Ltd. (IT Appeal Nos.1974, 1976 and 1978 of 2009). In the c i r c u ms t a n c e s , we wo u l d af f i r m the j u d g me n t of the Tribunal i n s o f ar as the question of exchange rate f luctuation is concerned."
12. From the above, it is clear that the Hon'ble High Court has categorically held that the exchange rate f luctuation arises out of and is directly related to the sale transaction involving the export of goods of the industrial undertaking and, theref ore, dif f erence on account of exchange rate f luctuation is entitled to deduction under s e c t i o n 8 0 I B o f t h e A c t . N o c o n t r a r y d e c i s i o n wa s brought to my notice. R e s p e c t f u l l y f o l l o wi n g t h e j u d g me n t o f t h e H o n ' b l e B o mb a y H i g h C o u r t i n the case of C IT V s . R a c h n a U d y o g ( s u p r a ) , I h o l d th at the d if f erence on account of exchange rate fluctuation is entitled to deduction under section 80IC of the Act. T his ground of appeal is a l l o we d .
32. Since in the present case also it is not disputed that the foreign exchange fluctuations relate to the export 16 activity carried out by the assessee, the foreign exchange fluctuation earned by the assessee is to be treated as its trading receipts/receipts from the manufacturing activity carried out by it and thereby entitling the assessee to claim deduction under section 80IC on the same. In view of the above we find no infirmity in the order of the CIT(A)allowing the assessee's claim of deduction under section 80IC on the foreign exchange fluctuation received.
33. In view of the above we hold that the assessee is entitled to claim deduction under section 80IC on scrap sales, insurance claim, credit balances written back and foreign exchange fluctuations earned. The ground of appeal raised by the revenue is therefore dismissed.
34. In effect the appeal of the revenue is dismissed.
Order pronounced in the open court.
Sd/- Sd/-
(BHAVNESH SAINI) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 16 t h December, 2016
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh