Income Tax Appellate Tribunal - Chandigarh
Euro Containers, , Chandigarh vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'A' CHANDIGARH
BEFORE MS SUSHMA CHOWLA, JUDICIAL MEMBER
AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER
ITA No. 73/CHD/2010
Assessment Year: 2004-05
ACIT, Central Circle-II, V M/s Euro Containers,
Chandigarh. 70, Industrial Area,
Phase-1, Chandigarh.
PAN: AAAFE-9069R
&
CO No.16/CHD/2010
In ITA No.73/Chd/2010
M/s Euro Containers, V ACIT, Central Circle-II,
70, Industrial Area, Chandigarh.
Phase-1, Chandigarh.
Department by: Shri N.K.Saini
Assessee by: Shri Amrinder Singh
D a t e o f H e a r i ng : 3 0. 0 8 . 2 0 11
D a t e o f P r o n o u nce m e n t : 30 . 0 8 . 201 1
ORDER
Per Mehar Singh, AM
The appeal filed by the Revenue and the Cross Objection filed by the assessee are directed against the order passed by the CIT(A) on 16.10.2009 relating to assessment year 2004-05.
2. In the appeal, the Revenue has raised the following Grounds of Appeal :
"1. The ld. CIT(A) has erred both in law and on f acts of the case in allo wing the assessee's cl aim of deduction u/s 80IB on job work done by it whereas the main activity of the assessee is manuf acturing of plastic drums which alone entitles it to deduction u/s 80IB.2
2. The ld. CIT(A) has erred both in law and on f acts of the case in holding that the assessee is eligible for deduction u/s 80IB on rebate on purchases of Rs.3,73,436/-
3. In the Cross Objection, the assessee has raised the following Grounds of Appeal :
"1. That the order passed by the ld. CIT(A) Ludhiana is contrary to l aw and f acts of the case.
2. That in the f acts and circumstances of the case the ld. CIT(A) gravely erred in upholding the action of the ld. AO in disallo wing deduction under Section 80IB in respect of additional income surrendered under Section 133A by the assessee industrial undertaking. The industrial undertaking had no other source of income except f or manuf acturing."
4. Now we are taking up the appeal filed by the Revenue. In the first Ground of Appeal, the revenue contended that the CIT(A) erred in allowing the assessee's claim u/s 80IB of the Act on job work done. The ld. DR placed reliance on the assessment order while stating that the issue is covered by the decision of the Hon'ble Punjab & Haryana High Court. Ld. AR supported the decision of the ld. CIT(A) and also vehemently contended that the issue is squarely covered by the decision of the jurisdictional High Court in the case of CI T, Ludhiana V Impel Forge & Allied Industries Ltd. (2009) 183 Taxman 38 (P&H).
5. We have carefully perused and considered the rival submissions, facts of the case and the order passed by the lower authorities. On appreciation of the factual and legal position of the case, we are of the considered opinion that the 3 issue of allowance of deduction u/s 80IB of the Act in respect of job charges is squarely covered by the decision of the jurisdictional High Court. The ld. CIT(A), after appreciation of the submissions filed by the assessee concluded the issue in favour of the assessee. It is pertinent to reproduce the said findings hereunder :
"4.2 On the issue of job charges as to whether deduction u/s 80IB is allo wable or not, Hon'ble Punjab & Haryana High Court has recently held in the case of CIT-I Ludhiana vs. Impel Forge & All ied Industries Ltd. (2009) 183 Taxman 38 (P&H) that the assessee is at l iberty to do manuf acture for itself or for others which makes no diff erence f or the purpose of Section 80IB of the Act. Relevant para of the judgement reads as under :
"5. Ref erence to Section 80IB of the Act sho ws that only requirement for its applicability is deriving of income f rom business ref erred to in sub-Section (3) to (11), (11A) and (11B) of the Act, apart f rom other conditions with which we are not concerned. It is not the case of the revenue that the business of the assessee does not f all under sub-sections (3) to (11), (11A) or (11B) of the Act. The assessee is at liberty to do manuf acture f or itself or f or others, which makes no diff erence f or the purpose of Section 80IB of the Act. The Tribunal has also relied upon simil ar vie w taken by Delhi High Court in CIT v. Northern Aromatics Ltd. (2005) 196 CTR (Delhi) 479."
4.3 Follo wing the above judgement, I hold that job work income is f rom the manuf acturing activity and the same is el igible f or deduction under Section 80IB. Hence, this Ground of Appeal is allo wed."
6. In view of the above discussion, this Ground of Appeal raised by the revenue is dismissed.
4
7. In Ground No.2, the Revenue contended that the CIT(A) was wrong in upholding that the assessee is eligible for deduction u/s 80IB of the Act on rebate on purchases of Rs.3,73,436/-. The ld. DR placed reliance on the assessment order whereas the ld. AR for the assessee supported the findings of the ld. CIT(A).
8. We have carefully perused the fact situation of the case, rival submissions and found that rebate on purchases affects the cost structures of the assessee. Thus, by reducing the cost of purchases, it enhanced the profit of the assessee. In view of this, the rebate on purchases is inextricably linked to the deduction of cost of purchases and manufacturing activity of the assessee. The rebate aspect on purchases cannot be artificially separated and considered in isolation. The findings of the CI T(A) are reproduced hereunder :
"4.6 As regards the rebate on purchases, the rebate on purchases goes to reduce the manuf acturing cost of the appellant and the same is directly l inked to the manuf acturing activity. Theref ore, I hold that the appellant is eligible f or deduction u/s 80IB on rebate on purchases of Rs.3,73,436/- and the AO is accordingly directed to allo w the deduction under Section 80IB on this amount."
9. Having regard to the discussion, we do not find any ground to interfere with the findings of the ld. CIT(A) and hence, the same are confirmed.
10. Ground Nos. 3 & 4 of the appeal of the Revenue are general in nature and hence, no separate adjudication is 5 required. Consequently, the appeal of the Revenue is dismissed.
11. Now we would discuss the Cross Objection raised by the assessee. The substance of the three Cross Objections raised by the assessee revolves around the factum that the assessee is eligible for deduction u/s 80IB of the Act in respect of additional income surrendered by the assessee in the course of survey operation u/s 133A of the Act. In the course of proceedings before the Bench, the AR contended that the impugned surrendered income represents not only business income but the income derived from such business activities undertaken by the assessee. Therefore, such surrendered income is eligible for deduction u/s 80IB of the Act. Ld. DR, on the other hand, pointed out that the identical issue is covered by the decision of the Chandigarh Bench in the case of ACIT V Arora Fabrics Pvt.Ltd. (2008) 171 Taxman 113 (Chd).
12. We have carefully perused the rival submissions and contents of the Cross Objections raised by the assessee. The expression derived from is judicially defined in numerous decisions of the Hon'ble Apex Court and various High Courts. The assessee is eligible in respect of such profit which sprouts from the industrial undertaking itself and not in respect of profit which emanates from undisclosed income surrendered in the course of survey operations. The identical issue has been covered in the decision of Chandigarh Bench of the Tribunal in ACIT V Arora Fabrics Pvt.Ltd. (supra) and jurisdictional High Court in the case of National Legguard 6 Works V CIT (Appeals) (2007) 288 ITR 18 (P&H). Findings of the ld. CI T(A) on the issue in question are reproduced hereunder:
"In the case of ACIT V Arora Fabrics Pvt.Ltd. (2008) 171 Taxman 113 (Chd)(Maj), the f acts of the case were that the assessee company was carrying on the business of manuf acturing of knitted cloth. A survey under Section 133A was carried out at the premises of the assessee by the department wherein the assessee company surrendered an income of Rs.52.50 lacs. Subsequently, the assessee company claimed that the surrendered amount was its business income eligible f or deduction under Section 80IB. Ho wever, the AO did not allo w the deduction under Section 80IB on the surrendered amount. The Hon'ble jurisdictional Tribunal on these f acts held that as the assessee had not substantiated its claim with documentary evidence that the surrendered amount was earned f rom manuf acturing activity or was derived f rom industrial undertaking, deduction under Section 80IB could not be allo wed on the surrendered income."
13. The issue is also squarely covered by the decision of the jurisdictional High Court in the case of National Legguard Works (supra). The relevant para of the said decision is reproduced hereunder :
"Export - Special deduction under Section 80HHC- Amount surrendered by assessee af ter survey operations disclosed excess stock - Burden on assessee to prove amount represented export prof its - Burden not discharged - Assessee not entitled to special deduction under Section 80HHC in respect of such amount - Income-tax Act, 1961, ss. 80 HHC, 133A."7
14. Having regard to the legal and factual discussions, we are of the considered opinion that the contentions raised by the assessee in the impugned Cross Objections cannot be accepted and hence, the same are dismissed.
15. In the result, both the appeal of the Revenue and Cross Objection of the assessee are dismissed.
Order pronounced in the Open Court on 30 t h August, 2011.
Sd/- Sd/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30 t h August,2011 'Poonam' Copy to: 1. The Appellant, 2. The Respondent, 3. The CIT(A), 4. The CIT
5. The D.R, Income-tax Department, Chandigarh Assistant Registrar, ITAT, Chandigarh