Income Tax Appellate Tribunal - Panji
Shaiv Distilleries Pvt. Ltd., Panaji vs Department Of Income Tax on 14 August, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
PANAJI BENCH, PANAJI
BEFORE SHRI P. K. BANSAL, HON'BLE ACCOUNTANT MEMBER
AND SHRI D.T. GARASIA, HON'BLE JUDICIAL MEMBER
ITA No.179/PNJ/2014
(Assessment Year-2009-10)
The Asst. Commissioner of Income Vs. M/s. Shaiv Distilleries (P) Ltd,
Tax, Circle- 2(1), Panaji, Goa. Plot No. 101-104,
(Appellant) Bicholim Indl Estate,
Bicholim-Goa.
PAN:AAHCS7846N(Respondent)
Appellant by : Shri B.Barthakur, Ld. DR
Respondent by : Shri Sham J. Kamat, CA
Shri Chinmay S. Kamat, CA
Date of Hearing : 07/08/2014
Date of Pronouncement : 14/08/2014
ORDER
PER: D.T. GARASIA This appeal has been filed by the department against the order of CIT(A)- Panaji, dated 14.02.2014 for the Assessment Year 2009-10.
2. The grounds are raised by the department which read as under:
"1. The order of Ld.CIT(A) has erred in holding that blending and bottling amounts to manufacture in terms of section 80IB(2)(iii).
2. The Ld CIT(A) has erred in not considering that sales tax incentive is in the nature of duty draw back and the Supreme Court decision in the case of Liberty India Vs. CIT squarely applies to the facts of the assessee‟s case as sales tax incentive is incentive profit and the same is not eligible for 80IB benefit."
2. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
2.1. Ground No. 1:- The assessee company is engaged in the business of Blending and Bottling of IMFL. The assessee claimed deduction u/s 80IB @ 30% of the profit derived from business. The AO denied the claim of the assessee u/s 80IB with the following concluding remarks.
From the discussion above, the following facts emerge:
The assessee carries on blending and bottling of Royal Stag Whisky, Imperial Blue Whisky and Three Kings Brandy, as per the labels printed on the finished product by the assessee itself.
The raw material used by the assessee is Vatted Malt spirit/CAB or concentrate of alcoholic beverage. The alcoholic beverage is whisky/brandy.
The concentrated whisky/brandy is diluted further by addition of water, the alcohol content is then increased by adding spirit and given colour by caramel. Therefore the process carried on by the assessee is blending of different types of alcohol with water.
Alcohol of different qualities is the raw material of the assessee along with water. Vatted Malt spirit/CAB (whisky/brandy) is of superior quality and grain neutral spirit is of a lower quality. Both these are blended together with water. The blending does not require any other means of change such as malting, fermentation, heating, vaporizing, distillation etc. The end result is whisky/brandy having a particular blend.
Blending is not a manufacturing activity and various courts including the Apex court have held that blending is only a processing activity. It cannot be termed as manufacture / production.
The process of creating whisky/brandy from barley/wheat/grapes can be termed manufacturing since an entirely new commodity is produced. However
3. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
the assessee is only blending different types of alcohol and cannot be said to carry on manufacture/production. It can claim itself to blend IMFL.
As the facts and circumstances of the case for the year under consideration being the same as in earlier year, the assessee's claim of deduction u/s. 80IB is disallowed in consonance with the stand taken in earlier years.
2.2. The matter carried to CIT(A) and CIT(A) has allowed the claim by observing as under:
"6. Thus, it can be seen from the assessment order that the disallowance is repetitive in nature and has been done in earlier years as well. During the course of appellate proceedings, the learned counsel of the appellant filed written submission and claimed that this issue has already been decided by the CIT (A) and Hon‟ble ITAT in favour of the appellant for earlier years. The Hon‟ble ITAT decided the issue for A.Yr. 2003-04 to 2005-06 in ITA Nos 111,112 and 113/PNJ/2008 with the following concluding remarks:
"We have carefully considered the rival submissions and perused the record. Though having regard to the spirited arguments advanced by both the parties eloquently on the issue, depicting their specialized knowledge on the process followed in conversion of pure alcohol liquor into IMFL meant for human consumption under particular brand names, it may not be necessary for us to dwell into each aspect in detail having regard to the fact that all the contentions were referred to in the order passed by the learned CIT(A) since the view taken by the learned CIT(A) is in consonance with the view taken by the Hon‟ble Madras High Court and in the absence of a contrary decision of any other High Court, we are bound by the aforecited decision and thus we confirm the order of the learned CIT(A) and dismiss the appeal filed by the Revenue."
In view of the fact that the Hon‟ble ITAT has decided this issue in favour of the appellant, A.O. is directed to allow the claim of deduction u/s 80IB to the appellant. This grounds of appeal of the appellant are allowed.
2.3 We have heard the rival contention of both the parties. Looking to the facts and circumstances of the case, we find that the issue in controversy is covered by the assessee's own case in A.Y.2006-07 in ITA No. 90/PNJ/2009 wherein the Tribunal has allowed the claim of the assessee for assessment year
4. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
2006-07 and this A.Y. 2008-09. We find that in ITA No. 90/PNJ/2009 wherein the Tribunal has dismissed the department's appeal by observing as under:
"6. Having carefully heard the submissions of the rival parties and perusing the material available on record, we find merit in the plea of the Learned Counsel that the Tribunal in assessee‟s own case supra, while following the order of the Channai Bench of the Tribunal in Vinbros & Company (supra) in ITA Nos,2019 and 2020/Madras/2006, dated 23rd February 2007, which was upheld by the Hon‟ble Madras High Court, vide its order dated 29th October 2007 (Tax Case (Appeal) No.1361 and 1362/2007, has confirmed the order of the learned CIT(A) in allowing the assessee‟s appeal. We further find that, recently, the Hon‟ble Supreme Court in Vinbros & Company (supra), after admitting the appeal, has dismissed the civil appeal filed by the Revenue. In the absence of any contrary material placed on recorded by the Revenue, we respectfully following the above decisions hold that the activity carried on by the assessee are manufacturing activity eligible for deduction under section 801B of the Act and, accordingly, we are inclined to uphold the finding of the learned CIT(A) in allowing the deduction under section 801B of the Act. The grounds taken by the Revenue are, therefore, rejected.
7. In the result, Revenue‟s appeal stands dismissed."
We respectfully following the same, we dismiss the revenue's appeal on this ground.
3. Ground No. 2:- The assessee is enjoying Industries sales tax holiday for 15 years from the year of the operation under the scheme of Govt of Goa. The Scheme was introduced as incentive to establish the new units in state of Goa. The scheme was modified in the year 2003 and then in the year 2005 where the units which were enjoying 15 years sales tax holiday and which did not complete the exemption period were given benefit to retain 75% of the Vat liability and deposit 25% of the dues of Govt. of Goa for the balance period. The assessee has received sales tax incentive of Rs.4,58,64,698/- from the Commercial Tax Department as VATD-NPV-CPS2005 appearing in the Profit and Loss account under the head other income. The assessee claimed 80IB benefit on the above income treating them as income derived from industrial undertaking. The Assessing Officer was of the view that sales tax incentive is not a profit of industry and it was disallowed by observing as under:
5. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
"In the light of the above discussion, the sales tax incentive is in the nature of duty draw back and the Supreme Court decision in the case of Liberty India Vs. CIT squarely applies to the facts of the assessee‟s case. Sales tax incentive is incentive profit and the same is not eligible for 801B benefit in view of the Supreme Court decision referred above, in which it held that incentive profits are not profits derived from the eligible business u/s.80IB. Accordingly, sales tax incentive is to be reduced from the gross total income for computing the deduction u/s.80IB which was not done at the time of assessment. Hence, it is requested that the Hon‟ble CIT(A) may enhance the addition in the assessment order of the above said amount as income from other sources."
3.1. The matter carried to CIT(A) and CIT(A) has allowed the claim by observing as under:
"9. I have gone through the letter of the A.O. requesting for enhancement and the submission of the appellant. In this case, the assessee is collecting 100% of the sales tax from its customers and paying 25% to the Govt. of Goa, while retaining the balance amount for itself. The incidence of collection of sales tax is intricately connected to every sale made by the appellant and therefore is part of assessee‟s sales turnover and the same cannot be separated. The amount paid to the Govt. of Goa is an expense to the assessee. Since sales tax recovered is part of sales turnover, it is the income derived from the Industrial undertaking and therefore, in my opinion, the enhancement application filed by the A.O. cannot be sustained.
However, in para 13 of its submission, the appellant claimed that there has been an inadvertent mistake because of which excess claim amounting to Rs.3,558/- has been made by the assessee. The A.O. is directed to verify the claim of the assessee and then enhance the income to that extent. In the result, the appeal is allowed."
3.2 Learned DR submitted that the issue in controversy is covered by the decision of ACIT vs. M/s. Sri Mahalasa Power Rentals, ITA No. 54/PNJ/2013 wherein similar issue has been decided by this Tribunal and this order was the action of the Assessing Officer. The Assessing Officer has taken the contention that the Assessing Officer has filed a letter before the Commissioner for enhancing the income. On the ground that Industries are enjoying 100% sales tax holiday for 15 years from the year of operation under the scheme of Govt. of Goa. The scheme was introduced as incentive to establish the new units in State
6. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
of Goa. The scheme was modified in the year 2003 and then in the year 2005 where the units which were enjoying 15 years sale tax holiday and which did not complete the exemption period were given benefit to retain 75% of the Vat liability and deposit 25% of the dues of Govt. of Goa for the balance period. The assessee has also received sales tax incentive of Rs.4,58,64,698/- from the Commercial Tax Department as VATD-NPV-CPS2005 appearing in the Profit and Loss account under the head other income. The assessee claiming 80IB benefit on the above income treating them as income derived from industrial undertaking. The Tribunal has taken the view following the decision of Hon'ble Supreme Court in the case of Liberty of India vs. CIT reported in 317 ITR 218 wherein the Hon'ble Supreme Court has taken the view against the assessee although in respect of DEPB/ Duty Drawback benefit, but the principle laid down by the Hon'ble Supreme Court is applicable to the case of the assessee. Therefore, the assessment must be enhanced and CIT(A) is not justified in deleting the same.
3.3 Learned AR submitted before us that the assessee has received sales tax incentive from the Commercial Tax Department. The assessee has claimed this incentive as income derived from industrial undertaking but the in the case of Liberty India vs. CIT reported in 317 ITR 218(SC) wherein the Hon'ble Supreme Court has held that duty drawback is refund of excise duty already paid hence, it reduces the cost of production and therefore this source is covered within the first degree and hence, it is eligible for 80I deduction. The Supreme Court held that the immediate source of income for the duty drawback is the government policy and not the industrial undertaking. Therefore, this issue in controversy where assessee received the sales tax incentive is first degree, it is the Govt. benefit and it is not an industrial undertaking benefit, therefore, it is not a profit derive from the eligible business. Therefore, AO has requested for
7. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
enhancing the income following the decision. The learned AR has filed written submission which read as under:
"The Respondent states and submits that the contentions raised by the AO in the assessment order are not tenable in law and the order of the Learned CIT(A) does not require interference, for the following reasons without prejudice to one another:
1 The Respondent charges OUTPUT VAT to its customers and pays 25% of the OUTPUT VAT as reduced by INPUT VAT to the Govt of Goa. The case is not covered by any of the cases cited by the AO.
a. In STERLING FOODS case the assessee was engaged in processing prawns and other sea food, which it exported. It also earned some Import entitlements granted by the Central Government under an Export Promotion Scheme. The assessee was entitled to use the import entitlements itself or sell the same to others. It sold the import entitlements that it had earned to others. Its total income for the assessment year 1979-80 included the sale proceeds for such import entitlements and it claimed relief under section 8OHH of the Income--tax Act,1961, in respect of the sale proceeds of the import entitlements. In these facts and circumstances it was held that these entitlements received by the assessee were not derived from the industrial undertaking.
b. In PANDIAN CHEMICALS case the assessee received interest on the deposit kept with the electricity department. In these facts and circumstances it was held that interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking.
c. In LIBERTY INDIA case the assessee received benefits like DEPB benefits and duty draw back from the Govt . In these facts and circumstances it was held that Duty drawback receipts and DEPB benefits do not form part of the net profits of eligible industrial undertakings for the purpose of the deduction under section 80-I / 80-IA / 80--lB j. What is duty drawback or DEPB:- Section 75 of the Customs Act, 1962, and section 37 of the Central Excise Act, 1944, empower the Government of India to provide for repayment of customs duty and The refund is of the average amount of duty paid on materials of any particular class or description of goods used in the manufacture of export goods of specified class. The Rules do not envisage a refund of an amount arithmetically equal to customs duty or Central excise duty actually paid by an individual importer-cum-manufacturer. Sub-section (2) of section 75 of the Customs Act requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and also based on the facts situation relevant in respect of each of various classes of goods
8. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
imported. Basically, the source of the duty drawback receipt lies in section 75 of the Customs Act and section 37 of the Central Excise Act and not in the Undertaking.
ii. Liberty India decision was on account of cost of manufacture and not on account of sales turnover iii. Duty drawback, rebate, etc., (resulting from cost of manufacture) should not be treated as adjustment (credited) to the cost of purchase or manufacture of goods.
jv. As a corollary the rebate etc., resulting from sale should not be debited to the sales turnover.
2 Section 145A as introduced WEP 1/4/99 mandates that the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be-----
------------adjusted to include the amount of any tax-------- actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation and that any tax under any-------------law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment.
3 The section 145A thus mandates INCLUSIVE method of accounting (which treats tax collection and payments as trading receipts and trading expenses respectively) rather than EXCLUSIVE method of accounting (which treats tax collection and payments as liabilities and assets respectively) 4 Even prior to insertion of Section 145A, the Apex Court has held in CHOWRINGHEE SALES BUREAU P. LTD. V. COMMISSIONER OF INCOME- TAX 87 ITR 542 that the sum realised as sales tax formed part of its trading receipts and that the fact that the Respondent credited the amount received as sales tax under the head "sales tax collection account" did not make any material difference. It is the true nature and quality of the receipt and not the head under which it is entered in the account books as would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt. This ratio has been followed in numerous subsequent judgments.
5 The Respondent has followed EXCLUSIVE method of accounting (which is not in accordance with Sec 145A), by accounting for purchases, sales and opening and closing stocks NET OF VAT. Thus Vat collection and payment has been considered as liability or asset as the case may be, being a Balance Sheet Item. This has given rise to an amount credited to profit and loss account as GVATD-NPV-CPS2005 which has been wrongly thought of as "incentive" by the AO.
9. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
6 However for Income Tax Computation the Respondent (as also the AO) is required to mandatorily follow u/s 145A the INCLUSIVE method treating the Vat collection and payment as income or expense as the case may be, as revenue items. The Respondent has recast the accounts on INCLUSIVE basis and attached the same to this reply in which the three columns showing 1) the EXCLUSIVE method figures, 2) the adjustments necessary to make the accounts on INCLUSIVE method figures and 3) the resultant figures following INCLUSIVE method are shown. Your Honour will see that in this computation the amount of GVATD-NPVCPS2005 which has been taken as "incentive" by the AO does not appear at all. Hence there is no question of non-granting of deduction under Section 801B on the alleged basis of such non-existent imaginary incentive being of "second degree" nature.
7 The Respondent submits that the issue raised by the AO is covered in favour of the Respondent by [2012] 24 taxmann.com 86 (Delhi) ITAT, DELHI BENCH „A‟ in Aroma Chemicals a copy of which „judgement is annexed hereto. Paragraph 6.3 thereof reads:
6.3 "In the instant case before us, not only that the learned Departmental Representative did not demonstrate before us as to how the schemes relating to DEPB and duty drawback on one hand and Cenvat on the other, are similar, as observed by AO/CIT(A), she did not even dispute the facts that net impact of entries made by the assessee in the P&L a/c is nil and that the assessee did not receive any incentive on this account from the Government, as revealed from computation on pp. 3 and 4 of the paper book filed by the assessee."
and Paragraph 7 thereof reads :-
"In the light of view taken in the aforesaid decisions, especially when the net effect of the accounting methodology employed by the assessee, as revealed from calculations on pp. 3 and 4 of the paper book is that, it did not, in sum and substance, impact the derivation of profits and gains ascertainable for the purposes of deduction under s. 80- lB of the Act while the Revenue has not demonstrated before us as to how the Cenvat scheme is parallel to the scheme of DEPB or duty drawback, we have no hesitation in holding that the learned CIT(A) was not justified in upholding the disallowance of deduction under s. 80-lB of the Act made by the AO in relation to the Cenvat credit of excise duty"
8 The Respondent submits that the principles of VAT are analogous to those of CENVAT (as enunciated in the above decision) as the effect of the VAT entries cancels the impact of the so-called incentives.
9 The Respondent submits that there is a distinction between incentives such as duty draw back/DAPB on one hand and the VAT schemes on the other. In short Duty draw backs /DAPB are the incentives given by the State to compensate the assessee in respect of Duties incurred by them in the cost of production (the expenditure side) when the output is exported out of the country. Under Section 145A the assessee is
10. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
required to account for the duty incurred IN FULL (and not net) "notwithstanding any right arising as a consequence to such payment" meaning the duty drawback (right) which arises in consequences of payment of duty.
When the duty incurred is accounted in full the compensating incentive appears as income on the credit side of the profit and loss account, naturally.
10 On the other hand the assessee (in the inclusive method which is followed for income tax computation) has already accounted for the collection and payment of VAT IN FULL as required u/s 145A. Accounting of VAT IN FULL has the effect of disappearance of income from the credit side of the profit and loss account.
11 Thus the case of LIBERTY INDIA and the Respondent are diametrically opposite.
12 Without prejudice to the above, the Respondent submits that even if the GVATD NPV--CPS2005 is treated as income by itself the same has a first degree connection with the Industrial undertaking, as the same is the turnover of the sale proceeds of the Undertaking. Nothing is received by the Respondent from the State as incentive but only a part of the receipts in the nature of sales proceeds received from the customers. It is very important to note that the GVATD NPV-CPS 2005 scheme for the purposes of charging FULL VAT is not dependent upon any contingency or conditions, as far as the assessee is concerned, like export or the like, as is the case in Duty Draw Back. It is also necessary to mention that even if the Respondent had given composite bills (without showing the VAT separately in the invoice)of sale proceeds, the Respondent will be still entitled to pay 25% of the VAT calculated backwards for splitting the gross sales proceeds between NET SALES and VAT. Hence the VAT collected is nothing but a part of the gross sales proceeds and has a first degree connection with the Industrial Undertaking and is a revenue DERIVED FROM such undertaking.
13 In Tuticorin Alkalies 227 ITR 172 SC it is held that Principles of accountancy do not override provisions of tax statutes. In Liberty India‟s case the Apex Court has interpreted the AS2 in a manner consistent with Section 145 as under:
"The cost of purchase includes duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight in wards and other expenditure directly attributable to the acquisition (Quoted from AS2).
Hence, trade discounts, rebate, duty drawback, and such similar items are deducted in determining the costs of purchase. Therefore, duty drawback, rebate, etc., should not be treated as adjustment (credited) to the cost of purchase or manufacture of goods. They should be treated as separate items of revenue or income and accounted for accordingly. (see page 44 of the Indian Accounting Standards and GAAP by Doiphy D‟souza).
11. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
Therefore, for the purposes of AS-2, Cenvat credits should not be included in the cost of purchase of inventories. Even the Institute of Chartered Accountants of India (ICAI) has issued guidance note on accounting treatment for Cenvat/Modvat under which the inputs consumed and the inventory of inputs should be valued on the basis of purchase cost net of specified duty on in puts (i.e., duty recoverable from the Department at a later stage) arising on account of rebates, duty drawback, DEPB benefit, etc. Profit generation could be on account of cost cutting, cost rationalization, business restructuring, tax planning on sundry balances being written back, liquidation of current assets, etc. Therefore, we are of the view that the duty drawback, DEPB benefits, rebates, etc., cannot be credited against the cost of manufacture of goods debited in the profit and loss account for purposes of section 80-lA/80-IB as such remissions (credits) would constitute independent source of income beyond the first degree nexus between profits and the industrial undertaking."
Thus the view of the Apex Court is in consonance with Sec 145A as under:
a. Purchases should be accounted with full taxes, duties, cess without reducing any amount receivable back from the authorities (right) in respect of duties, taxes, cess etc. b. Sales should be accounted with full taxes, duties, cess without reducing any amount receivable back from the authorities (right) in respect of duties, taxes, cess etc c. Opening and closing stocks also shall be similarly accounted.
14 For the purposes of Income tax computation the Respondent has followed the above to the letter and spirit.
15 It is therefore prayed that the issue may be decided in favour of the Respondent by sustaining the order of the first appellate order."
3.4. We have heard the rival contention of both the parties. Looking to the facts and circumstances of the case, we find that the assessee has received sales tax incentive of Rs.4,58,64,698/- from the Commercial Tax Department as VATD-NPV-CPS2005 appearing in the Profit and Loss account under the head other income. The assessee claiming 80IB benefit on the above income treating them as income derived from industrial undertaking. We find that Hon'ble Supreme Court in the case of Liberty India vs. CIT (Supra) wherein the Hon'ble Supreme Court has held that immediate source of income is to be looked into
12. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
while allowing the deduction under 80IA deduction. The Assessee has claimed the sales tax incentive the first degree of source is Government policy and not the industrial undertaking. Therefore, the assessee received sales tax VAT incentives is the first degree and it is Govt. benefit and it is not industrial undertaking benefit, therefore, it is not a profit derived from eligible business. Therefore, we are of the view that the issue in controversy is covered by the decision of Hon'ble ITAT, Pnaji, Bench in the case of ACIT vs. M/s. Sri Mahalasa Power Rentals, ITA No. 54/PNJ/2013 wherein the Tribunal has decided the issue by observing as under:
"3. We have heard the rival submissions and carefully considered the same. So far as the issue relating to the interest on FDR is concerned, we find that the issue is duly covered by the decision of the Hon‟ble Supreme Court against the Assessee in the case of Pandian Chemicals Ltd. v CIT, 262 ITR 278 in which the Hon‟ble Supreme Court while considering the issue relating to the claim of deduction of the Assessee u/s 8OHHC held as under:
Head note:-
"The words "derived from" in section 8OHH of the Income-tax Act, 1961, must be understood as something which has a direct or immediate nexus with the assessee‟s industrial undertaking. Although ectricity may be required for the purposes of the industrial undertaking, the deposit tequired for its supply is a step removed from the business of the industrial undertaking.
Held accordingly, that interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking itself and was not profits or gains derived by the undertaking for the purpose of the special deduction under section 8OHH.
CIT v. Raja Bahadur Kamakhya Narayan Singh [1948] 16 ITR 325 (PC) and Mrs. Bacha F. Guzdar v. CIT [1955] 27 ITR 1 (SC) applied."
Therefore, in our opinion, this issue is no more res integra and we accordingly set aside the order of CIT(A) on this issue and allow the ground of the Revenue by restoring the order of the AO.
4. Now, coming to the issue in respect of eligibility of the claim of the Assessee u/s 801B in respect of Sales Tax incentive, we noted that this issue is does not have any direct linkage to the eligible undertaking. We, therefore, set aside the order of the
13. ITA No. 179/PNJ/2014 (A.Y.2009-10) ACIT vs. M/s. Shaiv Distilleries (P) Ltd.
CIT(A) on this issue and restore the order of AO by holding that the Assessee is not eligible for deduction u/s 80-lB in respect of interest on FDR and Sales Tax incentive.
5. In the result, the appeal filed by the Revenue stands allowed."
We respectfully following the same, we allow the department's appeal on ground No. 2.
4. In the result, appeal filed by the department is partly allowed.
Order pronounced in the open Court on 14.8.2014.
Sd/- Sd/-
(P.K. BANSAL) (D.T. GARASIA)
Accountant Member Judicial Member
Place : PANAJI / GOA
Dated : 14.8.2014
P.S.- *PK*
Copy to :
(1) Appellant
(2) Respondent
(3) CIT concerned
(4) CIT(A) concerned
(5) D.R
(6) Guard file
True copy,
By order