Pyramid Plastics, Vapi vs Department Of Income Tax
- CitationITA No.3173/Ahd/2011
Ratio decidendi
The rule this decision rests on
The reasoning in this order rests on the following points, each following the court's approach to the three grounds: Foreign exchange fluctuation gain arising from forward contracts is income derived from the industrial undertaking and is eligible for deduction under section 80-IB where it is shown to be of the same character as the gains held eligible in the jurisdictional High Court decision in CIT v. Alps Chemicals Ltd., and the Revenue has not pointed to any factual distinction; the Tribunal follows that binding decision. Sundry balances written back, being deemed income under section 41(1), are not excluded from section 80-IB deduction where the underlying liability arose from expenditure relating to the industrial undertaking and the Revenue has not rebutted the finding that the income was derived from that undertaking; the Tribunal approves the appellate authority's finding on that factual basis. Income from scrap sales is eligible for section 80-IB deduction where it is of the identical character to income held eligible by the jurisdictional High Court in Harjivandas Juthabhai Zaveri, and no distinction on facts is shown; the Tribunal follows that decision.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
अपीलाथ / (Appellant) तयथ / ् (Respondent)
Revenue by : Shri Dinesh Singh, Sr.D.R.
Assessee(s) by : Shri Parin Shah,A.R.
PAN ;AADFP 1691B
ु वाई क तार ख/ Date सन of Hearing : 29/04/2015
घोषणा क तार ख / Date of Pronouncement: 19/6/2015 ITA No.3173/Ahd/2011 2 Assessment Year 2007-08
आदे श/O RDER
PER SHRI S.S. GODARA JUDICIAL MEMBER.
This Revenue's appeal for assessment year 2007-08 arises from order of the Commissioner of Income Tax (Appeals)-Valsad dated 14-09-2011 holding assessee's income from exchange rate difference of Rs.2,38,164/- as eligible for section 80IB deduction along with sundry balances written back of Rs.3,05,574/-and the same arising from scrap sales of Rs.37,60,588/-, respectively, in proceedings under section 143(3) of the Act.
2. The Revenue reiterate its pleading on all these issues in the course of hearing. The Assessee strongly supports the CIT (A) order under challenge.
3. The Revenue's first ground relates to an amount of Rs.2,38,164/-arisen from exchange rate difference. The Assessing Officer treated this sum as speculation profits earned on account of purchase of forward contract exchange rate fluctuation benefit. He treated the same as having no connection with the assessee's export business. The CIT (A) has reversed the said finding by quoting decision of the hon'ble Mumbai high court in CIT v/s. Rachana Udyog (Bom.) ITA No.2394 of 2009 dated 13-01-2010 holding it as eligible for section 80IB deduction.
4. We have heard both the parties and perused the material available on record. We find that hon'ble jurisdictional high court in the ITA No.3173/Ahd/2011 2 Assessment Year 2007-08
case of CIT vs. Alps Chemicals Ltd., 367 ITR 594 (Guj.) holds that similar foreign exchange fluctuation gain are entitled for section 80 IB deduction. The Revenue fails to point any distinction on facts. We follow the hon'ble jurisdictional high court and uphold the CIT(A)'s findings. This ground is rejected.
5. The Revenue's second ground challenges the CIT (A)'s order treating sundry balances written back amounting to Rs.3,05,574/- as eligible for section 80 IB deduction.
6. The CIT (A)'s order discusses the Assessing Officer's observation, assessee's submissions and findings under challenge as under:-
"6. Ground No.3 ; The Ld. AO has erred in considering sundry balances written back amounting to Rs.3,05,574/- as not eligible for deduction u/s. 80-IB of the Act.
6.1 Observations of AO : While making the addition, AO observed that the sundry balances written off represents the amount of old creditors after the liability payable and carried forward to the year under consideration. He also observed that the amount in question was taken care of while availing the benefit u/s. 8oIB of the Act, in which, the expenditure was incurred and amount were due to the creditors. Referring to the decision of the Hon.'ble Supreme Court in the case, of CIT v/s. Hukumchand Mohanalal 82 ITR 64,he observed that it is only because the fiction credit by section 41(1) of the Act. it is a deemed income. Therefore, the said receipt is treated as income but the same can not be treated as income derived' from industrial undertaking and therefore, the same is not eligible for deduction u/s. 80IB of the Act. He also referred to the decision of the DCIT v/s. Mira Industries 87 ITD 475. The AR of the appellant ITA No.3173/Ahd/2011 2 Assessment Year 2007-08
contended that it is an undisputed fact that when such an amount is earlier debited to the profit and loss account, the benefit u/s. 80IB must have gone down in those years and year in which, the same is written back, the benefit u/s.80IB may not be deprived of as the same expenditure/liability has the direct nexus to the business undertaking.
6.2 Submission of Id. AR : Considering the arguments advanced by the AR of the appellant are perused and found force in his contentions that the amount written back is in relation to the liabilities arised on account of certain expenses and thereby in the year increased such expenditure/liability, the benefit under section 80IB must have been reduced in that particular year. Therefore, it would be more logical to consider such amount written back eligible for the deduction u/s. 80IB of the Act.
6.3 DECISION ; I have considered the arguments advanced by the Id. AR of the appellant carefully. The AO is not justified in raising an a issue of fiction created u/s. 4:(1) of the Act and deprive of the benefit to the assessee. The total income to be determined for allowing the benefits u/s. 8o-IB and the deemed income u/s. 41(1) constitutes the total income. However, a precaution can be taken that such income is out of business income of the industrial units which is eligible for the benefits u/s. 8o-IB of the Act. In this case the Id. AR had demonstrated that the deemed income u/s. 41(1) constituted income from the industrial unit eligible for the benefits u/s. 80-IB. In view of above. I direct the AO to include the difference of sundry balance written back in computation of deduction u/s 80IB of the Act. Accordingly this ground of appeal is allowed."
ITA No.3173/Ahd/2011 2 Assessment Year 2007-08
We have examined rival contentions. The CIT (A) holds that the assessee's income in question has been derived from its industrial undertaking in question. The Revenue fails to file any evidence rebutting the same. We approve CIT (A)'s order in these facts and reject the Revenue's ground.
7. The Revenue's third and last ground challenges lower appellate order treating income of Rs.37,60,588/- derived from scrap sales as eligible for section 80-IB deduction. There is no issue on facts. The hon'ble jurisdictional high court in the case of Harjivandas Juthabhai Zaveri's case in 258 ITR 785 (Guj.) has treated identical income as eligible for section 80-IB deduction. The Revenue is not able to point out any distinction on facts. We affirm CIT (A)'s findings in these circumstances.
8. The Revenue's appeal is dismissed.
Order pronounced in the Court on __________ the _____ 2015 at Ahmedabad.
Sd/- Sd/-
(PRAMOD KUMAR) (S.S. GODARA)
ACCOUNTANT MEMBER. JUDICIAL MEMBER.
Pronounced on 19/6/2015
Sd/- Sd/-
(ANIL CHATURVEDI) (S.S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER ITA No.3173/Ahd/2011 2 Assessment Year 2007-08
आदे श क !त"ल#प अ$े#षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु त / Concerned CIT
4. आयकर आयु त(अपील) / The CIT(A) ValsadI
5. वभागीय #त#न ध, आयकर अपील य अ धकरण / DR, ITAT,
6. गाड% फाईल / Guard file.
उप/सहायक पंजीकार ( Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation- : 20-5-2015
2. Date on which the typed draft is placed before the Dictating Member; 22-5-2015
3. Date on which the approved draft comes to the Sr.P.S./P.S. 22-5-2015
4. Date on which the fair order is placed before the Dictating Member for Pronouncement 19-6-2015.
5. Date on which the file goes to the Bench Clerk......
6. Date on which the file goes to the Head Clerk..................................
7. The date on which the file goes to the Assistant Registrar for signature on the order..........................
8. Date of Despatch of the Order..................
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