2015 (11) TMI 108 - AT - Income Tax

Computation of allowable deduction u/s.80-IB - CIT (A) directing the AO to include the Cylinder Transport charge for the purpose of computation of allowable deduction - Held that - On examining the facts of the case it is revealed that the Central Excise Department has included the cylinder transport charges as a part of the sale consideration for the sale of liquid carbon dioxide; accordingly, they have levied central excise duty on the same. When one wing of the Central Government considers the transport charges on transport of CO2 Gas as a part of sale consideration and levies excise duty on the same, we wonder as to why the other wing of the Central Government refuses to treat the same as sale consideration for the purpose of granting benefit U/s.80-IB of the Act when the Act does not specifically prohibit from granting such benefits. The only grouse of the Revenue that transport charges on sale of liquid carbon dioxide gad does not have direct nexus with the assessee s industrial undertaking and therefore, the assessee is not entitled to the benefit of 80-IB of the Act are not acceptable. When the expenditure incurred towards transport charges for procuring raw materials is treated to have direct nexus with the assessee s industrial undertaking and allowed as deduction, the delivery charges of the finished product i.e., liquid carbon dioxide should also have to be treated in the similar manner as having direct nexus with the assessee s industrial undertaking and an integral part of the Turnover when the Act does not prevent from such inference - Decided against revenue.

Summary

Issues:
1. Interpretation of Sec.80-IB of the Income Tax Act regarding inclusion of cylinder transport charges for computation of allowable deduction.
2. Relevance of Central Excise Department's treatment of transport charges in granting benefits under Sec.80-IB.
3. Consistency in decision-making based on legal precedents and factual similarities.

Issue 1: Interpretation of Sec.80-IB:
The appeal involved a dispute over the inclusion of cylinder transport charges for computing the allowable deduction under Sec.80-IB of the Income Tax Act. The Assessing Officer had excluded these charges from the deduction, arguing that only profits derived from the manufacturing activity qualified for the deduction. The CIT (A), however, directed the AO to include the transport charges for the deduction, citing similarities with a previous case and legal precedents. The Tribunal upheld the CIT (A)'s decision, emphasizing that if expenses for procuring raw materials were allowed as deductions, then delivery charges for the finished product should also be considered integral to the turnover, unless specifically prohibited by the Act.

Issue 2: Central Excise Department's Treatment:
The Tribunal noted that while one wing of the Central Government, the Central Excise Department, included cylinder transport charges as part of the sale consideration for liquid carbon dioxide and levied excise duty on it, the Revenue department refused to treat the charges as sale consideration for granting benefits under Sec.80-IB. The Tribunal questioned this discrepancy, stating that if one government wing recognized the charges as part of the sale consideration, there was no reason to deny the benefit under Sec.80-IB unless explicitly prohibited by the Act. The Tribunal disagreed with the Revenue's argument that the transport charges lacked a direct nexus with the industrial undertaking, emphasizing the need for consistency in interpreting such matters.

Issue 3: Consistency in Decision-making:
The Tribunal highlighted the importance of consistency in decision-making based on legal precedents and factual similarities. It referenced a previous case and legal positions to support its decision in favor of the assessee. By considering the treatment of transport charges by the Central Excise Department and the absence of specific prohibition in the Act, the Tribunal concluded that the charges should be included for deduction under Sec.80-IB. The Tribunal dismissed the Revenue's appeal, affirming the CIT (A)'s order to include the cylinder transport charges for computing the allowable deduction.

In conclusion, the Tribunal's judgment clarified the interpretation of Sec.80-IB regarding the inclusion of cylinder transport charges, emphasized the relevance of the Central Excise Department's treatment in granting benefits, and stressed the need for consistency in decision-making based on legal precedents and factual similarities.