2019 (3) TMI 1886 - HC - Income Tax

Deduction u/s 80IB - income derived from the sale of reject coal and iron ore fine dust - HELD THAT - Admit following question of law arises - Did ITAT fall into error in holding that the income derived from the sale of reject coal and iron ore fine dust was entitled for deduction under Section 80-IB of the Income Tax Act having regard to the decision of the Supreme Court in Liberty India vs. Commissioner of Income Tax 2009 (8) TMI 63 - SUPREME COURT and Commissioner of Income Tax-II vs. Punjab Stainless Steel Industries 2001 (7) TMI 120 - SUPREME COURT ? Write-off in respect of advances given - HELD THAT - Additional question of law arises in this appeal - Whether the ITAT erred in holding that the write-off in respect of advances given to M/s Bear Logistics LLC was justified having regard to the decision of the Supreme Court in Southern Technologies Ltd. 2010 (1) TMI 5 - SUPREME COURT ? Inclusion of local taxes and duties in the turnover - Revenue urges on this aspect that the assessee produce powers for its captive unit and therefore the sale claimed by it was notional. Furthermore, it is stated that the local taxes collected were not in fact paid to the concerned State Governments - HELD THAT - This Court is of the opinion that the orders of the lower appellate authorities including ITAT cannot be faulted. Although, the transaction involved a notional sales nevertheless they have commercial element in as much as they were deemed to be sales and consequently included in the return of the local tax turnovers, filed by the assessee. As a consequence, the decision of the lower appellate authorities and the ITAT are affirmed on this aspect.

Summary

Issues:
1. Interpretation of Section 80-IB of the Income Tax Act regarding deduction for income from sale of reject coal and iron ore fine dust.
2. Justification of write-off in respect of advances given to M/s Bear Logistics LLC.
3. Inclusion of local taxes and duties in turnover and relief provided by lower appellate authorities.

Interpretation of Section 80-IB:
The primary issue in this case revolved around whether the Income Tax Appellate Tribunal (ITAT) erred in allowing deduction under Section 80-IB of the Income Tax Act for income derived from the sale of reject coal and iron ore fine dust. The court considered the decisions in Liberty India vs. Commissioner of Income Tax and Commissioner of Income Tax-II vs. Punjab Stainless Steel Industries. The court analyzed the commercial elements of the transactions and deemed sales, ultimately affirming the decisions of the lower appellate authorities and the ITAT on this aspect.

Justification of Write-off:
In the specific context of ITA 211/2019, an additional question arose regarding the write-off in respect of advances given to M/s Bear Logistics LLC. The court assessed whether the ITAT erred in justifying the write-off, considering the decision in Southern Technologies Ltd. vs. Joint CIT. The court examined the circumstances and upheld the decision of the ITAT on this matter.

Inclusion of Local Taxes and Duties:
The third issue raised in ITA 211/2019 concerned the inclusion of local taxes and duties in turnover and the relief granted by the lower appellate authorities. The revenue contended that the assessee's sales were notional due to the lack of actual payment of local taxes to the State Governments. However, the court found that the orders of the lower appellate authorities and the ITAT were sound. The court emphasized that despite the transactions being notional, they had commercial elements and were deemed sales, leading to their inclusion in the tax turnovers filed by the assessee. Consequently, the court affirmed the decisions of the lower appellate authorities and the ITAT on this issue.

In conclusion, the court addressed the various legal issues raised in the appeals, providing detailed analyses and ultimately affirming the decisions of the lower appellate authorities and the ITAT on the matters discussed. The case was listed for further proceedings on 6th August 2019.