9911796707
TMI Blog2017 (2) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit 431.07 lakhs, unclaimed balance o/s of 264.25 lakhs and difference between the WDV and books value of released asset of 96.77 lakhs. These 3 items are neither any income derived from an industrial undertaking nor a realization to reduce the cost of manufacturing/cost of sale of assessee and therefore, these 3 items are rightly reduced from the profit of the assessee for the purpose of computing deduction allowable u/s. 80IA(4)(iv)(c). Regarding the balance items such as dept. exam fees, sale of dept. books and sale of forms, sale of scrap/stock excess found, meter reading testing charges and BBC theft ca collected etc., in our considered opinion, these receipts reduce the cost of assessee which are debited to Profit 40,22,860/- which should not be reduced from profit of the assessee for computing deduction allowable to the assessee u/s. 80IA(4)(iv)(c). X X X X Extracts X X X X X X X X Extracts X X X X ..... f ld. CIT u/s. 263, how the assessee can claim relief in this year. In reply, the ld. AR of assessee had nothing to say. 4. The ld. DR of revenue supported the orders of authorities below. 5. We have considered the rival submissions. We find that the Statement of Facts filed by the assessee before the ld. CIT(Appeals) along with Form 35 are relevant to consider the facts and hence, the same are reproduced hereinbelow:- " STATEMENT OF FACTS The Appellant is a corporation formed for public utility for distribution of power. For the relevant assessment year under dispute the Appellant filed its return of income declaring taxable income of ₹ 2,17,67,626 after claiming deduction U/s.80- IA(4)(iv) (c) of the Act. The said matter was taken up for scrutiny after issuing notice U/s.143 (2) of the Act. The Retuned Income was accepted by the Assessing Officer and the assessment was concluded, accepting the Returned Income. Subsequently, the Commissioner of Income tax initiated proceedings u/s 263, proposing to deny the deduction 80IA (4) (iv) (c), on the grounds that the Appellant has not satisfied the conditions laid down in the Section. The Appellant objected to the proposed proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting policies and hence all the receipts of the company are only income relatable to the business undertaking of the company, and same is eligible for deduction as rightly claimed by the appellant. 5. The Learned CIT (A) further ought to have appreciated the various caselaw relied by the appellant and ought to have allowed the claim to the appellant in Toto. 6. Without prejudice, the disallowance as confirmed by CIT (A) is excessive, arbitrary, and unreasonable and ought to be reduced substantially. 7. The Learned CIT (A) erred in upholding the interest levied under section 234C and 234D of the Act. 8. For these and such other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed." 9. It is submitted by the ld. AR of assessee that details of miscellaneous income of ₹ 10,09,39,888 is available on pages 3 & 4 of the ld. CIT(Appeals)'s order. Thereafter, he submitted that the stand of ld. CIT(A) and of the AO is in line with the judgment of Hon'ble Apex Court rendered in the case of Liberty India v. CIT as reported in 317 ITR 218 (SC). But subsequent to that, in the case of CIT v. M/s. Meghalaya Steels Ltd. as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to society ₹ 5,905 Income from Trading: 3. Profit on sale of stores ₹ 67,84,271 4. Sale of Scrap ₹ 24,10,221 5. Misc. receipts from trading ₹ 46,93,290 Miscellaneous receipts: 6. Rental from staff qtrs ₹ 90,06,414 7. Rental from other ₹ 59,692 8. Excess found on physical verification of material stock ₹ 4,03,364 9. Commission for collection of electric duty ₹ 67,61,146 * Misc. Recovery ₹ 7,51,86,612 ₹ 10,03,39,888 Bifurcation of *Misc. recoveries ₹ 7,51,86,012/- is as under: 11. Penalty recovered from suppliers/contractors Rs.4,31,07,307 12. Unclaimed balance o/s Rs.2,64,25,609 13. Dept. Exam fees ₹ 2,346 14. Sale of dept. books ₹ 1,035 15. Sale of forms ₹ 4,18,341 16. Misc. recovery from employees ₹ 8,45,452 17. Sale of scrap/stock excess found ₹ 33,12,422 18. Meter reading testing charges ₹ 3,51,653 19. BBC theft ca collected ₹ 2,03,730 20. Difference between WDV/book value of released asset ₹ 96,77,085 ₹ 7,51,86,012 15. From the above details of miscellaneous income, it is seen that the income in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequence, it is also not an income derived from an industrial undertaking. Misc. receipts from trading also is an independent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses and as a consequence, it is also not an income derived from an industrial undertaking. Rental income also is an independent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses in the absence of this fact that assessee was paying rent of staff quarters which was debited to Profit & Loss account and as such recovery of rental income from staff quarters is going to reduce the expenses of the assessee incurred on rent. As a consequence, it is also not an income derived from an industrial undertaking. Commission for collection of electric duty also is an independent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses and as a consequence, it is also not an income derived from an industrial undertaking. Apart from the miscellaneous recovery of ₹ 7,51,86,012, we are left with two items i.e., sale of scrap of ₹ 24,10,221 and excess found on physical verification of material stock of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Meghalaya Steels Ltd. (supra) wherein it was held by the Hon'ble Apex Court that if a subsidy is received as reimbursement of cost actually incurred by assessee in manufacturing and selling of its products, then such subsidy should not be excluded from business profit. In our humble opinion, the ratio laid down by the Hon'ble Apex Court in this judgment is this that if a receipt is reducing the cost incurred by the assessee in the manufacturing/selling of its products, then such receipts should be considered as reduction in cost which will result into increase in profit derived from industrial undertaking and therefore, such receipts should not be reduced from the profit of the assessee. In this view of the matter, we have held in the above para that certain receipts should not be reduced from business profit of the assessee but other receipts are to be so reduced. 22. Regarding applicability of various judgments cited by ld. DR of revenue, we hold that we have followed two judgments of Hon'ble apex court as noted above and hence, other judgments are not relevant. 23. In the result, the appeal of the assessee stands partly allowed. 24. Now we take up the appeal of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22,860 c) Misc Receipts 60,09,691 d) Meter reading etc 6,18,000 3 Miscellaneous Receipts a) Rental from Staff Quarters 53,44,349 6,05,63,369 b) Rental from Others 4,20,981 c) Ecess cash 121 d) Excess Stock 1,39,817 e) Commission 68,11,603 f) Misc. Recoveries 4,78,46,497 Total Other income 7,16,67,413 27. In line with our decision in AY 2007-08, we hold that sale of scrap of ₹ 40,22,860 should not be reduced from the profit of the assessee for the purpose of computing deduction allowable to the assessee u/s. 80IA(4)(iv)(c) but the other receipts were rightly reduced from the profit of the assessee because these other receipts are neither income derived from industrial undertaking nor a receipt in the nature of reimbursement of expenses incurred by the assessee for manufacturing and selling of goods. The assessee gets relief to the extent of ₹ 40,22,860/- which should not be reduced from profit of the assessee for computing deduction allowable to the assessee u/s. 80IA(4)(iv)(c). 28. In the result, this appeal of assessee is partly allowed. 29. In the combined result, appeal of the assessee for AY 2006-07 is dismissed and the remaining two appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
