TMI Blog2016 (7) TMI 1494X X X X Extracts X X X X X X X X Extracts X X X X ..... nd namely the shareholder. The definition does not alter the legal position that dividend has to be taxed in the hands of the shareholder. - decided against revenue Addition under the head unaccounted profits on sale - mismatch in consumption of electricity and production of goods - Held that:- The assessee had filed a letter addressed to the State Electricity authorities informing them of malfunctioning of meter for two-three months. It is quite common feature that electricity meters in some cases do not function properly and electricity boards takes time to rectify the defects. Thus, a plausible and reasonable explanation was filed by the assessee about the discrepancy in electricity bill. But, the AO without making any inquiry in that regard, jumped on a final conclusion. Besides even if there was no malfunctioning of the meters, there can be many a reasons for mismatch in consumption of electricity and production of goods. The assessee is not manufacturing only one type of wires or not using one kind of raw material. The variation in the final product and the raw material will affect the consumption of electricity. Other factors mentioned by the assessee for variation in power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income on its own, that the AO had not made any changes to the said receipts in the assessment order, that the assessee could have no grievance against the order of the AO, that the assessee had, by its own admission, reflected the central sales tax receipt as revenue receipt which had not been commented adversely upon by the AO, that the stand of the Department was that the sales tax receipt was a revenue receipt, the assessee should have filed a revised return for claiming the relief in view of the decision of the honorable Supreme Court delivered in the case of Goetze India Ltd. The FAA further observed that the assessee had claimed that submission made by it was based on certain Supreme Court decisions, that it had not made any reference to any of such decisions, that whether the particular receipt within a subsidy scheme was revenue capital was to be decided on the purpose for which same had been granted, that the question as to whether a particular receipt was a winner capital was a question of fact that could be found out only after analysing and examining the scheme and the facts, that the claim made by the assessee for the first time could not be admitted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profits and gains of business of three new industrial undertaking i.e., Unit II, Unit III and Falaudi Unit without appreciating the fact that as the activities of these units do not constitute manufacture or production of any articles or things as specified in section 80-IB of the Act. 2. The appellant prays that the order of the CIT (A) on the above ground/s be set aside and that of the AO be restored." The Tribunal dealt the issue as under: 3. At the outset, Ld Counsel for the assessee brought our attention to the above ground no.1 raised by the Revenue and mentioned that an identical issue has been raised by the Revenue before the Tribunal in assessee‟s own case vide ITA No.4451 and 4452/M/2008 for the AY 2004-2005 and 2005-06, dated 20.11.2009. In this regard, Ld Counsel read out the relevant para 4 to 9 of the said order of the Tribunal (supra), wherein the Tribunal had decided the issue in favour of the assessee by holding that the activity of the assessee is a manufacturing activity and consequently eligible for deduction u/s 80IA of the Act. He further mentioned that, for the AYs 1995-96 to 1998-99, the Revenue was aggrieved with the similar decision of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier years. Since, the CIT (A) has followed the orders of the ITAT for the earlier years. Therefore, respectfully following the orders of the ITAT for the earlier years, we uphold the order of the CIT (A) and the grounds raised by the Revenue are dismissed." 6. From the above, the ITAT has been consistently granting relief to the assessee by holding that the activity of the assessee is a manufacturing activity and therefore, it is eligible for deduction u/s 80IA of the Act. As well, no contrary material has been brought to our notice by the Revenue to take a different view than that of the earlier views taken by the ITAT. Therefore, in these circumstances, following the principle of consistency, we are of the considered opinion that the assessee should get relief and accordingly the grounds raised by the Revenue are dismissed. 7. In the result, appeal of the Revenue is dismissed." Following the above order of the Tribunal, we decide the first ground of appeal against the AO. 4.Second ground of appeal is about deleting the addition, amounting to ₹ 97.16 lakhs, made u/s.2(22)(e) of the Act. During the assessment proceedings, the AO found that the assessee had shown an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or a partner and in which he has a substantial interest. Section 2(22)(e) defines the ambit of the expression "dividend". All payments by way of dividend have to be taxed in the hands of the recipient of the dividend namely the shareholder. Consequently, the effect of clause (e) of section 2(22) is to broaden the ambit of the expression "dividend" by including certain payments which the company has made by way of a loan or advance or payments made on behalf of or for the individual benefit of a shareholder. The definition does not alter the legal position that dividend has to be taxed in the hands of the shareholder." Respectfully following the above judgment and considering the fact that the assessee was not a shareholder we decide the second ground against the AO. 5.Last Ground of appeal is about deleting the addition of ₹ 2.81 crores under the head unaccounted profits on sale. During the course of assessment proceedings, the AO directed the assessee to submit month-wise power consumption of all the units. On the basis of power consumption unit figure of production in metric ton of power consumption was worked out for all the four units. The AO found that while the prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verned by excise law, VAT and other regulatory laws, that the figures reported for excise and VAT were the same as reported for the income tax, that the excise authorities had accepted the figures of production and/or sales as reported by the assessee, that during the period of August and September, 2008 the electricity meter was not working, that production in the earlier three months was much higher than the production during the months of August and September, 2008, that the bills for those months were raised on the assumed basis, that unit wise sub-meters were installed in the factory only during the financial year 2008-09, that prior to that the total power consumed based on the common meter reading was allocated to various units based on the power rating of installed machines, that power consumption per MT for the financial year 2007-08 could not be compared with the power consumed for financial year 2008-09 which was on actual basis, that the power consumption per MT depended upon the product mix as well as on the numbers of files to be standard together, that each unit had got specific connected load based on the machine installed in those units, that the exercise taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout making any inquiry in that regard, jumped on a final conclusion. Besides even if there was no malfunctioning of the meters, there can be many a reasons for mismatch in consumption of electricity and production of goods. The assessee is not manufacturing only one type of wires or not using one kind of raw material. The variation in the final product and the raw material will affect the consumption of electricity. Other factors mentioned by the assessee for variation in power consumption before the FAA, were also not considered by the AO.It is pertinent to note that the AO has not commented upon the documents maintained by the assessee for the purposes of excise duty or sales tax department. No evidence has been brought on record about unrecorded purchases of raw material. It is not understood as how without purchases goods were manufactured and sold as alleged by the AO. We are of the opinion that the FAA has rightly held that the addition made by the AO was based on surmises and conjectures and on any reliable evidence. So, confirming his order, we decide the last ground against the AO. C.O./01/Mum/2015 : 6.1.The only ground raised in the C.O. is about taxing the interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure and the same was raised without prejudice. In this regard, it was argued by the Ld Counsel that whether the impugned interest is assessed under the head „business income‟ or „income from other sources‟, if it is held that the said receipts do not qualify for deduction u/s 80IB of the Act, then the exclusion for the purposes of ascertaining the income qualifying for deduction has to be the „net interest income and not the „gross interest receipt‟. In support of his contention, Ld Counsel relied on the judgment of the Hon'ble Supreme Court in the case of ACG Associated Capsules P. Ltd vs. CIT (343 ITR 89). In this connection, both the parties stated that the said claim of the assessee needs to be considered in favour of the assessee in view of the binding judgment of the Hon'ble Apex Court in the case of ACG Associated Capsules P. Ltd vs. CIT (supra). Accordingly, we direct the AO to apply the said judgment on considering the facts of the present case after reasonable opportunity of being heard to the assessee as per the principles of the natural justice. In substance, ground no.3 is treated as allowed in favour of the assessee. Respectf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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