TaxTMI 
TaxTMI 
2013 (9) TMI 440
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....s. 1,20,323/-. d) Disallowance of deduction claimed under section 80IB on account of non furnishing of statutory audit report of Rs. 12,53,933/-. Disallowance under section 80IB was for the following reasons: i. Non-filing of statutory audit report. ii. Non -eligibility of deduction under section 80IB in respect of job work charges amounting to Rs. 10,33,913/-. iii. Non-eligibility of deduction under section 80IB in respect of the income derived from trading. Quantum of receipts from such purchase and sales of trading goods amount to Rs. 30,64,212/-. 3. The assessee preferred appeal before Ld. CIT(A), who partly allowed the assessee's appeal. 4. Being aggrieved with the order of the Ld. CIT(A), the department is in appeal before us and has taken the following grounds of appeal:- "1.Whether Ld. CIT(A) was correct on facts and circumstances of the case and in law in deleting the disallowance of Rs. 1,91,611/- made by the Assessing Officer on account of product development cost. 2. Whether Ld. CIT(A) CIT(A) was correct on facts and circumstances of the case and in law in deleting the addition of Rs.6,49,259/- made by the Assessing Officer on account of balan....
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.... the market and is in colour, printing and packaging. c) All products of the assessee are patented and copyright of these are with overseas principals. Assessee is not authorized to change its design etc. and these designs have remained same for more than a decade. d) All dyes/moulds, which are for manufacture of products, are already capitalized. But dyes which are packaging, colour etc., which have a short term life as per market trends, are claimed as revenue expenses. e) The assessee is following this accounting practice since its inception in 1996 and the same has been accepted by department in all previous assessments. 7. Ld. CIT(A) allowed the assessee's this ground of appeal, inter alia, observing as under:- "According to the appellant, the dyes and jigs are specially made for making packages for valued customers. Similarly, for the pens which are sold in the market, the packagings are periodically changed to attract the customer as per market trends and conditions. After having considered the aforesaid facts and after looking into the respective bills, I am satisfied that these are expenses of routine nature incurred on dyes and jigs for the packaging items ....
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....56 (Del) has held as under:- "Held, dismissing the application to direct reference, that the question whether on a given set of facts, replacement of certain items, forming an integral or important part of the machinery would be revenue expenditure or capital expenditure is primarily a question of fact. The Tribunal had reached the conclusion that the moulds in question did not enhance the capacity of the existing machines and were mere replacements for the moulds damaged during the process of manufacture of glass. It was also evident from the format of the question, proposed by the Revenue, that the finding of the Tribunal to the effect that the expenditure in question was incurred by the assessee on the "replacement" of the moulds was not under challenge. In view of the aforenoted finding recorded by the Tribunal, it was not justified in holding that the expenditure was revenue in nature. No question of law arose from its order." 9. Respectfully following the decision of the Hon'ble Delhi High Court this ground is dismissed. 10. Brief facts apropos ground No. 2 are that the assessee had claimed deduction on account of 'balance written off' as part of the 'miscellaneous e....
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.... stage. The leaves us with two amounts Hindustan National Glass Ltd. (Rs. 1,50,119/-) and M/s. Mysore Sales Intl. Ltd. (Rs. 4,92,312/-). 5.9 With regard to Hindustan National Glass Ltd. (Rs. 1,50,119/-), the appellant has submitted that an agreement had been entered with Hindustan National Glass Ltd. to supply 10,00,000 empty ink bottles within a period three months and an advance of Rs. 1,50,000/- had been paid by the appellant which was to be adjusted over the period of supply. Since the appellant company found that there was not much demand for ink in these days, the management took a decision not to buy empty bottles for this purpose. But Hindustan national Glass Ltd, the party who was to supply these bottles, refused to return the amount stating its letter dated 18.08.2003 that the amount in-question would not be refunded since the appellant has refused to honour its commitment of lifting 10 lakhs ink bottles per year. On receipt of this communication, the appellant took a judicious view to write off the amount instead of facing further penalties etc for refusing to place further orders. Under this scenario the appellant's action in writing off the amount advanced was a bus....
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.... allow such claim accordingly. Ground No. 5 is allowed. 12. Ld. DR relied on the assessment order and submitted that it was not proved that assessee had offered these amounts as income in earlier years. Ld. counsel submitted that these amounts were claimed under section 37 as business loss. 13. We have considered the submissions of both the parties and have perused the material on record. 14. From the findings of Ld. CIT(A), as reproduced earlier, it is evident that as far as amount relating to Hindustan National Glass Ltd amounting to Rs. 1,50,119/- was concerned, vide its letter dated 18.08.2003, the said company informed that it refused to supply bottles and refused to return the amount on the ground that assessee refused to honour its commitment of lifting 10 lakhs ink bottles per year. Therefore, Ld. CIT(A) allowed the deduction under section 37(1). 15. As regards the amount relating to Mysore Sales International Ltd., of Rs. 4,92,312/- is concerned facts are that the company, which was a Public Sector Undertaking, had supplied plastic granules to assessee for which payments were made to it. Further, on inspection of goods, its quality was found to be inferior and,....
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....icle or thing. c) The assessee had also derived income from trading and the quantum of receipts from such purchase and sale of trading goods amounting to Rs. 30,64,212/- which is also not eligible under section 80IB because no manufacturing activity had taken place in the case of such trading goods. 17. The Assessing Officer observed that since no deduction was allowed under section 80IB on account of non filing of audit report in form No. 10CCB, therefore, disallowance on the basis of reasons given at Sl. b and c above had no revenue effect. 18. Before Ld. CIT(A) the assessee had filed the required audit report under section 80IB in form No. 10CCB as additional evidence under Rule 46A of Income-tax Rules. The assessee relied on the decision of CIT Vs. Sivanand Electronics (1994) 209 ITR 63 (Bombay) and CIT Vs. Gujarat Oil & Allied Industries (1983) 201 ITR 325 (Gujarat), wherein it has been held that the word 'shall' employed in section 80J of the Act, which is on same lines as Section 80IB, has to be read as 'may' so as to make the beneficial provision fully operational and not frustrate the legislative object. The assessee had further submitted that since in earlier yea....
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....llowing decisions wherein it was held that the benefit of deduction under section 80IB should be made available as delay in submission of filing of audit report cannot be held against the assessee so as to deny the benefit of deduction under section 80IB, which had also been allowed both in the past as well as in the subsequent years. a) CIT Vs. Contimeters Electrical P. Ltd. (2009) 317 ITr 249 (Del). b) CIT Vs. WEB Commerce (India) Pvt. Ltd. 318 ITR 135 (Del). 24. He, therefore, accepted Assessee's plea regarding eligibility for allowability of deduction u/s 80IB. 25. As regard the second issue, Ld. CIT(A) did not accept the assessee's contention that the 'job work receipts' fit into the definition of 'manufacture' and 'production'. He relied on the decision in the case of IPCA Lab Ltd. Vs. DCIT (2004) 266 ITR 521 (SC) and ITO Vs. Induflex Products P. Ltd. (2006) 280 ITR 1 (SC)for the proposition that deduction provisions under the Act have to be strictly construed and if the words of the section are clear, then benefits which are not available under the section cannot be conferred by ignoring and misinterpreting the words in the section. 26. As regards the third is....