TaxTMI 
TaxTMI 
2015 (10) TMI 591
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....the provisions of Section 80IB. 2. That the Ld. CIT(A) is in error in not applying his own reasoning based upon decisions of the Supreme Court in the case of Liberty India Vs. CIT 317 ITR 218 and jurisdictional High Court in CIT Vs. Kothari Product Ltd. 295 ITR 223 whereby only amounts derived from an Industrial Undertaking and not amount attributable to an Industrial Undertaking are eligible for concession u/s 80IB. 3. That the Ld. CIT (A) has erred in treating the liability of Rs. 3,47,380/- written back as income eligible for deduction u/s 80IB without appreciating that Section 80IB is a concession limited to income derived directly from an Industrial Undertaking and cannot be given an expansive interpretation to cover any income a....
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....ifference. 4. It was contended that all these transactions in respect of Settlement Bargain pertain to purchase of raw material required by the assessee for its manufacturing activity and the assessee entered into an agreement during the course of its manufacturing business to guard against loss through future price fluctuation in respect of his contract for actual delivery of goods. The Assessing Officer was not convinced with the explanations of the assessee and relying upon his order in the block assessment, he disallowed the claim of deduction under section 80IB of the Act. 5. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) and placed the statement showing the name and address of the parties, details of orders pl....
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....nd was convinced with the arguments that the transaction appearing under the head "Bargain Settlement" account actually pertains to purchases of raw material in which the assessee deals and effect the cost of raw material and the same should more appropriately have been charged to or credited in the raw material purchase account. He accordingly held that this income was eligible for deduction under section 80IB of the Act. The relevant observations of the ld. CIT(A) are as under:- "From the perusal of the details filed by the appellant, it is found that under the head 'Bargain Settlement', he has debited/credited the difference accrued on account of three types of transactions as under:- (a) Profit/Loss due to rate difference in those....
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....n shown under a separate head. It is a regular business income forming part of turnover of the appellant. I find force in the arguments of the Ld. Counsel. It is true that the book entries appearing in the books of accounts as such are not decisive and sufficient for the purpose of ascertaining the taxability. Profit accrued due to rate difference in the case of actual delivery of goods is factually part of purchases and is not an income derived from speculative transactions or other sources. I have also gone through the block assessment order passed U/s. 158BC of the Act in assessee's own case, which covers part of the year under appeal. No disallowance U/s. 80IB has been made on profits earned/accrued due to rate difference in case of ....
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....pugned assessment year. Undisputedly, the orders are placed by the assessee for purchase of raw material and supply of raw material takes some time. When supply is effected at high seas, the rates are fluctuated and profit accrued to the assessee on account of fluctuation rates certainly reduces the cost of raw material, therefore, profit accrued thereon is certainly eligible for deduction under section 80IB of the Act. In the light of these facts, we are of the view that the credit balance accrued on account of settlement of rates is certainly eligible for deduction under section 80IB of the Act and we, therefore, find no infirmity in the order of the ld. CIT(A). Accordingly we confirm his order on this issue. 9. So far as ground No.3 i....