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2016 (11) TMI 116

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.... and without any basis. 2. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in charging tax on the book profits of 11,47,82,752/- under section 115JB of the I.T. Act 1961. The assessee company is not liable for tax on its book profits in respect of its income eligible for 100% deduction under section 80-IC. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by excluding the income fully deductible under section 80-IC from the purview of applicability of tax under section 115JB of the I.T. Act 1961. 3. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in reducing the deduction u/s 80-IC to the extent of Rs. 93,56,777/- out of total reduction of Rs. 2,08,48,484/- made by the ld. AO. The action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing the deduction under section 80-IC as claimed by the assessee company. 4. In the facts and circumstances of the case in law the ld.CIT(A) has erred i....

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....P/2014 (assessee's appeal) A.Y. 2010-11 "1. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld.AO in charging tax on the book profits of 22,65,01,252/- under section 115JB of the I.T. Act 1961 and in imposing total tax liability of Rs. 5,39,64,730/-. The assessee company is not liable for tax on its book profits in respect of its income eligible for 100% deduction under section 80-IC. The action of the ld CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by excluding the income fully deductible under section 80-IC from the purview of applicability of tax under section 115JB of the IT Act, 1961 and quashing the tax liability of Rs. 5,39,64,730/-. 2. In the facts and circumstances of the case in law the ld.CIT(A) has erred in confirming the action of the ld. AO in further reducing the deduction u/s 80-IC in respect of the under noted income and taxing them separately:- Particulars Amount (In Rs.) Interest against sale invoices 258/- Sundry Creditors Balance written back 48,875/- Total 49,133/- The action of the ld. CIT(A) is illegal, unjustif....

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....in law the Ld.CIT(A) has erred in allowing the claim of deduction of Rs. 4,39,076/- u/s 80-IC treating the sale of scarp as profit from eligible business. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance to Rs. 680/- as against disallowance of Rs. 234005/- made by the AO out of claim of deduction u/s 80-IC on account of interest against sales invoices." 2. All the appeals have been heard together, therefore, for the sake of convenience, a common order is being passed in all these appeals. 3. We shall decide the ground No. 1 of the assessee's appeal for A.Y. 2009-10, 2010-11, and 2011-12 and also the ground No. 2 of the appeal for assessment year 2008-09. Before that we discuss the brief facts, it would be relevant to give brief dates and events in the present set of appeals. The assessee company filed the return of income on 30/09/2008 for the assessment year 2008-09. The ld Assessing Officer issued notice U/s 143(2) of the Income Tax Act, 1961 (hereinafter referred as the Act) on 29/09/2009. Thereafter further notice U/s 142(1) of the Act was issued on 23/2/2010. The assessee vide writ petition No. 02/2010 ....

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....r) Rs. 1,27,804/- (E) Office Equipments Rs. 3,62,777/- (F) Plant & Machinery Rs. 36,88,874/- Explain in brief the deletion in respect building under consideration amounting to Rs. 5,52,905/- (vii) Explain as to why the deduction claimed @ 100% U/s 80-IC at Rs. 10,53,01,215/- may not be disallowed as the project does not fulfill all the conditions as laid down under the provisions of Section 80-IC(4)." Before the said notice was issued to the assessee, the Hon'ble Uttrakhand High Court vide order dated 26/11/2010 has dismissed the writ petition filed by the assessee vide reasoned order. It was held that Section 115JB of the Act will apply to the assessee being a company if it is entitled to deduction mentioned in section 80-IC of the Act. The reasoning of the Hon'ble Uttrakhand High Court is as under:- "14. The first thing that is required to be considered is whether in the matter of construction of the provisions of the Act, one can take notice of the policy. The policy talked about giving of exemption of Income-tax. The policy has been made by the Executive Government. The Act nowhere authorises the Government or the Executive Government to exempt Income-tax. In....

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....o be ascertained in the manner and to the extent prescribed in section 115JB. Since these two sections deal with two different situations, they play their role in two different situations and, accordingly, should be read to ascertain the purpose thereof as depicted by the clear words mentioned therein. Whereas section 80-IC grants deduction to all assessees and, accordingly, a company is also entitled to such deduction; section 115JB applies only to a company and comes into play only when, after such deduction, Income-tax payable by it is less than what has been mentioned therein and thereupon fastens a totally new Income-tax liability to the extent mentioned therein. 18. It is true that when section 115JB was inserted, there was no contemplation that, in future, section 80-IC would be inserted. Therefore, at the time when section 115JB was inserted, it was not intended to control section 80-IC. However, a look at section 115JB would make it amply clear that, from the day one, section 115JB controlled Income-tax payable on the total income as computed under the Act and, in the matter of computing Income-tax on the total income, after insertion of section 80-IC, all assessees, inc....

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....ompany, if it is entitled to the deductions mentioned in section 80-IC of the Act. 3.1 The assessee in reply to the notice issued by the Assessing Officer dated 29/11/2010 had submitted reply, which is as under:- "1. The products of the assessee company don't require any license from the Government authority, which is evLd.ent from the schedule 27(M) of the Balance sheet. The assessee company is having manufacturing drug license No. 01/UA/HPM/2006 dated 27/3/2006 issued by Drug Controller, Uttrakhand for manufacturing the Homeopathic medicine in Uttrakhand State. We have already submitted copy of the same. 2. The computation and balance sheet of SBL Pvt. Ltd. Delhi which is sister concern of the assessee company, for the relevant assessment year is enclosed. 3. It is submitted that the Hon'ble High Court of Uttrakhand, Nainital Bench has admitted the assessee company's writ petition in their order dated 16/09/2010 requesting the Department not to take any final decision in relation to its liability to pay tax under section 115JB (Minimum Alternate Tax (MAT) until the matter is heard. Copy of order is enclosed." The ld Assessing Officer has passed assessment or....

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....On going through the assessment records, it has been observed that the assessee company was liable for MAT u/s 115JB of the Income-tax Act on its book profit. The provisions of sec. 115JB of the Income-tax Act for the relevant period, are as under: "in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2007, is less than ten percent of its book profit, such book profit shall be treated to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of ten per cent." The assessee company has shown book profit of Rs. 11,47,82,752/- on which MAT of Rs. 1,30,04,885/-including surcharge, Education Cess & Higher Education Cess was payable. However, the records reveal that no MAT has been paid by the assessee for the A.Y. 2008-09. In these facts and circumstances, I have reason to believe that income of Rs. 11,47,82,752/- chargeable to tax under the provisions of sec. 115JB of the Income-tax Act, 1961, has escaped assessment within the me....

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.... not paid by the assessee for the A.Y. 2008-09 on its book profit of Rs. 11,47,82,752/-. Accordingly the case was reopened as income of Rs. 11,47,82,752/- chargeable to tax under the provision of section 115JB of the IT Act 1961 has escaped assessment within the meaning of section 147 of the IT Act 1961. This issue was never considered in full during the course of assessment proceedings u/s 143(3) of the IT Act for the A.Y. 2008-09. Further, it is pertinent to mention here that in the case of assessee company itself, the Hon'ble High Court of Uttrakhand, Nainital has held as under C.W.P. No 2 of 2010 dated 26/11/2010: "30. In the circumstances, the writ petitions are disposed of by declaring that an assessee, being a company and entitled to deductions u/s 80-IC, should be liable to pay income tax, if it comes within the provisions of Section 115JB to the extent mentioned therein. There shall be no order as to cost." Therefore, in view of the above and provisions of the Sec. 115JB of the IT Act, the assessee was liable for MAT for the A.Y. 2008-09 on the book profit calculated as per P&L A/c prepared in accordance with the provisions of the Companies Act, 1956. 3. Hence, t....

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.... (v) Gruh Finance Ltd. v. JCIT 243 ITR 482. 7. We have heard the rival contentions of both the parties, perused the material available on record and also perused the case laws cited by both the parties. We have reproduced the various dates and events, which have taken place in the present matter. We found that the misconduct of the assessee in filing the incorrect and wrong information before the ld Assessing Officer, CIT(A) was conspicuous and shows a total disrespect to the assessment proceedings and to the revision proceedings. The above said comment is based on the following analyses made us on the facts reproduced here in below: The assessee with a view to glossed over and with an intention to mislead had filed a reply before the ld Assessing Officer dated 16/12/2010 wrongly stating therein that the Hon'ble High Court of Uttarakhand in the writ petition order dated 16/9/2010 had requested the department not to take any final decision in relation to its liability to pay tax U/s 115Jb of the Act (Minimum Alternate Tax) until the matter is heard. As a matter of fact, the Hon'ble High Court vide order dated 26/11/2010 i.e. before reply was submitted by the assessee ha....

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.... and circumstances, the ld Assessing Officer was right in reopening the assessment proceedings. Similar fact has recently been decided by this Bench in the case of Shree Durga Marbles Vs ITO order dated 16/08/2016 passed in ITA No. 277/JP/2015 has occasion to go through the various cited case laws on the reopening and thereafter has held as under: "6. We have heard the rival contentions of both the parties and perused the material available on the record. For the purposes of decLd.ing this issue, it is necessary to reproduce the judgment of Full Bench of Hon'ble Delhi High Court in the case of CIT v.. Usha International, [2012] 348 ITR 485 wherein the Hon'ble Court has held as under: 35. In A.L.A. Firm (supra), the Supreme Court specifically dealt with propositions (2) and (4) quoted in paragraph 34 above and thereafter elucidated and explained that there was no difference between observations of the Supreme Court in Kalyanji Mavji & Co. (supra) and Indian & Eastern Newspaper's case (supra), as far as proposition (4) is concerned. It was held that: "We have pointed out earlier that Kalyanji Mavji (supra) outlines four situations in which action under Section 34(1)....

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....is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Mavji (supra). The difference, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the I.T.O. initiates reassessment proceedings in the light of "information" obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for e.g., as in the two Madras decisions referred to earlier. Proposition (2) no doubt covers this situation also but it is so wLd.ely expressed as to include also cases in which the I.T.O., having considered all the facts and law, arrives at a particular conclusion, but reinitiates proceedings because, on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been drawn earlier, he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax. In other words, as pointed out in Indian Eastern Newspaper Society's case, it also ropes....

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....ed w.e.f. 1st April, 1989. However, it was observed by the Supreme Court in Kelvinator of India Ltd. (supra) that amended provisions are wLd.er. What is important and relevant is that the principle of "change of opinion" was equally applicable under the un- amended provisions. The Supreme Court was therefore conscious of the said principle, when the observations mentioned above in A.L.A. Firm (supra) were made. 38.** ** ** 39. In view of the above observations we must add one caveat. There may be cases where the Assessing Officer does not and may not raise any written query but still the Assessing Officer in the first round/ original proceedings may have examined the subject matter, claim etc, because the aspect or question may be too apparent and obvious. To hold that the assessing officer in the first round did not examine the question or subject matter and form an opinion, would be contrary and opposed to normal human conduct. Such cases have to be examined individually. Some matters may require examination of the assessment order or queries raised by the Assessing Officer and answers given by the assessee but in others cases, a deeper scrutiny or examination may be necessar....

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....o tax has escaped assessment on account, inter alia, of the failure of the assessee to disclose fully and truly all material facts. The argument that production of the account books and other documentary evidence relevant for assessment must imply a full and true disclosure of all material facts must be rejected out of hand in the light of the provisions of Explanation 1, according to which mere production of the books of account or other evidence from which the Assessing Officer could have, with due diligence, discovered the material evidence does not necessarily amount to a disclosure within the meaning of the proviso. The action initiated by the respondent does not in that view suffer from any error of jurisdiction to warrant interference from this court in exercise of its writ jurisdiction. 12 to 18** ** ** 19. In the light of the authoritative pronouncements of the Supreme Court referred to above, which are binding upon us and the observations made by the High Court of Gujarat with which we find ourselves in respectful agreement, the action initiated by the Assessing Officer for reopening the assessment cannot be said to be either incompetent or otherwise improper to call ....

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....posed reopening cannot be assailed on the ground that the same is based only on a change of opinion. Further Delhi High Court in the matter of Mr. Kuldip Gandotra v. Union Of India (Uoi) And Ors. on 6 December, 2006 Equivalent citations: 136 (2007) DLT 44has held as under:- 1. Fraud and justice never dwell together (fraus et jus nunquam cohabitant) and fraud and deceit defend or excuse no man (fraus et dolus nemini patrocinari debent) are two doctrines which are applied by the Courts to recall earlier orders/judgments. 2. Since fraud strikes at the very root of an Order/judgment and effects solemnity, and the Rule of Law, Courts have exercised their inherent power whenever it is brought to their notice that fraud has been practiced. The above principles have been recently reiterated by the Supreme Court in the case of Hamza Haji v. State of Kerala and Anr. wherein the entire case law on the subject has been extensively examined and considered. In the said case, it has been held that a second review application in law is not maintainable but a Court can exercise it's power as a court of record to nullify a decision procured by playing a fraud. A decision procured by fraud m....

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....al and did not agree with the High Court that there is no legal duty cast upon a party to come to the Court with a true case and prove it by true evidence. It was held that fraud is an act of deliberate deception with a design to secure something by taking unfair advantage. Deception to gain by another's loss is fraud. Failure to disclose relevant and material facts and non-mentioning of even a document can tantamount to playing a fraud on the Court, if it is done with the intention to gain advantage with a view to procure an order or an advantage from the Court without disclosing all facts. Obtaining relief by deliberately suppressing facts, which were fundamental to entitlement of relief and foundation of the claim amounts to practicing fraud. By respectfully following the law laid down in the above said decisions we deem it appropriate to decide the issue of reopening against the assessee in respect of assessment year 2008-09. Accordingly, this ground of appeal is decided against the assessee. 8. Now the other grounds raised by the assessee are with respect of application of Section 115JB of the Act on the assessee. The assessee is engaged in the business of manufacturing ....

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....ns are special provisions, yet section 115JB is special to all the companies whereas section 80-IC was special to all the corporate and non-corporate assesses having industrial undertakings in Uttarakhand. Thus section 115JB was special to a wLd.er class, within which section 80-IC was 'super' special to a very specific class. Ld. CIT(A) has not appreciated the nuances of principles of interpretations and without dealing with this aspect of submissions, has summarily held that section 115JB has an overrLd.ing impact and that nothing was provided in section 115JB that the companies covered u/s 80-IC will be out of the purview of section 115JB. 4.5 Ld. CIT(A) has also not appreciated the resultant absurd and unintended consequences due to the interpretation placed by the Ld. AO. He has not dealt with the example given to explain the absurd results of the way interpretation of section 80-IC is given by the Ld. AO (example at page 11 of CIT(A) order). 4.6 Ld. CIT(A) has unduly influenced his decision by the CBDT clarification dated 05/06/2008. The clarification of CBDT is not binding on appellate authorities nor is the same binding on assessees. The CBDT has to follow the p....

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.... September 03,2015 in the case of Lloyd Electric and Engineering Ltd vs. State of Himachal Pradesh and Ors(Copy supplied) in Civil Appeal No. 6838 OF 2015 where in the Hon'ble Apex Court held as under:- "The High Court, with great respect, has gone wrong in not appreciating the background of the case and the decision of the Council of Ministers to extend its own Industrial Policy announced in 2004 and the tax concession beyond 31.03.2009. Once the Council of Ministers takes a policy decision, the implementing Department cannot issue a notification contrary to the policy decision taken by the Government..." 10. On the other hand, the ld DR has submitted that Section 115JB of the Act is required to be applied in view of the law laid. down by the Hon'ble Supreme Court in the case of Apollo 255 ITR 273 (2002) being the special provision and therefore the interpretation as sought to be given by the ld AR is not correct. He had further relied upon the judgment of the Hon'ble Delhi Tribunal in the case of the assessee itself being ITA No. 3957/Del/2012 order dated 23/05/2013 to the following effect: "8. A plain reading of the same shows that u/s 143(l)(a)(ii), the AO can ....

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.... We shall now examine the scheme of the provisions of sec. 115JB of the Act. It is pertinent to note that the provisions of sec. 10 lists out various types of income, which do not form part of Total income. All those items of receipts shall otherwise fall under the definition of the term "income" as defined in sec. 2(24) of the Act, but they are not included in total income in view of the provisions of sec. 10 of the Act. Since they are considered as "incomes not included in total income" for some policy reasons, the legislature, in its wisdom, has decided not to subject them to tax u/s 115JB of the Act also, except otherwise specifically provided for. Clause (ii) of Explanation 1 to sec.115JB specifically provLd.es that the amount of income to which any of the provisions of section 10 (other than the provisions contained in clause (38) thereof) is to be reduced from the Net profit, if they are credited to the Profit and Loss account. The logic of these provisions, in our view, is that an item of receipt which falls under the definition of "income", are excluded for the purpose of computing "Book Profit", since the said receipts are exempted u/s 10 of the Act while computing total ....

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....he case before the Special bench, no such notes has been inserted, which fact was specifically noted by the Special bench. Hence on this factual aspect also, the decision rendered by the Special bench is distinguishable. 28. In view of the foregoing discussions, we find merit in the contentions of the assessee that the profit arising on transfer of capital asset to its wholly owned Indian subsidiary company is liable to be excluded from the Net profit., i.e., the Net profit disclosed in the Profit and Loss account should be reduced by the amount of profit arising on transfer of capital asset and the amount so arrived at shall be taken as "Net profit as shown in the profit and loss account" for the purpose of computation of book profit under Explanation 1 to sec. 115JB of the Act. Alternatively, since the said profit does not fall under the definition of "income" at all and since it does not enter into the computation provisions at all, there is no question of including the same in the Book Profit as per the scheme of the provisions of sec. 115JB of the Act. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to exclude the above said profit fro....

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....er tax benefits. MAT acts as a cap on the total exemption claimed by profit-making Corporate entitles. 3. The philosophy of MAT being what it is, it is applicable to all corporate tax payers including those that enjoy tax incentives under any section of the income tax Act. Thus, companies enjoying tax incentives under Section 80-IC are also liable to pay MAT. 4. It is pertinent to point out that in the absence of the tax incentive under section 80-IC, these companies would have been liable to pay a much higher amount of tax. On the basis of the above, it was submitted that once the assessee changed its position and make huge investment, the revenue and the Government of India are bound by the principle of statutory estoppels and therefore, now the revenue cannot change the assessee U/s 115JB of the Act. 11. We have gone through the rival contentions of both the parties and perused the material available on the record. In our view, the issue of applicability of Section 115JB of the Act is no more res integra in view of the categorical finding by the Coordinate Bench of Delhi ITAT in ITA No. 3957/Del/2012 wherein the Coordinate Bench has held that Section 115JB is a special pro....

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....mpanies falling in the threshold limit provided under the provisions. Besides the above, the Hon'ble Supreme Court had examined the legality of Section 115J of the Act in the case of JCIT v. Rolte India (2011) 9 taxmann.com 2011 and held as under:- 7. In our view, section 115J/115JA are special provisions. Section 207 envisages that tax shall be payable in advance during any financial year on current income in accordance with the scheme provided in sections 208 to 219 (both inclusive) in respect of the total income of the assessee that would be chargeable to tax for the assessment year immediately following that financial year. Section 215(5) of the Act defined what is "assessed tax", i. e., tax determined on the basis of regular assessment so far as such tax relates to income subject to advance tax. The evaluation of the current income and the determination of the assessed income had to be made in terms of the statutory scheme comprising section 115J/115JA of the Act. Hence, levying of interest was inescapable. The assessee was bound to pay advance tax under the said scheme of the Act. Section 115J/115JA of the Act were special provisions which provided that where in the cas....

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....termined and then, the liability of the assessee to pay tax under section 115J of the Act arose, only if the total income as computed under the provisions of the Act was less than 30 per cent of the book profit. According to the Karnataka High Court, this entire exercise of computing income or the book profits of the company could be done only at the end of the financial year and hence the provisions of sections 207, 208, 209 and 210 (predecessors of sections 234B and 234C) were not applicable until and unless the accounts stood audited and the balance sheet stood prepared, because till then even the assessee may not know whether the provisions of section 115J would be applied or not. The Court, therefore, held that the liability would arise only after the profit is determined in accordance with the provisions of the Companies Act, 1956 and, therefore, interest under sections 234B and 234C is not leviable in cases where section 115J applied. This view of the Karnataka High Court in Kwality Biscuits Ltd. was not shared by the Gauhati High Court in Assam Bengal Carriers Ltd. v. CIT [1999] 239 ITR 862 and Madhya Pradesh High Court in Itarsi Oil & Flours (P.) Ltd. v. CIT [2001] 250 ITR....

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.... to be assessed U/s 115JB of the Act. 11.1 The argument of the ld AR invoking the principle of estoppels, in our view is not sustainable in the eyes of law. Under Articles 265 of the Constitution of India, the power to make laws lies with the Parliament. The office memorandum, though had been issued and marked to the Ministry of Finance, had not had legislative backing and is not supported by the Act of the Parliament. The office memorandum issued by the government of India through Ministry of Commerce and Industry was merely an executive instruction and is not a piece of legislation passed by the Parliament while exercising its power U/s 265 of the Constitution of India. There is no sovereign promise made by the Government on the basis of which the estoppels can be made by the assessee. As is clear from the correspondence placed on record by the assessee that a letter dated 20/2/2008 was written by the Principal Secretary of Industrial Development Department, Dehrodoon, Uttrakhand seeking the clarification, however, the competent officer of the revenue (CBDT) vide letter dated 05/6/2008 has clarified that the provisions of Section 115JB of the Act are applicable to the facts and ....

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.... 13. In Bachhittar Singh v. The State of Punjab3, a Constitution Bench of this Court had the occasion to consider the effect of an order passed by a Minister on a file, which order was not communicated to the person concerned. Referring to the Article 166(1) of the Constitution, the Court held that order of the Minister could not amount to an order by the State Government unless it was expressed in the name of the Rajpramukh, as required by the said Article and was then communicated to the party concerned. The court observed that business of State is a complicated one and has necessarily to be conducted through the agency of a large number of officials and authorities. Before an action is taken by the authority concerned in the name of the Rajpramukh, which formality is a constitutional necessity, nothing done would amount to an order creating rights or casting liabilities to third parties. It is possible, observed the Court, that after expressing one [1962] Supp 3 SCR 713 opinion about a particular matter at a particular stage a Minister or the Council of Ministers may express quite a different opinion which may be opposed to the earlier opinion. In such cases, which of the two ....

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....in the matters of taxation laws, the Court permits greater latitude to the discretion of the legislature and it is not amenable to judicial review. In view of the foregoing discussion, we are unable to concur with the submission of the appellant that the budget proposals are duly passed and approved by the Parliament and moreover, if the Page 23 appellant is aggrieved by the particular tariff prescribed under the Finance Act and the same is contrary to the approved budget proposals, he ought to have questioned the same if permissible. Hence, this issue is answered against the appellant. The law laid down by the Hon'ble Supreme Court is clearly applicable to the facts of the present case also. In view thereof, we find that Section 115JB is applicable to the assessee company and therefore, the ground of the assessee is required to be dismissed and we accordingly dismiss this ground in respect of all the appeals. 12. Ground No. 4 of ITA No. 706/JP/2014, ground No. 1 of 800/JP/2014, 801/JP/2014 and ground No. 2 of ITA No. 771/JP/2014 are against confirming the action of the ld Assessing Officer in reducing the deduction U/s 80-IC of the Act. During the assessment proceedings in r....

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....n respect of the remaining goods purchased by the assessee from the sister concerns namely the raw material and packing material and to that extent, the ld CIT(A) has confirmed the order passed by the ld Assessing Officer. 14. Now the revenue as well as the assessee are in appeals before us. The ld AR of the assessee has supported the order of the ld CIT(A) whereby the benefit has been given on the traded goods. It is the contention of the ld AR for the assessee that the raw materials and packing materials were purchased by the assessee from the sister concerns on account of emergency and even if the said goods were purchased from the third party by the assessee, it would have costed the assessee company at the same rate. Therefore, there was no inflation of profit as indicated by the ld Assessing Officer. 15. On the other hand, the ld DR has relied upon the order passed by the ld lower authorities with respect of raw material and packing materials and has submitted that the assessee has inflated the profit. The ld DR, in respect of traded goods , has submitted that the ld CIT(A) has wrongly given the benefit to the assessee as it was not the case of the assessee before the ld As....

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.... 2.2.7 Further, the sister concern has also transferred raw material and packing material at cost to the assessee company. The sister concern is not dealing in the raw materials and packing material. It does not sell the raw material and packing material to any third party. The said sales were to take care of the emergency needs of the appellant company. Since these are not finished goods produced and dealt with by the sister concern, there does not arise any question of earning any profit thereon by the sister concern. Thus, the allegation that these purchases from the sister concern have resulted into inflated deduction under section 80-IC is baseless. From perusal of the submissions made by the assessee before the ld CIT(A), it is abundantly clear that the assessee before the ld Assessing Officer has categorically submitted that the assessee has not claimed 80-IC benefit on the traded goods after purchasing it from the sister concerns. Similarly, it was also the case of the assessee that in respect of raw material and the packing material purchased by it from the sister concerns, the said sister concerns have not sold the raw material and packing material to any third party t....

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....paragraph 8 as under : "Applying the above test to the facts of this case, it is clear that POY simpliciter is not fit for being used in the manufacture of a fabric. It becomes usable only after it undergoes the operation/process which is called thermo mechanical process which converts POY into texturised yarn, which, in turn, is used for the manufacture of fabric. One more point needs to be mentioned. Under the Income-tax Act, as amended in 2009, the text given by this court in Oracle Software's case (2010) (1) Scale 425 has been recognized when the definition of the word "manufacture" is made explicit by the Finance (No. 2) Act, 2009, which states that "manufacture" shall, inter alia, mean a change in bringing into existence of a new and distinct object or articles or thing with a different chemical composition or integral structure. Applying this definition to the facts of the present case, it may be mentioned that the above thermo mechanical process also beings about a structural change in the yarn itself, which is one of the important tests to be seen while judging whether the process is manufacture or not. The structure, the character, the use and the name of the produc....

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.... concerns then the Assessing Officer shall calculate the GP profit @ 55% and apply the provisions of section 80-IC(7) read with Section 80IA(10) of the Act. In the light of the above, these issues are remanded back to the file of Assessing Officer and the appeal of the revenue as well as the assessee is allowed for statistical purposes only. 17. Sale of scrap:- The ld Assessing Officer has noticed that the scrap sale declared by the assessee of the packing material is out of the manufacturing activity of the assessee and therefore, the same was business receipt and accordingly, the ld Assessing Officer disallowed amount of Rs. 5,14,372 for the assessment year 2008-09, Rs. 5,28,014/- for the assessment year 2009-10, Rs. 4,39,076/- for the assessment year 2011-12. The ld CIT(A) while hearing the appeal against the order passed by the ld Assessing Officer has held that the revenue received from the sale of the scrap material will reduce the sale consideration/cost of raw material and therefore it will reduce the profit of the undertaking. It was held that there is a direct nexus between the sale activities and the profit from the eligible business and therefore has allowed the groun....

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.... the purpose of manufacture of steel, forging, transmission gears and parts, and accessories of motor vehicles. During the relevant assessment year, it claimed deduction under section 80-IB on its gross receipts which, apart from goods sales, also included scrap sales, labour charges and job work charges. The Assessing Officer held that the deduction under section 80-IB could not be allowed on sale of scrap, job work and labour charges as the same were attributable to the business carried on by the assessee, but not derived from the profits of industrial undertaking. On appeal, the Commissioner (Appeals) allowed deduction under section 80-IB on the scrap sales holding that the scrap generation at various stages of manufacturing process was part of the manufacturing activity of an industrial unit and, thus, profits and gains derived on that account were from the industrial undertaking. However, with regard to the claim of deduction on job work and labour charges, the Commissioner (Appeals) disallowed the appeal of the assessee and held that the job charges and labour charges not derived from the exports, were to be categorised as independent income and had to be deducted from gros....

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....t for being used as automobile parts. The process of heat treatment is absolutely essential for rendering them marketable. Without the heat treatment, the material is not fit for automobile industry. (para 10) Thus, in view of several decisions of the High Courts and the Supreme Court, the activity of forging is 'manufacturing' within the ambit of section 80-IB. It was immaterial that the assessee was doing the job of forging also for customers and was charging them on job-work basis or on the basis of labour charges. It would still be qualified as carrying eligible business under section 80-IB. (para 12) Keeping in view the activities of the assessee in giving heat treatment for which it had earned labour charges and job-work charges, it could, thus, be said that the assessee had done a process on the raw material which was nothing but a part and parcel of the manufacturing process of the industrial undertaking. Those receipts could not be said to be independent income of the manufacturing activities of the undertakings of the assessee and, thus, could not be excluded from the profits and gains derived from the industrial undertaking for the purpose of computing deduct....

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....nterprise. The term "gross turnover" and "net turn over" (or "gross sales" and "net sales") are sometimes used to distinguish the sales aggregate before and after deduction of returns and trade discounts.' 5.3 The Guide to Company Audit issued by the ICAI in the year 1980, while discussing 'sales', stated as follows : "Total turnover, that is, the aggregate amount for which sales are effected by the company, giving the amount of sales in respect of each class of goods dealt with by the company and indicating the quantities of such sales for each class separately. Note (i) The term "turnover" would mean the total sales after deducting therefrom goods returned, price adjustments, trade discount and cancellation of bills for the period of audit, if any. Adjustments which do not relate to turnover should not be made, e.g., writing off bad debts, royalty, etc. Where excise duty is included in turnover, the corresponding amount should be distinctly shown as a debit item in the profit and loss account.' (Emphasis supplied) The aforestated meaning given by the ICAI clearly denotes that in normal accounting parlance the word "turnover" would mean "total sales" as expla....

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....sions apply and operates in different fields. Whereas in Section 80HHC revolves around , the issue of export benefit on the turnover whereas in the case of 80-IC the benefit is to be calculated on the profit and loss of an undertaking qualifying as per Section 80-IC(2) of the Act. The treatment of the scrap for the purposes of manufacturing activity is required to be appreciated in the context that the sale of scrap which will goes to reduce the input cost of the undertaking and thereby decline the profit margin of the undertaking whereas in the case of 80HHC if the sale scrap is made a part of the turnover the export benefit of the undertaking will increase and therefore to different effects are therefore for treating the sale being part of the turnover and also treating the receipt of sale scrap being part and parcel of the activity being proximate to the activities of the industrial undertaking while computing the deduction u/s 80-IC of the Act. For the reasons stated above, we uphold the order passed by the ld CIT(A) and dismiss the appeals of the revenue on this ground. We hold that the sale of scrap being part and parcel of the activities of the undertaking and the gains deri....

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.... 5% i.e. for Rs. 25326452, on the face of it is appears to be incorrect. As per CIT(A), the total purchase of traded goods from the sister concerns was Rs. 20894012/-, therefore the basis for attributing at the figure of Rs. 25326452/-, in our view, was incorrect and is required to be verified by the ld Assessing Officer. The ld CIT(A) has merely accepted the figure of Rs. 25326452/- on the basis of the submissions made by the assessee. However, the said submissions have not been verified by the ld Assessing Officer. In the light of the facts and circumstances of the case, we deem it appropriate to remand the matter to the file of the ld Assessing Officer to verify as to what was the turnover of trading goods (not manufactured by the assessee) and what was the turnover of the goods manufactured by the assessee and thereafter disallowed interest on sale invoices only in respect to the manufactured goods . In view thereof, this issue is also remanded back to the file of the Assessing Officer. Accordingly, this ground of appeal is allowed for statistical purposes only. 24. Ground No. 2 of the assessee's appeal for A.Y. 2010-11 and Ground No. 3 of the assessee's appeal for A.....