2017 (2) TMI 858

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....interest of the revenue, thereby invoking the provision of section 263 of the Act is bad in law and not sustainable. 2. On the facts and circumstances of the case, the condition precedent for invoking section 263 of the Act being absent, the proceedings initiated under the said section was opposed to law and order passed u/s. 263 is liable to be cancelled. 3. The learned Commissioner of Income-tax ought to have appreciated that the total investment in plant and machinery is substantial more than 50% of the value of machinery as on 1.4.2004 and thus the company having satisfied the condition laid down in the Explanation to the section, he ought not to have directed the AO to withdrew the benefit claimed u/s. 80IA (4) (iv) (c) of the Act. 4. The learned Commissioner of Income-tax ought to have appreciated that even though the appellant had bifurcated a portion of its income as miscellaneous income, the same could not be treated as income from non-business activity and hence the benefit u/s. 80-IA(4) of the Act ought not to have been denied. 5. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allo....

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....ued by the CIT in his order u/s 263 the Assessing Officer disallowed the claim u/s 80-IA(4)(iv)(c) on the miscellaneous income - Rs. 15,53,99,921/-, and levied tax on the said income. The learned Assessing Authority further erred in levying the interest U/s.234C and 234D of the Act. Hence the appeal." 6. From the above Statement of Facts, it is seen that it is admitted by the assessee also in this Statement of Facts that based on the directions issued by the CIT in his order u/s. 263 of the Act, the AO disallowed the claim u/s. 80IA(4)(iv)(c) on the miscellaneous income of Rs. 15,53,99,921. In this view of the fact that this order of CIT u/s. 263 has attained finality, we hold that no interference is called for in the order of CIT (Appeals) in this year. 7. In the result, the appeal of assessee for AY 2006-07 is dismissed. 8. Now we take up the appeal of assessee for AY 2007-08 in ITA No.538/Bang/2013. The grounds raised by the assessee in this year are as under:- "1. The Learned Commissioner of Income tax (Appeals) erred in passing the order in the manner he did. 2. The Learned Commissioner of Income Tax (Appeals) erred in upholding the view of the assessing offi....

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....nd the net profit of the industrial undertaking is to be arrived at after deducting the manufacturing cost and selling costs actually incurred by the assessee after reducing the reimbursement of such cost received by the assessee from the Government. 10. He submitted that in the present case, the miscellaneous income of the assessee are of the same nature for which relief was allowed by the Hon'ble Apex Court in the case of CIT v. M/s. Meghalaya Steels Ltd. (supra) and therefore, this judgment of Hon'ble Apex Court has to be considered and relief should be allowed to the assessee. 11. Reliance was also placed on the judgment of the Hon'ble High Court of Karnataka rendered in the case of CIT v. Wipro Ltd. in ITA No.507/2002 dated 25.08.2010 (copy available on pages 176 to 209 of the PB). It was also submitted that the relevant para of this judgment are para Nos.30 & 36. 12. Thereafter, he placed reliance on the judgment of Hon'ble Apex Court rendered in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT as reported in 113 ITR 84 (SC). 13. As against this, the ld. DR of revenue supported the orders of authorities below. She placed reliance on the judgment of Ho....

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....o/s, Dept .Exams fees, sale of dept. books, sale of forms, miscellaneous recovery from employees, sale of scrap/stock excess found, meter reading testing charges, BBC theft ca collected and difference between WDV/book value of released asset. 16. Now, we examine the ratio laid down by Hon'ble apex court in the case of CIT v. M/s. Meghalaya Steels Ltd. (supra). As per this judgment, in our considered opinion, the ratio laid down by Hon'ble apex court is this that if a receipt is towards reimbursement of manufacturing or selling cost then such receipt is not an independent income but it will reduce the cost of manufacturing or selling and resultant increase in profit is profit from industrial undertaking. As per the judgment of Hon'ble apex court in the case of Liberty India (supra), the dispute was about DEPF and Duty draw back and it was held that it is an independent income and not an income derived from an industrial undertaking. Hence, there is no contradiction in these two judgments. In our humble opinion, if a receipt is in the nature of independent income, it has to be reduced from the profit as per P/L account but if a receipt is towards reimbursement of manufacturing or ....

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....ngly. 18. Now we examine the issue regarding miscellaneous recovery of Rs. 7,51,86,012. The items included herein are penalty recovered from suppliers/contractor of Rs. 431.07 lakhs, unclaimed balance o/s of Rs. 264.25 lakhs and difference between the WDV and books value of released asset of Rs. 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). 19. 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 & Loss account and therefore, these items should not be reduced from the profit of assessee as per Profit & Loss account for the purpose of computing deduction allowable to the assessee u/s. 80IA(4)(iv)(c). 20. Now we are left with only one item i.e., misc. recovery from employees of....

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....ing the explanation of the appellant. 3. The Learned CIT (A) further ought to have appreciated that appellant is engaged only in the business of distribution of electricity and does not have any other business and consequently the entire miscellaneous income is required to be considered for the purpose of deduction as rightly claimed by the appellant. 4. The Learned CIT(A) ought to have appreciated that miscellaneous income has been classified as such as per the requirement of the accounting 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....