TaxTMI 
TaxTMI 
2019 (1) TMI 2071
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....ether upon facts and circumstances of the case, the Ld. CIT(A) was justified in law and on facts in deleting the disallowance of Rs.45,60,985/- u/s. 80IC of the Income Tax Act, 1961 on job work charges received from the ITC Ltd .? 2. Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in law and on facts in deleting the disallowance of Rs.53,56,667/- u/s. 80IC of the Income Tax Act, 1961 in lieu of indirect benefit received by assessee from the parent company M/s. Cremica Agro Foods Ltd .? " 3. Ground No.1 relates to the claim of deduction u/s 80IC of the Act in respect of the income from Tahliwal unit of the assessee located in Himachal Pradesh on job work charges received by the assessee from ITC Ltd. The A.O. had denied the said claim stating that the deduction u/s 80IC is only available on income derived by an undertaking from the business of manufacturing or producing any article or thing and the nature of income of job work charges cannot be treated to have been derived by the undertaking by manufacturing or producing any article or thing. The Ld. CIT(A) decided the issue in favour of the assessee on finding that in assessment years 2006....
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....on u/s 80IC on Tahliwal unit on income earned from job charges of ITC Limited in the assessment year 2006-07, we submit that we have correctly claimed the deduction U/S 80IC of the Income Tax Act, 1961 on income earned from job charges. Reliance is placed on the following case laws: ACIT Vs. Biotech Medicals P Ltd. (2009) 170 Taxman 3 (2009) 310 ITR 47 (AT) (Hyd) (2009) 121 TTJ 858 Sec SOIB - Job Work/ Conversion charges entitled to 80IB. Profit on sale of scrap and interest on delayed payment have direct nexus with manufacturing activity. CIT Vs. Northern Arometics Ltd. (2005) 196 CTR 479 (Del) Warren Laboratories VS. DCIT (2005) 3 SOT 638 (Mum - Trib) 80IA - Assessee engaged in job work - eligible for deduction u/s 80IA. ITO, Ludhiana V/s Impel Forge P Ltd. (2008) 36 IT Rep 454 (Chd) Affirmed in (2009) 183 Taxman 38 (P&H) S.80-IB - Deduction allowable to a manufacturing unit who does the job work S.80-IB - Deduction allowable to a involving the same processes for others. Section-80 IB-assessee is at liberty to do manufacturing for itself or for others, which makes no difference for purpose of deduction u/s 80-IB. Allowable on job work. In view ....
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....een provided by M/s ITC to the assessee and it further provides that the machinery provided by it will be used only for the manufacturing and packing the products of M/s ITC Ltd. The details of the machinery have also been provided in the agreement as Schedule 2 and Annexure F. On the perusal of the agreement it is cleared that the assessee is providing labour, electricity etc. while the quality supervision during the manufacturing and packing process is done by the employees of M/s ITC Ltd. M/s ITC is providing raw material and itself incurring the expenditure for the transportation of raw material and finished products. No separate record as per assessee is being maintained for labour or electricity expenses. The assessee has received Rs.6,21,91,396/ - as job charges. 10. The income u/s 80IC is exempted only which is derived by an undertaking from the business of manufacturing or producing any article or thing not prohibited by thirteenth schedule of the Income Tax Act, 1961. The nature of income of job charges cannot be treated to have been derived by the undertaking by manufacturing or producing any article or thing by providing only the labour and electricity. Therefo....
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....has wider import, would have been used. Further, to avail of the benefit of deduction provisions, the assessee has to establish that the profits and gains are derived from its industrial undertaking and it is not sufficient that a commercial connection was established between profits earned and the industrial undertaking. The industrial undertaking itself has to be the source of the profit. When the industrial undertaking is engaged in manufacturing then the profit earned from the manufacturing alone qualify for the deduction 80IB. The nature of income of job charges cannot be treated to have Len derived by the undertaking by manufacturing or producing any article or thing by providing only the labour and electricity. Therefore, the proportionate income derived from the job work cannot be claimed as exempted u/s 80IC. Since the assessee has not maintained separate accounts for various expenses incurred on the job work done by it, the income earned from this activity cannot be determined accurately. However, to compute the exempted income and non exempted income u/s 80IC, I adopt the method to calculate it on proportionate basis i.e. Job charges received divided by....
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....gh Court in the case of CIT Vs. Northern Aromatics Ltd. (2005) 196 CTR 479 held that the assessee was entitled to claim deduct ion on profits earned on account of job work undertaken by it holding as under: Further, the basic process is carried out by the appellant is the same whether the production is done for itself or job work. The Hon'ble Punjab and Haryana High Court in the case of CIT us Impel Forge and Allied industries Ltd 326 ITR 27 has held that the assessee is at liberty to manufacture for itself or others which makes no difference for the purpose of deduction under section 80IB of the act. Similar view was taken by the Hon'ble Delhi High Court in the case of CIT us Northern Aromatics Ltd (2005) 196 CTR (Delhi) 479. In view of the same, the reduction in the claim made by the appellant under section 80IC on this account deserves to be deleted. These grounds of appeal are allowed." 37. Before us, the Ld. DR did not point out any infirmity in the order of the Ld.CIT(Appeals), nor did he bring to our notice any contrary decision of the jurisdictional High Court as opposed to that relied upon by the Ld.CIT (Appeals) while adjudicating the issue. In v....
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....owed the assessee's appeal following his order for assessment years 2006-07 and 2007-08. 8. During the course of hearing before us it was pointed out that this issue also had been decided in favour of the assessee by the ITAT in earlier years i.e., assessment years 2007-08 to 2008-09 and 2010-11 to 2013-14 in ITA No.555/Chd/2017 & Others in their order dated 21.5.2018. Drawing our attention to the relevant para 6 of the order, it was pointed out that the I.T.A.T. had allowed the same on noting that in the case of M/s Cremica Agro Foods Pvt. Ltd. the I.T.A.T. had decided identical issue in favour of the assessee in assessment year 2006-07. The relevant findings of the I.T.A.T. at para 6 of the order are as under: "6. Issue of disallowance of Section 80IC on indirect benefits A.Y. 2007-08: Ground No. 3 of the Revenue's appeal (Cremica) A.Y. 2010-11: Ground No. 3 of the Revenue's appeal (Cremica) A.Y. 2011-12: Ground No. 2 of the Revenue's appeal (Cremica) A.Y. 2012-13: Ground No. 2 of the Revenue's appeal (Cremica) A.Y. 2013-14: Ground No. 2 of the Revenue's appeal (Cremica) 6.1 The relevant portion of the Assessme....
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....ted in excess profit to the eligible unit. Unless until any specific benefit is pointed out and expressed in monetary terms, no addition can be made on the basis of conjectures and surmises." I have duly considered the reply of the assessee. It is observed that the exempted unit is using all the services, reputation, goodwill, experience, depots facilities, sharing of staff for sales and distribution, network of established non- exempted units etc. Therefore, the provisions of sub-section 8 & 10 of Section 80IA r.w.s. 14A of Income Tax Act, 1961 are applicable in the case of the assessee. The Assessing Officer during the assessment proceedings of assessment year 2006-07 has observed on this issue in the case of M/s. Cremica Agro Foods Ltd., which is relevant this year also as follows :- "8. The assessee is running a unit at Tahliwal claiming exemption u/s 80IC of the Income Tax Act, 1961 being established in a industrial growth centre in the state of Himachal Pradesh as per section 80IC(2)(ii). The assessee has taken the land on lease from Himachal Pradesh Government for establishing its unit in Himachal Pradesh. The funds and technical know-how has been provided ....
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....uments of the AR. The AO has reworked the claim under section80IC between the Tahliwal unit and the Phillaur unit on estimated basis without bringing any evidence on record to show whether there has been any transaction between the two units. The appellant has made the allocation of all common expenses on turnover basis and the AO has failed to mention any expense which has not been considered in the said exercise. Thus, the reducing of the eligible profits to the extent of 10% by the AO without any sound basis is unwarranted and is hereby ordered to be deleted. Further, the basic process is carried out by the appellant is the same whether the production is done for itself or job work. The Hon'ble Punjab and Haryana High Court in the case of CIT us Impel Forge and Allied industries Ltd 326ITR 27 has held that the assessee is at liberty to manufacture for itself or others which makes no difference for the purpose of deduction under section 80IB of the act. Similar view was taken by the Hon'ble Delhi High Court in the case of CIT vs Northern Aromatics Ltd (2005) 196 CTR (Delhi) 479. In view of the same, the reduction in the claim made by the appellant under section 8....
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....nsfer of goods and services to any other business or to any other person while in the case of the assessee there was no transfer of goods or service to any other business or to any other person. It was pointed out that the assessee had already al located the common expenses incurred to various units on the basis of turnover and, therefore, the denial of deduct ion to the extent of 10% of the profits on the basis of some notional expenses such as knowhow, goodwill, trade name, etc. was highly unjustified. 31. The Ld.CIT (Appeals) after considering assessee's submissions held the deduct ion of eligible profits by the Assessing Officer as unwarranted deleting the same by holding that the entire exercise of the Assessing Officer was done on estimate basis without bringing any evidence on record to show whether there was any transaction between the two units. The Ld. CIT(Appeals) held that the assessee having al located all common expenses on turnover basis and the Assessing Officer have not pointed out as to which expenses had not been considered, this al location of notional expenses by the Assessing Officer was unjustified and unwarranted. Relevant findings of the Ld.CIT....