Deduction under section. 80I Computation Goods transferred to assessee by other units at below market price

PUNJAB WOOL COMBERS LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX

ITAT, CHANDIGARH 'A’ BENCH Vimal Gandhi, Vice President & P.K. Bansal, A.M.

ITA No.1057/Chd/1996 10th January, 2003

(2003) 22 CCH 0025 ChdTrib

(2004) 2 SOT 0424

Legislation Referred to

Section 80HHC, 80-I

Case pertains to

Asst. Year 1992-93

Decision in favour of:

Matter remanded

Deduction under s. 80-I—Computation—Goods transferred to assessee by other

units at below market price—AO to adjust profits under s. 80-I to the difference

to the extent of .0261 per cent as was allowed by the Tribunal in the asst. yr.

1991-92 and in case the difference is more than .0261 per cent, the relief to the

assessee under s. 80-I should be reduced by the difference in excess of .0261

per cent—Matter remanded

(Para 3)

Conclusion:

Deduction under section. 80I Computation Goods transferred to

2 and in case the difference is more than

.0261 per cent, the relief to the assessee under s. 80-I should be reduced by the

difference in excess of .0261 per cent.

In favour of:

Matter remanded

Deduction under s. 80HHC—Computation—Treatment of CST and ST—CST and

ST cannot included in the total turnover for the purpose of computation of

deduction to the assessee under s. 80HHC

(Para 4.2)

Conclusion:

CST and ST cannot included in the total turnover for the purpose of computation of

deduction to the assessee under s. 80HHC.

Counsel appeared:

M.L. Joshi, for the Appellant : S.S. Thind, for the Respondent

ORDER

P.K. BANSAL, A.M. :

ORDER

This appeal of the assessee for the asst. yr. 1992-93 is directed against the order of

CIT(A) raising the following effective grounds of appeal:

"1. That the learned CIT(A) has erroneously upheld the action of learned AO for the

reduction of claim under s. 80-I from Rs. 83,91,322 to Rs. 70,26,952.

2. That the learned CIT(A) has erred in law and on the facts while rejecting the

assessee’s contention that no adjustment in the relief claimed under s. 80-I could be

made in view of the order of Hon’ble Tribunal in appellant’s own case of asst. yr. 1990-

91.

3. That the learned CIT(A) has erred in law and on the facts in upholding the action of

reducing the claim under s. 80HHC from Rs. 7,31,998 to Rs. 6,09,951.

4. That the learned CIT(A) has erred in law and on the facts while upholding the

disallowance of Rs. 98,284 under s. 43B.

5. That the learned CIT(A) has erred in law and on the facts while upholding the

disallowance of Rs. 9,061 out of telephone expenses.

6. That the learned CIT(A) has erred in law and on the facts while upholding the

disallowance of proportionate premium payable on redemption of debenture as revenue

expenditure."

2. At the outset, the assessee did not press ground No. 4. Therefore, the same stands

dismissed as not pressed.

3. The facts relating to grounds No. 1 and 2 are that the AO allowed deduction of Rs.

70,26,952 against Rs. 83,91,322 claimed by the assessee under s. 80-I of the IT Act.

While reducing the claim of the assessee the AO held that the goods transfer by other

units to this industrial unit were transferred below the market price. So the difference in

the valuation was added and the deduction claimed under s. 80-I was reduced by the AO

by applying provisions of ss. 80-I(6) and 80-I(9).

3.1 Before the CIT(A), the assessee remained unsuccessful.

3.2 The assessee has come up in appeal before us relying on the order of this Tribunal in

ITA No. 416/1995 for asst. yr. 1991-92 and ITA No. 1408/1994 for asst. yr. 1990-91

and submitted that similar disallowance was deleted by this Tribunal in asst. yrs. 1990-

91 and 1991-92. The Tribunal noted that the difference in transfer price of the goods by

other units and the market price on total supply was only Rs. 7,050 for asst. yr. 1990-91

and Rs. 42,302 for asst. yr. 1991-92. The facts and circumstances in the assessment

year are the same as were in the asst. yr. 1990-91. The assessee placed before us, at p.

1 of the paper book, a comparative chart showing value involved for the quantity in

rupees and submitted that during the year the difference was only of

Rs. 1,62,175 in the asst. yr. 1990-91. In the asst. yr. 1990-91 the difference was .0053

per cent, in asst. yr. 1991-92 the difference was .0261 per cent while in the assessment

year the difference is .0714 per cent

3.3 Learned Departmental Representative, on the other hand, submitted that in the

asst. yr. 1990-91, relief was allowed to the assessee because the Tribunal has observed

in para 14 of their order that the difference was insignificant and therefore, the Tribunal

instead of setting aside the order of CIT(A), allowed relief to the assessee. In the asst.

1. 1991-92, the Tribunal again allowed the relief to the assessee because the CIT(A)

observed that the difference was insignificant and accordingly the Tribunal restored the

matter to the AO to verify whether the difference is only of Rs. 92,302 as claimed by the

assessee. If the percentage in terms of value is compared in asst. yr. 1991-92 it was

only .026 per cent while during the year it is .0714 per cent

3.4 After giving thoughtful consideration to be rival submissions, we are of the view that

the facts involved in appeal before us, are identical to the facts involved in the asst. yrs.

1990-91 and 1991-92 decided by the Tribunal Chandigarh Bench (supra). Accordingly,

we hold that the principles applied by the Bench in the above order are to be applied in

the assessment year under appeal also. The assessee filed before us, the details in

respect of difference between the market price and the price paid by the assessee. We

find that during the year the difference of value in terms of percentage is .0714 while in

the last year it was .0261 per cent

3.5 Respectfully following the order for asst. yr. 1991-92, we restore this issue to the

file of AO directing him to adjust profits under s. 80-I to the difference to the extent of

.0261 per cent as was allowed by the Tribunal in the asst. yr. 1991-92 and in case the

difference is more than .0261 per cent, the relief to the assessee under s. 80-I should be

reduced by the difference in excess of .0261 per cent This dispose off grounds No. 1 and

2.

4. Ground No. 3 relates to the computation of deduction under s. 80HHC. While

computing the deduction the AO included CST and ST in the turn over when the assessee

was following the system of accounting by which CST and ST are being accounted for in

a separate account.

4.1 We have heard the rival submissions and perused the records. We find that this

issue is covered in favour of the assessee by the order of this Tribunal in ITA No.

264/1996 and 408/1996 in the case of Malwa Cotton Spg. Mills in which this Tribunal has

taken the view under para 36 of the order that items like CST and ST etc. are not to be

included in the total turn over following the judgment of Hon’ble Bombay High Court in

the case of CIT vs. Sudarshan Chemicals Industries Ltd. (2000) 163 CTR (Bom) 596 :

(2000) 245 ITR 769 (Bom).

4.2 Respectfully following the aforesaid judgment of the Tribunal, we restore the matter

to the file of AO directing him that the CST and ST be not included in the total turn over

for the purpose of computation of deduction to the assessee under s. 80HHC and

accordingly the AO is directed to re-compute deduction under s. 80HHC. Thus the

assessee succeeds on the ground also.

5. Ground No. 5 relates to the disallowance of Rs. 9,061.

5.1 Learned Authorized Representative for the assessee submitted that this ground is

covered in favour of the assessee by the order of this Tribunal in ITA No. 1408/1994 for

asst. yr. 1990-91.

5.2 Learned Departmental Representative was fair enough to concede this position. After

hearing the rival submissions and perusing the order of this Tribunal. We find that this

issue is duly covered under para 26 of the order of this Tribunal dt. 26th June, 1995

(supra) in which this Tribunal has taken the view that in the case of a company where

telephone facility is provided at the residence of the Directors which wholly and

exclusively for the business purpose of the assessee, no disallowance can be made in the

hands of the company.

5.3 Respectfully following the aforesaid decision, we allow this ground of appeal of the

assessee and delete the addition of Rs. 9,061.

6. Ground No. 6 relates to upholding the disallowance of proportionate premium payable

on redemption of debenture as revenue expenditure.

6.1 Both the parties agreed that this issue is covered by the decision of Hon’ble

Supreme Court in the case of Madras Industrial Investment Corpn. Ltd. vs. CIT (1997)

139 CTR (SC) 555 : (1997) 225 ITR 802 (SC). In ITA No. 264/1996. In the case of

Malwa Cotton Spg. Mills (supra) this Tribunal has taken a view that deduction in respect

of proportionate premium payable on redemption of debentures has to be allowed

proportionately during the period the debentures remain.

6.2 Respectfully following the decision of Hon’ble Supreme Court and the decision of

Tribunal in ITA No. 264/1996 we hold that no interference is called for in the order of

CIT(A) holding that the assessee should be allowed only deduction in respect of premium

payable on redemption of debenture on proportionate basis and this confirm the

disallowance made by the AO in this regard. Accordingly, this ground of the assessee’s

appeal stands dismissed.

7. In the result, appeal of the assessee is partly allowed.