TMI Blog2014 (5) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... Department that the same was a capital loss which was recouped by the Insurance Company - the receipts were capital in nature – the re-computation of deduction u/s 80IB is directed – Decided partly in favour of Assessee. - ITA No. 3109/Ahd/2010 - - - Dated:- 25-4-2014 - Shri Mukul Kr. Shrawat And Shri T. R. Meena,JJ. For the Petitioner : Shri O. P. Batheja, Sr. D. R. For the Respondent : Shri Rajiv Khandelwal, Madhsudhan Sarat Neel Khandelwal, AR ORDER Per Shri Mukul Kumar Shrawat, Judicial Member This is an appeal filed by the Assessee arising from the order of learned CIT(A) Valsad, dated 19.07.2010 and the only ground raised by the assessee is as follows: 1. The learned CIT(A) erred in confirming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med deduction u/s.80IB of Rs.61,25,513/-. According to him, the assessee is not eligible for the claim of deduction u/s.80IB because the amount received as Insurance Claim was not derived from the manufacturing activity. The entire claim u/s.80IB was thus disallowed. The matter was carried before the First Appellate Authority. 3. After considering the legal position, learned CIT(A) has held as under: 5.2 Decisions: I have carefully considered the elaborate submissions made by the ld. A.R. and the findings of the AO in the assessment order. I have summarized the contentions of the ld. AR into two aspects i.e. the insurance claim is business income and since the appellant had no other sources of income, the insurance claim is eligibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arising out of this receipt. Such income can only be computed by deducting the cost of raw material destroyed in fire from the gross receipt of insurance claims . Although the two Hon'ble High Courts have taken diverse views on the subjects but the substance emerges was that the deduction u/s. 8o-I/IA is not available on gross amount received from the insurance company but on the net receipts. In the instant case the AO observed that the Appellant received insurance claim of Rs 2,90,00,764/- which consisted of insurance claim on Plant Machinery of Rs. 83,67,780/- and the balance of Rs. 2,06,32,987/-was towards Raw Materials, Work-in- Progress and Finished goods. The AO, while completing the assessment further required from the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual amount of goods destroyed in the fire. Thus, the netting of gross receipts and the costs of goods (Rs.2,06,32,984 - Rs. 2,34,58,763 - (-) Rs. 28,25,777/-) results in loss and not in profits. It is also facts that Insurance covered by the Insurance Company is always less than the actual cost of the material insured. Similarly, the insurance compensation paid is always less than the actual costs of the goods. In the instant case also the same principle applied i.e. the cost of goods destroyed was of Rs.2,34,58,763/- and the amount received by the appellant from the Insurance company was Rs.2,06,32,984/-. In the result, no profits or gains aroused to the appellant out of the insurance receipts. Therefore, allowing deduction u/s.80-IB doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 80-IA of the Act. If this muich is undisputed, merely because of the fire and destruction of such goods before sale would hardly make any significant difference insofar as education under Section 80-IA of the Act is concerned. Looking from the other angle, what the assessee achieved through passing of the insurance claim was reduction of the loss arising out of the industrial undertaking. Such recouping or reduction of the loss cannot be kept out of consideration while computing the assessee s income eligible for reduction under Section 80-IA of the Act. 7.1 Likewise, in the case of CIT vs. Sportking India Ltd. (supra) the Hon ble Delhi High Court has decided the issue after considering the provisions of the Act as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons under section 80- IB. In the case of Dharam Pal Prem Chand Ltd. (supra) refund of excise duty was held to be profits and gains derived from an industrial undertaking within the meaning of an expression under section 80-IB. 7.2 In the light of the above two decisions and considering the facts of the case, we hereby hold that the assessee is entitled for claim of 80IB deduction only in respect of amount of Insurance Claim in respect of raw material, work in progress and finish goods. However, the assessee is not entitled for the claim of deduction u/s.80IB in respect of loss of machinery because it was rightly held by the Revenue Department that the same was a capital loss which was recouped by the Insurance Company; therefore, those ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
