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2015 (10) TMI 591 - ITAT LUCKNOW

2015 (10) TMI 591 - ITAT LUCKNOW - Claim of deduction of credit balance appearing under the head “Settlement Bargain” under section 80IB - Held that:- In block assessment there was no profit under this head, therefore, reliance of this order cannot be placed in the impugned assessment year. Undisputedly, the orders are placed by the assessee for purchase of raw material and supply of raw material takes some time. When supply is effected at high seas, the rates are fluctuated and profit accrued t .....

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gainst revenue.

Trade liabilities written off under section 41(1) - CIT(A) deleted addition - Held that:- We find that since it is a trade liability which was not required to pay in this year and it was offered as income and deduction was claimed thereon. The Revenue has not brought out anything on record to establish that these liabilities are not trade liabilities. Therefore, we find no merit in the Revenue’s appeal on this issue. Accordingly we confirm the order of the ld. CIT(A) o .....

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unt cannot be classified as having been derived from an Industrial Undertaking as per the provisions of Section 80IB. 2. That the Ld. CIT(A) is in error in not applying his own reasoning based upon decisions of the Supreme Court in the case of Liberty India Vs. CIT 317 ITR 218 and jurisdictional High Court in CIT Vs. Kothari Product Ltd. 295 ITR 223 whereby only amounts derived from an Industrial Undertaking and not amount attributable to an Industrial Undertaking are eligible for concession u/s .....

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O be restored. 2. Apropos grounds No.1 & 2, relate to the claim of deduction of credit balance appearing under the head Settlement Bargain under section 80IB of the Income-tax Act, 1961 (hereinafter called in short the Act ). 3. The facts in this regard borne out from the record are that the assessee-company is engaged in the manufacturing of Vegetable Ghee and trading in raw materials. It claimed deduction under section 80IB of the Act @ 30% of the income derived from industrial undertaking .....

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ry of the goods effected. 2) Profit or loss where part delivery effected and the part delivery due to physical shortage or excess at the time of unloading of goods is settled through rate difference. 3) Profit or loss, where there is conscious part delivery and/or no delivery and the account is settled through rate difference. 4. It was contended that all these transactions in respect of Settlement Bargain pertain to purchase of raw material required by the assessee for its manufacturing activit .....

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wing the name and address of the parties, details of orders placed, quantity received, transactions settled without delivery, transaction-wise profit/loss accrued in each case along with copies of contract notes, debit/credit notes, invoices for perusal. It was further contended that the transaction pertain to purchase of raw material required by the assessee for manufacturing activity and were entered into by the assessee during the course of manufacturing business to guard against loss through .....

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only for the reason that these were shown under the head Bargain Settlement , for which he has placed reliance upon various judgments in which it is held that book entries appearing in the books of account as such are not decisive and sufficient for the purpose of ascertaining the taxability. The claim in block assessment was disallowed only for the reason that there was no reason for disallowance in case of part delivery or no delivery. 6. The ld. CIT(A) re-examined the claim of the assessee in .....

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elevant observations of the ld. CIT(A) are as under:- From the perusal of the details filed by the appellant, it is found that under the head Bargain Settlement , he has debited/credited the difference accrued on account of three types of transactions as under:- (a) Profit/Loss due to rate difference in those cases where actual delivery of the goods was effected. b) Profit/Loss where due to some reasons part delivery of the goods was effected and part delivery due to physical shortage is settled .....

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ransactions pertain to purchase of raw materials required for the manufacturing activities. Total transactions have been categorized into two parts as under:- (a) Prof it due to rate difference where actual delivery made ₹ 41,55,945.00 (b) Loss due to rate difference where there is no delivery Rs. (1,32,467.00) Net Balance in Bargain Settlement A/c. ₹ 40,23.478.00 Ld. Counsel vehemently argued that all the transactions appearing under the head bargain settlement account actually pert .....

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ounts as such are not decisive and sufficient for the purpose of ascertaining the taxability. Profit accrued due to rate difference in the case of actual delivery of goods is factually part of purchases and is not an income derived from speculative transactions or other sources. I have also gone through the block assessment order passed U/s. 158BC of the Act in assessee s own case, which covers part of the year under appeal. No disallowance U/s. 80IB has been made on profits earned/accrued due t .....

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aw material for its manufacturing process. The ld. counsel for the assessee has tried to explain the nature of the orders with the submission that the assessee had to import raw material for which it placed orders for the supply of raw material and when supply takes time, the rates at high sea got fluctuated and at the fluctuated rates the settlement was done. Whatever profit is accrued to the assessee, it reduces the cost of raw material which affects the profit margin of the manufactured items .....

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t be placed in the impugned assessment year. Undisputedly, the orders are placed by the assessee for purchase of raw material and supply of raw material takes some time. When supply is effected at high seas, the rates are fluctuated and profit accrued to the assessee on account of fluctuation rates certainly reduces the cost of raw material, therefore, profit accrued thereon is certainly eligible for deduction under section 80IB of the Act. In the light of these facts, we are of the view that th .....

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o pay, therefore, the same has been written off and it is directly connected with industrial activities, but it was not accepted by the Assessing Officer and he was of the view that this income is not derived from the industrial undertaking. 10. Before the ld. CIT(A), it was contended that these are trade liabilities which were written off under section 41(1) of the Act, therefore, it is eligible for deduction under section 80IB of the Act. These trade liabilities relate to the industrial undert .....

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