TMI Blog2016 (11) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... t effects are therefore for treating the sale being part of the turnover and also treating the receipt of sale scrap being part and parcel of the activity being proximate to the activities of the industrial undertaking while computing the deduction u/s 80-IC of the Act. For the reasons stated above, we uphold the order passed by the ld CIT(A) and dismiss the appeals of the revenue on this ground. We hold that the sale of scrap being part and parcel of the activities of the undertaking and the gains derived from the said activity is arising out of core activity of the assessee and therefore, is required to be taken into consideration for the purposes of computation the deduction under the provisions. Interest on sale invoices - Held that:- The assessee has claimed that the interest charged on account of delayed payment from the purchaser in respect of the manufactured goods sold to them, is required to be allowed as deduction u/s 80-IC of the Act. However, the assessee itself is engaged in manufacturing activities and trading of goods, therefore, the assessee has itself offered amount for taxation. The assessee has not filed bifurcation of the interest received under the manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in charging tax on the book profits of 11,47,82,752/- under section 115JB of the I.T. Act 1961. The assessee company is not liable for tax on its book profits in respect of its income eligible for 100% deduction under section 80-IC. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by excluding the income fully deductible under section 80-IC from the purview of applicability of tax under section 115JB of the I.T. Act 1961. 3. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in reducing the deduction u/s 80-IC to the extent of ₹ 93,56,777/- out of total reduction of ₹ 2,08,48,484/- made by the ld. AO. The action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing the deduction under section 80-IC as claimed by the assessee company. 4. In the facts and circumstances of the case in law the ld.CIT(A) has erred in confirming the action of the ld. AO in fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80-IC as claimed by the assessee. 3. For that the assessee denies liability to pay the tax assessed and interest charged under section 234B, 234C and 234D. Grounds of ITA No. 707/JP/2014 (assessee's appeal) A.Y. 2010-11 1. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld.AO in charging tax on the book profits of 22,65,01,252/- under section 115JB of the I.T. Act 1961 and in imposing total tax liability of ₹ 5,39,64,730/-. The assessee company is not liable for tax on its book profits in respect of its income eligible for 100% deduction under section 80-IC. The action of the ld CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by excluding the income fully deductible under section 80-IC from the purview of applicability of tax under section 115JB of the IT Act, 1961 and quashing the tax liability of ₹ 5,39,64,730/-. 2. In the facts and circumstances of the case in law the ld.CIT(A) has erred in confirming the action of the ld. AO in further reducing the deduction u/s 80-IC in respect of the under noted income and taxing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease be granted by allowing the deduction u/s 80-IC in respect of the above incomes as claimed by the assessee company. Grounds of ITA No. 801/JP/2014 (revenue's appeal) A.Y. 2011-12 1. On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in restricting the disallowance to ₹ 17,49,276/- as against the disallowance of ₹ 2695292/- made by the AO out of claim of deduction u/s 80-IC on account of purchases of raw material, packing material and trade goods from its sister concern. 2. On the facts and circumstances of the case and in law the Ld.CIT(A) has erred in allowing the claim of deduction of ₹ 4,39,076/- u/s 80-IC treating the sale of scarp as profit from eligible business. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance to ₹ 680/- as against disallowance of ₹ 234005/- made by the AO out of claim of deduction u/s 80-IC on account of interest against sales invoices. 2. All the appeals have been heard together, therefore, for the sake of convenience, a common order is being passed in all these appeals. 3. We shall decide the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses. ₹ 75,33,567/- (C) Personnel Expenses ₹ 1,95,31,753/- (D) Advertisement expenses ₹ 87,12,737/- (E) Statutory expenses ₹ 41,83,881/- (F) Selling Distribution expenses ₹ 14,74,80,692/- (iv) Furnished list of unsecured loans amounting to ₹ 5,99,55,848/- which have been webbed off during the period under consideration alongwith made of repayment of unsecured loan. (v) Furnish details of miscellaneous income of ₹ 6,86,819/- (vi) Furnish details of evidences in respect of fixed assets as under: (A) Land ₹ 3,82,803/- (B) Building ₹ 1,75,37,657/- (C) Furniture Fittings ₹ 29,15,948/- (D) EDD Units (Computer) ₹ 1,27,804/- (E) Office Equipments ₹ 3,62,777/- (F) Plant Machinery ₹ 36,88,874/- Explain in brief the deletion in respect building under consideration amounting to ₹ 5,52,905/- (vii) Explain as to why the deduction claimed @ 100% U/s 80-IC at ₹ 10,53,01,215/- may not be disallowed as the project does not fulfill all the conditions as laid down under the provisions of Section 80-IC(4). Before the said notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay any Income-tax, but by virtue of section 115JB, if the same is applicable to the company, it will be liable to pay such tax as mentioned in section 115JB. The contention appears to be that in such view of the matter, section 80-IC and section 115JB cannot be read harmoniously and as the incorporating part of section 80-IC is clear, the same should be taken to control section 115JB. 17. Section 80-IC deals with a matter totally alien to section 115JB and, accordingly, there cannot be any question that both cannot be read harmoniously. Section 80-IC allows deduction. Section 115JB says that if allowing such deduction, Income-tax payable is less than what has been mentioned in section 115JB, the assessee, if it is a company, will be liable to pay Income-tax to be ascertained in the manner and to the extent prescribed in section 115JB. Since these two sections deal with two different situations, they play their role in two different situations and, accordingly, should be read to ascertain the purpose thereof as depicted by the clear words mentioned therein. Whereas section 80-IC grants deduction to all assessees and, accordingly, a company is also entitled to such deduction; se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof by the Legislature, as was clearly depicted in the policy. The Legislature did not accept the same. To that extent, the promise is not enforceable. 21. It was contended that a company will be liable to pay tax despite getting 100 percent deduction, but as against that, any other assessee will not be liable to pay any tax, that is discrimination. However, the vires of section 115JB, on that ground, has not been challenged. I would, therefore, not venture to go into that question except noting that on and from the date of insertion of section 115JB, an assessee, being a company, became liable to pay the tax mentioned in the said section, but not any other assessee. 22. We would, thus, conclude the matter holding that section 115JB will apply to an assessee, being a company, if it is entitled to the deductions mentioned in section 80-IC of the Act. 3.1 The assessee in reply to the notice issued by the Assessing Officer dated 29/11/2010 had submitted reply, which is as under:- 1. The products of the assessee company don't require any license from the Government authority, which is evLd.ent from the schedule 27(M) of the Balance sheet. The assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt by the petitioner and the petitioner ought to have gone by the normal statutory remedy. Be that as it may, liberty is given to the petitioner to argue the points raised in this petition before CIT(A). We are informed that appeal has been filed before CIT(A) and the same is pending. CIT(A) will decide the matter uninfluenced by observations made by the High Court in the impugned judgment. Accordingly, the special leave petition stands disposed of. 3.3 The ld Assessing Officer for the assessment year 2008-09 had issued a notice U/s 147 to the following effect: The assessee company is assessed to tax with this ward. It has e-filed its return of income for the A.Y. 2008-09 on 20.09.2008 declaring total income of ₹ 44,11,630/-. Assessment u/s 143(3) was completed on 30.12.2010 at the return income. On going through the assessment records, it has been observed that the assessee company was liable for MAT u/s 115JB of the Income-tax Act on its book profit. The provisions of sec. 115JB of the Income-tax Act for the relevant period, are as under: in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r:- 1. Notice u/s 148 has been timely issued as per provisions of section 149(l)(b) which provLd.es that notice can be issued for the relevant assessment year up to six years from the end of the relevant previous year after obtaining necessary approval/satisfaction u/s 151(2) of the I.T. Act, 1961. Necessary approval /satisfaction of the Joint Commissioner of Income-tax, Range-7, Jaipur was conveyed vide letter no. JCIT/R-7/JPR/2012-13/1054 dated 12/12/2012. 2. The PAN of the assessee is lying with this office and assessment completed in other years. The assessment for the A.Y. 2008-09 was completed u/s 143(3) of the Income-tax Act on 30/12/2010 at the Return Income. Later on it was found that the assessee company was liable for MAT u/s 115JB of the IT Act 1961 on its book profit. However, the records reveal that MAT of ₹ 1,30,04,885/- was not paid by the assessee for the A.Y. 2008-09 on its book profit of ₹ 11,47,82,752/-. Accordingly the case was reopened as income of ₹ 11,47,82,752/- chargeable to tax under the provision of section 115JB of the IT Act 1961 has escaped assessment within the meaning of section 147 of the IT Act 1961. This issue was neve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income rather it is the case where an erroneous order prejudicial to the interest of revenue has been passed by the ld Assessing Officer. On the basis of the submission, it was submitted that once the order has been tested by the superior authority U/s 263 of the Act and had dropped the proceedings, there was no occasion for the Assessing Officer to reopen the reassessment on the pretext of escapement of the assessment by not applying the provisions of Section 115JB of the Act. 6. On the other hand, the ld DR has submitted that the action of the ld Assessing Officer was in accordance with law and has relied upon the various decisions, which is as under:- (i) Kalyanji Mavji Co. v. CIT 102 ITR 287. (ii) Ess Kay Engineering Co. P. Ltd. v. CIT 247 ITR 818 (iii) Purushottam Das Bangur Anr. v. ITO 224 ITR 362 (iv) Consolidated photo Finvest Ltd. v. ACIT 281 ITR 394 (v) Gruh Finance Ltd. v. JCIT 243 ITR 482. 7. We have heard the rival contentions of both the parties, perused the material available on record and also perused the case laws cited by both the parties. We have reproduced the various dates and events, which have taken place in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed before the ld CIT(A) by the assessee, by that time, the SLP of the assessee has already been dismissed/disposed off by the Hon'ble Supreme Court vide order dated 06/1/2012. Thus, the assessee has been perpetuating and relying upon the order dated 13/9/2010 even after the dismissal of the writ petition on 26/11/2010 and disposal of SLP on 06/1/2012. Thus, in our view, the conduct of the assessee was far away from the truth and the action of the ld Assessing Officer, in our view was justified as the assessee at the time of proceedings U/s 143(3) as well as U/s 263 of the Act, have stated incorrect and untrue facts before the authorities. The reliance of the assessee on the judgment in the case of CIT Vs Usha International (supra) is misplaced and is not applicable in favour of the assessee. Our reading of the said judgment along with other judgments shows that in the present set of facts and circumstances, the ld Assessing Officer was right in reopening the assessment proceedings. Similar fact has recently been decided by this Bench in the case of Shree Durga Marbles Vs ITO order dated 16/08/2016 passed in ITA No. 277/JP/2015 has occasion to go through the various cited c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e forest of papers filed in connection with the assessment, several instances of earlier sales of house property by the assessee. That would be a case where the I.T.O. derives information from the record on an investigation or enquiry into facts not originally undertaken. Again, suppose in I.T.O. accepts the plea of an assessee that a particular receipt is not income liable to tax. But, on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under Section 147(b) by virtue of proposition (4) of Kalyanji Mavji, The fact that the details of sales of house properties were already in the file or that the decision subsequently come across by him was already there would not affect the position because the information that such facts or decision existed comes to him only much later. What then, is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Mavji (supra). The difference, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the I.T.O. initiates reassessment proceedings in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently come by the material from the record itself, then such a case would fall within the scope of Section 147(b) of the Act. [Emphasis supplied] 36. the aforesaid observations are complete answer to the submission that if a particular subject matter, item, deduction or claim is not examined by the Assessing Officer, it will nevertheless be a case of change of opinion and the reassessment proceedings will be barred. 37. We are conscious of the fact that the aforesaid observations have been made in the context of Section 147(b) with reference to the term 'information' and conceptually there is difference in scope and ambit of reopening provisions incorporated w.e.f. 1st April, 1989. However, it was observed by the Supreme Court in Kelvinator of India Ltd. (supra) that amended provisions are wLd.er. What is important and relevant is that the principle of change of opinion was equally applicable under the un- amended prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he very same material as was available to him at the time of assessment, initiate action under section 147, for doing so, would constitute action based entirely on a change in his opinion. The contention is that if the material was available to the Assessing Officer and if an assessment order based on that material is passed by him, a reassessment using the very same material or inferences available from that material should tantamount to a mere change of opinion, which cannot, according to the petitioner, constitute a valid ground for reassessment. 11. We may, before going into the merits of the main contention urged before us, deal with the question of limitation feebly argued by Mr. Vohra. As noticed earlier, the proviso to section 147 envisages action in the ordinary course within a period of four years from the end of the relevant assessment year. That limitation does not, however, apply to cases where income chargeable to tax has escaped assessment on account, inter alia, of the failure of the assessee to disclose fully and truly all material facts. The argument that production of the account books and other documentary evidence relevant for assessment must imply a full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment, as is the position in the present case. It is in that view inconsequential whether or not the material necessary for taking a decision was available to the Assessing Officer either generally or in the form of a reply to the questionnaire served upon the assessee. What is important is whether the Assessing Officer had based on the material available to him taken a view. If he had not done so, the proposed reopening cannot be assailed on the ground that the same is based only on a change of opinion. Further Delhi High Court in the matter of Mr. Kuldip Gandotra v. Union Of India (Uoi) And Ors. on 6 December, 2006 Equivalent citations: 136 (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be regarded as a mere secondary fact that was immaterial or irrelevant for granting relief. The facts concealed were not collateral or extraneous. In Story's Equity Jurisprudence, 14th Edition, Vol.1, as quoted in Hamza Haji (supra) it has been observed: Fraud indeed, in the sense of a Court of Equity, properly includes all acts, omissions, and concealments which involve a breach of legal or equitable duty, trust, or confidence, justly reposed, and are injurious to another, or by which an undue and unconscientious advantage is taken of another. 10. Thus omission and concealment which involves breach of legal or equitable duty and confidence justly reposed, is equal to fraud. Similarly, Page 3924 the Supreme Court in Bharau Dadu v. State of Maharashtra has held that suppression of a material document would amount to fraud on a Court. In another case S.P. Chengalvaraya Naidu (decd) thr. LRs v. Jagannath and Ors. , the Supreme Court was critical and did not agree with the High Court that there is no legal duty cast upon a party to come to the Court with a true case and prove it by true evidence. It was held that fraud is an act of deliberate deception with a design to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... khand in Appellant's own case has held that the assessee was liable for taxation u/s 115JB. (f) That the various case laws relied upon are with reference to different facts and circumstances and not related to the facts of the Appellant's case. 9. Feeling aggrieved by the order passed by the ld CIT(A), the assessee filed the appeal before us and it was contended as under:- 4.3 Ld. CIT(A) has, in a very summary manner, without appreciating the background and the promise with reference to which section 80-IC was introduced, has rejected the submissions of the Appellant and dismissed this ground of appeal. 4.4 Section 115JB was introduced with effect from 01/04/2001 and subsequent to this section 80-IC was introduced with effect from 01/04/2004. It was submitted before the Ld.. CIT(A) that section 80-IC was brought to the statute book subsequent to the existence of section 115JB. Therefore, later of the two, should prevail. It was also submitted that both the sections are special provisions, yet section 115JB is special to all the companies whereas section 80-IC was special to all the corporate and non-corporate assesses having industrial undertakings in Ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court has categorically held that the claim has to be decided uninfluenced by the decision of Uttarakhand High Court. This clearly establishes that the Hon'ble Supreme Court has expressed its disagreement with the decision of Hon'ble Uttarakhand High Court. Still placing reliance on Uttarakhand High Court by the Ld. CIT(A) amounts to not following the decision of Hon'ble Supreme Court in this regard. 4.9 Before the Ld. CIT(A), plethora of judicial pronouncements were relied upon in support of the arguments put forth. Ld. CIT(A) has not at all dealt with any of the judicial pronouncements. He has not dealt with how those judicial pronouncements do not support the case of the assessee. He has, in a very summary manner, simply mentioned that the facts and circumstances of assessee's case are different. No speaking order in this regard is passed. 4.10 In respect of principle of estoppel, further reliance is placed on a recent judgment of the Hon'ble Supreme Court delivered on September 03,2015 in the case of Lloyd Electric and Engineering Ltd vs. State of Himachal Pradesh and Ors(Copy supplied) in Civil Appeal No. 6838 OF 2015 where in the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(ii) of the Act. Hence the AO is correct in making adjustment u/s 143(1). Thus, we are unable to persuade ourselves to agree with the finding of the Ld. CIT(A)-I, Dehradun on this issue. The fact that the return is processed by a computer or by the Officer himself, does not make a difference, as in our opinion computerized processing is only an aid to the AO. As computation of book profits u/s 115 JB of the Act is not done in accordance with the provisions of the Act, and when an incorrect claim of reduction from book profits of amount which the assessee is eligible u/s 80 IC is made, it is an incorrect claim apparent from the record, which can be adjusted u/s 143(1) of the Act. In the result the order of Ld. CIT(A) is set aside and the order of the AO is restored. In rebuttal, the ld AR for the assessee has submitted that the Hon'ble Mumbai Tribunal in the similar facts and circumstances in the case of M/s Shivalik Venture Pvt. Ltd. v. DCIT in ITA No. 2008/Mum/2012 order dated 19/08/2015 has held as under:- 26. We shall now examine the scheme of the provisions of sec. 115JB of the Act. It is pertinent to note that the provisions of sec. 10 lists out various types of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inition of transfer and hence under the definition of Capital gains chargeable u/s 45 and consequently, the same does not fall within the purview of the definition of income given u/s 2(24) of the Act. Further, we notice that the Special bench did not have occasion to consLd.er the argument urged before us that the profits and gains arising on transfer of a capital asset by a holding company to its wholly owned Indian Company does not fall under the definition of income at all u/s 2(24) of the Act and hence the same does not enter into the computation provisions of the Act at all. We are impressed by the arguments advanced in this regard and we have also extensively dealt with the relevant provisions and also about the scheme of the provisions of sec. 115JB of the Act. We are of the view that the said contentions distinguish the decision rendered by the Special Bench in the case of Rain Commodities (supra). On merits also, we have earlier seen that the assessee herein has attached a note in the notes forming part of accounts and in the case before the Special bench, no such notes has been inserted, which fact was specifically noted by the Special bench. Hence on this factua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Notification dated 7th January, 2003 was published and subsequent incorporation of Section 80-IC. The ld AR has also drawn our attention to the reply given on behalf of the CBDT on 05/6/2008, which is as under:- 2. Section 115JB is a non-obstante provision and applies to all corporate taxpayers. According to this section, all corporate taxpayers are required to pay a Minimum Alternate Tax (MAT) at the rate of 10% of their book profits if the tax payable by them under the normal provisions of the Act is less than 10% of the book profits. The philosophy behind MAT is that every corporate entity should contribute a minimum amount of tax towards the national exchequer, in any case, the MAT paid by companies can be carried forward for 7 years and can be adjusted .against normal income tax payable in any of the future 7 years, on fulfillment of certain conditions. Thus, it is like payment of an advance tax only. 2.1 Profit-linked tax incentives, like the one under Section 80-IC, are inherently iniquitous as the bigger entitles comer greater tax benefits. MAT acts as a cap on the total exemption claimed by profit-making Corporate entitles. 3. The philosophy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment for the exemption of 80-IC was introduced in explanation-1, entitling the assessee like the appellant to have been exempted from filling the return under section 115JB. Therefore, the conjoint reading of the two provisions make it clear that Section 115JB of the Act shall apply even to the companies getting deduction U/s 80-IC of the Act and the said. Companies are liable to pay MAT charges. In our view, if the Legislature intends to give the exemption from the application of Section 115JB to the undertaking benefitting U/s 80-IC, then the Legislature would have amended or made the said legislature by way of insertion in explanation-1 of Section 115JB, as it has done by the Finance Act, 2002, 2004, 2007 and 2008 for other purposes by insertions, substitutions and amendments in the explanation-1 to Section 115JB of the Act . But the parliament has not deemed it appropriate to include the companies getting exemption U/s 80-IC of the Act out of the purview of Section 115JB of the Act. As already stated, Section 115JB is a non-obstante provision and applies to all companies falling in the threshold limit provided under the provisions. Besides the above, the Hon'ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is liable to pay tax under section 208 and the expression assessed tax is defined to mean the tax on the total income determined under section 143(1) or under section 143(3) as reduced by the amount of tax deducted or collected at source. Thus, there is no exclusion of section 115J/115JA in the levy of interest under section 234B. The expression assessed tax is defined to mean the tax assessed on regular assessment which means the tax determined on the application of section 115J/115JA in the regular assessment. 9. The question which remains to be considered is whether the assessee, which is a MAT Company, was not in a position to estimate its profits of the current year prior to the end of the financial year on 31st March. In this connection the assessee placed reliance on the judgment of the Karnataka High Court in the case of Kwality Biscuits Ltd. (supra) and, according to the Karnataka High Court, the profit as computed under the Income-tax Act, 1961 had to be prepared and thereafter the book profit as contemplated under section 115J of the Act had to be determined and then, the liability of the assessee to pay tax under section 115J of the Act arose, only if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 234B and 234C of the Act. Thus, it can be concluded that interest under sections 234B and 234C shall be payable on failure to pay advance tax in respect of tax payable under section 115JA/115JB. For the aforestated reasons, Circular No. 13/2001, dated 9-11-2001 issued by CBDT reported in 252 ITR (St.) 50 has no application. Moreover, in any event, para 2 of that Circular itself indicates that a large number of companies liable to be taxed under MAT provisions of section 115JB were not making advance tax payments. In the said circular, it has been clarified that section 115JB is a self-contained code and thus, all companies were liable for payment of advance tax under section 115JB and consequently provisions of sections 234B and 234C imposing interest on default in payment of advance tax were also applicable. Therefore, in our view, same principles are applicable to the present set of appeals , therefore respectfully following the law laid down by the various courts referred hereinabove, more particularly, the decision of the Hon'ble Supreme Court, the assessee is liable to be assessed U/s 115JB of the Act. 11.1 The argument of the ld AR invoking the principle of estoppe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly shows that the revenue, at any point of time, has not agreed to the demand of the assessee for giving exemption from the applicability of Section 115JB of the Act. In our view, the executive promises will not make the law inapplicable. The Hon'ble Supreme Court in the case of M/S Sethi Auto Service Station ... v. Delhi Development Authority Ors on 17 October, 2008 has held as under:- 12. It is trite to state that notings in a departmental file do not have the sanction of law to be an effective order. A noting by an officer is an expression of his viewpoint on the subject. It is no more than an opinion by an officer for internal use and consideration of the other officials of the department and for the benefit of the final decision-making authority. Needless to add that internal notings are not meant for outside exposure. Notings in the file culminate into an executable order, affecting the rights of the parties, only when it reaches the final decision-making authority in the department; gets his approval and the final order is communicated to the person concerned. 13. In Bachhittar Singh v. The State of Punjab3, a Constitution Bench of this Court had the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and criteria. Every legislation is done with the object of public good as said by Jeremy Bentham. Taxation is an unilateral decision of the Parliament Page 22 and it is the exercise of the sovereign power. The financial proposals put forth by the Finance Minister reflects the governmental view for raising revenue to meet the expenditure for the financial year and it is the financial policy of the Central Government. The Finance Minster's speech only highlights the more important proposals of the budget. Those are not the enactments by the Parliament. The law as enacted is what is contained in the Finance Act. After it is legislated upon by the Parliament and a rate of duty that is prescribed in relation to a particular Tariff Head that constitutes the authoritative expression of the legislative will of Parliament. Now in the present facts of the case, as per the finance bill, the legislative will of the Parliament is that for the commodities falling under Tariff Head 2208.10, the tariff is ₹ 300/- per litre or 400% whichever is higher. Even assuming that the amount of tax is excessive, in the matters of taxation laws, the Court permits greater latitude to the discretion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction U/s 80-IC of the Act. Similarly, the ld Assessing Officer has made disallowance of ₹ 2695292 out of the deduction U/s 80-IC for the assessment year 2011-12. 13. Being aggrieved by the order of the ld Assessing Officer, the assessee carried the matter before the ld CIT(A) and it was contended by the AR of the assessee before the ld CIT(A) that out of the total purchases of ₹ 37906334/- the traded goods constitute for a sum of ₹ 20894012 and the remaining goods were for raw material/packing material being used by the appellant company. It was also noticed by the ld CIT(A) that on the traded goods of ₹ 20894012/- the assessee has not claimed 80-IC deduction. Similarly, it is the case of the assessee for the assessment year 2011-12 that out of the total purchase for ₹ 4900531/- the traded goods constituted ₹ 1720028/- and on such traded goods, the assessee has not claimed deduction u/s 80-IC of the Act. On the basis of the submissions made by the assessee, the ld CIT(A) has granted relief on the traded goods in respect of both the assessment years. However, CIT has made the confirmation in respect of the remaining goods purchased by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l at cost to the assessee company. The sister concern is not dealing in the raw materials and packing material. It does not sell the raw material and packing material to any third party. The saLd. sales were to take care of the emergency needs of the appellant company. Since these are not finished goods produced and dealt with by the sister concern, there does not arise any question of earning any profit thereon by the sister concern. Thus, the allegation that these purchases from the sister concern have resulted into inflated deduction under section 80-IC is baseless. Similarly in assessment year 2011-12, the assessee in paragraph No. 2.2.4 and 2.2.7 has submitted as under: 2.2.4 During the course of assessment proceedings it was adequately explained vide litter dated 5.03.2014 18.03.2014 that there is no question of inflation of profits for claiming enhanced deduction under section 80-IC. It was also explained that the assessee company has not claimed any 80-IC deduction on profit from trading of goods. The ld. AO without assigning any reason rejected the explanation and proceeded to, reduce the 80-IC deduction. 2.2.5 2.2.6** ** ** 2.2.7 Further, the siste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the meaning of the word manufacture . Applying the above test to the facts of the present case, we are of the view that, in the present case, the assessee has undertaken an operation which renders a blank CD fit for use for which it was otherwise not fit. The blank CD is an input. By the duplicating process undertaken by the assessee, the recordable media which is unfit for any specific use gets converted into the programs which is embedded in the master media and, thus, the blank CD gets converted into recorded CD by the afore stated intricate process. The duplicating process changes the basic character of a blank CD, dedicating it to a specific use. Without such processing, blank CDs would be unfit for their intended purpose. Therefore, processing of blank CDs would be unfit for their intended purposes. Therefore, processing of blank CDs dedicating them to a specific use, constitutes a manufacture in terms of section 80-IA(12) read with section 33B of the Income-tax Act. Similarly, in the case of Emptee Poly-Yarn (P.) Ltd. (supra), the Hon'ble Supreme Court has followed the decision in the case of Oracle Software India Ltd. (supra), and held in paragraph 8 as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m whom. (vii) What was the prevailing market rate of the raw material/packing material at the time of selling by the sister concerns to the assessee. Thereafter compare the market rate of raw material/packing material with the purchased price of the assessee from the sister concerns. In the light of the above, the matter is remanded back to the file of the ld Assessing Officer. If it is concluded by the ld Assessing Officer that the goods purchased by the assessee were traded without trading any benefit U/s 80-IC then the Assessing Officer shall not reduce deductions U/s 80-IC to that extent. Further if the Assessing Officer found that the raw material/packing material are not manufactured by the sister concerns and is available at the same rate, then the ld Assessing Officer shall also not reduce the profit calculated by it by adding GP profit @ 55% to the cost price of the purchased material. If however the Assessing Officer comes to the conclusion after scrutinizing the record of the sister concerns more particularly the sale invoices, excise record, sale tax/vat record etc. that the goods sold (traded, raw material and packing material) were manufactured by the sister ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase price of the raw material. It was submitted that the said sale scrap cannot be utilized by the assessee and therefore, the ld CIT(A) was right in allowing the benefit. 20. We have heard the rival contentions of both the parties and perused the material available on the record. The present issue is squarely covered by the decision of the Coordinate Bench in the case of Yodeva Plastics (P) Ltd. v. DCIT (2016) 65 taxmann.com 37 (Hyd Trib) where the Coordinate Bench has held as under:- 36. Hence we are of the opinion that sale of scrap has the effect of reducing the cost of production. Further, sale of scrap is eligible for deduction under section 80-IC. The following cases support the view that 80-IC deduction would be available with respect to sale of scrap. 1. CIT v. Sundaram Clayton Ltd. [1982] 133 ITR 34 (Mad.); 2. CIT v. Wheels India Ltd. [1983] 141 ITR 745 (Mad.); 3. CIT v. Sadhu Forging Ltd. [2011] 336 ITR 444/11 taxmann.com 322/200 Taxman 1 (Mag.) (Delhi); and 4. Fenner (India) Ltd. v. CIT (No. 2) [2000] 241 ITR 803/[2002] 125 Taxman 386 (Mad.). 37. In the case of Sadhu Forgings Ltd. (supra) it has been held as follows : The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved purchase of steel, cutting the same, making of forging parts, giving heat treatment and machining. Dye making was stated to be the primary process and was a separate industry by itself. It was noted, and rightly so, that each of the above processes could be done in separate industrial undertaking, whereas the assessee had undertaken all those processes in its units. The issue was also that the assessee was doing those works on job basis for other undertakings, by getting the raw material from them. When the assessee was entitled to claim exemption in respect of income derived from such processes doing for itself, there was no reason as to why it would not be entitled to so merely because the raw material component was being supplied by other customers for whom the assessee was doing the job. In fact, deduction under section 80-IB is given on the profits derived from the manufacturing process, being undertaken by the assessee which qualifies for deduction. (para 9) The heat treatment is one of the processes through which the forgings are given the desired temperature and then cooled in different manner which results in changing the mechanical properties desired by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Punjab Stainless Steel Industries (2014) 46 taxmann.com 68 (SC) wherein the Hon'ble Supreme Court has given the reasons for not treating the sale of scrap as part of the turnover for the following reasons: 25. So as to be more accurate about the word turnover , one can either refer to dictionaries or to materials which are published by bodies of accountants. The Institute of Chartered Accountants of India (hereinafter referred to as the ICAI ) has published some material under the head Guidance Note on Tax Audit under section 44AB of the Income-tax Act . The said material has been published so as to guide the members of the ICAI. In our opinion, when a recognized body of accountants, after due deliberation and consideration publishes certain material for its members, one can rely upon the same. Paragraph 5 of the said Note deals with sales , turnover and gross receipts . Paragraph 5.2 and 5.3 of the said Note are reproduced hereinbelow, which pertain to the term turnover . 5.2 In the 'Guidance Note on Terms Used in Financial Statements' published by the ICAI, the expression 'Sales Turnover' (Item 15.01) has been defined as under :- The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to increase the export so as to bring more foreign exchange in our country. If the purpose is to bring more foreign exchange and to encourage export, we are of the view that the Legislature would surely like to give more benefit to persons who are making an effort to help our nation in the process of bringing more foreign exchange. If a trader or a manufacturer is trying his best to increase his exports, even at the cost of his business in a local market, we are sure that the Government would like to encourage such a person. In our opinion, once the Government decides to give some benefit to someone who is helping the nation in bringing foreign exchange, the Revenue should also make all possible efforts to encourage such traders or manufacturers by giving such business units more benefits as contemplated under the provisions of law. 29. For the aforesaid reasons, we are of the view that the view expressed by the High Court is in conformity with the normal accounting practice followed by the traders, including the respondent-assessee and it was justified in coming to a conclusion that the proceeds generated from the sale of scrap would not be included in the total turnover . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried the matter before the ld CIT(A), who had allowed the appeal and has only restricted to the disallowance for 5% with the following reasons:- As regards reduction of ₹ 134228/- on account of interest against sales invoices, it may be noted that the assessee was engaged in trading of goods as well as manufacturing activities and as bifurcation of such interest income from trading viz a viz manufacturing was not given therefore the A.O. reduced 50% of such interest income from claim u/s 80-IC. The appellant case is that 95.00% (Rs. 443979181/-) of the turnover is of manufactured goods and the turnover of trading goods was only for 5% (Rs. 25326452). As per the appellant, the apportion of interest should have been in the ratio of turnover. The contention of the appellant deserves merit inasmuch as the profit can be reduced only to the extent attributed to profit claimed u/s 80-IC and accordingly the A.O. is directed to disallow the interest only to the extent of 5%. Accordingly, the disallowance from the claim u/s 80-IC is to be made for ₹ 6711/- as against ₹ 134228/- made by the A.O. 23. We have heard the rival contentions of both the parties and per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be noted that there is nothing on record which may indicate that such creditors balances were on account of trade creditors and therefore the nexus of such activity with the manufacturing activity is not manifested. Accordingly, the A.O. has rightly reduced such amount from the claim of deduction u/s 80-IC. Similar finding is also given by the ld CIT(A) for the decision in A.Y. 2011-12. 26. Now the assessee is in appeals before us. The ld AR of the assessee has reiterated the submissions made before the ld CIT(A) and further submitted that the said write back reduces the cost of material consumed and would enhance the profit of the undertaking, excluding the same from section 80-IC deduction calculation is unjustified. 27. At the outset, the ld DR has vehemently supported the order of the lower authorities. 28. We have heard the rival contentions of both the parties and perused the material available on the record. The contention of the ld AR of the assessee that the credit balance of ₹ 48,875/- is required to be reduced from deduction u/s 80-IC of the Act, in our view, is required to be set aside to the file of the Assessing Officer, as the assessee has fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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