TMI Blog2017 (2) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of the assessee incurred on rent. As a consequence, it is also not an income derived from an industrial undertaking. Commission for collection of electric duty also is an independent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses and as a consequence, it is also not an income derived from an industrial undertaking. Apart from the miscellaneous recovery we are left with two items i.e., sale of scrap and excess found on physical verification of material stock. Regarding these two items, we are satisfied that this will go to reduce the cost incurred by the assessee and debited to Profit & Loss account and to this extent, these receipts should be reduced from the cost and therefore, these two items should not be reduced from the profit shown by the assessee in the Profit & Loss account for the purpose of computing deduction allowed to the assessee u/s. 80IA(4)(iv)(c). We hold accordingly. Miscellaneous recovery - Held that:- The items included herein are penalty recovered from suppliers/contractor of ₹ 431.07 lakhs, unclaimed balance o/s of ₹ 264.25 lakhs and difference between the WDV and books value of released asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sake of convenience. 2. First we take up the appeal for the AY 2006-07 in ITA No.537/Bang/2013. The grounds raised by the assessee in this year are as under:- 1. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax wrongly surmised that the assessment order passed u/s. 143(3) by AO is erroneous and prejudicial to the interest of the revenue, thereby invoking the provision of section 263 of the Act is bad in law and not sustainable. 2. On the facts and circumstances of the case, the condition precedent for invoking section 263 of the Act being absent, the proceedings initiated under the said section was opposed to law and order passed u/s. 263 is liable to be cancelled. 3. The learned Commissioner of Income-tax ought to have appreciated that the total investment in plant and machinery is substantial more than 50% of the value of machinery as on 1.4.2004 and thus the company having satisfied the condition laid down in the Explanation to the section, he ought not to have directed the AO to withdrew the benefit claimed u/s. 80IA (4) (iv) (c) of the Act. 4. The learned Commissioner of Income-tax ought to have appreciated that even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant was not eligible to claim deduction U/s.80-IA (4) (iv) (c) on, miscellaneous income accounted by the appellant in its books of accounts for the relevant assessment year, without appreciating the fact that the said miscellaneous income was earned during the regular course of business of the appellant amounting to ₹ 15,53,99,921/-. Based on the directions issued by the CIT in his order u/s 263 the Assessing Officer disallowed the claim u/s 80-IA(4)(iv)(c) on the miscellaneous income - ₹ 15,53,99,921/-, and levied tax on the said income. The learned Assessing Authority further erred in levying the interest U/s.234C and 234D of the Act. Hence the appeal. 6. From the above Statement of Facts, it is seen that it is admitted by the assessee also in this Statement of Facts that based on the directions issued by the CIT in his order u/s. 263 of the Act, the AO disallowed the claim u/s. 80IA(4)(iv)(c) on the miscellaneous income of ₹ 15,53,99,921. In this view of the fact that this order of CIT u/s. 263 has attained finality, we hold that no interference is called for in the order of CIT (Appeals) in this year. 7. In the result, the appeal of assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) was considered and thereafter it was held that if any subsidy is received from Government of India in order to reimburse, wholly or partly, costs actually incurred by the assessee in the manufacturing and selling of its products. The profits and gains for the purpose of section 80-IB and 80-IC will be after considering such subsidies, because those subsidies only reduce the cost and the net profit of the industrial undertaking is to be arrived at after deducting the manufacturing cost and selling costs actually incurred by the assessee after reducing the reimbursement of such cost received by the assessee from the Government. 10. He submitted that in the present case, the miscellaneous income of the assessee are of the same nature for which relief was allowed by the Hon ble Apex Court in the case of CIT v. M/s. Meghalaya Steels Ltd. (supra) and therefore, this judgment of Hon ble Apex Court has to be considered and relief should be allowed to the assessee. 11. Reliance was also placed on the judgment of the Hon ble High Court of Karnataka rendered in the case of CIT v. Wipro Ltd. in ITA No.507/2002 dated 25.08.2010 (copy available on pages 176 to 209 of the PB). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Unclaimed balance o/s Rs.2,64,25,609 13. Dept. Exam fees ₹ 2,346 14. Sale of dept. books ₹ 1,035 15. Sale of forms ₹ 4,18,341 16. Misc. recovery from employees ₹ 8,45,452 17. Sale of scrap/stock excess found ₹ 33,12,422 18. Meter reading testing charges ₹ 3,51,653 19. BBC theft ca collected ₹ 2,03,730 20. Difference between WDV/book value of released asset ₹ 96,77,085 ₹ 7,51,86,012 15. From the above details of miscellaneous income, it is seen that the income in dispute is interest income, profit on sale of stores, sale of scrap, misc. receipts from trading, rental from staff qtrs., renta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses and as a consequence, it is also not an income derived from an industrial undertaking. Rental income also is an independent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses in the absence of this fact that assessee was paying rent of staff quarters which was debited to Profit Loss account and as such recovery of rental income from staff quarters is going to reduce the expenses of the assessee incurred on rent. As a consequence, it is also not an income derived from an industrial undertaking. Commission for collection of electric duty also is an independent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses and as a consequence, it is also not an income derived from an industrial undertaking. Apart from the miscellaneous recovery of ₹ 7,51,86,012, we are left with two items i.e., sale of scrap of ₹ 24,10,221 and excess found on physical verification of material stock of ₹ 4,03,364. Regarding these two items, we are satisfied that this will go to reduce the cost incurred by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reimbursement of cost actually incurred by assessee in manufacturing and selling of its products, then such subsidy should not be excluded from business profit. In our humble opinion, the ratio laid down by the Hon ble Apex Court in this judgment is this that if a receipt is reducing the cost incurred by the assessee in the manufacturing/selling of its products, then such receipts should be considered as reduction in cost which will result into increase in profit derived from industrial undertaking and therefore, such receipts should not be reduced from the profit of the assessee. In this view of the matter, we have held in the above para that certain receipts should not be reduced from business profit of the assessee but other receipts are to be so reduced. 22. Regarding applicability of various judgments cited by ld. DR of revenue, we hold that we have followed two judgments of Hon ble apex court as noted above and hence, other judgments are not relevant. 23. In the result, the appeal of the assessee stands partly allowed. 24. Now we take up the appeal of assessee for AY 2008-09 in ITA No.539/Bang/2013. The grounds raised by the assessee in this year are as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome from Trading a) Profit on sales of store 15,502 1,06,66,053 b) Sale of Scrap 40,22,860 c) Misc Receipts 60,09,691 d) Meter reading etc 6,18,000 3 Miscellaneous Receipts a) Rental from Staff Quarters 53,44,349 6,05,63,369 b) Rental from Others 4,20,981 c) Ecess cash 121 d) Excess Stock 1,39,817 e) Commission 68,11,603 f) Misc. Recoveries 4,78,46,497 Total Other income 7,16,67,413 27. In line with our decision in AY 2007-08, we hold that sale of scrap of ₹ 40,22,860 should not be reduced from the profit of the assessee for the purpose of computing deduction allowable to the assessee u/s. 80IA(4)(iv)(c) but the other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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