TMI Blog2011 (9) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... same has not been derived from the industrial undertaking and hence, the disallowance of part deduction claimed u/s. 80 IB of the Act is unjustified and may be deleted. 3. The Assessee is a company. It is engaged in the business of manufacture and sale of glass. The Assessee was entitled to a deduction while computing total income a deduction of the income derived from the industrial undertaking viz., manufacture of glass. The above grounds are directed against the action of the revenue authorities in not considering other income amounting to ₹ 1,07,05,561 for deduction u/s 8OlB of the Act. The aforesaid amount comprises of the following sums: Insurance Receipt- Sales 358,577 Octroi Receipts 539,399 Insurance claim received 1,486,649 Miscellaneous income 96,594 Gain due to Foreign exchange difference 653,804 Cash Discount received 266,125 Sundry Advances w/back 1,926,135 Sundry credit bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits of the undertaking. 6. Aggrieved by the order of the CIT(A) the assessee is in appeal before the Tribunal. 7. We have heard the rival submissions. We will deal with the individual items of income which were held by the CIT(A) to be not income derived from the business of the eligible undertaking for computing deduction under section 80 IB of the Act. (i) Insurance receipt:- According to the Assessee, the sum of ₹ 3,58,577 was insurance is in fact part and parcel of the sales of its manufacturing activity. The stand of the ld. Counsel for the assessee before us was that when it sells its product the same includes the cost of the glass as well as the insurance on the glass sold to the customers. The customer pays the cost of the glass plus the insurance premium paid by the assessee and for accounting purposes assessee shows insurance receipts separately. According to the assessee this also is part of the sale proceeds of glass and eligible for deduction under section 80 IB of the Act. The Assessee submits that the amount is credited to this separate account instead of considering the same as part of actual sales value since the same are separately charged. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee earned income on the above two activities it cannot be considered as income derived from the business of manufacturing and sale of glass articles. (iii) Insurance claim of ₹ 14,86,649 is stated to be the sum received from the insurance company, against the claims lodged by it in respect of the breakages/damages that occur while the goods are in transit either on purchase account or on sale account. The Assessee submits that insurance received/receivable is definitely part parcel of the business activity of the undertaking and has direct bearing on the income of the undertaking. Without prejudice, the appellant submits that the amounts received against breakages/damages would go to reduce the cost of purchases of manufacturing of the glass articles and., hence, has direct connection with the income of the undertaking and hence, the same would form part of eligible profits of the undertaking and thus, the deduction ought to be allowed in respect of the same. As far as insurance claim received by the assessee on account of damage of the goods in transit has to be considered as income derived from the eligible business. The decision of the Hon ble Bombay High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation in the currency either while making actual payments for purchases or on actual receipt from the customers on sales made to them. The Assessee submits that the amount is directly related to the earning of the income of the undertaking and part and parcel of the sales proceeds and / or reduction in purchase price of glass and hence, the deduction u/s.8OlB is allowable in respect of the said amount. The claim of the assessee that this would be income derived from the industrial undertaking being part of the sale proceeds of the eligible undertaking is supported by the decision of the Hon ble Bombay High Court in the case of CIT vs. Kamper Industries India Ltd., 326 ITR 455(Bom), wherein it was held that they are part of sale proceeds and have to be considered as income derived from the eligible business. The AO is directed to allow the claim of the assessee for deduction. (vi) Cash Discount received of ₹ 2,66,125 is on purchases from one of the suppliers M/s. Asahi India Limited and since the assessee made early payment to the said party, discount was received, which in effect, would go to reduce the purchase cost of the assessee and hence, eligible for deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 36,00,000 is claimed by the Assessee to be in the nature of reimbursement of the expenses debited to the profit and loss account and incurred on behalf of the other group concern of the appellant M/s. Sejal Float Glass Ltd. The assessee submits that the other group concern has been using the administrative facilities and other services of the assessee and hence, a mutual understanding is arrived at for charging lump sum amount in respect of the utilization of various administrative facilities of the appellant. The Assessee claims that the administrative charges recovered from the group concern is basically in the form of reimbursement of the various expenses incurred by the Assessee and hence, would go to reduce the overall expenses of the appellant and thereby increase the profits of the eligible undertaking. The Assessee submits that the amount recovered from the group concern is part and parcel of the business profits eligible for claim of deduction uls.801B of the Act and hence, the Assessee should be allowed the deduction accordingly. We have considered the rival submissions. It is the claim of the assessee that the amount in question is reimbursement of expenses by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th which there are business dealings and the same according to the Assessee is part of the earnings related to the industrial undertaking and hence, deduction is allowable u/s.8OlB of the Act in respect of the said income. On items (x) to (xii) above, we hold as follows: Interest on trade deposits and interest on margin money cannot be considered as income derived on eligible business as laid down by the Hon ble Supreme Court in the case of Liberty India, 317 ITR 218(SC). For the same reasons given above interest on inter corporate deposits cannot be considered as income derived from the eligible business. (xiii) Interest of ₹ 17,045 is on Bill of Exchange drawn on customers against sales realized late. Interest is charged thereon for delayed payment by the customers. Thus, the Assessee submits that the interest is earned on delayed payment from the customers and hence, part and parcel of sale proceeds and thereby deduction u/s.801B is allowable on the said amount and the same may be therefore allowed. Interest paid by the customer for late payment as we have already held should be considered as interest derived from the eligible business for allowing deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o defects in its books of account and that the same amounts as shown by the purchaser were accounted in the appellant s books of account and hence, merely because the other party deducted TDS by treating the purchase of glass as contract the same transaction does not become two separate transactions and thus, the addition sustained as alleged unaccounted sales of ₹ 2,50,893/- is without any justification and liable to be deleted. 9. The AO on scrutiny of the Annual Informaion Report (AIR) of Tax Deducted at Source (TDS) noticed that one M/S.Dona Builders Private Limited (DB)had deducted tax at source on payment of ₹ 2,50,893/- purported to a payment to the Assessee as a contractor. The AO called upon the Assessee to explain this receipt and how it is reflected in the books of accounts of the Assessee. The Assessee explained that a firm of Architects M/S.Euro Architectural (P) Ltd. (Dona Planate) was a group concern of DB. The Assessee sold Reflective Super Silver Dark Blue Glass to them under sale invoice dated 24.1.2006. A copy of the invoice together with copy of the Ledger extract of Euro Architectural Pvt. Ltd. In the books of the Assessee was also given to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he account of the appellant by a sum of ₹ 1,50,000 towards wastage against the purchases made of ₹ 3,88,893 from the appellant. This left balance of ₹ 2,50,893 payable to the appellant. It deducted TDS of ₹ 8,980 on the said sum as payment to contractors and paid the remainder sum of ₹ 2,41,913 to the appellant vide the aforesaid cheque duly credited by the appellant in its books of course in the account of M/s. Dona builders Pvt. Ltd. The impugned sum is thus found to be a payment for contract and not for supply of goods. Obviously, the appellant has not recorded the gross amount of ₹ 2,50,893/- in the income declared in the return. The AO has rightly brought this amount to tax. The ground is dismissed. 11. Aggrieved by the order of the CIT(A), the Assessee has raised Gr. (B) before the Tribunal. We have heard the rival submissions. The same submissions made before AO were reiterated on behalf of the Assessee. The Learned D.R. relied on the order of the CIT(A). 12. We have considered the orders of the revenue authorities and the documents on record. Copy of the invoice for supply of Reflective Super Silver Dark Blue Glass dated 24.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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