ITA No. 456 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 456 of 2010 Date of Decision: 20.9.2010 M/s Friends Castings (P) Ltd. ....Appellant. Versus Commissioner of Income Tax ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Jorawar Singh Bhasin, Advocate for the appellant. ADARSH KUMAR GOEL, J. 1. This order will dispose of ITA Nos. 455 and 456 of 2010 as both involve common questions. 2. ITA No. 456 of 2010 is an appeal by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order of the Income Tax Appellate Tribunal, Amritsar Bench (hereinafter referred to as “the Tribunal) in ITA No. 68 (ASR)2009 dated 9.10.2009, for the assessment year 2000-01, proposing following substantial questions of law:- “i) Whether the order of the Tribunal, apparently being non-specific and non-speaking, is liable to be set aside as such? ii) Whether in the facts and in the circumstances ITA No. 456 of 2010 -2- of the case, the Tribunal was justified in upholding the findings of the ld. CIT (A) that job work charges, derived from industrial activity, could be excluded from the eligible profits of the industrial undertaking, for computing the deduction u/s 80-IA/80-IB? iii) Whether, the job work charges, being part of the business profits, could be considered at par with brokerage, commission, interest, rent and other charges, under clause (baa) to section 80HHC(4C), so as to exclude 90% of the same from business profits, for computing the deduction u/s 80HHC? iv) Whether on the facts and circumstances of the case the Tribunal was justified in law in holding that in terms of Section 80-IA (9) of the Act where two deductions under Section 80HHC and 80-IB of the Act are available, then the deduction computed u/s 80-IB shall be reduced from the business profits to compute deduction u/s 80HHC on the resultant profits? v) Whether the order of the Tribunal is legally unsustainable & bad in law and perverse?” 3. Learned counsel for the assessee fairly states that question (iii) could not be pressed in view of the judgment of this Court in Liberty India v. Commissioner of Income Tax, [2007] 293 ITR 520 (P&H). ITA No. 456 of 2010 -3- 4. A reading of question nos. (i) & (v) clearly shows that they are general in nature and, thus, cannot be held to be substantial questions of law. 5. Adverting to question no. (ii), the grievance of the assessee is that job work charges which were derived from industrial activity could not be excluded from eligible profits for determining deduction under Section 80-IA/80-IB of the Act. Few facts essential for adjudicating this controversy may be noticed. The income of the assessee as per computation had been shown at Rs.36,42,280/-. The assessee had claimed deduction @ 30% thereon amounting to Rs.10,92,684/-. However, the same was computed by reducing the non-business income of the assessee in the shape of job work charges (Rs.3,66,850/-); interest on fixed deposit (Rs.8,96,859/-); sale of incentives (Rs.10,00,328/-) and interest on income tax refund (Rs.57,981/-) from the income of Rs.36,42,280/- by the Assessing Officer. The CIT (A) upheld the aforesaid disallowances. The CIT(A) while concurring with the Assessing Officer regarding exclusion of job work charges for calculating deduction under Section 80-IA/80-IB observed as under:- “... The key ingredients for allowing deduction u/s 80-IA are that the income should be derived from industrial undertaking and the assessee should manufacture or produce an article or thing. The assessee has been found to be eligible for deduction u/s 80-IA in respect of its own production of goods. However, the appellant has not led any evidence ITA No. 456 of 2010 -4- before the A.O. that the job work charges were received for manufacturing or producing articles or things. The only argument which has apparently been advanced before the AO was that expenditure in respect of job work charges should also be reduced if the same were not being considered for special deduction u/s 80-IA. During the appellate proceedings also no such plea has been taken. Since the appellant has not been able to show that the job work charges were received for manufacturing or producing an article or thing from its industrial undertaking, deduction u/s 80-IA is not allowed in respect of these receipts. The case law relied upon by the appellant are not relevant since in those cases there was a finding that the assessee were manufacturing or producing articles or things. In this connection, it is worthwhile to note that deduction u/s 80-IA is not allowed on merely processing of raw material, unless the processes result in a new distinct commodity.” 6. The Tribunal upheld the findings of the CIT(A). Learned counsel for the assessee was unable to advance any argument to dispel the findings recorded by the CIT(A) and upheld by the Tribunal that the receipts on account of job work was not a result of manufacturing or by producing article or thing and, therefore, the assessee was not entitled to claim deduction thereon under Section ITA No. 456 of 2010 -5- 80-IA. Accordingly, question No. (ii) is not a substantial question of law. 7. Referring to question No. (iv), the claim of the assessee is that the assessee was entitled to deduction under Section 80-IA as well as under Section 80HHC on the same amount. Necessary facts may be referred to. The assessee had claimed deduction under section 80HHC amounting to Rs.14,65,802/- in the return of income filed on 2.11.2000. The Assessing Officer held that the assessee was entitled to deduction under Section 80HHC on the balance amount which remained after allowing deduction under Section 80-IA. According to the Assessing Officer such relief was in excess by Rs.1,73,903/-. This was upheld by the CIT(A). The Tribunal while affirming the aforesaid view had recorded as follows:- “8. As regards the issue involved in Ground Nos. 7 (i) to 7(iii) and 8(i) to 8(ii), in which the assessee has raised the issue regarding calculation of profit under section 80HHC after reducing the profit u/s 80-IA of the Act. As stated by the Ld. counsel for the assessee that the Ld. CIT(A) has wrongly calculated the profit u/s 80HHC at Rs.9,32,480/- against the claim as per Audit report and ignoring the mode of calculation of profit u/s 80HHC, that it is independent and nothing to do with section 80-IA. The plea of the assessee regarding the provisions of law that section 80AB is clarificatory in nature and supersedes all the provisions of Chapter VI-A including section 80-IA(9) of the Act. ITA No. 456 of 2010 -6- 8.1 After going through the impugned orders, we are of the considered opinion that the Ld. first appellate authority has decided the issue in dispute against the assessee by following the order of the ITAT (Special Bench), Chennai, in the case of ACIT Vs. Rogini Garments (2007) 294 ITR (AT) 15, which is on the same issue. In the case of Rogini Garments, the Special Bench held that the restrictive provisions of section 80-IA(9) had to be given effect to, and the definition of business profit as contained in clause (baa) below section 80HHC(4C) has to be construed in light of these restrictions. The Special Bench held that relief u/s 80-IA should be deducted from the profits & gains of the business before computing the relief u/s 80HHC. The Ld. first appellate authority had decided issue against the assessee by discussing the issue in dispute with the support of various judgments mentioned in the impugned orders at paras 3.6 & 3.7 on page 12 & 13. The case law cited by the ld. counsel for the assessee has also been discussed by the ld. first appellate authority. We have also gone through the same and are of the considered opinion that recently this issue has been decided by the I.T.A.T. Special Bench 'C' New Delhi, in the case of ACIT, Range-II, Moradabad Vs. M/s Hindustan Mint. & Agro Products ITA No. 456 of 2010 -7- Pvt. Ltd. Chandausi, consisting of five members, wherein they have discussed various case laws in details and held that deduction is to be allowed under any other provision of Chapter VI-A with the heading 'C' is to be reduced by amount of deduction allowed u/s 80-IB/80-IA of the Act and decided the issue in dispute in favour of the Revenue vide order dated 23rd June, 2009. Keeping in view of facts and circumstances of the present case, we are of the view that the issue in dispute is squarely covered by the decision of the ITAT, Special Bench 'C', New Delhi (supra), in favour of the Revenue and against the assessee. Thus, respectfully following the decision rendered by the ITAT, Special Bench 'C', New Delhi, in the case of ACIT, Moradabad Vs. M/s Hindustan Mint & Agro Products Pvt. Ltd., Chandausi, passed in ITA Nos. 1537, 1538 & 1539 (DEL)/2007 for the assessment years 2001-02, 2003- 04, 2004-05 dated 23rd June, 2009, we dismiss Ground Nos. 7(i) to 7(iii) and 8(i) to 8(ii) of the appeals of the assessee.” 8. Learned counsel for the assessee was unable to point out that the approach of the authorities below was contrary to any statutory provision except to urge that the view taken by the Tribunal is erroneous as under Section 80-IA(9) which are also applicable in view of Section 80-IB(13), the only restriction is that deduction should not exceed the ITA No. 456 of 2010 -8- total profits and gains, and the restriction that deduction claimed and allowed under Section 80-IA or 80-IB could not be allowed under any other provision should be read in the light of condition of deduction not exceeding total profits and gains. 9. We are unable to accept the submission. 10. The restriction under Section 80-IA(9) is not only that the total deduction should not exceed profits and gains, there is a further restriction that deduction allowed under Section 80-IA or 80-IB will be a bar to claim deduction under any other provision of the Chapter. 11. In view of above, we hold that no substantial question of law arises in this appeals. 12. The appeals are accordingly dismissed. (ADARSH KUMAR GOEL) JUDGE September 20, 2010 (AJAY KUMAR MITTAL) gbs JUDGE ITA No. 456 of 2010 -9- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 455 of 2010 Date of Decision: 20.9.2010 M/s Friends Castings (P) Ltd. ....Appellant. Versus Commissioner of Income Tax ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Jorawar Singh Bhasin, Advocate for the appellant. ADARSH KUMAR GOEL, J. For orders, see ITA No. 456 of 2010 (M/s Friends Castings (P) Ltd. v. Commissioner of Income Tax). (ADARSH KUMAR GOEL) JUDGE September 20, 2010 (AJAY KUMAR MITTAL) gbs JUDGE