×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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11-09-2019, Bhole Baba Milk Food, Section 80IB, 2(29BA), Tribunal Agra
This appeal by the assessee is directed against the order of the ld. Commissioner of Income Tax(A)-II, Agra dated 28.02.2014 wherein the assessee has challenged the action of the CIT(A) in confirming disallowance of deduction of Rs. 62, 35, 937 claimed by the assessee u/s 80 IB of the Act, out of net profit on the trading goods of Dholpur Unit.
2. The Assessing Officer (In short ‘the AO’) has recomputed the deduction claimed u/s 80IB of the Act, by separating income earned from insurance, Interest, rent, brokerage & commission and net profit of trading good from Dholpur Trading Unit of Rs. 10, 800/-, 8,99,049/-, 8,35,440,18,35,262/- and Rs. 62,35,637/- respectively. Accordingly, the AO has computed deduction u/s 80 IB at Rs. 1,20,99,129/- as against the revised deduction of Rs. 1,46,51,327/- computed by the assessee during the assessment proceeding instead of Rs. 1,75, 51,043/- claimed in the return of income.
3. Aggrieved assessee went in appeal before the ld. CIT(A) challenging vide ground no. 4 that net profit earned on trading of goods of Dholpur unit amounting to Rs. 62,25,935/- were not liable to be disallowed for purpose of calculating the deduction u/s 80IB of the Act. The Ld. CIT(A) has confirmed the addition after carefully considering the written submission filed by the assessee on 07.10.2013, reproduced vide Para 4.3, and called for a remand report from the AO vide letter No. 128/CIT((A)-II/JCIT-4/Agra/2012-13/995 dated 10.12.2013 to verify the supporting evidences, the AO relied upon while concluding that the appellant assessee was engaged in trading of goods along with carrying out its manufacturing activities (Refer para 5.1 of impugned order).
3.1. The CIT(A) has reproduced in para 5.2 in page no. 5 to 9 of the of the impugned order, the AO’s remand report dated 17.10.2013 being furnished in compliance to the CIT(A)’s letter dated 07.10.2013, on the submissions of the assessee that disallowance of deduction u/s 80 IB is not justified on the profits derived on trading goods. In para 6 of the remand report, AO noted that as per the auditor reports, Annexure ‘A’, quantitative trading results for the year under consideration and the has not disputed the same except stating that after purchase of ghee and skimmed milk powder, they were processed by removing moisture and guthle. The AO concluded I remand report that merely by removing moisture and guthle, the purchased ghee and skimmed milk powder do not get converted into a new commercial product.
3.2 Thereafter, the CIT(A) confront the Assessee and the AO to the remand report in hearing held on 22.10.2013 and noted discussion and observations vide para 5.3,5.4 and 5.5 from page No. 11 to14. He has given finding in para 5.6 to 5.9 on page No. 15 to 20. The relevant material part of the finding of the CIT(A)’s is summarized hereunder:
5.1 After considering the written submission of the Ld. AR filed on 07.10.2013 claiming that the goods have been purchased by the assessee for reprocessing and repacking and then their sales have been made under the brand name of the company and therefore, there is no trading sale, the AO has been asked vide my letter A. No. 128/CIT(A)-ll/JCIT-4/Agra/2012- 13/995 dated 10.10.2013 to provide supporting information / details on the basis of which, the conclusion has been drawn that the assessee (appellant) is engaged in trading of goods along with carrying out its manufacturing activities.
5.2 In compliance to my letter dated 10.10.2013, report has been submitted by the JCIT, Range-4 (who passed the impugned order) vide his letter dated 17.10.2013 and the same is reproduced as under: -
"2. The remand report is being called for on the submission made by assessee that the disallowance of deduction u/s 80IB is not justified on profits derived from trading of goods. The assessee has claimed that the goods so purchased were reprocessed and repacked and then their sales have been made under the brand name of the company and therefore, there is no trading sales done by assessee and all the sales are manufacturing sales. The remand report is also called for to explain the basis for computation of trading sales made in the assessment order on proportionate basis.
3. Sri R.M. Singhal, Advocate attended and submitted his written reply dated 17.10.2013 which is reproduced as under-
"2. On the last date of hearing the appellant was asked to furnish basis for claiming deduction u/s 8018 of the Income Tax Act, 1961. in this connection, it is submitted that the appellant is engaged in manufacturing of Desi Ghee and otheritems of milk products. As already stated that the Ld. Assessing Officer has disallowed net profit on trading goods ofDholpur Unit amounting to Rs.62,35,937/- while calculating deduction allowable under the provisions of section 80IB of the Income Tax Act. The aforesaid amount was a part