Vesuvius India Limited v. Assistant Commissioner Of Income Tax

OD-38 ITAT/186/2017 IA NO: GA/1/2018 (Old No: GA/2157/2018)IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION(INCOME TAX)ORIGINAL SIDE VESUVIUS INDIA LIMITEDVERSUS ASSISTANT COMMISSIONER OF INCOME TAX BEFORE :THE HON’BLE JUSTICE T.S. SIVAGNANAMAndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate : 25[th] November, 2021 Mr. J.P. Khaitan, Sr. Adv. …For Appellant The Court : This appeal filed by the revenue filed under Section260A of the Income Tax Act, 1961 (the `Act’ for brevity) is directedagainst the order dated 28[th ]December, 2016 passed by the IncomeTax Appellate Tribunal, “C” Bench, Kolkata (the `Tribunal’) in ITA No.614/Kol/2011 for the assessment year 2004-05. The assessee has raised the following substantial questions oflaw for consideration:- a)Whether on the facts and in the circumstances of the case andin law, the Tribunal erred in denying the claim of the appellantthat profits and gains of business of the undertaking eligible fordeduction under Section 80-IB shall be re-computed by considering only the income and expenditure having direct andimmediate nexus to the said undertaking ? b)Whether on the facts and in the circumstances of the case andin law and without prejudice to 7(a), the Tribunal erred indenying the claim of the appellant that profit and gains ofbusiness of the undertaking eligible for deduction under Section80-IB shall be re-computed by excluding net of other incomeinstead of gross of other income ? c)Whether on the facts and in the circumstances of the case andin law the Tribunal erred in law in remanding back the matterto the Assessing officer for re-examination in allowing the claimof petitioner on account of interest from the other ofRs.38,27,000/- relates to interest on late payment received fromtrade debtors and miscellaneous income of Rs.10,86,000/- hasbeen generated from sale of scrap in computing profits andgains of business of eligible undertaking under Section 80IB,when Appellate and Assessing authority both have been fullysatisfied about the nature of the said incomes ? We have heard Mr. J.P. Khaitan, learned Senior Counselassisted by Mr. Somak Basu, learned Counsel appearing for therespondent/assessee and Mr. P.K. Bhowmik, learned Counselappearing for the appellant. Learned Counsel appearing for the appellant assesseesubmitted that a substantial question of law being ground (c)is not pressed. Thus it leaves us with substantial questions of law (a) and (b) to be decided. The order impugned before us passed by the Tribunal isfor assessment years 2003-04 and 2004-05 and the Tribunal disposedof both the appeals by a common order dated 28[th] December, 2016. Asagainst the order passed for the assessment year 2003-04, theappellant/assessee had filed appeal before this Court being appealITAT 188 of 2017 and by judgment dated 24[th] November, 2021 wehave allowed the appeal filed by the assessee in part and remandedthe matter to the assessing officer for fresh consideration. In theimpugned order, in paragraph 5 the Tribunal has noted the groundsraised by the assessee before it. However, there appears to be a smallerror in not noting the grounds raised by the assessee for theassessment year 2004-05. Though the grounds were identical, thefigures mentioned therein differ. For easy reference, we note the saidgrounds as under :- “2(a) That on the facts and in the circumstances of the case, theLd.CIT(Appeals) was not justified rather grossly erred inexcluding other income comprising of commission ofRs.25,000/-, interest from bank of Rs.5,36,000/-, interest fromothers of Rs.38,27,000/0 and scrap sales of Rs.10,86,000/- incomputing profits and gains of business of the undertakingeligible for deduction u/s80IB. 2(b) That on the facts and in the circumstances of the case, theLd.CIT (Appeals) erred in facts and law in denying the claim of theappellant to exclude net of the aforesaid other income and not gross ofthe aforesaid income from the profits and gains of business of theeligible undertaking. “2(a) That on the facts and in the circumstances of the case, theLd.CIT(Appeals) was not justified rather grossly erred inexcluding other income comprising of commission ofRs.25,000/-, interest from bank of Rs.5,36,000/-, interest fromothers of Rs.38,27,000/0 and scrap sales of Rs.10,86,000/- incomputing profits and gains of business of the undertakingeligible for deduction u/s80IB. 2(b) That on the facts and in the circumstances of the case, theLd.CIT (Appeals) erred in facts and law in denying the claim of theappellant to exclude net of the aforesaid other income and not gross ofthe aforesaid income from the profits and gains of business of theeligible undertaking. 2(c) That on the facts and in the circumstances of the case andwithout prejudice to Ground No.2(a) and 2(b) taken here-in-above, theLd. CIT (Appeals) erred in not re-computing profits and gains ofbusiness of the undertaking eligible for deduction u/s 80IB byconsidering only the income and expenditure attributable to the saidundertaking.” Except for the above distinction namely, the figures which havebeen mentioned above for the assessment year 2004-05, in all otheraspects the matter is identical to that of the decision for theassessment year 2003-04. We have elaborately heard Mr. Khaitan, learned senior counselappearing for the appellant and Mr. Bhowmick, learned seniorstanding counsel appearing for the respondent/revenue. The Tribunalby impugned order dated 28[th] December, 2016 granted partial relief tothe assessee but in so far as certain grounds, which were canvassedby the appellant/assessee the Tribunal did not take a decision in thematter but held those grounds to have become infructuous and theydo not require any adjudication. The correctness of such order isbeing tested. To be noted that the Tribunal on the major issue, whichwas canvassed before it, on law held in favour of the assessee and forthe purpose of computation the matter has been remanded back tothe Assessing Officer. The submission of the learned counsel for theappellant assessee is that the other two grounds, which have beencanvassed by the assessee would also form integral part of the mainground, which was canvassed before the Tribunal and the assesseenever gave up those grounds of challenge. For consideration of the said submission of the learned counsel, we take note that thegrounds, which were canvassed by the assessee before the Tribunal,which are quoted herein below: “ 2[a]. That on the facts and in the circumstances of thecase, the Ld. CIT[Appeals] was not justified rather grossly erredin excluding other income comprising of commission ofRs.5,09,000/- interest from bank of Rs.8,72,000/-, interest fromothers of Rs.46,73,000/- and miscellaneous income ofRs.6,34,000/- in computing profits and gains of business of theundertaking eligible for deduction u/s. 80IB. 2[b]. That on the facts and in the circumstances of the case,the Ld. CIT[Appeals] erred in facts and law in denying the claimof the appellant to exclude net of the aforesaid other income andnot gross of the aforesaid income from the profits and gains ofbusiness of the eligible undertaking. 2[c]. That on the facts and in the circumstances of the caseand without prejudice to Ground No.2[a] and 2[b] taken here-inabove, the Ld. CIT[Appeals] erred in not re-computing profits andgains of business of the undertaking eligible for deduction u/s80IB by considering only the income and expenditure attributableto the said undertaking.” As mentioned above, the ground no.2[a] [supra] has beendecided in favour of the assessee in respect of the two items, namely,interest from others and sale of scrap. After having held that there ismerit in the submission of the assessee as the proposition canvassed by them are supported with the judgments of the Hon’ble High Courts 2[c]. That on the facts and in the circumstances of the caseand without prejudice to Ground No.2[a] and 2[b] taken here-inabove, the Ld. CIT[Appeals] erred in not re-computing profits andgains of business of the undertaking eligible for deduction u/s80IB by considering only the income and expenditure attributableto the said undertaking.” As mentioned above, the ground no.2[a] [supra] has beendecided in favour of the assessee in respect of the two items, namely,interest from others and sale of scrap. After having held that there ismerit in the submission of the assessee as the proposition canvassed by them are supported with the judgments of the Hon’ble High Courts and the Hon’ble Supreme Court, the Tribunal remanded the matter tothe Assessing Officer with a direction to examine the interest fromothers and miscellaneous income and the Assessing Officer wasdirected to give relief to the assessee in the light of the judicialpronouncements referred to in paragraph 6.4 of the order passed bythe Tribunal. If such relief granted by the Tribunal to the assessee,we find no justifiable reason for having rejected the grounds 2(b) and2(c) as having become infructuous. The Tribunal has not assignedany reason as to why and in what manner those two grounds havebecome infructuous. In any event, whether the claim made by theassessee to exclude net of the aforesaid other income and not gross ofthe aforesaid income from profits and gains of business of the eligibleundertaking is also required to be considered by the Assessing Officerand this will form integral part of the computation directed to be doneby the Tribunal by reminding the matter to the Assessing Officer.Furthermore, the assessee’s specific case was that the Commissionerof Income Tax [Appeals] had committed an error in not re-computingthe profits and gains of business of the undertaking eligible fordeduction under section 80IB by considering only the income andexpenditure attributable to the said undertaking. This ground also willform integral part of the ground no.2[a] of the grounds and the sameis required to be considered by the Assessing Officer as to whetherthose grounds raised by the Assessing Officer are justifiable andlegally tenable. Therefore, we are of the view that on remand while theAssessing Officer would comply with the direction issued by theTribunal he shall also examine the grounds raised by the assessee, being ground no.2[b] and 2[c] [supra]. The assessee is at liberty toplace all materials in support of their contention and thereafter theAssessing Officer shall redo the assessment in accordance with law. With the above observation, the appeal stands partly allowed.Consequential substantial questions of law are left open. Stay application, GA/2157/2018 stands disposed ofaccordingly. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.) SN./D.GhoshAR(CR)