IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : "B" NEW DELHI
AND SHRI J.SUDHAKAR REDDY, AM
AND SHRI C.M. GARG, JM
ITA Nos: 4207,4208/Del/2013
AYs : - 2008-09, 2006-07
DCIT, vs. M/s. Continental Engines Limited
Central Circle-2, 22,Commercial Complex,
New Delhi. Malcha Marg, New Delhi.
(PAN AABCC9896N)
(Appellant) (Respondent)
Appellant by :Shri K.V.S.R. Krishna, CA
Respondent :Smt Parminder Kaur, Sr. DR
ORDER
PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
Both these appeals are filed by the revenue and are directed against separate
orders of the Commissioner of Income Tax (A) V New Delhi dated 6.3.2013 for the
year 2006-07 and dated 8.3.2013 for the asstt. year 2008-09. Both these appeals
are heard together and are being disposed off by way of this common order.
2. The assessee is company and is engaged in the business of manufacturing of
auto components.
3. We have heard Smt. Parwinder Kaur Ld. Sr. DR on behalf of the revenue and
Shri K.V.S.R. Krishna the Ld. Counsel on behalf of the assessee.
ITA Nos. 4207,4208/Del/2013
AYs 2008-09,2006-07
DCIT vs. Continental Engines Ltd.
4. On a careful consideration of rival contentions and the facts and circumstances
of the case and on a perusal of the papers on record and the orders of the
authorities below we hold as follows :-
We take up the revenue appeal in ITA No. 4207/D/13 on the following grounds
:-
1. " On the facts and in the circumstances of the case, the CIT(A) has erred
in deleting the addition of Rs. 2,21,770/- made by the AO on account of
disallowance of deduction u/s 10B of the Income Tax Act, 1961 on
miscellaneous income earned by the assessee from sale of scrap.
2. On the facts and in the circumstances of the case, the CIT(A) has erred
in holding the miscellaneous income earned from sale of scrap as main
business activity.
3. On the facts and in the circumstances of the case, the CIT(A) has erred
in directing the AO to allow the revised claim of deduction under section
10B of the Income Tax Act, 1961 at Rs. 52,46,09,215/- from Rs.
50,25,60,163/- as claimed by the assessee other than filing revised return
of income.
4. On the facts and in the circumstances of the case, the CIT(A) has erred
in ignoring the decision of Hon'ble Apex Court in the case of Goetze
(India) Ltd. Vs. CIT 284 ITR 323 (SC) (2006), which is squarely applicable
in the instant case."
5. The first ground is against the order of the Ld. CIT(A) allowing the claim of the
assessee, to include miscellaneous income in profits of business, for the purpose of
computing deduction u/s 10B. The first appellate authority dealt with this issue in
para 5 at page 2 of his order. He followed his own decision taken in the year 2006-
07 and directed the AO to grant relief. In the asstt. year 2006-07 we find that the
miscellaneous income in question pertains to sale of scrap and write off of certain
credit balances. Both these items of income have been assessed under the head "
income from business of profession" by the AO. It is not the case of AO that these
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ITA Nos. 4207,4208/Del/2013
AYs 2008-09,2006-07
DCIT vs. Continental Engines Ltd.
incomes are assessable under some other head of income and not as income from
business. Under these circumstances, we are of the considered opinion that the
order of the first appellate authority has to be upheld by applying the decision of the
special bench of the Tribunal in the case of Maral Overseas Ld. Vs. ACIT , ITA Nos.
777 & 999 (Ind) of 2004 & 295 & 356 (Ind) of 2006 dated 28.3.2012, where it is
held that in the case of Liberty India, the Hon'ble Supreme Court has dealt with the
provisions of section 80IA/80IB of the Act and not section 10B where a formula has
been prescribed u/s 10B(4), the application of which would result in arriving at the
figure of profits and gains that are to be considered as derived by the 100% EOU,
for the purpose of computing exemption u/s 10B (1) Thus a disallowance on the
ground that a particular income is not derived from the business is bad in law as the
same does not confirm to the formula prescribed under the Act. Ground No. 2 is
same as ground No. 1. Hence both ground No. 1 & 2 are dismissed.
6. Ground No. 3 & 4, are against the action of the Ld. CIT(A) admitting an
additional claim of the assessee. We find that the assesee has made a claim u/s 10B
in the return of income. It is only a case where the claim u/s 10B was sought to be
recomputed. It is not a fresh claim and hence in our view the judgment of the
Hon'ble Supreme Court in the case of Goetze (India) Ltd. does not apply.
7. Be it as it may, this is a legal ground and all the facts relatable to this ground
are on record. Thus in view of the decision of Hon'ble Supreme Court in the case of
NTPC Ltd. 229 ITR 383 (SC) we do not find any infirmity in the action of the first
appellate authority. As far as computation of relief u/s 10B is concerned the Ld. DR
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ITA Nos. 4207,4208/Del/2013
AYs 2008-09,2006-07
DCIT vs. Continental Engines Ltd.
could not controvert the factual finding of the Ld. CIT(A) and hence the same is
upheld. Hence these two ground Nos. 3 & 4 are dismissed.
8. In the result, appeal of the revenue is dismissed.
ITA No. 4208/Del/13 is the revenue appeal for the asstt. year 2006-07. The grounds
are as under :-
1. On the facts and in the circumstances of the case, the CIT(A) has erred in
deleting the addition of Rs. 15,94,813/- made by the Assessing Officer on
account of disallowance of interest on account of interest free loan of Rs. 2.64
crore advanced to its subsidiary company.
2. On the facts and in the circumstances of the case, the CIT(A) has erred in
deleting the addition of Rs. 20,37,678/- made by the AO on account of
disallowance of deduction u/s 10B of the Income Tax Act, 1961 on
miscellaneous income earned by the assessee from sale of scrap
3. On the facts and in the circumstances of the case, the CIT(A) has erred in
holding the miscellaneous income earned from sale of scrap as main business
activity.
9. The first issue is regarding the deletion of addition of Rs. 15,94,813/- by the
Ld. CIT(A) on account of disallowance of interest, on interest free loan of Rs. 2.64
crores advanced to a subsidiary company. The first appellate authority has given a
finding that the AO was factually wrong in holding that the assessee had given
interest free advance to its subsidiary M/s. Intermotor B V Holland, Europe.
10. The factual position is that the assessee had purchased shares of a subsidiary
company for the purpose of having control over it. The amount in question is
investment made and not a loan advanced. As there is no interest free loan given we
uphold the findings in para 5.2 of the CIT(A) order and dismiss ground No. 1 of the
revenue.
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ITA Nos. 4207,4208/Del/2013
AYs 2008-09,2006-07
DCIT vs. Continental Engines Ltd.
11. Ground No. 2 is on the disallowance of deduction u/s 10B of miscellaneous
income. The miscellaneous income in question is earned from sale of scrap. The
income from these items has been assessed under the head ""income from business
profession". Under these circumstances there can be no disallowance by applying
the proposition laid down by the special bench of the Tribunal in the case of Maral
Overseas Ltd. vs. ACIT ITA Nos. 777 & 999 (Ind) of 2004 & 295 & 356 (Ind) of
2006 dated 28.3.2012 (SB). For the reasons given while dismissing revenue's appeal
ground No. 3 & 4 for the asstt. Year 2008-09 ground of the revenue is dismissed.
12. Ground No. 3 is an extension of ground No. 2 and requires no adjudication.
Ground No. 4 & 5 are general in nature.
13. In the result both the appeals of the revenue are dismissed.
Order pronounced in the Open Court on 20th November, 2014.
sd/- sd/-
(C.M.GARG) (J.SUDHAKAR REDDY)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: the 20th November, 2014
*veena
Copy of the Order forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
6. Guard File
By Order
Deputy Registrar
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