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DCIT, Central Circle-2, 22, New Delhi. Malcha Marg, Vs. M/s. Continental Engines Limited Commercial Complex, New Delhi.
November, 21st 2014
                    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




                                                                                             2
                                                             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







                                                                                              3
                                                               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.




                                                                                                4
                                                             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




                                                                                              5

 
 
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