IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER
AND AMIT SHUKLA, JUDICIAL MEMBER
I.T.A. No. 6225/M/2012 (AY:2006-2007)
ACIT-8(3), / M/s. Zenith Infotech Ltd,
R.No.217, Aayakar Bhavan, Zenith House, 30 MIDC,
M.K. Marg, Mumbai -020. Central Road, Andheri (E),
./ PAN : AAACZ0401B
( /Appellant) .. ( / Respondent)
/ Appellant by : Shri Neil Philip, DR
/ Respondent by : None
/ Date of Hearing : 04.08.2015
/Date of Pronouncement : 28 .08.2015
/ O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the Revenue on 10.10.2012 is against the order of the
CIT (A)-18, Mumbai dated 25.7.2012 for the assessment year 2006-2007. In this
appeal, Revenue raised the following grounds which read as under:
"On the facts and in the circumstan ces of the case and in law, the Ld CIT (A) erred in
directing the Assessing Officer to allow deduction u/s 80IB on the profit of Rs.
58,68,989/- from traded goods without appreciating the finding of the AO.
On the facts and in the circumstances of the case and in law, the CIT (A)
erred in directing the Assessing Officer to allow deduction u/s 80IB on the profit of
traded goods without appreciating the fact that before the CIT (A), the assessee had
itself conceded disallowance of deduction u/s 80IB to the extent of net profit of
traded goods as against the disallowance of gross profit of traded goods made by the
2. Briefly stated relevant facts of the case are that the assessee is engaged in
the business of production and development of software. Assessee filed the return
of income declaring the total income of Rs. 1,66,34,581/- under the normal
provisions of the Act and Rs. 6,93,93,806/- as book profits u/s 115JB of the Act. In
the return of income, assessee claimed Rs. 35,36,67,618/- as deduction u/s 80IB of
the Act, which includes the traded goods turnover of Rs. 58,68,984/-. AO completed
the assessment u/s 143(3) r.w.s 147 of the Act and the assessed income was
determined at Rs. 3,17,15,640/-. In the assessment, AO applied the MAT provisions
and held that the profit on ,,traded goods of Rs. 58,68,984/- is not eligible for
deduction u/s 80IB of the Act. Accordingly, AO made a disallowance of Rs.
58,68,984/- and computed the revised deduction eligible u/s 80IB of the Act.
Aggrieved with the said decision of the AO, assessee is in appeal before the CIT (A).
3. During the proceedings before the CIT (A), after considering the submissions
of the assessee, CIT (A) allowed the appeal. Para 2.3 of the CIT (A)s order is
relevant in this regard. Aggrieved with the said decision of the CIT (A), Revenue is
in appeal before the Tribunal by raising the above mentioned grounds.
4. During the proceedings before us, Ld DR relied on the order of the AO and
stated that the deduction u/s 80IB is allowable only on the profits derived from the
,,industrial undertaking, the profits from the ,,trading cannot be said to be derived
from industrial undertaking and therefore, the decision taken by the AO is
5. On the other hand, none appeared on behalf of the assessee to represent its
6. We have heard the Ld DR for the Revenue and perused the orders of the
Revenue Authorities as well as the relevant material placed before us. On perusal of
the CIT (A)s order in general and contents of para 2.3 in particular, we find the
same are relevant to the issue under consideration. Considering the significance and
for the sake of completeness of this order, relevant portions from the said 2.3 of the
CIT (A)s order are extracted as under:-
The brought-out material is commonly referred to as ,,traded material since it
is purchased from a supplier in standard for. However, it is to be noted that after
integration of this brought out items in the production of software by the company, it
(ie the brought-out material) loses its original form and gets merged with the
software product as an inseparable content.
In view of the above, the plea of the appellant is allowed and the AO is
directed to treat the same as eligible for deduction u/s 80IB as claimed by the
7. As mentioned above, though the brought-out material is referred to as ,,traded
material, such material, which form an inseparable part like software products,
cannot constitute traded material and the same is eligible for deduction u/s 80IB of
the Act. Therefore, the CIT (A) has rightly adjudicated the issue and allowed the
claim of the assessee. In our opinion, the decision taken by the CIT (A) is fair and
reasonable and it does not call for any interference. Thus, the grounds raised by the
Revenue are dismissed.
8. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 28th August, 2015.
(AMIT SHUKLA) (D. KARUNAKARA RAO)
JUDICIAL MEMBER ACCOUNTANT MEMBER
.../ OKK , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , , / DR,
6. / Guard file.
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai