Sayaji Industries Ltd.,, Ahmedabad v. The DY.CIT., (OSD)Circle-8,, Ahmedabad

CO 232/AHD/2007 | 2004-2005
Pronouncement Date: 30-07-2010 | Result: Dismissed

Appeal Details

RSA Number 23220523 RSA 2007
Assessee PAN AADCS0861R
Bench Ahmedabad
Appeal Number CO 232/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 20 day(s)
Appellant Sayaji Industries Ltd.,, Ahmedabad
Respondent The DY.CIT., (OSD)Circle-8,, Ahmedabad
Appeal Type Cross Objection
Pronouncement Date 30-07-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-07-2010
Date Of Final Hearing 16-06-2010
Next Hearing Date 16-06-2010
Assessment Year 2004-2005
Appeal Filed On 10-08-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : A HMEDABAD (BEFORE HON'BLE SHRI G.D. AGRAWAL V.P. (AZ) & HON BLE SHRI T.K. SHARMA J.M.) I.T.A. NO. 2577/AHD./2007 ASSESSMENT YEAR : 2004-2005 DEPUTY COMMISSIONER OF INCOME TAX (OSD) -VS.- SAY AJI INDUSTRIAL LTD. AHMEDABAD CIRCLE-8 AHMEDABAD (PAN : AADCS 0861 R) (APPELLANT) (RESPONDENT) & C.O. NO. 232/AHD/2007 (ARISING OUT OF ITA NO. 2577/AHD/2007 ASSESSMENT YEAR : 2004-2005 SAYAJI INDUSTRIAL LTD. AHMEDABAD -VS.- DEPU TY COMMISSIONER OF INCOME TAX (OSD) CIRCLE-8 AHMEDABAD (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : SMT. APARNA PARELKAR DEPARTMENT BY : SHRI A.K. KHANDELWAL D .R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTI ON BY THE ASSESSEE ARE AGAINST THE ORDER DATED 30.03.2007 OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS)-XIV AHMEDABAD FOR THE ASSESSMENT YEAR 2004-05. 2. VARIOUS GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER :- (1) THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPE ALS)-XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.43 18 625/- ON ACCOUNT OF LATE PAYMENT OF PROVID ENT FUND CONTRIBUTION OF EMPLOYEES. (2) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.11 64 075/- ON ACCOUNT OF DISALLOWANCE OF TECHNI CAL KNOW-HOW FEES. (3) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTIN G THE ASSESSING OFFICER NOT TO REDUCE INSURANCE CLAIM FROM PROFIT F ROM BUSINESS OF COMPUTING DEDUCTION U/S. 80HHC. (4) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTIN G THE ASSESSING 2 ITA NO. 2577 & CO 232/AHD/2007 OFFICER NOT TO REDUCE DEDUCTION U/S. 80G FOR PURPOS E OF COMPUTING DEDUCTION U/S. 80HHC. 3. IN RESPECT OF ALL THE AFORESAID GROUNDS OF APPEA L RAISED BY THE REVENUE WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFO RE US. OUR DECISION IN RESPECT OF EACH GROUND OF APPEAL IS AS UNDER :- 3.1. GROUND NO. 1 :- IN THE IMPUGNED ORDER THE LE ARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE DISALLOWANCE OF RS.43 18 6 25/- MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THESE PAYMENTS WERE MADE WITHIN GRACE P ERIOD. FOR THIS HE RELIED ON THE DECISION OF ITAT DELHI BENCH IN THE CASE OF MARUBENI INDIA (P) LTD. REPORTED IN 104 TTJ 911 (ITAT DEL.). THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) IS FAIR AND REASONABLE THEREFORE NO INTERFERENCE IS CALLED FOR. THE GROU ND OF APPEAL IS REJECTED. 4. GROUND NO. 2 :- IN THE ASSESSMENT ORDER THE ASS ESSING OFFICER DISALLOWED TECHNICAL KNOW-HOW FEES OF RS.11 64 075/- BY TREATING THE SAM E AS CAPITAL EXPENDITURE. IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) DELETED THE DISALLOWANCE FOLLOWING THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1989-90. SINCE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS FOLLOWED TH E DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1989-90 WE INCLINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). RESULTANTLY THIS GROUND OF APPEAL IS REJECTED. 5. GROUND NO. 3 :- THE CONTROVERSY INVOLVED IN THIS GROUND IS WHETHER FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC INSURANCE CLAIM SHOULD BE REDUCED FROM PROFIT? AT THE TIME OF HEARING BOTH SIDES CONCEDED THAT T HIS ISSUE SHOULD BE SENT BACK TO THE FILE OF ASSESSING OFFICER WHO WILL EXAMINE THE NATURE O F INSURANCE CLAIM. IF THE INSURANCE CLAIM IS RELATING TO TURNOVER OF THE GOODS IN WHICH ASSESSEE IS DEALING IN THAT EVENT IT SHOULD FORM PART OF THE PROFIT. IF THE SAID CLAIM IS IN THE CAPITAL FIE LD THEN IT SHOULD BE EXCLUDED FROM THE PROFIT WHIL E COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE I.T. ACT. THIS ISSUE IS ACCORDINGLY REMANDED TO ASSESSING OFFICER WHO WILL EXAMINE THE NATURE O F INSURANCE CLAIM AND RE-COMPUTE THE DEDUCTION UNDER SECTION 80HHC AFRESH AS PER DIRECTI ON GIVEN HEREINABOVE AFTER GIVING OPPORTUNITY TO THE ASSESSEE. 3 ITA NO. 2577 & CO 232/AHD/2007 6. GROUND NO. 4 :- WE FIND THAT THIS ISSUE IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT RAJKOT BENCH IN THE CASE OF R AJOO ENGINEERS LTD. REPORTED IN 100 ITD 555 (ITAT RAJ.). THE REASONING GIVEN BY THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER IS CONTAINED IN PARA 11.2 WHICH REA DS AS UNDER :- 11.2. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT ALONG WITH THE CASE LAWS AS RELIED UPON. I AM INCLINED TO AGREE WITH THE APPELLANTS CONTENTIONS. I FIND NOTH ING WRONG IN CLAIMING DEDUCTION U/S. 80G IN RESPECT OF DONATION MADE OF R S.21 66 000/- DURING THE YEAR UNDER CONSIDERATION AND AT THE SAME TIME C LAIMING DEDUCTION U/S. 80HHC OF THE ACT. IT IS SEEN THAT THE DEDUCTION U/S . 80HHC IS IN RESPECT OF INCOME EARNED BY THE ASSESSEE BUT DEDUCTION U/S. 8 0G IS CLAIMED IN RESPECT OF EXPENDITURE INCURRED BY THE APPELLANT. F URTHER IT IS TO BE SEEN THAT AS PER EXPLANATION (BAA) THE PROFITS OF THE B USINESS IS TO BE COMPUTED AS PER THE INCOME COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND THEREFORE IT IMPLIES THAT ONLY THE INCOME COMPUTED UNDER THE SPECIFIC HEAD OF BUSINESS IS TO BE THE ST ARTING POINT FOR WORKING DEDUCTION U/S. 80HHC. IN SHORT DEDUCTION U/S. 80HH C WHICH IS A DEDUCTION OF EXPENDITURE INCURRED CAN NEVER BE CON SIDERED TO HAVE BEEN ALLOWED U/S. 80HHC AS THE BASIS FOR CLAIMING DEDUCT ION U/S. 80HHC IS INCOME AND NOT EXPENDITURE. IN VIEW OF THE ABOVE FA CTS NARRATED ABOVE I HOLD THAT THE A.O. WAS NOT JUSTIFIED IN REWORKING T HE DEDUCTION U/S. 80HHC AFTER EXCLUDING THE DEDUCTION U/S. 80G ALREAD Y GRANTED. THE A.O. IS THEREFORE DIRECTED TO MODIFY THE WORKING OF DE DUCTION U/S. 80HHC ACCORDINGLY. 6.1. THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER IS IN CONFORMITY WITH THE DECISION OF THE COO RDINATE BENCH OF ITAT RAJKOT IN THE CASE OF RAJOO ENGINEERS LTD. (SUPRA). WE THEREFORE DECLIN E TO INTERFERE. RESULTANTLY GROUND NO. 4 IS ALSO REJECTED. 7. THE ONLY GROUND RAISED BY THE ASSESSEE IN ITS CR OSS OBJECTION IS AS UNDER :- THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HA S ERRED IN CONFIRMING THAT INTEREST INCOME OF RS.5 74 000/- SH OULD BE EXCLUDED WHILE COMPUTING DEDUCTION U/S . 80HHC OF THE ACT. IT IS SUBMITTED THAT THE CIT(A.) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICE R TO ACCEPT THE DEDUCTION U/S. 80HHC AS COMPUTED BY THE APPELLANT. IN ANY EVENT ONLY THE NET INTEREST OUGHT TO HAVE BEEN CONSIDERED. IT IS SUBMITTED THAT IT BE SO HELD NOW. 4 ITA NO. 2577 & CO 232/AHD/2007 8. THE FACTS RELATING TO CONTROVERSY INVOLVED IN TH E AFORESAID GROUND OF CROSS OBJECTION IS THAT THE ASSESSEE-COMPANY HAS REDUCED 90% OF NET IN TEREST OF RS.98 595/- FROM ITS PROFIT OF BUSINESS. IN THE ASSESSMENT ORDER THE ASSESSING OF FICER REDUCED 90% OF GROSS INTEREST AMOUNTING TO RS.5 74 000/-. ON APPEAL IN THE IMPUG NED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) UPHELD THE ACTION OF ASSESSING OFFICER FOR THE DETAILED REASONS GIVEN IN PARA 6.2 ON PAGE 3 OF THE IMPUGNED ORDER. THE PARA 6.2 OF THE IMPUGNED ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS REPRODUCED H EREUNDER :- 6.2. I HAVE CONSIDERED THE FACTS AND THE SUBMISSIO NS OF THE APPELLANT. I DO NOT AGREE WITH THE APPELLANTS VIEW. AS PER THE DEC ISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF K.S. SUBBIAH PILLAI & CO. (INDIA) LTD. VS.- CIT (2003) 260 ITR 304 ONLY THE GROSS INTEREST HAS TO BE REDUCED FROM THE PROFIT FOR CALCULATING THE DEDUCTION U/S. 80HHC AS PER EX PLANATION (BAA) TO SEC. 80HHC AND ALSO FURTHER IN THE CASE OF RANI PALIWAL VS.- CIT (2004) 268 ITR 220 (P&H). THE PUNJAB & HARIYANA HIGH COURT HAS HELD THAT IT IS THE GROSS RECEIPT WHICH HA TO BE REDUCED FROM THE PROFI T AS PER EXPLANATION (BAA) TO SEC. 80HHC ACT FOR CALCULATING THE DEDUCTI ON U/S. 80HHC OF THE I.T. ACT. THIS VIEW GIVEN BY THE MADRAS HIGH COURT & P&H HIGH COURT HAS BEEN FOLLOWED BY THE HON'BLE ITAT AHMEDABAD BENCH IN THE CASE OF ACIT (OSD) RANGE-8 VS.- M/S. SAGAR DRUGS & PHARMACEUTICALS LTD . IN ITA NO. 1587/AHD/2004 DT. 31.05.2006 FOR AY 2000-01. FOLLOW ING THE ABOVE JUDICIAL DECISIONS I HOLD THAT THE A.O. WAS QUITE JUSTIFIED IN REDUCING THE GROSS INTEREST FROM THE PROFIT WHILE CALCULATING THE DEDU CTION U/S. 80HHC OF THE ACT. THIS GROUND IS THEREFORE REJECTED. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) THE ASSESSEE IS IN CROSS OBJECTION BEFORE THE TRIBUNAL. 8.1. AT THE TIME OF HEARING BEFORE US THE LD. COUN SEL OF THE ASSESSEE SUBMITTED THAT EXPLANATION (BAA) TO SECTION 80HHC PROVIDES THAT 90 % OF INTEREST RENT ETC. HAS TO BE REDUCED FROM THE PROFITS AND GAINS FOR THE PURPOSES OF SE CTION 80HHC. IN LALSONS ENTERPRISES 89 ITD 25 THE SPECIAL BENCH OF THE TRIBUNAL HELD THAT IN COMPUTING THE SAID INTEREST RENT ETC. THE ASSESSEE BE PERMITTED TO NET OFF THE INTEREST RECEI PT AGAINST THE INTEREST EXPENDITURE (HAVING A NEXUS THE RECEIPT) AND ONLY THE BALANCE COULD BE RE DUCED. THIS VIEW WAS AFFIRMED BY THE DELHI HIGH COURT IN SHRI RAM HONDA POWER EQUIPMENT 289 IT R 475 (DELHI). THEREFORE ASSESSING OFFICER BE DIRECTED TO FOLLOW THE DECISION OF HON'B LE DELHI HIGH COURT IN THE CASE OF SHRI RAM HONDA POWER EQUIPMENT (SUPRA). 5 ITA NO. 2577 & CO 232/AHD/2007 8.2. ON THE OTHER HAND THE LD. D.R. FOR THE REVENU E POINTED OUT THAT NOW THIS ISSUE IS SQUARELY COVERED BY AN ORAL JUDGMENT DELIVERED ON 19.03.2010 IN CIT VS.- ASIAN STAR CO. LTD. 200 OF 2009 AND OTHER CASES WHEREIN THE HON'BLE BOMBAY HIGH COURT HAS DISSENTED FROM THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT AND HELD THAT THE L ANGUAGE OF EXPLANATION (BAA) TO SECTION 80HHC DID NOT PAY NETTING OFF. IT HELD THAT THE SPE CIAL BENCH HAD TRAVERSED THE LIMITS OF INTERPRETATION AND LEGISLATED IN GIVING THE DEDUCTI ON. IT HELD THAT MERELY BECAUSE SECTION 80HHC WAS AN INCEN PROVISION WAS NO GROUND FOR GIVING MOR E DEDUCTION THAT WHAT THE STATUTE PERMITTED. IT IS FOR PURPOSES OF EXPLANATION (BAA) TO SECTION 80HHC 90% OF GROSS INTEREST HAS TO BE REDUCED FROM BUSINESS PROFITS. 8.3. AFTER HEARING BOTH THE SIDES WE HAVE CAREFULL Y GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ASIAN STAR CO. LTD. (SUPRA) HELD THAT NETTING OF INTEREST IS NOT PERMITTED THEREFORE 90% OF GROSS AMOUNT OF INTEREST IS REQUIRED TO BE EXCLUDED. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ASIAN STAR CO. LTD. (SUPRA) HAS DULY CONSIDERED THE JUDGMENT OF THE HON'BLE DELHI HIGH C OURT IN THE CASE OF SHRI RAM HONDA POWER EQUIPMENT REPORTED IN 289 ITR 475 (DELHI). WE THER EFORE HELD THAT THE VIEW TAKEN BY BOTH THE DEPARTMENTAL AUTHORITIES BELOW IS FAIR AND REASONAB LE. RESULTANTLY THE GROUND OF CROSS OBJECTION RAISED BY THE ASSESSEE IS REJECTED. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS PART LY ALLOWED AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 30.07.201 0 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 30 / 07 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.