GHCL Limited, Ahmedabad v. The ACIT., Circle-4,, Ahmedabad

CO 268/AHD/2010 | 2001-2002
Pronouncement Date: 13-11-2014 | Result: Dismissed

Appeal Details

RSA Number 26820523 RSA 2010
Assessee PAN AAACG5609C
Bench Ahmedabad
Appeal Number CO 268/AHD/2010
Duration Of Justice 4 year(s) 2 month(s) 14 day(s)
Appellant GHCL Limited, Ahmedabad
Respondent The ACIT., Circle-4,, Ahmedabad
Appeal Type Cross Objection
Pronouncement Date 13-11-2014
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 13-11-2014
Date Of Final Hearing 20-10-2014
Next Hearing Date 20-10-2014
Assessment Year 2001-2002
Appeal Filed On 30-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI N. S. SAINI ACCOUNTANT MEMBER. ITA. NO. 570/AHD/2008 (ASSESSMENT YEAR:2001-02) ACIT CIRCLE-4 AHMEDABAD APPE LLANT VS. GHCL LTD. GHCL HOUSE NR. PANJABI HALL NAVRANGPURA AHMEDABAD RESPONDENT & C. O. NO. 268/AHD/2010 (ASSESSMENT YEAR:2001-02) GHCL LTD. GHCL HOUSE NR. PANJABI HALL NAVRANGPURA AHMEDABAD APPELLANT VS. ACIT CIRCLE-4 AHMEDABAD RESPONDENT I.T.A. NO. 570/AHD/2008 & C. O. NO. 268/AHD/2010 FOR A.Y. 2001-02 (ACIT VS. GHCL LTD.) PAGE 2 PAN: AAACG5609C / BY REVENUE :SHRI SUBHASH BAINS CIT D.R. / BY ASSESSEE : SHRI S. N. SOPARKAR A.R. /DATE OF HEARING :20.10.2014 !'# /DATE OF PRONOUNCEMENT : 13.11.2014 ORDER PER SHAILENDRA KUMAR YADAV J.M: BOTH THESE APPEAL AND CROSS OBJECTION ARE ARISING O UT FROM THE ORDER OF CIT(A)-VIII AHMADABAD DATED 15. 11. 2007 FOR A.Y. 2001-02. SO THEY ARE BEING DISPOSED OF BY COMMON ORDER FOR SAKE OF CONVENIENCE. 2. IN ITA NO. 570/AHD/2008 REVENUE HAS FILED THE A PPEAL ON THE FOLLOWING GROUNDS: 1. THE LD. CIT (A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE A.O. TO REDUCE 90% OF THE INTEREST AFTER NETTING OFF INTEREST EXPENSES HAVING NEXUS WITH INTEREST INCOME. 2. THE LD. CIT (A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE APART FROM EXPENSES OF RS.1 10 79 552/- ALREADY CONSIDERED BY THE ASSESSEE FOR PROPORTIONATE ALLOCATION ONLY AUDITORS EXPENS ES OF RS.17 27 437/- NEED TO BE ALLOCATED I.T.A. NO. 570/AHD/2008 & C. O. NO. 268/AHD/2010 FOR A.Y. 2001-02 (ACIT VS. GHCL LTD.) PAGE 3 PROPORTIONATELY AND DIRECTING THE A.O. TO REWORK TH E INDIRECT EXPENSES FOR EXPORT OF TRADING GOODS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. ASSESSEE IS ENGAGED IN BUSINESS OF MANUFACTURING OF SODA ASH AND EDIBLE SALT. FIRST ISSUE IS WITH REGARDS TO EXCLUDING 90% OF GROSS INTEREST OF RS. 503.02 LACS FROM PROFI TS OF BUSINESS UNDER EXPLANATION (BAA) TO SECTION 80HHC. THE WORD IS RECEIPT AND NOT INCOME ACCORDINGLY WHILE COMPUTI NG DEDUCTION U/S. 80HHC 90% OF GROSS RECEIPT IS TO BE REDUCED AND NOT NET OF INTEREST. IN THIS REGARD STAND OF ASSESSEE HAS BEEN THAT INTEREST WAS EARNED ON OVER DUE COLLECTIO N OF SALES BILLS MARGIN MONEY DEPOSITS WITH THE BANK AND TURN OVER TAX REFUND FROM STATE GOVERNMENT ETC. AND THESE HAVE DI RECT BUSINESS CONNECTION AND WERE NECESSITATED BY PRIMAR Y BUSINESS NEEDS AND DO NOT REPRESENT ANY INVESTMENT OF SURPLUS FUNDS. THUS IT WAS SUBMITTED BEFORE CIT(A) THAT INTEREST INCOME SHOULD BE NETTED OUT WITH EXPENSES AND ONLY INTEREST INCOME NOT HAVING NEXUS WITH INTEREST INCO ME SHOULD BE DISALLOWED. CIT(A) HAVING CONSIDERED THE SUBMIS SION ON BEHALF OF ASSESSEE DIRECTED THE ASSESSING OFFICER T O REDUCE 90% OF THE INTEREST BY NETTING OF INTEREST EXPENSES HAV ING NEXUS WITH INTEREST INCOME. SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE INTER ALIA SUBMITTED THAT CIT(A ) ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO REDUCE 90% OF I.T.A. NO. 570/AHD/2008 & C. O. NO. 268/AHD/2010 FOR A.Y. 2001-02 (ACIT VS. GHCL LTD.) PAGE 4 THE INTEREST AFTER NETTING OF INTEREST EXPENSES HAV ING NEXUS WITH INTEREST. 3.1 AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND M ATERIAL ON RECORD WE ARE NOT INCLINED TO INTERFERE WITH TH E FINDING OF CIT(A) WHO HAS DIRECTED THE A.O. TO REDUCE 90% OF T HE INTEREST BY NETTING OF INTEREST EXPENSES HAVING NEXUS WITH I NTEREST INCOME. THIS VIEW IS FORTIFIED BY THE DECISION OF HONBLE SUPREME COURT IN ACG ASSOCIATED CAPSULES (P) LTD. V . CIT (2012) 343 ITR 89 (SC). IN VIEW OF THIS ORDER OF THE CIT(A) ON THIS ISSUE IS UPHELD. 4. NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE OF DE DUCTION CLAIMED BY ASSESSEE U/S. 80HHC. ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD CLAIMED DEDUCTION OF RS.89 86 625 /- U/S. 80HHC(3)(C)(II). THE DEDUCTION U/S. 80HHC(3)(C) (I I) IN RESPECT OF EXPORT OF TRADING GOODS WAS TO BE COMPUTED AS PE R FORMULA GIVEN BELOW. [EXPORT TURNOVER IN RESPECT OF EXPORT OF TRADING GO ODS] [DIRECT + INDIRECT COST ATTRIBUTABLE TO EXPORT OF S UCH TRADING GOODS]. INDIRECT COST WAS DEFINED BY EXPLANATION [E] TO ABO VE SUBSECTION AS COSTS NOT BEING DIRECT COSTS ALLOCA TED IN THE RATIO OF EXPORT TURNOVER OF TRADING GOODS TO TOTAL TURNOVER. I.T.A. NO. 570/AHD/2008 & C. O. NO. 268/AHD/2010 FOR A.Y. 2001-02 (ACIT VS. GHCL LTD.) PAGE 5 ASSESSING OFFICER ALSO HELD THAT FREIGHT AND INSURA NCE OF RS.86 34 619/- WAS ATTRIBUTABLE TO EXPORT OF TRADIN G GOODS. THEREFORE THIS WAS TO BE REDUCED ONLY FOR PURPOSE OF CALCULATING EXPORT TURNOVER OF TRADING GOODS AND NO T FOR THE PURPOSE OF DETERMINING COST OF EXPORT TRADING GOODS . ASSESSEE HAD DETERMINED INDIRECT COST AT RS.5 55 527/- AS PE R REPORT IN FORM NO.10CCAC. ASSESSING OFFICER DETERMINED THE T OTAL DIRECT EXPENSES WHICH WAS TO BE ALLOWED IN THE RAT IO OF EXPORT TURNOVER OF TRADING GOODS TO TOTAL TURNOVER AS RS.1 12.66 CRORES WHICH CONSISTED OF THE FOLLOWING: 1. PAYMENT TO EMPLOYEES RS.21.30 CRORES. 2. ADMINISTRATIVE & MISC. EXPENSES RS.23.76 CRORE S. 3. SELLING AND DISTRIBUTIVE EXPENSES RS.23.17 CRO RES. 4. FINANCIAL EXPENSES BEFORE NETTING OF RS.41.83 CRORES. 5. DEPRECIATION ON ASSETS COMMONLY USED FOR MANUFACTURING & TRADING RS. 2.60 CRORE S ACCORDINGLY ASSESSING OFFICER CALCULATED INTEREST EXPENSES AT RS.5 11 91 316/- AND DEDUCTION U/S. 80HHC(3)(C)(II) AS RS. (-) 3 30 12 545/- AND ADJUSTED PROFIT OF THE BUSINESS A S RS.20 21 95 319/- AND DEDUCTION U/S. 80HHC(3)(C)(I) AS RS.1 46 87 350/-. ULTIMATELY THE TOTAL DEDUCTION A LLOWABLE U/S. 80HHC(3) FOR EXPORT OF MANUFACTURED GOODS AND TRADING GOODS WAS WORKED OUT AT NEGATIVE FIGURE AS LOSS ON EXPORT OF TRADING GOODS WAS MORE THAN PROFIT ON EXPORT OF MAN UFACTURED GOODS AND THEREFORE NO DEDUCTION WAS ALLOWABLE TO THE I.T.A. NO. 570/AHD/2008 & C. O. NO. 268/AHD/2010 FOR A.Y. 2001-02 (ACIT VS. GHCL LTD.) PAGE 6 ASSESSEE. ACCORDINGLY HE DISALLOWED DEDUCTION CLA IMED BY ASSESSEE U/S. 80HHC OF RS.2 05 58 280/-. 4.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS SUBMISSIONS MADE ON BEHALF OF ASSES SEE. HAVING CONSIDERED THE SAME CIT(A) DIRECTED THE ASS ESSING OFFICER THAT APART FROM EXPENSES OF RS.1 10 79 552/ - ALREADY CONSIDERED BY ASSESSEE FOR PROPORTIONATE ALLOCATION ONLY AUDITORS EXPENSES OF RS. 17 27 437/- NEED TO BE AL LOCATED PROPORTIONATELY AND DIRECTED THE ASSESSING OFFICER TO REWORK THE INDIRECT EXPENSES FOR EXPORT OF TRADING GOODS. IT WAS FOUND THAT ASSESSEE HAD ALREADY TAKEN INTO ACCOUNT ADMINI STRATIVE MISCELLANEOUS EXPENSES OF RS.1 10 79 522/- WHICH HA VE BEEN ALLOCATED PROPORTIONATELY AS INDIRECT COST FOR EXPO RT OF TRADING GOODS TELEPHONE AND FAX EXPENSES OF RS.60 60 926/- PRINTING AND STATIONERY EXPENSES OF RS.14 53 189/- ELECTRIC ITY CHARGES OF OFFICE OF RS.27 99 095/- BUSINESS PROMOTION EXP ENSES OF RS. 3 29 364/- BOOKS AND PERIODICAL EXPENSES OF RS.1 8 1 253/- NEWSPAPER AND MAGAZINE EXPENSES OF RS.1 35 695/- AN D RENT OF RS.1 20 000/-. ASSESSEE SUBMITTED THAT AT DELHI BRANCH THE EXPORT OF TRADING GOODS I.E. YARN WAS CARRIED OUT A ND ONLY ONE PERSON WAS ENGAGED AND THE CLEARING AND FORWARDING WAS DONE THROUGH AN AGENT. THE CONNECTED SALARY EXPENSES AL LOCATED BY THE APPELLANT WAS OF RS.2 LAKHS AND RENT RATES AND TAXES OF DELHI OFFICE OF RS.1.20 LAKHS ATTRIBUTABLE TO TRADI NG OF EXPORT GOODS HAVE BEEN CONSIDERED. ASSESSEE HAD CONSIDERE D CLEARING I.T.A. NO. 570/AHD/2008 & C. O. NO. 268/AHD/2010 FOR A.Y. 2001-02 (ACIT VS. GHCL LTD.) PAGE 7 AND FORWARDING EXPENSES OF RS.16 LAKHS HAS BEEN DIR ECTLY RELATED TO TRADING EXPORT. THE MAJOR ADMINISTRATIV E EXPENSES OF MODEM AND V SAT EXPENSES OF RS.40.48 LAKHS ARE RELA TED TO SODA ASH MANUFACTURING. SIMILARLY IT WAS CONTENDED ON BEHALF OF ASSESSEE THAT ENTIRE TRAVELING EXPENSES OF RS.1 62 56 816/- WAS FOR SODA ASH MANUFACTURING. LEASE RENT AND REN TED HOUSE EXPENSES WAS NOT FOR TRADING EXPORT LEGAL AND PROF ESSIONAL EXPENSES OF RS.2 93 55 772/- HAVE BEEN INCURRED COM PLETELY FOR SODA ASH. HOWEVER PAYMENT TO AUDITORS OF RS.17 27 437/- NEEDS TO BE ALLOCATED PROPORTIONATELY FOR EXPORT OF MANUFACTURED GOODS AND TRADING EXPORT IN ADDITION T O RS.1.10 CRORES. THE STAFF RECRUITMENT EXPENSES OF RS.9.18 LAKHS WERE ENTIRELY FOR SODA ASH MANUFACTURING. IN THIS BACKG ROUND CIT(A) OBSERVED THAT APART FROM EXPENSES OF RS.1 10 79 522/- AUDITORS EXPENSES OF RS.17 27 437/- NEED TO BE ALL OCATED PROPORTIONATELY WHICH MAKES TOTAL INCOME OF RS.1 28 06 959/- FOR ALLOCATION. ACCORDINGLY ASSESSING OFFICER WAS DIRECTED TO REWORK THE INDIRECT EXPENSES FOR EXPORT OF TRADING GOODS. IN VIEW OF THIS ORDER OF THE CIT(A) ON THIS ISSUE IS UPHELD. 5. IN C.O. NO. 268/AHD/2010 ASSESSEE HAS FILED THE C.O. ON FOLLOWING GROUNDS: 1.1 THE LEARNED CIT(A) ERRED IN LAW AND ON FACT IN UPHOLDING THE ACTION OF ASSESSING OFFICER IN REOPENING THE ASSESSMENT AND HENCE THE ORDER PASSED BY THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE AND THAT THE ORDER OF THE ASSESSI NG I.T.A. NO. 570/AHD/2008 & C. O. NO. 268/AHD/2010 FOR A.Y. 2001-02 (ACIT VS. GHCL LTD.) PAGE 8 OFFICER WAS WITHOUT JURISDICTION UNDER SECTION 148/147 AND HENCE BE HELD VOID AB INITIO. 1.2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACT IN NOT UPHOLDING THAT THERE MUST BE FRESH MATERIAL OR FRES H INFORMATION AVAILABLE ON RECORD TO FORM REQUISITE BELIEF OF UNDERASSESSMENT AND NOT MERE CHANGE OF OPINION ON THE PART OF ASSESSING OFFICER. 1.3. THEREFORE IT IS SUBMITTED THAT NO TAX HAS BEE N UNDER-ASSESSED DURING THE ORIGINAL ASSESSMENT AND EXCEPT AUDIT REMARK THERE IS NO FURTHER COGENT ADDITIONAL INFORMATION EVIDENCING ANY ESCAPEMENT OF INCOME. HENCE THIS REASSESSMENT IS HELD WITHOUT JURISDICTION IF IT IS MERELY PURSUANT TO REPORT OR REMARK OF THE AUDIT PART. 1.4 THE RESPONDENT FURTHER SUBMITS THAT THE JUDGEM ENT IN IPCA LABORATORIES LIMITED 266 ITR 521 (SC) RELI ED UPON BY THE DEPARTMENT FOR REASSESSMENT WAS DELIVERED ON 11TH MARCH 2004 AND WAS AVAILABLE AT THE TIME OF PASSING ORIGINAL ASSESSMENT ORDER ON 26TH MARCH 2004. IT IS THEREFORE SUBMITTED THAT RELIEF C LAIMED ABOVE BE ALLOWED AND ASSESSMENT BE MODIFIED ACCORDINGLY . 6. BY WAY OF CROSS OBJECTION ASSESSEE HAS CHALLENG ED THE ORDER OF CIT(A) UPHOLDING THE REOPENING OF ASSESSME NT. LD. AUTHORIZED REPRESENTATIVE STATED THAT IN ABSENCE OF ANY FRESH MATERIAL OR FRESH INFORMATION BUT MERELY ON CHANGE OF OPINION IS NOT JUSTIFIED. ASSESSEE CLAIMED THAT UNDER THE PROVISIONS OF I.T.A. NO. 570/AHD/2008 & C. O. NO. 268/AHD/2010 FOR A.Y. 2001-02 (ACIT VS. GHCL LTD.) PAGE 9 RULE 27 OF INCOME TAX RULE IT HAS RIGHT TO CHALLENG E THE ORDER OF CIT(A) ON ISSUE DECIDED AGAINST ASSESSEE EVEN WI THOUT FILING CROSS OBJECTION. REGARDING MERIT OF REOPENING LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT ORIGINAL RETURN OF IN COME FILED ON 30.10.2001 REVISED RETURN OF INCOME WAS FILED O N 27.03.2003 ASSESSMENT ORDER U/S. 143(3) WAS PASSED ON 26.03.2004 CIT(A) PASSED ITS APPELLATE ORDER ON 07 .12.2004 AND NOTICE U/S. 148 WAS ISSUED ON 30.03.2006. ACCO RDING TO LD. AUTHORIZED REPRESENTATIVE ISSUE OF DEDUCTION U/ S. 80HHC HAVE BEEN EXAMINED AND ADJUDICATED BY ASSESSING OFF ICER. THE ORIGINAL ASSESSMENT ORDER MERGED WITH ORDER OF CIT( A) HENCE RE-OPENING IS NOT JUSTIFIED. ASSESSING OFFICER IN ORIGINAL ASSESSMENT ORDER AFTER DETAILED APPRAISAL/EXAMINATI ON OF FACTS MERITS AND CASE LAWS ALLOWED DEDUCTION U/S. 80HHC W HICH HAS BEEN WITHDRAWN IN RE-ASSESSMENT ORDER WITHOUT ANY N EW FACTS OR MATERIAL. THUS RE-OPENING IS BASED ON CHANGE O F OPINION AND ON RE-APPRAISAL OF SAME EVIDENCE ON RECORD HEN CE NO VALID. LD. AUTHORIZED REPRESENTATIVE ALSO OBJECTED THE RE- OPENING ON THE BASIS OF AUDIT QUERY. WITHOUT PREJU DICE TO THE MERIT OF ISSUE RAISED FOR RE-OPENING BY WAY OF CROS S OBJECTION AS WE HAVE DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY UPHOLDING THE ORDER OF CIT(A) ON MERIT. ACCORDING TO US THE ISSUE RAISED BY WAY OF CROSS OBJECTION ON POINT OF RE-OPENING GOES ACADEMIC AND ASSESSEE IS AT LIBERTY TO RAISE T HE SAME AS AND WHEN THERE IS NEED FOR SAME. AS A RESULT C.O. FILED BY ASSESSEE IS DISMISSED FOR REASONS DISCUSSED ABOVE. I.T.A. NO. 570/AHD/2008 & C. O. NO. 268/AHD/2010 FOR A.Y. 2001-02 (ACIT VS. GHCL LTD.) PAGE 10 7. IN RESULT ASSESSEES C.O. AS WELL AS REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 13 TH DAY OF NOV. 2014. SD/- SD/- (N. S. SAINI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY S.K.SINHA $ $ $ $ &' &' &' &' ('# ('# ('# ('# / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. -- . / CONCERNED CIT 4. .- / CIT (A) 5. '23 & / DR ITAT AHMEDABAD 6. 367 89 / GUARD FILE. BY ORDER / $ :/ - <