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

ITA 1110/AHD/2007 | 2003-2004
Pronouncement Date: 05-02-2010 | Result: Dismissed

Appeal Details

RSA Number 111020514 RSA 2007
Assessee PAN AAACG5609C
Bench Ahmedabad
Appeal Number ITA 1110/AHD/2007
Duration Of Justice 2 year(s) 10 month(s) 21 day(s)
Appellant The ACIT, Circle-4,, Ahmedabad
Respondent GHCL Limited, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 05-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 05-02-2010
Date Of Final Hearing 28-01-2010
Next Hearing Date 28-01-2010
Assessment Year 2003-2004
Appeal Filed On 15-03-2007
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI JM AND D.C.AGRAWAL A M ASSTT. CIT CIRCLE-4 1 ST FLOOR NAVJIVAN TRUST BUILDING OFF. ASHRAM ROAD AHMEDABAD-14. V/S . G.H.C.L. LTD. GHCL HOUSE OPP. PUNJABI HALL SWASTIK SOCIETY NAVRANGPURA AHMEDABAD. PAN NO.AAACG 5609 C (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI RAJIV AGARWAL CIT/DR RESPONDENT BY:- SHRI S. N. SOPARKAR AR O R D E R PER D.C.AGRAWAL ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) RAISING THE FOLLOWING GROUND :- 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO EXCLUDE SALES TAX AND EXCISE DUTY ELEMENTS FROM THE TOTAL TURN OVER IN COMPUTING THE DEDUCTION U/S 80 HHC AND U/S 80HHE O F THE I.T.ACT IGNORING THE DECISION OF THE HONBLE ITAT AHMEDABAD IN THE CASE OF ACIT VS. HARSHA ENGINEERS LTD. FOR ASST. YEAR 2002-03 IN ITA NO.204 2/AHD/2005 DATED 21.07.2006 AND FURTHER IGNORING THE FACT THAT THE T URNOVER ALWAYS INCLUDED THE ELELEMENTS OF TAXES AS HELD IN THE CASES OF CHOWRA NGHEE SALES BUREAU VS. CIT 87 ITR 547 (SC) SINCLAIR MURRAY & CO. P. LTD. VS. CIT 97 ITR 615 (SC) & MC DOWELL & CO. LTD. VS. CIT 154 ITR 148 (SC). 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS OF COM PUTATION OF DEDUCTION UNDER SECTION 80 HHC. LD. AO HAD INCLUDED SALES-TAX AND ITA NO.1110/AHD/2007 ASST. YEAR :2003-04 2 EXCISE DUTY IN THE TOTAL TURNOVER WHICH WAS EXCLUDE D BY LD. CIT(A) AS UNDER :- 3.2.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND ALSO EXAMINED THE REASONING GIVEN BY THE AO IN HIS ORDER. JUDICIAL AUTHORITIES HAVE BEEN CONSISTENTLY HOLDING THAT THE NUMERATOR AND THE DENOMINATOR BEING EXPORT TURNOVER AND TOTAL TURNOVE R SHALL BE GIVEN THE SAME TREATMENT AS REGARDS SALES TAX AND EXCISE DUTY AND ACCORDINGLY THE DENOMINATOR CANNOT BE ARTIFICIALLY INFLATED BY INCL UDING THE SAID ITEMS IN COMPUTING THE DEDUCTION U/S 80 HHC. IN THIS REGARD THE CONTENTION OF THE APPELLANT IS TENABLE IN VIEW OF THE BINDING JUDICIA L PRECEDENCE AND ACCORDINGLY I DIRECT THE AO TO EXCLUDE SALES TAX AN D EXCISE DUTY ELEMENTS FROM THE TOTAL TURNOVER IN COMPUTING THE DEDUCTION U/S 80 HHC AND U/S 80HHC. THUS GROUND NO.1.1(C) AND 4.1 TO 4.3 OF THE APPELLANT SUCCEEDS . 3. WE HAVE HEARD THE PARTIES. IN OUR CONSIDERED VIE W THE ISSUE IS NOW DIRECTLY COVERED IN FAVOUR OF ASSESSEE BY THE DECIS ION OF HON. SUPREME COURT IN THE CASE OF CIT VS. LAXMI MACHINE WORKS (2 007) 290 ITR 667) (SC). THE OBSERVATIONS FROM THE HEAD NOTES OF THE D ECISION ARE AS UNDER : SECTION 80HHC OF THE INCOME-TAX ACT 1961 IS A BE NEFICIAL SECTION : IT WAS INTENDED TO PROVIDE INCENTIVE TO PROMOTE EXPORTS. THE INTENT ION WAS TO EXEMPT PROFITS RELATABLE TO EXPORTS. JUST AS COMMISSION RECEIVED BY THE ASSE SSEE IS RELATABLE TO EXPORTS AND YET IT CANNOT FORM PART OF TURNOVER FOR THE PURPOSES OF SECTION 80HHC EXCISE DUTY AND SALES TAX ALSO CANNOT FORM PART OF TURNOVER. JUST AS INTEREST COMMISSION ETC. DO NOT EMANATE FROM THE TURNOVER SO ALSO EXCISE DUTY AND SALES TAX DO NOT EMANATE FROM SUCH TURNOVER. SINCE EXCISE DUTY AND SALES TAX DID NOT INVOLVE ANY SUCH TURNOVER SUCH TAXES HAD TO BE EXCLUDED. COMMISSION INTEREST RENT ETC. DO YIELD PROFITS BUT THEY DO NOT PARTAKE OF THE CHARACTER OF TURNOVER AN D THEREFORE THEY ARE NOT INCLUDIBLE IN THE TOTAL TURNOVER. IF SO EXCISE DUTY AND SAL ES TAX ALSO CANNOT FORM PART OF THE TOTAL TURNOVER UNDER SECTION 80HHC(3). ONE CANNOT INTERPRET THE WORDS TOTAL TURNOVER WIT H REFERENCE TO THE DEFINITION OF THE WORD TURNOVER IN OTHER LAWS LIK E THE CENTRAL SALES TAX OR AS DEFINED IN ACCOUNTING PRINCIPLES. EXCISE DUTY AND SALES TAX ARE INDIRECT TAXES. THEY ARE RECOVERED BY THE ASSESSEE ON BEHALF OF THE GOVERNMENT. BY THE COURT : THE PRINCIPAL REASON FOR ENACTING A FORMULA IN SECTION 80HHC OF THE INCOME-TAX ACT 1961 IS TO DISALLOW A PART OF THE CONCESSION THERE-UNDER WHEN THE ENTIRE DEDUCTION CLAIMED CANNOT BE REGARDED AS RELATING TO EXPORTS. THEREFORE WHILE INTERPRETING THE WORDS TOTAL TURNOVER IN TH E FORMULA IN SECTION 80HHC ONE HAS TO GIVE A SCHEMATIC INTERPRETATION. THE VARIOUS AMENDMENTS MADE THEREIN SHOW 3 THAT RECEIPTS BY WAY OF BROKERAGE COMMISSION INTE REST RENT ETC. DO NOT FORM PART OF BUSINESS PROFITS AS THEY HAVE NO NEXUS WITH THE ACT IVITY OF EXPORT. THE AMENDMENTS MADE FROM TIME TO TIME INDICATE THAT THEY BECAME NE CESSARY IN ORDER TO MAKE THE FORMULA WORKABLE. IF SO EXCISE DUTY AND SALES TAX ALSO CANNOT FORM PART OF THE TOTAL TURNOVER UNDER SECTION 80HHC(3) : OTHERWISE THE FO RMULA BECOMES UNWORKABLE. 4. THEREFORE RESPECTFULLY FOLLOWING THE DECISION O F HON. APEX COURT WE CONFIRM THE ORDER OF LD. CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE 5. IN THE RESULT APPEAL FILED BY THE REVENUE IS DI SMISSED. SD/- SD/- (BHAVNESH SAINI) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 5/2/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD ORDER PRONOUNCED IN OPEN COURT ON 5/2/2010