The DCIT, Circle-4,, Ahmedabad v. Klockner Desma Machinery Pvt.Ltd..,, Ahmedabad

ITA 1605/AHD/2007 | 2003-2004
Pronouncement Date: 01-04-2010 | Result: Dismissed

Appeal Details

RSA Number 160520514 RSA 2007
Assessee PAN AAACK8768N
Bench Ahmedabad
Appeal Number ITA 1605/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 11 day(s)
Appellant The DCIT, Circle-4,, Ahmedabad
Respondent Klockner Desma Machinery Pvt.Ltd..,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 01-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 01-04-2010
Date Of Final Hearing 01-04-2010
Next Hearing Date 01-04-2010
Assessment Year 2003-2004
Appeal Filed On 20-04-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI A.N.PHAUJA ACCOUNTANT MEMBER ITA NO.1605 & 1647/AHD/2007 ASSESSMENT YEARS:2003-04 & 2001- 02 DATE OF HEARING:1.4.10 DRAFTED:5.4.10 DCIT CIRCLE-4 NAVJVAN TRUST BLDG. OFF. ASHRAM ROAD AHMEDABAD V/S. KLACKNER DESMA MACHINERY PVT. LTD. NR. MADALPUR UNDERBRIDGE ELLISBRIDGE AHMEDABAD PAN NO.AAACK8768N (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI M.J. SHAH AR REVENUE BY:- SMT. NEETA SHAH SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE APPEALS BY THE REVENUE ARE ARISING OUT OF OR DERS OF COMMISSIONER OF INCOME-TAX(APPEALS)-VIII AHMEDABAD IN APPEAL NOS. CIT(A)-VIII/DC-4/196 & 156/05-06 BY DIFFERENT DATES I.E.10-01-2007 AND 11- 01-2007. THE ASSESSMENTS WERE FRAMED BY THE DCIT CIRCLE-4 AHMEDABAD U/S.143(3) AND 143(3) R.W.S. 263 OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDERS OF DIFFERENT DATES I.E. 25-11-2005 AND 30-09-2005FOR THE ASSESSM ENT YEAR 2003-04 AND 2001-02 RESPECTIVELY. 2. THE FIRST ISSUE IN ITA NO.1605/AHD/2007 OF THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) IN DIRECTING THE ASSESS ING OFFICER TO EXCLUDE SALES TAX AND EXCISE DUTY FROM THE TOTAL TURNOVER WHILE COMPU TING DEDUCTION U/S.80HHC(3) OF THE ACT. WE FIND THAT THIS ISSUE IS SQUARELY COVER ED BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. LAKSHMI MACHINE WORKS (2007) 290 ITR 667 (SC) WHEREIN THE HONBLE APEX COURT HAS HELD AS UNDER:- ITA 1605 & 1647/AHD/2007 A.Y. 03-04 & 01-02 DCIT CIR-4 ABD V. KLOCKNER DESMA MACHIN ERY PVT. LTD. PAGE 2 6. THE LEARNED CIT(APPEALS)-V AHMEDABAD ERRED IN CONFIRMING THAT EXCISE DUTY IS PART OF TOTAL TURNOVER FOR THE PURPOSE OF C ALCULATION OF DEDUCTION U/S.80HHC OF THE ACT. IN FACT IN CIVIL APPEAL NO.4409 OF 2005 THE ABOV E PROPOSITION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER [SEE : PAGE NO.24 OF THE PAPER BOOK] IF SO THEN EXCISE DUTY AND SALES TAX ALSO CANNOT FORM PAR T OF THE TOTAL TURNOVER UNDER SECTION 80HHC(3) OTHERWISE THE FORMULA BECOM ES UNWORKABLE. IN OUR VIEW SALES TAX AND EXCISE DUTY ALSO DO NOT HAVE AN Y ELEMENT OF TURNOVER WHICH IS THE POSITION EVEN IN THE CASE OF RENT COM MISSION INTEREST ETC. IT IS IMPORTANT TO BEAR IN MIND THAT EXCISE DUTY AND SALE S TAX ARE INDIRECT TAXES. THEY ARE RECOVERED BY THE ASSESSEE ON BEHALF OF THE GOVERNMENT. THEREFORE IF THEY ARE MADE RELATABLE TO EXPORTS THE FORMULA UNDER SECTION 80HHC WOULD BECOME UNWORKABLE. THE VIEW WHICH WE HAVE TAKEN IS IN THE LIGHT OF THE AMENDMENTS MADE TO SECTION 80HHC FROM TIME TO TIME. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE A SSESSEE WE DISMISS THIS ISSUE OF THE REVENUES APPEAL. ACCORDINGLY THIS ISSUE OF TH E REVENUES APPEAL IS DISMISSED. 4. THE NEXT ISSUE IN ITA NO.1605/AHD/2007 OF THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFI CER NOT TO EXCLUDE 90% OF THE OTHER INCOME OF EXCHANGE RATE FLUCTUATION GAIN WHILE COMP UTING DEDUCTION U/S.80-IB & 80HHC OF THE ACT. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.2 & 4 :- 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DIRECTING THE A.O NOT TO EXCLUDE 90% OF THE OTHER INCOME OF E XCHANGE RATE FLUCTUATION GAIN AT RS.3 95 650/- FROM THE PROFITS OF BUSINESS IN COMPUTING THE DEDUCTION U/S.80HHC AND U/S.80IB. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DIRECTING THE A.O NOT TO ELIMINATE THE EXCHANGE RATE FLUCTUAT ION GAIN OF RS.3 95 650/- WHILE COMPUTING THE DEDUCTION U/S.80IB(3) OF THE I. T. ACT 1961. 5. AT THE OUT LD. COUNSEL FOR THE ASSESSEE STATED T HAT BOTH THE ISSUE OF DEDUCTION U/S. 80HHC AND 80-IB OF THE ACT ARE SQUAR ELY COVERED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. AMBA IMPEX (2006) 282 ITR 144 (GUJ) WHEREIN THE HON'BLE GUJARAT HIGH COURT HAS HELD AS UNDER:- THE ENTIRE CASE OF THE REVENUE IS BUILT ON THE FAC T THAT THE AMOUNT HAS BEEN RECEIVED IN A YEAR SUBSEQUENT TO THE YEAR OF EXPORT S. AS CAN BE SEEN FROM THE ASSESSMENT ORDER IT TALKS OF EXPORT REALIZATION FOR EXPORTS MADE UP IN MARCH 31 2000. THERE IS NOTHING TO INDICATE AND NONE OF THE AUTHORITIES HAVE APPLIED THEIR MIND AS TO WHETHER THE SUM OF R S.13 18 068 IS RELATABLE TO EXPORTS MADE DURING ONLY ONE FINANCIAL YEAR OR MORE THAN ONE FINANCIAL YEAR ITA 1605 & 1647/AHD/2007 A.Y. 03-04 & 01-02 DCIT CIR-4 ABD V. KLOCKNER DESMA MACHIN ERY PVT. LTD. PAGE 3 PRECEDING MARCH 31 2000. THIS WOULD HAVE A MATERI AL BEARING TAKING INTO CONSIDERATION THE PROVISIONS OF SUB-SECTION (2) OF SECTION 80HHC OF THE ACT AS WAS APPLICABLE DURING THE YEAR UNDER CONSIDERATION. UNDER SUB-SECTION (2) OF SECTION 80HHC OF THE A CT SALE PROCEEDS OF GOODS OR MERCHANDISE EXPORTED OUT OF INDIA AND RECEIVED I N CONVERTIBLE FOREIGN EXCHANGE BECOME ENTITLED TO THE DEDUCTION SUBJECT T O FULFILLMENT OF OTHER REQUISITE CONDITIONS. CLAUSE (A) OF SUB-SECTION (2 ) OF SECTION 80HHC OF THE ACT PROVIDES THAT SUCH SALE PROCEEDS HAVE TO BE REC EIVED IN CONVERTIBLE FOREIGN EXCHANGE WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR OR WITHIN SUCH FURTHER PERIOD AS THE COMPETEN T AUTHORITY MAY ALLOW IN THIS BEHALF. THUS A PLAIN READING OF THE PROVISION MAKE S IT CLEAR THAT ONCE THE COMPETENT AUTHORITY HAS EXTENDED THE TIME IN A CAS E WHERE IT IS NECESSARY OR WHERE THE SALE PROCEEDS HAVE BEEN RECEIVED WITH IN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR SUCH SALE PROCEE DS ARE DIRECTLY RELATABLE TO THE EXPORTS MADE AND NO FURTHER INQUIRY IS NECESSAR Y. THEREFORE THE ENTIRE CONTROVERSY AS TO WHETHER SUCH RECEIPT AMOUNTS TO ANY OTHER RECEIPT STIPULATED IN EXPLANATION (BAA)(1) NEED NOT BE TAKEN UP FOR CONSIDERATION. ONCE THE LEGISLATURE HAS PROVIDED FOR TREATING A RE CEIPT WITHIN A PERIOD OF SIX MONTHS AFTER THE END OF THE PREVIOUS YEAR OR WITHI N FURTHER EXTENDED PERIOD AS SALE PROCEED RELATABLE EXPORTS IT WOULD NOT BE OPEN TO THE REVENUE TO RAISE SUCH A CONTROVERSY. THE LEGISLATURE IN ITS WI SDOM HAS TAKEN INTO CONSIDERATION THE FACT THAT IN THE CASE OF EXPORTS MADE SALE PROCEEDS ARE NOT NECESSARILY REALIZABLE IMMEDIATELY WITHIN THE ACCOU NTING PERIOD IN WHICH EXPORTS HAVE BEEN MADE. AS A COROLLARY BY THE TIME SUCH SALE PROCEEDS ARE RECEIVED WITHIN THE PRESCRIBED TIME BY VIRTUE OF E XCHANGE RATE DIFFERENCE THERE MIGHT BE A SITUATION WHERE A LARGER AMOUNT IS RECEIVED THAN THE AMOUNT AS REFLECTED IN THE SHIPPING BILL. HENCE MERELY B ECAUSE AN AMOUNT IS RECEIVED IN A YEAR SUBSEQUENT TO THE YEAR OF EXPORT BY WAY OF EXCHANGE RATE DIFFERENCE IT DOES NOT NECESSARILY ALWAYS FOLLOW T HAT THE SAME IS NOT RELATABLE TO THE EXPORTS MADE. AS CAN BE SEEN FROM THE IMPUGNED ORDER OF THE TR IBUNAL AS WELL AS THE ORDERS OF THE COMMISSIONER (APPEALS) AND THE ASSESS ING OFFICER NONE OF THE AUTHORITIES HAVE APPROACHED THE ISSUE IN THE LIGHT OF THE PROVISIONS OF SUBS- SECTION (2) OF SECTION 80HHC OF THE ACT. NO EVIDENC E IS AVAILABLE ON RECORD TO ESTABLISH FULFILLMENT OR OTHERWISE OF THE CONDITIO NS STIPULATED BY SUBS-SECTION (2) OF SECTION 80HHC OF THE ACT. IN THESE CIRCUMST ANCES IT WOULD NOT BE FAIR AND JUST FOR EITHER SIDE TO RESOLVE THE CONTROVERSY IN THE ABSENCE OF THE RELEVANT FACTS AND EVIDENCE BEING AVAILABLE ON RECO RD. IN THE LIGHT OF WHAT IS STATED HEREINBEFORE THE QUESTION IS LEFT UNANSWERED AND THE APPEAL IS RESTORED TO THE FILE OF THE TRIBU NAL ONLY IN RELATION TO THE ISSUE RELATABLE TO DEDUCTION UNDER SECTION 80HHC OF THE ACT WITHOUT EXPRESSING ANY FINAL OPINION ON THE MERITS OF THE M ATTER. THE TRIBUNAL SHALL AFTER HEARING BOTH THE SIDES DECIDE THE APPEAL ON THIS COUNT BE OPEN TO THE TRIBUNAL TO RESTORE THE ISSUE TO THE FILE OF THE AS SESSING AUTHORITY TO ASCERTAIN PROPER FACTS IN THE CIRCUMSTANCES. ITA 1605 & 1647/AHD/2007 A.Y. 03-04 & 01-02 DCIT CIR-4 ABD V. KLOCKNER DESMA MACHIN ERY PVT. LTD. PAGE 4 HE FURTHER STATED THAT AS REGARDS TO DEDUCTION U/S. 80-IB OF THE ACT ON THIS EXCHANGE RATE FLUCTUATION GAIN THE ISSUE IS COVERED IN ASSE SSEES OWN CASE IN ITA NO.807 /AHD/2009 FOR ASSESSMENT YEAR 2005-06 WHEREIN THE C BENCH OF THIS TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA-7 AS UNDER:- 7. SO FAR AS THE GAINS ON ACCOUNT OF FOREIGN EXCHA NGE FLUCTUATIONS ARE CONCERNED THE 1ISSUE IS COVERED IN FAVOUR OF THE A SSESSEE BY THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN CIT V. AMBA IMPEX (282 ITR 144) IN WHICH IT HAS BEEN HELD THAT THE EXTRA REALIZATION ON ACCO UNT OF FOREIGN EXCHANGE FLUCTUATION IS ONLY PART OF THE SALE PROCEEDS AND S HOULD BE CONSIDERED AS HAVING BEEN DERIVED FROM THE UNDERTAKING. THE CIT(A ) HAS FOLLOWED THE AFORESAID JUDGMENT. RESPECTFULLY FOLLOWING THE JUDG MENT WE CONFIRM HIS DECISION. THE FACTS BEING EXACTLY IDENTICAL IN THE PRESENT YE AR ALSO ON BOTH THE ISSUES RESPECTFULLY FOLLOWING DECISION OF JURISDICTIONAL H IGH COURT AND TRIBUNALS DECISION IN ASSESSEES OWN CASE (SUPRA) WE CONFIRM THE ORDER OF CIT(A) AND BOTH THE ISSUE OF THE REVENUES APPEAL IS DISMISSED. 6. THE NEXT COMMON ISSUE IN BOTH THE APPEALS OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER NOT TO DISALLOW THE TAX COMPONENT BEING TDS ON ROYALTY PAYMENT. 7. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE FAIRL Y STATED THAT THE COMMON ISSUE IS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNA L IN ASSESSEES OWN CASE IN ITA NO.807/AHD/2009 DATED 21-05-2009 IN PARA-4 AS UNDER:- 4. THE REVENUE IS IN APPEAL. THE LEARNED SR.DR FAI RLY DREW OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN ITA NO.2522/AHD/2007 F OR THE AY 2004-05 WHICH WAS RELIED UPON BY THE CIT(A) WHILE DELETING THE DI SALLOWANCE AND STATED THAT SINCE THE FACTS ARE THE SAME FOR THE YEAR UNDER APP EAL THE SAID ORDER MAY HAVE TO BE FOLLOWED. SINCE THE ISSUE IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL CITED SUPRA AND THERE BEING NO CHANGE IN THE FACTUAL POSITION FOR THE YEAR UNDER APPEAL RESPECTFULLY FOLLOWING THE ORDER WE CONFIRM THE DECISION OF THE CIT(A) AND DIS MISS THE GROUNDS. WE FIND THAT THE TRIBUNAL HAS RELIED ON THE DECISIO N OF EARLIER YEAR IN ITA NO.2522/AHD/2007 WHEREIN THE ISSUE WAS DECIDED VIDE PARA-7 AS UNDER:- 7. THE NEXT GROUND RELATES TO DISALLOWANCE OF TDS ON ROYALTY OF RS.4 92 312/- . THE ASSESSING OFFICER CONSIDERED THIS AS TAX ON I NCOME AND HENCE NOT ITA 1605 & 1647/AHD/2007 A.Y. 03-04 & 01-02 DCIT CIR-4 ABD V. KLOCKNER DESMA MACHIN ERY PVT. LTD. PAGE 5 ALLOWABLE. THE CIT(A) FOUND THAT THIS GROUND BEING SIMILAR IN NATURE WHICH HAS BEEN DECIDED BY HIM VIDE HIS ORDER DATED 11.1.2007. IN ASSESSEES OWN CASE RELYING UPON HIS OWN ORDER DECIDED THIS ISSU E IN FAVOUR OF THE ASSESSEE. THIS IS AN AMOUNT OF TAX DEDUCTED AS SOURCE FROM TH E ROYALTY AN INTEREST FOR ALLOWING THE CLAIM OF ROYALTY U/S.40(A)(II) OF THE ACT. THIS BY ITSELF CANNOT BE SUBJECT TO DISALLOWANCE. IT PARTAKE THE CHARACTER O F ROYALTY IN THE HANDS OF THE ASSESSEE AND ALLOWABLE. WE UPHELD THE ORDER OF THE CIT(A). THE FACTS BEING EXACTLY IDENTICAL IN THE PRESENT YE AR ALSO RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL WE CONFIRM THE ORDER OF CIT(A) AND THE COMMON ISSUE IN BOTH THE APPEAL OF REVENUE ARE DISMISSED. 8. IN THE RESULT BOTH REVENUES APPEALS ARE DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 01/04/2010 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SI NGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 01/04/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VIII AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD