DCIT, Hyderabad v. M/s Premier Explosives Ltd., Secunderabad

ITA 1672/HYD/2008 | 2004-2005
Pronouncement Date: 29-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 167222514 RSA 2008
Assessee PAN AABCP2277J
Bench Hyderabad
Appeal Number ITA 1672/HYD/2008
Duration Of Justice 2 year(s) 1 month(s) 10 day(s)
Appellant DCIT, Hyderabad
Respondent M/s Premier Explosives Ltd., Secunderabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-12-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 29-12-2010
Assessment Year 2004-2005
Appeal Filed On 19-11-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA.1672/HYD/2008 ASSESSMENT YEAR 2004-05 THE DCIT CIRCLE 16(3) HYDERABAD VS M/S PREMIER EXPLOSIVES LTD. SECUNDERABAD PAN AABCP 2277 J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CHAITANYA KUMAR RESPONDENT BY : SHRI K.V.N. CHARYA O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT(A) V HYDERABAD DATED 15.9 .2008 AND PERTAINS TO THE ASSESSMENT YEAR 2004 - 2005. 2. THE FIRST GROUND RAISED BY THE REVENUE IN ITS APPEAL IS THAT THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TAKE INTO ACCOUNT AND ADJUSTED BOOK PROFIT FOR THE PURPOSE OF CALCULATING DEDUCTION U/S 80HHC WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE IT ACT . 3. AFTER HEARING BOTH THE PARTIES WE ARE OF TH E OPINION THAT THIS ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF THE H ONBLE SUPREME COURT IN THE CASE OF AJANTA PHARMA LTD. VS. CIT (327 ITR 305) (SC) WHEREIN IT WAS HELD THAT: A) THE SECTION 115JA WAS A SELF CONTAINED CODE AND APP LIED NOTWITHSTANDING ANY PROVISION IN THE ACT. SECTION 115JB IS THE ITA NO.1672/H/2008 M/S PREMIER EXPLOSIVES LTD. SECUNDERABAD 2 2 SUCCESSOR SECTION TO S.115JA. SEC.115JB CONTINUES TO REMAIN A SELF CONTAINED CODE. B) THAT ALL ASSESSABLE ENTITIES WERE NOT ELIGIBLE FOR DEDUCTION U/S 80HHC(1B). SIMILARLY ONLY ELIGIBLE GOODS WERE ENT ITLED TO SUCH SPECIAL DEDUCTION U/S 80HHC(1). SEC.80HHC(3) WAS G EARED TO THE EXPORTS WHEREAS THE LEVY U/S 115JB WAS ON THE DEEM ED INCOME. THE IDEA WAS TO EXCLUDE EXPORT PROFITS FROM THE C OMPUTATION OF BOOK PROFITS U/S 115JB. C) III) THAT IF THE DICHOTOMY BETWEEN ELIGIBILITY OF PROFITS AND DEDUCTIBILITY OF PROFITS WAS NOT KEPT IN MIND SEC TION 115JB WOULD CEASE TO BE SELF CONTAINED CODE. D) IV) THAT THEREFORE THE APPELLATE TRIBUNAL WAS RIG HT IN HOLDING THAT 100% OF THE EXPORT PROFITS EARNED BY THE ASSESSEE A S COMPUTED U/S 80HHC(3) WAS ELIGIBLE FOR REDUCTION UNDER CLAUSE (I V) OF THE EXPLANATION TO SECTION 115JB. 4. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE ABOVE JUDGEMENT OF THE HONBLE SUPREME COURT WE DISMISS THIS GROUND TAKEN BY THE REVENUE. 5. THE NEXT GROUND RAISED BY THE REVENUE IS THA T CIT(A) HAS GIVEN RELIEF OF RS.3 21 510/- WITHOUT ANY EVIDENCE ON RECORD AND IGNORED THE FINDINGS OF THE ASSESSING OFFICER. 6. THE AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE (P) LTD. VS. CIT & ANOTHER (327 ITR 456) (SC) WHEREIN IT WAS HELD THAT: THE MOST IMPORTANT EXPRESSION IN SECTION 195(1) OF THE IT ACT 1961 DEALING WITH DEDUCTION OF TAX AT SOURCE CONSISTS OF THE WORDS CHARGEABLE UNDER THE PROVISIONS OF THE ACT. A PE RSON PAYING INTEREST OR ANY OTHER SUM TO A NON RESIDENT IS NOT LIABLE TO DEDUCT TAX IF SUCH SUM IS NOT CHARGEABLE TO TAX UNDER THE ACT. SECTIO N 195 CONTEMPLATES NOT MERELY AMOUNTS THE WHOLE OF WHICH ARE PURE INCOME PAYMENTS IT ALSO COVERS COMPOSITE PAYMENTS WHICH HAVE AN ELEMENT OF INCOME IMBEDDED OR INCORPORATED IN THEM. THE OBLIGATION ITA NO.1672/H/2008 M/S PREMIER EXPLOSIVES LTD. SECUNDERABAD 3 3 TO DEDUCT TAX AT SOURCE IS HOWEVER LIMITED TO APP ROPRIATE PROPORTION OF INCOME CHARGEABLE UNDER THE ACT FORMING PART OF THE GROSS SUM OF MONEY PAYABLE TO THE NON RESIDENT. IT IS FOR THIS REASON THAT THE CBDT HAS CLARIFIED IN CIRCULAR NO.728 DATED OCT. 31 1995 THAT THE TAX DEDUCTOR CAN TAKE INTO CONSIDERATION THE EFFECT OF THE DTAA IN RESPECT OF PAYMENTS OF ROYALTIES AND TECHNICAL FEES WHILE DEDUCTING TAX AT SOURCE. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITT ED THAT THE CIT(A) GIVEN RELIEF WITHOUT EVIDENCE ON RECORD AND AS SUCH HIS ORDERS TO BE REVERSED. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ASSESSING OFFICER WHILE PASSING ASSESSMENT ORDER MADE AN ENQUIRY AND FOUND THAT THE ASSESSEE COMPANY HAS PURCHASED DOLLARS IN ITS CURRENT ACCOUNT HELD AT GT B (ORIENTAL BANK OF COMMERCE) IN INDIAN CURRENCY AND THE SAME WERE REMI TTED TO CITY BANK ABROAD AND ACCORDINGLY THE CURRENT ACCOUNT IS DEBIT ED. IT WAS ALSO OBSERVED THAT THE DESCRIPTION MENTIONED IN THE LEDG ER ACCOUNT DOES NOT TALLY WITH THE NATURE OF PAYMENT THAT THE ASSESSEE HAS CLAIMED. IT IS ALSO FOUND THAT THE LEGAL SERVICES WERE RENDERED IN INDI A HENCE INCOME HAS BEEN ACCRUED IN INDIA. FURTHER THE ASSESSEE FAILE D TO FURNISH THE DETAILS OF PROFESSIONAL SERVICES RENDERED BY THE FOREIGNERS AN D THE PAPERS THAT WERE SUBMITTED TO THE DEPARTMENT OF COMMERCE AT USA TOWA RDS ANTI DUMPING DUTIES. HOWEVER IN THE COURSE OF FIRST APPELLATE PROCEEDINGS ASSESSEE ARGUED THAT FOREIGN CONSULTANTS RENDERED THEIR SERV ICES ABROAD AND PAYMENTS WERE MADE TO THEM DIRECTLY. AS THE CONSUL TANTS HAVE RENDERED THEIR SERVICES ABROAD NO INCOME ACCRUED IN INDIA AN D INCOME CHARGEABLE TAX AND PROVISIONS OF SECTION 195 NOT ATTRACTED. T HE CIT(A) THOUGH NOT AGREED WITH THE CONTENTION OF THE ASSESSEE COUNSEL HE GIVEN A RELIEF TO THE TUNE OF RS.3 21 510/- WITHOUT ANY BASIS. IN OUR OP INION THIS PART OF THE ISSUE TO BE EXAMINED BY THE ASSESSING OFFICER AFRES H IN THE LIGHT OF THE ITA NO.1672/H/2008 M/S PREMIER EXPLOSIVES LTD. SECUNDERABAD 4 4 JUDGEMENT RELIED BY THE ASSESSEES COUNSEL. ACCO RDINGLY THE ISSUE IS SET ASIDE TO THE FILE OF ASSESSING OFFICER FOR FRESH CO NSIDERATION. 9. IN THE RESULT THE APPEAL OF THE REVENUE IN ITA NO.1672/H/2008 IS PARTLY ALLOWED FOR STATISTICAL PU RPOSE. ORDER PRONOUNCED IN THE OPEN COURT 29. 12.2010 SD/- SD/- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 29 TH DECEMBER 2010 COPY FORWARDED TO: 1. THE DCIT CIRCLE 16(3) HYDERABAD 2. M/S PREMIER EXPLOSIVES LTD. 202& 203 MINERVA COMPLEX SECUNDERABAD. 3. CIT(A)-V HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP