Vishal Exports Overseas Limited,, Ahmedabad v. The ACIT.,Circle-8,, Ahmedabad

ITA 1698/AHD/2004 | 2000-2001
Pronouncement Date: 24-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 169820514 RSA 2004
Bench Ahmedabad
Appeal Number ITA 1698/AHD/2004
Duration Of Justice 6 year(s) 7 month(s) 3 day(s)
Appellant Vishal Exports Overseas Limited,, Ahmedabad
Respondent The ACIT.,Circle-8,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 24-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 24-12-2010
Date Of Final Hearing 08-12-2010
Next Hearing Date 08-12-2010
Assessment Year 2000-2001
Appeal Filed On 21-05-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND T.K SHARMA JUDICIAL MEMBER) ITA NO.1683/AHD/2004 [ASSTT. YEAR : 1999-2000] ACIT CIR.8 AHMEDABAD. VS. VISHAL EXPORTS OVERSEAS LTD. VISHAL HOUSE OPP: SALES INDIA ASHRAM ROAD AHMEDABAD. ITA NO.1698/AHD/2004 [ASSTT. YEAR : 2000-2001] VISHAL EXPORTS OVERSEAS LTD. VISHAL HOUSE OPP: SALES INDIA ASHRAM ROAD AHMEDABAD. VS. ACIT CIR.8 AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHELLEY JINDAL ASSESSEE BY : SHRI S.N.SOPARKAR O R D E R PER G.D. AGARWAL VICE-PRESIDENT : THESE ARE TWO APPEALS ONE BY THE REVENUE AND OTHER BY THE ASSESSEE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XIV AHMEDABAD DATED 12.03.2004 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER P ASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. FOR THE SAKE OF CONVENIE NCE WE DISPOSE OF BOTH THE APPEALS BY THIS COMMON ORDER. ITA NO.1683/AHD/2004 : A.Y.1999-2000 (REVENUES APP EAL) 2. THE GROUND NO.1 OF THE REVENUES APPEAL READS AS UNDER: 1. LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLD ING THAT THE LOSS AT THE FIRST LIMB OF SECTION 80HHC(3) SHOULD BE IGN ORED AND TAKEN AS NIL AND COMPUTATION OF DEDUCTION U/S.80HHC BE DON E ON THE INCENTIVES. 3. AT THE TIME OF HEARING BEFORE US BOTH THE PARTI ES FAIRLY ADMITTED THIS ISSUE SHOULD BE SET ASIDE TO THE FILE OF THE ASSESS ING OFFICER FOR RE-COMPUTATION ITA NO.1683 AND 1698/AHD/2004 -2- OF DEDUCTION UNDER SECTION 80HHC IN VIEW OF 5 TH PROVISO INSERTED BY THE TAXATION LAWS AMENDMENT ACT 2005 WITH RETROSPECTIV E EFFECT FROM 1-4-1992. 4. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MAT ERIAL PLACED BEFORE US. WE FIND THAT THE TAXATION LAWS AMENDMENT ACT 2005 HAS INTRODUCED FOUR PROVISO AFTER FIRST PROVISO IN SECTION 80HHC(3 ). THREE PROVISOS WERE INSERTED W.E.F. 1-4-1998 AND FOURTH PROVISO W.E.F 1 -4-1992. THUS ALL THE ABOVE PROVISOS HAVE BEEN INSERTED BY THE TAXATION L AWS AMENDMENT ACT 2005 BUT WITH RETROSPECTIVE EFFECT. IN VIEW OF THE RETROSPECTIVE EFFECT GIVEN TO THEM ALL THE PROVISOS WOULD BE APPLICABLE TO THE YE AR UNDER APPEAL. WE THEREFORE DIRECT THE ASSESSING OFFICER TO RE-COMPUT E DEDUCTION UNDER SECTION 80HHC IN VIEW OF THE AMENDED PROVISIONS OF THE LAW. 5. THE GROUND NO.2 OF THE REVENUES APPEAL READS AS UNDER: 2. THE LD.CIT(A) HAS ALSO ERRED IN LAW AND ON FACT S IN HOLDING THAT THE ASSESSEE SHOULD BE ALLOWED THE DIVISION-WISE EX PORTS PROFITABILITY. 6. AT THE TIME OF HEARING BEFORE US IT IS SUBMITTE D BY THE LEARNED DR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S DIRECTED THE ASSESSING OFFICER TO COMPUTE DEDUCTION UNDER SECTION 80HHC ON DIVISION-WISE EXPORT PROFIT. HE HAS STATED THAT THE ABOVE VIEW OF THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT CORRECT BECAUSE THE DED UCTION UNDER SECTION 80HHC IS PERMISSIBLE TO AN ASSESSEE AND NOT TO EACH UNIT OR DIVISION. THEREFORE THE DIRECTION OF THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) TO ALLOW DEDUCTION UNDER SECTION 80HHC ON DIVISION- WISE PROFITABILITY IS CONTRARY TO LAW. HE ALSO STATED THAT THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR EACH DIVISION AND THEREFORE THE PROFIT OF EACH DIVISION CANNOT BE ASCERTAINED WITH CERTAINTY. IN SUPPORT O F THIS CONTENTION HE RELIED UPON THE FOLLOWING DECISIONS: I) SYNCO INDUSTRIES LTD. VS ASSESSING OFFICER (INCOME- TAX) (SC) 299 ITR 444; II) A. M. MOOSA VS COMMISSIONER OF INCOME-TAX (SC) 294 ITR 1 ITA NO.1683 AND 1698/AHD/2004 -3- III) INCOME-TAX OFFICER VS INDUFLEX PRODUCTS P. LTD. (S C) 280 ITR 1 IV) IPCA LABORATORY LTD. VS DEPUTY COMMISSIONER OF INCO ME-TAX (SC) 266 ITR 521 7. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND STATED THAT VARIOUS DECISIONS RELIED UPON BY THE LEARNED DR WER E ON DIFFERENT ISSUES AND NONE OF THE DECISIONS IS ON THE ISSUE OF ALLOWABILI TY OF DEDUCTION UNDER SECTION 80HHC ON DIVISION-WISE PROFIT. HE HAS STATED THAT THIS ISSUE IS CONSIDERED BY VARIOUS BENCHES OF THE ITAT AHMEDABAD WHEREIN DEDU CTION UNDER SECTION 80HHC IS ALLOWED ON DIVISION-WISE PROFIT. IN SUPPO RT OF THIS CONTENTION HE RELIED UPON THE FOLLOWING DECISIONS: I) M/S.MEGHMANI ORGANICS LTD. VS. ACIT 1201/AHD/2007 DATED 5- 3-2010; II) DEEJA CHEMICALS IND. PVT. LTD. VS. ACIT ITA NOS.47 35 TO 4739/AHD/1996 DATED 31-1-2003; III) DCIT VS. MADHUSUDAN IND. LTD. ITA NO.2136/AHD/1997 HE THEREFORE SUBMITTED THAT THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) WAS FULLY JUSTIFIED IN DIRECTING THE ASSE SSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80HHC ON DIVISION-WISE PROF IT. WHEN A QUERY WAS ASKED BY THE BENCH WHETHER THE ASS ESSEE CLAIMED DEDUCTION ON DIVISION-WISE PROFIT IN THE PRECEDING AS WELL AS SUBSEQUENT YEARS THE LEARNED COUNSEL FOR THE ASSESSEE WAS UNABLE TO REPLY. HE H OWEVER SUGGESTED THAT SINCE THE MATTER FOR COMPUTATION OF DEDUCTION UNDER SECTI ON 80HHC IS BEING SET ASIDE IN VIEW OF THE GROUND NO.1 OF THE REVENUES APPEAL THE ISSUE RELATING TO THE SECOND GROUND MAY ALSO GO BACK TO THE FILE OF T HE ASSESSING OFFICER AND HE CAN EXAMINE WHETHER DEDUCTION UNDER SECTION 80HHC W AS CLAIMED AND ALLOWED IN THE EARLIER AND PRECEDING YEARS ON DIVIS ION-WISE BASIS OR NOT. 8. IN REJOINDER THE LEARNED DR ALSO FAIRLY ADMITTE D THAT THE ISSUE RELATING TO THE GROUND NO.2 OF THE REVENUES APPEAL CAN ALSO BE SET ASIDE TO THE FILE OF THE ITA NO.1683 AND 1698/AHD/2004 -4- ASSESSING OFFICER FOR RE-ADJUDICATION KEEPING IN VI EW THE STAND TAKEN BY THE ASSESSEE AS WELL AS THE REVENUE IN THE PRECEEDING A S WELL AS SUBSEQUENT YEARS. 9. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. ADMITTEDLY THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80HHC IN THE PRECEDING AS W ELL AS SUBSEQUENT YEARS. HOWEVER WHETHER IN THOSE YEARS THE DEDUCTION WAS CLAIMED/ALLOWED ON DIVISION-WISE TURNOVER/PROFIT OR IT WAS ALLOWED ON THE TOTAL TURNOVER/PROFIT OF ALL THE DIVISION IS NOT CLEAR. NEITHER THE ASSESSEE N OR THE REVENUE CAN TAKE DIFFERENT STAND IN DIFFERENT YEARS IF THE FACTS RE MAIN THE SAME. WHILE TAKING THIS VIEW WE DERIVE SUPPORT FROM THE DECISION OF T HE HONBLE APEX COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 0321. IN VIEW OF THE ABOVE WE DEEM IT PROPER TO SET ASIDE THE ORDER OF THE AUTHORITIES BELOW ON THIS POINT ALSO AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. WE DIRECT HIM TO RE-ADJUDICATE THE ISSUE CONSIDERING T HE STAND TAKEN BY THE ASSESSEE/DEPARTMENT IN THE PRECEDING AS WELL AS SUB SEQUENT YEAR. HE WILL ALSO TAKE INTO ACCOUNT THE VARIOUS JUDICIAL PRONOUNCEMEN TS RELIED UPON BY BOTH THE SIDES BEFORE US. NEEDLESS TO MENTION THAT HE WILL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE RE-ADJUDICATIN G THE ISSUE. ITA NO.1698/AHD/2004 : A.Y.2000-2001 (ASSESSEES AP PEAL) 10. THE FIRST GROUND OF THE ASSESSEES APPEAL READS AS UNDER: 1. THE LD.CIT(A) ERRED IN LAW WHILE CONFIRMING VIE WS OF LEARNED ACIT AND FAILED TO APPRECIATE THE MEANING IN CONTEX T OF PROVISO TO SS 80HHC(3)(B) OF THE I.T.ACT FOR WORD TOTAL TURNOVER AND EXPORT TURNOVER. 11. AT THE TIME OF HEARING BEFORE US THE LEARNED C OUNSEL POINTED OUT THAT THE ISSUE RELATING TO THE DEDUCTION UNDER SECTION 80HHC HAS ALREADY BEEN SET ASIDE BY THE ITAT FOR THE YEAR UNDER CONSIDERATION TO THE FILE OF THE ASSESSING OFFICER WHILE ADJUDICATING THE REVENUES APPEAL. H E HAS SUGGESTED THAT WHEN ITA NO.1683 AND 1698/AHD/2004 -5- THE MATTER IS ALREADY SET ASIDE AND IS PENDING BEFO RE THE ASSESSING OFFICER FOR COMPUTATION OF DEDUCTION UNDER SECTION 80HHC LET T HIS ISSUE BE ALSO SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR RE-ADJUDIC ATION. COPY OF THE ORDER OF THE ITAT IN ITA NO.1684/AHD/2004 DATED 7-8-2009 IS FURN ISHED BEFORE US. THE LEARNED DR FAIRLY ACCEPTED THE ABOVE SUBMISSIONS OF THE LEARNED COUNSEL. 12. WE FIND THAT THE REVENUES APPEAL FOR A.Y.2000- 2001 (I.E. THE YEAR UNDER APPEAL) WAS ALREADY ADJUDICATED BY THE ITAT V IDE ORDER DATED 7-8-2009 (SUPRA) AND THE ITAT SET ASIDE THE MATTER RELATING TO COMPUTATION OF DEDUCTION UNDER SECTION 80HHC BACK TO THE FILE OF THE ASSESSI NG OFFICER. WHEN THE MATTER IS ALREADY PENDING BEFORE THE ASSESSING OFFI CER WE SET ASIDE THE ISSUE RAISED BEFORE US VIDE GROUND NO.1 OF THE ASSESSEES APPEAL AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE MAY MAKE APPROPRIATE CLAIM WITH REGARD TO THE DETERMINATION OF THE TOTAL TURNOVER AND EXPORT TURNOVER BEFORE THE ASSESSING OFFICER. 13. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS U NDER: 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS WHILE C ONFIRMING DISALLOWANCE OF PAYMENT MADE IN CASH FOR PURCHASES MADE FROM PSU OF INDIA VIZ. MMTC FOR RS.47 00 000 IN VIEW OF CIRCUMS TANCES OF CASE U/S.40A(3) OF THE I.T.ACT. 14. AT THE TIME OF HEARING BEFORE US IT IS SUBMITT ED BY THE LEARNED COUNSEL THAT DURING THE YEAR UNDER CONSIDERATION THE ASSES SEE MADE PAYMENT OF RS.47 00 000/- FOR THE PURCHASES MADE FROM MMTC WH ICH IS A PUBLIC SECTOR UNDERTAKING. HE HAS STATED THAT AS PER RULE 6DD(B) ANY PAYMENT MADE TO GOVERNMENT IS NOT REQUIRED TO BE DISALLOWED UNDER S ECTION 40A(3). HE HAS STATED THAT MMTC IS A PUBLIC SECTOR UNDERTAKING AND PAYMENT MADE TO MMTC IS AS GOOD AS PAYMENT MADE TO GOVERNMENT. HE ALSO MADE ALTERNATE REQUEST THAT IF THE DISALLOWANCE IS SUSTAINED THEN THE ASS ESSING OFFICER MAY BE DIRECTED TO COMPUTE DEDUCTION UNDER SECTION 80HHC ON THE INC OME DETERMINED BY HIM AFTER MAKING THE ABOVE ADDITION. THE LEARNED DR O N THE OTHER HAND STATED THAT ITA NO.1683 AND 1698/AHD/2004 -6- AS PER RULE 6DD(B) PAYMENT MADE TO GOVERNMENT UNDE R THE RULES FRAMED BY IT WHERE SUCH PAYMENT IS REQUIRED TO BE MADE IN LEGAL TENDER IS EXEMPT. THAT THE PAYMENT TO MMTC CANNOT BE CONSIDERED AS PAYMENT MAD E TO THE GOVERNMENT AND MOREOVER THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT POINTED OUT ANY RULE FRAMED BY THE GOVERNMENT AS PER WHICH THE PAYMENT IS TO BE MADE TO PSU IN CASH. HE THEREFORE SUBMITTED THAT THE DISALLOWANCE MADE UNDER SECTION 40A(3) SHOULD BE SUSTAINED. 15. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. RULE 6DD(B) READS AS UNDER: 6DD. CASES AND CIRCUMSTANCES IN WHICH A PAYMENT OR AGGREGATE OF PAYMENTS EXCEEDING TWENTY THOUSAND RUPEES MAY BE MA DE TO A PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAW N ON A BANK OR ACCOUNT PAYEE BANK DRAFT.NO DISALLOWANCE UNDER SUB-SECTION (3) OF SECTION 40A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PR OFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTION (3A) OF SE CTION 40A WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAY EE BANK DRAFT EXCEEDS TWENTY THOUSAND RUPEES IN THE CASES AND CIRCUMSTANC ES SPECIFIED HEREUNDER NAMELY : . (B) WHERE THE PAYMENT IS MADE TO THE GOVERNMENT AN D UNDER THE RULES FRAMED BY IT SUCH PAYMENT IS REQUIRED TO BE MADE I N LEGAL TENDER; FROM THE ABOVE IT IS EVIDENT THAT THE ASSESSEE WOU LD FALL WITHIN THE AMBIT OF RULE 6DD(B) IF (I) PAYMENT IS MADE TO GOVERNMENT AND (II) AS PER THE RULE FRAMED BY THE GOVERNMENT SUCH PAYMENT IS REQUIRED TO BE MADE IN LEGAL TENDER. IN OUR OPINION THE PAYMENT MADE TO PUBLIC SECTOR UNDERTAKING CANNOT BE EQUATED WITH THE PAYMENT MADE TO THE GOVERNMENT. A PUBLIC SECTOR UNDERTAKING IS NOT GOVERNMENT OF INDIA. IT IS ONLY AN UNDERTAKING OF THE GOVERNMENT OF INDIA. MOREOVER NO SUCH RULE IS POI NTED OUT BY THE LEARNED COUNSEL BY WHICH THE PAYMENT IS REQUIRED TO BE MADE TO THE PUBLIC SECTOR UNDERTAKINGS IN LEGAL TENDER. IN VIEW OF THE ABOVE WE UPHOLD THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. ITA NO.1683 AND 1698/AHD/2004 -7- 16. COMING TO THE ALTERNATIVE REQUEST OF THE ASSESS EE THE DEDUCTION UNDER SECTION 80HHC IS TO BE COMPUTED ON THE PROFIT OF TH E BUSINESS. AS PER THE EXPLANATION (BAA) TO SECTION 80HHC DEFINES THE TERM PROFIT OF THE B USINESS AS UNDER: (BAA) 'PROFITS OF THE BUSINESS' MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION' AS REDUCED BY-- (1) NINETY PER CENT. OF ANY SUM REFERRED TO IN CLA USES (IIIA) (IIIB) (IIIC) (IIID) AND (IIIE) OF SECTION 28 OR OF ANY RECEIPTS BY WAY OF BROKERAGE COMMISSION INTEREST RENT CHARGES OR A NY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFIT S ; AND (2) THE PROFITS OF ANY BRANCH OFFICE WAREHOUSE O R ANY OTHER ESTABLISHMENT OF THE ASSESSEE SITUATE OUTSIDE INDIA ; FROM THE ABOVE IT IS EVIDENT THAT THE PROFIT OF T HE BUSINESS MEANS THE PROFIT OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS OR PROFESSION. THEREFORE IF WHILE COMPUTING ANY INC OME UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS OR PROFESSION ANY DISALL OWANCE IS MADE THEN THE PROFIT AND GAINS WHICH IS DETERMINED AFTER MAKING S UCH DISALLOWANCE WOULD BE THE PROFIT AND GAINS FOR THE PURPOSE OF SECTION 80H HC. WE THEREFORE ACCEPT THE ALTERNATE CLAIM OF THE ASSESSEE AND DIRECT THE ASSE SSING OFFICER TO ADOPT THE PROFIT OF THE BUSINESS AS DETERMINED BY HIM UNDER T HE HEAD PROFIT AND GAINS OF THE BUSINESS OR PROFESSION. 17. IN RESULT THE REVENUES APPEAL IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSE WHILE THE ASSESSEES APPEAL IS DEEMED TO BE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 24 TH DECEMBER 2010. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT ITA NO.1683 AND 1698/AHD/2004 -8- PLACE : AHMEDABAD DATE : 24-12-2010 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD