M/s Fleming Laboratories Ltd.,, Hyderabad v. ACIT, Hyderabad

ITA 1757/HYD/2008 | 2002-2003
Pronouncement Date: 16-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 175722514 RSA 2008
Assessee PAN AAACF3245M
Bench Hyderabad
Appeal Number ITA 1757/HYD/2008
Duration Of Justice 1 year(s) 3 month(s) 27 day(s)
Appellant M/s Fleming Laboratories Ltd.,, Hyderabad
Respondent ACIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 16-04-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 16-04-2010
Date Of Final Hearing 25-03-2010
Next Hearing Date 25-03-2010
Assessment Year 2002-2003
Appeal Filed On 19-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI AKB ER BASHA ACCOUNTANT MEMBER . ITA NO.1757/HYD/08 : ASSESSMENT YEAR 2002-03 M/S.FLEMING LABORATORIES LTD. BEGUMPET HYDERABAD. PAN: AAACF 3245M VS THE ACIT CIR-1(3) HYDERABAD. (APPLICANT) (RESPONDENT) APPELLANT BY : SHRI K. VASANT KUMAR RESPONDENT BY : SHRI H. PHANI RAJU O R D E R PER AKBER BASHA ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT (A)-II HYDERABAD DATED 7-10-2008 AND IT RELATES TO THE ASSESSMENT YEAR 2002-03. WE FIND THA T THIS APPEAL IS TIME BARRED BY 7 DAYS AND THE ASSESSEE HAS FIL ED AFFIDAVIT DATED 1-6-2009 BEFORE US. WE HAVE GONE THROUGH THE SAID AFFIDAVIT AND SATISFIED WITH THE REASONS GIVEN BY T HE ASSESSEE FOR THE DELAY OF 7 DAYS. HENCE WE CONDONE THE DELAY A ND ADMIT THE APPEAL. 2. GROUNDS RAISED IN THIS APPEAL ARE AS FOLLOWS: '1. THE ORDER OF THE LEARNED CIT (A) IS ERRONEOUS BOTH ON FACTS AND N LAW IN SO FAR AS IT IS PREJUDICIAL TO T HE ASSESSEE. 2 2. THE LEARNED CIT (A) ERRED IN HOLDING THAT THE ADVA NCE PAID RS.1 00 000 FOR DEVELOPMENT OF SOFTWARE WHICH IS WRITTEN OFF IS A CAPITAL LOSS AND NOT ALLOWABLE WIT HOUT APPRECIATING THE FACT THAT SUCH SOFTWARE IF DEVELOP ED WOULD HAVE BEEN ELIGIBLE FOR DEPRECIATION. 3. THE LEARNED CIT(A) ERRED IN HOLDING TAT THE ASSESSI NG OFFICER IS RIGHT IN REDUCING 90% OF OTHER INCOME OF RS.61 96 836 INSTEAD OF APPRECIATING THE FACT THAT THE OTHER INCOME INCLUDE ITEMS WHICH DOES NOT FALL UNDE R SEC. 28(IIIA) (IIIB) ETC. AND ARE NOT IN THE NATUR E OF COMMISSION BROKERAGE ETC. AND THEREBY ERRED IN UPHOLDING THE COMPUTATION OF DEDUCTION U/S 80HHC. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HIMSELF HAS COMPUTED THE DEDUCTION N THAT MANNER INSTEAD OF APPRECIATING THAT THE DEDUCTION SHOULD B E COMPUTED AS PER PROVISIONS OF THE ACT AND NOT ON T HE BASIS OF THE COMPUTATION BY THE ASSESSEE. 5. ANY OTHER GROUND TAT MAY BE URGED AT THE TIME OF HEARING.' 3. GROUNDS NOS. 1 AND 5 ARE GENERAL IN NATURE AND T HEY DO NOT REQUIRE ANY ADJUDICATION. 4. GROUND NO.2 IS WITH REGARD TO ADDITION OF RS.1 L AKH FOR DEVELOPMENT OF SOFTWARE WHICH IS WRITTEN OFF AS A CAPITAL LOSS. IN THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE DU RING THE APPELLATE PROCEEDINGS IT WAS SUBMITTED THAT THE AM OUNT WAS BEING TREATED AS AN ADVANCE FOR ASSET ONLY AND THE ASSESSEE 3 COULD NOT PROCURE THE SAME AND IT HAS WRITTEN OFF T HE SAME BY DEBITING THE P & L A/C. IT WAS FATHER SUBMITTED TH AT THE I T ACT ALLOWS ALL EXPENSES IN SOME WAY OR THE OTHER AND IF IT IS REVENUE IN NATURE IT IS ALLOWED IMMEDIATELY AND IT IS A CA PITAL IT IS TO BE ALLOWED OVER A PERIOD OF TIME AS ALONG AS IT RELATE S TO BUSINESS. THE FIRST APPELLATE AUTHORITY AFTER GOING THROUGH T HE FACTS ON THIS ISSUE HELD THAT THE ADVANCE WAS PAID FOR ACQUISITIO N OF AN ASSET AND TO THAT EXTENT THE EXPENDITURE WAS INITIALLY L AID OUT TO BE CAPITALIZED AND IT WAS FURTHER SUBMITTED THAT OTHER WISE ALSO THE SAME HAS NOT BEEN INCURRED IN THE PREVIOUS YEAR REL EVANT TO THE ASSESSMENT YEAR IN QUESTION. THE CIT (A) FURTHER HE LD THAT IF THE ADVANCE WAS PAID FOR A CAPITAL ASSET THE LOSS ARIS ING THERE FROM WOULD BE OF THE NATURE OF A CAPITAL LOSS AND HE CON FIRMED THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. AFTE R GOING THE FACTS AN THE CIRCUMSTANCES OF THE CASE AND THE ORDERS OF THE AUTHORITIES WE FIND THAT THE EXPENDITURE IN QUESTI ON WAS NOT INCURRED IN THE PREVIOUS YEAR RELEVANT TO THE ASSE SSMENT YEAR UNDER CONSIDERATION. THE ADVANCE WAS PAID FOR A CAP ITAL ASSET AND HENCE ANY LOSS ARISING FROM CAPITAL ASSET WOULD BE IN THE NATURE OF CAPITAL LOSS ONLY. TO THAT EXTENT WE DO NOT SEE ANY INFIRMITY IN THE ORDERS OF THE CIT(A) AND THE SAME IS CONFIRMED. THEREFORE THE GROUND TAKEN BY THE ASSESSEE IS REJE CTED. 5. GROUND NOS. 3 AND 4 RELATE TO THE RE-COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER ERRED IN REDUCING THE 90% OF THE OTHER INCOME AMOUNTING TO RS.61 96 8 36 INSTEAD OF APPRECIATING THE FACT THAT RS.60 35 047 OF OTHER INCOME ARE DIRECTLY DERIVED FROM THE BUSINESS OF EXPORT OF BUL K DRUGS. ONLY 4 INTEREST ON MARGIN AND OTHER MISC. INCOME AMOUNTING TO RS.1 61 789 SHOULD HAVE BEEN CONSIDERED FOR BEING R EDUCED BY 90% SINCE THE OTHER RECEIPTS ARE DERIVED FROM BUSIN ESS OF EXPORT OF BULK DRUGS. THE ASSESSEE WHILE CALCULATING THE P ROFIT OF THE BUSINESS THE ASSESSEE ITSELF REDUCED INADVERTENTLY 90% OF EXPORT INCENTIVE FROM THE PROFIT OF THE BUSINESS FO R THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. N OW THE ASSESSEE RECOMPUTED THE DEDUCTION U/S 80HHC IN ACCO RDANCE WITH THE PROVISIONS OF THE ACT. IT IS SUBMITTED TH AT THE ISSUE MAY BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFIC ER WITH A DIRECTION TO VERIFY THE CLAIM MADE BY THE ASSESSEE IN THE RECOMPUTATION AS THE DEDUCTION SHOULD BE COMPUTED A S PER THE PROVISIONS OF THE ACT AND NOT ON THE BASIS OF THE C OMPUTATION MADE BY THE ASSESSEE. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE WHILE SU PPORTING THE ORDER OF THE CIT (A) SUBMITTED THAT THE RETURN FOR CLAIMING DEDUCTION UNDER SECTION 80HHC WAS DULY CERTIFIED BY THE AUDITORS AND THE ASSESSEE-COMPANY ITSELF REDUCED 9 0% OF THE EXPORT INCENTIVES FOR THE PURPOSE OF CALCULATING TH E PROFIT OF THE BUSINESS. THE ABOVE WORKING SHOWS THAT THE ASSESSEE ITSELF HAS TAKEN INTO CONSIDERATION FOR THE PURPOSE OF 90% OF THE EXPORT INCENTIVES WHILE COMPUTING THE SAME IN CLAUSE (IIIA ) OF SECTION 80HHC OF THE ACT AND HENCE THE ORDER OF THE CIT (A) CAN BE SUSTAINED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE CIT (A) CONFIRMED THE DEDUCTION U/S 80HHC ON THE GROUND THAT THE ASSE SSEE OR HIS 5 CHARTERED ACCOUNTANT THEMSELVES HAVE EXCLUDED THE 90% OF THE EXPORT INCENTIVES FROM THE BUSINESS PROFIT WHILE C ALCULATING THE DEDUCTION U/S 80HHC IN TERMS OF EXPLANATION [BAA] T O S.80HHC OF THE ACT RATHER THAN FOLLOWING THE PROVISIONS OF THE INCOME-TAX ACT. HENCE WE ARE NOT IN AGREEMENT WITH HIS ORDE R. IN THE INTEREST OF THE JUSTICE WE FEEL IT PROPER TO RESTO RE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER TO RECOMPUTE THE DEDUCTIONS UNDER S.80HHC OF THE ACT IN ACCORDANCE WITH THE LAW AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. THE ASSESSEE IS DIRECTED TO SUBMIT HIS REVISED COMPUTATION OF DE DUCTION UNDER S.80HHC TO THE ASSESSING OFFICER ACCORDINGLY. THE G ROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ALLOWED FOR STATIS TICAL PURPOSE. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. THE ORDER WAS PRONOUNCED IN THE COURT ON 16-4-201 0. SD/- SD/- (G.C. GUPTA) (AKBER BASHA) VICE PRESIDENT ACCOUNTANT MEMBER. DT/- 16-4-2010. COPY FORWARDED TO: JMR* 1. SRI K. VASANT KUMAR ADVOCATE 6-3-240/3 SHARAD ADEVI STREET PREMNAGAR KHIRATABAD HYDERABAD. 2. 3. 4. THE ACIT CIR-1(3) HYDERABAD. CIT (A)-II HYDERABAD. CIT A P HYDERABAD. 5. THE D.R. ITAT HYDERABAD 6