M/s. MAHALAXMI CHEMICAL WORKS, MUMBAI v. ACIT. CIR- 23(2), MUMBAI

ITA 1763/MUM/2007 | 2002-2003
Pronouncement Date: 30-04-2010 | Result: Allowed

Appeal Details

RSA Number 176319914 RSA 2007
Assessee PAN AAAFM1978M
Bench Mumbai
Appeal Number ITA 1763/MUM/2007
Duration Of Justice 3 year(s) 2 month(s) 1 day(s)
Appellant M/s. MAHALAXMI CHEMICAL WORKS, MUMBAI
Respondent ACIT. CIR- 23(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted K
Tribunal Order Date 30-04-2010
Date Of Final Hearing 05-02-2010
Next Hearing Date 05-02-2010
Assessment Year 2002-2003
Appeal Filed On 27-02-2007
Judgment Text
ITA NO. 1763/MUM/07 ASSESSMENT YEAR 2002-03 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI K BENCH MUMBAI BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) AND SHRI V DURGA RAO (JUDICIAL MEMBER). ITA NO. 1763/MUM/07 ASSESSMENT YEAR 2002-03 MAHALAXMI CHEMICAL WORKS .APPELLANT 3 MANGAL VIHAR 811 MAHATMA GANDHI ROAD MULUND (WEST) MUMBAI 400 080 PAN : AAAFM1978M VS. ASSISTANT COMMISSIONER OF INCOME TAX - CIRCLE 23(2) MUMBAI . RESPONDENT APPELLANT BY : SHRI DEEPAK LALA RESPONDENT BY : SHRI DEEPAK SUTARIA O R D E R PER PRAMOD KUMAR: 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER DATED 18 TH DECEMBER 2006 PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT 1961 FOR THE ASSESSMENT YEAR 2002-03. 2. WE MAY MENTION THAT THE IMPUGNED ORDER PASSED BY THE CIT(A) IS A ITA NO. 1763/MUM/07 ASSESSMENT YEAR 2002-03 PAGE 2 OF 8 CONSOLIDATED ORDER FOR THE ASSESSMENT YEARS 2000-01 2002-03 AND 2003- 04 BUT AS SUBMITTED BY THE LEARNED COUNSEL ASSES SEES APPEAL FOR THE ASSESSMENT YEARS 2000-01 AND 2003-04 HAVE BEEN DISM ISSED BY THE TRIBUNAL AS THE ASSESSMENTS FOR THE SAID YEARS HAVE BEEN SET ASIDE BY THE LEARNED COMMISSIONER UNDER SECTION 263 OF THE ACT A ND THE ASSESSEE DID NOT FILED ANY APPEAL AGAINST THE ORDER PASSED UNDER SECTION 263. A COPY OF THE TRIBUNALS ORDER DATED 9 TH APRIL 2008 SO DISMISSING THE APPEALS HAS BEEN PLACED ON RECORD. LEARNED COUNSEL FOR THE ASSE SSEE HAS ALSO STATED THAT THE ASSESSMENT YEAR BEFORE US WAS NOT SUBJECTE D TO REVISION PROCEEDINGS AND AS SUCH THIS IS THE ONLY SURVIVING ASSESSMENT OUT OF THREE ASSESSMENTS DEALT BY THE CIT(A) IN CONSOLIDAT ED ORDER REQUIRING OUR ADJUDICATION. IT IS IN THIS BACKDROP THAT WE HAVE T AKEN UP THIS APPEAL FOR HEARING. 3. GROUND NO. 1 IS NOT PRESSED BY THE ASSESSEE AND IS DISMISSED AS SUCH. 4. IN GROUND NO. 2 THE ASSESSEE IS AGGRIEVED OF T HE CIT (A) FAILING TO APPRECIATE THAT THE ASSESSING OFFICER HAS ERRED IN INCLUDING THE EXCISE DUTY OF RS 17 75 096 INCURRED BY THE APPELLANT ON G OODS EXPORTED OUT OF INDIA AS A PART OF DIRECT COSTS ATTRIBUTABLE TO EX PORTS WHILE COMPUTING ADMISSIBLE DEDUCTION UNDER SECTION 80 HHC. 5. THE IMPUGNED ACTION OF THE ASSESSING OFFICER HAS BEEN CONFIRMED BY ITA NO. 1763/MUM/07 ASSESSMENT YEAR 2002-03 PAGE 3 OF 8 THE CIT(A) ON THE GROUND THAT WHILE EXCISE DUTY IS A PART OF COST OF GOODS MANUFACTURED BY THE ASSESSEE THE EXCISE DUTY REFUN D IS ONLY A BENEFIT GRANTED TO EXPORTER FOR ITS EXPORT ACTIVITY AND TH AT EXCISE DUTY REFUND TO THE ASSESSEE WAS ACTUALLY THE EXCISE DUTY PAID. TH E ASSESSEE IS AGGRIEVED AN IS IN APPEAL BEFORE US. 6. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD WE ARE INCLINED TO UPHOLD THE GRIEVANCE OF THE ASSESSEE. IT IS ONLY ELEMENTARY THAT IN ORDER TO MAKE THE INDIAN P RODUCTS INTERNATIONALLY COMPETITIVE EXPORTS OF GOODS FROM INDIA IS RELIEVE D OF THE DOMESTIC LEVIES BOTH CUSTOMS AND CENTRAL EXCISE. THIS LEGAL POSIT ION IS NOT IN DISPUTE. ONCE EXCISE DUTY CANNOT BE LEVIED ON GOODS PRODUCED FOR EXPORTS IT IS ONLY A NATURAL COROLLARY TO THAT LEGAL POSITION THAT ANY EXCISE DUTY PAYMENT BY THE ASSESSEE CANNOT BE SAID TO BE RELATED TO THE EX PORT ACTIVITY AND SHOULD THEREFORE BE EXCLUDED FROM DIRECT COSTS ATTRIBUTABL E TO EXPORTS. WE DIRECT THE ASSESSING OFFICER TO DO SO. 7. GROUND NO. 2 IS THUS ALLOWED. 8. GROUND NO. 3 IS ONLY AN ALTERNATIVE CONTENTION TO GROUND NO. 2 BUT ONCE WE HAVE ALLOWED THE GROUND NO. 2 THIS DOES NO T REQUIRE ANY ADJUDICATION AND IS RENDERED INFRUCTUOUS. WE DECLIN E TO ADJUDICATE ON THE SAME. ITA NO. 1763/MUM/07 ASSESSMENT YEAR 2002-03 PAGE 4 OF 8 9. GROUND NO. 3 IS THUS DISMISSED AS INFRUCTUOUS. 10. IN GROUND NO. 4 THE ASSESSEE IS AGGRIEVED THAT THE CIT(A) ERRED IN NOT APPRECIATING THAT THE ASSESSING OFFICER HAS ERR ED IN INCLUDING THE OCTROI DUTY OF RS 53 377 INCURRED BY THE APPELLANT ON GOODS EXPORTED OUT OF INDIA AS A PART OF DIRECT COSTS ATTRIBUTABLE TO EXPORTS WHILE COMPUTING ADMISSIBLE DEDUCTION UNDER SECTION 80 HHC. GROUND N O. 5 IS AN ALTERNATIVE GROUND TO THE SAME. 11. FOLLOWING THE VIEW WE HAVE TAKEN WITH REGARD TO GROUND NO. 2 ABOVE AS THE LEGAL POSITION IS IN PARI MATERIA INASMUCH AS OCTROI DUTY IS ALSO NOT PAYABLE IN RESPECT OF GOODS FOR EXPORTS WE UPHOLD THIS GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO EXCLUD E THE AMOUNT OF RS 53 377 FROM DIRECT COSTS ATTRIBUTABLE TO EXPORTS FO R THE PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 80 HHC. THE ALTE RNATE CONTENTION IS RENDERED INFRUCTUOUS AND DOES NOT CALL FOR ANY ADJU DICATION. 12. GROUND NO. 4 IS THUS ALLOWED AND GROUND NO. 5 I S DISMISSED AS INFRUCTUOUS. 13. GROUND NO. 6 IS NOT PRESSED AND IS DISMISSED AS SUCH. ITA NO. 1763/MUM/07 ASSESSMENT YEAR 2002-03 PAGE 5 OF 8 14. IN GROUND NO. 7 THE ASSESSEE IS AGGRIEVED OF C IT(A)S UPHOLDING THE INCLUSION OF OCTROI REFUND AS PART OF THE TOTAL TUR NOVER FOR THE PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 80 HHC. 15. LEARNED REPRESENTATIVES AGREE THAT THE ISSUE IS BY NOW COVERED BY DECISIONS OF COORDINATE BENCHES IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY OCTROI REFUND IS TO BE EXCLUDED FROM T HE TURNOVER. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO WHIL E RECOMPUTING THE DEDUCTION UNDER SECTION 80 HHC EXCLUDE THE OCTROI DUTY FROM THE TURNOVER. 16. GROUND NO. 7 IS THUS ALLOWED. 17. IN GROUND NO. 8 THE ASSESSEE IS AGGRIEVED THAT THE CIT(A) DID NOT ADJUDICATE ON ASSESSEES GRIEVANCE AGAINST REDUCTIO N OF RS 50 520 FROM INDIRECT COSTS ATTRIBUTABLE TO EXPORTS FOR COMPUTI NG DEDUCTION UNDER SECTION 80 HHC. WITH THE CONSENT OF THE PARTIES HO WEVER THIS ISSUE IS REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR F RESH ADJUDICATION ON MERITS BY WAY OF A SPEAKING ORDER AFTER GIVING AN O PPORTUNITY OF HEARING TO THE ASSESSEE. 18. GROUND NO. 8 IS THUS ALLOWED FOR STATISTICAL PU RPOSES. ITA NO. 1763/MUM/07 ASSESSMENT YEAR 2002-03 PAGE 6 OF 8 19. IN GROUND NO. 9 THE ASSESSEE IS AGGRIEVED THAT THE CIT(A) FAILED TO APPRECIATE THAT THE ASSESSING OFFICER HAS ERRED IN IGNORING THE REDUCTION OF 10% OF EXPORT INCENTIVES FROM THE INDIRECT COSTS ATTRIBUTABLE TO EXPORTS WHILE RECOMPUTING THE DEDUCTION UNDER SECTION 80 HH C. 20. LEARNED REPRESENTATIVES AGREE THAT THIS ISSUE I S NOW COVERED IN FAVOUR OF THE ASSESSEE BY HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF HERO EXPORTS VS CIT (295 ITR 454). WE ACCORDING LY UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DECLINE TO INTERFERE IN THE MATTER. 21. GROUND NO. 9 IS ALLOWED IN THE TERMS INDICATED ABOVE. 22. IN GROUND NO. 10 THE ASSESSEE IS AGGRIEVED OF CIT(A) FAILING TO APPRECIATE THAT THE ASSESSING OFFICER HAS ERRED IN CONSIDERING THE REMUNERATION PAID TO PARTNERS OF RS 5 00 000 AS PAR T OF INDIRECT COSTS ATTRIBUTABLE TO EXPORTS WHILE COMPUTING THE DEDUCT ION UNDER SECTION 80 HHC. 23. THE CIT(A) HAS CONFIRMED THE ABOVE ADDITION ON THE GROUND THAT THE REMUNERATION PAID TO THE PARTNERS IS A PART OF THE COSTS INCURRED BY THE ASSESSEE AND IS TO BE THEREFORE ALLOCATED TO THE EXPORTS AS WELL. LEARNED COUNSELS CONTENTION IS THAT IT IS ONLY AN ALLOCATI ON OF PROFITS QUA THE FIRM AND THE REMUNERATION PAID TO THE PARTNERS IS A PART OF THE PROFIT ALLOCATION ITA NO. 1763/MUM/07 ASSESSMENT YEAR 2002-03 PAGE 7 OF 8 TO THE PARTNERS. HE THEN SUBMITS THAT HE WILL BE CO NTENT IF THE REMUNERATION PAID TO PARTNERS IS ALLOCATED TO THE E XPORTS AND ALSO OTHER INCOMES OF THE ASSESSEE. LEARNED DEPARTMENTAL REPRE SENTATIVE DOES NOT OPPOSE THIS ALTERNATE CONTENTION. WITH THE CONSENT OF THE PARTIES THEREFORE WE REMIT THE MATTER TO THE FILE OF THE A SSESSING OFFICER FOR TAKING INTO ACCOUNT ONLY SUCH PART OF THE REMUNERAT ION PAID TO THE PARTNERS AS MAY BE REASONABLY ALLOCATED TO THE EXPO RTS. 24. GROUND NO. 10 IS THUS ALLOWED FOR STATISTICAL P URPOSES. 25. IN THE RESULT THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH TH DAY OF APRIL 2010. SD/- SD/- ( V D RAO) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 30 TH DAY OF APRIL 2010. COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT MUMBAI 4. THE COMMISSIONER (APPEALS) MUMBAI 5. DEPARTMENTAL REPRESENTATIVE - BENCH MUMB AI 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI ITA NO. 1763/MUM/07 ASSESSMENT YEAR 2002-03 PAGE 8 OF 8 DATE INITIAL 1. DRAFT DICTATED ON 23.4.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 26.4.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 26.4.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 26.4.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 26.4.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 30.4.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 30.4.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER