M/S. SAKARWADI TRADING CO P. LTD., Mumbai v. THE ACIT CIR-2(3), Mumbai

ITA 1901/MUM/2004 | 2000-2001
Pronouncement Date: 31-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 190119914 RSA 2004
Assessee PAN AAACE3445N
Bench Mumbai
Appeal Number ITA 1901/MUM/2004
Duration Of Justice 7 year(s) 9 day(s)
Appellant M/S. SAKARWADI TRADING CO P. LTD., Mumbai
Respondent THE ACIT CIR-2(3), Mumbai
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 31-03-2011
Date Of Final Hearing 16-02-2011
Next Hearing Date 16-02-2011
Assessment Year 2000-2001
Appeal Filed On 22-03-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NOS. 7261 7262 & 7263/MUM/2007 (ASSESSMENT YEAR: 2001-02 2002-03 & 2003-04) M/S. EXCEL BEARINGS P. LTD. INCOME TAX OFFICER - 6( 2)(3) 401 DOLLY CHAMBERS AAYAKAR BHAVAN M.K. ROAD STRAND ROAD COLABA VS. MUMBAI 400020 MUMBAI 400020 PAN - AAACE 3445 N APPELLANT RESPONDENT APPELLANT BY: SHRI VIPUL B. JOSHI & SHRI SAMEER DALAL RESPONDENT BY: SHRI SUMEET KUMAR O R D E R PER B. RAMAKOTAIAH A.M. THESE THREE APPEALS ARE BY THE ASSESSEE AGAINST THE ORDERS OF THE CIT(A) VI DATED 10.10.2007 PASSED SIMILARLY BUT SEPARATEL Y FOR THE RESPECTIVE ASSESSMENT YEARS. EVENTHOUGH THE CIT(A) ORDERS REFE R TO ITAT ORDER WHILE CONSIDERING THE JURISDICTION ISSUE THE ITAT ORDER PERTAINS TO A.Y. 2001-02 ONLY AND NOT TO A.Y. 2002-03 AND 2003-04 WHEN ASSES SMENT UNDER SECTION 143(3) WAS DONE FOR THE FIRST TIME R.W.S. 147 WHICH ARE CONTESTED. THE ISSUES ARE COMMON THEREFORE THE APPEALS ARE HEARD TOGETHE R. 2. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNED D .R. IN DETAIL. THE ASSESSEE HAS PLACED PAPER BOOKS AND WRITTEN SUBMISS ION ALONGWITH VARIOUS ORDERS OF CASES RELIED UPON. THESE ARE CONSIDERED I N DECIDING THE APPEALS. 3. THE ASSESSEE HAS RAISED VARIOUS GROUNDS AND ADDITIO NAL GROUND FOR A.Y. 2001-02 ON THE ISSUE OF JURISDICTION FOR REOPENING THE ASSESSMENTS AND ON MERITS OF VARIOUS DISALLOWANCES MADE BY THE A.O. IN THE REASSESSMENT. 4. THE FACTS FOR A.Y. 2001-02 ARE THAT THE RETURN OF I NCOME WAS ORIGINALLY FILED DECLARING TAXABLE INCOME AT ` NIL AND TAXABLE ADJUSTED BOOK PROFITS UNDER SECTION 115JB OF THE INCOME TAX ACT 1961 AT ` 2 50 415/- AFTER ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 2 CLAIMING DEDUCTION UNDER SECTION 80HHC AT ` 33 90 542/- AND DEDUCTION UNDER SECTION 80IB AT ` 11 53 613/-. THE SAID RETURN WAS REVISED DECLARING AT ` NIL AND TAXABLE ADJUSTED BOOK PROFITS UNDER SECTIO N 115JB OF THE I.T. ACT AT ` 9 28 523/- AFTER CLAIMING DEDUCTION UNDER SECTION 8 0HHC AT ` 27 12 434/- AND DEDUCTION UNDER SECTION 80IB AT ` 11 53 613/-. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMP LETED BY THE A.O. ON 25.07.2003 DETERMINING THE INCOME OF THE ASSESSEE A T ` 11 32 520/-. THE A.O. WHILE FRAMING ASSESSMENT DISALLOWED ON AD H OC BASIS MOTOR CAR EXPENSES AND DEPRECIATION AS CLAIMED BY THE ASSESSE E. THE A.O. DURING THE ASSESSMENT PROCEEDINGS ALSO RAISED A SPECIFIC QUERY ABOUT THE COMPUTATION UNDER SECTION 80HHC AND 80IA/IB OF THE ACT. AFTER E XAMINING BOTH THE CLAIMS THE A.O. RECOMPUTED DEDUCTION UNDER SECTION 80HHC AND 80IA OF THE ACT AND RESTRICTED THE SAME TO ` 20 08 991/- AND ` 8 78 732/- RESPECTIVELY. THE MATTER WAS CARRIED IN APPEAL BY T HE ASSESSEE BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE ASSESSEE AS WELL AS THE REVENUE CARRIED THE MATTER IN FURTHER A PPEAL BEFORE THE HON'BLE ITAT. THE HON'BLE ITAT IN ITA NO. 2937/MUM/2004 AND ITA NOS. 1914 & 1915/MUM/2004 VIDE ITS ORDERS DATED 26.04.2006 AND 22.12.2006 RESTORED THE MATTER BACK TO THE FILE OF THE A.O. WI TH A DIRECTION TO DECIDE THE MATTER DE NOVO IN BOTH THE APPEALS. PENDING THE APP EAL BEFORE THE TRIBUNAL THE A.O. ISSUED NOTICE UNDER SECTION 154 DATED 17.1 1.2004 BASED ON REVENUE AUDIT OBJECTION PROPOSING TO RECTIFY THE O RDER PASSED UNDER SECTION 143(3) OF THE ACT STATING THAT THE ASSESSEE HAD CLA IMED EXCESS DEDUCTION UNDER SECTION 80HHC AND 80IA OF THE ACT. THE ASSESS EE FILED REPLIES ON 02.12.2004 AND 24.12.2004 CHALLENGING THE JURISDICT ION OF THE A.O. IN ISSUING THE NOTICE UNDER SECTION 154 AS WELL AS THE MERITS OF THE ISSUE AS RAISED IN THE AUDIT OBJECTION. NO FORMAL ORDER WAS PASSED. PENDING THE RECTIFICATION APPLICATION AND TRIBUNAL APPEAL ON 1 3.09.2005 THE A.O. ISSUED NOTICE UNDER SECTION 148 OF THE ACT PROPOSING TO RE OPEN THE ASSESSMENT FOR A.Y. 2001-02 PRESUMABLY ON THE VERY SAME AUDIT OBJ ECTION. ACCORDINGLY THE ASSESSEE VIDE LETTER DATED 28.10.2005 REQUESTED THE A.O. TO FURNISH THE REASONS RECORDED FOR REOPENING THE ASSESSMENT AND A LSO OBJECTED TO THE PROPOSED REOPENING. ON 14.11.2006 ALONGWITH THE NO TICE UNDER SECTION ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 3 143(2) OF THE ACT THE A.O. SUPPLIED THE ASSESSEE RE ASONS RECORDED BY HIM FOR REOPENING THE ASSESSMENT. IN THE LETTER SENT TO THE ASSESSEE IN RESPONSE TO ITS OBJECTION TO THE REOPENING PROCEEDINGS THE A.O. STATED THE REASONS RECORDED FOR REOPENING OF ASSESSMENT ARE BASED ON I NFORMATION AVAILABLE ON RECORD. HE INTIMATED THE REASONS FOR REOPENING BUT THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME IN RESPONSE. THEREAFTER ON 30.11.2006 THE A.O. PASSED ORDER UNDER SECTION 143(3) R.W.S. 147 OF THE ACT REDUCED THE AMOUNT RECEIVED BY THE ASSESSEE ON SALE OF DUTY ENTITLEMEN T PASSBOOK (DEPB) AS ACCORDING TO HIM THE AMOUNT RECEIVED ON SALE OF DE PB LICENSE WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE AC T. THE A.O. FURTHER REDUCED THE AMOUNT OF DEDUCTION UNDER 80IA OF THE A CT WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. ACCORDING LY THE A.O. RECOMPUTED DEDUCTION UNDER SECTION 80HHC AND 80IA OF THE ACT A ND RESTRICTED THE SAME TO RS.21 93 264/- AND ` 8 64 953/- RESPECTIVELY. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) CHALLENGING THE REASSESSME NT PROCEEDINGS AND ALSO THE MERITS OF THE ADDITION MADE BY THE A.O. THE ASS ESSEE CHALLENGED THE ASSESSMENT PROCEEDINGS ON FOLLOWING COUNTS: (A) THE REASSESSMENT WAS BASED MERELY ON AN AUDIT OBJECTION AS SUCH THE SAME WAS BAD IN LAW AS IT AMOUNTED TO A MERE CHANGE OF OPINION; (B) NECESSARY SANCTION OF THE AUTHORITIES MENTIONED IN SECTION 151(1) OF THE ACT WAS NOT OBTAINED PRIOR TO ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT; (C) N O OPPORTUNITY MUCH LESS ANY HEARING WAS GIVEN TO THE ASSESSEE BY THE A.O. AFTER THE NOTICE UNDER SECTION 143(2) ALONGWITH THE REASONS FOR REOPENING WERE PROVIDED TO THE ASSESSEE ON 14.11.2006; (D) THE APPEALS OF THE ASSE SSEE AS WELL AS REVENUE CHALLENGING THE ASSESSMENT ORDER ON RECOMPUTING THE DEDUCTIONS UNDER SECTION 80HHC AND 80IA FOR THE YEAR UNDER CONSIDERA TION WERE PENDING BEFORE THE TRIBUNAL; AND (E) APART FROM THIS THE AS SESSEE BROUGHT TO THE NOTICE OF THE CIT(A) THAT THE 154 PROCEEDINGS INITI ATED BY THE A.O. ON THE BASIS OF THE AUDIT OBJECTION ON THE VERY SAME ISSUE FOR WHICH NO ORDER WAS PASSED BY THE A.O. 5. CIT(A) HAS REJECTED THE CONTENTIONS ON JURISDICTION AND GAVE RELIEF ON DEPRECIATION ON MOTOR CAR AND CONFIRMED THE OTHER D ISALLOWANCES ON WORKING OF 80IB/80HHC. ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 4 6. THE FACTS IN A.Y. 2002-03 AND A.Y. 2003-04 ARE DIFF ERENT IN AS MUCH AS THERE WAS NO ASSESSMENT UNDER SECTION 143(3) AND THE ASSESSMENT WAS DONE FOR THE FIRST TIME AFTER REOPENING UNDER SECTI ON 148. THE CIT(A) HOWEVER REFERRED TO THE FACT IN A.Y. 2001-02 IN TH ESE YEARS ALSO IN HIS SIMILAR ORDER PASSED FOR EACH OF THE YEAR BUT HOWEV ER REJECTED THE ISSUE ON JURISDICTION AS THE A.O. REOPENED THE ASSESSMENT WI THIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR THEREFORE MANY OF THE LEGAL CONTENTIONS ARE NOT APPLICABLE. 7. ISSUE OF JURISDICTION TO REOPEN THE SAME UNDER SECT ION 148 7.1 THE LEARNED COUNSEL PLACED HIS ARGUMENTS WHICH ARE SIMILAR FOR ALL THE YEARS AND HIS ARGUMENTS AND CASE LAW RELIED UPO N CAN BE SUMMARISED AS UNDER: - (A) REOPENING OF ASSESSMENT UNDER SECTION 147 IS NO T VALID WHEN THE NOTICE UNDER SECTION 154 WAS ISSUED AND PROCEEDINGS WERE PENDING. I. CIT VS. EID PARRY LTD. 216 ITR 289 (MAD.) II. BERGER PAINT INDIA LTD. VS. ACIT & ORS. 322 ITR 369 (CAL) III. JETHALAL K. MORBIA VS. ACIT 109 TTJ (MUM) 1 (B) REOPENING OF ASSESSMENT ON THE BASIS OF OBJE CTION WAS BAD IN LAW. I. INDIAN & EASTERN EXPRESS SOCIETY VS. CIT 199 ITR 996 (SC) II. IL&FS INVESTMENT MANAGERS LTD. VS. ITO 298 ITR 32 (BOM) III. CIT VS. SANT RAM MANGAT RAM 312 ITR 100 (P&H) IV. CIT VS. INDIAN SUGAR & GENERAL INDUSTRY EXPORT IMPORT CORPORATION LTD. 8 DTR (DEL) 112 V. CHIEF CIT VS. KANHAIYALAL KAPOOR & SONS 147 TAXM AN 12 (ALL) VI. CIT VS. METTUR CHEMICAL & INDUSTRIAL CORPORATIO N 242 ITR 119 (MAD.) VII. ADANI EXPORTS VS. CIT 240 ITR 224 (GUJ) VIII. BALAJI MOTORS P. LTD. VS. DCIT 91 TTJ (LUCK) 604 IX. ITO VS. ESSENTIAL MOTTO 17 DTR (CHD) 281 ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 5 (C) WHEN THERE IS NO FAILURE ON THE PART OF THE ASS ESSEE THE REOPENING IS BAD IN LAW IN THE ABSENCE OF FRESH INFORMATION EV EN WITHIN 4 YEAR PERIOD: I. PRASHANT JOSHI VS. ITO 324 ITR 154 (BOM) II. BAPALAL & CO. VS. JCIT 289 ITR 37 (MAD) III. CIT VS. MANOHARLAL GUPTA 213 CTR (RAJ) 193 IV. AIPTA MARKETING P. LTD. VS. ITO 121 SOT 302 (MU M) V. PIROJSHA GODREJ FOUNDATION VS. ADIT (EXMPTION) 1 33 TTJ (MUM) 194 VI. RAJGARH LIQUORS VS CIT 89 ITD 84 (IND) (D) REOPENING UNDER SECTION 147 IS BAD IN LAW WHEN SIMILAR/SAME ISSUE WAS PENDING BEFORE APPELLATE AUTHORITY (IN THIS CAS E ITAT) I. ADOR TECHNOPACK LTD. VS. DCIT 271 ITR 50 (BOM) II. METRO AUTO CORPORATION VS. ITO 286 ITR 618 (BOM ) THE LEARNED COUNSEL ALSO RAISED OBJECTION THAT THE NECESSARY ADMINISTRATIVE APPROVAL UNDER SECTION 151 WAS NOT OBTAINED AND REL IED ON VARIOUS CASES WHEREAS THE LEARNED D.R. PLACED ON RECORD THE COPIE S OF ADMINISTRATIVE APPROVAL WHICH WAS ALSO FURNISHED TO THE LEARNED CO UNSEL. HENCE THESE OBJECTIONS ARE NOT MAINTAINABLE. 7.2 THE LEARNED D.R. HOWEVER DISTINGUISHED THE FA CTS FOR A.Y. 2002-03 AND 2003-04 TO A.Y. 2001-02 AND SUBMITTED THAT IN T HESE YEARS SINCE ONLY 143(1) WAS DONE AND NO ASSESSMENT WAS DONE ORIGINAL LY THE REOPENING IS PROPER AND RELIED ON THE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500. FOR A.Y. 2001-02 HIS SUBMISSION WAS THAT THIS YEAR THE A.O. HAS CONSIDERED THE ISSUES OF: (I) DISALLOWANCE OF DEDUCTION UNDER SECTION 80IB ON DEPB PROFITS. THIS ISSUE WAS CONSIDERED BY THE ITAT ORDER AND SO NOT PART OF THE DISPUTE. CONSEQUENCE TO THE DISALLOWANCE ON 80IB ON DEPB PRO FIT THE 80IB DEDUCTION WAS RESTRICTED SO THE ISSUE HAS TO BE CON CLUDED AGAINST THE ASSESSEE; ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 6 (II) DISALLOWANCE ON 80HHC CLAIM THIS ISSUE WAS R ESTORED BY THE ITAT TO EXAMINE AS PER THE AMENDED PROVISIONS AND THE A.O. ALLOWED THE CLAIM ON EXAMINATION AS PER THE ITAT DIRECTIONS AND (III) RESTRICTION OF DEDUCTION UNDER SECTION 80HHC INVOKING 80IA(A) TO THE EXTENT OF PROFITS ALLOWED UNDER SECTION 80IB . THIS ISSUE IS COMMON IN ALL YEARS. REFERRING TO THE REASONS RECORDED IT WAS THE SUBMIS SION OF THE LEARNED D.R. THAT THE SUBJECT MATTER OF APPEAL BEFORE THE ITAT W AS DEDUCTION UNDER SECTION 80IB AND 80HHC IN TOTO ON DEPB ISSUES AND I NVOKING 80IA(9) WHICH WAS DONE FOR THE FIRST TIME IN REOPENED ASSESSMENT WAS WITH IN THE LAW. WITH REFERENCE TO THE OBJECTION OF THE ASSESSEE ON INITI ATION OF 154 PROCEEDINGS AND SUBSEQUENT REOPENING THE LEARNED D.R. SUBMITTE D THAT THE ASSESSEE OBJECTED TO THE PROCEEDINGS UNDER SECTION 154 AND S O THE SAME COULD NOT BE PROCEEDED WITH AND THE A.O. HAS NOT FORMED ANY OPIN ION AS NO ORDERS WERE PASSED AND PROCEEDINGS WERE DEEMED TO HAVE BEEN DRO PPED. IT WAS HIS SUBMISSION THAT THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF EID PARRY LTD. (SUPRA) DOES NOT APPLY AS THAT W AS A CASE OF INITIATING 154 PROCEEDINGS AFTER REOPENING UNDER SECTION 147 ON TH E SAME ISSUE. WITH REFERENCE TO THE REOPENING ON THE BASIS OF AUDIT OB JECTION IT WAS HIS SUBMISSION THAT THE A.O. HAS NOT RECORDED IN THE RE ASON THAT THE AUDIT OBJECTION IS THE BASIS FOR FORMING OPINION AND STAT ES THAT THE AUDIT OBJECTION CAN BE A STARTING POINT FOR FORMING THE OPINION AND RELIED ON THE HON'BLE SUPREME COURT DECISION IN THE CASE OF PVS BEEDIES ( P) LTD. 237 ITR 13. IT WAS ALSO HIS CONTENTION THAT THE ASSESSEE HAS NOT F ILED ANY RETURN IN RESPONSE TO NOTICE UNDER SECTION 148 AND SO IT CAN NOT RAISE OBJECTIONS ON TECHNICALITIES NOW AS IT HAS NOT FOLLOWED THE GUIDE LINES ISSUED BY THE HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA ) LTD. VS. ITO 259 ITR 19. IT WAS ALSO HIS FURTHER SUBMISSION THAT THE A.O . HAS NOT FORMED ANY OPINION ON INVOKING 80IA IN SCRUTINY UNDER SECTION 143(3) SO THERE IS NO QUESTION OF CHANGE OF OPINION IN THE REASSESSMENT P ROCEEDINGS. HE RELIED ON THE JUDGEMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF PRAFUL C. PATEL VS. ACIT 236 ITR 832. ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 7 7.3 LEARNED COUNSEL IN REPLY SUBMITTED THAT THE SUB JECT MATTER OF APPEAL BEFORE THE ITAT WAS ALLOWANCE UNDER SECTION 80HHC A ND SO THE PROCEEDINGS INITIATED FOR A.Y. 2001-02 WHEN THE MATTER WAS PEND ING IN APPEAL WAS BAD IN LAW. FURTHER IT WAS SUBMITTED THAT THE A.O. COUL D NOT HAVE HAD ANY INDEPENDENT MIND WITHOUT THE BASIS OF AUDIT OBJECTI ON AND SO REOPENING ON THE BASIS OF AUDIT OBJECTION IS NOT CORRECT. HE REL IED ON THE CASE OF ASIAN PAINTS VS. DCIT 308 ITR 195 (BOM) FOR REOPENING WIT HIN 4 YEARS IN THE ABSENCE OF FAILURE ON THE PART OF THE ASSESSEE. 7.4 WE HAVE CONSIDERED THE ISSUE AND ARGUMEN TS OF THE RIVAL PARTIES. AS STATED EARLIER THE FACTS IN A.Y. 2001-02 ARE DIFFER ENT FROM A.Y. 2002-03 AND A.Y. 2003-04. AS FAR AS A.Y. 2001-02 IS CONCERNED THE APPEALS WERE PENDING WHEN THE NOTICE FOR REOPENING WAS ISSUED. MANY OF T HE ARGUMENTS OF THE ASSESSEE ON REOPENING CANNOT BE ACCEPTED AS THE FAC TS ARE DIFFERENT IN EACH CASE AND LEGAL PROPOSITIONS CAN BE APPLIED WHEN THE FACTS ARE SIMILAR. AS FAR AS THE SATISFACTION RECORDED BY THE A.O. IS CONCERN ED THE SAME DOES SEEM TO BE ON THE BASIS OF AUDIT OBJECTION EVENTHOUGH THE A .O. DID NOT STATE THE SAME IN THE REASONS RECORDED. THAT MAY BE STARTING POINT. AS FAR AS THE AUMENTMENT OF SIMULTANEOUS PROCEEDINGS UNDER SECTIO N 154 AND 147 THE LEGAL OPINION ON THAT ISSUE IS ALSO AT VARIANCE. IN THE CASE OF EID PARRY LTD. THE HON'BLE MADRAS HIGH COURT HELD THAT AFTER THE I NITIATION OF RECTIFICATION PROCEEDINGS UNDER SECTION 154 THE A.O. DOES NOT HAV E JURISDICTION TO REOPEN THE SAME AND PASS AN ORDER UNDER SECTION 147 WHERE AS IN THE CASE CIT VS. INDIA SEA FOODS ITA 128 OF 2010 DT17-01-2011 THE H ON'BLE KERALA HIGH COURT HAS CONSIDERED AND HELD THAT EVEN AN ASSESSME NT HAPPENS TO BE AN UNDER ASSESSMENT OR A MISTAKE IN ORDER THE COURSE OPEN TO THE A.O. IS EITHER TO RECTIFY THE MISTAKE UNDER SECTION 154 OR TO MAKE REASSESSMENT UNDER SECTION 147. IT FURTHER CONSIDERED THAT WHILE IT IS CORRECT AS HELD IN CIT VS. EID PARRY LTD. 216 ITR 289 (MAD.) THAT THE A.O. HAS TO CHOOSE BETWEEN THE TWO AND CAN NOT INITIATE BOTH THE PROCEEDINGS A T THE SAME TIME THE PRINCIPLE OF CONSTRUCTIVE RESJUDICATA MADE APPLICAB LE BY THE HON'BLE MADRAS HIGH COURT THAT THE A.O. HAVING INITIATED RECTIFICA TION PROCEEDINGS UNDER SECTION 154 SHOULD STICK TO THE SAME ONLY AND CANNO T DROP THAT AND PROCEED UNDER SECTION 147 IS NOT ACCEPTABLE. THE FACT THAT THE A.O. INVOKED SECTION 154 ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 8 AND DROPPED IT DOES NOT AFFECT THE VALIDITY OF THE REASSESSMENT UNDER SECTION 147. THIS IS NOT A SIMPLE COMPUTATIONAL ERROR WHICH COUL D BE RECTIFIED U/S 154 AND NOT UNDER PROCEEDINGS U/S 147 AS HELD BY TH E HONBLE BOMBAY HIGH COURT. THE ISSUE INVOLVED INTERPRETATION OF LA W. IN THE PRESENT CASE THE A.O. PROPOSED THE MODIFICATION UNDER SECTION 154 IN RECTIFYING THE DEDUCTION UNDER SECTION 80HHC INVOKING SECTION 80IA(9) AND TH E ASSESSEE OBJECTED TO THE SAME AS A DISPUTABLE POINT. ON THAT BASIS THE PROCEEDINGS ARE NOT CONTINUED. WE DO NOT SEE ANY REASON TO HOLD THAT TH E A.O. HAS DECIDED OR FORMED AN OPINION TO RECTIFY UNDER SECTION 154 AND HE WAS PREVENTED IN REOPENING UNDER SECTION 147. 7.5 ONLY RELEVANT ARGUMENT WHICH CAN BE AC CEPTED IS THAT THE ISSUE OF DEDUCTION UNDER SECTION 80HHC WAS SUBJECT MATTER OF APPEAL AND SO THE A.O. IS NOT CORRECT IN REOPENING THE ASSESSMENT WHE N THE MATTER WAS PENDING WITH THE ITAT. THE LEGAL PROPOSITIONS RELIE D ON DO ESTABLISH THAT WHEN THE MATTER IS PENDING IN APPEAL AND NOT CONCLU DED THE A.O. CANNOT EXERCISE THE JURISDICTION TO REOPEN THE ASSESSMENT. ON THAT REASON WE ARE OF THE OPINION THAT THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 FOR A.Y. 2001-02 ARE BAD IN LAW. 7.6 HAVING ARRIVED AT THAT CONCLUSION IT IS NOTICED THAT THE A.O. PASSED ORDER NOT ONLY ON THE REOPENED ISSUES BUT AL SO ON THE ISSUES RESTORED BY THE ITAT. THIS WAS A COMMON ORDER THEREFORE TO THE EXTENT OF ISSUES REOPENED UNDER SECTION 147 THE ORDER IS TO BE HELD BAD IN LAW. THE COMPUTATION OF DEDUCTION UNDER SECTION 80HHC IS ALS O ONE OF THE ISSUES AS STATED BY THE REVENUE BEFORE THE ITAT. THE ISSUE CO NTESTED BEFORE THE ITAT WAS WHETHER THE PROFIT ON SOME DEPB LICENCE IS COVE RED UNDER CLAUSE 3 OF SECTION 28 OF THE ACT FOR THE PURPOSE OF COMPUTATIO N OF DEDUCTION UNDER SECTION 80HHC AND ALSO HAS TO BE INCLUDED FOR THE P URPOSE OF TOTAL TURNOVER. WHEN THE REVENUE RAISED THIS GROUND THE ITAT VIDE I TS ORDER IN ITA NO. 2097/MUM/2004 DATED 26 TH MAY 2006 HAS RESTORED THE COMPUTATION UNDER SECTION 80HHC BACK TO THE FILE OF THE A.O. TO BE DE CIDE AFRESH. THE OPERATIVE PART OF THE ITAT ORDER IS AS UNDER: - ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 9 DURING THE COURSE OF HEARING IT IS AGREED BY BOTH THE PARTIES THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE A .O. TO BE DECIDED AFRESH IN VIEW OF THE RETROSPECTIVE AMENDMENT MADE WITH REFERENCE TO THE PROVISIONS OF SECTION 80HHC BY WAY OF TAXATION AMENDMENT ACT 2005: THEREFORE WE ARE OF THE OPINION THAT COMPUTATION O F 80HHC HAS TO BE EXAMINED AFRESH BY THE A.O CONSEQUENT TO THE DIRECT ION OF ITAT. IN OUR OPINION THERE WAS NO NEED TO RESORT TO PROVISIONS O F SECTION 147 WHEN THE ISSUE WAS PENDING BEFORE THE APPELLATE FORUM AND AC CORDINGLY THE PROCEEDINGS INITIATED UNDER SECTION 147 TO THE EXTE NT OF ISSUES INVOLVED IN APPEAL ARE CONSIDERED BAD IN LAW. 8. IN A.Y. 2002-03 AND 2003-04 THE ISSUE IS WHETHE R REOPENING UNDER SECTION 147 IS PERMISSIBLE WHEN THERE WAS NO ORDER OF 143(3) AND ONLY INTIMATION UNDER SECTION 143(1) WAS DONE. AS HELD B Y THE HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P . LTD. 291 ITR 500 THE REOPENING FOR A.Y. 2002-03 AND 2003-04 WHERE THE R ETURN WAS PROCESSED ONLY UNDER SECTION 143(1) ARE TO BE HELD VALID AS T HERE WAS NO OPINION FORMED AT THE STAGE OF INTIMATION AND THE SAME WAS NOT AN ASSESSMENT. THE LEARNED COUNSEL RELIED ON THE ORDER OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PRASHANT S. JOSHI IN WRIT PETITION NO. 2287 OF 2009 DATED 22.02.2010 TO QUESTION THE REOPENING EVEN IN ORDER OF PROCEEDI NGS UNDER SECTION 143(1). THE HON'BLE HIGH COURT HOWEVER DISCUSSED THE ISSUE IN PARA 16 AS UNDER: 16. COUNSEL FOR THE REVENUE SUBMITTED BEFORE THE C OURT THAT IN THE PRESENT CASE NO ASSESSMENT HAS TAKEN PLACE AND AT THE STAGE OF SECTION 143(1) THERE IS ONLY AN INTIMATION. RELIAN CE IS SOUGHT TO BE PLACED ON THE JUDGMENT OF THE SUPREME COURT IN ASSISTANT COMMISSIONER OF INCOME TAX V/S RAJESH JHAVERI STOCK BROKERS P. LTD. (2007) 291 ITR 500(S.C.). THE JUDGMENT OF THE SUPRE ME COURT IN RAJESH JHAVERI HAS NOTICED THE DIFFERENCE BETWEEN THE EXPRESSION INTIMATION AND ASSESSMENT AND THE SUPREME COURT HELD THAT IN THE SCHEME OF THINGS AN INTIMATION UNDER SECTION 143(1) (A) THE QUESTION OF A CHANGE OF OPINION AS CONTENDED DID NOT ARISE. THE JUDGMENT OF THE SUPREME COURT ALSO EMPHASISES WHAT IS MEANT BY THE EXPRESSION REASON TO BELIEVE AND THE NATURE OF THE BELIEF TH AT IS TO BE FORMED BY THE ASSESSING OFFICER THAT THE INCOME FOR ANY ASSES SMENT YEAR HAS ESCAPED ASSESSMENT. THE SUPREME COURT HELD THAT AT THE STAGE OF THE ISSUANCE OF A NOTICE UNDER SECTION 148 THE ASSESSI NG OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSE SSMENT AND AT ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 10 THAT STAGE AN ESTABLISHED FACT THAT INCOME HAS ESCA PED ASSESSMENT IS NOT REQUIRE. THE SUPREME COURT HELD THUS: - SECTION 147 AUTHORISES AND PERMITS THE ASSESSING O FFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEV E THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD R EASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATI ON. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCO ME HAD ESCAPED ASSESSMENT IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOM E HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSIN G OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSIO N .. AT THAT STAGE THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS AT THE INITIATION STAGE WHAT IS REQUIRED IS REASON TO BELIEVE BUT NOT ES TABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE THE ONLY Q UESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COUL D HAVE FORMED A REQUISITE BELIEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PR OVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STATE. THIS IS SO BECAUSE THE FORMA TION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACT ION. THE SUPREME COURT HELD THAT SO LONG AS THE INGREDIE NTS OF SECTION 147 ARE FULFILLED THE ASSESSING OFFICER IS FREE TO INI TIATE PROCEEDINGS UNDER SECTION 147 AND FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER HIM POWERLESS TO INITIATE REASSESSMENT PROCE EDINGS EVEN WHEN AN INTIMATION UNDER SECTION 143(1) HAD BEEN IS SUED. IN OTHER WORDS WHEN AN INTIMATION HAS BEEN ISSUED UNDER SEC TION 143(1) THE ASSESSING OFFICER IS COMPETENT TO INITIATE REASSESS MENT PROCEEDINGS PROVIDED THAT THE REQUIREMENTS OF SECTION 147 ARE F ULFILLED. IN SUCH A CASE AS WELL THE TOUCHSTONE TO BE APPLIED IS AS TO WHETHER THERE WAS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T. THE TOUCH STONE TO BE APPLIED IS AS TO WHETHER THER E WAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. ON THIS ISSUE T HERE IS NO DOUBT THAT A.O. HAS FORMED AN OPINION ON THE BASIS OF THE LEGA L OPINION THEN EXISTING THAT THERE WAS REASON TO BELIEVE. THE LEARNED COUNS EL QUESTIONED THE REASONING ONLY ON THE ISSUE THAT THE BASIS WAS AUDI T REPORT OBJECTION BUT THE BELIEF FORMED BY THE A.O. WAS NOT QUESTIONED. THE A .O. HAS CONSIDERED THREE ISSUES FOR FORMING THE BELIEF. ONE OF THE ISSUES IS DENIAL OF DEDUCTION UNDER SECTION 80IB ON DEPB PROFITS. THE ISSUE IS CONCLUDE D AGAINST THE ASSESSEE NOT ONLY BY THE ITAT IN THEIR OWN CASE FOR A.Y. 200 1-02 AND EARLIER YEARS BUT ALSO BY THE HON'BLE SUPREME COURT IN THE CASE OF LI BERTY INDIA VS. CIT 317 ITR 218. THEREFORE IT CANNOT BE STATED THAT THE A.O . HAS NO REASON TO BELIEVE THAT INCOME ESCAPED ASSESSMENT IN THESE YEARS. THER EFORE THE REOPENING U/S 147 IN THESE ASSESSMENT YEARS IS TO BE UPHELD. THE GROUND NO. 1 FOR A.Y. 2001-02 ON THIS ISSUE AND ADDITIONAL GROUND AR E PARTLY ALLOWED. GROUND NO. 1 FOR A.Y. 2002-03 AND 2003-04 ARE REJECTED. ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 11 ISSUE OF DEDUCTION UNDER SECTION 80IB ON SAL E PROCEEDS OF DEPB: 9.1 THE ASSESSEE RAISED GROUND NO. 2 ELABORATELY O N THIS ISSUE. HOWEVER WE NOTICE THAT THE ISSUE WAS CONCLUDED BY THE ITAT IN ITA NO. 1914 & 1915/MUM/2004 DATED 22.12.2006 AT PARA 12 HOLDING A S UNDER: - 12. WE HAVE CONSIDERED THE SUBMISSION MADE BY BOTH SIDES MATERIAL ON RECORD AND ORDERS OF THE AUTHORITIES BE LOW. AS FAR AS THE NATURE OF DUTY DRAW BACK AND DEPB LICENCES IS CONCE RNED THOUGH BOTH ARE GIVEN TO THE ASSESSEE TO COMPENSATE THEM A GAINST THE DUTY (EXCISE AND CUSTOMS) PAID BY THEM ON IMPORT OR IN T HE COURSE OF MANUFACTURING. HOWEVER BOTH ARE NOT IDENTICAL AND THE SAME FOR THE REASON THAT DUTY DRAW BACK ENTITLEMENT IS GIVEN TO THE PERSON SPECIFICALLY AND IS NON-TRANSFERABLE WHEREAS DEPB L ICENCES IS TRANSFERABLE SUBJECT TO THE CONDITIONS OF IMPORT EX PORT POLICY ANNOUNCED BY THE GOVERNMENT OF INDIA HENCE PROFIT ON SALE OF DPB LICENCES CANNOT BE SAID TO HAVE BEEN DERIVED FROM T HE INDUSTRIAL UNDERTAKING BECAUSE IT IS EARNED BY SELLING THE DEP B ENTITLEMENT IN THE OPEN MARKET AND SUCH ACTIVITY CANNOT BE TERMED AN ACTIVITY OF INDUSTRIAL UNDERTAKING. AT THE MOST THIS CAN BE IN CIDENTAL BUSINESS ACTIVITY OF THE ASSESSEE. FURTHER DUTY DRAW BACK R EFUND IS OF THE NATURE OF THE AMOUNT EARLIER SPENT HENCE THE SAME CANNOT BE GIVEN DIFFERENTIAL TREATMENT AT TWO DIFFERENT POINT OF TI MES. THEREFORE IN ALL SITUATIONS IN OUR OPINION DUTY DRAW BACK REFUND W OULD BE ELIGIBLE FOR DEDUCTION UNDER ALL RESPECTIVE SECTIONS. NOW WE HA VE TO CONSIDER THE OTHER CONTENTION OF THE ASSESSEE THAT PROVISIONS OF SECTION 80IB WERE WIDER SCOPE. THE PROVISIONS OF SECTION 80IB(1) DEFI NES THE ELIGIBLE BUSINESS REFERRED TO SUB-SECTION 3 TO 11 OF THAT SE CTION HENCE ACTUAL DETERMINATION OF ELIGIBLE PROFITS IS REQUIRED TO BE DONE AS PER THE COMBINED EFFECT OF SUB-SECTION 80IB(1) R.W. SPECIFI C SUB-SECTION AS APPLICABLE TO THE CONCERNED ASSESSEE. THIS IS PARTI CULARLY IMPORTANT IN VIEW OF DIFFERENT LANGUAGE BEING USED IN DIFFERENT SUB-SECTIONS BY THE LEGISLATIVE. FOR EXAMPLE IN SUB-SECTION 3 4 5& 6 THE LEGISLATURE HAS USED PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING WHEREAS IN OTHER SUB-SECTION 7 TO 11 THE REFERENCE IS OF PROFITS AND GAINS DERIVED FROM THE BUSINESS OF THE NATURE OF SP ECIFIED THEREIN. USE OF SUCH DIFFERENT LANGUAGE IN DIFFERENT SUB-SEC TIONS IN OUR CONSIDERED VIEW LEAD TO AN OBVIOUS CONCLUSION THAT WHERE THE LEGISLATURE HAS INTENDED TO GIVE A WIDER MEANING TO THE PROVISIONS THE TERM ANY BUSINESS HAS BEEN USED AND WHERE IT I S NOT SO TERM PROFITS AND GAINS DERIVED BY AN INDUSIAL UNDERTAK ING HAS BEEN USED. ADMITTEDLY THE ASSESSEES CASE WOULD FALL SU B-SECTION 3/4/5 OF SECTION 80IB HENCE THE RATIO OF THE DECISION G IVEN IN THE CONTEXT OF SECTION 80HH 80HHA 80I AND 80J WOULD BE SQUARELY APPLICABLE. IN THIS VIEW OF THE MATTER WE ARE OF THE VIEW THAT PR OFIT ON SALE OF DEPB LICENCES WOULD NOT BE ELIGIBLE FOR DEDUCTION U/S. 8 0IB OF THE ACT. THUS WE HOLD THAT THE ORDER OF THE LEARNED CIT(A) IS IN ACCORDANCE WITH LAW. ACCORDINGLY THIS GROUND OF THE ASSESSEE STANDS REJECTED. ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 12 A.O. EVENTHOUGH NOT REMANDED AGAIN BY THE ITAT RE PEATED THE SAME STAND AS IN THE ORIGINAL ORDER AND THE CIT(A) BASED ON TH E FINDINGS OF THE ITAT IN ASSESSEES OWN CASE CONFIRMED THE SAME. THE ISSUE IS CONCLUDED BY THE ITAT IN THE ORIGINAL ASSESSMENT SO THERE IS NO NEE D TO RE-AGITATE OR RE- ADJUDICATE THE SAME AGAIN. MOREOVER THE ISSUE IS AL SO CONCLUDED BY THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT 317 ITR 218 WHEREIN IT WAS HELD AS UNDER: - CONTINUING OUR ANALYSIS OF SECTION 80-IA/80-IB IT MAY BE MENTIONED THAT SUB-SECTION (13) OF SECTION 80-IB PROVIDES FOR APPLICABILITY OF THE PROVISIONS OF SUB-SECTION (5) AND SUB-SECTIONS (7) TO (12) OF SECTION 80- IA SO FAR AS MAY BE APPLICABLE TO THE ELIGIBLE BU SINESS UNDER SECTION 80-IB. THEREFORE AT THE OUTSET WE STATED THAT ONE NEEDS TO READ SECTIONS 80-I 80-IA AND 80-IB AS HAVING A COMMON S CHEME. ON A PERUSAL OF SUB-SECTION (5) OF SECTION 80-IA IT IS NOTICED THAT IT PROVIDES FOR THE MANNER OF COMPUTATION OF PROFITS OF AN ELIG IBLE BUSINESS. ACCORDINGLY SUCH PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESS EE. THEREFORE THE DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFITS OF ELIGIBLE BUSINESS HAVE GOT TO BE REJECTED IN VIEW OF THE OVERRIDING P ROVISIONS OF SUB- SECTION (5) OF SECTION 80-IA WHICH ARE ALSO REQUIR ED TO BE READ INTO SECTION 80-IB. (SEE SECTION 80-IB(13)). WE MAY REI TERATE THAT SECTIONS 80-I 80-IA AND 80-IB HAVE A COMMON SCHEME AND IF S O READ IT IS CLEAR THAT THE SAID SECTIONS PROVIDE FOR INCENTIVES IN TH E FORM OF DEDUCTION(S) WHICH ARE LINKED TO PROFITS AND NOT TO INVESTMENT. ON AN ANALYSIS OF SECTIONS 80-IA AND 80-IB IT BECOMES CLE AR THAT ANY INDUSTRIAL UNDERTAKING WHICH BECOMES ELIGIBLE ON S ATISFYING SUB- SECTION (2) WOULD BE ENTITLED TO DEDUCTION UNDER S UB-SECTION (1) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH INDUSTRI AL UNDERTAKING AFTER SPECIFIED DATE(S). HENCE APART FROM ELIGIBILITY S UB-SECTION(1) PURPORTS TO RESTRICT THE QUANTUM OF DEDUCTION TO A SPECIFIED PERCENTAGE OF PROFITS. THIS IS THE IMPORTANCE OF THE WORDS DERIV ED FROM INDUSTRIAL UNDERTAKING AS AGAINST PROFITS ATTRIBUTABLE TO IN DUSTRIAL UNDERTAKING. IT HAS BEEN FURTHER HELD (PLACITUM 22 & 24 AT PAGE 235): THEREFORE WE ARE OF THE VIEW THAT THE DUTY DRAW BACK DEPB BENEFITS REBATES ETC. CANNOT BE CREDITED AGAINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PROFIT AND LOSS ACCOUNT FOR PURPOSES OF SECTION 80-IA/80-IB AS SUCH REMISSIONS (CREDITS) WOULD CONSTITUTE INDEPENDENT SOURCE OF INCOME BEYOND THE FIRST DEGREE NEXUS BETWEEN PROFITS AND THE INDUSTRIAL UNDERTAKIN G. IN THE CIRCUMSTANCES WE HOLD THAT DUTY DRAWBACK RE CEIPT/DEPB BENEFITS DO NOT FORM PART OF THE NET PROFITS OF ELI GIBLE INDUSTRIAL ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 13 UNDERTAKING FOR THE PURPOSES OF SECTION 80-I/80-IA/ 80-IB OF THE 1961 ACT. GROUND NO. 2 ON THIS ISSUE IN A.Y. 2001-02 IS THER EFORE REJECTED. 9.3 SIMILAR GROUNDS WERE RAISED IN OTHER YEAR S ON THE SAME ISSUE WHERE THE A.O. HAS DENIED DEDUCTION ON SALE PROCEEDS OF D EPB. RELYING ON THE ORDER IN ASSESSEES OWN CASE IN EARLIER YEAR AND FO R THE REASONS STATED IN EARLIER PARA THE GROUNDS ARE REJECTED. THE ORDER O F THE A.O. AND CIT(A) ON THIS IS UPHELD. 10. REGARDING GROUND NO. 3 THE A.O. ALLOWE D DEDUCTION UNDER SECTION 80HHC EVEN INCLUDING THE SALE PROCEEDS OF DEPB WHIC H WAS DISPUTED EARLIER IN A.Y. 2001-02 CONSEQUENT TO AMENDMENT BRO UGHT TO SECTION 80HHC. SO ALLOWANCE OF DEDUCTION UNDER SECTION 80HH C IS NOT A DISPUTE. WHAT IS DISPUTED IS THE QUANTUM OF PROFIT TO BE CON SIDERED FOR DEDUCTION. THE A.O. CONSIDERED PROVISIONS OF SECTION 80IA(9) A ND RESTRICTED THE PROFITS OF THE BUSINESS. THE ASSESSING OFFICERS WORKING WA S UPHELD BY THE CIT(A) AS THE OPINION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF HINDUSTAN MINT AND AGRO PRODUCTS P. LTD. 119 ITD 107 (DEL) WAS SAM E. SIMILAR OPINION WAS ALSO EXPRESSED BY THE HON'BLE DELHI HIGH COURT IN T HE CASE OF GREAT EASTERN EXPORTS VS. CIT ( ITA NO. 267 OF 2008) DATED 29.11. 2010 AS ALSO THE HON'BLE KERALA HIGH COURT IN THE CASE OF OLAM EXPORTS (INDI A) LTD. VS. CIT 184 TAXMAN 373. HOWEVER THE JURISDICTIONAL HIGH COURT IN THE CASE OF ASSOCIATED CAPSULES P. LTD. VS. DCIT IN ITA NO. 303 6 OF 2010 DATED 10.11.2011 HAS DIFFERED FROM THE ABOVE AND HELD AS UNDER: - 39. IN THE RESULT WE HOLD THAT SECTION 80IA(9) DO ES NOT AFFECT THE COMPUTABILITY OF DEDUCTION UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTER VI-A BUT IT AFFECTS THE ALLOWABILIT Y OF DEDUCTIONS COMPUTED UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTER VI- A SO THAT THE AGGREGATE DEDUCTION UNDER SECTION 80 IA AND OTHER PROVISIONS UNDER HEADING C OF CHAPTER VI-A DO NOT EXCEED 100% OF THE PROFITS OF THE BUSINESS OF THE ASSESSEE. OUR AB OVE VIEW IS ALSO SUPPORTED BY THE C.B.D.T. CIRCULAR NO. 772 DATED 23 -1-21998 WHEREIN IT IS STATED THAT SECTION 80IA(9) HAS BEEN INTRODUCED WITH A VIEW TO PREVENT THE TAX-PAYERS FROM CLAIMING REPEAT ED DEDUCTIONS IN RESPECT OF THE SAME AMOUNT OF ELIGIBLE PROFITS. THU S THE OBJECT OF SECTION 80IA(9) BEING NOT TO CURTAIL THE DEDUCTIONS COMPUTABLE UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTER IT IS REASONABLE TO HOLD THAT SECTION 80IA(9) AFFECTS ALLOWABILITY OF D EDUCTION AND NOT ITA NOS. 7261 7262 & 7263/MUM/2007 M/S. EXCEL BEARINGS P. LTD. 14 COMPUTATION OF DEDUCTION. TO ILLUSTRATE IF RS.100/ - IS THE PROFITS OF THE BUSINESS OF THE UNDERTAKING RS.30/- IS THE PROFIT ALLOWED AS DEDUCTION UNDER SECTION 80IA(1) AND THE DEDUCTION C OMPUTED AS PER SECTION 80HHC IS RS.80/- THEN IN VIEW OF SECTION 80IA(9) THE DEDUCTION UNDER SECTION 80HHC WOULD BE RESTRICTED T O RS.70/- SO THAT THE AGGREGATE DEDUCTION DOES NOT EXCEED THE PR OFITS OF THE BUSINESS. RESPECTFULLY FOLLOWING THE SAME THE A.O. IS DIRECT ED TO REWORK OUT THE DEDUCTION UNDER SECTION UNDER SECTION 80HHC ACCORDI NGLY AND IN NO CASE THE DEDUCTION SHOULD EXCEED THE PROFITS OF THE BUSI NESS. THE ISSUE TO THE EXTENT OF WORKING OUT THE DEDUCTION U/S 80HHC IS RE STORED TO THE FILE OF THE A.O. IN A.Y. 2001-02 2002-03 AND 2003-04. 11. IN THE RESULT APPEALS ARE PARTLY AL LOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 31 ST MARCH 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VI MUMBAI 4. THE CIT VI MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.