STRIDES ARCOLAB LTD, NAVI MUMBAI v. ITO 10(3)(4), MUMBAI

ITA 2061/MUM/2009 | 1999-2000
Pronouncement Date: 23-07-2010 | Result: Allowed

Appeal Details

RSA Number 206119914 RSA 2009
Assessee PAN AADCS8104P
Bench Mumbai
Appeal Number ITA 2061/MUM/2009
Duration Of Justice 1 year(s) 3 month(s) 21 day(s)
Appellant STRIDES ARCOLAB LTD, NAVI MUMBAI
Respondent ITO 10(3)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 23-07-2010
Date Of Final Hearing 14-05-2010
Next Hearing Date 14-05-2010
Assessment Year 1999-2000
Appeal Filed On 02-04-2009
Judgment Text
1 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI R S PADVEKAR JM & SHRI RAJENDRA SING H AM ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD 206 DEVARATA SECTOR 17 - VASHI NAVI MUMBAI 703 VS THE INCOME TAX OFFICER WARD 10(3)(4) MUMBAI (APPELLANT) (RESPONDENT) PAN AADCS8104P ASSESSEE BY: SHRI P J PARDI WALA/MR MADHUR AGARWAL REVENUE BY: SHRI AJAY KUMAR SRIVASTAVA O R D E R PER R S PADVEKAR: THESE ARE TWO APPEALS FILED BY THE ASSESSEE CHALLEN GING THE RESPECTIVE ORDERS OF THE LD CIT(A)-X MUMBAI FOR THE ASSESSMEN T YEARS 1998-99 AND 1999-00. IN THESE APPEALS THE FACTS AS WELL AS THE ISSUES ARE IDENTICAL; HENCE THESE APPEALS ARE DISPOSED OFF BY THIS COMMO N ORDER. 2 FIRST WE WILL TAKE UP THE APPEAL FOR AY 1998-99 AND THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS IN ITS APPEAL : 1. THE LD CIT(A)-X MUMBAI ERRED IN DISMISSING APPELL ANTS GROUND OF APPEAL THAT THE A.O. HAS GONE BEYOND THE SCOPE OF D IRECTIONS CONTAINED IN THE HONBLE TRIBUNALS ORDER DATED 24.2.2006 WHI LE MAKING HIS ORDER DATED 31.10.2006. 2 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD 2. WITHOUT PREJUDICE TO THE GROUND OF APPAL NO.1 IT I S SUBMITTED THAT THE CIT(A) ERRED IN DISMISSING THE APPELLANTS GROUND T HAT THE EXPORT SALE PROCEEDS ALTHOUGH HAVING BEEN BROUGHT INTO INDIA IN CONVERTIBLE FOREIGN EXCHANGE BEYOND THE PERIOD OF SIX MONTHS THE SAME OUGHT TO HAVE BEEN CONSIDERED AS EXPORT TURNOVER FOR THE PURPOSES OF COMPUTING AMOUNT DEDUCTIBLE U/S 80HHC OF THE I T ACT. 3. THE CIT(A) ERRED IN DISMISSING THE APPELLANT GROUN D BEFORE HIM THAT THERE WAS NO NET INTEREST INCOME INCLUDED IN THE P ROFITS & GAINS OF BUSINESS SO AS TO BE REDUCED FOR WORKING OUT PROFIT S OF THE BUSINESS FOR THE PURPOSES OF COMPUTING AMOUNT DEDUCTIBLE U/ 80HH C OF THE ACT. 4. THE CIT(A) ERRED IN NOT TAKING ON RECORD THE BREAKU P OF EXPORT INCENTIVES OF RS.9 92 20 418/- FILED BEFORE HIM AND CONSEQUENT LY APPLYING THE PROVISIONS OF SECTION 28(IIID) OF THE I T ACT TO TH E ENTIRE AMOUNT OF RS. 9 92 20 418/- 5. THE CIT(A) ERRED IN DIRECTING THE A.O. TO ALLOW PAY MENTS OF EMPLOYEES TOWARDS SHARE CONTRIBUTION TO PROVIDENT FUND MADE O NLY WITHIN THE GRACE PERIOD. 6. THE CIT(A) ERRED IN HOLDING THAT SECTION 234D IS A PROCEDURAL SECTION AND WILL HAVE APPLICATION TO THE YEAR UNDER APPEAL. 3. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS. AT THE TIME OF HEARING OF THESE APPEALS THE LD COUNSEL FOR THE ASSESSEE S UBMITTED THAT HE IS NOT PRESSING THE ADDITIONAL GROUNDS. 3.1 AS THE ADDITIONAL GROUNDS ARE NOT PRESSED HENC E THE APPLICATION FOR ADMISSION OF THE ADDITIONAL GROUNDS IS NOT CONSIDER ED. 3 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD 4 THE FIRST GRIEVANCE OF THE ASSESSEE IN THE APPEAL FOR AY 1998-99 GROUND 1 IS THAT THE A.O. TRAVELLED BEYOND THE DIRE CTIONS GIVEN BY THE TRIBUNAL IN ITS ORDER DATED 24.2.2006 WHILE PASSING THE ASSESSMENT ORDER WHICH IS THE SUBJECT MATTER OF THIS APPEAL DATED 30 .10.2006. 5 IN THIS APPEAL THE ORIGINAL ASSESSMENT WAS COMPL ETED U/S 143(3) ON 27.3.2001 DETERMINING THE TOTAL INCOME AT RS. 1 64 66 710/- AFTER ALLOWING DEDUCTION U/S 80HHC AT RS. 95 25 250/- AS AGAINST R S. 6 38 25 180/- CLAIMED BY THE ASSESSEE. THE ASSESSEE FILED AN APPE AL BEFORE THE LD CIT(A) AND THE LD CIT(A) HAD GIVEN RELIEF TO THE ASSESSEE . THE ASSESSEE AS WELL AS THE REVENUE CHALLENGED THE IMPUGNED ORDER OF THE LD CIT(A) BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 24.2 .2006 HAD SET ASIDE THE ENTIRE MATTER OF THE REVENUES APPEAL AS WELL AS T HE ASSESSEES APPEAL TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION. IN COMPL IANCE OF THE DIRECTIONS OF THE TRIBUNAL THE A.O. ISSUED FRESH NOTICE TO THE ASSES SEE AND PASSED FRESH ASSESSMENT ORDER U/S 143(3) R.W.S 254 OF THE ACT VI DE ORDER DATED 31.10.2006. WHILE PASSING FRESH ASSESSMENT ORDER AS PER THE A.O. PROFIT OF THE BUSINESS WAS WORKED OUT IN NEGATIVE FIGURE. HE THEREFORE DENIED THE ENTIRE CLAIM OF DEDUCTION U/S 80HHC TO THE ASSESSEE . THE ASSESSEE CHALLENGED THE ACTION OF THE A.O. BEFORE THE LD CIT (A) BY TAKING THE GRIEVANCE THAT THE A.O. EXCEEDS ITS JURISDICTION WHILE PASSIN G THE SECOND ASSESSMENT ORDER WHICH IS NOT AS PER THE DIRECTIONS GIVEN BY THE TRIBUNAL. THE LD CIT(A) WAS NOT IMPRESSED WITH THE PLEA OF THE ASSESSEE AND HE HELD THAT THE ORDER OF THE A.O. IS WELL WITHIN THE DIRECTIONS OF THE TR IBUNAL. NOW THE ASSESSEE IS IN APPEAL BEFORE US TAKING THE GRIEVANCE AGAINST TH E ORDER OF THE LD CIT(A) ON THIS ISSUE. 4 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD 6 THE LD COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT IN THE ORIGINAL ASSESSMENT ORDER THE A.O. HAS NOT EXCLUDED 90% OF THE INCENTIVE AND IT WAS NOT A SUBJECT MATTER OF BOTH THE PARTIES BEFORE THE TRIBUNAL. THE LD COUNSEL ALSO REFERRED TO THE PAGE 5 OF THE ASSESSMENT ORDER PASSED U/S 143(3) DATED 27.3.2001 AND SUBMITS THAT THE A.O. WORKED OUT 90% EXPORT INCENTIVE AT RS. 8 92 98 676/-. IT IS FURTHER ARGUED THAT THE TR IBUNAL SET ASIDE THE ISSUE TO THE FILE OF THE A.O. ONLY ON TWO POINTS I.E. (I) TO CONSIDER THE DECISION OF THE SUPREME COURT IN THE CASE OF IPCA LABORATORIES LTD (266 ITR 521) AND (II) AMENDMENT MADE TO SEC. 80HHC BY THE TAXATION LAWS ( AMENDMENT) ACT 2005; MORE PARTICULARLY IN THE CONTEXT OF INSERTION OF FIFTH PROVISO. HE THEREFORE PLEADED THAT THE ORDER OF THE TRIBUNAL I S TO BE INTERPRETED BY CONSIDERING THE GROUND TAKEN BY THE PARTIES AND THE FINDINGS AND DIRECTIONS ARE PRESUMED TO BE RELATED TO AND RESTRICTED TO THE ISSUE BEFORE THE TRIBUNAL. ALL THE DIRECTIONS OF THE TRIBUNAL ARE TO BE READ S TRICTLY WITH THE GROUNDS BEFORE IT. HE THEREFORE PLEADED THAT THE DEDUCTIO N WORKED OUT BY THE A.O. AT NIL MAY BE CANCELLED AND THE SAME MAY BE ALLOWED AS CLAIMED BY THE ASSESSEE. ON THE OTHER HAND THE LD DR SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. 7 WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO THE RI VAL SUBMISSIONS OF THE PARTIES. IN THE FIRST ROUND OF APPEAL ADMITTE DLY THE ISSUE OF QUANTUM DEDUCTION U/S 80HHC WAS BEFORE THE TRIBUNAL AND IT IS CLEAR FROM THE GROUNDS TAKEN BY THE REVENUE AS WELL AS THE ASSESSE E. THE TRIBUNAL SET ASIDE THE ISSUE OF DEDUCTION CLAIMED U/S 80HHC IN R ESPECT OF THE GROUNDS TAKEN BY THE REVENUE AS WELL AS THE ASSESSEE TO THE FILE OF THE A.O. WITH THE FOLLOWING DIRECTIONS: 5. THE ADDITIONAL GROUND OF APPEAL TAKEN BY THE DE PARTMENT IS A PURELY LEGAL GROUND OF APPEAL ARISING AS A RESULT OF THE D ECISION OF THE HONBLE SUPREME COURT IN IPCA LABORATORIES LTD VS DCIT 266 ITR 521 (SC). IT IS 5 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD THEREFORE ADMITTED. THE COMPUTATION OF RELIEF U/S 80HHC OF THE I T ACT REQUIRES TO BE CONSIDERED IN THE LIGHT OF THE DECIS ION OF THE SPECIAL BENCH OF THE TRIBUNAL IN B SORABJI VS ITO 95 ITD 540 (BOM )(SB) AND THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN ROHAN DYES & INTERMEDIATES P LTD 270 ITR 350 (BOM) AND OTHER REL EVANT DECISIONS IN THIS BEHALF AS ALSO THE AMENDMENTS RECENTLY MADE IN THE PROVISIONS OF SECTION 80HHC. IT IS THEREFORE CONSIDERED APPROPR IATE TO SET ASIDE THE ORDER OF THE DEPARTMENTAL AUTHORITIES AND RESTORE T HE ENTIRE MATTER FOR A FRESH ADJUDICATION TO THE FILE OF THE A.O. IN THE L IGHT OF THE RELEVANT DECISIONS AND AMENDED PROVISIONS OF SECTION 80HHC. WE ORDER ACCORDINGLY. 8 ON SIMILAR LINES THE TRIBUNAL ALSO SET ASIDE THE GROUND OF THE ASSESSEE TO THE FILE OF THE A.O. FOR FRESH ADJUDICA TION IN RESPECT OF THE ISSUE OF DEDUCTION U/S 80HHC. 9 WHEN THE A.O. PASSED THE ORDER GIVING EFFECT TO T HE ORDER OF THE TRIBUNAL IT IS SEEN THAT HE HAS TAKEN INTO CONSIDE RATION THE DECISION OF THE SUPREME COURT IN THE CASE OF IPCA LABORATORIES LTD VS DCIT 266 ITR 521 (SC) AS WELL AS THE AMENDMENT MADE TO SEC. 28 OF SE C. 80HHC BY TAXATION LAWS (AMENDMENT) ACT 2005. 10 ON THE PERUSAL OF THE ORDER OF THE TRIBUNAL IT IS SEEN THAT NO SPECIFIC DIRECTIONS ARE GIVEN BY THE TRIBUNAL. IN FACT AS PE R THE LANGUAGE IN THE DIRECTIONS THE ENTIRE ISSUE WAS KEPT OPEN AND THE SAME WAS REMANDED BACK TO THE FILE OF THE A.O. FOR AFRESH ADJUDICATION. W E ARE UNABLE TO ACCEPT THE PLEA OF THE ASSESSEE THAT WHILE PASSING THE SECOND ASSESSMENT ORDER THE A.O. TRAVELLED BEYOND THE DIRECTIONS OF THE TRIBUNA L. WE FIND NO MERIT IN THE GROUND TAKEN BY THE ASSESSEE AND ACCORDINGLY GROUN D NO.1 IS DISMISSED. 6 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD 11 SO FAR AS GROUND NO.2 IS CONCERNED I.E. IN RESPE CT OF CONVERTIBLE FOREIGN EXCHANGE BROUGHT INTO INDIA BEYOND THE PERIOD OF SI X MONTHS. 12 THE LD COUNSEL FOR THE ASSESSEE SUBMITS THAT SUB SEQUENTLY THE LD CIT(A) HAS GRANTED PERMISSION. THE LD COUNSEL ALSO FILED A COPY OF THE ORDER OF THE CIT(A) DATED 28.7.2009 WHICH IS PLACED ON RE CORD. THE LD COUNSEL FURTHER SUBMITTED THAT SPECIFIC DIRECTION MAY BE GI VEN TO THE A.O. U/S 155(13) OF THE ACT TO AMEND THE ORDER. ON THE OTHE R HAND THE LD DR HAS NO OBJECTION FOR THE SAME. WE ACCORDINGLY DIRECT THE A.O. TO RECTIFY HIS ORDER U/S 155(13) OF THE ACT. ACCORDINGLY GROUND NO.2 IS ALLOWED. 13 GROUND NO.3 IS IN RESPECT OF NETTING OF INTEREST . 14. THE LD COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTE D THAT THE ISSUE ARISING FROM GROUND NO.3 IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF ASIAN STAR CO. AS THE ISSUE STANDS COVERED AGAINST THE ASSESSEE AS FAIRLY CONCEDED BY THE LD COUNSEL FOR THE ASSESSEE THE GROUND NO.3 IS DISMISSED. 15 SO FAR AS THE GROUND NO.4 IS CONCERNED THE LD C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS LTD HAS CONSIDERED THE NEWLY INSERTED CLAUS E OF SEC. 28 I.E. CL (IIID) AS WELL AS CL. (IIIE). HENCE THE ISSUE OF DEPB WHE RE THE PROFIT OF TRANSFER OF DEPB CREDITS AND NOT TO ADVANCE LICENSES ACCRUED/RE CEIVED AND DUTY 7 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD DRAWBACK ACCRUED/RECEIVED MAY BE SET ASIDE TO THE F ILE OF THE A.O.. ON THE OTHER HAND THE LD DR HAS NO OBJECTION TO SET ASIDE THE ISSUE TO THE FILE OF THE A.O. 16 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES WE SET ASIDE THE ISSUE ARISING FROM GROUND NO.4 TO THE FILE OF THE A.O. FO R FRESH ADJUDICATION WITH THE DIRECTIONS THAT HE SHOULD DECIDE THE ISSUE AFTE R CONSIDERING THE PRINCIPLES LAID DOWN BY THE SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF TOPMAN EXPORTS (SUPRA). WE MAKE IT CLEAR THAT AT T HE TIME OF HEARING OF THIS APPEAL THE DECISION OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS (SUPRA) WAS PENDING BEFORE THE HONBLE HIGH COURT. IF THE S AID MATTER IS DECIDED BY THE HONBLE HIGH COURT THEN THE DECISION OF THE HO NBLE HIGH COURT SHOULD BE FOLLOWED. ACCORDINGLY GROUND NO.4 IS ALLOWED FO R STATISTICAL PURPOSE. 17 GROUND NO.5 IS IN RESPECT OF EMPLOYEES CONTRIBUT ION TO PROVIDENT FUND MADE WITHIN THE GRACE PERIOD. 18 WE HAVE HEARD THE PARTIES. ADMITTEDLY THE PAYME NTS ARE MADE WITHIN THE GRACE PERIOD AND NOW IT IS WELL SETTLED PRINCIP LES THAT IF THE PAYMENT ARE DEPOSITED WITHIN THE GRACE PERIOD ALLOWED BY THE RE SPECTIVE STATUTES THEN THE SAME MAY BE TREATED AS PAYMENT MADE WITHIN THE DUE DATE. THE A.O. IS DIRECTED TO ALLOW THE PAYMENT MADE BY THE ASSESSEE IN RESPECT OF THE EMPLOYEES CONTRIBUTION. ACCORDINGLY GROUND NO.5 I S ALLOWED. 19 SO FAR AS THE ISSUE ARISING FROM GROUND NO.6 IS CONCERNED IT IS IN RESPECT OF CHARGING OF INTEREST U/S 234D ON THE REF UND CREDITED. 8 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD 20 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HIS ISSUES IS STAND COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE SPECIAL BENCH IN THE CASE OF ITO VS EKTA PROMOTERS P LTD ( 113 ITD 719) (DEL) (SB). THE LD DR FAIRLY CONCEDED THAT THIS ISSUE IS STANDS COVERED I N FAVOUR OF THE ASSESSEE. WE THEREFORE FOLLOWING THE DECISION OF THE SPECI AL BENCH OF THE TRIBUNAL IN THE CASE OF EKTA PROMOTERS P LTD (SUPRA) DIRECT TH E A.O. NOT TO CHARGE INTEREST U/S 234D. ACCORDINGLY GROUND NO.6 IS ALLO WED. 21 NOW WE WILL TAKE UP THE APPEAL FOR AY 1999-00. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS IN THIS APPEA L: 1. THE LD CIT(A) VIDE HIS ORDER DATED 30.12.2008 ER RED IN DISMISSING THE APPELLANTS GROUND OF APPEAL BEFORE HIM THAT TH E A.O. HAS GONE BEYOND THE SCOPE OF DIRECTIONS CONTAINED IN THE HON BLE TRIBUNALS ORDER DATED 24.2.2006 WHILE MAKING HIS ORDER DATED 31.10. 2006. 2 THE CIT(A) ERRED IN DISMISSING THE APPELLANTS GR OUND BEFORE HIM THAT THERE WAS NO NET INTEREST INCOME INCLUDED IN THE PROFITS AND GAINS OF BUSINESS SO AS TO BE REDUCED FOR WORKING OUT THE PROFITS OF THE BUSINESS FOR THE PURPOSES OF COMPUTING AMOUNT DEDUC TIBLE U/S 80HHC OF THE I T ACT. 3(A) THE CIT(A) ERRED IN HOLDING THAT THE A.O. HAS RIGHTLY CONSIDERED THE ISSUE OF OTHER INCOME AMOUNTING TO RS. 54.44 LACS F OR THE PURPOSES OF COMPUTING DEDUCTION U/S 80HHC OF THE I T ACT. (B) THE CIT(A) ERRED IN DISMISSING THE GROUND OF TH E APPELLANT AND CONSEQUENTLY UPHOLDING THE ACTION OF THE A.O. IN DI SALLOWING 90% OF DEPB PROCEEDS UNDER EXPLANATION(BAA) TO SECTION 80HHC OF THE I T ACT. (C) THE CIT(A) ERRED IN NOT GRANTING RELIEF AGAINST THE APPELLANT GROUND BEFORE HIM THAT EXCISE DUTY IS NOT REQUIRED TO BE INCLUDED 9 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD IN WORKING OUT THE TOTAL TURNOVER FOR THE PURPOSES OF COMPUTING AMOUNT DEDUCTIBLE U/S 80HHC OF THE I T ACT. 3A THE CIT(A) ERRED IN DISMISSING THE GROUND BEFORE HIM THAT NO DISALLOWANCE U/S 43B IS CALLED FOR IN RESPECT OF PF PAYMENTS AGGREGATING TO RS.7 60 373/- 4. THE CIT(A) ERRED IN NOT ADJUDICATING UPON THE GR OUND BEFORE HIM THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THEIR CASE NO INTEREST U/S 234B OF THE I T ACT IS CHARGEABLE. 5. THE CIT(A) ERRED IN NOT ADJUDICATING UPON THE GR OUND BEFORE HIM THAT THE A.O. ERRED IN CHARGING INTEREST U/S 220(2) OF T HE I T ACT AT RS. 52 53 742/- 22 SO FAR AS GROUND NO.1 IS CONCERNED IT IS IDENTI CAL TO THE GROUND NO.1 IN THE APPEAL FOR THE AY 1998-99. 23 WE HAVE ALREADY DEALT WITH THE ISSUE WHILE DECID ING THE ISSUE FOR AY 1998-99. WE THEREFORE FOLLOWING THE REASONS GIVEN WHILE DECIDING THE APPEAL FOR THE AY 19980-99 HEREIN ABOVE DISMISS TH E GROUND NO.1 IN THIS YEAR ALSO. 24 SO FAR AS THE GROUND NO.2 IS CONCERNED IT IS ID ENTICAL WITH THE GROUND NO.2 TAKEN BY THE ASSESSEE IN AY 1998-99. AS FAIRLY CONCEDED BY THE LD COUNSEL FOR THE ASSESSEE THE ISSUE ARISES IN GROUN D NO.2 IS DECIDED AGAINST THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF ASIAN STAR CO. (SUPRA). WE THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT DISMISS THE GROUND N O.2 FOR THIS YEAR ALSO. 10 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD 25 NOW WE TAKE GROUND NO. 3(A). IN FACT THIS GROUN D IS TO BE CONSIDERED WITH THE GROUND NO.1 AS THE GRIEVANCE OF THE ASSESS EE IS THAT THE ISSUE OF THE OTHER INCOME WHICH HAS BEEN CONSIDERED BY THE A.O. WHILE PASSING THE FRESH ASSESSMENT ORDER WAS NOT THE SUBJECT MATTER O F GROUND BEFORE THE TRIBUNAL. 26 WE HAVE ALREADY DISMISSED THE GROUND NO.1 BY HOL DING THAT THE A.O. HAS DECIDED THE ISSUE OF SEC. 80HHC WELL WITHIN THE DIRECTIONS OF THE TRIBUNAL WHILE PASSING THE SECOND FRESH ASSESSMENT ORDER. WE ACCORDINGLY DISMISS THE GROUND NO.3 (A). 27 SO FAR AS GROUND NO. 3(B) IS CONCERNED IT IS IN RESPECT OF DEPB PROCEEDS. 28 WE HAVE ALREADY SET ASIDE THE ISSUE TO THE FILE OF THE A.O. IN THE AY 1998-99. FOR THE SAME REASONS IN THIS YEAR ALSO WE REMAND THE ISSUE WHETHER THE DISALLOWANCE SHOULD BE MADE BY CONSIDE RING THE ENTIRE SALES PROCEEDS OR PROFITS ON TRANSFER OF DEPB BACK TO THE FILE OF THE A.O. TO DECIDE THE SAME AFTER CONSIDERING THE PRINCIPLES LA ID DOWN BY THE SPECIAL BENCH OF THE TRIBUNAL OR THE HONBLE HIGH COURT OF BOMBAY AS THE CASE MAY BE IN THE CASE OF TOPMAN EXPORTS (SUPRA). ACCORDI NGLY GROUND NO.3 (B) IS ALLOWED FOR STATISTICAL PURPOSE. THE A.O. IS ALSO D IRECTED TO GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 29 NEXT ISSUE IN GROUND 3 (C) RELATES TO IN NOT GRA NTING RELIEF ON EXCISE DUTY. 11 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD 29.1 THE ASSESSEE HAS PLEADED BEFORE THE A.O. THAT THE ELEMENT OF EXCISE DUTY SHOULD NOT BE INCLUDED IN THE TOTAL TURNOVER B UT THE SAME WAS NEGATED BY THE A.O.. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD CIT(A) WHO ALSO DECLINED TO GIVE RELIEF TO THE ASSESSEE BY GIVING T HE REASON THAT EXCISE DUTY WAS NEVER A ISSUE OF DISPUTE BETWEEN THE ASSESSEE AND THE DEPARTMENT FOR THIS YEAR. 30 WHILE REJECTING THE PLEA OF THE ASSESSEE THAT TH E ISSUE OF DEDUCTION U/S 80HHC WAS LEFT OPEN BY THE TRIBUNAL WE UPHOLD THE ORDER OF THE A.O. AS WE HAVE ALREADY HELD THAT THE ISSUE IN RESPECT O F SEC. 80HHC WAS SET ASIDE WITHOUT SPECIFYING THE LIMIT; HENCE THE A.O. AS WELL AS THE LD CIT(A) WERE BOUND TO CONSIDER THE ISSUE. WE THEREFORE DI RECT THE A.O. TO DELETE THE ELEMENT OF EXCISE DUTY WHILE COMPUTING THE TOTAL TU RNOVER AS IT IS FAIRLY COVERED BY THE DECISION OF THE SUPREME COURT IN THE CASE OF SUDARSHAN CHEMICALS LTD ( 292 ITR 641(SC) AND LAKSHMI MACHINE S TOOLS (290 ITR 667) ACCORDINGLY GROUND 3 ( C) IS ALLOWED. 31 GROUND 3A RELATES TO DISALLOWANCE MADE U/S 43B O F THE ACT IN RESPECT OF PF PAYMENTS TO THE EXTENT OF RS. 7 60 373/-. 32 WE HAVE HEARD THE PARTIES. WHILE COMPUTING THE INCOME UNDER THE NORMAL PROVISIONS THE A.O. HAS MERELY MENTIONED TH AT AFTER THE ORDER DATED 8.11.2002 GIVING EFFECT TO THE CIT(A)S ORDER DIS ALLOWANCE U/S 43B IS MADE. AFTER GOING THROUGH THE ORDER OF THE LD CIT(A) IT IS SEEN THAT THE DISALLOWANCE U/S 43B IS MADE ON THE REASONS THAT TH E ASSESSEE HAS NOT 12 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD DEPOSITED THE PAYMENT WITHIN THE DUE DATE AS SPECIF IED IN SECOND PROVISO TO SEC. 43B. NOTHING IS ON RECORD TO CLEAR THE FACTUA L POSITION OTHER THAN THE ABOVE FINDINGS OF THE LD CIT(A). WE ACCORDINGLY CONSIDER IT FIT TO REMAND THE ISSUE BACK TO THE FILE OF THE A.O. FOR FRESH CO NSIDERATION AND DECIDE THE SAME IN LIGHT OF THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF CIT VS ALOM EXTRUSIONS LTD (319 ITR 306) (SC). ACCOR DINGLY THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 33 GROUND NO.4 IS IN RESPECT OF INTEREST CHARGED U/ S 234B OF THE ACT. 33.1 THE LD COUNSEL FOR THE ASSESSEE SUBMITS THAT A FTER THE AMENDMENT OF SECTION 80HHC BY THE TAXATION LAWS (AMENDMENT) ACT 2005 THE CBDT ISSUED A CIRCULAR DIRECTING ALL THE CHIEF COMMISSIO NERS THAT THE SAID AMENDMENT IS BROUGHT IN THE STATUTE WITH RETROSPECT IVE EFFECT AND HENCE NO PENALTY OR INTEREST SHALL BE LEVIED OR CHARGED; AS THE CASE MAY BE IN RESPECT OF ANY FRESH DEMAND RAISED CONSEQUENCE OF THE IMPLE MENTATION OF THE AMENDMENT IF THERE IS VARIATION IN THE RETURNED IN COME AND ASSESSED INCOME. THE LD COUNSEL FILED A COPY OF THE CBDT CI RCULAR NO.2 OF 2006 DATED 17.1.2006. HE THEREFORE PLEADED THAT AS THIS CIRC ULAR ISSUED BY THE CBDT IS BINDING ON ALL THE TAX AUTHORITIES AND HENCE DIRE CTIONS MAY BE GIVEN TO THE A.O. NOT TO CHARGE THE INTEREST U/S 234B. WE HAVE A LSO HEARD THE LD DR. 34 WE HAVE PERUSED THE COPY OF THE CIRCULAR NO. 2 O F 2006 DATED 17.1.2006 ISSUED BY THE CBDT WHEREIN THE INSTRUCTI ONS ARE ISSUED TO ALL THE CHIEF COMMISSIONERS OF INCOME TAX TO WAIVE OFF THE INTEREST AS WELL AS THE PENALTY WHICH WILL FOLLOW DUE TO THE ASSESSMENT MADE AFTER CONSIDERING THE TAXATION LAWS (AMENDMENT)ACT. 2005 MORE PARTIC ULARLY WHILE 13 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD DETERMINING WHETHER THE ASSESSEE IS ELIGIBLE FOR DE DUCTION U/S 80HHC THAT IS ALSO ON ACCOUNT OF VARIATION IN THE RETURNED OR ASSESSED INCOME ATTRIBUTABLE TO PROFIT ON SALE OF DEPB CREDITS OR D FRC. AS RIGHTLY POINTED OUT BY THE LD COUNSEL FOR THE ASSESSEE THE CIRCULA RS ISSUED BY THE CBDT ARE BINDING ON ALL THE TAX AUTHORITIES. IN THE PRESENT CASE MAJOR ADDITION IS DUE TO VARIATION IN THE DEDUCTION CLAIMED U/S 80HHC. WE THEREFORE DIRECT THE A.O. NOT TO CHARGE THE INTEREST IN BOTH THE ASSESSM ENT YEARS; TO THE EXTENT OF INCOME ENHANCED DUE TO COMPUTATION OF DEDUCTION U/S 80HHC AS PER AMENDMENT MADE BY THE TAXATION LAWS (AMENDMENT) ACT 2005. ACCORDINGLY ASSESSEE SUCCEEDS ON THIS GROUND. 35 GROUND NO.5 IS IN RESPECT OF INTEREST CHARGED U/ S 220(2) OF THE I T ACT. 36 WE HAVE HEARD THE PARTIES. THE ARGUMENT OF THE L D COUNSEL FOR THE ASSESSEE IS THAT AS PER CBDT CIRCULAR 2 OF 2006 REF ERRED ABOVE IF ANY DEMAND IS RAISED AFTER CONSIDERING THE DEDUCTION AL LOWABLE U/S 80HHC IN VIEW OF THE AMENDMENT OF SEC 80HHC BY THE TAXATION LAWS (AMENDMENT) ACT 2005 THEN NO INTEREST SHOULD BE LEVIED. SO FA R AS THE PROVISIONS OF SECTION 220(2) IS CONCERNED THE INTEREST IS PAYABL E BY THE ASSESSEE IF THE DEMAND IS RAISED U/S 156 IS NOT PAID WITHIN THE PER IOD SPECIFIED IN THE NOTICE OR WITHIN 30 DAYS. IN FACT THE LEVY OF INTE REST WHICH IS CONTEMPLATED UNDER SEC. 220(2) IS RELEVANT WITH THE RECOVERY PRO CEEDINGS BUT AT THE SAME TIME IF NO INTEREST IS CHARGED AS PER CBDT CIRCULA R NO.2 OF 2006 ON THE ELEMENT OF THE ENHANCE INCOME CONCERNED WITH DEPB /DFRC THEN IN CONSEQUENT TO THE DEMAND WILL ALSO WILL BE REDUCED. IN OUR OPINION GROUND NO.5 IS CONSEQUENTIAL GROUND AND WE HAVE ALREADY AL LOWED GROUND NO.4 AND TO THAT EXTENT THE DEMAND WILL BE REDUCED AND THE ASSESSEE WILL NOT BE 14 ITA NO. 2821/MUM/2008 (ASST YEAR 1998-99) ITA NO.2061/MUM/2009 (ASST YEAR 1999-00) M/S STRIDES ARCOLAB LTD REQUIRED TO PAY INTEREST U/S 220(2) OF THE ACT. AC CORDINGLY GROUND NO.5 IS DISPOSED IN THE ABOVE TERMS. 37 IN THE RESULT BOTH THE APPEALS FILED BY THE ASS ESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 23 RD DAY OF JULY 2010. SD/- SD/- ( RAJENDRA SINGH ) ACCOUNTANT MEMBER (R S PADVEKAR ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 23 RD JULY 2010 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI