The Punjab State Cooperative Supply and Marketing Federation Ltd., Chandigarh v. JCIT, Chandigarh

ITA 29/CHANDI/2011 | 1998-1999
Pronouncement Date: 30-03-2011 | Result: Allowed

Appeal Details

RSA Number 2921514 RSA 2011
Assessee PAN AAAAT3454G
Bench Chandigarh
Appeal Number ITA 29/CHANDI/2011
Duration Of Justice 2 month(s) 19 day(s)
Appellant The Punjab State Cooperative Supply and Marketing Federation Ltd., Chandigarh
Respondent JCIT, Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-03-2011
Date Of Final Hearing 21-03-2011
Next Hearing Date 21-03-2011
Assessment Year 1998-1999
Appeal Filed On 10-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL: A B ENCH: CHANDIGARH BEFORE HONBLE SHRI D K SRIVASTAVA AM AND HONBLE MS. SUSHMA CHOWLA JM ITAS NO. 29 & 30/CHANDI/2011 ASSESSMENT YEAR: 1998-99 & 1999- 2000 THE PUNJAB STATE COOPERATIVE V. JOINT C.I.T. SPL R ANGE I SUPPLY & MARKETING FEDERATION CHANDIGARH LIMITED PLOT NO. 4 SECTION 35-B CHANDIGARH PIN: AAAAT 3454G (APPELLANT-ASSESSEE) (RESPONDENT) APPELLANT BY: SHRI YASH PAUL GOYAL RESPONDENT BY: SHRI S.S. KAMWAL ORDER D K SRIVASTAVA: BOTH THE APPEALS HAVE BEEN FILED BY THE ASSESSEE. MAJOR ISSUES RAISED IN THEM ARE COMMON. WE THEREFORE F IND IT CONVENIENT TO DISPOSE OFF BOTH THE APPEALS BY A CONSOLIDATED ORDER. I.T.A. NO. 29/CHANDI/2011 GROUND NO. 1 TAKEN BY THE ASSESSEE READS AS UNDER: 1 THE LD. CIT(A) HAS WRONGLY RESTRICTED THE DEDUCT ION U/S 80HHC TO RS. 175 310/- WHEREAS THE ASSESSEE HAS CLAIMED A DE DUCTION OF RS. 25 70 360/-. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE HAD CLAIMED DEDUCTION AMOUNTING TO RS. 25 70 360/- U/S 80HHC. THE AO SCRUTINIZED THE CLAIM OF THE ASSESSEE. HE NOTICED THAT THE DEDUCTI ON U/S 80HHC HAS BEEN CLAIMED IN RESPECT OF UNITS BEING MAINTAINED BY PUN JAB STATE COOPERATIVE SUPPLY AND MARKETING FED LTD (COTTON CELL) BATHINDA AND MA RKFED MODERN RICE MILL NAWANSHAHAR AT RS. 12 38 698/- AND RS. 13 31 662/- RESPECTIVELY. THE AO FURTHER NOTICED THAT THE ASSESSEE HAD RESTRICTED TO TAL TURNOVER OF THE BUSINESS TO THE AFORESAID TWO UNITS INSTEAD OF TAKING TOTAL TUR NOVER OF THE BUSINESS AS A WHOLE. HE THEREFORE CALLED UPON THE ASSESSEE TO WHY DEDUCTION U/S 80HHC AS CLAIMED BY THE ASSESSEE SHOULD NOT BE MODIFIED. IN THE LIGHT OF HIS ASSESSMENT ORDER FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 1997-98. FURTHER CONSIDERING THE REPLY OF THE ASSE SSEE THE AO HAS TAKEN TOTAL TURNOVER OF THE BUSINESS AS A WHOLE INSTEAD OF REST RICTING TOTAL TURNOVER TO THE AFORESAID TWO UNITS AS CLAIMED BY THE ASSESSEE AND ACCORDINGLY PROCEEDED TO COMPUTE THE RELIEF ADMISSIBLE U/S 80HHC. THIS HAS LEAD TO DEDUCTION OF RELIEF FROM RS. 25 70 360/- CLAIMED BY THE ASSESSEE U/S 80 HHC TO RS. 1 75 310/-. 3. AGGRIEVED BY THE AFORESAID ORDER OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HOWEVER CON FIRMED THE ACTION OF THE AO IN THIS BEHALF. 4. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A) THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. RELYING UPON THE JUDG MENT OF HON'BLE MADRAS HIGH COURT IN CIT V. MADRAS MOTORS LTD/ M.M. FORGINGS LT D 257 ITR 60 (MAD) CIT V. ASHOK LEYLAND LTD 297 ITR 107 (MAD) AND CIT V. FAL INDUSTRIES LTD 314 ITR 47 (MAD) HE SUBMITTED THAT THE TOTAL TURNOVER IN THE CONTEXT OF CLAUSE (A) OF SUB- SECTION (3) OF SECTION 80HHC AND INCLUDE TOTAL TURN OVER OF THOSE UNITS WHICH WERE ENGAGED IN THE BUSINESS OF EXPORT AND IN THE T OTAL TURNOVER OF THE BUSINESS OF THE ASSESSEE. 5. IN REPLY THE DR SUPPORTED THE ORDER PASSED BY TH E AO AND THE LD. CIT(A). HE SUBMITTED THAT THE ASSESSEE ITSELF HAS ACCEPTED THE ORDER OF LD. CIT(A) FOR ASSESSMENT YEAR 1997-98 IN WHICH SIMILAR ISSUE WAS DECIDED AGAINST THE ASSESSEE. 6. WE HAVE HEARD BOTH THE PARTIES. THE SHORT ISSUE IS WHETHER THE TOTAL TURNOVER OF THE BUSINESS CARRIED OUT BY THE ASSESSE E SHOULD BE RESTRICTED TO TOTAL TURNOVER OF ONLY THOSE UNITS WHICH WERE ENGAGED IN THE BUSINESS OF EXPORT OR SHOULD INCLUDE TOTAL TURNOVER OF THE BUSINESS CARRI ED OUT BY THE ASSESSEE. 7. CLAUSE (A) OF SUB-SECTION (3) OF SECTION 80HHC H AS IT STOOD IN ASSESSMENT YEAR UNDER APPEAL READ AS UNDER: 3(A) WHERE THE EXPORT OUT OF INDIA IS OF GOODS OR MERCHANDISE MANUFACTURED (OR PROCESSED) BY THE ASSESSEE THE PR OFITS DERIVED FROM SUCH EXPORT SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS THE SAME PROPORTION AS THE EXPORT TURNOVE R IN RESPECT OF SUCH GOODS BEARS TO THE TOTAL TURNOVER OF THE BUSINESS C ARRIED ON BY THE ASSESSEE. 8. THE AFORESAID PROVISION WAS INSERTED IN INCOME-T AX ACT BY FINANCE (NO. 2) ACT 1991 W.E.F. ON 1.4.1992 I.E. ASSESSMENT YEAR 1 992-93. 9. BARE PERUSAL OF THE AFORESAID PROVISION INDICATE THAT THE RELIEF TO BE COMPUTED UNDER SUB-SECTION (1) OF SECTION 80HHC SHA LL BE THE AMOUNT WHICH BARES TO THE PROVISIONS OF THE BUSINESS THE SAME P ROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH CASES BEARS TO BE TOTA L TURNOVER OF THE BUSINESS CARRIED OUT BY THE ASSESSEE. TOTAL TURN OVER IS DEFINED BY EXPLANATION (BA) TO SECTION 80HHC. ACCORDINGLY TO THE SAID DEFINITION TOTAL TURN OVER SHALL NOT INCLUDE FROM INSURANCE ATTRIBUTABLE TO THE TRANSPOR T OF GOODS OR MERCHANDISE BEYOND THE CUSTOM STATION AS DEFINED IN THE CUSTOM ACT. THERE ARE NO WORDS OF LIMITATION IN CLAUSE (A) TO SUB-SECTION (3) OF SECT ION 80HHC. THE RESTRICTED AMOUNT OF TOTAL TURNOVER OF THE BUSINESS TO THE TOTAL TURNOVER OF ONLY THOSE UNITS WHICH ARE ENGAGED IN THE BUSINESS OF EXPORT. IN THIS VIEW OF THE MATTER THE ORDER PASSED BY THE LD. CIT(A) IS QUITE INCONFO RMITY WITH THE PROVISIONS OF CLAUSE (A) TO SUB-SECTION (3) OF SECTION 80HHC. 10. AT THE TIME OF HEARING AUTHORIZED REPRESENTATI VE FOR THE ASSESSEE HAS STRONGLY RELIED ON THE JUDGMENT OF HON'BLE MADRAS H IGH COURT IN CIT V. MADRAS MOTORS LTD/M.M. FORGING LTD 257 ITR 60 (MAD). AT PAGE 49 OF THE AFORESAID REPORT THE PROVISIONS OF SUB-SECTION (3) OF SECTION 80HHC HAVE BEEN REPRODUCED. AT THIS STAGE IT MAY BE RELEVANT TO MEN TION THAT THE HON'BLE HIGH COURT IN THAT CASE WAS CONCERNED WITH ASSESSMENT YE ARS 1989-90 AND 1990-91. BARE PERUSAL OF THE PROVISIONS OF SECTION 80HHC (3) (A) AS REPRODUCED AT PAGE 69 OF THE AFORESAID REPORT SHOWS THAT THESE PROVISIONS ARE MATERIALLY DIFFERENT FROM THOSE MADE EFFECT FROM 1.4.1992 I.E. ASSESSMENT YEA R 1992-93. HON'BLE MADRAS HIGH COURT HAS RENDERED THE JUDGMENT IN CIT V. MADR AS MOTORS LTD/M.M.FORGINGS LTD (SUPRA) IN THE CONTEST OF THE PROVISIONS AS THEY EXISTED IN THOSE TWO ASSESSMENT YEARS NAMELY ASSESSMENT YEARS 1989-90 AND 1990-91. SINCE THOSE PROVISIONS HAVE BEEN SUBSTANTIALLY AMEN DED W.E.F. 1992. 11. IN CIT V. ASHOK LEYLAND LTD (SUPRA) HON'BLE MAD RAS HIGH COURT HAS FOLLOWED ITS OWN DECISION IN CIT V. MADRAS MOTORS L TD/M.M. FORGINGS LTD (SUPRA) AND ACCORDINGLY HELD THAT THE SCRAP SALES COULD NOT BE INCLUDED IN THE TOTAL TURNOVER FOR THE PURPOSE OF CALCULATION OF DEDUCTIO N U/S 80HHC. 12. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS ALSO RELIED UPON THE JUDGMENT OF THE HON'BLE MADRAS HIGH COURT IN CIT V. FAL INDUSTRIES LTD 314 ITR 47 (MAD) IN WHICH THE HON'BLE MADRAS HIGH COURT HAS HELD THAT THE LOCAL SALES COULD NOT FORM PART OF TOTAL TURNOVER FOLLOWING ITS OWN DECISION IN CIT V. ASHOK LEYLAND LTD (SUPRA). THE AFORESAID JUDGMENT HAS BE EN NOTED BY OTHER HON'BLE HIGH COURT ALSO. IN CIT AND ANOTHER V. MOTOR INDUS TRIES CO. LTD 326 ITR 358- 362 (KARN) HON'BLE KARNATAKA HIGH COURT HAS HELD A S UNDER: HAVING HEARD THE COUNSEL FOR THE PARTIES WE HAVE TO CONSIDER WHETHER THE VALUE RECEIVED BY THE ASSESSEE BY SELLING SCRAP IN A DOMESTIC MARKET HAS TO BE INCLUDED TOWARDS ITS TOTAL TURNOVER WHILE CALCULATING THE DEDUCTION U/S 80HHC. BY LOOKING INTO THE DEFINITION OF EXPORT TURNOVER AND TOTAL TURNOVER AS DEFINED U/S 80HHC (4C) EXPLAN ATION (B) AND (BOOKS OF ACCOUNT) IT IS CLEAR THEY ARE DIFFERENT AND DIS TINCT TURNOVERS. THE EXPORT TURNOVER INCLUDES ONLY THE VALUE RECEIVED BY SELLING THE PRODUCTS OF THE ASSESSEE FROM OUT OF COUNTRY. BUT TOTAL TURNOV ER INCLUDES THE TURNOVER OF THE ASSESSEE WHICH IS INCLUSIVE OF EXPO RT TURNOVER AND ALSO THE DOMESTIC TURNOVER. THEREFORE WE ARE OF THE VIEW T HAT IN VIEW OF THE DISTINCT DEFINITION CLAUSE OF EXPORT TURNOVER AND T OTAL TURNOVER WHILE COMPUTING THE TOTAL TURNOVER FOR THE PURPOSE OF 80H HC THE AO IS REQUIRED TO CONSIDER THE VALUE RECEIVED BY SALE OF THE SCRAP ALSO AS THE SAME CANNOT BE EXCLUDED AS THE SALE OF SCRAP AMOUNT S TO A TURNOVER IN A DOMESTIC MARKET. IT IS QUITE OBVIOUS FROM THE AFORESAID THAT THERE I S DIVERGENT JUDGMENT ON THE ISSUE. ON THE FACTS OF THE CASE AS ALSO STATUTORY PROVISIONS AS THEY EXISTED IN THE ASSESSMENT IN APPEAL WE ARE INCLINED TO HOLD THAT EXPRESSION TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE AS USED IN CLAUSE (A) OF SUB-SECTION (3) OF SECTION 80HHC WOULD INCLUDE TOTAL TURNOVER AS HELD BY THE LD. CIT(A). IN THIS VIEW OF THE MATTER GROUND NO. 1 TAKEN BY THE ASSES SEE IS DISMISSED. 13. GROUND NO. 2 TAKEN BY THE ASSESSEE READS AS UND ER: 2 THE LD. CIT(A) HAS ERRED IN DISALLOWING THE DEDU CTION OF RS. 14 06 53 947/- U/S 80P(2)(A)(III). 14. WE HAVE HEARD BOTH THE PARTIES. AT THE TIME OF HEARING AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRONGLY SUBMITTED THAT THE ASSESSEE WOULD NOT LIKE TO PRESS THE AFORESAID GROUND AS IT WAS SQUARE LY COVERED AGAINST THE ASSESSEE BY JUDGMENT OF HON'BLE SUPREME COURT IN NA TIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERATION OF INDIA LTD V. UN ION OF INDIA (2003) 128 TAXMAN 361 (S.C) GROUND NO. 2 IS THEREFORE DISMISS ED AS NOT PRESSED. 15. APPEAL FILED BY THE ASSESSEE IS DISMISSED. I.T.A. NO. 30/CHANDI/2011 GROUND NO. 1 TAKEN BY THE ASSESSEE READS AS UNDER: 1 THE LD. CIT(A) HAS ERRED IN DISALLOWING THE DED UCTION OF RS. 6 26 04 410/- U/S 80P(2)(A)(III). 16. WE HAVE HEARD BOTH THE PARTIES. THE ISSUE RAISE D IN GROUND NO. 1 BY THE ASSESSEE IN APPEAL IS SIMILAR TO GROUND NO. 1 TAKEN BY THE ASSESSEE IN ITS APPEAL NO. I.T.A. NO. 29/CHANDI/2011 WHICH HAS SINCE BEEN DISMISSED BY US FOR THE REASONS GIVEN IN THIS ORDER. GROUND NO. 1 IS DISMIS SED. 17. GROUND NO. 2 TAKEN BY THE ASSESSEE READS AS UND ER: THE LD. CIT(A) HAS ERRED IN DISALLOWING TRAVELING EXPENSES OF RS. 10 24 321/- AS THE SAME ARE ALLOWABLE U/S 37(1). 18. WE HAVE HEARD BOTH THE PARTIES. THECA HAS CONF IRMED THE ACTION OF THE AO IN THIS BEHALF WITH THE FOLLOWING OBSERVATIONS: 8 IN THE FIFTH GROUND OF APPEAL THE APPELLANT HAS AGITATED AGAINST THE DISALLOWANCE OF RS. 10 24 321/- OUT OF TRAVELING EX PENSES AS BEING TOTALLY UNJUSTIFIED. THE LIABILITY HAD ACCRUED DURING THE YEAR. 8.1 THE AO DISALLOWED THE TRAVELING EXPENSES ON THE GROUND THAT THESE BILLS WERE NOT CLEARED OR AID INVESTMENT THIS ASSES SMENT YEAR BUT ERE ADJUSTED IN THE NEXT YEAR. HE HELD THAT THE CREDIT COULD ONLY BE ALLOWED WHEN THE PAYMENT IS MADE ON ACTUAL BASIS. THUS HE ADDED THE SAME TO THE TOTAL INCOME. 8.2 THE APPELLANT HAS FILED WRITTEN SUBMISSIONS AND EXPLAINED THAT THE OBSERVATIONS AND DISALLOWANCE MADE BY THE AO ARE TO TALLY UNCALLED FOR IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSES SEE WAS MAINTAINING THE ACCOUNTS ON MERCANTILE BASIS. THE FOREIGN TRAV ELING WAS DONE BY THE STATE COOPERATION MINISTER AND THE FINANCIAL COMMIS SIONER (CO-OPERATION) AND T.A. BILLS WERE SUBMITTED DURING THE RELEVANT P REVIOUS YEAR. THE EXPENSES HAD BECOME DUE DURING THE RELEVANT PREVIOU S YEAR AND WERE AS SUCH ALLOWABLE. THERE IS NO LAW OR ACCOUNTING PRIN CIPLE UNDER WHICH THE SAID EXPENSES COULD BE DISALLOWED ESPECIALLY WHEN T HE ASSESSEE WAS MAINTAINING ACCOUNTS ON MERCANTILE BASIS. 8.3 I HAVE GONE THROUGH RIVAL SUBMISSIONS. IT IS Q UITE POSSIBLE THAT THE EXPENSES MAY HAVE BEEN INCURRED DURING THE YEAR UND ER CONSIDERATION AND THE SAME COULD BE ALLOWABLE IN THE YEAR UNDER C ONSIDERATION ESPECIALLY WHEN THE APPELLANT IS FOLLOWING MERCANTI LE SYSTEM OF ACCOUNTING HOWEVER SUCH EXPENSES ARE NOT OTHERWISE ALLOWABLE BECAUSE THEY HAVE NOT BEEN INCURRED FOR THE LEGITIMATE BUSINESS NEEDS OF THE CONCERN. THE STATE CO-OPERATION MINISTER AND FINANCIAL COMMISSIO NER (CO-OPERATION) DO NOT HELD ANY POSITION IN THIS APEX CO-OPERATION SOC IETY AND EXPENSES INCURRED BY THEM ARE NOT A FIT CHARGE ON THE REVENU E OF THIS CONCERN. THE SAME ARE DISALLOWED. 19. IT WAS CONTENDED BY THE AUTHORIZED REPRESENTATI VE FOR THE ASSESSEE THAT FOREIGN EXPENSES WAS UNDERTAKEN BY STATE GOVT COOPE RATIVE MINISTER AND FINANCIAL COMMISSIONER IN CONNECTION WITH BUSINESS OF THE ASSESSEE. THEREFORE T.A BILLS SUBMITTED BY THEM WERE PASSED BY THE ASSE SSEE. ACCORDING TO HIM THE IMPUGNED EXPENSES WERE INCURRED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF BUSINESS. IN SUPPORT OF HIS CLAIM HE RELIED UPON T HE AGENDA NOTE AND ALSO DECISIONS TAKEN IN THE MEETING OF BOARD OF DIRECTIO NS. 20. THE AGENDA NOTE AND DECISIONS TAKEN IN THE MEET ING OF BOARD OF DIRECTORS DID NOT INDICATE AS TO WHAT AGENDA NOTE OR DECISION S WERE TAKEN IN THE BOARD OF DIRECTORS. THERE PERUSAL SHOWS THAT FOREIGN TRAVEL ING WAS UNDER TAKEN NOT ONLY BY COOPERATIVE MINISTRY PUNJAB BUT ALSO BY HIS ATTE NDER AND ALSO THE FINANCIAL COMMISSIONER. NEITHER THE STATE COOPERATIVE MINISTE R NOR THE FINANCIAL COMMISSIONER DID NOT HELD ANY POSITION IN THIS SOCI ETY. THERE IS NO MATERIAL ON RECORD AS WHAT BUSINESS WAS SERVED BY THEIR PRESENC E. IT IS THE CASE WHERE SUPERIOR AUTHORITY OF THE STATE GOVT COOP MINISTER OR FINANCIAL COMMISSIONER USED THERE OFFICES TO GET THEIR FOREIGN TRAVELING. THE EXPENSES INCURRED BY THEM DID NOT HAVE THE CHARACTER OF BUSINESS EXPENSES. T HE LD. CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE AO. GROUND NO. 2 IS DISMISSED. 21. GROUND NO. 3 READS AS UNDER: 3. THE LD. CIT(A) HAS WRONGLY RESTRICTED THE DEDUC TION U/S 80HHC TO RS. 21 459/- WHEREAS THE ASSESSEE HAS CLAIMED A DED UCTION OF RS. 12 98 307/-. 22. WE HAVE HEARD BOTH THE PARTIES. GROUND NO. 3 TA KEN BY THE ASSESSEE IS SIMILAR TO GROUND NO. 1 TAKEN BY THE ASSESSEE IN IT S APPEAL BEARING I.T.A. N. 29/CHANDI/2011 WHICH WE HAVE ALREADY DISMISSED. FO LLOWING THE SAME THIS GROUND IS DISMISSED. 23. APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON MARCH 2011 (SUSHMA CHOWLA) (D K SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER CHANDIGARH: THE MARCH 2011 SURESH COPY TO: 1. THE APPELLANT THE PUNJAB STATE COOPERATIVE SUPP LY & MARKETING FEDERATION LTD CHANDIGARH 2. THE RESPONDENT JOINT C.I.T. SPL RANGE-I CHANDI GARH 3. THE CIT(A) CHANDIGARH 4. THE LD. CIT CHANDIGARH 5. THE D.R INCOME-TAX DEPARTMENT CHANDIGARH TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH PAGE BREAK