R.K. OVERSEAS, MUMBAI v. ADDL CIT RG 18(2), MUMBAI

ITA 3930/MUM/2012 | 2006-2007
Pronouncement Date: 05-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 393019914 RSA 2012
Assessee PAN AAEFR3489E
Bench Mumbai
Appeal Number ITA 3930/MUM/2012
Duration Of Justice 1 year(s) 1 month(s)
Appellant R.K. OVERSEAS, MUMBAI
Respondent ADDL CIT RG 18(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 05-07-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 05-07-2013
Assessment Year 2006-2007
Appeal Filed On 05-06-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI .. ! ' #$ % & ' ' ( BEFORE SHRI R.S.SYAL AM AND SHRI AMIT SHUKLA JM ITA NO.3930/MUM/2012 : ASST.YEAR 2006-2007 ITA NO.3931/MUM/2012 : ASST. YEAR 2007-2008 M/S R.K. OVERSEAS 3 RD FLR. GALA NO. 59 EVERGREEN INDL. ESTATE MAHALAXMI MUMBAI-400 011 PAN :AAEFR3489E ) ) ) ) / VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE 18(2) 1 ST FLOOR PIRAMAL CHAMBERS PAREL MUMBAI.400 012 ( + / // / APPELLANT) ( -.+ / RESPONDENT) ITA NO.3648/MUM/2012 : ASST.YEAR 2006-2007 THE ASSISTANT COMMISSIONER OF INCOME- TAX CIRCLE 18(2) 1 ST FLOOR PIRAMAL CHAMBERS PAREL MUMBAI.400 012 ) ) ) ) / VS. M/S R.K. OVERSEAS 3 RD FLR. GALA NO. 59 EVERGREEN INDL. ESTATE MAHALAXMI MUMBAI-400 011 PAN :AAEFR3489E ( + / // / APPELLANT) ( -.+ / RESPONDENT) + / // / 0 0 0 0 / ASSESSEE BY : SHRI SURINDER MEHRA -.+ / 0 / 0 / 0 / 0 / REVENUE BY : MRS. R.M. MADHAVI ) / $! / / / / DATE OF HEARING : 02.07.2013 123 / $! / DATE OF PRONOUNCEMENT : 05.07.2013 ' % ' % ' % ' % / / / / O R D E R PER R.S.SYAL ( AM) : THIS BUNCH OF THREE APPEALS COMPRISING OF TWO APPEA LS FOR THE A.Y.2006-07 AND ONE FOR THE A.Y.-2007-08 INVOLV ES CERTAIN COMMON ISSUES. WE ARE THEREFORE PROCEEDING TO D ISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONV ENIENCE. ITA NO.3930 3931 &3648/MUM/2012. M/S. R.K.OVERSEAS . 2 A.Y.2006-07 - ITA NO.3930/MUM/2012 2. ALL THE GROUNDS DEAL WITH CERTAIN ASPECTS OF DED UCTION U/S 10B. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAVING MANUFACTURING UNIT AT AMRITSAR CLAIMED DEDUC TION U/S. 10B AMOUNTING TO RS.1 11 62 462/- BEING PROFIT DERI VED FROM 100% EXPORT ORIENTED UNIT. THE ASSESSING OFFICER O BSERVED THAT THE ASSESSEE HAS TWO UNITS ONE AT AMRITSAR AND OTH ER AT MUMBAI. MUMBAI UNIT WAS FOUND TO BE ENGAGED IN TRADING ACTI VITIES. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD NOT P ROPERLY ALLOCATED COMMISSION AND SALARY EXPENSES BETWEEN TH E AMRITSAR AND MUMBAI UNITS. THE ASSESSEE WAS CALLED UPON TO E XPLAIN AS TO WHY THESE EXPENSES SHOULD NOT BE APPORTIONED IN THE RATIO OF TURNOVER OF THE TWO UNITS. THE ASSESSEE MADE SUBMIS SION ACCEPTING THAT AT THE MOST SOME PERCENT OF SALARY OF HEAD OFFICE CAN BE DEBITED TO THE AMRITSAR UNIT. THE ASSESSING OFFICER WORKED OUT THE RATIO OF TURNOVER OF BOTH THESE UNIT S AT 49.20 : 50.80. CONSIDERING THE FACT THAT THE ONLY AMRITSAR UNIT WAS ELIGIBLE FOR DEDUCTION U/S. 10B THE AO APPORTIONED COMMISSION AND SALARY BETWEEN THE TWO UNITS IN THE RATIO OF TU RNOVER. THIS LED TO THE REDUCTION IN THE PROFITS OF THE AMRITSAR UNI T BY RS.6 88 848. THE AMOUNT OF DEDUCTION U/S.10B WAS ACCORDINGLY WOR KED OUT. THE LD. CIT(A) UPHELD THE ASSESSMENT ORDER. 3. AFTER CONSIDERING THE RIVAL SUBMISSION AND PERUS ING THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT ON LY AMRITSAR UNIT ITA NO.3930 3931 &3648/MUM/2012. M/S. R.K.OVERSEAS . 3 IS ELIGIBLE FOR DEDUCTION U/S.10B HAVING MANUFACTUR ING FACILITIES. THE MUMBAI UNIT IS ONLY ENGAGED IN TRADING AND HENC E IS NOT ELIGIBLE FOR DEDUCTION. INSOFAR AS THE ALLOCATION OF COMMISSION AND SALARY BETWEEN THE TWO UNITS IS CONCERNED WE F IND THAT THE ASSESSING OFFICER HAS ADOPTED A VERY REASONABLE MAN NER IN SUCH BIFURCATION IN THE RATIO OF TURNOVER OF SAID TWO UN ITS. IN DOING SO HE DID NOT DISTURB THE AMOUNT OF `WAGES WHICH WAS CHARGED ONLY TO THE MANUFACTURING UNIT. IN OUR CONSIDERED OPINI ON NO EXCEPTION CAN BE FOUND TO THE VIEW TAKEN BY THE LEA RNED CIT(A) IN UPHOLDING THE ALLOCATION OF COMMISSION AND SALAR Y BETWEEN THE TWO UNITS IN THE RATIO OF THEIR RESPECTIVE TURNOVER S. THE IMPUGNED ORDER IS THEREFORE UPHELD ON THIS SCORE. 4. THE SECOND ISSUE IS ABOUT DENIAL OF DEDUCTION U/ S. 10B IN RESPECT OF EXPORT INCENTIVE AMOUNTING TO RS.4 98 11 4/-. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. WE FIND THAT THIS ISSU E HAS BEEN DECIDED BY THE SPECIAL BENCH OF THE TRIBUNAL IN MARAL OVERSEAS LTD. VS. ADDL. CIT (2012) 146 TTJ (IND) (SB) 129 BY HOLDING THAT THE EXPORT INCENTIVES FORM PART OF `PROFITS OF THE BUSINESS OF THE ELIGIBLE UNDERTAKING AND HENCE CANNOT BE EXCLUD ED FROM THE ELIGIBLE PROFIT FOR THE PURPOSE OF COMPUTING DEDUCT ION U/S.10B. THE IMPUGNED ORDER BEING CONTRARY TO THE VIEW EXPR ESSED BY THE SPECIAL BENCH IN THIS CASE IS THEREFORE SET-ASIDE ON THIS ISSUE. ITA NO.3930 3931 &3648/MUM/2012. M/S. R.K.OVERSEAS . 4 6. LAST ISSUE IS ABOUT THE DENIAL OF DEDUCTION U/S. 10B IN RESPECT OF INTEREST INCOME OF RS.71131. WE FIND THAT THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER ABOUT THE NATURE OF INTEREST INCOME. THE ASSESSING OFFICER SIMPLY REDUCED THIS AMOUNT FROM THE ELIGIBLE PROFIT OF THE AMRITSAR UNIT. THE IMPU GNED ORDER IS SILENT ON THIS ASPECT OF THE MATTER. GOING BY THE PHRASEOLOGY OF SECTION 10B(1) IT IS SEEN THAT IT TALKS OF PROVID ING DEDUCTION OF SUCH PROFIT AND GAIN AS ARE DERIVED BY AN ELIGIBL E UNDERTAKING. SUB-SECTION (4) OF SECTION 10B GIVES MEANING TO THE EXPRESSION `PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS BY PROVIDING IT TO BE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUS INESS OF THE UNDERTAKING THE SAME PROPORTION AS THE EXPORT TURN OVER IN RESPECT OF SUCH ARTICLES AND THINGS ETC. BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. A CONJOINT READING OF SUB-SECTION (1) AND (4) OF SECTION 10B MAKES IT ABU NDANTLY CLEAR THAT THE WORD `DERIVED FROM AS EMPLOYED IN SUB-SEC TION (1) IN FACT REFERS TO THE PROFIT OF THE BUSINESS OF TH E UNDERTAKING TO BE COMPUTED IN THE RATIO OF EXPORT TURNOVER TO THE TOT AL TURNOVER. SO LONG AS A PARTICULAR ITEM OF INCOME FALLS UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION THE SAME QUA LIFIES FOR CONSIDERATION UNDER THIS SECTION. IF HOWEVER THE ITEM OF INCOME FALLS UNDER ANY OTHER HEAD INCLUDING `INCOME FROM O THER SOURCES THE SAME GOES OUT OF THE AMBIT OF THE ELIGIBLE PROF ITS FOR THE PURPOSE OF DEDUCTION U/S 10B. THE CORRECT NATURE O F THE AMOUNT OF INTEREST OF RS.71 131 IS NOT EMANATING FROM THE MATERIAL ON RECORD. IN OUR CONSIDERED OPINION THE ENDS OF JUST ICE WOULD MEET ITA NO.3930 3931 &3648/MUM/2012. M/S. R.K.OVERSEAS . 5 ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE IS S ET-ASIDE AND THE MATTER RESTORE TO THE FILE OF A.O. WE ORDER ACCORDIN GLY AND DIRECT HIM TO FIRST DECIDE THE HEAD UNDER WHICH SAID INTER EST INCOME OF RS.71 311/- FALLS AND THEREAFTER TAKE A DECISION ON THE INCLUSION OR OTHERWISE OF SUCH AMOUNT IN THE ELIGIBLE PROFITS FO R THE PURPOSE OF DEDUCTION U/S. 10B. THE JUDGMENT OF THE HONBLE SU PREME COURT IN ACG ASSOCIATED CAPSULES PVT. LTD. VS. CIT (2012) 34 3 ITR 89 (SC) RELIED BY THE LD. AR FOR THE PROPOSITION OF `NETTI NG OF INTEREST IS RELEVANT IN THE CONTEXT OF EXPLANATIO N (BAA) BELOW SECTION 80HHC(4C) DEFINING THE EXPRESSION `PROFITS OF THE BUSINESS. IT HAS NO APPLICATION UNDER SEC. 10B WH ICH IS DIFFERENTLY WORDED AND HAS NO DEFINITION OF THE EXP RESSION `PROFITS OF THE BUSINESS SIMILAR TO THAT OF SECTION 80HHC. 7. IN THE RESULT THE APPEAL OF ASSESSEE FOR A.Y. 2 006-07 IS PARTLY ALLOWED. A.Y.2006-07 - ITA NO.3648/MUM/2012 8. THIS APPEAL BY THE REVENUE ARISES OUT OF THE OR DER PASSED BY THE LD. CIT(A) ON 20.03.2012 AGAINST THE DELETIO N OF PENALTY OF RS.3 03 694/- IMPOSED BY THE ASSESSING OFFICER U /S 271 (1)(C) OF INCOME TAX ACT IN THE RELATION TO THE A.Y.2006-0 7. 9. THE ASSESSING OFFICER IMPOSED PENALTY IN THE RES PECT OF THE REDUCTION IN THE AMOUNT OF DEDUCTION U/S.10B. THE L D. CIT(A) CHOSE TO DELETE THE PENALTY. ITA NO.3930 3931 &3648/MUM/2012. M/S. R.K.OVERSEAS . 6 10. AFTER CONSIDERING THE RIVAL SUBMISSIO NS AND PERUSING THE MATERIAL ON RECORD WE FIND THAT THE FOUNDATION FOR THE IMPOSITION OF PENALTY IS THE REDUCTION IN THE AMOUN T OF DEDUCTION U/S.10B. THE AMOUNT OF SUCH DEDUCTION IS BACKED BY AUDIT REPORT IN FORM NO. 56G AS PER THE REQUIREMENTS OF SUB-SECT ION (5) OF SECTION 10B. ONCE THE ASSESSEE MAKES A CLAIM ON TH E BASIS OF AN OPINION EXPRESSED BY AN EXPERT WHICH IN THE PRESEN T CASE IS THE CHARTERED ACCOUNTANT THERE CAN BE NO QUESTION OF I MPOSITION OF ANY PENALTY ON THE MERE FACT THAT THE AMOUNT OF DED UCTION WAS REDUCED BY THE ASSESSING OFFICER. THERE CAN NEVER BE ANY DOUBT ON THE BONA-FIDE OF THE ASSESSEE IN CLAIMING THE DEDUCTION BASED ON THE AUDIT REPORT GIVEN BY THE AUDITOR. UNDER THE SE CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THA T THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY U/S. 2 71(1)(C). WE THEREFORE UPHOLD THE IMPUGNED ORDER. 11. IN THE RESULT THE APPEAL OF REVENUE FOR A.Y. 2 006-07 IS DISMISSED. A.Y.2007-08 IN ITA NO.3931/MUM/2012 12. THIS APPEAL BY THE ASSESSEE IS AGAINST THE REDU CTION IN THE AMOUNT OF DEDUCTION U/S. 10B. 13. THE FIRST ISSUE IS ABOUT THE BIFURCATION OF COM MISSION AND SALARY BETWEEN THE AMRITSAR AND MUMBAI UNITS IN THE RATIO OF ITA NO.3930 3931 &3648/MUM/2012. M/S. R.K.OVERSEAS . 7 THEIR RESPECTIVE TURNOVERS. BOTH THESE SIDES ARE I N AGREEMENT THAT THE FACTS OF THIS GROUND ARE SIMILAR TO THOSE OF TH E PRECEDING YEAR. IN VIEW OF OUR DECISION TAKEN HEREINABOVE WE UPHOL D THE IMPUGNED ORDER ON THIS ISSUE. 14. SECOND ISSUE IS ABOUT THE DENIAL OF DEDUCTION I N RESPECT OF INTEREST OF RS.1 07 857/-. HERE ALSO BOTH THE PARTI ES ARE IN AGREEMENT THAT THE FACTS OF THE INSTANT YEAR ARE MU TATIS MUTANDIS SIMILAR TO THOSE OF THE PRECEDING YEAR. IN VIEW OF THE OUR ABOVE DECISION WE SET-ASIDE THE IMPUGNED ORDER AND RESTO RE THE MATTER TO THE FILE OF THE AO FOR TAKING A FRESH DECISION I N CONFORMITY WITH OUR DIRECTIONS GIVEN ABOVE. 15. IN THE RESULT THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 5 TH DAY OF JULY 2013. ' % / 123 4')5 5 TH JULY 2013 2 / : SD/- SD/- (AMIT SHUKLA) (R.S.SYAL) ' ' ' ' ' ' ' ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; 4') DATED : 5 TH JULY 2013. SHEKHAR ' % / -'$#; < ;3$ ' % / -'$#; < ;3$ ' % / -'$#; < ;3$ ' % / -'$#; < ;3$/ COPY OF THE ORDER FORWARDED TO : 1. + / THE APPELLANT 2. -.+ / THE RESPONDENT. 3. = ( ) / THE CIT-7 MUMBAI. 4. = / CIT(A)-13 MUMBAI ITA NO.3930 3931 &3648/MUM/2012. M/S. R.K.OVERSEAS . 8 5. ;@: -'$') / DR ITAT MUMBAI 6. : A / GUARD FILE. ' %) ' %) ' %) ' %) / BY ORDER .;$ -'$ //TRUE COPY// B BB B/ // /C D C D C D C D ( DY./ASSTT. REGISTRAR) / ITAT MUMBAI