M/s LG Polymers India Pvt Ltd., Visakhapatnam v. The JCIT(OSD), Circle-3(1)., Visakhapatnam

ITA 427/VIZ/2006 | 2003-2004
Pronouncement Date: 03-01-2011 | Result: Allowed

Appeal Details

RSA Number 42725314 RSA 2006
Bench Visakhapatnam
Appeal Number ITA 427/VIZ/2006
Duration Of Justice 4 year(s) 2 month(s) 7 day(s)
Appellant M/s LG Polymers India Pvt Ltd., Visakhapatnam
Respondent The JCIT(OSD), Circle-3(1)., Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 03-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted Not Allotted
Tribunal Order Date 03-01-2011
Date Of Final Hearing 25-10-2010
Next Hearing Date 25-10-2010
Assessment Year 2003-2004
Appeal Filed On 27-10-2006
Judgment Text
ITA NOS.427/V/06&115/V/07 LG POLYMERS INDIA P LTD VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO. 427 /VIZAG/ 20 06 ASSESSMENT YEAR : 2003 - 04 L.G. POLYMERS INDI A (P) LTD VISAKHAPATNAM JCIT(OSD) CIRCLE - 3(1) VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AAACL 8528P ITA NO. 115 /VIZAG/200 7 ASSESSMENT YEAR : 2003 - 04 L.G. POLYMERS INDIA (P) LTD VISAKHAPATNAM ACIT CIRCLE - 3(1) VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AAACL 8528P APPELLANT BY: SHRI C.V.S. MURTHY CA RESPONDENT BY: SHRI TH. LUCAS PETER CIT( DR ) ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER : - THESE APPEALS ARE PREFERRED ON BEHALF OF THE ASSESSEE AGAINST THE RESPECTIVE ORDER OF THE CIT(A). SINCE THESE APPEALS WERE HEARD TOGETHER THESE ARE BEING DISPOSED OFF BY THIS ORDER. WE HOWEVER PREFER TO ADJUDICATE THESE APPEALS ONE AFTER THE OTHER. ITA NO.427 OF 2006: 2. THROUGH THIS APPEAL ASSESSEE HAS CHALLENGED THE ORDER OF THE CI T(A) ON TWO GROUNDS WHICH ARE AS UNDER: GROUND NO.2 : THE CIT(A) - I VISAKHAPATNAM IS NOT JUSTIFIED IN RESTRICTING THE CLAIM OF THE APPELLANT U/S 80HHC OF THE INCOME TAX ACT AT RS.1 58 32 166/ - AS AGAINST RS.1 76 38 672/ - CLAIMED BY THE APPELLANT IN ITS REVISED COMPUTATION FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AS THE COMPUTATION OF BOOK PROFIT ELIGIBLE FOR DEDUCTION U/S 80HHC WAS WORKED OUT IN ACCORDANCE ITA NOS.427/V/06&115/V/07 LG POLYMERS INDIA P LTD VSKP 2 WITH THE CBDT CIRCULAR DATED 19.12.1991 AND THE SAME IS FULLY SUPPORTED BY THE DECISION OF THE BANGALORE BENCH REPORTED IN 268 ITR PAGE 371 THE CLAIM OF THE APPELLANT AT RS.1 76 38 672/ - OUGHT TO HAVE BEEN ALLOWED AS ELIGIBLE DEDUCTION U/S 80HHC OF THE I.T. ACT INSTEAD OF RS.1 58 32 166/ - ALLOWED BY THE ASSESSING AUTHORITY. HENCE THE APP ELLANT PRAYS FOR RELIEF. GROUND NO.3 : THE CIT (A) - I VISAKHAPATNAM IS ALSO NOT JUSTIFIED IN REJECTING THE CLAIM OF THE APPELLANT AS THAT WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE I.T. ACT THE ENTIRE PROFIT ELIGIBLE FOR DEDUCTION U/S 80HHC HAS TO BE ALLOWED INSTEAD OF RESTRICTING THE DEDUCTION OF SUCH ELIGIBLE PROFIT BASING ON THE YEAR IN WHICH CERTAIN PERCENTAGE OF ELIGIBLE DEDUCTION U/S 80HHC IS TO BE ALLOWED. IN THE PRESENT ASSESSMENT YEAR SUCH PERCENTAGE OF ELIGIBLE DEDUCTION WAS 50% WHICH WA S ONLY DEDUCTED FROM OUT OF THE BOOK PROFIT COMPUTED BY THE ASSESSING AUTHORITY FOR PURPOSES OF LEVYING TAX U/S 115JB OF THE I.T. ACT. HENCE THE APPELLANT PRAYS THE HONOURABLE BENCH TO KINDLY GIVE NECESSARY DIRECTION IN THIS REGARD BY ALLOWING THE CLAIM OF THE APPELLANT FOR RS.3 52 77 344/ - INSTEAD OF RS.1 58 32 166/ - . 3. DURING THE COURSE OF HEARING OF THE APPEAL THE LD. COUNSEL FOR THE ASSESSEE HAS OPTED NOT TO PRESS THE GROUND NO.2. ACCORDINGLY THIS GROUND IS DISMISS ED BEING NOT PRESSED. NOW THE S OLE GROUND LEFT FOR ADJUDICATION IS ONLY WITH REGARD TO THE ELIGIBL E DEDUCTION U/S 80HHC OF THE I.T. ACT. 4. IN THIS R EGARD THE ASSESSEE HAS CLAIMED THE ENTIRE DEDUCTION ADMISSIBLE U/S 80HHC FOR THE COMPUTATION OF B OOK PROFIT U/S 115JB OF THE ACT WHILE THE REVENUE HAS RESTRICTED IT TO 50% OF SUCH ADMISSIBLE DEDUCTIONS. NOW THE ASSESSEE IS BEFORE US WITH THE SUBMISSIONS THAT THE IMPUGNED ISSUE IS SQUARELY COVERED BY THE JUDGEMENTS OF THE APEX COURT IN THE CASE OF AJANTA PHARMA LIMITED VS. CIT REPORTED AT 327 ITR 305. THEREFORE THE 100% OF THE ELIGIBLE DEDUCTIONS WORKED OUT BY HIM AT RS.3 16 64 332/ - HAS TO BE ALLOWED AS AGAINST 50% I.E. OF RS.1 58 32 166/ - ALLOWED BY THE LOWER AUTHORITIES. COPY OF THE ORDER OF JUDGEMENT OF THE APEX COURT IS ALSO PLACED ON RECORD. 5. THE LD. D.R. DID NOT DISPUTE THE FACTUAL ASPECT. ITA NOS.427/V/06&115/V/07 LG POLYMERS INDIA P LTD VSKP 3 6. HAVING CAREFULLY EXAMINED THE JUD GEMENT OF THE APEX COURT AND THE ORDER OF THE LOWER AUTHORITIES WE FIND THAT THE IMPUGNED IS SQUARELY COVERED BY THE JUDGEMENT OF THE APEX COURT IN THE CA SE OF AJANTA PHARMA LIMITED IN WHICH THEIR LORDSHIP HAVE CATEGORICALLY HELD THAT THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION U/S 80HHC IS TO BE REDUCED IN ORDER TO DETERMINE THE BOOK PROFIT IN TERMS OF SECTION 115JB OF THE ACT. SINCE THE IMPUGNED ISSUE I S SQUARELY COVERED BY JUDGEMENT OF THE APEX COURT IN THE AFORESAID CASE WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE A.O. TO REDUCE THE 100% PROFITS ELIGIBLE FOR DEDUCTION U/S 80HHC FROM THE NET PROFIT AS SHOWN IN THE P&L ACCOUNT IN ORDER TO DETERM INE THE BOOK PROFIT IN TERMS OF SECTION 1 1 5JB OF THE ACT. ACCORDINGLY THIS APPEAL IS DISPOSED OFF. ITA NO.115 OF 2007: 7. IN THIS APPEAL THE ASSESSEE HAS RAISED THE VARIOUS GROUNDS OF APPEAL BUT THEY ALL RELATE TO THE COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. ACCORDING TO THE ASSESSEE IT SHOULD BE COMPUTED INDEPENDENTLY IRRESPECTIVE OF THE BROUGHT FORWARD LOSSES. BUT ACCORDING TO THE REVENUE IT CAN ONLY BE COMPUTED AFTER ALLOWING THE SET OFF OF THE BROUGHT FORWARD LOSSES. THE BRIEF FACTS BORNE OUT FROM THE RECORD ARE THAT THE ASSESSMENT WAS ORIGINALLY COMPUTED U/S 143(3) OF THE ACT ON 27.3.2006 DETERMINING THE TOTAL INCOME BEFORE DEDUCTION U/S 80HHC OF THE ACT AT RS.1 68 87 160/ - . HOWEVER SINCE NORMAL INCOME AS COMPUTED BY THE A.O. WAS LESS T HAN 30% OF THE BOOK PROFIT THE PROVISION OF SECTION 1 1 5JB WAS APPLIED AND THE TOTAL INCOME AFTER ALLOWING DEDUCTION U/S 80HHC WAS COMPUTED AT RS.37 29 49 931/ - . C ONSEQUENT UPON THE PASSING OF THE APPEAL ORDER IN CASE OF THE ASSESSEE THE APPEAL EFFECT WAS GIVEN VIDE ORDER DATED 23.10.2006 DETERMINING THE TOTAL INCOME AT RS.36 45 08 370/ - AFTER ALLOWING DEDUCTION U/S 80HHC OF THE ACT. SUBSEQUENTLY THE A.O. NOTICED THAT DEDUCTION U/S 80HHC WAS ALLOWED BEFORE SETTING OFF EARLIER YEARS LOSSES/DEPRECIATION AN D THE SAME WAS CONSIDERED AS MISTAKE APPARENT FROM RECORD . A NOTICE U/S 154 OF THE ACT WAS ISSUED ON 23.10.2006 PROPOSING TO RECTIFY THE SAID MISTAKE. IN RESPONSE TO THE SAID NOTICE THE ASSESSEE SUBMITTED THAT CARRY FORWARD LOSSES NEED NOT BE DEDUCTED F OR ARRIVING AT DEDUCTION ADMISSIBLE U/S 80HHC SINCE PAST LOSSES ITA NOS.427/V/06&115/V/07 LG POLYMERS INDIA P LTD VSKP 4 HAVE NO RELEVANCE TO THE CURRENT YEARS BUSINESS. THE A.O. HOWEVER RELYING UPON THE PROVISIONS CONTAINED U/S 80AB OF THE ACT AS WELL AS THE DECISION OF THE HONBLE HIGH COUIRT IN CASE OF IPCA LABORATORIES VS. DCIT REPORTED IN 266 ITR 521 CONCLUDED THAT DEDUCTION U/S 80HHC IS ADMISSIBLE ONLY AFTER SETTING OFF THE BROUGHT FORWARD LOSSES ON EARLIER YEARS. ACCORDINGLY THE A.O. REDUCED THE BROUGHT FORWARD LOSSES FROM THE GROSS TOTAL INCOME AND AR RIVED AT A NET INCOME OF RS.2 45 33 867/ - . FROM SUCH NET INCOME IF ADJUSTMENT TOWARDS DEDUCTION OF 90% OF EXPORT INCENTIVES AS WELL AS INTEREST ON OTHER RECEIPTS IS MADE IT RESULTS IN A NEGATIVE FIGURE AND HENCE THE ASSESSING OFFICER CONCLUDED THAT THE A SSESSEE IS NOT ENTITLED TO ANY DEDUCTION U/S 80HHC OF THE ACT. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBMISSION THAT ISSUE IS DEBATABLE ONE AS SUCH RECTIFICATION CANNOT BE CALLED U/S 154 OF THE ACT. THE CIT(A) WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE AND HE APPROVED THE RECTIFICATION. 8. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND REITERATED ITS CONTENTIONS. HE HAS ALSO INVITED OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN THE CASE OF DCIT VS. M/S. VIVA GRANITES ITA 284/ V/ 2002 AND JUDGEMENT OF THIS JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VISAKHA INDUSTRIES 251 ITR 471 WITH THE SUBMISSION THAT EVEN ON MERIT THE BROUGHT FORWARD LOSSES SHOULD NOT BE DEDUCTED FROM THE PROFITS OF BUSINESS F OR THE PURPOSE OF CALCULATING DEDUCTIONS U/S 80HHC OF THE ACT . T HE COPY OF THE ORDER OF THE TRIBUNAL IS PLACED ON RECORD. 9. THE LD. D.R. HOWEVER PLACED A HEAVY RELIANCE UPON THE ORDER OF THE CIT(A). 10. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM CAREF UL PERUSAL OF RECORD WE FIND THAT THE IMPUGNED ISSUE WHETHER THE BROUGHT FORWARD LOSSES IS TO BE REDUCED FROM THE PROFITS OF BUSINESS FOR COMPUTING THE DEDUCTIONS IS NOT PLAIN AND SIMPLE ON WHICH PARTICULAR VIEW CAN BE TAKEN. VARIOUS AUTHORITIES HAVE TAK EN A DIFFERENT VIEW IN THIS REGARD. THE TRIBUNAL IN THE CASE OF DCIT VS. VIVA GRANITES (SUPRA) HAVE ALSO TAKEN A VIEW THAT BROUGHT FORWARD LOSSES SHOULD NOT BE DEDUCTED FROM PROFITS OF BUSINESS FOR THE PURPOSE OF CALCULATING ITA NOS.427/V/06&115/V/07 LG POLYMERS INDIA P LTD VSKP 5 DEDUCTION U/S 80HHC OF THE ACT FOLLOWING THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VISAKHA INDUSTRIES (SUPRA). THEREFORE THIS ISSUE IS ALSO COVERED ON MERIT IN FAVOUR OF THE ASSESSEES . M ORE OVER BEING ISSUE OF DEBATABLE IN NATURE THE RECTIFICATION U/S 15 4 IS NOT PERMISSIBLE UNDER THE LAW. THE SCOPE OF PROVISIONS OF SECTION 154 IS VERY LIMITED AND ONLY RECTIFICATION IS PERMISSIBLE WITH REGARD TO THE TOPOGRAPHICAL AND CLERICAL ERROR OR ON A PARTICULAR ISSUE ON WHICH THERE IS NO AMBIGUITY OR AMBIGUITY HAS B EEN CLEARED BY A SPECIFIC AMENDMENT OR BY THE JUDGEMENT OF THE APEX COURT. BUT IN THE INSTANT CASE THE ISSUE WAS QUITE DEBATABLE ONE . TH EREFORE WE ARE OF THE VIEW THAT THE RECTIFICATION U/S 154 IS NOT PERMISSIBLE. ACCORDINGLY WE SET ASIDE THE ORDER O F THE CIT(A) AND DELETE THE ADDITIONS MADE ON ACCOUNT OF RECTIFICATION. 11. IN THE RESULT THE APPEALS OF THE ASSESSEES ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 03.01 .20 1 1 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER J UDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 3 RD JANUARY 2011 COPY TO 1 M/S. L.G. POLYMERS INDIA (P) LTD. R.R. VENKATAPURAM VISAKHAPATNAM 2 JCIT (OSD) CIRCLE - 3(1) VISAKHAPATNAM 2 A CIT CIRCLE - 3(1) VISAK HAPATNAM 3 THE CI T VISAKHAPATNAM 4 THE CIT (A) VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM