Eimco Elecon (I) Ltd.,, Dist.Anand v. The ACIT.,Anand Circle,, Anand

ITA 48/AHD/2008 | 2004-2005
Pronouncement Date: 17-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 4820514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 48/AHD/2008
Duration Of Justice 2 year(s) 7 month(s) 15 day(s)
Appellant Eimco Elecon (I) Ltd.,, Dist.Anand
Respondent The ACIT.,Anand Circle,, Anand
Appeal Type Income Tax Appeal
Pronouncement Date 17-08-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 17-08-2010
Date Of Final Hearing 16-08-2010
Next Hearing Date 16-08-2010
Assessment Year 2004-2005
Appeal Filed On 02-01-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.48/AHD/2008 ASSESSMENT YEAR: 2004-05 DATE OF HEARING:16.8.10 DRAFTED:17.8.10 EIMO ELECON (I) LIMITED ANAND SOJITRA ROAD VALLBH VIDYANAGAR TAL & DIST. ANAND PAN NO.AAACE4645C V/S . ASSTT. COMMISSIONER OF INCOME TAX CIRCLE- ANAND (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SUNIL H TALATI AR RESPONDENT BY:- SHRI R.K. DHANESTA DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDE R OF COMMISSIONER OF INCOME-TAX (APPEALS)-IV BARODA IN APPEAL NO.CAB/IV -A-289/06-07 DATED 26-10- 2007. THE ASSESSMENT WAS FRAMED BY ACIT ANAND CIRC LE U/S.143(3) OF THE INCOME- TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 28-12-2006 FOR ASSESSMENT YEAR 2004-05. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF DIRECTORS FOREIGN T RAVEL EXPENSES INCURRED BY ASSESSEE-COMPANY. FOR THIS THE ASSESSEE HAS RAISED THE GROUND NO.2 :- 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.12 26 960 BEING 40% O F DIRECTORS FOREIGN TRAVELING EXPENSES INCURRED BY THE COMPANY. YOUR AP PELLANT SUBMITS THAT ADHOC DISALLOWANCE MADE IS NOT JUSTIFIED AND SAME B E DELETED NOW. 3. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SHRI SUNIT H TALATI STATED THAT DETAILED SUBMISSIONS WERE MADE BEFORE THE CIT(A) W HICH IS AT PAGE 5-7 OF ASSESSEES PAPER BOOK WHERE THE DETAILS WERE ALSO FURNISHED TO ASSESSING OFFICER ITA NO.48/AHD/2008 A.Y. 2004-05 EIMCO ELECON (I) LTD. V. ACIT CIR-ANAND PAGE 2 WHICH IS AT PAGE-3 OF THE ASSESSMENT ORDER IN PARA- 4.1 WHEREIN FOREIGN TOUR EXPENSES OF RS.16 40 704/- IN RESPECT OF DIRECTORS AT RS.14 26 698/- WHICH WAS IN RESPECT OF OTHER EMPLOYEES WERE FURNISHED. THE AO E RRED IN APPLYING FORMULA OF 40% DISALLOWANCE OUT OF TOTAL EXPENSES OF RS.30 67 402/ - WHICH INCLUDED EXPENSES ON FOREIGN TOUR OF EMPLOYEES FOR THE PURPOSE OF BUSINE SS OF THE ASSESSEE-COMPANY THOUGH THE AO AT PAGE-4 OF THE ASSESSMENT ORDER OBS ERVED THAT OUT OF THE TOTAL FOREIGN TOUR EXPENSES OF THE DIRECTOR OF THE COMPAN Y 40% OUT OF SUCH EXPENSES OF RS.30 67 402/- IS DISALLOWED. THUS ALTHOUGH DISALLO WANCE WAS TO BE MADE IN RESPECT OF DIRECTORS TRAVELING EXPENSES DISALLOWANCE IS A LSO MADE IN RESPECT OF EMPLOYEES TRAVELING EXPENSES WHICH IS NOT AT ALL JUSTIFIED. THEREFORE DISALLOWANCE OF 40% ON RS.12 26 698/- DESERVES TO BE DELETED AND THE SAME BE DELETED. LD. COUNSEL FOR THE ASSESSEE AS REGARDS THE EXPENS ES ON FOREIGN TOUR INCURRED BY THE DIRECTOR STATED THAT DETAILS WERE FURNISHED WH ICH ARE AT PAGE 77 TO 122 OF ASSESSEES PAPER BOOK EVIDENCING VARIOUS VOUCHERS A ND STATEMENT INCLUDING THE DETAILS OF PURPOSE OF VISIT TO THE FOREIGN COUNTRY. ACCORDING TO HIM ALL THE VISITS WERE FOR THE PURPOSE OF PURCHASE OF MACHINE OR VISIT TO AN EXHIBITION AND THIS CAN BE VERIFIED FROM THE DETAILS OF EXHIBITION GIVEN AT PA PER BOOK PAGE 115 TO 122. THE AUTHORITIES BELOW HAVE UNFORTUNATELY FAILED TO APPR ECIATE THAT ALL THE EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS AND DISALLOWED THE CLAIM BY ACCEPTING THE SAME IN PART ONLY. ACCORDING TO THE LD. COUNSEL IN RESP ECT OF IDENTICAL DISALLOWANCE THE TRIBUNAL FOR ASSESSMENT YEAR 2002-03 HAD RESTORED T HE ISSUE TO THE FILE OF ASSESSING OFFICER IN ITA NO.189/AHD/2006 VIDE PARA-6 OF THE TRIBUNAL ORDER AND ON EXACTLY IDENTICAL GROUND FOR ASSESSMENT YEAR 2001-02 IN ITA NO.941/AHD/2005 AT PARA-13 THE TRIBUNAL HAS ALLOWED THE ENTIRE CLAIM AND HELD THAT ONCE IT IS ACCEPTED BY THE A.O. THAT FOREIGN TOUR WAS FOR THE PURPOSE OF BUSIN ESS THE PART DISALLOWANCE IS NOT JUSTIFIED. HE ALSO STATED THAT UNFORTUNATELY FOR AS SESSMENT YEAR 2003-04 THE TRIBUNAL IN ITA NO.2420/AHD/2007 COULD NOT APPRECIATE THE SUBMISSIONS AND CONFIRMED 40% DISALLOWANCE. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSI NG OFFICER HAS NOT EXAMINED THE FACTS PROPERLY AS REGARDS TO VISITS OF ASSESSEE TO FOREIGN COUNTRIES WHETHER THE SAME ARE FOR THE PURPOSES OF BUSINESS OR NOT. WE FIND FR OM THE TRIBUNALS ORDER FOR ASSESSMENT YEAR 2002-03 IN ITA NO.189/AHD/2006 DATED 18-12-2009 WHEREIN THE ITA NO.48/AHD/2008 A.Y. 2004-05 EIMCO ELECON (I) LTD. V. ACIT CIR-ANAND PAGE 3 TRIBUNAL HAS RESTORED THE MATTER TO THE FILE OF ASS ESSING OFFICER BY GIVING FOLLOWING FINDINGS IN PARA-6 :- 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE RES TORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO SEE WHETHER VISITS ARE PRO PERLY RECORDED IN THE PASS PORT AND WHETHER THE COUNTRIES TO WHICH VISITS ARE UNDERTAKING ARE ON BUSINESS MAP OF THE ASSESSEE WHETHER IT IS PURCHASING RAW M ATERIAL OR MAKING SALES OR PROCURING TECHNICAL EXPERTISE. IF ASSESSEE IS UN ABLE TO PRODUCE ANY EVIDENCE AS TO THE BUSINESS PURPOSE OF THE TRIPS T HE DISALLOWANCE IS CALLED FOR. ACCORDINGLY THIS ISSUE IS RESTORED TO THE FIL E OF THE ASSESSING OFFICER. ACCORDINGLY ON IDENTICAL DIRECTIONS WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER. THIS ISSUE OF THE ASSESSEES APP EAL IS ALLOWED FOR STATISTICAL PURPOSES. 5. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN NOT ALLOWING THE NETTING OF INTEREST INCOME FOR THE PUR POSE OF COMPUTATION OF DEDUCTION U/S.80HC. FOR THIS ASSESSEE HAS RAISED THE FOLLOWI NG GROUND NO.3 :- 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING RECALCULATION OF DEDUCTION U/S.80HHC BY REDUCING GROSS INTEREST. YOUR APPELLANT SUBMITS THAT ONLY NET INTEREST BE CO NSIDERED AND AO BE DIRECTED TO ALLOW THE DEDUCTION UD/S.80HHC AS PER P ROVISIONS OF LAW. 6. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS REQUIRE D THE ASSESSEE TO EXPLAIN THE NATURE OF INTEREST INCOME OF RS.1 20 73 457/-. THE ASSESSEE STATED THAT ONLY NET FIGURE OF INTEREST IS TO BE CONSIDERED AFTER CONSID ERING THE INTEREST PAID DURING THE YEAR AND INTEREST EARNED DURING THE YEAR. ACCORDING TO ASSESSEE THERE BEING NO SURPLUS THE INTEREST SHOULD NOT BE REDUCED WHILE C ALCULATING THE DEDUCTION U/S.80HHC OF THE ACT. ADMITTEDLY THE INTEREST INCO ME IS ARISING OUT FIXED DEPOSIT MAINTAINED WITH BANKS AS STATED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US. THE AO TREATED THE INTEREST INCOME AS INCOME FROM OTHER SOURCES AND EXCLUDED THE GROSS INTEREST FOR THE PURPOSE OF COMPUTATION OF DE DUCTION UNDER CLAUSE (BAA) OF SECTION 80HHC OF THE ACT. THE CIT(A) ALSO CONFIRMED THE NATURE OF INTEREST AS INCOME FROM OTHER SOURCES. AGGRIEVED ASSESSEE NOW CAME IN SECOND APPEAL BEFORE US. ITA NO.48/AHD/2008 A.Y. 2004-05 EIMCO ELECON (I) LTD. V. ACIT CIR-ANAND PAGE 4 7. BEFORE US WE FIND THAT THIS ISSUE IS NOW SETTLED BY HONBLE APEX COURT IN THE CASE OF CIT V. K. RAVINDRANATH NAIR (2007) 295 ITR 228 (SC) AND BY THE RECENT DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT V. ASIAN STAR CO. LTD. IN ITA NO.200 OF 2009 (BOM) WHEREIN HONBLE BOMBAY HIGH COURT OBSERVE D THAT EXPLANATION (BAA) TO S. 80HHC REQUIRES THAT NINETY PER CENT OF RECEIPTS BY WAY OF BROKERAGE COMMISSION INTEREST RENT CHARGES OR A NY OTHER RECEIPT OF A SIMILAR NATURE HAVE TO BE REDUCED FROM THE PROFITS. THE REA SON WHY ITEMS LIKE BROKERAGE ETC HAVE TO BE EXCLUDED IS BECAUSE THEY DO NOT POSSESS ANY NEXUS WITH EXPORT TURNOVER AND THEIR INCLUSION IN PROFITS WOULD RESULT IN A DI STORTION OF THE FIGURE OF EXPORT PROFITS. HOWEVER AS SOME EXPENDITURE MIGHT HAVE BEEN INCURR ED IN EARNING THESE INCOMES AN ADHOC DEDUCTION OF TEN PER CENT FROM SUCH INCOME IS ALLOWED. IT WAS FURTHER OBSERVED BY THE HONBLE HIGH COURT THAT ONCE PARLIA MENT HAS LEGISLATED BOTH IN REGARD TO THE NATURE OF THE EXCLUSION AND THE EXTEN T OF THE EXCLUSION IT WOULD NOT BE OPEN TO THE COURT TO ORDER OTHERWISE BY REWRITING T HE LEGISLATIVE PROVISION. THE TASK OF INTERPRETATION IS TO FIND OUT THE TRUE INTENT OF A LEGISLATIVE PROVISION AND IT IS CLEARLY NOT OPEN TO THE COURT TO LEGISLATE BY SUBSTITUTING A FO RMULA OR PROVISION OTHER THAN WHAT HAS BEEN LEGISLATED BY PARLIAMENT. IT IS NOT OPEN T O SAY THAT SOMETHING MORE THAN THE 10% STATUTORILY PROVIDED SHOULD ALSO BE ALLOWED. HO NBLE HIGH COURT FURTHER HELD THAT IN CIT V. SHRI RAM HONDA POWER EQUIP (2007)289 ITR 475 (DEL) THE DELHI HIGH COURT HAS NOT ADEQUATELY EMPHASIZED THE ENTIRE RATI ONALE FOR CONFINING THE DEDUCTION ONLY TO THE EXTENT OF NINETY PER CENT OF THE EXCLUD IBLE RECEIPTS AND IT CANNOT BE FOLLOWED. AS REGARDS THE JUDGEMENT OF THE SPECIAL BENCH IN LALSONS ENTERPRISES HONBLE HIGH COURT HELD THAT WE ARE AFFIRMATIVELY OF THE VIEW THAT THE TRIBUNA L HAS TRANSGRESSED THE LIMITATIONS ON THE EXERCISE OF JUD ICIAL POWER AND . HAS IN EFFECT LEGISLATED BY PROVIDING A DEDUCTION ON THE GROUND O F EXPENSES OTHER THAN IN THE TERMS WHICH HAVE BEEN ALLOWED BY PARLIAMENT. THAT I S IMPERMISSIBLE. IN REPLY THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT WHEN TWO HIGH COURTS DIFFER ON THE SAME ISSUE THE BENEFICIAL VIE W SHOULD BE TAKEN IN FAVOUR OF THE ASSESSEE. HE STATED THAT HONBLE DELHI HIGH COURT I N THE CASE OF CIT V. SHRI RAM HONDA POWER EQUIP (2007) 289 ITR 475 (DELHI) HAS ALLOWED THE CLAIM O F THE ASSESSEE AS REGARD TO NETTING OF INTEREST ON THE AL LOWANCE OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. ITA NO.48/AHD/2008 A.Y. 2004-05 EIMCO ELECON (I) LTD. V. ACIT CIR-ANAND PAGE 5 8. WE FIND THAT THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF ASIAN STAR CO. LTD. (SUPRA) HAS CONSIDERED THE DELHI HIGH COURT JUDGMEN T IN THE CASE OF SHRI RAM HONDA POWER EQUIP (SUPRA) AS WELL THE CASE OF SPECIAL BENCH OF THIS TRIBUNAL IN LALSON ENTERPRISES AND HELD THAT 90% OF RECEIPTS BY WAY OF INTEREST HA VE TO BE REDUCED FROM THE BUSINESS PROFITS WHILE COMPUTING D EDUCTION U/S.80HHC OF THE ACT UNDER CLAUSE (BAA). IN THE PRESENT CASE BEFORE US I T IS NOT CASE THAT THE INTEREST INCOME IS BUSINESS INCOME RATHER IT IS REVERSE AND THE INTEREST INCOME IS INCOME FROM OTHER SOURCES AND EVEN DELHI HIGH COURT IN THE CASE OF SHRI RAM HONDA POWER EQUIP (SUPRA) HAS HELD THAT INTEREST INCOME BEING I NCOME FROM OTHER SOURCES IS NO ELIGIBLE FOR DEDUCTION UNDER CLAUSE BAA OF SECTION 80HHC OF THE ACT. RESPECTFULLY FOLLOWING HONBLE BOMBAY HIGH COURT IN ASIAN STAR CO. LTD. (SUPRA) WE UPHOLD THE ORDER OF CIT(A) AND THIS ISSUE OF THE ASSESSEES AP PEAL IS DISMISSED. 9. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 17/08/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 17/08/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-IV BARODA 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD