M/S. SHIVASSA APPARELS, MUMBAI v. THE ITO WD 15(2)(3), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI BEFORE SHRI. N.V. VASUDEVAN (J.M.) AND SHRI. PRAMOD KUMAR (A.M) ITA NO. 6182 / MUM/ 200 7 ASSESSMENT YEAR: 2004 - 2005 SHIVASSA APPARELS SARAF & CHANDRA (C.A.) BHARAT INS. BLDG. 3 RD FLR. 15 - A HORNIMAN CIR FORT MUMBAI 400 001. PAN: AAUFS9219F VS . ITO WD 15(2)(3) MATRU MANDIR 1 ST FLR. TARDEO RD. MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI.P.S. RAMMATH RESPONDENT BY : SHRI PRABHAT JHA O R D E R PER N.V. VASUDEVAN J.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 29.08.2007 OF LEARNED CIT(A) - XV MUMBAI RELATING TO ASSESSMENT YEAR 2004 - 05. 2. THE FIRST ISSUE THAT ARISES FOR THE CONSIDERATION IN THIS APPEAL BY THE ASSESS EE I S TO WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.80IB OF THE ACT IN RESPECT OF DEPB AMOUNT RECEIVED AND DUTY DRAWBACK. THE ASSESS EE IS A MANUFACTURER AND EXPORTER OF READYMADE GARMENTS. IN THE RETURN OF INCOME ASSESSEE CLAIMED DEDUCTION U/S.80IB OF THE ACT AT RS.6 50 884/ - . ON SCRUTINY OF THE P & L A/C. THE ASSESSING OFFICER FOUND THAT THE OPERATING PROFIT OF THE ASSESSEE WAS RS.6 50 884/ - AND THE SAME HAVE BEEN ARRIVED AFTER TAKING INTO CONSIDERATION THE DEPB AMOUNT RECEIVED BY THE ASSESSEE AT RS.11 12 135/ - AND DUTY DRAWBACK AT RS.1 54 456/ - . THE ASSESSING OFFICER THEREFORE FOUND THAT IF THE ELEMENT OF DEPB AMOUNT RECEIVED AN D DUTY DRAWBACK ARE EXCLUDED FROM THE PROFIT THE OPERATING PROFIT WOULD BE REDUCED TO A LOSS OF RS.5 18 744/ - . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DEPB AMOUNT AND DUTY DRAWBACK CANNOT BE CONSIDERED AS PROFIT DERIVED FROM INDUSTRIAL UNDERTAKI NG AND HE THEREFORE DISALLOWED THE CLAIM ITA NO.6182/MUM/2007 A . Y . : 2004 - 2005 2 OF THE ASSESSEE FOR DEDUCTION U/S.80IB OF THE ACT. THE LEARNED CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 3. BEFORE US LEARNED COUNSEL FOR THE ASSESSEE COULD NOT POINT OUT AS HOW THE DEPB AND DUTY DRAWBACK CAN BE CONSIDERED AS INCOME DERIVED FROM INDUSTRIAL UNDERTAKING . THE HON BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. VS. CIT (262 ITR 278) (SC) AND IN THE CASE OF CIT VS. STERLING FOOD (237 ITR 579) (SC) AND IN THE CASE OF LIBERTY INDIA VS. CIT ( 317 ITR 218)(SC) HAS HELD THAT DEPB AND DUTY DRAWBACK CANNOT BE CONSIDERED AS PROFIT DERIVED FROM THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF ALLOWING DEDUCTION U/S.80IB OF THE ACT . IN VIEW OF THE AFORESAID DECISIONS WE ARE OF THE VI EW THAT CIT(A) WAS FULLY JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.80IB OF THE ACT ON DUTY DRAWBACK AND DEPB RECEIPTS. 4. THE NEXT ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL IS WITH REGARD TO CLAIM FOR DEDUCTION U/S.80H HC . WE HAVE ALREADY NOTICED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORTER OF READYMADE GARMENTS AT ITS UNIT LOCATED AT SILVASA A UNION TERRITORY. WE HAVE ALSO SEEN THAT ASSESSEE CLAIMED DEDUCTION U/S.80IB OF THE ACT OF RS.6 50 884/ - . WE HAVE ALSO SEEN THAT CLAIM FOR DEDUCTION OF THE ASSESSEE FOR 80IB WAS REJECTED BY THE ASSESSING OFFICER. IN THE COURSE OF ASSESSMENT PR O CE E DING THE ASSESSEE VIDE HIS LETTER DATED 27.12.2006 SUBMITTED THAT IT WAS ENTITLED TO CLAIM DEDUCTION U/S.80HHC OF THE ACT. THE ASSESSEE CLAIM ED DEDUCTION U/S.80HHC OF THE ACT AT RS. 3 41 763/ - . THE ASSESSING OFFICER REFUSED TO CONSIDER THE AFORESAID CL AIM OF THE ASSESSEE FOR THE REASON THAT THE SAME WAS NOT MADE IN THE RETURN OF INCOME. ON APPEAL BY THE ASSESSEE THE CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER FOR THE FOLLOWING REASONS. I HAVE CONSIDERED THE TECHNICAL CLAIM OF THE APPELLANT. I FIND THAT THE APPELLANT FAILED TO CLAIM OF DEDUCTION U/S.80HHC IN THE RETURN OF INCOME AS WELL AS BY FILLING REVISED RETURN. IN THIS WAY IT APPEARS TO BE A TOTALLY A CLAIM MADE BY THE APPELLANT BEFORE ASSESSING OFFICER IN COURSE OF ASSESSMENT PROCEED ING. NOW THE QUESTION ARISES AS TO WHETHER THE ITA NO.6182/MUM/2007 A . Y . : 2004 - 2005 3 ASSESSING OFFICER IS LEGALLY BOUND TO CONSIDER SUCH CLAIM OR NOT? I FIND THAT DECISION OF HON BLE SUPREME COURT IN THE CASE OF GOETAZE INDIA LTD. VS. CIT 284 ITR 323 (SC) CLEARLY GIVES AN ANSWER TO THIS Q UESTION WHEREIN IT WAS HELD THAT THE ASSESSING OFFICER IS NOT UNDER ANY LEGAL OBLIGATION TO ENTERTAIN SUCH FRESH CLAIM AT THE ASSESSMENT STAGE WHEREAS SUCH CLAIM HAS NOT BEEN MADE IN THE RETURN OR REVISED RETURN. THEREFORE I DISMISS THE APPEAL OF THE APPELLANT FOLLOWING THE ABOVE DECISION. 5. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEGITIMATE CLAIM TO WHICH THE ASSESSEE WAS ENTITLED TO AS PER THE LAW SHOULD BE ALLOWED NOTWITHSTANDING THE FACT THAT THE SAME WAS NOT CLAIM ED I N THE RETURN OF INCOME. IT WAS FURTHER SUBMITTED THAT IN THE DECISION IN THE CASE OF GOETZE INDIA LTD. VS. CIT 284 ITR 323 (S C) THE HON BLE SUPREME COURT HAS NOT DEALT WITH THE POWER OF THE APPELLATE AUTHORITY UNDER THE ACT REGARDING ENTERTAINING A CLA IM WHICH WAS NOT MADE IN THE ORIGINAL RETURN OF INC O ME OR BY FILING REVISED RETURN OF INCOME . A CCORDING TO HIM T HE CIT(A) THEREFORE OUGHT TO HAVE ENTERTAINED THE CLAIM OF THE ASSESSEE AND EXAMINE D THE ELIGIBILITY OR OTHERWISE O F CLAIM MADE BY THE ASSESSEE. 6. THE LEARNED D.R. RELIED ON THE ORDER OF THE LEARNED CIT(A) . A FTER CONSIDERING THE RIVAL SUBMISSION W E ARE OF THE VIEW THAT THE LEARNED CIT(A) SHOULD HAVE ENTERTAINED AND EXAMINE D THE CLAIM OF THE ASSESSEE FOR DEDUCTIO N U/S.80HHC OF THE ACT. THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. JAI PARABOLIC SPRINGS LTD. 306 ITR 42 (DELHI) AFTER CONSIDERING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. (SC) H AS HELD THAT THE TRIBUNAL HAS POWER TO ENTERTAIN A CLAIM BY WAY OF ADDITIONAL GROUNDS WHICH ARISES FOR CONSIDERATION IN AN ASSESSMENT AND NECESSARY FOR PROPER DECISION OF THE CASE. APPLYING THE RATIO LAID DOWN IN THE AFORESAID CASE WE HOLD THAT CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.80HHC OUGHT TO HAVE BEEN EXAMINE D BY THE CIT(A). 7. THE ISSUE REQUIRES EXAMINATION BY THE ASSESSING OFFICER. WE THEREFORE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THE ISSUE WITH REGARD TO THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.80HHC FOR FRESH ITA NO.6182/MUM/2007 A . Y . : 2004 - 2005 4 CONSIDERATION BY THE ASSESSING OFFICER. THE ASSESSING OFFICER WILL CONSIDER THE CLAIM OF THE ASSESSE E FOR DEDUCTION U/S.80HHC IN ACCORDANCE WITH LAW AFTER AFFORDING THE ASSESSEE OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 30 TH DAY OF APRIL 2010. SD/ - (PRAMOD KUMAR) (ACCOUNTANT MEMBER) SD/ - (N.V. VASUDEVAN) (JUDICIAL MEMBER) MUMBAI DATED 30 TH APRIL 2010. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) - XV MUMBAI 4. COMMISSIONER OF INCOME TAX CITY - XV MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH J MUMBAI // TRUE COPY // BY ORDER ASSTT. REGISTRAR ITAT MUMBAI ITA NO.6182/MUM/2007 A . Y . : 2004 - 2005 5 DATE INITIALS 1. DRAFT DICTATED ON 27.04.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 28.04.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM /JM 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER