ADDL CIT SP RG 4, MUMBAI v. ACC LTD, MUMBAI

ITA 6262/MUM/2010 | 1990-1991
Pronouncement Date: 21-12-2011 | Result: Partly Allowed

Appeal Details

RSA Number 626219914 RSA 2010
Assessee PAN AAACT1507C
Bench Mumbai
Appeal Number ITA 6262/MUM/2010
Duration Of Justice 1 year(s) 4 month(s) 2 day(s)
Appellant ADDL CIT SP RG 4, MUMBAI
Respondent ACC LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-12-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 21-12-2011
Date Of Final Hearing 07-12-2011
Next Hearing Date 07-12-2011
Assessment Year 1990-1991
Appeal Filed On 19-08-2010
Judgment Text
ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 1 OF 21 IN THE INCOME TAX APPELLATE TRIBUNAL 'H' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NOS. 6262 & 6263/MUM/2010 (ASSESSMENT YEARS:1990-91 & 1991-92) ADDL. C.I.T. SP RANGE-4 ACC LIMITED 29 TH FLOOR CENTRE-1 CEMENT HOUSE WORLD TRADE CENTRE 121 M.K. ROAD CUFFE PARAE MUMBAI 400005 VS MUMBAI 400020 PAN NO: AAACT 1507 C APPELLANT RESPONDENT ITA NOS.6279 TO 6284/MUM/2010 (ASSESSMENT YEARS: 1990-91 TO 1994-95 & 1996-97) ACC LIMITED ASST. COMMISSIONER OF CEMENT HOUSE INCOME TAX RANGE 1(1) 121 MK ROAD MUMBAI MUMBAI 400020 VS PAN: AAACT 1507 C APPELLANT RESPONDENT DEPARTMENT BY: SHRI SRINIVASA RAO ASSESSEE BY: SHRI VIJAY SHAH &BASANT KARAT DATE OF HEARING: 07/12/2011 DATE OF PRONOUNCEMENT: 21/12/2011 O R D E R PER BENCH: IN THESE EIGHT APPEALS THERE ARE CROSS APPEALS FOR ASSESSMENT YEAR 1990-91 AND 1991-92 BY THE ASSESSEE AND REVENU E WHEREAS THERE ARE ONLY ASSESSEE APPEALS IN OTHER ASSESSMENT YEARS. SINCE COMMON ISSUES ARE INVOLVED THESE WERE HEARD TOGETH ER AND DECIDED AS UNDER. ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 2 OF 21 ASSESSEE APPEALS: ITA 6279 TO 6284/ M /2010 IN ALL ASSESSEES APPEALS VARIOUS GROUNDS R AISED ARE ON FOUR ISSUES. THE ASSESSEE HAS FURNISHED A CHART INDICATI NG THE ISSUES AND GROUNDS OF APPEAL RELEVANT TO EACH ASSESSMENT Y EAR. ACCORDINGLY ON THE BASIS OF THE CHART AND SUBMISSI ONS FROM THE LEARNED COUNSEL AND LEARNED DEPARTMENTAL REPRESENTA TIVE THE ISSUES ARE DECIDED AS UNDER. ISSUE NO.1 . EXCLUSION OF RENTAL INCOME INTEREST INCOME AND MANAGEMENT FEES IN COMPUTING PROFITS FROM BUSINESS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC : 1.0 THIS ISSUE ARISES AS GROUND NO.1 IN ASSESSMEN T YEARS 1992- 93 1993-94 1994-95 AND AS GROUND NO 1 & 2 IN AY 1 996-97. THE CONTENTION IS WITH REFERENCE TO EXCLUSION OF ABOVE RECEIPTS FROM PROFITS OF BUSINESS UNDER SEC. 80HHC. 1.1 IN THE COURSE OF ARGUMENTS THE LEARNED COUNSEL DID NOT PRESS THE ISSUE WITH REFERENCE TO EXCLUSION OF RENTAL INC OME AND INTEREST INCOME IN VIEW OF THE ORDERS OF THE ITAT IN EARLIER YEARS AS WELL AS THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF ASIAN STAR CO. LTD 326 ITR 56. HENCE THAT PART OF THE GRO UND PERTAINING TO THE EXCLUSION OF RENTAL INCOME AND INTEREST INCO ME WAS TREATED AS WITHDRAWN. 1.2 THE OTHER ISSUE TO BE CONSIDERED IN THESE GROUN DS IS WITH REFERENCE TO THE RECEIPT OF MANAGEMENT FEES. THE AS SESSEE HAS ENTERED INTO AN AGREEMENT WITH THE YANBU CEMENT COM PANY LTD TO OFFER TECHNICAL KNOWHOW FOR THE OPERATION MAINTENA NCE AND EFFICIENT WORKING OF THEIR CEMENT PLANTS. THE ASSES SEE RECEIVED CONSIDERATION IN FOREIGN CURRENCY BY WAY OF MANAGEM ENT CONSULTANCY FEES. IT IS THE CLAIM OF THE ASSESSEE THAT THE RECEIPT IS NOTHING BUT INCOME ARISING IN THE COURSE OF MAIN BU SINESS HENCE TO BE CONSIDERED AS PROFITS OF THE BUSINESS FOR T HE PURPOSE OF DEDUCTION UNDER SECTION 80HHC. THE MATTER WAS ORIGI NALLY RAISED ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 3 OF 21 AS ADDITIONAL GROUNDS BEFORE THE INCOME TAX APPELLA TE TRIBUNAL WHICH SET ASIDE THE ISSUE TO THE FILE OF THE ASSESS ING OFFICER FOR EXAMINATION ON FACTS. THE ASSESSING OFFICER VIDE TH E ORDER GIVING EFFECT TO IN PARA 4 DISCUSSED THIS MATTER EXAMINED THE ISSUE WITH REFERENCE TO PROVISIONS OF EXPLANATION BAA TO SEC.8 0HHC. SINCE THE ASSESSEE IS NOT HAVING ANY BRANCH OFFICE OUTSIDE IN DIA HE ALSO DISCUSSED THIS ISSUE WHETHER IT IS COVERED BY BAA ( II) AND SINCE NO FACTS WERE SUBMITTED WITH REFERENCE TO NATURE OF RE CEIPTS HE HAS GIVEN A FINDING THAT FACTUAL VERIFICATION OF ASSESS EES CLAIM IS NOT POSSIBLE AND ACCORDINGLY DISMISSED THE ASSESSEES CLAIM. CIT(A) UPHELD THE SAME. 1.3 BEFORE US THE LEARNED COUNSEL REITERATED THE S AME SUBMISSIONS. AFTER CONSIDERING THE FACTS WE ARE OF THE OPINION THAT THE ORDERS OF THE ASSESSING OFFICER AND CIT (A) ON THIS ISSUE ARE TO BE UPHELD. EVEN THOUGH THE ASSESSEE CLAIMS THAT IT IS OPERATIONAL INCOME TO BE CONSIDERED AS PROFITS OF BUSINESS T HESE RECEIPTS HAVE NO DIRECT RELATIONSHIP WITH THE ASSESSEES CLAIM UN DER SECTION 80HHC ON EXPORT OF GOODS. THESE ARE SERVICES SEPAR ATELY RENDERED BY THE ASSESSEE COMPANY TO A FOREIGN COMPANY. THERE FORE EVEN THOUGH IT IS A BUSINESS INCOME THESE INCOMES WILL FALL UNDER NON OPERATIONAL INCOME LIKE BROKERAGE COMMISSION INTE REST OR ANY OTHER RECEIPT OF SIMILAR NATURE TO BE EXCLUDED AT 9 0% UNDER THE PROVISIONS OF SECTION 80HHC EXPLANATION (BAA). EVEN IN THE PROCEEDINGS BEFORE THE AO WHEN RESTORED BY ITAT AS SESSEE DID NOT SUBMIT ANY DETAILS TO SUBSTANTIATE THE CLAIM. CONSI DERING THAT ASSESSEE ORIGINALLY EXCLUDED THE SAME AND ONLY CONT ESTED BEFORE THE ITAT AS ADDITIONAL GROUND THE ASSESSING OFFICERS AND THE CIT (A)S ORDERS ON THIS ISSUE ARE UPHELD AND ASSESSEES GROU ND IS REJECTED. 1.4 IN THE RESULT ALL RESPECTIVE GROUNDS ON THIS I SSUE STANDS REJECTED. ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 4 OF 21 ISSUE-2. EXCLUSION OF MISCELLANEOUS RECEIPTS FROM PROFITS AND GAINS IN COMPUTING DEDUCTION UNDER SECTION 80I : THIS ISSUE ARISES AS GROUND NO.3 IN ASSESSMENT YEAR 1996-97 ONLY. 2.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE IN CLUDED MISCELLANEOUS RECEIPTS AS PROFIT & GAINS OF BUSINES S WHILE COMPUTING DEDUCTION UNDER SECTION 80I IN RESPECT OF MADUKARAI UNIT. THE AO DID NOT ALLOW DEDUCTION ON THE ABOVE I NCOMES BUT CIT (A) HAS ALLOWED THE SAME. AGAINST THE ORDERS OF THE CIT (A) THE REVENUE WENT IN APPEAL. THE HON'BLE ITAT HAS RESTOR ED THE MATTER TO ASSESSING OFFICER FOR DECIDING THE ISSUE IN THE LINE WITH DECISIONS OF HON'BLE AHMEDABAD SPECIAL BENCH IN THE CASE OF N IRMA INDUSTRIES LTD VS. ACIT (2005) 95 ITD 199 (AHD-SB) AS WELL AS DECISION OF DELHI SPECIAL BENCH IN THE CASE OF LALS ON ENTERPRISES VS. DCIT 89 ITD 25(DEL.SB). IN COMPUTING DEDUCTION UNDER SECTION 80HH AND 80I IN CONSEQUENTIAL ORDERS RELIEF WAS N OT GRANTED BY THE ASSESSING OFFICER IN RESPECT OF THE FOLLOWING A MOUNTS: PARTICULARS AMOUNT ( ` ) CAR & BUS HIRE CHARGES 14 716.80 SALE OF EMPTY OIL DRUMS 4 544.70 RENT RECOVERED FROM OUTSIDE PARTIES 18 23 465.00 SCHOOL GRANT RECEIVED 3 11 269.15 INCIDENTAL CHARGES ON MATERIAL RECEIVED 26 859.00 RECOVERY OF LOST TOOLS 400.00 CONSULTANCY SERVICE CHARGES 10 200.00 REBATE ON FRANKING MACHINE 901.00 SUNDRY 5 83 397.51 HO ENTRY 4 47 599.00 TOTAL 32 23 352.16 THE ASSESSING OFFICER EXAMINED THE AMOUNTS AND HAS COME TO THE CONCLUSION THAT THESE RECEIPTS WERE NOWHERE ESTABLI SHED TO HAVE ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 5 OF 21 DIRECT OR IMMEDIATE NEXUS WITH THE INDUSTRIAL UNDER TAKING. ACCORDINGLY HE DISALLOWED THE CLAIM UNDER SECTION 8 0I. BEFORE THE CIT (A) THE ASSESSEE REITERATED THE SAME SUBMISSION AND THE CIT (A) ALLOWED THE AMOUNT TO THE EXTENT OF INCOMES ARISING FROM SALE OF EMPTY OIL DRUMS INCIDENTAL CHARGES ON MATERIAL REC EIVED AND RECOVERY OF LOST TOOLS WHEREAS HE DID NOT ALLOW OTH ER AMOUNTS. 2.2 BEFORE US THE LEARNED COUNSEL FAIRLY SUBMI TTED THAT THE ASSESSEE WAS NOT IN A POSITION TO CORRELATE THE AMO UNTS RECEIVED AS RENT FROM OUTSIDE PARTIES AS RECOVERY OF THE AMOUNT S PAID AND OTHER RECEIPTS DETAILS OF WHICH ARE NOT AVAILABLE AT PRE SENT. IN VIEW OF THIS WE HAVE NO OTHER OPTION THAN TO CONFIRM THE A CTION OF THE ASSESSING OFFICER IN TREATING THE MISCELLANEOUS EXP ENSES AS NOT RELATED TO THE INDUSTRIAL UNDERTAKING. EVEN THOUGH THE ASSESSEE RELIED ON THE DECISION OF THE HON'BLE MADRAS HIGH C OURT IN THE CASE OF CIT VS. SUNDARAM INDUSTRIES LTD (2002) 253 ITR 3 96 (MAD) THE ISSUE WAS RELATED TO SALE OF SCRAP WHICH THE CIT (A ) HAS ALLOWED. SIMILAR RELIANCE ON CIT VS. ELTEK SGS (P) LTD (2006 ) 10 SOT 178 (DEL) IS ALSO MISPLACED WHERE THE ISSUE IS WITH REF ERENCE TO AMOUNT OF DUTY DRAWBACK THE PRINCIPLE OF WHICH WAS SUBSEQ UENTLY REVERSED BY THE HONBLE SUPREME COURT IN LIBERTY INDIA 317 I TR218 (SC). ASSESSEE COULD NOT RELATE THE RECEIPT OF THE ABOVE INCOME TO THE INDUSTRIAL UNIT FOR CLAIM OF DEDUCTION UNDER SECTIO N 80I. IN VIEW OF THIS THE ASSESSEES CLAIM CANNOT BE ALLOWED. ACCOR DINGLY THE GROUND ON THIS ISSUE IS DISMISSED. ISSUE-3 . ERROR ON COMPUTATION OF INTEREST UNDER SECTION 244A : THIS ISSUE ARISES AS GROUND NO.1 IN AY 1990-91 AND AY 1991-92 AS GROUND NO.2 IN AY 1992-93 AND AY 1994-95 AND AS GROUND NO.4 IN 1996-97. 3.1 THE ASSESSEE WAS AGGRIEVED BY THE METHOD O F CALCULATION OF INTEREST ON THE REFUND UNDER SECTION 244A. THE MAIN GRIEVANCE OF THE ASSESSEE WAS THAT THE INTEREST UNDER SECTION 24 4A IS TO BE ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 6 OF 21 CALCULATED ON THE TAX REFUND WITHOUT REDUCING THE I NTEREST GRANTED EARLIER ON REFUND. 3.2 IT WAS FAIRLY SUBMITTED BEFORE US THAT THIS ISS UE WAS CONSIDERED BY THE ITAT MUMBAI BENCHES (A) IN ABUDHA BI COMMERCIAL BANK LTD VS. DCIT IN ITA NO.5136/MUM/200 9 (COPY PLACED ON RECORD) WHEREIN IT HAS BEEN HELD THAT THE INTEREST NEEDS TO BE CALCULATED ON THE REFUND DUE TO THE ASSESSEE WIT HOUT REDUCING THE INTEREST UNDER SECTION 244A WHICH IS PART OF RE FUND EARLIER GRANTED. IN THE ABOVE CASE IT WAS HELD VIDE PARA 7 & 8 AS UNDER: 7.WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND REL EVANT RECORD. IT IS EVIDENT FROM THE ORDERS OF THE LOWER AUTHORITIES THAT THE ASSESSING OFFICER HAS CALCULAT ED THE INTEREST UNDER SECTION 244A BY REDUCING THE REFUND OF TAX ALREADY GRANTED TO THE ASSESSEE. IN THE AMOUNT OF R EFUND THE INTEREST WHICH WAS GRANTED EARLIER OCCASIONS AL SO INCLUDED. THEREFORE THE ASSESSING OFFICER HAS REDU CED THE TOTAL REFUND GRANTED WHICH CONSISTS REFUND OF T AX AND INTEREST ALREADY GRANTED UNDER SECTION 244A. THEREF ORE WE FIND FORCE IN THE CONTENTION OF THE LEARNED AUTH ORIZED REPRESENTATIVE THAT WHILE COMPUTING THE INTEREST UN DER SECTION 244A THE ASSESSING OFFICER HAS REDUCED BOT H THE REFUND OF TAX AS WELL INTEREST GRANTED UNDER SECTIO N 244A FROM THE REFUND DUE TO THE ASSESSEES. IN ORDER TO C OMPUTE THE INTEREST UNDER SECTION 244A THE AMOUNT OF BALA NCE REFUND DUE TO THE ASSESSEE HAS TO BE DETERMINED AFT ER DEDUCTING THE AMOUNT OF TAX ALREADY REFUNDED AND NO T AMOUNT OF INTEREST ALREADY GRANTED UNDER SECTION 24 4A. THUS THE INTEREST COMPONENT IN THE REFUND ALREADY GRANTED SHOULD BE EXCLUDED WHILE THE SAME IS TO BE REDUCED FROM THE REFUND DUE TO THE ASSESSEE FOR THE PURPOSE OF SECTION 244A FOR FUTURE INTEREST ON THE BALANCE REFUND DUE AMOUNT. ACCORDINGLY WE ARE OF THE VIEW THAT THE METHOD ADOPTED BY THE ASSESSING OFFICER SUFFERE D FROM GRAVE ERROR AS THE SAME HAS RESULTED THE REDUC TION OF INTEREST PAYABLE TO THE ASSESSEE BECAUSE THE PRI NCIPAL AMOUNT IS REDUCED BY INTEREST COMPONENT ALREADY GRANTED AND THEN FUTURE INTEREST IS COMPUTED. THE I NTEREST ALREADY GRANTED UP TO A DATE IS RELEVANT ONLY FOR E XCLUSION OF PERIOD FOR WHICH IT IS GRANTED AND THE FUTURE IN TEREST HAS TO BE GRANTED FROM THE SUBSEQUENT PERIOD. THERE FORE THE INTEREST ALREADY GRANTED CANNOT REDUCE THE PRIN CIPLE REFUND DUE TO THE ASSESSEE BUT THE AMOUNT WHICH REPRESENTS THE TAX ALREADY REFUNDED HAS TO BE REDUC ED ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 7 OF 21 FROM THE TOTAL REFUND DUE TO THE ASSESSEE FOR COMPU TATION OF INTEREST UNDER SECTION 244A. WE NOTE THAT THE CI T (A) HAS DECIDED THE ISSUE IN PARA 2.2 OF THE IMPUGNED O RDER AS UNDER: 2.2 I HAVE CONSIDERED THE APPELLANTS REQUEST AND EXAMINED THE FACTS. IN VIEW OF THE FACTS ABOVE I F IND THAT THE ISSUE RELATES TO CALCULATION METHOD ADOPTE D BY THE DEPARTMENT AND ASSESSEE. IT IS SEEN THAT METHOD ADOPTED BY THE ASSESSING OFFICER IS BEING CONSISTENTLY FOLLOWED IN RESPECT OF ALL ASSESSEES. THEREFORE I AM OF THE VIEW THAT METHOD ADOPTED BY THE ASSESSING OFFICER AS PER PROVISIONS OF THE ACT CANNOT BE FAULTED. I THEREFORE INCLUDED TO AGREE WI TH THE COMPUTATION METHOD ADOPTED BY THE ASSESSING OFFICER. ACCORDINGLY THE GROUND UNDER APPEAL IS DISMISSED. 8.FROM THE ABOVE IT IS CLEAR THAT THE CIT (A) HAS N OT GONE INTO THE QUESTION OF CORRECTNESS OF METHOD ADOPTED BY THE ASSESSING OFFICER BUT DECIDED THE ISSUE ON THE GROU ND THAT THE METHOD ADOPTED BY THE ASSESSING OFFICER IS BEING CONSISTENTLY FOLLOWED IN RESPECT OF ALL ASSESSEES. THEREFORE THE IMPUGNED ORDER OF THE CIT (A) QUA TH IS ISSUE IS NOT SUSTAINABLE IN LAW AND LIABLE TO BE SE T ASIDE. WE ACCORDINGLY DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO CALCUL ATE THE INTEREST ON THE REFUND DUE TO THE ASSESSEE WITHOUT REDUCING THE INTEREST UNDER SECTION 244A WHICH IS P ART OF THE REFUND EARLIER GRANTED FROM THE REFUND DUE. 3.3 RESPECTFULLY FOLLOWING THE ABOVE SINCE THE ISSUE IS SAME THE ASSESSING OFFICER IS DIRECTED TO RECALCULATE THE IN TEREST UNDER SECTION 244A BY EXCLUDING THE AMOUNT OF INTEREST AL READY GRANTED IN THE EARLIER REFUND. WITH THESE DIRECTIONS RESPECTI VE GROUNDS ARE CONSIDERED AS ALLOWED. ISSUE.4. NON-GRANT OF INTEREST UNDER SECTION 244A ON REFUND ARISING DUE TO ADDITIONAL GROUNDS TAKEN BEFORE HON' BLE ITAT : THIS ISSUE ARISES IN THE APPEAL AT GROUND NO.2 FOR THE AY1990-91 & 1991-92 GROUND NO.3 IN AY1992-93 GROUND NO.2 IN A Y1993-94 & 1994-95 AND GROUND NO.5 IN AY 1996-97. 4.1 THE ISSUE ARISES IN A PECULIAR WAY IN THE ASS ESSEES CASE AS THE ASSESSEE HAS NOT MADE CERTAIN CLAIMS BEFORE THE ASS ESSING OFFICER ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 8 OF 21 IN THE COURSE OF ORIGINAL ASSESSMENT OR BEFORE THE CIT (A). IT RAISED ADDITIONAL GROUNDS BEFORE THE ITAT ON INCLUSION AN D EXCLUSION OF CERTAIN AMOUNTS FOR DEDUCTION UNDER SECTION 80HHC A ND 80I. INCOME TAX APPELLATE TRIBUNAL AFTER ADMISSION OF AD DITIONAL GROUNDS RESTORED THE ISSUES TO THE FILE OF THE ASSE SSING OFFICER FOR FRESH CONSIDERATION. WHILE GIVING EFFECT TO THE ORD ERS OF THE ITAT THE ASSESSING OFFICER ALLOWED CERTAIN CLAIMS RESULTING IN REFUND TO THE ASSESSEE DUE TO RE-DETERMINATION OF TOTAL INCOME. I T WAS THE ASSESSEES CONTENTION THAT THE INTEREST UNDER SECTI ON 244A WAS NOT ALLOWED ON SUCH REFUND ON THE REASON THAT THE ASSES SEE HAS NOT MADE CLAIMS ORIGINALLY UNDER SECTION 244A (2) AND A NY DELAY ON THE PART OF THE ASSESSEE SHOULD BE EXCLUDED. CIT (A) AG REED WITH THE ABOVE CONTENTION STATING THAT SINCE THE ASSESSEE HA S NOT CLAIMED THE AMOUNTS ORIGINALLY THE ASSESSING OFFICER WAS C ORRECT IN NOT ALLOWING INTEREST UNDER SECTION 244A TO THE APPELLA NT COMPANY IN COMPLIANCE TO THE PROVISIONS OF SECTION 244A(2) OF THE INCOME TAX ACT. 4.2. IT WAS THE SUBMISSION OF THE LEARNED COUNSEL THAT SIMILAR ISSUE AROSE IN THE CASE OF CIT VS. SOUTH INDIAN BAN K LTD (2011) 237 CTR 74 (KER) WHEREIN IT WAS HELD THAT BELATED CLAIM S OF DEDUCTION BY THE ASSESSEE WILL NOT JUSTIFY DENIAL OF INTEREST ON REFUND ARISING OUT OF SUCH CLAIMS OTHERWISE ELIGIBLE UNDER SECTION 234A(1). HOWEVER IT WAS ALSO THE SUBMISSION THAT THE ASSESSI NG OFFICER HAS NOT FOLLOWED THE PROVISIONS OF SECTION 244A(2) AND DECLINED INTEREST UNDER SECTION 244A(2) WITHOUT REFERRING THE MATTER TO CCIT OR CIT AND THEREFORE THE ASSESSING OFFICERS ACTION CANNO T BE JUSTIFIED FOLLOWING THE PRINCIPLES LAID DOWN BY THE ITAT IN T HE CASES OF DCIT VS. VIDEOCON INTERNATIONAL LTD 6 SOT 227 (MUM) AND ARTIST TREE PVT. LTD VS. INCOME TAX OFFICER (2005) 93 ITD 603 ( MUM). IT WAS ALSO SUBMITTED THAT GIVING EFFECT TO THE ORDERS OF THE ITAT ARE PROCEEDINGS EQUIVALENT TO SEC.154 AS HAS BEEN CONSI DERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF EMPIRE IND USTRIES LTD VS. ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 9 OF 21 CIT (1992) 93 ITR 295 (BOM). FURTHER ISSUE IS SUCH THAT TWO VIEWS ARE POSSIBLE THE ASSESSING OFFICERS ACTION IN DEN YING THE INTEREST UNDER SECTION 244A IN CONSEQUENTIAL PROCEEDINGS IS NOT CORRECT. 4.3. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWE VER SUBMITTED THAT THE DECISION OF THE ASSESSEES IN MAKING THE C LAIM BELATEDLY HAS RESULTED IN REFUNDS IN CONSEQUENTIAL PROCEEDING ONLY AND HAD THE ASSESSEE MADE THE CLAIMS AT THE TIME OF FILING THE RETURN THE REVENUE WOULD HAVE ISSUED REFUND WITHOUT ANY INTERE ST LIABILITY AT THE EARLIEST POSSIBLE TIME AND THEREFORE THE ASSES SING OFFICER WAS CORRECT IN DENYING THE INTEREST ON THE DELAY ATTRIB UTABLE TO THE ASSESSEE UNDER SECTION 244A(2). THE LD.DR RELIED ON CIT VS ASSAM ROOFING LTD 330 ITR 87 (GAU) FOR THR PROPOSITION TH AT APPELLATE PROCEEDINGS HAS TO BE INCLUDED IN THE EXPRESSION P ROCEEDING AS APPEARING IN SUB SECTION 2 OF SEC. 244A. THEREFORE DELAY IN MAKING CLAIM IS ATTRIBUTABLE TO ASSESSEE AS HELD IN THE AB OVE CASE. 4.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS PLACED ON RECORD ON THIS ISSUE. EVEN THOUGH THE HON 'BLE KERALA HIGH COURT HAS HELD IN THE CASE OF CIT VS. SOUTH I NDIAN BANK LTD (2011) 237 CTR 74 (KER) THAT THE BELATED CLAIM OF D EDUCTION BY THE ASSESSEE WILL NOT JUSTIFY THE DENIAL OF INTEREST AN D REFUND ARISING OUT OF SUCH CLAIMS OTHERWISE ELIGIBLE UNDER SECTION 244 A(1) IN THIS CASE THE REFUND AROSE CONSEQUENT TO THE ORDERS OF THE IT AT UNDER SECTION 254. THEREFORE IN OUR VIEW THE PROVISIONS OF SECTI ON 244A(3) WILL APPLY WHICH IS AS UNDER: 244A. INTEREST ON REFUNDS: (1).. (2). (3) WHERE AS A RESULT OF AN ORDER UNDER SUB-SECTIO N (3) OF SECTION 115WE OR SECTION 115WF OR SECTION 115WG OR SUB-SECTION(3) OF SECTION143 OR SECTION 144 OR SECT ION 147 OR SECTION 154 OR SECTION 155 OR SECTION 250 OR SEC TION 254 OR SECTION 260 OR SECTION 262 OR SECTION 263 OR SECTION 264 OR AN ORDER OF THE SETTLEMENT COMMISSIO N UNDER SUB-SECTION (4) OF SECTION 245D THE AMOUNT ON ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 10 OF 21 WHICH INTEREST WAS PAYABLE UNDER SUB-SECTION (1) HAS BEEN INCREASED OR REDUCED AS THE CASE MAY BE THE INTEREST SHALL BE INCREASED OR REDUCED ACCORDINGLY AND IN A CASE WHERE THE INTEREST IS REDUCED THE ASSESSING OFFICER SHALL SERVE ON THE ASSESSEE A NOTICE OF DEMAND IN THE PRESCRIBED FORM SPECIFYING THE AMOUNT OF THE EXCESS INTEREST PAID A ND REQUIRING HIM TO PAY SUCH AMOUNT; AND SUCH NOTICE O F DEMAND SHALL BE DEEMED TO BE A NOTICE UNDER SECTION 156 AND THE PROVISIONS OF THIS ACT SHALL APPLY ACCORDINGLY. ( EM PHASIS SUPPLIED) THERE IS NO DENYING THE FACT THAT THE ASSESSEE WAS ALLOWED INTEREST UNDER SECTION 244A(1) EARLIER IN THE ORIGINAL ASSES SMENT PROCEEDINGS. THEREFORE AS A RESULT OF ORDERS UNDER SECTION 254 WHICH THE ASSESSING OFFICER HAS PASSED NOW THE INT EREST UNDER SECTION 244A(1) WILL HAVE TO BE INCREASED OR REDUCE D ACCORDINGLY AND THE ASSESSING OFFICER HAS NO OPTION TO VARY THE PERIOD ON INTERPRETATION OF PROVISIONS OF SECTION 244A(2). PR OVISIONS OF SECTION 244A(2) DOES NOT APPLY IN THESE FACTS OF THE CASE AS THE ASSESSEE WAS ALREADY BEEN GRANTED INTEREST UNDER SECTION 244 A(1) AND THE PERIOD FOR SUCH REFUND HAS ALREADY BEEN DETERMINED. IF CONSEQUENT TO THE ORDERS UNDER SECTION 254 THE RESULTANT ORDER GIVES RISE TO FURTHER REFUND THE ASSESSING OFFICER HAS TO INCREA SE THE INTEREST ON THE ENHANCED REFUND WITHOUT VARYING THE PERIOD FOR WHICH INTEREST WAS GRANTED EARLIER. 4.5 THE CASE OF REVENUE IS SUPPORTED BY JUDG MENT OF HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS ASSAM ROOF ING LTD 330 ITR 87( GAU) BUT IN THAT CASE INTEREST U/S 244A (1) WAS GRANTED FOR THE FIRST TIME AFTER THE ORDER OF CIT(A) IN WHICH CLAIM WAS MADE. MOREOVER THE HONBLE KERALA HIGH COURT IN THE CASE OF SOUTH INDIAN BANK (SUPRA) HELD AGAINST REVENUE AND IN FAVOR OF A SSESSEE. NO JURISDICTIONAL HIGH COURT JUDGMENT WAS BROUGHT TO O UR NOTICE. THEREFORE THE VIEW FAVOURABLE TO ASSESSEE IS TO BE FOLLOWED. HOWEVER WE ARE OF THE VIEW THAT PROVISIONS OF SEC 244A(3) ARE APPLICABLE ON THE FACTS OF THIS CASE. AO HAS NO OBL IGATION TO RE ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 11 OF 21 DETERMINE THE PERIOD FOR WHICH INTEREST WAS TO BE G RANTED ONCE INTEREST WAS GRANTED IN EARLIER PROCEEDING. HE HAS TO ENHANCE OR DECREASE ON THE QUANTUM ONLY. IN VIEW OF THIS WE D IRECT THE ASSESSING OFFICER TO INCREASE OR REDUCE THE INTERES T UNDER SECTION 244A(1) R.W.S. 244A(3) AND REWORK THE INTEREST ACCO RDINGLY. 4.6 SINCE THE ASSESSING OFFICER ALSO HAS NOT REFE RRED THE MATTER TO THE CHIEF COMMISSIONER OR CIT WHERE ANY QUESTION AR ISES AS TO THE PERIOD TO BE EXCLUDED THE ACTION OF THE ASSESSING OFFICER IN EXCLUDING CERTAIN PERIOD IS ALSO NOT ACCEPTABLE. RE SPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN BY THE ITAT IN T HE CASE OF DCIT VS. VIDEOCON INTERNATIONAL LTD (2006)6 SOT 247 (MUM ) AND ARTIST TREE PVT LTD VS. INCOME TAX OFFICER (2005) 93 ITD 6 03 (MUM) ASSESSING OFFICERS ACTION CANNOT BE JUSTIFIED ON T HIS REASON ALSO. HOWEVER AS PROVISIONS OF SECTION 244A(3) ARE VERY CLEAR IN OUR OPINION ASSESSING OFFICER HAS NO OPTION TO VARY PE RIOD FOR GRANTING INCREASED INTEREST WHEN THE PERIOD WAS ALREADY FIXE D IN THE ORIGINAL PROCEEDINGS UNDER SECTION 244A(1). ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED TO REWORK THE INTEREST. THE RES PECTIVE GROUNDS ARE CONSIDERED ALLOWED. 5. IN THE RESULT APPEALS IN AY 1990-91 AND AY 1 991-92 ARE ALLOWED WHEREAS APPEALS IN AY 1992-93 AY 1993-94 AY1994-95 AND AY 1996-97 ARE PARTLY ALLOWED. REVENUE APPEALS ITA 6262 & 6263/MUM/2010 ITA NOS. 6262: ASSESSMENT YEAR 1990-91. 6. GROUND NO.1 IN THE REVENUES APPEAL IS WIT H REFERENCE TO NON ALLOWANCE OF CLAIM ON ROAD TRANSPORT SUBSIDY. BRIEF LY STATED THE ASSESSEE HAD RECEIVED CERTAIN ROAD TRANSPORT SUBSID Y UNDER THE TRANSPORT SUBSIDY SCHEME 1971 FOR SETTING UP NEW IN DUSTRIAL UNIT AT BILASPUR IN HIMACHAL PRADESH. THIS ISSUE WAS RES TORED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING ON MERITS VID E THE ITAT ORDERS DATED 18.01.2007. THE ASSESSING OFFICER WHILE GIVIN G EFFECT TO THE ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 12 OF 21 ORDER DID NOT GRANT RELIEF IN RESPECT OF THE ABOVE. HOWEVER THE CIT (A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON THE BASIS OF THE DECISION OF THE ITAT IN OTHER YEARS IN ASSESSEES O WN CASE FOLLOWING THE DECISION OF APEX COURT IN CIT VS. PONNI SUGARS & CHEMICALS LTD (2008) 306 ITR 392 (SC). 6.1 IT WAS FAIRLY ADMITTED THAT THE IDENTIC AL CLAIM FOR ALL THE LATTER YEARS IN ASSESSEES OWN CASE HAS BEEN DECIDE D BY THE ITAT IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY THIS ISSUE I S COVERED AGAINST THE REVENUE. WE HAVE PERUSED THE ORDERS PLACED ON R ECORD IN ALL THE YEARS FROM THE ASSESSMENT YEAR 1991-92 TO 1998-99 I N THE RESPECTIVE ITA NOS AS GIVEN BELOW: A.Y 91-92 ITA NO.1105/M/97 (PARA 9.0) A.Y 92-93 ITA NO.3961/M/97 (PARA 9.0) A.Y 93-94 ITA NO.6901/M/97 (PARA 9.0) A.Y 94-95 ITA NO.3055/M/98 (PARA 9.0) A.Y. 96-97 ITA NO.3783/M/00 (PARA 4.0) A.Y. 97-98 ITA NO.3298/M/01 (PARA 3-5) A.Y 98-99 ITA NO.6289/M/03 (PARA 4-6) THE CIT (A) ALSO NOT ONLY FOLLOWED THE ABOVE ORDERS BUT ALSO ANALYZED THE ISSUE IN THE LIGHT OF THE SUPREME COUR T JUDGMENT AND THE JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT V S. RELIANCE INDUSTRIES LTD (2004) AND THE ORDERS OF THE CIT (A) IS AS UNDER: 5.8 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MAD E ON BEHALF OF THE APPELLANT. I HAVE ALSO GONE THROUGH T HE TRANSPORT SUBSIDY SCHEME 1971. FROM THE PERUSAL OF THE SCHEME AND VARIOUS FACTS PLACED BEFORE ME I FO UND THAT THE GAGAL UNIT OF THE APPELLANT COMPANY IS SITUATED IN THE STATE OF HIMACHAL PRADESH WHICH IS AMONG ONE OF THE SELECTED AREAS ELIGIBLE FOR TRANSP ORT SUBSIDY. ON PERUSAL OF THE PREAMBLE AND OTHER SALIE NT FEATURES OF THE SCHEME IT IS SEEN THAT THE PURPOSE OF THE INTRODUCTION OF SCHEME WAS TO ENCOURAGE SETTING UP OF INDUSTRIES TO PROMOTE GROWTH IN CERTAIN SELECTED AR EAS AND THE SELECTED AREAS SPECIFIED IN THE SCHEME WERE INDUSTRIALLY UNDERDEVELOPED AREAS AND HENCE THRUST WAS SOUGHT TO BE GIVEN FOR THEIR INDUSTRIAL GROWTH. FRO M THE ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 13 OF 21 READING OF THE SCHEME IT IS EVIDENT THAT THE PURPO SE OF THE SCHEME WAS TO ENCOURAGE INDUSTRIALIZATION ON BACKWARD AREAS. HENCE APPLYING THE RATIO OF THE DECISION IN THE CASE OF THE APEX COURT IN THE CASE OF SAHNEY STEEL (SUPRA) AND PONNI SUGAR (SUPRA) IT IS HELD THAT THE ROAD TRANSPORT SUBSIDY IS IN THE NATURE OF CAPITAL RECEIPT. THE SAID VIEW IS ALSO FORTIFIES BY THE DECISION OF SPECIAL BENCH OF JURISDICTIONAL ITAT A ND ALSO BY THE JURISDICTIONAL HIGH COURT BOTH IN THE CASE OF RELIANCE INDUSTRIES (SUPRA). FURTHERMORE TRANSPORT SUBSIDY AVAILED IN SUBSEQUENT ASSESSMENT YEARS PURSUANT TO THE SAME SCHEME HAS BEEN HELD AS CAPIT AL RECEIPT BY THE JURISDICTIONAL ITAT IN APPELLANTS O WN CASE. THEREFORE THE ASSESSING OFFICER IS DIRECTED TO TREAT THE ROAD TRANSPORT SUBSIDY RECEIVED BY THE APPELLAN T AS CAPITAL RECEIPT AND EXCLUDE THE SAME IN COMPUTING T OTAL INCOME. THIS GROUND IS THUS ALLOWED. WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE RS OF THE CIT AS SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN ALL THE LATER YEARS ON THE SAME SCHEME. ACCORDINGLY REVENUE GROUN D IS REJECTED. 7. GROUND NO.2 PERTAINS TO NON EXCLUSION OF PROFITS ON SALE OF FIXED ASSETS FROM BOOK PROFITS COMPUTED UNDER SECTI ON 115J. THE ASSESSEES CLAIM FOR EXCLUSION OF SALE OF FIXED ASS ETS IN COMPUTING THE BOOK PROFIT BY WAY OF ADDITIONAL GROUND WAS RAI SED BEFORE THE ITAT IN THE ORIGINAL APPELLATE PROCEEDINGS. THE MAT TER WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO DECIDE IT A FRESH. THE ASSESSING OFFICER WHILE GIVING EFFECT TO THE ORDERS OF THE IT AT DID NOT GRANT RELIEF. THE CIT (A) ALLOWED THE GROUND IN FAVOUR OF THE ASSESSEE FOLLOWING ITAT ORDERS IN OTHER YEARS. 7.2 IT WAS FAIRLY ADMITTED THAT THIS ISSUE IS T O BE DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE CONSEQUEN T TO THE ORDERS OF THE SPECIAL BENCH OF THE HYDERABAD ITAT IN THE C ASE OF RAIN COMMODITIES LTD VS. DCIT 41 DTR 449 (HYD). THIS ISS UE IS ALSO SUPPORTED BY THE PRINCIPLES LAID DOWN BY THE HON'BL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. VEEKAYLAL INVESTMENT C .(P) LTD 249 ITR 597 (BOM) WHEREIN THE HON'BLE HIGH COURT DECIDED TH E INCOME FROM CAPITAL GAIN SHOULD BE INCLUDED FOR THE PURPOSE OF COMPUTING BOOK ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 14 OF 21 PROFIT UNDER SECTION 115J. THEREFORE THE ISSUE IS TO BE DECIDED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THE ORDER OF THE CIT (A) IS MODIFIED TO THAT EXTENT AND THE ORDER OF THE ASSESSING OFFICER IS RESTORED. THE GROUND IS CONSIDERED AS AL LOWED. 8. GROUND NO.3 PERTAINS TO THE ADDITION OF PROVIS ION OF INTEREST ON INCOME TAX TO BOOK PROFIT UNDER SECTION 115J. TH E ASSESSEE CLAIMED EXCLUSION OF INTEREST UNDER THE INCOME TAX IN COMPUTING BOOK PROFIT BY WAY OF ADDITIONAL GROUND THE ISSUE O F WHICH WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER WHILE GIVING EFFECT TO THE ORDERS DID NOT ALLOW CLA IM CONTENDING THAT THE PROVISIONS OF INTEREST ON INCOME TAX IS UNASCER TAINED LIABILITY AND HENCE FALLS UNDER THE AMBIT OF CLAUSE (C) TO EX PLANATION TO SECTION 115J OF THE ACT. THE CIT (A) GAVE RELIEF TO THE ASSESSEE BY STATING AS UNDER: 8.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A R OF THE APPELLANT AND ALSO PERUSED THE DECISION RELI ED UPON BY THEM. AS PER CLAUSE (A) OF EXPLANATION TO S ECTION 115J ONLY THE AMOUNT OF INCOME TAX PAID OR PAYABLE BE ADDED BACK IN COMPUTING BOOK PROFIT. INCOME TAX IS CHARGED UNDER SECTION 4 OF THE ACT AT THE RATE SPEC IFIED IN THE FINANCE ACT WHEREAS INTEREST IS CHARGED UNDER THE VARIOUS OTHER PROVISIONS OF THE ACT. THUS THERE ARE DISTINCT PROVISION FOR CHARGING INCOME TAX AND INTE REST. THE PURPOSE OF CHARGING INCOME TAX AND INTEREST IS ALTOGETHER DIFFERENT. WHILE THERE WAS PROVISION FOR WAIVER OF INTEREST THERE IS NO PROVISION FOR WAIVER OF IN COME TAX. THUS IT IS NOT POSSIBLE TO TREAT INTEREST AS PART OF INCOME TAX. THE ABOVE VIEWS IS FORTIFIED BY THE DECISION O F PANAJI ITAT IN THE CASE OF SALGOACAR MINING IND. (P) LTD VS. JCIT (2006) 102 ITD 289 (PANAJI). 8.4 FOLLOWING THE SAID DECISION AND ALSO THE DECISI ON OF KERALA HIGH COURT REFERRED TO HEREIN ABOVE THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE INTEREST O N INCOME TAX OF ` 46 57 560/-IN COMPUTING BOOK PROFIT UNDER SECTION 115J. THIS GROUND IS THUS ALLOWED. 8. 2 AFTER CONSIDERING RIVAL ARGUMENTS WE ARE OF THE OPINION THAT THERE IS NO NEED TO MODIFY THE ORDER OF THE CIT (A) ON THIS ISSUE. THE ISSUE IS COVERED BY THE HON'BLE HIGH COURT OF KERAL A DECISION IN THE ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 15 OF 21 CASE OF CIT VS. FERTILIZER &CHEMICALS TRAVANCORE LT D 261 ITR 484(KER) WHEREIN IT WAS HELD THAT SECTION 115J (1A) EXPLANATION(A) MENTIONS ONLY THE AMOUNT OF INCOME TAX PAID OR PAYA BLE AND DOES NOT INCLUDE THE INTEREST ON INCOME TAX. THE HON'BLE HIGH COURT HELD AS UNDER:- HELD (I) THAT IN SO FAR AS INTEREST ON INCOME-TAX WAS NOT MENTIONED IN SECTION 115J EXPLANATION (A) OF THE I NCOME TAX ACT 1961 THE ASSESSING OFFICER COULD NOT ADD INTEREST ON INCOME TAX OF ` 7 72 421/- FOR DETERMINING THE BOOK PROFIT FOR ASSESSMENT YEAR 1990-91. THE INCLUSION OF INTEREST AS PART OF INCOME TAX WAS EFFECTIVE FROM 1.4.2002 (CONSEQUENT TO MODIFICATION IN PROVISIONS) UNDER THE PROVISIONS OF 115JB WHICH ARE NOT APPLICABLE FOR TH E YEAR UNDER CONSIDERATION. IN VIEW OF THESE ORDER OF THE CIT ( A) IS UPHELD AND THE GROUND IS REJECTED. 9. GROUND NO.4 PERTAIN TO DENIAL OF DEDUCTION UNDER SECTION 80HHC ON THE BASIS OF BOOK PROFIT UNDER SECTION 115 J. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE H AS CLAIMED DEDUCTION UNDER SECTION 80HHC COMPUTED ON THE BASIS OF BOOK PROFIT BEFORE THE HON'BLE ITAT BY WAY OF AN ADDITIO NAL GROUND. THE HON'BLE ITAT VIDE ORDER DATED 18.01.2007 HAS RESTOR ED THE SAID ISSUE TO THE ASSESSING OFFICER TO DECIDE IT AFRESH. 9.2 THE ASSESSING OFFICER WHILE GIVING EFFECT TO TH E ORDER OF INCOME TAX APPELLATE TRIBUNAL DATED 18-01-2007 DID NOT GRA NT THE SAID RELIEF CONTENTING THAT THE ASSESSEE HAS NOT FILED A UDIT REPORT IN FORM NO.10CCAC DULY VERIFIED BY THE CA/AUDITOR ALONG WIT H RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE CIT (A) ALLOWED THE DEDUCTION UNDER SECTION 80HHC FROM BOOK PROFIT ON THE CONTENTION THAT REQUIREMENT OF FILING FORM 10CCAC I S MANDATORY IF THE ASSESSEE IS CLAIMING DEDUCTION UNDER SECTION 80 HHC IN THE NORMAL COMPUTATION OF TOTAL INCOME. NO SUCH REQUIRE MENT HAS BEEN SPECIFIED IN THE PROVISIONS OF SECTION 115J. ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 16 OF 21 9.3 IT HAS BEEN SUBMITTED THAT IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT IN THE ASSESSMEN T YEAR 1998-99 FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF AJANTA PHARMA 327 ITR 305 (SC). THE ITAT HELD AS UN DER: 18. THE SHORT ISSUE INVOLVED IN THIS APPEAL IS AS TO WHAT IS THE AMOUNT OF DEDUCTION UNDER SECTION 80HHC EXPORT PROFITS COMPUTED UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS AND PROFESSION OR EXPORT PROFI TS AS PER BOOKS OF ACCOUNT TO BE EXCLUDED FOR THE PURPOSE OF COMPUTATION OF BOOK PROFITS UNDER SECTION 115JA. WH ILE THE ASSESSING OFFICER HAS HELD THAT THE PROFIT TO B E EXCLUDED IS PROFITS COMPUTED UNDER THE HEAD PROFIT S AND GAINS FROM BUSINESS AND PROFESSION THE CIT (A) HA S CONFIRMED THE SAID ACTION BY PLACING RELIANCE ON TH E IPCA LABORATORIES LIMITED VS DCIT (251 ITR 401). THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 19. IN THE CASE OF AJANTA PHARMA LTD VS. CIT (327 I TR 305) THE QUESTION WHICH CAME UP FOR CONSIDERATION OF HON'BLE SUPREME COURT WAS WHETHER FOR DETERMINING THE BOOK PROFITS IN TERMS OF SECTION 115JB THE N ET PROFITS AS SHOWN IN THE PROFIT AND LOSS ACCOUNT HAV E TO BE REDUCED BY THE AMOUNT OF PROFITS ELIGIBLE FOR DE DUCTION UNDER SECTION 80HHC OR BY THE AMOUNT OF DEDUCTION UNDER SECTION 80HHC?. THEIR LORDSHIPS INTER ALIA NOTED THAT THE PROVISIONS REGARDING MINIMUM ALTERNATE TAX AND INCENTIVES FOR EXPORTS OPERATE IN TWO DIFFERENT SPHERES AND FORMULA MEANT FOR COMPUTING EXPORT INCENTIVE CANNOT BE USED IN ADJUSTMENT OF THE BOOK PROFITS FOR MINIMUM ALTERNATIVE TAX. HON'BLE SUPREM E COURT INTER ALIA OBSERVED AS FOLLOWS: .SEC 80HHC PROVIDES FOR TAX INCENTIVES. SECTION 80HHC(1) AT ONE POINT OF TIME LAID DOWN THAT AN AMO UNT EQUAL TO THE AMOUNT OF DEDUCTION CLAIMED SHOULD BE DEBITED TO THE P&L A/C OF THE PREVIOUS YEAR IN RESP ECT OF WHICH DEDUCTION IS TO BE ALLOWED AND CREDITED TO TH E RESERVE ACCOUNT TO BE UTILIZED FOR THE BUSINESS PUR POSE. SECTION 80HHC(1) CONCERNS ELIGIBILITY WHEREAS SECTI ON 80HHC(3) CONCERNS COMPUTATION OF THE QUANTUM OF DEDUCTION/TAX RELIEF. A BARE READING OF SECTION 80AB SHOWS THAT COMPUTATION OF DEDUCTION IS GEARED TO THE AMOUNT OF INCOME BUT SECTION 80HHC(3) WHICH REFERS TO QUANTIFICATION OF DEDUCTION IS GEARED TO THE EXPORT S ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 17 OF 21 TURNOVER AND NOT TO THE INCOME. ON THE OTHER HAND SECTION 115JB REFERS TO LEVY OF MAT ON THE DEEMED INCOME. THE ABOVE DISCUSSION IS ONLY TO SHOW THAT SECTION 80HHC AND 115JB OPERATE IN DIFFERENT SPHERE S. THUS TWO ESSENTIAL CONDITIONS FOR INVOKING SECTION 80HHC(1) ARE THAT ASSESSEE MUST BE IN THE BUSINESS OF EXPORT AND SECONDLY THAT SALE PROCEEDS OF SUCH EXPO RTS SHOULD BE RECEIVABLE IN INDIA IN CONVERTIBLE FOREIG N EXCHANGE. HENCE SECTION 80HHC(1) REFERS TO ELIGIB ILITY WHEREAS SECTION 80HHC(3) REFERS TO COMPUTATION OF T AX INCENTIVE. COMING TO SECTION 80HHC(1B) IT IS CLEAR THAT AFTER FINANCE ACT 2000 WITH EFFECT FROM ASSESSMENT YEAR 2001-02 EXPORTERS WOULD NOT GET 100 PER CENT DEDUCTION IN RESPECT OF PROFITS DERIVED FROM EXPORT S BUT THAT THEY WOULD GET DEDUCTION OF 80 PER CENT IN ASSESSMENT YEAR 2001-02 70 PER CENT IN THE ASSESSMENT YEAR 2002-03 AND SO ON. THUS SECTION 80HHC(1B) DEALS NOT WITH ELIGIBILITY BUT WITH THE EXTENT OF DEDUCTION. AS EARLIER STATED SECTION 11 5JB IS A SELF CONTAINED CODE. IT TAXES DEEMED INCOME. IT B EGINS WITH A NON ABSTANTE CLAUSE. SECTION 115JB REFERS TO COMPUTATION OF BOOK PROFITS WHICH HAVE TO BE COMP UTED BY MAKING UPWARD AND DOWNWARD ADJUSTMENTS. IN THE DOWNWARD ADJUSTMENT VIDE CLAUSE (IV) IT SEEKS TO EXCLUDE ELIGIBLE PROFITS DERIVED FROM EXPORTS. ON THE OTHER HAND UNDER SECTION 80HHC(1B) IT IS THE EXTEN T OF DEDUCTION WHICH MATTERS. THE WORD THEREOF IN EACH OF THE ITEMS UNDER SECTION 80HHC(1B) IS IMPORTANT. THU S IF AN ASSESSEE EARNS ` 100 CRORES THEN FOR THE ASSESSMENT YEAR 201-02 THE EXTENT OF DEDUCTION IS 80 PER CENT THEREOF AND SO ON WHICH MEANS THAT THE PRINCIPLE OF PROPORTIONALITY IS BROUGHT INTO SCALE DOWN THE TAX INCENTIVE IN A PHASED MANNER. HOWEVER FOR THE PURPOSES OF COMPUTATION OF BOOK PROFITS WHICH COMPUTATION IS DIFFERENT FROM NORMAL COMPUTATION UN DER THE 1961 ACT/COMPUTATION UNDER CHAPTER VIA. WE NEED TO KEEP IN MIND THE UPWARD AND DOWNWARD ADJUSTMENTS AND IF SO READ IT BECOMES CLEAR THAT CL AUSE (IV) COVERS FULL EXPORT PROFITS OF 100 PER CENT AS ELIGIBLE PROFITS AND THAT THE SAME CANNOT BE REDUCED TO 80 PER CENT BY RELYING ON SECTION 80HHC(1B). THUS FOR COMPUTING BOOK PROFITS THE DOWNWARD ADJUSTMENT I N THE ABOVE EXAMPLE WOULD BE ` 100 CRORES AND NOT ` 90 CRORES. THE IDEA BEING TO EXCLUDE EXPORT PROFITS FROM COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB WHI CH IMPOSES MAT ON DEEMED INCOME. THE ABOVE REASONING ALSO GETS SUPPORT FROM THE MEMORANDUM OF EXPLANATIO N TO THE FINANCE BILL 2000. ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 18 OF 21 10. ONE OF THE CONTENTIONS RAISED ON BEHALF OF THE DEPARTMENT WAS THAT IF CLAUSE (IV) OF EXPLANATION T O SECTION 115JB IS READ IN ENTIRETY INCLUDING THE LAS T LINE THEREOF (WHICH READS AS SUBJECT TO THE CONDITIONS SPECIFIED IN THAT SECTION) IT BECOMES CLEAR THAT THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION UNDER SECT ION 80HHC COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CL AUSE (C) OF SUB SECTION 3 OR SUB SECTION (3A) AS THE CA SE MAY BE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THAT SECTION. ACCORDING TO THE DEPARTMENT THE ASSESSEE HEREIN IS TRYING TO READ THE VARIOUS PROVISIONS OF SECTION 80 HHC IN ISOLATION WHEREAS AS PER CLAUSE (IV) OF EXPLANATION TO SEC 115JB IT IS CLEAR THAT BOOK PROFIT SHALL BE REDUCE D BY THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION UNDER SECT ION 80HHC AS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SUB-SECTION 3 OR SUB-SECTION (3A) AS THE CASE MAY BE OF THAT SECTION AND SUBJECT TO THE CONDITIONS SPECIFIED IN THAT SECTION THEREBY MEANI NG THAT THE DEDUCTION ALLOWABLE WOULD BE ONLY TO THE EXTENT OF DEDUCTION COMPUTED IN ACCORDANCE WITH THE PROVISION S OF SECTION 80HHC. THUS ACCORDING TO THE DEPARTMENT B OTH ELIGIBILITY AS WELL AS DEDUCTIBILITY OF THE PRO FIT HAVE GOT TO BE CONSIDERED TOGETHER FOR WORKING OUT THE DEDUCTION AS MENTIONED IN CLAUSE (IV) OF EXPLANATIO N TO SECTION 115JB. WE FIND NO MERIT IN THIS ARGUMENT. I F THE DICHOTOMY BETWEEN ELIGIBILITY OF PROFIT AND DEDUCTIBILITY OF PROFIT IS NOT KEPT IN MIND THEN SECTION 115JA WILL CEASE TO BE A SELF-CONTAINED CODE. IN SE CTION 115JB AS IN SECTION 115JA IT HAS BEEN CLEARLY STA TED THAT THE RELIEF WILL BE COMPUTED UNDER SECTION 80HHC(3)/(3A) SUBJECT TO THE CONDITIONS UNDER SUB- SECTIONS (4) AND (4A) OF THAT SECTION. THE CONDITIO NS ARE ONLY THAT THE RELIEF SHOULD BE CERTIFIED BY THE CHA RTERED ACCOUNTANT. SUCH CONDITION IS NOT A QUALIFYING COND ITION BUT IT IS A COMPLIANCE CONDITION. THEREFORE ONE CA NNOT RELY UPON THE LAST SENTENCE IN CLAUSE (IV) OF EXPLA NATION TO SECTION 115JB (SUBJECT TO THE CONDITIONS SPECIFI ED IN SUB-SECTION (4) AND (4A) OF THAT SECTION) TO OBLITE RATE THE DIFFERENCE BETWEEN ELIGIBILITY AND DEDUCTIBILITY OF PROFITS AS CONTENDED ON BEHALF OF THE DEPARTMENT. 20. THE SAME PRINCIPLES APPLY ON THE SITUATION BEFO RE US. THEREFORE WHAT IS TO BE EXCLUDED MUST START WITH B OOK PROFITS OF EXPORT BUSINESS AS BASE. ONE CANNOT HAVE COMPUTATION OF BOOK PROFIT WITH TAX PROFITS AS THE BASE. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE BROAD P RINCIPLES CLEARLY DISCERNABLE FROM HON'BLE SUPREME COURTS JU DGMENT IN AJANTA PHARMA CASE (SURPA) WE UPHOLD THE GRIEVA NCE OF ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 19 OF 21 THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GI VE RESULTANT RELIEF IF ANY 9.4. IN VIEW OF THIS THERE IS NO NEED TO MODIFY TH E ORDERS OF THE CIT (A) AND ACCORDINGLY THE GROUND OF THE REVENUE S TANDS DISMISSED. IN THE RESULT THIS APPEAL IS PARTLY AL LOWED. ITA NO.6263/MUM/2010 : 10.0 GROUND NO.1 IN THIS REVENUE APPEAL PERT AINS TO THE ISSUE OF EXCLUSION OF MISCELLANEOUS RECEIPTS FROM PROFITS AND GAINS IN COMPUTING DEDUCTION UNDER SECTION 80HHC. IT WAS SUB MITTED THAT THE MISCELLANEOUS RECEIPTS ARE INEXTRICABLY LINKED TO THE INDUSTRIAL UNDERTAKING AND HAVE IN ESSENCE REDUCED THE CORRESP ONDING EXPENSES OF THE INDUSTRIAL UNDERTAKING. THEREFORE FOLLOWING THE PRINCIPLES ESTABLISHED BY THE HON'BLE MAD HIGH COUR T IN THE CASE OF CIT VS. SUNDARAM INDUSTRIES LTD (2002) 253 ITR 396 (MAD) THE ABOVE AMOUNTS ARE TO BE INCLUDED FOR THE PURPOSE OF PROFITS AND GAINS IN COMPUTING DEDUCTION UNDER SECTION 80HHC AN D 80I. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER REFERRI NG TO THE ORDER OF THE ASSESSING OFFICER WHILE GIVING EFFECT TO THE ORDER OF THE ITAT SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED ANY E VIDENCE WITH REFERENCE TO THE NATURE OF RECEIPT OF SALE OF STORE S AND MATERIALS. THAT IS THE REASON THE ASSESSING OFFICER DID NOT IN CLUDE THE ABOVE AMOUNT AS PART OF INCOME OF THE ABOVE PROFIT OF THE UNDERTAKING. FURTHER REFERRING TO THE ORDER OF THE CIT (A) IT WA S SUBMITTED THAT THE CIT (A) ALSO WITHOUT EXAMINING THE NATURE OF TH E AMOUNT DIRECTED THE ASSESSING OFFICER TO INCLUDE THE AMOUN T OF RECEIPTS FROM PROFITS AND GAINS OF THE UNDERTAKING. 10.2. WE HAVE CONSIDERED THE ISSUE AND THE NATURE OF THE AMOUNT AS STATED ABOVE. EVEN THOUGH THE GROUND REFE RS TO THE AMOUNT OF ` 22 71 530/- THE CIT (A) DID NOT ALLOW THE OTHER AMO UNTS WHICH THE ASSESSEE HAS NOT CONTESTED IN HIS APPEAL. THEREFORE THE ONLY ISSUE IS WITH REFERENCE TO THE AMOUNT OF ` 20 91 406/- PERTAINING TO SALE OF STORES AND MATERIALS TO CONTR ACTORS. IT WAS ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 20 OF 21 FAIRLY ADMITTED BEFORE US THAT THE DETAILS OF THE A BOVE AMOUNT ARE NOT AVAILABLE WITH THE ASSESSEE AT PRESENT AS THE A SSESSMENT YEAR INVOLVED IS 1991-92. CONSIDERING THAT THE OTHER AMO UNTS ALSO PERTAIN TO SUPPLY TO THE CONTRACTORS WHICH THE ASSE SSEE HAS NOT CONTESTED WE ARE OF THE OPINION THAT THE SALE OF S TORES AND MATERIALS TO THE CONTRACTORS ALSO IS OF SIMILAR NAT URE. IN THE ABSENCE OF ANY DETAILS BEING FURNISHED BY THE ASSESSEE BEFO RE THE ASSESSING OFFICER CONSEQUENT TO THE DIRECTIONS OF THE ITAT I T IS NOT CORRECT ON THE PART OF THE CIT (A) TO DIRECT THE ASSESSING OFF ICER TO INCLUDE THE AMOUNT WITHOUT EXAMINING THE NATURE OF THE AMOUNT. THEREFORE WE ARE NOT IN AGREEMENT WITH THE ORDER OF THE CIT (A). SINCE THE ASSESSEE COULD NOT ESTABLISH THE NATURE OF THE RECE IPTS AS PERTAINING TO THE INCOME DERIVED FROM THE UNDERTAKING WE UPHO LD THE ORDER OF THE ASSESSING OFFICER AND REVERSE THE DIRECTIONS OF THE CIT (A). ACCORDINGLY GROUND NO.1 IS ALLOWED. 11. GROUND NO.2 PERTAINS TO CLAIM OF EXCLUSION OF SALE OF MACHINERY IN COMPUTING TOTAL TURNOVER FOR THE PUR POSE OF DEDUCTION UNDER SECTION 80HHC. THE ASSESSEE CLAIMED EXCLUSION ON ACCOUNT OF SALE OF MACHINERY FROM TOTAL TURNOVER IN COMPUTING DEDUCTIONS UNDER SECTION 80HHC BEFORE THE HON'BLE I .T.A.T. BY WAY OF ADDITIONAL GROUND. THE HON'BLE ITAT HAS RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OF FICER WHILE GIVING EFFECT TO THE ORDER OF THE HON'BLE ITAT DID NOT GRA NT RELIEF IN THIS RESPECT ON THE CONTENTION THAT THE ITEMS TO BE EXCL UDED TO WORK OUT THE TOTAL TURNOVER ARE CLEARLY SPECIFIED IN EXPLA NATION (BAA) BELOW SECTION 80HHC(4C) OF THE ACT. THE CIT (A) HAS HELD THAT THE TOTAL TURNOVER SHOULD NOT INCLUDE ANY INCOME WHICH HAS NO NEXUS WITH THE SALE PROCEEDS AND DIRECTED THE ASSESSING OFFICE R TO EXCLUDE THE SALE OF MACHINERY FROM TOTAL TURNOVER IN COMPUTING DEDUCTION U/S 80HHC. SINCE SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEAR 1998-99 IN ITA NO.6289/M/2003 FOLLO WING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. ITA NOS 6262 & 6263 AND 6279 TO 6284 ACC LTD MUMBAI PAGE 21 OF 21 LAKSHMI MACHINE WORKS (2007) 290 ITR 667 (SC) WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDERS OF THE CIT (A) ON THE ISSUE. THEREFORE THIS GROUND IS ALSO REJECTED. THIS APPEA L IS PARTLY ALLOWED. 12. IN THE RESULT ASSESSEE APPEALS IN AY 1990-91 AND AY 1991-92 ARE ALLOWED WHEREAS ITS APPEALS IN AY 1992-93 AY 1993-94 AY 1994-95 AND AY 1996-97 ARE PARTLY ALLOWED. REVENUE APPEALS ARE PARTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DECEMBER 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED 21 ST DECEMBER 2011. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR H BENCH ITAT MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI