TRACER LABS P. LTD, MUMBAI v. ITO WD 7(3)(2), MUMBAI

ITA 6314/MUM/2009 | 2000-2001
Pronouncement Date: 21-05-2010 | Result: Allowed

Appeal Details

RSA Number 631419914 RSA 2009
Assessee PAN AABCT0287E
Bench Mumbai
Appeal Number ITA 6314/MUM/2009
Duration Of Justice 5 month(s) 14 day(s)
Appellant TRACER LABS P. LTD, MUMBAI
Respondent ITO WD 7(3)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 21-05-2010
Assessment Year 2000-2001
Appeal Filed On 07-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI R K PANDA AM ITA NO 6314/MUM/2009 (ASSESSMENT YEAR 2000-01) M/S TRACER LABS PVT LTD 5 JOLLY BHAWAN NO.2 7 NEW MARINE LINES CHURCHGATE MUMBAI -400 020 PAN: AABCT 0287 E VS ITO WARD 7(3)(2) MUMBAI APPELLANT RESPONDENT APPELLANT BY : SHRI PRAKASH JHUNJHUNWALA RESPONDENT BY : SHRI C P PATHAK ORDER DATE OF HEARING: 17.05.2010 DATE OF ORDER: 21.05.2010 THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 30TH SEPTEMBER 2009 OF THE CIT (A)-XIII MUMB AI RELATING TO ASSESSMENT YEAR 2000-01. 2. THE GROUNDS OF APPEAL NO.1 & 2 OF THE ASSESSEES AP PEAL READ AS UNDER:- 1.0 ON FACT & CIRCUMSTANCES OF THE CASE AND IN LAW LD CIT (A) ERRED IN ALLOWING THE DEDUCTION U/S 80HHC AT RS 1 06 595/- AS AGAINST APPELLANTS CLAIM OF RS 5 72 494/-. 2.0 THE LD AO WHILE COMPUTING DEDUCTION U/S 80HHC ERRED IN INCLUDING THE FREIGHT CHARGES OF RS 1 11 7 80/- AS DIRECT COST THOUGH EXCLUDED FROM FOB VALUE OF EXPOR TS. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF EXPORT OF PHARMA CEUTICAL PRODUCTS. THE ASSESSING OFFICER DURING THE ASSESSM ENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS CLAIMED OF EXPORT TU RNOVER OF RS 28 61 851/-. FROM THE COPIES OF THE CERTIFICATES I SSUED BY DGFT ITA 6314/M/09 TRACER LABS PVT LTD ============== 2 MUMBAI HE NOTED THAT FOB VALUE OF THE GOODS EXPORTE D WAS RS 26 90 406/-. HE NOTED FROM THE FOREIGN EXCHANGE RE ALISATION CERTIFICATE ISSUED BY THE BANK THAT THE FOREIGN EXC HANGE REALISATION BY THE ASSESSEE FOR THE CORRESPONDING EXPORT WAS ON LY RS 26 72 056/-. ACCORDING TO THE ASSESSING OFFICER S INCE THE PROVISIONS OF SECTION 80HHC ARE VERY CLEAR WHICH PR OVIDES THAT THE EXPORT TURNOVER IS THE FOB VALUE OF GOODS EXPORTED SUBJECT TO THE LIMIT OF THE FOREIGN EXCHANGE REALISED ON SUCH EXPO RTS THEREFORE HE TOOK THE EXPORT TURNOVER AT RS 26 72 056/-. 4. IN APPEAL THE CIT (A) UPHELD THE ACTION OF THE ASSE SSING OFFICER FOR WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE THE TRIBUNAL SUBMITTED THAT THE ASSESSING OF FICER EXCLUDED THE SEA FREIGHT EXPENSES OF RS 2 11 780/- FROM THE CIF VALUE OF EXPORT AND DETERMINED FMV VALUE OF EXPORT AT RS 26 72 056/-. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE T HE ASSESSING OFFICER SHOULD HAVE EXCLUDED THE SEA FREIGHT EXPENS ES OF RS 2 11 780/- FROM THE DIRECT COST THEREBY THE DEDUCTI ON U/S 80HHC ON TRADING EXPORT SHALL REMAIN UNCHANGED. THE SEA F REIGHT OF RS 2 11 780/- IS INCURRED FOR THE EXPORT OF THE GOODS OUT OF INDIA AND DOES NOT RELATE TO DIRECT COST OF THE GOODS IN VIE W OF EXPLANATION (D) TO SECTION 80HHC(3). HE FILED A REVISED STATEM ENT OF ELIGIBLE DEDUCTION OF SECTION 80HHC AND REQUESTED THE TRIBUN AL TO GIVE A DIRECTION TO ASSESSING OFFICER TO EXCLUDE THE SEA F REIGHT EXPENSES OF RS 2 11 780/- FROM THE DIRECT COST AS SUCH SEA FRE IGHT IS EXCLUDED FROM THE EXPORT TURNOVER. 6. IN HIS ALTERNATE CONTENTION THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE MATTER MAY BE SET ASIDE TO THE ASSESSING OFFICER FOR VERIFICATION OF THE REVISED C HART AND DECIDE THE ISSUE AFRESH AS PER LAW. ITA 6314/M/09 TRACER LABS PVT LTD ============== 3 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND WHILE SUPPORTING THE ORDER OF THE ASSESSING O FFICER AND CIT (A) SUBMITTED THAT HE HAS NO OBJECTION IF THE MATTE R IS SET ASIDE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN VIE W OF THE REVISED CHART FILED BY THE ASSESSEE. 8. AFTER HEARING BOTH THE SIDES I AM OF THE OPINION T HAT THE ALTERNATE CONTENTION OF THE ASSESSEE THAT THE MATTE R MAY BE SET ASIDE TO THE ASSESSING OFFICER FOR VERIFICATION OF THE REVISED COMPUTATION AND TO DECIDE THE ISSUE AFRESH FINDS ME RIT. I THEREFORE DEEM IT PROPER TO RESTORE THE MATTER BAC K TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE TH IS ISSUE AFRESH AND IN ACCORDANCE WITH THE LAW AFTER GIVING DUE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. I HOLD AND DIRECT ACCORDING LY. THE ABOVE TWO GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 9. GROUNDS OF APPEAL NO.3 & 4 OF THE ASSESSEES APPEAL READ AS UNDER:- 3.0 THE LD AO WHILE COMPUTING DEDUCTION U/S 80HHC ERRED IN INCLUDING THE EXCISE MODVAT RECEIVABLE U/S 145A OF RS 1 94 793/- ON IGNORING THE FACT THAT SECTION 145 A IS NOT APPLICABLE FOR DETERMINING THE DIRECT COST OF TRADE D GOODS. 4.0 THE LD AO COMPUTED THE DEDUCTION U/S 80HHC ON APPLYING THE PROVISION OF SECTION 80HHC(3)(B) AS AG AINST APPELLANTS CLAIM U/S 80HHC(3)(A). 10. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED T HAT THE ASSESSEE HAS SHOWN THE DIRECT EXPENSES AT RS 26 82 894/- IN ITS PROFIT AND LOSS ACCOUNT. FROM THE COMPUTATION OF D EDUCTION U/S 80HHC THE ASSESSEE HAS CLAIMED THE SAME AMOUNT OF DIRECT EXPENSES. THE ASSESSING OFFICER OBSERVED FROM SCHE DULE 2 OF NET CURRENT ASSETS OF THE AUDIT REPORT THAT THE ASSESS EE HAS SHOWN EXCISE REBATE RECEIVABLE AT RS 1 94 793/-. ON BEIN G QUESTIONED BY THE ASSESSING OFFICER IT WAS SUBMITTED THAT THE SA ME IS THE EXCISE ITA 6314/M/09 TRACER LABS PVT LTD ============== 4 AMOUNT PAID ON VARIOUS PURCHASES. IT WAS SUBMITTED THAT PURCHASE BILLS HAVE BEEN CONSIDERED EXCLUSIVE OF THIS DUTY A ND SEPARATE DEBIT NOTE HAS BEEN ISSUED BY VARIOUS PARTIES. THE ASSES SING OFFICER NOTED FROM THE SUBMISSION OF THE ASSESSEE THAT IT I S ACCOUNTING THE PURCHASES UNDER EXCLUSIVE METHOD. ACCORDING TO T HE ASSESSING OFFICER IN VIEW OF THE PROVISIONS OF SECTION 145A O F THE INCOME-TAX ACT EXCISE REBATE RECEIVABLE AT RS 1 94 793/- SHOUL D BE CONSIDERED AS PART OF THE TOTAL COST OF PURCHASES. THEREFORE HE TOOK THE DIRECT COST OF THE GOODS SOLD (TRADING EXPORT) AT RS 28 77 687/- IE (RS 26 82 894 + RS 1 94 793). 11. BEFORE CIT (A) THE ASSESSEE REITERATED THE SAME SUB MISSIONS AS MADE BEFORE THE ASSESSING OFFICER. HOWEVER THE CIT (A) WAS NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE AS SESSEE. WHILE UPHOLDING THE ORDER OF THE ASSESSING OFFICER THE CI T (A) OBSERVED THAT EXCISE DUTY PAID IS THE COST OF PURCHASE OF GO ODS. ACCORDING TO HIM EVEN SECTION 145A REQUIRES THE VALUATION OF PUR CHASE AND SALES OF GOODS SHALL BE FURTHER ADJUSTED TO INCLUDE THE A MOUNT OF ANY TAX DUTY CESS OR FEE ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION. SINCE THE ASSESSEE HAS FAILED TO ACCOUNT THE EXCISE DUTY ON THE PURCHASES THE SA ME SHALL BE LIABLE TO BE INCLUDED IN THE DIRECT COST OF GOODS S OLD. HE ACCORDINGLY UPHELD THE ORDER OF THE AO. 12. AGGRIEVED WITH SUCH ORDER OF THE CIT (A) THE ASSES SEE IS IN APPEAL BEFORE THE TRIBUNAL. 13. THE LEARNED COUNSEL FOR THE ASSESSEE ASSAILING THE ORDERS OF THE ASSESSING OFFICER AND CIT (A) SUBMITTED THAT UN DER PROVISIONS OF SECTION 145A THE PURCHASE SALES AND INVENTORIE S ARE TO BE INCREASED BY TAX DUTY CESS OR FEES. HOWEVER FOR COMPUTING THE DIRECT COST OF TRADING EXPORT THE PROVISIONS OF SECTION 145A SHALL NOT APPLY AND ACCORDINGLY THE EXCISE DUTY IS NOT TO BE INCLUDED IN DIRECT COST OF EXPORTS. ITA 6314/M/09 TRACER LABS PVT LTD ============== 5 14. IN HIS ALTERNATE SUBMISSION HE SUBMITTED THAT THE ASSESSING OFFICER WHILE COMPUTING THE DEDUCTION U/S 80HHC INC LUDED EXCISE DUTY IN DIRECT COST OF TRADING GOODS. HOWEVER HE SHOULD HAVE SIMULTANEOUSLY INCREASED THE COST OF PURCHASE DUE T O WHICH THE NET PROFIT WOULD STAND REDUCED BY THE SIMILAR AMOUNT TH EREBY HAVING NO IMPACT ON TOTAL INCOME. HE FURTHER SUBMITTED THAT THERE IS NO CLOSING INVENTORY AT THE END OF THE YEAR. THEREFOR E A DIRECTION MAY BE GIVEN TO REDUCE THE EXCISE MODVAT OF RS 1 94 793 /- FROM DIRECT COST OF TRADING EXPORT OR TO DIRECT THE ASSESSING O FFICER TO REDUCE THE NET PROFIT BY SIMILAR AMOUNT. 15. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND SUPPORTED THE ORDER OF THE CIT (A). 16. AFTER HEARING BOTH THE SIDES I FIND SOME MERIT IN T HE ALTERNATE CONTENTION MADE BY THE LEARNED COUNSEL FO R THE ASSESSEE. SINCE IT REQUIRES VERIFICATION AT THE LEVEL OF THE ASSESSING OFFICER TO FIND OUT THERE WILL BE NO IMPACT ON THE TOTAL INCOM E I DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF TH E ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. NEE DLESS TO SAY THE ASSESSING OFFICER SHALL GIVE DUE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. I HOLD & DIRECT ACCORDINGLY. THE GROUND S RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PU RPOSE. 17. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 21ST DAY OF MAY 2010. SD/- ( R K PANDA ) ACCOUNTANT MEMBER MUMBAI DATED 21ST MAY 2010 ITA 6314/M/09 TRACER LABS PVT LTD ============== 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-XXXIII MUMBAI 4. THE CIT- XXII MUMBAI 5. THE DR SMC BENCH. / // / / TRUE COPY / / BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI *CHAVAN ITA 6314/M/09 TRACER LABS PVT LTD ============== 7 DATE INITIALS DRAFT DICTATED ON 19 .05.2010 SR. P.S. DRAFT PLACED BEFORE THE AUTHOR 19.05.2010/ 20.05.2010 SR. P.S. DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER AM/JM DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM APPROVED DRAFT COMES TO THE SR. PS SR. P.S. KEPT FOR PRONOUNCEMENT ON SR. P.S. FILE SENT TO THE BENCH CLERK SR. P.S. DATE ON WHICH FILE GOES TO THE HEAD CLERK DATE OF DISPATCH