ACIT 17(2), MUMBAI v. M.M. INTERNATIONAL, MUMBAI

ITA 6375/MUM/2009 | 2000-2001
Pronouncement Date: 02-11-2011 | Result: Allowed

Appeal Details

RSA Number 637519914 RSA 2009
Assessee PAN AAEFM6628A
Bench Mumbai
Appeal Number ITA 6375/MUM/2009
Duration Of Justice 1 year(s) 10 month(s) 23 day(s)
Appellant ACIT 17(2), MUMBAI
Respondent M.M. INTERNATIONAL, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 02-11-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 02-11-2011
Date Of Final Hearing 20-10-2011
Next Hearing Date 20-10-2011
Assessment Year 2000-2001
Appeal Filed On 10-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE S/SHRI B.R.MITTAL (JM) AND SHRI R.K.PANDA(A. M ) ITA NO.6375/MUM/2009 (ASSESSMENT YEAR: 2000-01) ASSISTANT COMMISSIONER OF INCOME TAX 17(2) ROOM NO.217 PIRAMAL CHAMBERS MUMBAI-400012. V/S M/S M.M. INTERNATIONAL 14 BHOJ TERRACE TEJU KAYA PARK DR.BABASAHEB AMBEDKAR ROAD WADALA MUMBAI-400019 PAN: AAEFM6628A APPELLANT RESPONDENT DATE OF HEARING : 20.10.2011 DATE OF PRONOUNCEMENT : 02.11.2011 APPELLANT BY : SHRI G.P.T RIVEDI RESPONDENT BY : SHRI KIRAN P .KAPADIA O R D E R PER R.K.PANDA (AM) THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 30.9.2009 PASSED BY THE LD.CIT(A)-XVII MUMBAI RELATING TO THE ASSESSMENT YEAR 2000-01. 2. GROUND NO.1 BY THE REVENUE READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE A O TO CONSIDER SALE-TAX REFUND OF RS.69 02 926/- FOR THE PURPOSE OF SECTION 80HHC WITHOUT APPRECIATING THE FACT THAT SALES-TAX REFUND DOES NOT FALL WITHIN THE AMB IT OF SECTION 28(IIIA) (B) (C ) (D) AND (E) OF THE IT ACT 3. FACTS OF THE CASE IN BRIEF ARE THAT DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE AS SESSEE ITA NO.6375/MUM/2009 (ASSESSMENT YEAR: 2000-01) 2 HAS CREDITED SALES-TAX SET-OFF OF RS.69 02 926/- AND HAS DEDUCTED THE SAME FROM THE PURCHASES HENCE THE PURC HASES OF RS.6 79 34 747/- HAVE BEEN REDUCED BY THAT AMOUN T AND THE PROFIT HAS BEEN INFLATED BY THE SAME AMOUNT. TH E AO THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SALES- TAX SET-OFF SHOULD BE ALLOWED FOR CONSIDERATION OF DEDUCTION U/S 80HHC AS THERE WAS NO DIRECT NEXUS BETWEEN SUC H RECEIPT AND EXPORT BUSINESS. IT WAS EXPLAINED BY TH E ASSESSEE THAT SALES-TAX SET-OFF IS NOTHING BUT RE DUCTION IN COST PRICE OF PURCHASE. THE COST OF MATERIAL PURC HASED WILL NATURALLY BE REDUCED BY THE SETOFF AVAILABLE ON A CCOUNT OF SALES-TAX. IT WAS SUBMITTED THAT IT IS GENERALLY AC CEPTED PRINCIPLE THAT SALES-TAX SET-OFF AVAILABLE WILL HAV E A DIRECT NEXUS ON COST OF MATERIAL AND TO THAT EXTENT EXPORT BUSINESS ALSO. IT WAS ALSO SUBMITTED THAT THE TREATMENT IS IN LINE WITH THE GUIDELINES AS PER AS-2 ISSUED BY ICAI ACCORDIN G TO WHICH THE TRADE DISCOUNTS DUTY DRAWBACK AND SIMIL AR ITEMS ARE TO BE DEDUCTED WHILE DETERMINING THE COST OF PU RCHASES. 4. HOWEVER THE AO WAS NOT SATISFIED WITH THE EXPL ANATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM THESE ARE NOT RECEIPTS WITHIN THE MEANING OF SECTION 28(IIIA) (I IIB) (IIIC) OF INCOME TAX ACT 1961 (THE ACT) ETC. ACCORDING TO H IM THIS IS NOT ADMISSIBLE AND HE THEREFORE INCREASED THE DIRE CT COST OF ITA NO.6375/MUM/2009 (ASSESSMENT YEAR: 2000-01) 3 THE ASSESSEE BY THE AMOUNT OF SALES TAX SET OFF OF RS.69 02 926/-. 5. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT SALES-TAX IS DIRECTLY RELATABLE TO THE TRADING OF GOODS. REL YING ON A COUPLE OF DECISIONS IT WAS SUBMITTED THAT MATCHING PRINCIPLE OF DIRECT COST ATTRIBUTABLE TO EXPORT SHOULD BE ARR IVED AT FOR THE PURPOSE OF SECTION 80HHC. IT WAS SUBMITTED THAT THE REIMBURSEMENT OF TAXES AND DUTIES PAID ON PURCHASE OF GOODS SHOULD BE REDUCED THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF DAL ICHI KARKARIA LTD. REPOR TED IN 156 CTR 172 (SC) WAS RELIED UPON TO THE PROPOSITION THA T THE COST OF RAW MATERIAL SHOULD BE DETERMINED ACCORDING TO THE GUIDANCE NOTE OF INSTITUTE OF CHARTERED ACCOUNTANT S OF INDIA. IN THIS DECISION IT HAS BEEN HELD THAT WHILE DETER MINING THE COST OF EXCISABLE PRODUCT COVERED BY MODVAT THE EXC ISE DUTY PAID ON RAW MATERIAL IS NOT TO BE INCLUDED. IT HAS BEEN FURTHER HELD IN THE SAID DECISION THAT THE MEANIN G OF THE COST HAS TO BE GIVEN AS ACCORDS WITH THE MEANING T HAT A MAN OF BUSINESS PUT UPON IT. IT WAS FURTHER ARGUED THAT SALES TAX REFUND IS A TRADING RECEIPT AND CANNOT BE HELD AS A N INCOME OR RECEIPT FROM OTHER SOURCES. THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ALFA LAV AL INDIA LTD. REPORTED IN 186 CTR 390 (BOM) WAS RELIED UPON TO TH E PROPOSITION THAT SALES-TAX SET -OFF IS A TRADING RE CEIPT AND ITA NO.6375/MUM/2009 (ASSESSMENT YEAR: 2000-01) 4 TAXABLE ONLY UNDER THE HEAD PROFIT AND GAINS OF BUS INESS OR PROFESSION. 6. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD. CIT(A) DIRECTED THE AO TO TREAT THE SALES- TAX SET-OFF AS BUSINESS INCOME AND ALLOW THE SAME AS DEDUCTION U/S 80HHC OF THE ACT. 7. AGGRIEVED WITH SUCH ORDER OF THE LD.CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 8. THE LD. DR REFERRING TO THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S DRESSER R AND INDIA P. LTD. (2010) 323 ITR 429 (BOM) SUBMITTED TH AT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD T HAT RECOVERY OF FREIGHT INSURANCE AND PACKING RECEIPT S SALES- TAX REFUND AND SERVICE INCOME ETC. ARE NOT PROFIT S FROM BUSINESS AND 90% OF THE SAME HAS TO BE EXCLUDED WHILE COMPUTING THE PROFIT FROM THE BUSINESS FOR THE PURP OSES OF COMPUTATION OF SPECIAL DEDUCTION U/S 80HHC OF THE ACT. 9. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND SUBMITTED THAT IN VIEW OF THE EXPLANATION (D) TO S ECTION 80HHC (IIIB) OF THE ACT DIRECT COST MEANS THE COST DIRECTLY ATTRIBUTABLE TO THE TRADING OF GOODS ETC OUT OF IN DIA INCLUDING THE PURCHASE PRICE OF SUCH GOODS. REFERRING TO TH E DECISION ITA NO.6375/MUM/2009 (ASSESSMENT YEAR: 2000-01) 5 OF THE HONBLE SUPREME COURT IN CIT V/S LAKSHMI MA CHINE WORKS (2007) 290 ITR 667 (SC) HE SUBMITTED THAT E XCISE DUTY AND SALES-TAX CANNOT FORM PART OF THE TOTAL TU RNOVER AND THEREFORE SUCH TAX HAVE TO BE EXCLUDED FROM THE TOT AL TURNOVER U/S 80HHC (III) OF THE ACT. REFERRING TO THE DECISION RELIED UPON BY THE LD. DR HE SUBMITTED THAT THE S AID DECISION IS DISTINGUISHABLE SINCE IT IS IN THE CASE OF SALES-TAX REFUND AND NOT IN THE CASE OF SALES-TAX SET-OFF. R EFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN T HE CASE OF ALFA LAVAL INDIA LTD (SUPRA) HE SUBMITTED THAT THE SALES TAX SET-OFF RECEIVED BY THE ASSESSEE BEING ASSES SED AS A PART OF THE BUSINESS PROFIT UNDER THE HEAD PROFIT A ND GAINS OF BUSINESS OR PROFESSION CANNOT BE EXCLUDED WHILE COM PUTING THE DEDUCTION U/S 80HHC. RELYING ON A COUPLE OF DE CISIONS HE SUBMITTED THAT THE ORDER OF THE LD. CIT(A) BEING IN ACCORDANCE WITH LAW SHOULD BE UPHELD. 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE PARTIES PERUSED THE ORDERS OF THE AO AND THE LD. CIT(A) AND THE PAPER BOOK FILED BY THE ASSESSEE. WE HAVE A LSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. I N OUR OPINION THE MATTER NEEDS FRESH ADJUDICATION AT THE LEVEL OF THE AO IN VIEW OF THE LATEST DECISION OF THE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT V/S DRESSER RAND IND IA P. LTD.(SUPRA) WHICH WAS NOT AVAILABLE AT THE TIME OF ITA NO.6375/MUM/2009 (ASSESSMENT YEAR: 2000-01) 6 ASSESSMENT OR AT THE TIME OF HEARING BEFORE THE LD . CIT(A). WE THEREFORE RESTORE THIS ISSUE TO THE FILE OF TH E AO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AND IN ACCORDA NCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THIS GRO UND BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 11. GROUND NO.2 BY THE REVENUE READS AS UNDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DIRECTING THE AO TO CONSIDER THE VALUE OF DEPB LICENCE AS BUSINESS INCOME U/S 28(IIIB) AND TO ALLOW DEDUCTION U/S 80 HHC WITHOUT TAKING INTO CONSIDERATION PROVISIONS OF SE CTION 28 (IIID). 12. AFTER HEARING BOTH THE SIDES WE FIND THAT THE LD. CIT(A) FOLLOWING THE DECISION OF SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF TOPMANS EXPORT V/S ITO IN ITA NO.5769/MUM/2006 DIRECTED THE AO TO RE-COMPUTE THE DEDUCTION U/S 80HHC BY TAKING THE DEPB AMOUNT OF RS.34 22 684/- AS BUSINESS INCOME FOR THE PURPOSES OF SECTION 80HHC. HOWEVER THE ABOVE DECISION HAS SINC E BEEN REVERSED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S KALPATHARU COLOURS AND CHEMICALS IN IN COME TAX APPEAL NO.2887 OF 2009 ORDER DATED 28/29 JUNE 2010. THEREFORE WE DEEM IT FIT AND PROPER TO RESTORE THI S ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN THE LI GHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT CITED ITA NO.6375/MUM/2009 (ASSESSMENT YEAR: 2000-01) 7 (SUPRA). THE GROUND RAISED BY THE REVENUE IS ACCORD INGLY ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT THE APPEAL OF THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND NOVEMBER. 2011. SD/- S D/- (B.R.MITTAL) (R. K.PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI DATED : 2 ND NOVEMBER 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER ASSTT. REGISTRAR ITAT MUMBAI