ACIT,, Ludhiana v. M/s Vardhman Textiles Ltd.,, Ludhiana

ITA 64/CHANDI/2010 | 2000-2001
Pronouncement Date: 22-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 6421514 RSA 2010
Bench Chandigarh
Appeal Number ITA 64/CHANDI/2010
Duration Of Justice 2 year(s) 1 month(s) 10 day(s)
Appellant ACIT,, Ludhiana
Respondent M/s Vardhman Textiles Ltd.,, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 22-02-2012
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 22-02-2012
Date Of Final Hearing 16-02-2012
Next Hearing Date 16-02-2012
Assessment Year 2000-2001
Appeal Filed On 12-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L.KARWA VICE PRESIDENT AND SHRI MEHAR SINGH ACCOUNTANT MEMBER ITA NO. 64/CHD/2010 ASSESSMENT YEAR: 2000-01 ACIT CIRCLE-I V M/S VARDHMAN TEXTILES LTD. LUDHIANA. CHANDIGARH ROAD LUDHIANA. PAN: AABCM-4692E APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : SHRI SUBHASH AGGARWAL & ITA NO. 1172/CHD/2009 ASSESSMENT YEAR: 2000-01 M/S VARDHMAN TEXTILES LTD. V ACIT RANGE-1 CHANDIGARH ROAD LUDHIANA. LUDHIANA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.N.GUPTA SINGH RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 16.02.2012 DATE OF PRONOUNCEMENT : 22.2.2012 ORDER PER MEHAR SINGH AM THE CROSS-APPEALS AS INDICATED ABOVE FILED BY TH E REVENUE AND THE ASSESSEE ARE DIRECTED AGAINST ORDER OF CIT(A) LUDHIANA PASSED ON 28.10.2009 U/S 250(6) OF THE INCOME-TAX ACT 1961 (IN SHORT 'THE ACT') FOR TH E ASSESSMENT YEAR 2000-01. 2 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) ERRED IN LAW AND FACTS IN ALLOWING DEDUCTION U/S 80IB ON QUALITY CLAIM AND BROKERAGE ON OCEAN FREIGHT FROM SHIPPING AGENCIES IGNORING THE FACT THAT THE ASSESSEE HAD FAILED TO BROUGHT ANY EVIDENCE ON RECORD BEFORE THE AO AS TO WHETHER THE RECEIPTS WERE EARNED FROM MANUFACTURING ACTIVITIES. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN RESTRICTING THE ADDITION TO RS.1 0 000/- INSTEAD OF RS.36.57 LACS MADE BY THE AO U/S 14A OF THE INCOME-TAX ACT 1961 RELATING TO EXEMPT DIVIDEND INCOME. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN ALLOWING THE ASSESSEE'S GROUND REGARDING CALCULATION OF INDIRECT COST OF TRADING GOODS FOR DEDUCTION U/S 80HHC IGNORING THE FACT THAT THE AO HAD RIGHTLY DISALLOWED THE SAME FOR THE REASONS THAT THE SAME COULD NOT BE ALLOWED UNLESS OR UNTIL THE RETURN OF INCOME WAS REVISED AS HELD IN THE CASE OF GOETZE INDIA LTD. V CIT 284 ITR 323 (S.C). 4. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 3. IN GROUND NO.1 REVENUE CONTENDED THAT CIT(A) ERRED IN LAW ERRED IN LAW AND FACTS IN ALLOWING DEDUCTION U/S 80IB ON QUALITY CLAIM AND BROKERAGE O N OCEAN FREIGHT FROM SHIPPING AGENCIES IGNORING THE F ACT THAT THE ASSESSEE HAD FAILED TO BROUGHT ANY EVIDENC E ON RECORD BEFORE THE AO AS TO WHETHER THE RECEIPTS WER E EARNED FROM MANUFACTURING ACTIVITIES . 4. LD. 'AR' REFERRED TO PAGES 31 32 OF THE PAPER B OOK AND PLACED RELIANCE ON THE ORDER OF THE CIT(A) TO SUPPORT HIS CONTENTIONS. 3 5. LD. 'DR' PLACED RELIANCE ON THE ORDER OF THE AO. 6. THE AO IN THE ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 254 OF THE ACT FOR THE ASSESSMENT YEAR 2002-01 DATED 31.12.2008 CATEGORICALLY RECORDED FINDINGS THAT THE ASSESSEE M ERELY PLACED RELIANCE ON THE CASE-LAWS WITHOUT EXPLAINING AND SUBSTANTIATING THAT THE CLAIM OF QUALITY CLAIM AND BROKERAGE ON OCEAN FREIGHT FROM SHIPPING AGENCIES SPROUTED FROM THE MANUFACTURING ACTIVITIES OF THE ASSESSEE. ACCORDINGLY AO DISALLOWED THE CLAIM U/S 80IB OF THE ACT IN RESPECT OF SUCH MISCELLANEOUS INCOME. LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESS EE AS IS EVIDENT FROM PARA 4.2 OF THE APPELLATE ORDER WHICH IS REPRODUCED HEREUNDER : 4.2 I HAVE EXAMINED THE MATTER AND FIND THAT AS REGARDS THE QUALITY CLAIM IT HAS BEEN SUBMITTED BY THE APPELLANT THAT IT HAD PROVIDED FOR QUALITY CLAI M IN ITS BOOKS OF ACCOUNT FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000. HOWEVER THE SAME WAS REVERSED WHEN CONSIDERED NON PAYABLE IN THE BOOKS OF ACCOUNT FOR THE ASSESSMENT YEAR 2000-01. THE PLEA OF THE ASSESSEE THAT THE AMOUNT REPRESENTS ONLY REVERSAL OF CERTAIN PROVISIONS OF LIABILITY WH ICH ARE CONSIDERED NON-PAYABLE AND THE AMOUNT SHOULD BE INCLUDED IN THE ELIGIBLE PROFIT OF THE UNDERTAKI NG ON THE SAME BASIS WHEN IT WAS EXCLUDED AT THE TIME OF MAKING PROVISIONS FOR THE ASSESSMENT YEARS 1998-98 AND 1999-2000 HAS MERIT IN IT. ALSO AS THE QUALITY CLAIM IS LINKED TO THE GOODS MANUFACTURED BY THE ASSESSEE I HOLD THAT THE SAME IS ELIGIBLE FOR DEDUCTION U/S 80IB. 4 7. A BARE PERUSAL OF THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE CIT(A) REVEALS THAT AN AMOUNT OF RS.54 228/- REPRESENTING QUALITY CLAIM WAS PROVIDE D IN ITS BOOKS OF ACCOUNT FOR THE ASSESSMENT YEAR 1998- 99 AND 1999-2000. HOWEVER THE SAME WAS REVERSED WHEN CONSIDERED AS NOT PAYABLE IN THE BOOKS OF ACCOUNT FOR THE ASSESSMENT YEAR 2000-01. THE ASSESSEE ACCORDINGLY CLAIMED DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF SUCH REVERSAL OF THE PROVISION CREATED FOR THE EARLIER ASSESSMENT YEAR 1998-99 AND 1999-2000. AT THE OUTSET IT IS CLEAR ON FACTS THAT THE IMPUGNED AMOU NT DOES NOT PERTAIN TO THE ASSESSMENT YEAR UNDER REFERENCE AS THE PROVISIONS WERE CREATED FOR THE E ARLIER YEARS. IN VIEW OF THIS SUCH AMOUNT CANNOT BE CLAIM ED AS INCOME DERIVED FROM THE MANUFACTURING ACTIVITIES DURING THE ASSESSMENT YEAR UNDER REFERENCE. FURTHER THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM BY CO GENT AND CREDIBLE EVIDENCES THAT THE AMOUNT OF RS.1 39 969/- REPRESENTING BROKERAGE ON OCEAN FREIG HT FROM SHIPPING AGENCIES HAS BEEN DERIVED FROM THE MANUFACTURING ACTIVITIES ITSELF. THE EXPRESSION APPEARING IN SECTION 80IB OF THE ACT I.E. DERIVED FROM HAS BEEN JUDICIALLY DEFINED IN THE CASE OF PANDIAN CHEMICALS LTD. V CIT (2003) 262 ITR 278 (S. C) CIT VS. STERLING FOODS 237 ITR 579 (S.C) AND LIBER TY INDIA V CIT 317 ITR 218. IN ALL THESE DECISIONS MISCELLANEOUS INCOME WHICH DOES NOT HAVE DIRECT NE XUS WITH THE MANUFACTURING ACTIVITIES DOES NOT QUALIFY FOR 5 DEDUCTION U/S 80IB OF THE ACT. IT IS A SETTLED PROPOSITION OF LAW THAT SUCH INCOME MUST SPROUT FRO M THE MANUFACTURING ACTIVITIES ITSELF AND SHOULD HAVE FIRST DEGREE RELATIONS WITH THE MANUFACTURING ACTIVITIES. THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE AP EX COURT IN THE CASE OF LIBERTY INDIA V CIT (2009) 3 17 ITR 218 (S.C). THE RELEVANT PORTION OF THE SAID DE CISION IS REPRODUCED HEREUNDER : THE INCOME-TAX ACT 1961 BROADLY PROVIDES FOR TWO TYPES OF TAX INCENTIVES VIZ. INVESTMENT- LINKED INCENTIVES AND PROFIT-LINKED INCENTIVES. CHAPTER VI-A OF THE ACT WHICH PROVIDES FOR INCENTIVES IN THE FORM OF DEDUCTIONS ESSENTIALLY BELONGS TO THE CATEGORY OF PROFIT-LINKED INCENTIVES. THEREFORE WHEN SECTION 80IA/80IA REFERS TO PROFITS DERIVED FROM ELIGIBLE BUSINESS IT IS NOT THE OWNERSHIP OF THAT BUSINESS WHICH ATTRACTS THE INCENTIVES : WHAT ATTRACTS THE INCENTIVES UNDER SECTION 80IA/80IB IS THE GENERATION OF PROFITS (OPERATIONAL PROFITS). IT IS FOR THIS REASON THAT PARLIAMENT HAS CONFINED DEDUCTION OF PROFITS DERIVED FROM ELIGIBLE BUSINESS MENTIONED IN SUB-SECTIONS (3) TO (11A). EACH OF THE BUSINESSES MENTIONED IN SUB- SECTIONS (3) TO (11A) CONSTITUTES A STAND-ALONE ITEM IN THE MATTER OF COMPUTATION OF PROFITS. SECTION 80-IB AND 80IA ARE A CODE BY THEMSELVES AS THEY CONTAIN BOTH SUBSTANTIVE AS WELL AS PROCEDURAL PROVISIONS. SECTION 80-IB PROVIDES FOR ALLOWING OF DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINESS. THE CONNOTATION OF THE WORDS DERIVED FROM IS 6 NARROWER AS COMPARED TO THAT OF THE WORDS ATTRIBUTABLE TO. BY USING THE EXPRESSION DERIVED FROM PARLIAMENT INTENDED TO COVER SOURCES NOT BEYOND THE FIRST DEGREE. SECTION 80-I 80-IA AND 80IAPROVIDE FOR INCENTIVES IN THE FORM OF DEDUCTIONS WHICH ARE LINKED TO PROFITS AND NOT INVESTMENT. ON ANALYSIS OF SECTIONS 80-IA AND 80IB IT BECOMES CLEAR THAT ANY INDUSTRIAL UNDERTAKING WHICH BECOMES ELIGIBLE ON SATISFYING SUB-SECTION (2) WOULD BE ENTITLED TO DEDUCTION UNDER SUB- SECTION (1) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING AFTER THE SPECIFIED DATE. APART FROM ELIGIBILITY SUB- SECTION (1) PURPORTS TO RESTRICT THE QUANTUM OF DEDUCTION TO A SPECIFIED PERCENTAGE OF THE PROFITS. THIS IS THE IMPORTANCE OF THE WORDS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS AGAINST PROFITS ATTRIBUTABLE TO AN INDUSTRIAL UNDERTAKING. DEPB/DUTY DRAWBACK ARE INCENTIVES WHICH FLOW FROM THE SCHEMES FRAMED BY THE CENTRAL GOVERNMENT OR FROM SECTION 75 OF THE CUSTOMS ACT 1962. INCENTIVE PROFITS ARE NOT PROFITS DERIVED FROM ELIGIBLE BUSINESS UNDER SECTION 80IB : THEY BELONG TO THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERTAKING. PROFITS DERIVED BY WAY OF INCENTIVES SUCH AS DEPB/DUTY DRAWBACK CANNOT BE CREDITED AGAINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PROFIT AND LOSS ACCOUNT AND THEY DO NOT FALL WITHIN THE EXPRESSION PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING UNDER SECTION 80IB. 7(I) IN VIEW OF THE ABOVE DISCUSSIONS AND HAVING RE GARD TO THE JUDICIAL HIERARCHY THE DECISION OF THE HON' BLE 7 SUPREME COURT WOULD PREVAIL AND WOULD BE APPLICABLE IN THE TERRITORY OF INDIA IN VIEW OF ARTICLE 141 O F THE CONSTITUTION. THE DECISION IN ITA NO. 537/CHD/2004 ASSESSMENT YEAR 200-01 IN THE CASE OF MAHAVIR SPINNING MILL LTD. WOULD NOT HOLD THE FIELD IN VIE W OF THE LATEST DECISION OF THE HON'BLE SUPREME COURT I N THE CASE OF LIBERTY INDIA (SUPRA) WHEREBY THE ISSUE IS SQUARELY COVERED BY THE SAID DECISION. 8. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSIO N THE ISSUE IN QUESTION RAISED IN THIS GROUND OF APP EAL OF THE REVENUE IS ALLOWED. 9. IN GROUND NO. 2 THE REVENUE CONTENDED THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTR ICTING THE ADDITION TO RS.1 0 000/- INSTEAD OF RS.36.57 LA CS MADE BY THE AO U/S 14A OF THE INCOME-TAX ACT 1961 RELATING TO EXEMPT DIVIDEND INCOME. THE CIT(A) PAR TLY ALLOWED THIS GROUND OF APPEAL OF THE REVENUE AS CONTAINED IN PARA 6.3 AND 6.4 OF HIS ORDER WHICH I S REPRODUCED HEREUNDER: 6.3 I HAVE NOTICED THAT A SIMILAR ISSUE WAS A SUBJECT MATTER OF APPEAL IN ONE OF THE GROUP COMPANIES I.E. M/S VARDHMAN HOLDINGS LTD. OF THE ASSESSEE IN THE ASSESSMENT YEAR 2004-05 WHEREIN THE CIT(A) JALANDHAR VIDE HIS ORDER DATED 26.2.2009 IN APPEAL NO.ROT/2/CIT(A)/JAL/08-09 HAS OBSERVED AS UNDER: HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY. THE SAME ISSUE AROSE IN THE CASE OF APPELLANT COMPANY IN ITS APPEAL FOR THE 8 ASSESSMENT YEAR 2002-03 WHICH WAS ADJUDICATED UPON BY THE LD CIT(A)-II LUDHIANA (SUPRA). THE LD. CIT(A)-II LUDHIANA NOTED THAT IN THE CASE OF THE APPELLANT IN THE ASSESSMENT YEAR 2001-02 IT WAS HELD THAT MAKING DISALLOWANCE U/S 14A IN THE AFORESAID MANNER WAS NOT CORRECT. THE DISALLOWANCE WAS UPHELD TO THE EXTENT OF RS.1 LAC. IN THE ABSENCE OF DETAILS AND FOR THE SAME REASONS IT IS HELD ACCORDINGLY. DISALLOWANCE IS UPHELD TO THE EXTENT OF RS.1 LAC AND THE REST OF THE DISALLOWANCE IS DELETED. THIS GROUND IS THUS PARTLY ALLOWED. 6.4 FOLLOWING THE DECISION OF MY LD. COLLEAGUE I.E. CIT(A)-II LUDHIANA AND CIT(A) JALANDHAR I RESTRICT THE DISALLOWANCE TO THE EXTENT OF RS.1 LAC. 10. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE RIVAL SUBMISSIONS AND THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE CIT(A). ASSESSEE SUBMITTED BEF ORE THE CIT(A) REGARDING ALLOCATION OF PERSONNEL ADMINISTRATION AND FINANCIAL EXPENSES TO DIVIDEND INCOME ON NOTIONAL BASIS IT IS STATED THAT AS PER DECISION OF SPECIAL BENCH OF ITAT CHANDIGARH BENCH IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. IN ITA NO. 946/CHD/1997 103 TTJ 36 4 (CHD)(SB) 1994-95 THE DIRECTIONS ARE AS UNDER : THAT THE ACTUAL EXPENDITURES INCURRED ARE TO BE TAKEN IN TO CONSIDERATION. THERE IS NO QUESTION OF TAKING EXPENDITURE ON ESTIMATE OR PRESUMPTION BASIS WHILE COMPUTING DIVIDEND 9 INCOME OR WHILE ALLOWING DEDUCTION U/S 80M OF INCOME-TAX ACT. 11. WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AS ALSO THE SUBMISSIONS IN THE MATTER. WE HAVE ALS O PERUSED THE FINDINGS OF THE LOWER AUTHORITIES. THU S HAVING REGARD TO THE ABOVE LEGAL AND FACTUAL DISCUS SION THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 12. IN GROUND NO. 3 REVENUE CONTENDED THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE ASSESSEE'S GROUND REGARDING CALCULATION OF INDIRECT COST OF TRADING GOODS FOR DEDUCTION U/S 80HHC IGNORING T HE FACT THAT THE AO HAD RIGHTLY DISALLOWED THE SAME FO R THE REASONS THAT THE SAME COULD NOT BE ALLOWED UNLESS O R UNTIL THE RETURN OF INCOME WAS REVISED AS HELD IN T HE CASE OF GOETZE INDIA LTD. V CIT 284 ITR 323 (S.C). THE LD. CIT(A) ALLOWED THIS GROUND OF APPEAL. THE RELE VANT FINDINGS OF THE LD. CIT(A) ON THE ISSUE ARE REPROD UCED HEREUNDER : I HAVE ANALYSED THE MATTER AND FIND THAT IN THE CASE OF HERO EXPORTS V CIT 213 CTR (S.C) 291 IT HAS BEEN HELD THAT THERE IS NO MERIT IN THE CONTENTIO N OF THE DEPARTMENT THAT THE QUESTION OF ALLOCATION DOES NOT ARISE IN CASES FALLING UNDER S. 80HHC(3)(B). FIRSTLY CL. (E) TO THE EXPLANATION WHICH REFERS TO ALLOCATION OF COSTS APPLIES TO SS. 80HHC(3)(A) AND 80HHC(3)(C). SECONDLY S. 80HHC(3)(B) EQUATES EXPORT PROFITS TO EXPORT TURNOVER LESS DIRECT AND INDIRECT COSTS ATTRIBUTABL E TO THE EXPORTS OF TRADING GOODS. THEREFORE THE PRINCIPLE OF ATTRIBUTION IS RETAINED. THIRDLY KEEPI NG 10 IN MIND THE PROVISIONS OF S. 80HHC(3)(B) R/W CLS. ( D) AND (E) OF THE EXPLANATION IT IS CLEAR THAT LEGISLA TURE INTENDED ALLOCATION OF COSTS BETWEEN EXPORT TURNOVE R AND TOTAL TURNOVER. IT IS TRUE THAT THE APPORTIONME NT MAY NOT APPLY TO MOST CASES UNDER S.80HHC(3)(B). BUT IN CERTAIN CASES FALLING UNDER S. 80HHC(3)(B) RATIO STILL APPLIES. FOR EXAMPLE IN THE CASE WHERE THE ASSESSEE EXPORTS ALL BOUGHT-OUT ITEMS BUT BRING S BACK ONLY A PART OF THE EXPORT PROCEED INTO INDIA I N SUCH CASES THE RATIO WILL APPLY AND THEREFORE IF ONE IS TO READ CL. (E) IT RETAINS THE WORDS INDIREC T COSTS TO BE ALLOCATED IN THE RATIO OF EXPORT TURNOV ER TO TOTAL TURNOVER. THE WORD ATTRIBUTABLE IN S. 80HHC(3)(B) IN THE MAIN SECTION ITSELF INDICATES TH AT APPORTIONMENT (PRINCIPLE OF ATTRIBUTATION) IS NOT OMITTED FROM THE SAID PROVISION OF S.80HHC(3)(B). ASSESSEE HAS EARNED OTHER INCOME APART FROM FOB VALUE OF EXPORTS. THEREFORE SOME EXPENSES HAS TO BE ATTRIBUTED TO IT. 10% OF THE TOTAL OTHER INCOME WOULD BE FAIR ESTIMATE. THIS GUIDANCE VALUE IS NOT FLOWING FROM CL. (BAA) BUT FROM THE SCHEME OF S. 80HHC READ WITH THE MEMORANDUM TO THE FINANCE ACT OF 1991. IF ALLOCATION OF EXPENSES IS TO BE DON E ON ACTUAL BASIS IT WOULD NOT ONLY BE VERY DIFFICUL T BUT IN SOME CASES ACTUAL APPORTIONMENT MAY NOT BE IN THE INTEREST EVEN OF THE DEPARTMENT. 7.3 FOLLOWING THE JUDGMENT OF HON'BLE SUPREME COURT AS RELIED ON BY THE LD. 'AR' THE GROUND OF APPEAL IS ALLOWED. 13. WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE RIVAL SUBMISSIONS AND THE RELEVANT RECORDS INCLUDI NG THE FINDINGS OF THE AO AND THE CIT(A). HAVING REGAR D TO THE LEGAL AND FACTUAL DISCUSSION WE DO NOT FIND AN Y INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) AND H ENCE 11 THE SAME ARE UPHELD AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 14. AS THE GROUND NOS. 4 & 5 ARE GENERAL IN NATURE NEED NO SEPARATE ADJUDICATION. 15. IN THE RESULT THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ITA NO. 1172/CHD/2009 (ASSESSEE'S APPEAL-A.Y. 2000-01) 16. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER PASSED BY LD. CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE NOT ALLOWING SET OFF OF LOSS OF RS.2 74 47 311/- SUFFERED BY ANANT SPINNING MILLS (UNIT-III) AGAINST BUSINESS PROFITS EARNED BY THE ASSESSEE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD/ALTER/ AMEND ONE OR ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING OF APPEAL 17. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS LD. 'AR' FILED WRITTEN SUBMISSION VIDE LETTER DATED 16.2.2012 AND RELEVANT PART-THEREOF IS REPRODUCED HEREUNDER: 1. THAT THE ABOVE CAPTIONED APPEAL WAS HEARD BY YO UR HONORS THIS MORNING WHEN YOU WERE PLEASE TO DIRECT THE APPELLANT TO SUBMIT THE FACTUAL BACKDROP IN RESPECT OF GROUND OF APPEAL NO. 2. 2. THE APPELLANT IS ENGAGED IN RUNNING SEVERAL BU SINESS AT VARIOUS LOCATIONS INCLUDING ONE UNIT NAMELY ANAN T SPINNING MILLS UNIT - III AT MANDIDEEP BHOPAL. THE APPELLANT SUFFERED A LOSS OF RS.2 74 47 31 II- IN THAT UNIT THE APPELLANT DID NOT CLAIM A SETOFF OF THIS LOSS AG AINST THE BUSINESS INCOME OF OTHER BUSINESSES 12 AGGREGATING TO RS.47 20 76 810/- AS WOULD BE CLEAR FRO M A COPY OF THE IMPUGNED ORDER FRAMED U/S 143(3) OF THE I NCOME TAX ACT 1961 (PAGE 11). 3. THE APPELLANT REALIZED THIS OMISSION AFTER THE DE CISION OF THE HON'BLE ITAT IN THE CASE OF NAVIN BHARAT INDUSTRIES LTD VS. DCIT REPORTED IN 270 ITR 1 (BOM) AND FILED AN ADDITION AL GROUND OF APPEAL BEFORE THE HON'BLE ITAT CHANDIGARH WHICH HAS BEEN DEALT WITH BY THE HON'BLE ITAT BENCH 'B' CHANDIGARH IN THEIR ORDER DATED 25.01.2008 WHICH REA DS AS UNDER: 'THE NEXT ADDITIONAL GROUND RAISED BY THE ASSESSES IS THAT THE AUTHORITIES BELOW HAVE ERRED IN LAW IN AS MUCH AS NOT ALLOWING SETTING OFF OF LOSS AMOUNTING TO RS.2 74 4 7 311/- SUFFERED BY ANANT SPINNING MILLS (UNIT NO III) AGAI NST THE BUSINESS PROFIT EARNED BY THE COMPANY AND EXCLUDING THE SAME FROM THE PROFITS OF THE COMPANY WHILE CALCULAT ING ITS TAXABLE INCOME. ADMITTEDLY THIS GROUND WAS NOT AGI TATED BEFORE THE AUTHORITIES BELOW '. THIS ADDITIONAL GROUND OF APPEAL WAS ADMITTED BY TH E HON'BLE ITAT IN THE INTEREST OF JUSTICE BY OBSERVING ' WE REMAND THIS ISSUE BACK TO THE FILE OF THE LD. ASSESSI NG OFFICER FOR FRESH ADJUDICATION AS PER PROVISIONS OF LAW'. 4. THE AO IN HIS IMPUGNED ORDER HAS REPRODUCED THE ADDITIONAL GROUND OF APPEAL CLEARLY SHOWING THAT THE I SSUE INVOLVED WAS REGARDING THE CLAIM OF ALLOWING OF SETTIN G OFF OF LOSS OF RS.2 74 47 311/- SUFFERED BY ANANT SPINNI NG MILLS (UNIT NO. III). HIS FINDING IS ON PAGE 4 OF THE ASSESSMENT ORDER. A PERUSAL OF THIS FINDING SHOWS TH AT HE HIMSELF HAS MENTIONED THAT A LOSS OF RS.2 74 47 3 11/- WAS SUFFERED BY ANANT SPINNING MILLS (UNIT NO.III). HE HAS NOT QUESTIONED THIS FIGURE BUT HAS DISALLOWED TH E CLAIM BY RELYING ON THE DECISION OF HON'BLE SUPREME C OURT OF INDIA IN GOETZ (INDIA) LTD. V CIT 284 ITR 323 (S.C ) ON A LEGAL GROUND. 5. A COPY OF SUBMISSIONS FILED BEFORE THE CIT(A) I S ENCLOSED WHEREIN THE APPELLANT HAS RESTATED THAT THE LOSS SUF FERED BY ANANT SPINNING MILLS (UNIT NO. III) WAS RS.2 74 47 311/- AND THAT SINCE THE CONSOLIDATED B OOK PROFITS OF THE COMPANY DECLARED BY THE APPELLANT STA NDS ADJUSTED BY THE LOSSES OF ANANT III THEREFORE IN ACCORDANCE WITH THE JUDGEMENT OF HON'BLE ITAT MUMBA I NO OTHER TREATMENT FOR THE SAID LOSSES SHOULD BE DON E IN THE COMPUTATION OF TAXABLE INCOME OF THE APPELLANT. THESE FACTS HAVE BEEN ACCEPTED BY THE CIT(A) WHO HA S DISALLOWED THE AMOUNT OF RS.2 74 47 311/- AGAIN ON A LEGAL ISSUE. 6. IN THESE CIRCUMSTANCES IT IS HUMBLY SUBMITTED T HAT THE RELEVANT FACTS ARE UNCONTROVERTED. 13 18. LD. 'DR' PLACED RELIANCE ON THE ORDER OF THE LO WER AUTHORITIES. 19. WE HAVE HEARD THE RIVAL SUBMISSIONS CONSIDERED FACTS OF CASE AND THE CASE LAWS CITED BY THE ASSESS EE. THE FINDINGS OF THE AO ON THE ISSUE IN QUESTION A S CONTAINED IN THE ASSESSMENT ORDER DATED 31.12.2008 U/S 143(3) R.W.S. 254 OF THE ACT ARE REPRODUCED HEREUNDER: 2.1(II) REGARDING ISSUE IN ADDITIONAL GROUND RELATING SET OFF OF LOSS AMOUNTING TORS.2 74 47 311/- SUFFERED BY ANANT SPINNING MILLS (UNIT NO. III) AND DEDUCTION EQUAL TO 10% OF ITEMS COVERED BY EXPLANATION (BAA) TO SECTION 80HHC FROM THE INDIRECT COST OF TRADING GOODS NO SUCH CLAIMS DESERVE ANY CONSIDERATION AT THIS STAGE IN VIEW OF THE CASE GOETZE (INDIA) LTD. V CIT REPORTED (2006) 284 ITR 323 (S.C) ACCORDING TO WHICH NO CLAIM BE ADMISSIBLE WITHOUT REVISION OF RELEVANT RETURN OF INCOME. THUS RESPECTFULLY FOLLOWING THE CASE LAW (SUPRA) BOTH THE CLAIMS OF ASSESSEE MADE IN ADDITIONAL GROUNDS ARE DISALLOWED BEING INADMISSIBLE ACCORDINGLY. 19(I) FURTHER THE FINDINGS OF THE LD. CIT(A) A S CONTAINED IN PARA 5.3 OF HIS ORDER ARE REPRODUCED HEREUNDER : 5.3 I HAVE ANALYSED THE MATTER AND FIND THAT THE FINANCE ACT 2003 AMENDED SECTION 10B(6) WITH RETROSPECTIVE EFFECT FROM 01.04.2001 BY INSERTING THE WORDS ENDING BEFORE 01.04.2001 IN SECTION 10B(6)(I) AND SECTION 10B(6)(II). THE RESULT IS BUSINESS LOSSES OR UNABSORBED DEPRECIATION ARISING 14 IN ASSESSMENT YEAR 2001-02 AND SUBSEQUENT YEARS CAN BE CARRIED FORWARD AND SET OFF. WHEREAS THE ASSESSMENT YEAR INVOLVED IN THE APPELLANTS CASE IS 2000-01 AND THE AMENDMENT AS BROUGHT OUT BY FINANCE ACT 2003 IS NOT APPLICABLE IN THIS CASE. TH E RELIANCE PLACED BY THE LD. 'AR' ON THE CASE LAWS AS MENTIONED ABOVE IS MISPLACED AS THERE IS A SPECIFIC PROVISION IN SECTION 10B AS TO WHAT TREATMENT IS TO BE GIVEN TO CARRY FORWARD OF BUSINESS LOSSES. THE GROUND OF APPEAL IS DISMISSED. 20. ON A CAREFUL PERUSAL AND CONSIDERATION OF THE ABOVE PRODUCED SUBMISSIONS FILED BY THE ASSESSEE A ND FINDINGS OF THE CIT(A) WE ARE OF THE CONSIDERED OP INION THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY T HE THIRD MEMBER DECISION OF THE ITAT BOMBAY IN THE CA SE OF NAVIN BHARAT INDUSTRIES LTD. V DCIT 2004-(090)- ITD- 0001T-TBOMT. 21. A BARE PERUSAL OF THE DECISION REVEALS THAT THE ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APP EAL RAISED BY THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF ITAT BOMBAY IN NAVIN BHARAT INDUSTRIES LTD. (SUPRA) AS IS EVIDENT FROM THE RELEVANT PART OF THE SAID THIRD MEMBER DECISION AS REPRODUCED HEREUNDER : IN THE PRESENT CASE 1 FIND THAT THE BENEFIT OF SEC TION 10A OF THE ACT WAS AVAILABLE TO THE ASSESSEE FOR FIVE YEARS. THE ASSESSEE CLAIMED BENEFIT FOR THREE YEANS. FOR REST OF THE YEA NS THE ASSESSEE DID NOT CLAIM THE BENEFIT OF SECTION 10A O F THE ACT. THE ASSESSEE OPTED TO GET THE PROFITS OF NEW INDUSTRIAL U NDERTAKING ASSESSED UNDER THE NORMAL PROVISIONS. I FIND NO PROV ISION IN THE ACT BY WHICH THE ASSESSEE CAN BE FORCED TO AVAIL TH E BENEFIT FOR FIVE YEANS. IF THE ASSESSEE WANTS TO PUT THE INCOME UNDER THE 15 NORMAL COMPUTATION PROCEDURE THERE APPEARS TO BE NO BAR FOR DOING SO. IF ONE PURCHASES TICKET TO UNDERTAKE JOURN EY FROM MUMBAI LO DELHI LATER ON HE DECIDES TO DISEMBARK FR OM THE TRAIN AL KOTA THE RAILWAY AUTHORITIES CANNOT FORCE HIM TO G O UP TO DELHI. IF THE BENEFIT IS CONFERRED ON THE ASSESSEE H E CANNOT BE FORCED TO AVAIL THE SAME. SECTION 10A OF THE ACT IS A CODE BY ITSELF. IT CONTA INS THE SCHEME OF TAXATION FORMULATED BY THE GOVERNMENT FOR TAXABI LITY OF UNITS SET UP IN THE EXPORT PROCESSING ZONE. AS SUCH IT CANNOT BE COMPARED WITH SECTION 10 OF THE ACT. EX CONSEQUENT THE DECISIONS RENDERED IN THE CASES OF HARPRASAD & CO. (P) LTD. (SUPRA) AND S.S. THIAGARAJAN (SUPRA) IN THE CONTEXT OF SECTION 10 OF THE ACT CANNOT BE APPLIED OVER HERE. COMING TO THE APPLICABILITY OF SECTION 10A(4)(II) OF THE ACT I FIND THAT IT PUT INTERDICT QUA SECTIONS 72 AND 74. IT DOES NOT PRECLUDE THE OPERATION OF SECTIONS 70 AND 71. SECTION 14A OF THE ACT IS APPLICABLE IN RESPECT OF EXPENDITURE . LOSS IS D IFFERENT FROM EXPENDITURE. AS SUCH THE ASSESSEE IS ENTITLED TO SETTING OFF THE LOSS INCURRED BY THE SEEPZ UNIT. IN VIEW OF TH IS FINDING THE QUESTION WHETHER SECTION 14A OF THE ACT IS PROSPEC TIVE OR RETROSPECTIVE IN OPERATION HAS BECOME ACADEMIC. I CONCU R WITH THE FINDING OF THE LD. ACCOUNTANT MEMBER. 22. IT IS MENTIONED THAT THE ADDITIONAL GROUND RAI SED BY THE ASSESSEE HAD ALREADY BEEN ADMITTED BY THE TRIBUNAL VIDE DECISION IN ITA NO. 537/CHD/2004 ASSESSMENT YEAR 2000-01 DATED 25.1.2008. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE IN VIEW OF TH E SUPREME COURT DECISION IN THE CASE OF GOETZE (INDIA ) LTD. V CIT 284 ITR 323 (S.C). HOWEVER AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THE RATIO OF T HE DECISION DOES NOT DEFINE THE POWERS OF THE INCOME-T AX ACT. IT IS EVIDENT THAT THE AMENDMENT AS QUOTED B Y THE 16 CIT(A) IN HIS ORDER PERTAINS TO THE ASSESSMENT YE AR 2001-02 AND REFERENCE TO THE BROUGHT FORWARD DEPRECIATION AND LOSSES WHEREAS IN THE PRESENT CAS E THE RELEVANT ASSESSMENT YEAR IS 200-01 AND SET-OFF CLAIMED BY THE ASSESSEE PERTAINS TO THE SAID UNIT. 23. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSI ONS AND RESPECTFULLY FOLLOWING THE DECISION OF THE THI RD MEMBER CASE (SUPRA) THE GROUNDS OF APPEAL ARE DECI DED IN FAVOUR OF THE APPELLANT. HENCE THE APPEAL OF T HE ASSESSEE IS ALLOWED. 24. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. 25. RESULTANTLY THE APPEAL OF THE REVENUE IN ITA NO.64/CHD/2010 IS PARTLY ALLOWED AND THAT OF THE ASSESSEE IN ITA NO.1172/CHD/2009 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEB. 2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 22 ND FEB. 2012. POONAM COPY TO: THE APPELLANT THE RESPONDENT THE CIT(A) CIT DR ASSISTANT REGISTRAR ITAT CHANDIGARH