M/s. Misons Exports, Tiruppur v. ACIT, Tiruppur

IN THE INCOMETAX APPELLATE TRIBUNAL: A-BENCHL;CHENN AI (BEFORE SHRI U.B.S.BEDI JUDICIAL MEM BER AND SHRI ABRAHAM P. GEORGE. ACCOU NTANT MEMBER) ITA NO. 657 / MDS/ 2008 ASST. YEAR 2004-05 M/S MISONS EXPORTS 8A SASTHRI NAGAR SAK LAYOUT ANGERIPALAYAM ROAD TIRUPUR 641603 PAN: AAFFM0201J VS THE ACIT CIR.I TIRUPUR (APPELLANT) (RESPONDENT) APPELLANT BY: RESPONDENT BY: MS. RUPA J.THARAYIL SHRI SHAJI P.JACOB ORDER PER SHRI ABRAHAM P.GEORGE ACCOUNTANT MEMBER: IN THIS APPEAL ASSESSEE ASSAILS THE ORDER OF THE C IT UNDER SEC. 263 OF THE INCOME-TAX ACT 1961 (THE ACT FOR SHORT) FOR THE IMPUGNED ASSESSMENT YEAR. 2. LD. CIT VIDE HIS ORDER DATED 04-02-2008 UNDER S EC. 263 OF THE ACT HAD SET ASIDE THE ASSESSMENT FOR THE IMPUGNED ASST. YEA R FOR A REASON THAT THE AO HAD GIVEN DEDUCTION UNDER SEC. 8-IB OF THE ACT ON DUTY DRAW BACK OF ` 43 40 431/-. ACCORDING TO THE CIT IN VIEW OF THE D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JA MEEL LEATHERS & UPPERS (246 ITR 97) AND ALSO IN THE CASE OF CIT VS. VISWANATHAN & CO. (261 ITR 737) ITA NO.657/MDS//08. 2 WHEREIN IT WAS CLEARLY HELD THAT DUTY DRAW BACK WAS NOT AN INCOME DERIVED FROM AN INDUSTRIAL UNDERTAKING FOR THE PURPOSUE OF CLAIM ING DEDUCTION UNDER SEC. 80IB OF THE ACT SUCH DEDUCTION WAS ERRONEOUSLY GIVEN O N SUCH DUTY DRAW BACK BY THE AO. THOUGH THE ASSESSEE SUBMITTED BEFORE THE CIT T HAT SUCH INCOME WAS A PART OF THE BUSINESS INCOME OF THE ASSESSEE FROM ITS IND USTRIAL UNDERTAKING RELYING ON THE DECISION OF THE DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS.ELTEK SGS P. LTD. (2006) 10 SOT 178 AND THAT OF THE CORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. P.S.APPARELS (2007) 11 SOT 43 TH IS WAS NOT ACCEPTED BY THE CIT WHO TOOK REFUGE IN THE DECISION OF HONBLE JUR ISDICTIONAL HIGH COURT JAMEEL LEATHERS & UPPERS (SUPRA). LD. CIT WAS OF THE OPINI ON THAT THE AO HAD NOT FOLLOWED THE SETTLED LEGAL POSITION AND HENCE THE ORDER WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 3. NOW BEFORE US IN THE GROUNDS FILED BY THE ASSESS EE IT ASSAILS SIMULTANEOUS DEDUCTION BEING NOT GRANTED TO IT UNDE R SEC. 80IB AND 80HHC OF THE ACT AND IN TREATING DUTY DRAW BACK AS NOT BUSI NESS INCOME BY THE AO. SINCE THE ORDER APPEALED AGAINST IS AN ORDER OF THE CIT P ASSED UNDER SEC. 263 OF THE ACT THESE GROUNDS WHICH ASSAIL THE ACTION OF THE A O ARE IRRELEVANT. THE ORDER OF THE AO IS NOT IN APPEAL BEFORE US. HOWEVER ASSESE E HAS ALSO FILED AN ADDITIONAL GROUND RELYING ON RULE 19 OF THE APPELLATE TRIBUNAL RULES. IN THIS ADDITIONAL GROUND THE PLEADING OF THE ASESSEE IS THAT THE ORDE R OF THE CIT LACKED JURISDICTION AND DID NOT SATISFY THE REQUIREMENTS OF SEC.263 OF THE ACT SINCE ORIGINAL ASSESSMENT WAS COMPETED UNDER SEC.143(3) OF THE ACT . ACCORDING TO THE ITA NO.657/MDS//08. 3 ASSESSEE SUCH ORIGINAL ASSESSMENT WAS NOT ERRONEOU S AND HENCE THE PRIMARY REQUISITE UNDER SEC.263 OF THE ACT FOR INVOKING THE SAID SECTION WAS NOT SATISFIED. 4. PLEADING FOR ADMISSION OF ADDITIONAL GROUND LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT WAS CLEARLY LEGAL ISSUE AND THERE FORE HAD TO BE ADMITTED. 5. LD. DR DID NOT RAISE SERIOUS OBJECTION TO THE AD DITIONAL GROUND BEING RAISED BY THE ASSESSEE. HENCE ADDITIONAL GROUND IS ADMITTED AND IS BEING DISPOSED OF HEREUNDER. 6. LD. COUNSEL FOR THE ASSESEE IN SUPPORT OF THE AD DITIONAL GROUND SUBMITTED THAT ON THE DATE WHEN THE ASSESSMENT WAS COMPLETED BY THE AO QUESTION WHETHER DUTY DRAW BACK WAS TO BE CONSIDERED AS PART OF INCOME FROM INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER SEC. 80IB OF THE ACT WAS A DEBATABLE ONE AND THE AO HAD TAKEN A VIEW WHICH WAS NOT UNLAW FUL AND THE CIT WAS TRYING TO SUBSTITUTE HIS VIEW WITH THE VIEW OF THE AO. ACC ORDING TO THE LD. AR THIS TRIBUNAL IN THE CASE OF P.S.APPARELS (SUPRA) HAD A FTER CONSIDERING THE DECISION SOF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF JALEEL LEATHERS & UPPERS (SUPRA) RELIED ON HERE BY THE CIT FOR INVOKING HIS REVISIONARY JURISDICTION HAD HELD THAT DUTY DRAW BACK INCOME WAS ELIGIBLE FOR D EDUCTION UNDER SEC. 80IB OF THE ACT. HOWEVER SHE FAIRLY ADMITTED THAT ON MERIT S THE ISSUE STOOD COVERED ITA NO.657/MDS//08. 4 AGAINST THE ASSESSEE BY THE DECISION OF HONBLE APE X COURT IN THE CASE OF LIBERTY INDIA LTD. V. CIT (317 ITR 218). 7. PER CONTRA THE LD. DR SUBMITTED THAT THERE WAS NO DISCUSSION IN THE ASSESSMENT ORDER REGARDING THE CLAIM OF THE ASSESSE E MADE UNDER SEC. 80IB OF THE ACT ON THE DUTY DRAW BACK INCOME ACCORDING TO T HE LD. DR AO HAD NEVER REQUIRED FROM THE ASSESSEE ANY DETAILS REGARDING CL AIM FOR DEDUCTION UNDER SEC. 80IB OF THE ACT AND ASSESSEE HAD ALSO NOT FURNISHED ANY PARTICULARS IN THIS REGARD DURING THE COURSE OF ASSESSMENT. THEREFORE ACCORDI NG TO HIM THERE WAS A COMPLETE NON-APPLICATION OF MIND BY THE AO WHICH RE NDERED THE ASSESSMENT ORDER ERRONEOUS. ACCORDING TO HIM SUCH ERROR WAS A LSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN VIEW OF THE DECISION OF HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF SAKTHI FOOTWEAR V. ACIT (317 ITR 194) AND A LSO THE DECISION OF THE HONBE APEX COURT IN THE CASE OF LIBERTY INDIA LTD. (SUPRA). ACCORDING TO HIM HONBLE APEX COURT IN THE CASE OF ACIT VS. SAURASHT RA KUTCH STOCK EXCHANGE LTD.(305 ITR 227) CLEARLY HELD THAT THE EXPOSITION OF LAW MADE BY THE APEX COURT WOULD ACT RETROSPECTIVELY AND THE LAW WAS THE SAME FROM THE VERY BEGINNING AS IT SO STOOD INTERPRETED. 8. WE HAVE CAREFULLY PERUSED THE RECORDS AND HEARD THE RIVAL SUBMISSIONS. FACTS NOT DISPUTED ARE THAT DURING THE COURSE OF OR IGINAL ASSESSMENT THERE WAS NO ENQUIRY FROM THE AO REGARDING THE CLAIM OF DEDUC TION MADE BY THE ASSESSEE ITA NO.657/MDS//08. 5 UNDER SEC.80B OF THE ACT NEITHER WAS ANY CLARIFICA TION OR DETAILS IN THIS REGARD SUBMITTED BY THE ASSESSEE. IF WE LOOK AT THE ORIGIN AL ASSESSMENT ORDER DATED 22- 12-2006 THE WHOLE OF THE ASSESSMENT ORDER DEALS WI TH THE EXIGIBILITY OF THE CLAIM OF DEDUCTION UNDER SEC.80IB AND 80HHC OF THE ACT S IMULTANEOUSLY. AO AFTER ELABORATE DISCUSSION HELD THAT DEDUCTION UNDER SEC. 80HHC HAD TO BE COMPUTED ON THE TOTAL INCOME AS REDUCED BY THE DEDUCTION ALL OWED UNDER SEC. 80IB OF THE ACT. HOWEVER NOTHING IS MENTIONED WHATSOEVER REGAR DING THE CORRECTNESS OF THE CLAIM FOR DEDUCTION UNDERSEC. 80IB OF THE ACT. THUS CLEARLY THERE HAS BEEN A NON-APPLICATION OF MIND BY AO WITH REGARD TO THE CL AIM OF THE ASSESSEE UNDER SEC.80IB OF THE ACT AT THE STAGE OF ASSESSMENT. IF WE LOOK AT THE ORDER OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF JAMEEL LEA THER & UPPER (SUPRA) IT WAS DATED 14-10-1998 AND WHEN THE ASSESSMENT WAS COMPL ETED ON 22-12-2006 AO OUGHT HAVE BEEN WELL AWARE OF THE SAID DECISION. IT WAS HELD BY THE JURISDICTIONAL HIGH COURT IN THE SAID DECISION THAT CASH ASSISTANC E DUTY DRAW BACK AND VALUE OF IMPORT LICENSE NOMINATION WERE NOT INCLUDIBLE IN TH E PROFIT DERIVED FROM THE INDUSTRIAL UNDERTAKING. AS FOR THE RELIANCE PLACED BY THE AR ON THE DECISION OF COORDINATE BENCH IN THE CASE OF P.S. APPARELS (SUPR A) MIGHT BE IT HAS CONSIDERED THE DECISION OF THE JURISDICTIONAL HIGH COURT IN JEMEEL LEATHERS & UPPERS (SUPRA) THEREIN. NEVERTHELESS IT REMAINS AN INCONTROVERTIBLE FACT THAT AO HAD NOT CONSIDERED THE ISSUE AT ALL AT THE STAGE OF ASSESSMENT. NOW THE HONBLE APEX COURT HAS SETTLED THE ISSUE REGARDING DUTY DRA W BACK WHETHER ELIGIBLE FOR DEDUCTION UNDER SEC.80IB OF THE ACT THROUGH ITS DEC ISION IN LIBERTY INDIA LTD.S CASE (SUPRA). WE ARE IN AGREEMENT WITH THE ARGUMENT OF THE LD. DR THAT ITA NO.657/MDS//08. 6 EXPOSITION OF LAW AS MADE BY HONBLE APEX COURT WOU LD ACT RETROSPECTIVELY AND THE LAW HAS TO BE INTERPRETED AS THOUGH IT WAS THE SAME FROM THE VERY BEGINNING. SO IN OUR OPINION BY SHEER NON-APPLICATION OF MI ND THERE WAS AN ERROR IN THE ORDER OF THE AO AND SUCH ERROR WAS UNDOUBTEDLY PREJ UDICIAL TO THE INTERESTS OF THE REVENUE IN VIEW OF THE DECISIONS OF THE HONBLE JU RISDICTIONAL HIGH COURT AS WELL AS THE HONBLE APEX COURT. WE THEREFORE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE CIT IN THIS REGARD. WE REFUSE TO INTERFERE THER EIN. 10. APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25 -02 -2011 SD/- SD/- (U.B.S.BEDI) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: 25 TH FEB. 2011. NBR CC: ASSESSEE /ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE. ITA NO.657/MDS//08. 7