AIA Engineering Ltd.,, Ahmedabad v. The Dy.CIT., Circle-1,, Ahmedabad

ITA 686/AHD/2009 | 2001-2002
Pronouncement Date: 04-02-2011 | Result: Partly Allowed

Appeal Details

RSA Number 68620514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 686/AHD/2009
Duration Of Justice 1 year(s) 11 month(s) 1 day(s)
Appellant AIA Engineering Ltd.,, Ahmedabad
Respondent The Dy.CIT., Circle-1,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 04-02-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 04-02-2011
Date Of Final Hearing 31-01-2011
Next Hearing Date 31-01-2011
Assessment Year 2001-2002
Appeal Filed On 03-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT JUDICIAL MEMBER) ITA NO.686/AHD/2009 [ASSTT. YEAR : 2001-2002] AIA ENGINEERING LTD. 115 G.V.M.M. ESTATE ODHAV ROAD AHMEDABAD. VS. DCIT CIR.1 AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUNIL H. TALATI REVENUE BY : DR. RAJA RAM SAH O R D E R PER MUKUL KUMAR SHRAWAT JUDICIAL MEMBER: THIS APPEAL HAS BEEN FILED AT THE BEHEST OF THE ASSESSEE WHIC H HAS EMANATED FROM THE ORDER OF THE CIT(A)-VI AHMEDABAD DATED 12.12.2008. 2. AT THE OUTSET THE LEARNED AR SHRI SUNIL TALATI HAS INFORMED THAT GROUND NO.1 IN RESPECT OF REOPENING OF THE ASSESSME NT UNDER SECTION 148 AND GROUND NO.5 IN RESPECT OF CHARGING OF INTEREST UNDE R SECTION 234-B AND 234C OF THE ACT ARE NOT PRESSED. LIKEWISE HE HAS INFOR MED THAT GROUND NO.6 AND 7 BEING GENERAL IN NATURE ARE ALSO NOT PRESSED. IN V IEW OF HIS STATEMENT THESE GROUNDS ARE HEREBY DISMISSED BEING NOT PRESSED. 3. NOW WE ARE LEFT WITH GROUND NOS.2 AND 3 WHICH A RE IN RESPECT OF CLAIM OF DEDUCTION UNDER SECTION 80HHC ON EXCHANGE RATE D IFFERENCE AND GROUND NO.4 IN RESPECT OF DISALLOWANCE OF BAD DEBTS. 4. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT DATED 29.12. 2006 WERE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF ALLOYS STEEL CASTING. IN RESPECT OF GROUND NO.2 AND 3 I.E. THE CLAIM OF DEDUCTION UNDER SECTI ON 80HHC ON EXCHANGE FLUCTUATION RATE DIFFERENCE THE AO HAS NOTED THAT THE AMOUNT OF RS.5 46 005/- WAS TREATED AS BUSINESS PROFIT FOR THE PURPOSE OF C OMPUTATION OF DEDUCTION ITA NO.686/AHD/2009 -2- UNDER SECTION 80HHC. HOWEVER AS PER THE A.O. 90% OF THE EXCHANGE RATE DIFFERENCE SHOULD NOT HAVE BEEN CLAIMED AND HE HAS DEDUCTED THE SAID AMOUNT FROM THE PROFIT OF THE BUSINESS FOR WORKING OUT THE DEDUCTION UNDER SECTION 80HHC OF THE ACT. AFTER APPLYING THE FORMULA PRESC RIBED UNDER THE ACT THE EXCESS DEDUCTION WAS COMPUTED AT RS.14 567/- WHICH WAS CHALLENGED BEFORE THE CIT(A). 5. THE LEARNED CIT(A) HAS GIVEN A FINDING THAT THE FOREIGN EXCHANGE FLUCTUATION RATE WAS NOT DIRECTLY CONNECTED FROM TH E EXPORT BUSINESS AND IT HAD ARISEN DUE TO FLUCTUATION IN THE VARIATION IN THE C URRENCY RATES AS PER THE INTERNATIONAL SCENARIO. HE HAS ALSO NOTED THAT THE SAID FOREIGN EXCHANGE FLUCTUATION WAS NOT DUE TO EITHER SALE OR PURCHASE OF THE YEAR. THE ACTION OF THE AO WAS CONFIRMED. 6. AFTER HEARING THE SUBMISSIONS OF BOTH THE SIDES WE HEREBY CONFIRM THE FINDINGS OF THE AUTHORITIES BELOW PRIMARILY BECAUSE OF THE REASON THAT IN A LATEST DECISION OF COMMISSIONER OF INCOME-TAX VS SHAH ORIG INALS 327 ITR 19 (BOM) IT WAS OPINED THAT IN A SITUATION WHEN EXCHAN GE FLUCTUATION IS NOT DERIVED OR BE PART OF THE EXPORT PROFIT SUCH GAIN C ANNOT BE INCLUDED IN THE PROFIT OF THE BUSINESS FOR CALCULATING THE DEDUCTION UNDER SECTION 80HHC. SECONDLY THE ASSESSEE HAS NOT MADE OUT HIS CASE THAT ONE OF THE CONDITION AS PRESCRIBED UNDER SECTION 80HHC THAT THE SALE PROCEEDS RECEIVAB LE IN CONVERTIBLE FOREIGN EXCHANGE HAS TO BE BROUGHT INTO INDIA WITHIN THE PE RIOD OF SIX MONTHS AS PRESCRIBED THEREIN. IN THE ABSENCE OF THESE DETAIL S AND THAT THERE WAS NO DIRECT NEXUS BETWEEN FOREIGN EXCHANGE FLUCTUATION AND THE EXPORT ACTIVITY FOR THE YEAR UNDER CONSIDERATION AND THAT THE FOREIGN EXCHANGE H AD IN FACT BROUGHT INTO INDIA WITHIN THE PRESCRIBED PERIOD WE HEREBY HOLD THAT T HE AUTHORITIES BELOW HAS RIGHTLY REDUCED THE CLAIM OUT OF THE TOTAL CLAIM OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. RESULTANTLY THIS GROUND OF THE ASSESSEE IS HEREBY DISMISSED. ITA NO.686/AHD/2009 -3- 7. THE NEXT ISSUE YET TO BE DECIDED IS AS PER GROUN D NO.4 IN RESPECT OF THE DISALLOWANCE OF BAD DEBTS AND IN THIS REGARD THE O BSERVATION OF THE AO WAS THAT A SUM OF RS.56 25 989/- WAS CLAIMED AS BAD DEB TS. IN THIS CONNECTION THE EXPLANATION OF THE ASSESSEE WAS THAT THE SALE INVOI CE WAS RAISED WHICH WAS DISPUTED BY M/S.MAGATTAEAUD INDUSTRIES PVT. LTD. I T WAS FURTHER EXPLAINED THAT A SETTLEMENT TOOK PLACE BETWEEN THE TWO PARTIES AND AS PER THE SAID SETTLEMENT THE ASSESSEE WAS REQUIRED TO PAY A LESSER AMOUNT AN D THE BALANCE AMOUNT HAS BEEN WRITTEN OFF AS BAD DEBTS FOR THE YEAR UNDER CO NSIDERATION. HOWEVER THE AO WAS NOT CONVINCED AND THE CLAIM WAS DISALLOWED W HICH WAS CONFIRMED BY THE CIT(A). WITH THIS BACKGROUND WE HAVE HEARD BO TH THE SIDES. ONCE IT IS AN ADMITTED FACT THAT THE IMPUGNED AMOUNT HAD A DIRECT CONNECTION WITH THE BUSINESS ACTIVITY OF THE ASSESSEE AND WRITTEN OFF I N THE BOOKS OF ACCOUNTS DURING THE YEAR UNDER CONSIDERATION ON ACCOUNT OF A SETTLE MENT ARRIVED AT BETWEEN THE ASSESSEE AND THE SAID PARTY THEREFORE ON THESE FA CTS THE ISSUE APPEARS TO BE COVERED BY A LATEST DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T. R. F. LTD. VS COMMISSIONER OF INCOME-TAX 323 ITR 397 (SC) WHEREIN IT IS OPINED THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT HAD BECOME IRRECOVERABLE AND IT IS ENOUGH IF THE BA D DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. FOL LOWING THIS DECISION WE HEREBY HOLD THAT THE ISSUE BEING COVERED BY THE DEC ISION OF THE HONBLE APEX COURT THEREFORE THE ASSESSEE IS ENTITLED FOR THE C LAIM. WE HOLD ACCORDINGLY AND ALLOW THIS GROUND. 8. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 4 TH FEBRUARY 2011. SD/- SD/- (G.D. AGARWAL) VICE-PRESIDENT (MUKUL KR. SHRAWAT) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 04-02-2011