M/s. KSB PUMPS LTD., MUMBAI v. DCIT CIR- 3(2), MUMBAI

ITA 739/MUM/2007 | 2003-2004
Pronouncement Date: 07-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 73919914 RSA 2007
Assessee PAN AAACK5918J
Bench Mumbai
Appeal Number ITA 739/MUM/2007
Duration Of Justice 4 year(s) 7 month(s) 15 day(s)
Appellant M/s. KSB PUMPS LTD., MUMBAI
Respondent DCIT CIR- 3(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-09-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 07-09-2011
Date Of Final Hearing 28-06-2011
Next Hearing Date 28-06-2011
Assessment Year 2003-2004
Appeal Filed On 22-01-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH MUMBAI. BEFORE SHRI PRAMOD KUMAR ACCOUNTANT MEMBER AND SMT ASHA VIJAYRAGHAVAN JUDICIAL MEMBER I.T.A NO.739/ MUM/2007 ASSESSMENT YEAR: 2003-04 KSB PUMPS LTD. .. APPELLANT 126 MAKER CHAMBERS-III NARIMAN POINT MUMBAI-20 PA NO.AAACK 5918 J VS DY.CIT CIRCLE 3(2) .. RESPONDEN T AAYAKAR BHAVAN M.K. ROAD MUMBAI. APPEARANCES: JITENDRA B. SANGHVI FOR THE APPELLANT USHA NAIR FOR THE RESPONDENT DATE OF HEARING : 5.9.2011 DATE OF PRONOUNCEMENT : 7 -09-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSEE HAS CALLED I NTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 13 TH NOVEMBER 2006 IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESS MENT YEAR 2003-04. 2. IN GROUND NO.1 THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCE: I.T.A NO.739/ MUM/2007 ASSESSMENT YEAR: 2003-04 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(A) ERRED IN SUSTAINING THE ADDITION MADE U/S.41(1) OF RS.3 06 20 848 BEING THE DIFFERENCE IN THE SALES TAX LOAN LIABILITY AND THE ACTUAL PAYMENT RE PRESENTING THE NET PRESENT VALUE OF EXISTING LIABILITY IN RESPECT OF THE SAME MADE DURING F.Y. 2002-03 UNDER THE SALES TAX 1993 PACKAGE SCHEME OF INCENTIV E. 4. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE I SSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY SPECIAL BENCH OF THIS DECISION O F THIS TRIBUNAL IN THE CASE OF SULZER INDIA LTD VS JCIT (42 SOT 457) EVEN AS LEARNED DE PARTMENTAL REPRESENTATIVE DUTIFULLY RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW . 5. IN VIEW OF THE FACT THAT THE ISSUE IN APPEAL IS ADMITTEDLY COVERED BY SPECIAL BENCH DECISION IN THE CASE OF SULZER INDIA LTD (SUPRA) WE CANNOT TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE SPECIAL BENCH. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF SPECIAL BENCH IN THE CASE OF SULZER INDIA LTD(SUPRA) WE UPHOLD THE GRIEVANCE O F THE ASSESSEE AND THE ASSESSEE SUCCEEDS ON THIS ISSUE. 6. GROUND NO.1 IS THUS ALLOWED. 7. IN GROUND NO.2 ASSESSEE IS AGGRIEVED THAT THE LEA RNED CIT(A) ERRED IN DIRECTING TO EXCLUDE RS.1 94 89 287 BEING RECEIPT ON SALE OF SERVICES IN COMPUTING PROFIT OF THE BUSINESS UNDER EXPLANATION (BAA) TO SECTION 80 HHC AND ALSO (II) ERRED IN NOT ACCEPTING THE APPELLANTS CONTENTION THAT DISALLOWANCE OF CLA IM FOR DEDUCTION SHOULD HAVE BEEN RESTRICTED TO ONLY PROFITS ON TRANSFER OF DEPB LICE NCE AND NOT ON GROSS RECEIPTS. 8. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. THE ASSESSING OFFICER INCLUDED SALES OF SERVICES AMOUNTING TO RS.1 94 89 287 (THE CORRECT FIGURE AS CLAIMED BY THE ASSESSEE IS RS.1 63 64 914) IN THE TOTAL TU RNOVER FOR THE PURPOSE OF DEDUCTION U/S. 80 HHC. THE CIT(A) FOLLOWING THE ORDER OF H IS PREDECESSOR FOR THE ASSESSMENT YEAR 1998-99 DIRECTED THE AO TO EXCLUDE 90% OF THE SALES OF SERVICES FROM THE I.T.A NO.739/ MUM/2007 ASSESSMENT YEAR: 2003-04 3 PROFITS OF BUSINESS UNDER EXPLANATION (BAA) TO SECT ION 80 HHC. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 8. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSE SSMENT YEAR 1998-99 AND THE MATTER HAS BEEN SET ASIDE TO THE FILE OF THE AO OFFICER TO RE-WORK THE ASSESSEES CLAIM U/S. 80 HHC BASED ON THE GUIDELINES LAID DOWN BY TH E HONBLE SUPREME COURT IN THE CASES OF LAKSHMI MACHINE 290 ITR 667(SC AND K.RA VINDRANATHAN NAIR 295 ITR 228 (SC).. LEARNED DEPARTMENTAL REPRESENTATIVE SUPPOR TED THE ORDER OF THE CIT(A). LEARNED COUNSEL ALSO SUBMITS THAT THE DECISION IN T HE CASE OF K.RAVINDRANATHAN IS ON DIFFERENT FACTS AND HENCE IT IS NOT APPLICABLE IN ASSESSEES CASE. 9. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD WE FIND THAT A COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1998-99 AFTER CONSIDERING THE FACTS IN DETAIL HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO TO REWORK THE ASSESSEES CLAI M UNDER SECTION 80 HHC BASED ON THE GUIDELINES LAID DOWN IN THE CASE OF LAKSMI MACH INE AND K.RAVINDRANATHAN NAIR (SUPRA) AND OBSERVED AS FOLLOWS: WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS SUBMISSIONS MADE BY THE COUNSELS. WE FIND THAT ALL THESE ISSUE S REGARDING EXCLUSION FROM TOTAL TURNOVER AND DEDUCTION OF 90% UNDER EXPLANATI ON (BAA) TO SECTION 80 HHC FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S. 80 HHC ARE NOW SETTLED BY THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF LAKSHMI MACHINE 290 ITR 667(SC) AND THE CASE OF K. RAVINDRANATHAN NAIR (SUPRA). IN THE CASE OF LAKSHMI MACHINE (SUPRA) IT HAS BEEN CLEARLY HELD T HAT EXCISE DUTY AND SALES TAX DO NOT INVOLVE ANY TURNOVER AND VIDE THE DECISION I N THE CASE OF K RAVINDRANATHAN NAIR (SUPRA) EVEN PROCESSING CHARGE S HAVE BEEN CONSIDERED TO COME WITHIN THE AMBIT OF EXPLANATION (BAA) TO SECTI ON 80 HHC. IT HAS BEEN HELD IN LATTER CASE THAT ALL SUCH AMOUNTS ARE TO BE CON SIDERED AS PART OF TOTAL TURNOVER FOR APPLYING THE FORMULA TO WORK OUT THE DEDUCTION U/S. 80 HHC. HENCE WE FEEL IT NECESSARY TO REMIT THE MATTER BACK TO THE FILE O F THE ASSESSING OFFICER FOR DECIDING THE ELIGIBLE DEDUCTION OF ASSESSEE U/S. 80 HHC IN ACCORDANCE WITH THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT I N THE CASE OF LAKSHMI MACHINE AND K.RAVINDRANATHAN NAIR (SUPRA). THEREFO RE WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD AND DIRECT THE ASSESSING OFFICER TO RE-WORK THE ASSESSEES CLAIM U/S. 80 HHC BASED ON THE GUIDE LINES LAID DOWN BY THE I.T.A NO.739/ MUM/2007 ASSESSMENT YEAR: 2003-04 4 HONBLE SUPREME COURT IN THE CASES OF LAKSHMI MACHI NE AND K.RAVINDRANATHAN NAIR (SUPRA). HENCE THIS GROUND IS DISPOSED OF WI TH THE ABOVE DIRECTION. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH IN ASSESSEES OWN CASE (SUPRA) WE REMIT THE ISSUE TO THE FILE OF THE AO REWORK THE ASSESSEES CLAIM UNDER SECTION 80 HHC BASED ON THE GUIDELINES LAID DOWN IN THE CASE OF LAKSMI MACHINE AND K.RAVINDRANATHAN NAIR (SUPRA). 10. WITH REGARD TO SECOND LIMB OF THE GROUND I.E. R EDUCING THE ENTIRE SALE PROCEEDS OF DEPB LICENCE INSTEAD OF PROFITS LEARNE D COUNSEL FAIRLY AGREES THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE JUDGEM ENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. KALPATARU COLOURS AND C HEMICALS 328 ITR 451(BOM) WHEREIN IT HAS BEEN HELD THAT DEPB SALE PROCEEDS CANNOT BE BIFURCATED INTO PROFI TS AND FACE VALUE. THE ENTIRE AMOUNT IS PROFITS FO R S. 80HHC R.W.S. 28(IIID). ACCORDINGLY WE REJECT THE GROUND TAKEN BY THE ASSESSEE. 11. GROUND NO.2 IS THUS PARTLY ALLOWED FOR STATIST ICAL PURPOSES. 12.. IN GROUND NO.3(I) THE ASSESSEE IS AGGRIEVED C IT(A)S UPHOLDING THE ACTION OF THE AO OF DEDUCTION OF RS.13 71 000 BEING MISCELLANEOUS RECEIPTS AND IN (II) THE ASSESSEE IS AGGRIEVED CIT(A)S UPHOLDING THE AOS ACTION OF DED UCTING RS.16 15 000 BEING INCOME FROM NON-TRADE INVESTMENTS. BOTH THE ISSUES WERE N OT PRESSED BY LEARNED COUNSEL FOR THE ASSESSEE THEREFORE THE SAME ARE DISMISSED AS NOT PRESSED. 13. IN GROUND N.(III) THE ASSESSEE IS AGGRIEVED IN CIT(A)S ACTION IN REDUCING DEDUCTION U/S. 80-IB WHILE COMPUTING DEDUCTION UNDE R SECTION 80 HHC. 14. THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 80IB AT RS. 1 86 10 408. IN THE ASSESSMENT ORDER U/S. 143(3) OF THE ACT THE ASSES SING OFFICER REDUCED THE DEDUCTION ALLOWED U/S. 80IB FROM THE PROFITS OF BUSINESS IN V IEW OF THE PROVISIONS CONTAINED IN I.T.A NO.739/ MUM/2007 ASSESSMENT YEAR: 2003-04 5 SECTION 80IB(13) R.W.S. 80IA(9) AND ALLOWED DEDUCTI ON AT RS.1 75 11 808. VIDE ORDER U/S. 154 THE ASSESSEE HAS BEEN ALLOWED DEDUCTION OF RS. 1 80 74 609 CLAIMED EARLIER. THE CIT (A) OBSERVED THAT THE SINCE THE EXPORT TURNOVER CON STITUTES 5.53% OF THE TOTAL TURN OVER OF NASIK UNIT 5.53% OF THE DEDUCTION ALLOWED U/S 80IB MAY BE TAKEN TO BE THE DEDUCTION ALLOWED IN RESPECT OF PROFIT FROM EXPORT WHICH ARE ELIGIBLE FOR DEDUCTION U/S. 80 HHC. THEREFORE HE WAS OF THE OPINION THAT THE DEDUCTIO N U/S. 80IB RELATABLE TO EXPORTS I.E. 5.53% OF RS.1 80 74 609 AT RS.9 92 600 BE EXCLUDED INSTEAD OF WHOLE DEDUCTION OF RS.1 75 11 808 ALLOWED U/S. 80IB AND DIRECTED THE A O TO REWORK OUT THE DEDUCTION U/S. 80 HHC ACCORDINGLY. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 15. AT THE TIME OF HEARING LEARNED COUNSEL FOR THE ASS ESSEE CONTENDS THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.5541/M/05 FOR THE ASS ESSMENT YEAR 2001-02 AND ALSO FOR THE ASSESSMENT YEAR 2003-04. IT WAS ALSO SUBM ITTED THAT LATER ON THE ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN THE CASE OF ACIT VS. HINDUSTAN MINT. 315 ITR (AT) 401(SB). HE ALSO CONTENDS THAT NOW TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ASSOCIATED CAPSULES PVT LTD. V DCIT IN INCOME TAX APPEAL NO.3036 OF 2010 ORDER DATED 10 TH JANUARY 2011 HAS REVERSED THE DECISION OF THE ITAT IN THE CASE OF HINDUSTAN MINT (SUPRA). IN VI EW OF THIS HE CONTENDS THAT THE ISSUE IS NOW SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.5541/M/05 FOR THE ASSESSMENT YEAR 2001-02 AND ALSO FOR THE ASSESSMENT YEAR 2003-04. 16. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD WE FIND THAT HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF ASSOCIATED CAPSULES P.LTD (SUPRA) HAS DISAPPROVED THE STAND TA KEN BY SPECIAL BENCH IN THE CASE OF ACIT VS. HINDUSTAN MINT(SUPRA) WHEREIN THE TRI BUNAL HAS TAKEN THE VIEW AGAINST THE ASSESSEE IN VIEW OF THIS RESPECTFULLY FOLL OWING THE JUDGEMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ASSOCIAT ED CAPSULES PVT LTD. (SUPRA) WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM WHOLE DEDUCTION U/S. 80 HHC OF THE ACT. I.T.A NO.739/ MUM/2007 ASSESSMENT YEAR: 2003-04 6 17. GROUND NO.3(III) IS THUS ALLOWED. 18. IN GROUND NO.4 THE ASSESSEE IS AGGRIEVED AGAIN ST DISALLOWANCE OF DEDUCTION U/S. 80M ON DIVIDEND DISTRIBUTED. 19. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.77 01 248. THE ASSESSEE ALSO DISTRIBUTED DIVIDEND AMOUNTING TO RS.1 74 000. SINCE THE DIVIDEND DISTRIBUTED BY THE ASSESSEE WAS HIGHER THAN THE DIVIDEND INCOME THE ASSESSEE CLAIMED DEDUCTION TO THE EXTENT OF RS.76 51 248 U/S. 80M OF THE I.T.ACT AFTER SUO MOTO APPORTIONING EXPE NSES OF RS.50 000 TOWARDS THE EXEMPT INCOME. THE ASSESSING OFFICER DID NOT ALLOW THE DEDUCTION U/S. 80M IN VIEW OF THE PROVISIONS CONTAINED IN SECTION 115-O (5) OF THE I.T.ACT AS PER THE SAID SECTION NO DEDUCTION UNDER ANY OTHER PROVISIONS OF THE ACT SHALL BE ALLOWED TO A COMPANY OR A SHAREHOLDER IN RESPECT OF THE AMOUNT W HICH HAS BEEN CHARGED TO TAX UNDER SUB-SECTION(1) OF SECTION 115-O(5) OF THE ACT . AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. AGGRIEVED FURTHER THE ASSESSEE IS IN APPEAL BEFORE US. 20. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. 21. WE FIND THAT AS HELD BY HONBLE BOMBAY HIGH CO URT IN THE CASE OF CIT VS. SAUMYA FINANCE & LEASING CO. PVT.LTD. 300 ITR 422( BOM) WHAT IS MATERIAL IS THAT DIVIDEND IS DISTRIBUTED IN THE RELEVANT PERIOD AND NOT THE NATURE OF DIVIDEND. IT IS NOT REALLY NECESSARY THAT DIVIDEND MUST PERTAIN TO THE RELEVANT PERIOD ITSELF. THE ASSESSEE HAD PAID INTERIM DIVIDEND IN THIS CASE AND TO THAT EXTENT CONSIDERING THAT DIVIDEND WAS PAID WITHIN RELEVANT PERIOD DEDUCTION OUGHT TO HAVE BEEN ALLOWED. WE ACCORDINGLY UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GRANT RELIEF IN THE LIGHT OF OUR ABOVE OBSERVATI ONS. I.T.A NO.739/ MUM/2007 ASSESSMENT YEAR: 2003-04 7 22. GROUND NO.4 IS THUS ALLOWED IN THE ABOVE TERMS. 23. IN THE RESULT APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 7 TH SEPTEMBER 2011 SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI DATED 7 TH SEPTEMBER 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) -III MUMBA I 4. COMMISSIONER OF INCOME TAX MC-III MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH A MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI