Income Tax Appellate Tribunal - Mumbai
Allana Frozen Foods Ltd, Mumbai vs Dcit Cir 1(1), Mumbai on 2 January, 2017
आयकर अपील य अ धकरण "A" यायपीठ मब
ंु ई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI
BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER
AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No.4056/Mum/2011
( नधा रण वष / Assessment Year : 2002-03)
Allana Frozen Food s Limited , बनाम/ Deputy Commissioner of
Allana House, Income Tax - Circle - 1(1),
v.
Allana Road , Aayakar Bhavan,
Colab a, 5 t h floor,
Mumbai - 400 001. M.K. Road,
Mumbai 400 020.
थायी ले खा सं . /PAN : AAACA 5974 C
(अपीलाथ /Appellant) .. ( यथ / Respondent)
आयकर अपील सं./I.T.A. No.5534/Mum/2011
( नधा रण वष / Assessment Year : 2002-03)
ACIT - 1 (1), बनाम/ Allana Frozen Food s Pvt.
Room No. 579, v. Limited,
Aayakar Bhavan, Allana House,
Mumbai - 20 Allana Road ,
Colab a,
Mumbai - 400 001.
थायी ले खा सं . /PAN : AAFPT 4456R
(अपीलाथ /Appellant) .. ( यथ / Respondent)
आयकर अपील सं./I.T.A. No.4121/Mum/2011
( नधा रण वष / Assessment Year : 2003-04)
Allana Cold Storage s बनाम/ Deputy Commissioner of
Limited, v. Income Tax - Circle - 1(1),
Allana House, Aayakar Bhavan,
Allana Road , 5 t h floor,
Colab a, M.K. Road,
Mumbai - 400 001. Mumbai 400 020.
थायी ले खा सं . /PAN : AAACA 5972 E
(अपीलाथ /Appellant) .. ( यथ / Respondent)
2 ITA 4056/Mum/2011, ITA 5534/Mum/11
ITA 5548/Mum/2011, ITA 4121/Mum/11,
ITA 5533/Mum/2011, ITA 5518/Mum/11,
ITA 4185/Mum/11 & ITA 4110/Mum/11
आयकर अपील सं./I.T.A. No.5548/Mum/2011
( नधा रण वष / Assessment Year : 2003-04)
ACIT - 1 (1), बनाम/ Allana Cold Storage
Room No. 579, Limited,
v.
Aayakar Bhavan, Allana House,4 JA
Mumbai 400 020. Allana Road ,
Colab a,
Mumbai - 400 001.
थायी ले खा सं . /PAN : AAACA 5972 E
(अपीलाथ /Appellant) .. ( यथ / Respondent)
आयकर अपील सं./I.T.A. No.4185/Mum/2011
( नधा रण वष / Assessment Year : 2004-05)
Allana Inve stments & बनाम/ Deputy Commissioner of
Trading Co. Ltd., v. Income Tax - Circle - 1(1),
Allana House, Aayakar Bhavan,
Allana Road , Colaba, 5 t h floor,
Mumbai - 400 001. M.K. Road,
Mumbai 400 020.
थायी ले खा सं . /P AN : AAACA 591 5 F
(अपीलाथ /Appellant) .. ( यथ / Respondent)
आयकर अपील सं./I.T.A. No.5518/Mum/2011
( नधा रण वष / Assessment Year : 2004-05)
ACIT - 1 (1), बनाम/ Allana Cold Storage s
Room No. 579, Limited,
v.
Aayakar Bhavan, Allana House,4 JA
Mumbai 400 020. Allana Road ,
Colab a,
Mumbai - 400 001.
थायी ले खा सं . /PAN : AAACA 5972 E
(अपीलाथ /Appellant) .. ( यथ / Respondent)
3 ITA 4056/Mum/2011, ITA 5534/Mum/11
ITA 5548/Mum/2011, ITA 4121/Mum/11,
ITA 5533/Mum/2011, ITA 5518/Mum/11,
ITA 4185/Mum/11 & ITA 4110/Mum/11
आयकर अपील सं./I.T.A. No.4110/Mum/2011
( नधा रण वष / Assessment Year : 2004-05)
Allana Cold Storage s बनाम/ Deputy Commissioner of
Limited, Income Tax - Circle - 1(1),
v.
Allana House, Aayakar Bhavan,
Allana Road , 5 t h floor,
Colab a, M.K. Road,
Mumbai - 400 001. Mumbai 400 020.
थायी ले खा सं . /PAN : AAACA 5972 E
(अपीलाथ /Appellant) .. ( यथ / Respondent)
आयकर अपील सं./I.T.A. No.5533/Mum/2011
( नधा रण वष / Assessment Year : 2004-05)
ACIT - 1 (1), बनाम/ Allana Inve stments &
Room No. 579, v. Trading Co. Ltd.,
Aayakar Bhavan, Allana House,
Mumbai 400 020. Allana Road , Colaba,
Mumbai - 400 001.
थायी ले खा सं . /PAN : AAACA 5915 F
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Assessee by Ms. Vasanti Patel &
Shri Apurva Shah
Revenue by : Shri A. Ramachandran
ु वाई क तार ख / Date of Hearing
सन : 28-09-2016
घोषणा क तार ख /Date of Pronouncement : 02-01-2017
आदे श / O R D E R
PER RAMIT KOCHAR, Accountant Member
These are bunch of eight appeals pertaining to different assessee's of the same group. Out of these eight appeals, four appeals by the assessees' being ITA Nos. 4056/Mum/11, 4121/Mum/11,4185/Mum/11 and 4110/Mum/11 and other four appeals by the Revenue being ITA Nos. 5534/Mum/11, 5548/Mum/11, 5518/Mum/11 and 5533/Mum/11 are 4 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 cross appeals for the assessment years 2002-03 to 2004-05 which are directed against separate appellate orders passed by the learned Commissioner of Income Tax(Appeal), Mumbai (hereinafter called "the CIT(A)"). The issues involved in all these appeals are common; the same have been heard together and are being disposed of by this single consolidated order for the sake of convenience.
First we shall take up assessee's appeal in ITA no. 4056/Mum/2011 for assessment year 2002-03.
2. The assesseee has raised following grounds of appeal in the memo of appeal filed with the Income-Tax Appellate Tribunal(hereinafter called " the Tribunal") :
" The Commissioner of Income Tax(Appeals)-1,Mumbai erred:-
1.1. Without prejudice, in not appreciating that Allanasons Ltd. , a Trading House, had made a profit on the sale of goods purchased from the Appellant, a Supporting Manufacturer, as was evident from the Form No 10CCAB filed with the Assessing Officer."
The assessee has also raised following additional grounds of appeal:-
"Without prejudice to the Appellant's contention [which has been accepted by the Commissioner of Income Tax (Appeals)] that its claim for deduction u/s 80HHC as a Supporting Manufacturer is not dependant on the outcome of claim made by Allanasons Ltd., a Trading House which issued Disclaimer Certificate in favour of Appellant:-
1.2 erred in not appreciating that Allanasons Ltd., the Trading House which made a disclaimer, would be entitled to a deduction u/s 80HHC for the year under appeal as per Section 80HHC as amended by Taxation Laws (Amendment) Act, 2005.
The above additional ground which is being raised before the Hon'ble Income Tax Appellate Tribunal arises out of the recent judgment of Hon'ble Gujarat High Court in the Writ Petition filed by Allanasons Ltd. [156/2006 renumbered as 10187/2012] and the judgment of the 5 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 Hon'ble Supreme Court in Topman Exports reported at 342 ITR 49 and delivered on 08/02/2012.
We pray that the above ground be kindly admitted since it emanates from the order of the Commissioner of Income Tax (Appeals)."
3. The learned counsel for the assessee submitted that these additional grounds of appeal are legal grounds and it goes to the root of the matter and need to be admitted in the interest of justice. The learned DR did not objected to the admission of these additional grounds of appeal. After hearing both the parties, we direct that these additional grounds be admitted in the interest of substantial justice and be adjudicated on merits in accordance with law.
4. The brief facts of the case are that the assessee is a manufacturer of frozen foodstuffs who exported large parts of its production through an export house namely Allana Sons Limited. The assessee being a supporting manufacturer, got a disclaimer certificate from the export house as prescribed under sub section 4A(b) of Section 80 HHC of the Act. The assessee had claimed deduction u/s 80HHC of the Act on disclaimed turnover of Rs. 39,07,97,779/- . The assessee has made claim of deduction u/s 80 HHC of the Act on the profit arose to the assessee on the sales to the export house of its manufactured goods which was specified as assessee's turnover in the disclaimer certificate issued by the export house in favour of the assessee. The claim of the assessee for deduction u/s 80HHC of the Act was denied by the AO relying on the decision of the Hon'ble Supreme Court in the case of IPCA Laboratories Ltd., (2004)266 ITR 521(SC), as no deduction u/s 80HHC of the Act was available to Allana Sons Limited. Thus, in nutshell, the A.O. disallowed the deduction u/s 80HHC of the Act to the assessee on the ground that M/s Allana Sons Limited itself is not entitled to deduction u/s 80 HHC of the Act, then the assessee being supporting manufacturer cannot claim any deduction u/s. 80HHC of the Act on the export turnover disclaimed by the export house. It is pertinent to note at this stage that loss of Allana Sons Limited from export of 6 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 trading goods is much more than profits earned by it on export of manufactured goods. The assessee was , however, allowed deduction u/s 80HHC of the Act on the direct export turnover made by the assessee. The AO passed assessment order dated 17-03-2005 u/s. 143(3) of the Act.
5. Aggrieved by the assessment order dated 17-03-2005 passed by the AO u/s 143(3) of the Act, the assessee carried the matter in appeal before the ld. CIT(A) whereby the assessee reiterated the submissions as were made before the A.O. . The assessee contended that in view of insertion of fifth proviso to Section 80HHC(3) with retrospective effect from 1.4.1992 by Taxation Laws (Amendment) Act, 2005 to provide that the losses from trading/manufacturing exports would be adjusted against export incentives as provided in the said proviso, and that a deduction u/s 80HHC of the Act would be allowable against the balance profit. It was submitted that the assessee being supporting manufacturer should be allowed deduction u/s 80HHC of the Act on profits made by it on goods supplied to export house , Allanasons Limited for which it hold disclaimer certificate from Allana Sons Limited. It was submitted that the decision of Hon'ble Supreme Court in the case of Ipca Laboratories Limited(supra) is not applicable to supporting manufacturers as the same is applicable to trading house/export houses who have made exports . The assessee relied upon CBDT circular no 528 dated 16th December 1988 to contend that the CBDT circular clarifies the manner of computing deduction u/s 80HHC of the Act in the case of supporting manufacturers. Thus, it was submitted that to get deductions u/s 80HHC of the Act in the case of supporting manufactures, it is not relevant whether the trading house/export house has made profits or not . The ld. CIT(A) observed that as per the ratio of law laid down by the Hon'ble Supreme Court in the case of IPCA Laboratories Ltd. (supra) the income has to be computed in accordance with the provisions of the Act, then not only profits but also losses have to be taken in to consideration before allowing deduction u/s 80HHC of the Act which shall be 7 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 allowed only when there is positive profit after adjusting losses, if any. Thus as per learned CIT(A), the losses arising from export of traded goods shall be set off against profit from export of manufactured goods by Allana Sons Limited before allowing deduction u/s 80HHC of the Act in the hands of Allana Sons Limited. Thus, it was observed by the learned CIT(A) that ratio of decision of Hon'ble Supreme Court in Ipca Laboratories Limited(supra) clearly lays down that if no deduction is available in the hands of trading house/export house , because there is a net loss in the case of export house/ trading house , then the export house cannot pass on or give credit of such non existing deduction to a supporting manufacture . The ld. CIT (A) further observed the assessee has complied with all the necessary provisions of Sec. 80 HHC (1A) r.w.s. 3A, 4A of the Act for claiming deduction as envisaged in proviso to section 80HHC(l) and hence the AO was not correct in denying the claim of the deduction made by the assessee in view of the following facts:-
(i) Admittedly the appellant was a supporting manufacturer in terms of clause "D" of the explanation to section 80HHC.
(ii) The disclaimer certificate issued to the appellant was by an export house /trading house as per clause "C" of the explanation.
(iii) The disclaimer certificate required under sub section (4A) of Section 80HHC of the Act in form No. 10 CCAB as per rule 18BBA(2) of Income-
tax Rules,1962 was filed by the appellant along with return of income for claiming deduction u/s 80HHC(1A) certifying that the export house had not claimed deduction under Section 80HHC(1) on the export of trading goods effected on manufacturing goods of the appellant.
(iv) The appellant has also filed a certificate in prescribed proforma i.e. form no. 10CCAC as per Rule 18BBA(3) in terms of sub clause (a) of sub section (4A) of Section 80HHC.
8 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11
6. Aggrieved by the appellate order dated 15-03-2011 passed by learned CIT(A) , the assessee filed second appeal before the Tribunal because Allana Sons Limited was having net loss after adjusting the loss arising from export of traded goods with profit earned on export of manufactured goods. Thus, there was a net loss and Allana Sons Limited was not entitled for deduction u/s 80HHC of the Act and consequently the assessee was denied the benefit of deduction u/s 80HHC of the Act being a supporting manufacturer. It is the contention of the ld. Counsel for the assessee that the assessee is entitled for deduction u/s 80HHC of the Act as the assessee is supporting manufacturer and has earned profits on sales made to the export house Allana Sons Limited which were exported by Allana Sons Limited and against which disclaimer certificate is issued by Allana Sons Limited. The assessee had filed Form No. 10CCAB as per Rule 18BBA(2) of the Income-tax Rules, 1962. The ld. Counsel submitted that the deduction was disallowed to the assessee by the authorities below keeping in view the decision of Hon'ble Supreme Court in the case of IPCA Laboratories Ltd. (supra) on the ground that there is no profit from export activities( after adjusting loss from export of traded goods against profit on export of manufactured goods) in the case of Allana Sons Limited which is an export house to whom the assessee has supplied its products for onward exports by Allana Sons Limited. It was submitted that now with the introduction of Taxation Laws (Amendment )Act 2005 , fifth proviso to section 80 HHC(3) of the Act has been inserted w.e.f. 01-04-1992, the export house Allana Sons Limited shall become eligible for deduction u/s 80HHC of the Act as the export incentives received by Allana Sons Limited and retained by them shall become eligible to be set off to the extent of 90% against loss from export activities and if the net result after above adjustments is positive profit entitling Allana Sons Limited to get deduction u/s 80HHC of the Act . Thus, it was submitted that the assessee being supporting manufacturer is also entitled for deduction u/s 80HHC of the Act as it hold disclaimer certificate issued by Allana Sons Limited. The 9 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 assessee has brought on record the Tribunal order in ITA No. 6344/Mum/2013 for the assessment year 2002-03 dated 6th April, 2016 in the case of M/s Allana Sons Ltd. v. Addl. CIT , whereby the Tribunal directed the authorities below to allow deduction u/s 80 HHC of the Act to M/s Allana Sons Limited keeping in view of the amendments brought in by the Taxation Laws (Amendment) Act, 2005 w.e.f. 01-4-1992 whereby proviso 5 to section 80 HHC (3) of the Act was inserted. The assessee vide its paper book has filed the order giving effect to the aforestated tribunals order in ITA No. 6344/Mum/2013 , vide appeal effect order dated 23rd May, 2016 passed by the AO wherein the A.O. allowed the deduction of Rs. 3,52,20,045/- u/s 80HHC of the Act to Allana Sons Limited. The said orders are placed in file. The ld. Counsel submitted that in view of the decision of the tribunal in the case of Allana Sons Limited (supra), the assessee's claim should be allowed being supporting manufacturer as now deduction of Rs. 3,52,20,0045/- is allowed to Allana Sons Limited u/s 80HHC of the Act and the assessee holds disclaimer certificate issued by Allana Sons Limited . It is also submitted that the Hon'ble Bombay High Court in the case of M/s Allana Sons Ltd. v. DCIT vide Writ Petition No. 802 of 2005 vide orders dated 22nd July, 2014 has allowed the Writ Petition and quashed the reassessment notice dated 10-01- 2005 issued by the AO u/s 148 of the Act, by holding as under:-
"In any view of the matter, the stand of the petitioner on with regard to interest income being included while computing claim for deduction under Section 80HHC of the Act has been upheld not only by the CIT(A) but also by the Tribunal in its order dated 22 November 2006. Besides the amendment to Section 80HHC (3) of the Act by addition of fifth proviso thereto with retrospective effect will work to the benefit of the petitioner. In the above view of the matter, allowing reassessment proceedings would be a mere academic exercise only because the Assessing officer would bound by the orders of the Tribunal. Moreover, the very basis of the impugned notice dated 10 January 2005 will not be sustainable. In view of all the above reasons, we set aside the impugned notice dated 10 January 2005."
10 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 Thus, it is submitted that now the assessee is entitled for deduction u/s 80HHC of the Act. It was also submitted that the Mumbai Bench of the Tribunal in the case of other supporting manufacturer namely Frigorifico Allana Limited in cross appeals ACIT v. Frigorifico Allana Limited and ors. vide ITA No. 5513/Mum/2011 and ors. for the assessment years 2002-03 to 2004-05 vide common orders dated 27th July, 2016 has also allowed the claim of deduction under section 80HHC of the Act to other supporting manufacturer of Allanasons Limited namely Frigorifico Allana Limited and ors. , keeping in view insertion of fifth proviso to Section 80HHC(3) of the Act by the introduction of Taxation Laws (Amendment) Act, 2005 with effect from 01-04-1992 , whereby the Tribunal has held as under:-
"These appeals belong to different assessees of same group arising in different assessment years involving identical issues and therefore these were heard together and being disposed by this common order.
2. During the course of hearing, arguments were made by Shri P.J. Pardiwalla & Ms. Vasanti Patel, Authorised Representatives (ARs) on behalf of the Assessee and by Shri G.M. Doss & Shri E. Shreedhar, Departmental Representatives (DRs) on behalf of the Revenue.
First we shall take up appeals of the Assessee & Revenue in the case of Frigerio Conserva Allana Ltd in ITA No.4195/Mum/2011 & ITA No. 5528/Mum/2011, respectively, for A.Y. 2000-01:
3. Ground Nos 1 & 2 of assessee's appeal and Ground No.2 of Revenue's appeal involve identical issue with regard to denial of deduction u/s 80HHC to the assessee on the ground that deduction u/s 80HHC was denied to the main exporter also, to whom the assessee (a supporting manufacturer) had sold its goods.
3.1. We have heard both the parties on this issue in detail and also gone through the orders of the lower authorities as well as copies of judgment placed before us. The brief background of this case is that assessee is supporting manufacturer, selling its goods to the export house namely M/s. Allana Sons Ltd, who had issued disclaimer certificate in favour of the assessee u/s 80HHC and accordingly, the assessee claimed benefit of deduction u/s 80HHC on the amount of turnover made by the assessee to the export company. During the course of reassessment proceedings, the AO noted that the said export house has been denied
11 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 the benefit of deduction u/s 80HHC on the ground that the said export house company namely M/s. Allana Sons Ltd. ('here in after referred to as 'ASL' in short) had incurred loss in case the amount of incentive is not included in its export profits. Accordingly, the AO of the assessee withdrew the benefit of claim of deduction u/s 80HHC in the case of present assessee also solely on the ground when the main exporter i.e. ASL as itself being denied the benefit of deduction u/s 80HHC, therefore, consequently, the assessee should also be denied the benefit of deduction u/s 80HHC. Accordingly, the claim made by the assessee u/s 80HHC for Rs.16,87,12,722/- on the turnover of Rs.97,59,61,941/- (disclaimed by ASL in favour of the assessee) was withdrawn by the AO.
3.2. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) and made exhaustive submissions on various grounds to agitate this addition. Ld. CIT(A) accepted the submissions of the assessee in part and allowed the benefit of deduction u/s 80HHC to the assessee on the ground that the assessee is entitled for benefit of deduction u/s 80HHC without depending upon actual allowability of deduction u/s 80HHC in the hands of export house and he further held that in any case the export house has been actually allowed the deduction u/s 80HHC, and therefore, on facts also the assessee is entitled for deduction u/s 80HHC.
3.3. Being aggrieved, the revenue filed an appeal before the Tribunal on the ground that Ld. CIT(A) ought not to have allowed the benefit of deduction u/s 80HHC in the light of judgment of Hon'ble Supreme Court in the CIT v. IPCA Laboratories Ltd. 266 ITR 521 (SC) wherein it was held that in case there was loss from export activities, then the export house cannot pass on the benefit of deduction u/s 80HHC by way of issue of disclaimer certificate u/s 80HHC (4)(a) to the supporting manufacturer.
3.4. Before us, the Ld. Counsel of the assessee defended and justified the order of Ld. CIT(A) for allowing deduction u/s 80HHC on many grounds. His first argument was that deduction has been actually allowed to the export house i.e. ASL by the Tribunal and order of the Tribunal has been upheld by the Hon'ble Bombay High Court wherein the reopening done by the AO of the ASL has been quashed and on merits also Hon'ble High Court had found that deduction u/s 80HHC was allowable in the hands of ASL as per law and facts. Thus, the whole premise on which the deduction was disallowed in the hands of the assessee ceases to exist and therefore the deduction has to be allowed to the assessee. Second argument made by the assessee was that this controversy has been resolved in the judgment of Hon'ble Banglore Bench in the case of Shamanur Kallappa & Sons vs. ACIT 23 DTR (Bang)(Trib) 269 which has been subsequently upheld by the Hon'ble Karnataka High Court by vide its order dated 12th January 2015 in ITA No. 10/2009 by holding that deduction u/s 80HHC to the supporting manufacturer is allowable independent of actual allowing of deduction in the hands of main exporter. The third argument made by the Ld. Counsel 12 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 was that reopening was done in the case of the assessee by the AO on the issue of disallowance u/s 40A(3) only and no issue was raised in the 'Reasons' recorded with respect to deduction u/s 80HHC. The disallowance made u/s 40A(3) has been deleted by the Ld. CIT(A) against which revenue has not filed any appeal. Thus, main issue on which 'Reasons' were recorded has been settled and therefore, no other disallowance would be sustainable as reopening would become bad in law.
3.4. Per contra, Ld. DR relied upon the judgment of Hon'ble Supreme Court in the case of IPCA Laboratories Ltd. v. CIT (supra) and relied upon the order of the AO. We have considered the entire matrix and facts of this case and copies of judgment placed before us. Before going deeper in details, it has been noted by us at the outset that deduction u/s 80HHC in the hands of ASL (i.e. export house) has been found to be allowable by Hon'ble Bombay High Court in the case of M/s. Allana Sons Ltd. v. DCIT writ petition No.802 of 2005 dated 22nd July 2014 wherein it was held that reopening of the assessment in the hands of M/s. Allana Sons Ltd. was not valid as per law and the same was quashed with following observations:
"We have considered the rival submission. It is well settled that a notice to reopen the assessment under section 148 of the Act can only be issued if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. This reason to believe on the part of the Assessing Officer has not to be on the basis of change of opinion i.e. where Assessing Officer has had occasion to consider an issue during the assessment proceeding under section 143(3) of the Act. In this case, the Assessing Officer had during the proceeding under section 143(3) of the Act raised queries to the petitioner specifically with regard to petitioner's claim for deduction under section 80HHC of the Act and the petitioner's response to the same was considered by the Assessing Officer while passing the assessment order. Therefore, the impugned notice and the grounds in support thereof are in fact a change of pinion on the part of the Assessing Officer. Therefore, on the aforesaid ground alone impugned notice is not sustainable."
3.5. It is further noted by us that, on merits also Hon'ble High Court observed that deduction u/s 80HHC was actually allowable to the said export house the observations of the Hon'ble High Court are very useful and these are reproduced hereunder for the sake of ready reference:
"In any view of the matter, the stand of the petitioner on merits with regard to interest income being included while computing the claim for deduction under section 80HHC of the Act has been upheld not only by the CIT(A) but also by the Tribunal in its order dated 22 November 2006. Besides the amendment to section 80HHC(3) of the Act by addition of 13 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 fifth proviso thereto with retrospective effect will work to the benefit of the petitioner. In the above view of the matter, allowing reassessment proceedings would be a mere academic exercise only because the Assessing Officer would be bound by the orders of the Tribunal. Moreover, the very basis of the impugned notice dated 10 January 2005 will not be sustainable. In view of all the above reasons, we set aside the impugned notice date 10th January 2005."
3.6. Thus, it is noted by us that the Hon'ble High Court has not only quashed the reassessment order but also held that deduction u/s 80HHC is actually allowable to ASL. It is further noted by us that it has been held by Hon'ble Gujarat High Court in the case of Avani Exports & Others dated 02.07.2012 that the amendment made by Taxation Laws (Amendment) Act 2005 in section 80HHC to curtail the benefit of u/s 80HHC on the amount of incentive received by the main exporters would not operate retrospective. Thus, if we consider on facts the case of ASL on merits also, it is noted that after including amount of incentives there would arise positive amount of profit. Thus, viewed from any angle, and keeping in view the fact that when deduction u/s 80HHC has been actually allowed in the hands of ASL i.e. export house, therefore, the whole premises of the AO based upon which the deduction was denied to the assessee, ceases to exist. Under these facts and circumstances, we find that Ld. CIT(A) has rightly allowed the benefit of deduction u/s 80HHC to the assessee and therefore, we find nothing wrong in the order of Ld. CIT(A) and therefore, the same is upheld. Since, we have allowed the relief to the assessee on the first argument itself therefore, we treat other arguments as academic in nature and therefore, we are not dealing with the same at this stage. As a result, grounds raised by the revenue in this appeal are dismissed and grounds raised by the assessee may be treated as allowed."
7. The ld. D.R., in the other hand, relied on the order of the Ahmedabad Bench of the Tribunal in the case of ITO v. Shri Rameshchandra S. Patel in ITA No. 505/Ahd/2008 for assessment year 2004-05 dated 27th August, 2010 whereby the Tribunal vide para 20 to 22 of its order has held as under:-
"Thus, from a reading of the aforesaid provision of law in our considered opinion a supporting manufacturer who receive certificate referred to in sub-section (4A) clause (b) of the Act is entitled for deduction under section 80HHC to the extent of profit earned by it on such goods to the Export House subject to provisions of sub-section (IB) of section 80HHC of the· Act. Nowhere the section stipulates· for allowing deduction under section 80HHC (lA) it is also a condition precedent that Export House should have also made a profit on export of trading goods. The Learned Assessing Officer disallowed the claim in view of his 14 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 reading of the decision of the Hon'ble Supreme Court in the case of IPCA Laboratory Ltd., (supra). We find that in the case of IPCA Laboratory Ltd., (supra) the Hon'ble Supreme Court was confronted with the case of an Export House. The assessee there was an Export House. That assessee suffered a loss on export of trading goods. While computing deduction allowable under section 80 HHC of the Act the assessee ignored the loss on export of trading goods on the ground that it has issued a disclaimer certificate under section 80 HHC (4A(b) of the Act in respect of turnover of trading goods. In this context, the Hon'ble Supreme Court viewed that the disclaimer certificate can be given in respect of profit only and not in respect of loss. In other words, as assessee who is an Export House or Trading House is entitled to reduce the amount of deduction allowable under section 80- HHC by issuing a disclaimer certificate but the assessee cannot increase the amount of deduction otherwise allowable under section 80 HHC by issuing a disclaimer certificate."
21. The decision is an Authority for the proposition that an Export House or Trading House cannot increase the deduction otherwise allowable under section 80HHC by issuing a certificate under sub-section (4A)(b) of the Act in respect of certain turnover.
22. However, on consideration of the facts of the case, we are of the view that the matter requires re-consideration at the level of the Learned Assessing Officer. The Learned Assessing Officer noted in the assessment order that the exporter has earned a profit on export of manufactured goods in a sum of Rs. 20,22,000/-. The Learned Assessing Officer however, choose to consider the loss suffered on export of trading goods with the assessee in a sum of Rs. 1,54,000/- for the purpose of rejecting the claim of the assessee treating thereby that since the export House M/s. Clariant India Ltd., has incurred losses in trading goods therefore, claim of the assessee have to be rejected by applying the decision in the case of IPCA Laboratories. The findings of the Learned Assessing Officer thus cannot be approved in this way but we may also note here that at page-7 of the Assessment' Order the Learned Assessing Officer mentioned that the Learned Assessing Officer of M/s. Clariant India Ltd., has pointed out that the return for Assessment Year 2004-05 has shown loss from traded goods. No facts were gathered whether the exporter M/s. Clariant India Ltd. has in fact filed the return of income at loss or at profit because if ultimately profit is shown in the return of income on export considering both manufactured 15 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 goods and trading goods, perhaps the Learned Assessing Officer could not have denied the claim of the assessee. The Learned Commissioner of Income Tax (Appeals) without considering the facts properly and without giving any specific finding on the issue agreed with the assessee's submission. The order of the Learned Commissioner of Income Tax (Appeals) is thus not on facts and is in clear violation of section 250(6) of the I.T. Act. Since the entire facts have not been brought on record and considered either by the Learned Assessing Officer or by the Learned Commissioner of Income Tax(Appeals}, we are of view the matter requires re- consideration by the Learned Assessing Officer. We accordingly, set aside the orders of the authorities below and restore the matter to the file of Learned Assessing Officer for re-consideration' in view of the above observation. The Learned Assessing Officer shall give reasonable sufficient opportunity of being heard to the assessee. As a result, this ground of Departmental appeal is allowed is for statistical purpose."
8. We have considered the rival contentions and also perused the material available on record including case laws relied upon. We have observed that the assessee is a manufacturer of frozen foodstuffs who exported large parts of its production through an export house namely Allana Sons Limited. The assessee being a supporting manufacturer, got a disclaimer certificate from the export house as prescribed under sub section 4A(b) of Section 80 HHC of the Act. The assessee had claimed deduction u/s 80HHC of the Act on disclaimed turnover of Rs. 39,07,97,779/- . The assessee has made claim of deduction u/s 80 HHC of the Act on the profit arose to the assessee on the sales to the export house of its manufactured goods which was specified as assessee's turnover in the disclaimer certificate issued by the export house in favour of the assessee. Now , vide Taxation Laws (Amendment) Act, 2005 , proviso 5 to section 80 HHC (3) of the Act is inserted w.e.f. 01-04-1992 whereby the 90% of export incentives are taken into account for the purpose of computing deduction u/s 80 HHC of the Act. The claim of deduction u/s 80HHC of the Act is allowed to M/s Allanasons Limited in view of the afore- stated amendment brought in by Taxation Laws (Amendment) Act, 2005 w.e.f. 01-04-1992 as now there is no loss from export activities in the hands of 16 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 Allana Sons Limited if 90% export incentives retained by Allana Sons Limited are duly considered while computing profits eligible for deduction u/s 80HHC of the Act as now M/s Allana Sons has positive profits after adjusting loss from export of traded goods with the profits from export of manufactured goods after factoring 90% of export incentives as per fifth proviso to Section 80HHC(3) of the Act inserted vide Taxation Laws(Amendment) Act, 2005 w.e.f. 01-04-1992 , and thereby deduction is already allowed by Revenue to said Allana Sons Limited by the Revenue vide orders dated 23-05-2016 giving appeal effect to tribunal's order in ITA No. 6344/Mum/2013 dated 06-04- 2014 in the case of Allana Sons Limited for the assessment year 2002- 03(copy placed on record), and hence the assessee being supporting manufacturer holding disclaimer certificate issued by Allana Sons Limited is also entitled for deduction u/s 80 HHC of the Act. The Hon'ble Bombay High Court has also upheld the allowability of deduction u/s 80 HHC of the Act to Allana Sons Limited on merits keeping in view insertion of fifth proviso to Section 80HHC(3) of the Act by Taxation Laws(Amendment) Act, 2005 w.e.f. 01-04-1992. The Hon'ble Bombay High Court in the case of M/s Allana Sons Ltd. v. DCIT vide Writ Petition No. 802 of 2005 vide orders dated 22nd July, 2014 has allowed the Writ Petition and quashed the reassessment notice dated 10-01-2005 issued by the AO u/s 148 of the Act, by holding as under:-
"In any view of the matter, the stand of the petitioner on with regard to interest income being included while computing claim for deduction under Section 80HHC of the Act has been upheld not only by the CIT(A) but also by the Tribunal in its order dated 22 November 2006. Besides the amendment to Section 80HHC (3) of the Act by addition of fifth proviso thereto with retrospective effect will work to the benefit of the petitioner. In the above view of the matter, allowing reassessment proceedings would be a mere academic exercise only because the Assessing officer would bound by the orders of the Tribunal. Moreover, the very basis of the impugned notice dated 10 January 2005 will not be sustainable. In view of all the above reasons, we set aside the impugned notice dated 10 January 2005."
17 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 The Mumbai Bench of the Tribunal in the case of other supporting manufacturer to Allana Sons Limited namely Frigorifico Allana Limited and ors. in cross appeals ACIT v. Frigorifico Allana Limited and ors. vide ITA No. 5513/Mum/2011 and ors. for the assessment years 2002-03 to 2004-05 vide common orders dated 27th July, 2016 has also allowed the claim of deduction under section 80HHC of the Act. , keeping in view insertion of fifth proviso to Section 80HHC(3) of the Act by the introduction of Taxation Laws (Amendment) Act, 2005 with effect from 01-04-1992 , whereby the Tribunal has held as under:-
"These appeals belong to different assessees of same group arising in different assessment years involving identical issues and therefore these were heard together and being disposed by this common order.
2. During the course of hearing, arguments were made by Shri P.J. Pardiwalla & Ms. Vasanti Patel, Authorised Representatives (ARs) on behalf of the Assessee and by Shri G.M. Doss & Shri E. Shreedhar, Departmental Representatives (DRs) on behalf of the Revenue.
First we shall take up appeals of the Assessee & Revenue in the case of Frigerio Conserva Allana Ltd in ITA No.4195/Mum/2011 & ITA No. 5528/Mum/2011, respectively, for A.Y. 2000-01:
3. Ground Nos 1 & 2 of assessee's appeal and Ground No.2 of Revenue's appeal involve identical issue with regard to denial of deduction u/s 80HHC to the assessee on the ground that deduction u/s 80HHC was denied to the main exporter also, to whom the assessee (a supporting manufacturer) had sold its goods.
3.1. We have heard both the parties on this issue in detail and also gone through the orders of the lower authorities as well as copies of judgment placed before us. The brief background of this case is that assessee is supporting manufacturer, selling its goods to the export house namely M/s. Allana Sons Ltd, who had issued disclaimer certificate in favour of the assessee u/s 80HHC and accordingly, the assessee claimed benefit of deduction u/s 80HHC on the amount of turnover made by the assessee to the export company. During the course of reassessment proceedings, the AO noted that the said export house has been denied the benefit of deduction u/s 80HHC on the ground that the said export house company namely M/s. Allana Sons Ltd. ('here in after referred to
18 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 as 'ASL' in short) had incurred loss in case the amount of incentive is not included in its export profits. Accordingly, the AO of the assessee withdrew the benefit of claim of deduction u/s 80HHC in the case of present assessee also solely on the ground when the main exporter i.e. ASL as itself being denied the benefit of deduction u/s 80HHC, therefore, consequently, the assessee should also be denied the benefit of deduction u/s 80HHC. Accordingly, the claim made by the assessee u/s 80HHC for Rs.16,87,12,722/- on the turnover of Rs.97,59,61,941/- (disclaimed by ASL in favour of the assessee) was withdrawn by the AO.
3.2. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) and made exhaustive submissions on various grounds to agitate this addition. Ld. CIT(A) accepted the submissions of the assessee in part and allowed the benefit of deduction u/s 80HHC to the assessee on the ground that the assessee is entitled for benefit of deduction u/s 80HHC without depending upon actual allowability of deduction u/s 80HHC in the hands of export house and he further held that in any case the export house has been actually allowed the deduction u/s 80HHC, and therefore, on facts also the assessee is entitled for deduction u/s 80HHC.
3.3. Being aggrieved, the revenue filed an appeal before the Tribunal on the ground that Ld. CIT(A) ought not to have allowed the benefit of deduction u/s 80HHC in the light of judgment of Hon'ble Supreme Court in the CIT v. IPCA Laboratories Ltd. 266 ITR 521 (SC) wherein it was held that in case there was loss from export activities, then the export house cannot pass on the benefit of deduction u/s 80HHC by way of issue of disclaimer certificate u/s 80HHC (4)(a) to the supporting manufacturer.
3.4. Before us, the Ld. Counsel of the assessee defended and justified the order of Ld. CIT(A) for allowing deduction u/s 80HHC on many grounds. His first argument was that deduction has been actually allowed to the export house i.e. ASL by the Tribunal and order of the Tribunal has been upheld by the Hon'ble Bombay High Court wherein the reopening done by the AO of the ASL has been quashed and on merits also Hon'ble High Court had found that deduction u/s 80HHC was allowable in the hands of ASL as per law and facts. Thus, the whole premise on which the deduction was disallowed in the hands of the assessee ceases to exist and therefore the deduction has to be allowed to the assessee. Second argument made by the assessee was that this controversy has been resolved in the judgment of Hon'ble Banglore Bench in the case of Shamanur Kallappa & Sons vs. ACIT 23 DTR (Bang)(Trib) 269 which has been subsequently upheld by the Hon'ble Karnataka High Court by vide its order dated 12th January 2015 in ITA No. 10/2009 by holding that deduction u/s 80HHC to the supporting manufacturer is allowable independent of actual allowing of deduction in the hands of main exporter. The third argument made by the Ld. Counsel was that reopening was done in the case of the assessee by the AO on the issue of disallowance u/s 40A(3) only and no issue was raised in the 19 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 'Reasons' recorded with respect to deduction u/s 80HHC. The disallowance made u/s 40A(3) has been deleted by the Ld. CIT(A) against which revenue has not filed any appeal. Thus, main issue on which 'Reasons' were recorded has been settled and therefore, no other disallowance would be sustainable as reopening would become bad in law.
3.4. Per contra, Ld. DR relied upon the judgment of Hon'ble Supreme Court in the case of IPCA Laboratories Ltd. v. CIT (supra) and relied upon the order of the AO. We have considered the entire matrix and facts of this case and copies of judgment placed before us. Before going deeper in details, it has been noted by us at the outset that deduction u/s 80HHC in the hands of ASL (i.e. export house) has been found to be allowable by Hon'ble Bombay High Court in the case of M/s. Allana Sons Ltd. v. DCIT writ petition No.802 of 2005 dated 22nd July 2014 wherein it was held that reopening of the assessment in the hands of M/s. Allana Sons Ltd. was not valid as per law and the same was quashed with following observations:
"We have considered the rival submission. It is well settled that a notice to reopen the assessment under section 148 of the Act can only be issued if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. This reason to believe on the part of the Assessing Officer has not to be on the basis of change of opinion i.e. where Assessing Officer has had occasion to consider an issue during the assessment proceeding under section 143(3) of the Act. In this case, the Assessing Officer had during the proceeding under section 143(3) of the Act raised queries to the petitioner specifically with regard to petitioner's claim for deduction under section 80HHC of the Act and the petitioner's response to the same was considered by the Assessing Officer while passing the assessment order. Therefore, the impugned notice and the grounds in support thereof are in fact a change of pinion on the part of the Assessing Officer. Therefore, on the aforesaid ground alone impugned notice is not sustainable."
3.5. It is further noted by us that, on merits also Hon'ble High Court observed that deduction u/s 80HHC was actually allowable to the said export house the observations of the Hon'ble High Court are very useful and these are reproduced hereunder for the sake of ready reference:
"In any view of the matter, the stand of the petitioner on merits with regard to interest income being included while computing the claim for deduction under section 80HHC of the Act has been upheld not only by the CIT(A) but also by the Tribunal in its order dated 22 November 2006. Besides the amendment to section 80HHC(3) of the Act by addition of fifth proviso thereto with retrospective effect will work to the benefit of the petitioner. In the above view of the matter, allowing reassessment 20 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 proceedings would be a mere academic exercise only because the Assessing Officer would be bound by the orders of the Tribunal. Moreover, the very basis of the impugned notice dated 10 January 2005 will not be sustainable. In view of all the above reasons, we set aside the impugned notice date 10th January 2005."
3.6. Thus, it is noted by us that the Hon'ble High Court has not only quashed the reassessment order but also held that deduction u/s 80HHC is actually allowable to ASL. It is further noted by us that it has been held by Hon'ble Gujarat High Court in the case of Avani Exports & Others dated 02.07.2012 that the amendment made by Taxation Laws (Amendment) Act 2005 in section 80HHC to curtail the benefit of u/s 80HHC on the amount of incentive received by the main exporters would not operate retrospective. Thus, if we consider on facts the case of ASL on merits also, it is noted that after including amount of incentives there would arise positive amount of profit. Thus, viewed from any angle, and keeping in view the fact that when deduction u/s 80HHC has been actually allowed in the hands of ASL i.e. export house, therefore, the whole premises of the AO based upon which the deduction was denied to the assessee, ceases to exist. Under these facts and circumstances, we find that Ld. CIT(A) has rightly allowed the benefit of deduction u/s 80HHC to the assessee and therefore, we find nothing wrong in the order of Ld. CIT(A) and therefore, the same is upheld. Since, we have allowed the relief to the assessee on the first argument itself therefore, we treat other arguments as academic in nature and therefore, we are not dealing with the same at this stage. As a result, grounds raised by the revenue in this appeal are dismissed and grounds raised by the assessee may be treated as allowed."
It is also noted that Hon'ble Apex Court in the case of CIT v. Avani Exports vide order dated 30/03/3015 , duly considered the amendment in Section 80HHC(3) with retrospective effect from 01/04/1992 substituted the following in the direction of the Hon'ble High Court:-
"Having seen the twin conditions and since 80HHC benefit is not available after 04/04/2005 , we are satisfied that cases of exporters having a turnover below and those above 10 crore should be treated similarly. This order is in substitution of the judgment in Appeal."
Thus in light of our detailed discussions as set out above, we restore the matter to the file of the AO for computing deduction allowable to the assessee u/s 80HHC of the Act in accordance with law . The assessee is directed to appear before the AO and produce all relevant evidences and explanations in 21 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 support of its contentions. The AO shall provide proper and reasonable opportunity of being heard to the assessee in accordance with law in accordance with principles of natural justice. This disposes of appeal in ITA no. 4056/Mum/2011 filed by the assessee for the assessment year 2002-03. We order accordingly.
9. In the result , appeal of the assessee is allowed for statistical purposes as indicated in our above order.
Revenue Appeal in the case of ACIT v. Allana Frozen Foods Private Limited in ITA no. 5534/Mum/2011 for assessment year 2002-03
10. Our above decision in ITA no. 4056/Mum/2011 for assessment year 2002-03 in preceding para shall apply mutatis mutandis to the Revenues' appeal in ITA no. 5534/Mum/2011 as identical issue is involved. Thus, Revenue appeal in ITA no. 5534/Mum/2011 for assessment year 2002-03 is allowed for statistical purposes. We order accordingly.
11. In the result , Revenue appeal in ITA no. 5534/Mum/2011 for assessment year 2002-03 is allowed for statistical purposes.
Assessee's Appeal in the case of Allana Cold Storage Limited v. DCIT in ITA no. 4121/Mum/2011 for assessment year 2003-04 and Revenue Appeal in ITA no. 5548/Mum/2011 for assessment year 2003-04 in the case of ACIT v. Allana Cold Storage Limited.
12. Our above decision in ITA no. 4056/Mum/2011 for assessment year 2002-03 in preceding paras' in the case of Allana Frozen Foods Limited shall apply mutatis mutandis to the Assessee's appeal in ITA no. 4121/Mum/2011 as well to the Revenues' appeal in ITA no. 5548/Mum/2011 as identical issues' are involved. Thus, both the assessees' appeal in ITA No. 22 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 4121/Mum/2011 and Revenue appeal in ITA no. 5548/Mum/2011 for assessment year 2003-04 are allowed for statistical purposes. We order accordingly.
13. In the result , both the assessees' appeal in ITA no. 4121/Mum/2011 and Revenue appeal in ITA no. 5548/Mum/2011 for assessment year 2003- 04 are allowed for statistical purposes.
Assessee's Appeal in the case of Allana Cold Storage Limited v. DCIT in ITA no. 4110/Mum/2011 for assessment year 2004-05 and Revenue Appeal in ITA no. 5518/Mum/2011 for assessment year 2004-05 in the case of ACIT v. Allana Cold Storage Limited.
14. Our above decision in ITA no. 4056/Mum/2011 for assessment year 2002-03 in preceding paras' in the case of Allana Frozen Foods Limited with respect to allowability of deduction u/s 80HHC of the Act to a supporting manufacturer shall apply mutatis mutandis to the assessee's appeal in ITA no. 4110/Mum/2011 as well to the Revenues' appeal in ITA no. 5518/Mum/2011 as identical issues' are involved. Thus, both the assessees' appeal in ITA No. 4110/Mum/2011 and Revenue appeal in ITA no. 5518/Mum/2011 for assessment year 2004-05 are allowed for statistical purposes, so far as allowability of deduction u/s 80HHC of the Act to a supporting manufacturer is concerned. We order accordingly.
15. The Revenue in ITA No 5518/Mum/2011 is also aggrieved by the decision of the learned CIT(A) in restoring the issue of disallowance of expenditure of Rs. 2,00,000/- u/s 14A of the Act incurred in relation to earning of exempt income as made by the AO. The Revenue has raised following ground of appeal with respect to disallowance of expenditure u/s 14A of the Act in relation to earning of exempt income, in memo of appeal filed with the tribunal :
23 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 "2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in restoring the issue of disallowance of Rs. 2,00,000/- U/s. 14A as per rule 8D to the Assessing Officer's file and directing that disallowance to be as per immediate preceding year in the light of observation of jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd.
vs. DCIT 234 ITR 1 (Bom.) as the decision of Hon'ble Bombay High Court is not accepted by the Department".
16. The assessee has earned dividend income of Rs. 19,61,241/- and claimed exemption u/s 10(34) of the Act. The assessee has not shown any expenditure on the earning of the dividend income. The AO invoked the provisions of section 14A of the Act. The assessee submitted that the assessee has not incurred any expenditure which needs to be disallowed u/s 14A of the Act. It was submitted that there are no new investments made during the year and the dividend is earned on investments made in the past. The dividend is represented by only four dividend warrants. However the A.O. was of the view that every income has a bearing on the profit and loss account directly or indirectly. Since it was difficult to ascertain to what extent the expenses debited to P&L account related to earning of dividend income, the A.O. disallowed an amount of expenditure of Rs. 2,00,000/- on ad-hoc basis (for assessment year 2004-05) incurred in relation to earning of exempt income u/s 14A of the Act, vide assessment order dated 26-12-2006 passed u/s 143(3) of the Act.
17. Aggrieved by the assessment order dated 26-12-2006 passed by the A.O., the assessee filed its first appeal before the ld. CIT(A) whereby the assessee contended that as per the order of the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. v. DCIT reported in (2010) 328 ITR 81(Bom HC), any disallowance of expenditure incurred in relation to earning of exempt income u/s 14A should be restricted to a reasonable estimation of the expenses incurred to earn exempt income. The ld. CIT(A) after considering 24 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 the order of the A.O. and the submission of the assessee observed that the A.O. has made the disallowance as per clause (iii) of rule 8D(2) of the Income- tax Rules, 1962. The ld. CIT(A) held that the A.O. is not justified in making the disallowance on ad-hoc lump-sum basis keeping in view the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd.(supra), whereby Rule 8D is applicable from assessment year 2008-09 onwards. The ld. CIT(A) held that the A.O. should give reasonable opportunity to the assessee for working out the disallowance of expenditure incurred by the assessee related to exempt income and accordingly the learned CIT(A) set aside the matter back to the file of the A.O. for de-novo determination of the disallowance of expenditure incurred in relation to earning of exempt income in accordance with decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd.(supra), vide appellate orders dated 15-03-2011 passed by learned CIT(A).
18. Aggrieved by the appellate order dated 15-03-2011 passed by the ld. CIT(A), the Revenue filed this appeal before the Tribunal.
19. The ld. D.R. submitted that the A.O. has rightly made the disallowance of Rs.2,00,000/- on lump-sum ad-hoc basis u/s 14A of the Act in assessee's case.
20. The ld. Counsel for the assessee submitted and conceded that this matter can be set aside to the file of the A.O. who can make disallowance having regards to the assessee's account as per mandate of Section 14A of the Act. It was submitted that Rule 8D of Income-tax Rules, 1962 is not applicable to the impugned assessment year under appeal , as the instant assessment year under appeal is assessment year 2004-05 which is prior to the assessment year 2008-09 , and Rule 8D of Income-tax Rules, 1962 is applicable from assessment year 2008-09 in view of decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd.(supra) 25 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11
21. We have considered the rival contentions and also perused the material available on record. The A.O. has made ad-hoc lump-sum disallowance of Rs. 2,00,000/- towards expenditure incurred in relation to earning of exempt income , without having regards to the accounts of the assessee as per mandate of Section 14A(2) of the Act. We are of the considered view that the appeal under consideration is prior to assessment year 2008-09 and hence Rule 8D of Income-tax Rules, 1962 is not applicable to the impugned assessment year under appeal. Keeping in view the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd.(supra), the disallowance u/s 14A of the Act should be restricted to a reasonable estimation having regards to the accounts of the assessee. In our considered view , the ld. CIT(A) has rightly set aside and restored the issue back to the file of the A.O. for working out reasonable disallowance u/s 14A of the Act. We do not any infirmity in the order of the ld. CIT(A) and accordingly the said appellate order of learned CIT(A) is sustained and confirmed and the AO in remand proceedings shall work out reasonable disallowance of expenditure incurred in relation to earning of exempt income having regards to the accounts of the assessee in accordance with mandate of Section 14A(2) of the Act. The assessee is directed to appear before the AO and produce all relevant evidences and explanations in support of its contentions. The AO shall provide proper and reasonable opportunity of being heard to the assessee in accordance with law in accordance with principles of natural justice. This disposes of ground no 2 raised by the Revenue in memo of appeal filed with the tribunal. We order accordingly.
22. In the result, both the assessees' appeal in ITA no. 4110/Mum/2011 and Revenue appeal in ITA no. 5518/Mum/2011 for assessment year 2004- 05 are allowed for statistical purposes.
26 ITA 4056/Mum/2011, ITA 5534/Mum/11 ITA 5548/Mum/2011, ITA 4121/Mum/11, ITA 5533/Mum/2011, ITA 5518/Mum/11, ITA 4185/Mum/11 & ITA 4110/Mum/11 Assessee's Appeal in the case of Allana Investment and Trading Company Limited v. DCIT in ITA no. 4185/Mum/2011 for assessment year 2004- 05 and Revenue Appeal in ITA no. 5533/Mum/2011 for assessment year 2004-05 in the case of ACIT v. Allana Investment and Trading Company Limited.
23. Our above decision in ITA no. 4110/Mum/2011 for assessment year 2004-05 in preceding paras' in the case of Allana Cold Storage Limited shall apply mutatis mutandis to the assessee's appeal in ITA no. 4185/Mum/2011 as well to the Revenues' appeal in ITA no. 5533/Mum/2011 as identical issues' are involved. Thus, both the assessees' appeal in ITA No. 4185/Mum/2011 and Revenue appeal in ITA no. 5533/Mum/2011 for assessment year 2004-05 are allowed for statistical purposes. We order accordingly.
24. In the result, both the assessees' appeal in ITA no. 4185/Mum/2011 and Revenue appeal in ITA no. 5533/Mum/2011 for assessment year 2004- 05 are allowed for statistical purposes.
25. In the result, all the assessees' appeal and Revenue's appeal are allowed for statistical purposes.
Order pronounced in the open court on 2nd January, 2017. आदे श क घोषणा खुले #यायालय म% &दनांकः 02-01-2017 को क गई ।
Sd/-
Sd/-
(MAHAVIR SINGH) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
मुंबई Mumbai; &दनांक Dated 02-01-2017
[
व.9न.स./ R.K., Ex. Sr. PS
27 ITA 4056/Mum/2011, ITA 5534/Mum/11
ITA 5548/Mum/2011, ITA 4121/Mum/11,
ITA 5533/Mum/2011, ITA 5518/Mum/11,
ITA 4185/Mum/11 & ITA 4110/Mum/11
आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु:त(अपील) / The CIT(A)- concerned, Mumbai
4. आयकर आय:
ु त / CIT- Concerned, Mumbai
5. =वभागीय 9त9न?ध, आयकर अपील य अ?धकरण, मुंबई / DR, ITAT, Mumbai "A" Bench
6. गाडC फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या=पत 9त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai