Income Tax Appellate Tribunal - Mumbai
Diamond Dye-Chem Ltd., Mumbai vs Department Of Income Tax on 20 March, 2006
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'L, MUMBAI.
Before Shri Shri J. Sudhakar Reddy, Accountant Member and
Shri R.S. Padvekar, Judicial Member.
I.T.A. No. 3342/Mum/2006
Assessment Year : 2002-03.
Asstt. Commissioner of M/s Diamond Dye-Chem. Ltd.
Income Tax, Vs. 20/7th floor, Tardeo Airconditioned
Circle-6(2), Mumbai. Market, Tardeo, Mumbai-34.
PAN AAACD3478N.
Appellant Respondent
Appellant by : S/Shri S.S. Rana &
R.C. Prasad.
Respondent by : None.
ORDER
Per J. Sudhakar Reddy, A.M.
This is an appeal filed by the assessee directed against the order of the CIT(Appeals)-VI, Mumbai dated 20-03-2006 for the assessment year 2002-03.
2. None appeared on behalf of the assessee despite the issual of notice in the address mentioned at Col. 11 in Form No. 36. The assessee filed a letter dated 19th January, 2010, indicating the fact that he is aware of posting of the appeal. Instead of making efforts to obtain the appeal papers, the assessee suggests that the papers be sent to him at a changed address. On a perusal of the request and also perusal of the papers on record, we are of the considered opinion that this is not a fit case for grant of adjournment. Thus we reject the same and dispose of the appeal exparte on merits after hearing the learned DR.
23. The assessee in this case is in the business of manufacturing and of optical brighteners used as brightening agents. The Revenue's ground of appeals read as follows:
1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing Assessing Officer to exclude duty and sales tax from the total turnover for the purpose of computation of deduction u/s 80HHC by relying on the decision of the Bombay High Court in the case of Sudarshan Chemicals Ltd. vs. CIT (245 ITR
769) without appreciating the fact that the department had not accepted the decision and its appeal on merits was pending before the Apex Court and also not appreciating that as per the provisions of Section 145A the same is to be included as an integral part of the turnover.
2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing Assessing Officer to not deduct 90% of the receipts by way of Write back suppliers. Write back customers, sales tax refund, provision write back, excise duty and tender fees, as provided for by explanation (baa) while computing the deduction u/s 80HHC without appreciating that the same had no nexus with the business profits derived from the business of exports.
3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to give further reduction of 5% of arm's length price in view of proviso to Section 92C(2) without appreciating the fact that the assessee has never contended this issue during the assessment proceedings before the AO of transfer pricing and in the subsequent year the same has not been allowed by the A.O.
4. After hearing the learned DR, we find that ground No. 1 is covered against the Revenue and in favour of the assessee by the decision of Hon'ble Supreme Court in the case of Laxmi Machine Tools 290 ITR 677 (S.C.) wherein the decision of Hon'ble Bombay High Court in the case of Sudarshan Chemicals vs. CIT has been up held. Respectfully following the same, we uphold the order of the CIT(Appeals) wherein he 3 directed the AO to exclude the excise duty and sales-tax from the total turnover while computing deduction u/s 80HHC.
5. In the result, ground No.1 of the Revenue is dismissed.
6. Coming to ground No.2, we are of the considered opinion that the first appellate authority was right in holding that a) write back suppliers, b) right back from customers, c) sales tax refund, d) write back of provision of refund of excise duty and tender fee, cannot be excluded under clause (baa) of Explanation to section 80HHC.
7. A perusal of all these items clearly show that when the expenditure was incurred, it has gone to reduce the profits of business and when the entry is reversed, profits of business goes up. None of the receipts can be considered as a receipt by way of brokerage, commission, interest, rent, charges or any other receipt of similar nature. All these items are connected with the operations of the assessee. Thus we agree with the findings of the CIT(Appeals) and dismiss ground No.2 of the Revenue.
8. Coming to ground No. 3 which is on the issue of adjustment made to arm's length price under Transfer Pricing Regulations, the grievance of the Revenue is that the CIT(Appeals) directed the AO to grant a reduction of 5% from the arm's length price in view of the proviso to section 92C(2). The learned DR, though not leaving his ground, ultimately submitted that in view of the CBDT Circular on the issue, if the variation is less than 5% being arm's length price determined by the TPO and the arm's length price determined by the assessee, no adjustment is called for. In view of the above submission, we dismiss ground No. 3 of the Revenue.
49. In the result, the appeal of the Revenue is dismissed.
Order pronounced on this 27th day of January, 2010.
Sd/- Sd/-
(R.S. Padvekar) (J. Sudhakar Reddy)
Judicial Member. Accountant Member.
Mumbai,
Dated : 27th January, 2010.
Wakode
Copy forwarded to :
1. Appellant.
2. Respondent
3. C.I.T.
4. CIT(A)
5. DR, L-Bench
(True copy)
By Order
Asstt.Registrar,
ITAT, Mumbai Benches