Income Tax Appellate Tribunal - Ahmedabad
Vishal Exports Overseas Limited,, ... vs Department Of Income Tax on 12 March, 2004
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD
AHMEDABAD "C" BENCH
(BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND
T.K SHARMA, JUDICIAL MEMBER)
ITA No.1683/Ahd/2004
[Asstt. Year : 1999-2000]
ACIT, Cir.8 Vs. Vishal Exports Overseas Ltd.
Ahmedabad. "Vishal House", Opp: Sales India
Ashram Road, Ahmedabad.
ITA No.1698/Ahd/2004
[Asstt. Year : 2000-2001]
Vishal Exports Overseas Ltd. Vs. ACIT, Cir.8
"Vishal House", Opp: Sales India Ahmedabad.
Ashram Road, Ahmedabad.
(Appellant) (Respondent)
Revenue by : Shri Shelley Jindal
Assessee by : Shri S.N.Soparkar
ORDER
PER G.D. AGARWAL, VICE-PRESIDENT : These are two appeals - one by the Revenue and other by the assessee against the order of the Commissioner of Income Tax (Appeals)-XIV, Ahmedabad dated 12.03.2004 arising out of the order of the Assessing Officer passed under Section 143(3) of the Income Tax Act, 1961. For the sake of convenience we dispose of both the appeals by this common order.
ITA No.1683/Ahd/2004 : A.Y.1999-2000 (Revenue's appeal)2. The Ground No.1 of the Revenue's appeal reads as under:
"1. Ld.CIT(A) has erred in law and on facts in holding that the loss at the first limb of section 80HHC(3) should be ignored and taken as "Nil" and computation of deduction u/s.80HHC be done on the incentives."
3. At the time of hearing before us, both the parties fairly admitted this issue should be set aside to the file of the Assessing Officer for re-computation ITA No.1683 and 1698/Ahd/2004 of deduction under Section 80HHC in view of 5th proviso inserted by the Taxation Laws Amendment Act, 2005 with retrospective effect from 1-4-1992.
4. We have heard the learned DR and perused the material placed before us. We find that the Taxation Laws Amendment Act, 2005 has introduced four Proviso after first Proviso in Section 80HHC(3). Three provisos were inserted w.e.f. 1-4-1998 and Fourth Proviso w.e.f 1-4-1992. Thus, all the above provisos have been inserted by the Taxation Laws Amendment Act, 2005 but with retrospective effect. In view of the retrospective effect given to them all the provisos would be applicable to the year under appeal. We therefore direct the Assessing Officer to re-compute deduction under Section 80HHC in view of the amended provisions of the law.
5. The Ground No.2 of the Revenue's appeal reads as under:
"2. The ld.CIT(A) has also erred in law and on facts in holding that the assessee should be allowed the division-wise exports profitability."
6. At the time of hearing before us, it is submitted by the learned DR that the learned Commissioner of Income Tax (Appeals) has directed the Assessing Officer to compute deduction under section 80HHC on division-wise export profit. He has stated that the above view of the learned Commissioner of Income Tax (Appeals) is not correct because the deduction under Section 80HHC is permissible to an assessee and not to each unit or division. Therefore, the direction of the learned Commissioner of Income Tax (Appeals) to allow deduction under Section 80HHC on division-wise profitability is contrary to law. He also stated that the assessee has not maintained separate books of accounts for each division, and therefore, the profit of each division cannot be ascertained with certainty. In support of this contention, he relied upon the following decisions:
i) Synco Industries Ltd. Vs Assessing Officer (Income-tax) (SC) 299 ITR 444;
ii) A. M. Moosa Vs Commissioner of Income-tax (SC) 294 ITR 1 -2- ITA No.1683 and 1698/Ahd/2004
iii) Income-tax Officer Vs Induflex Products P. Ltd. (SC) 280 ITR 1
iv) IPCA Laboratory Ltd. Vs Deputy Commissioner of Income-tax (SC), 266 ITR 521
7. The learned counsel for the assessee, on the other hand, stated that various decisions relied upon by the learned DR were on different issues and none of the decisions is on the issue of allowability of deduction under Section 80HHC on division-wise profit. He has stated that this issue is considered by various Benches of the ITAT, Ahmedabad wherein deduction under Section 80HHC is allowed on division-wise profit. In support of this contention, he relied upon the following decisions:
i) M/s.Meghmani Organics Ltd. Vs. ACIT, 1201/ahd/2007 dated 5- 3-2010;
ii) Deeja Chemicals Ind. Pvt. Ltd. Vs. ACIT, ITA Nos.4735 to 4739/ahd/1996 dated 31-1-2003;
iii) DCIT Vs. Madhusudan Ind. Ltd., ITA No.2136/Ahd/1997 He therefore submitted that the learned Commissioner of Income Tax (Appeals) was fully justified in directing the Assessing Officer to allow deduction under Section 80HHC on division-wise profit.
When a query was asked by the Bench whether the assessee claimed deduction on division-wise profit in the preceding as well as subsequent years, the learned counsel for the assessee was unable to reply. He however suggested that since the matter for computation of deduction under Section 80HHC is being set aside, in view of the Ground No.1 of the Revenue's appeal, the issue relating to the second ground may also go back to the file of the Assessing Officer and he can examine whether deduction under Section 80HHC was claimed and allowed in the earlier and preceding years on division-wise basis or not.
8. In rejoinder, the learned DR also fairly admitted that the issue relating to the Ground no.2 of the Revenue's appeal can also be set aside to the file of the -3- ITA No.1683 and 1698/Ahd/2004 Assessing Officer for re-adjudication keeping in view the stand taken by the assessee as well as the Revenue in the preceeding as well as subsequent years.
9. We have carefully considered the arguments of both the sides and perused the material placed before us. Admittedly, the assessee was entitled to deduction under Section 80HHC in the preceding as well as subsequent years. However, whether in those years, the deduction was claimed/allowed on division-wise turnover/profit or it was allowed on the total turnover/profit of all the division is not clear. Neither, the assessee nor the Revenue can take different stand in different years, if the facts remain the same. While taking this view, we derive support from the decision of the Hon'ble Apex Court in the case of Radhasoami Satsang Vs. CIT, (1992) 193 ITR 0321. In view of the above, we deem it proper to set aside the order of the authorities below on this point also and restore the matter back to the file of the Assessing Officer. We direct him to re-adjudicate the issue considering the stand taken by the assessee/department in the preceding as well as subsequent year. He will also take into account the various judicial pronouncements relied upon by both the sides before us. Needless to mention that, he will allow adequate opportunity of being heard to the assessee while re-adjudicating the issue.
ITA No.1698/Ahd/2004 : A.Y.2000-2001 (Assessee's Appeal)10. The first ground of the assessee's appeal reads as under:
"1. The ld.CIT(A) erred in law while confirming views of learned ACIT and failed to appreciate the meaning in context of proviso to SS 80HHC(3)(b) of the I.T.Act for word "Total Turnover" and "Export Turnover".
11. At the time of hearing before us, the learned counsel pointed out that the issue relating to the deduction under Section 80HHC has already been set aside by the ITAT for the year under consideration to the file of the Assessing Officer while adjudicating the Revenue's appeal. He has suggested that when -4- ITA No.1683 and 1698/Ahd/2004 the matter is already set aside and is pending before the Assessing Officer for computation of deduction under Section 80HHC, let this issue be also set aside to the file of the Assessing Officer for re-adjudication. Copy of the order of the ITAT in ITA No.1684/Ahd/2004 dated 7-8-2009 is furnished before us. The learned DR fairly accepted the above submissions of the learned counsel.
12. We find that the Revenue's appeal for A.Y.2000-2001 (i.e. the year under appeal) was already adjudicated by the ITAT vide order dated 7-8-2009 (supra) and the ITAT set aside the matter relating to computation of deduction under Section 80HHC back to the file of the Assessing Officer. When the matter is already pending before the Assessing Officer, we set aside the issue raised before us vide Ground No.1 of the assessee's appeal and restore the matter back to the file of the Assessing Officer. The assessee may make appropriate claim with regard to the determination of the total turnover and export turnover before the Assessing Officer.
13. Ground No.2 of the assessee's appeal reads as under:
"2. The ld.CIT(A) erred in law and on facts while confirming disallowance of payment made in cash for purchases made from PSU of India viz. MMTC for Rs.47,00,000 in view of circumstances of case u/s.40A(3) of the I.T.Act."
14. At the time of hearing before us, it is submitted by the learned counsel that during the year under consideration, the assessee made payment of Rs.47,00,000/- for the purchases made from MMTC, which is a public sector undertaking. He has stated that as per Rule 6DD(b), any payment made to government is not required to be disallowed under Section 40A(3). He has stated that MMTC is a public sector undertaking and payment made to MMTC is as good as payment made to government. He also made alternate request that if the disallowance is sustained, then the Assessing Officer may be directed to compute deduction under Section 80HHC on the income determined by him after making the above addition. The learned DR, on the other hand, stated that -5- ITA No.1683 and 1698/Ahd/2004 as per Rule 6DD(b), payment made to government under the rules framed by it where such payment is required to be made in legal tender is exempt. That the payment to MMTC cannot be considered as payment made to the Government and moreover, the learned counsel for the assessee has not pointed out any rule framed by the Government, as per which the payment is to be made to PSU in cash. He therefore submitted that the disallowance made under Section 40A(3) should be sustained.
15. We have carefully considered the arguments of both the sides and perused the material placed before us. Rule 6DD(b) reads as under:
"6DD. Cases and circumstances in which a payment or aggregate of payments exceeding twenty thousand rupees may be made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft.--No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely :--
..........
(b) where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in legal tender;
From the above, it is evident that the assessee would fall within the ambit of Rule 6DD(b) if - (i) payment is made to Government and (ii) as per the rule framed by the Government, such payment is required to be made in legal tender. In our opinion, the payment made to public sector undertaking cannot be equated with the payment made to the government. A public sector undertaking is not Government of India. It is only an undertaking of the Government of India. Moreover, no such Rule is pointed out by the learned counsel by which the payment is required to be made to the public sector undertakings in legal tender. In view of the above, we uphold the disallowance under Section 40A(3) of the Act.
-6-ITA No.1683 and 1698/Ahd/2004
16. Coming to the alternative request of the assessee, the deduction under section 80HHC is to be computed on the profit of the business. As per the Explanation (baa) to Section 80HHC defines the term "profit of the business"
as under:
(baa) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession"
as reduced by--
(1) ninety per cent. of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits ; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India ;"
From the above, it is evident that the "profit of the business" means the profit of the business as computed under the head "profit and gains of the business or profession". Therefore, if while computing any income under the head "Profit and Gains of the Business or Profession" any disallowance is made then the profit and gains which is determined after making such disallowance would be the profit and gains for the purpose of section 80HHC. We therefore accept the alternate claim of the assessee and direct the Assessing Officer to adopt the profit of the business as determined by him under the head "Profit and Gains of the Business or Profession.
17. In result, the Revenue's appeal is deemed to be allowed for statistical purpose while the assessee's appeal is deemed to be partly allowed for statistical purpose.
Order pronounced in Open Court on 24th December, 2010.
Sd/- Sd/- (T.K. SHARMA) (G.D. AGARWAL) JUDICIAL MEMBER VICE-PRESIDENT -7- ITA No.1683 and 1698/Ahd/2004 Place : Ahmedabad Date : 24-12-2010 Copy of the order forwarded to: 1) : Appellant 2) : Respondent 3) : CIT(A) 4) : CIT concerned 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD -8-