Income Tax Appellate Tribunal - Mumbai
Jindal Drugs Ltd., Mumbai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH 'J ' MUMBAI BEFORE SHRI R K GUPTA, JM & SHRI B RAMAKOTAIAH, AM ITA Nos. 137,138 &139/Mum/07 (Asst Years 1999-00, 2001-02 & 03-04 ) M/s Jindal Drugs Ltd Bakhtawar, 6th Floor B & C 229 Nariman Point Mumbai 21 Vs The Asst Commr of Income Tax Range 3(2), Mumbai (Appellant) (Respondent) PAN AAACJ1000A ITA No.1750/Mum/06 (Asst Year 1999-00 ) ITA No.36 & 37/Mum/07 (Asst Years 2001-02 & 2003-04 ) The Asst Commr of Income Tax Range 3(2), Mumbai Vs M/s Jindal Drugs Ltd Bakhtawar, 6th Floor B & C 229 Nariman Point Mumbai 21 (Appellant) (Respondent) PAN AAACJ1000A Assessee by: Shri Rajan Vora/Nimesh I Vora Revenue by: Shri N K Balodia,CIT(DR) ORDER
PER BENCH:
These are six appeals by the assessee and the department against the orders of the CIT(A) relating to assessment years 1999-00, 2000-01 & 2003-04.
2 Common issues are involved in all these appeals; therefore, they are disposed off together.
3 In appeals for AY 1999-00 and 2001-02 ground nos 1 & 2 relate to in confirming the reopening of the assessment. No such ground has been raised in appeal for AY 2003-04.
4 We will dispose off these appeals in the following manner:ITA No. 139/Mum/07 (AY 2003-04) - by the Assessee)
5 Ground nos. 1 to 5 relate to denial of deduction u/s 80HHC in respect of DEPB license.
5.1 The AO disallowed the deduction u/s 80HHC in respect of the profit earned on account of DEPB scheme at Rs. 6,55,01,801/-.
6 The ld counsel of the assessee, who appeared before the Tribunal stated that in view of the decision of the Special Bench in the case of Topman Exports reported in 318 ITR 87(SB)(AT) the deduction u/s 80HHC on account of DEPB receipt is eligible. On the other hand, the ld DR placed reliance on the orders of the authorities below.
7 After considering the material on record, we find that the issue in respect of DEPB profit for the purpose of deduction u/s 80HHC has been decided by the Special Bench in the case of Topman Exports (supra). Accordingly, we set aside this issue to the file to the AO to allow deduction u/s 80HHC on the profit of DEPB scheme in light of the decision of the Special bench (supra). We order accordingly.
8 Ground nos 6 to 8 relate to in confirming the action of the AO in treating the interest income as income from other sources as against business income and without prejudice, only 90% of the net interest has to be reduced for the purpose of claiming deduction u/s 80HHC.
8.1 The AO treated the interest income of Rs. 7,37,51,962/- under the head income from other sources against business income shown by the assessee. By treating interest income as income from other sources, the AO disallowed the deduction u/s 80HHC on the basis of reasoning given by him in earlier assessment order and placing reliance on the decision of Raviratna Exports Ltd reported in 246 ITR 443.
8.2 It was submitted before the CIT(A) that the assessee has been carried out financial activity and therefore, interest earned from the same is operational income. It was further submitted that the assessee is an Exporter and it has to keep FDRs with banks for obtaining various credit facilities on which interest income has been earned. It was also submitted that it has been held by various Courts and Tribunals that when FDRs were kept with bank for obtaining credit facilities for export, the interest income has to be treated as income from business and not income from other sources. Reliance was placed on the decision of the Tribunal in the case of Jetin & Co decided in ITA No.1112/Mum/04 dated 12.6.2006 and in the case of Opera Clothing decided in ITA No. 3250/Mum/02 dated 28.3.2006. Reliance was also placed on the decision of the Hon'ble Bombay High Court in the case of Indo Swiss Jewels Ltd reported in 284 ITR 389. It was submitted that in this case it has been held that interest earned on the amounts kept aside for import of machinery and invested in short term corporate deposits was assessable as business income.
8.3 The CIT(A) after considering the submissions and other material on record found that the decision of the Supreme Court in the case of Tuticorn Alkali Chemicals and Chemicals and Fertilizers Ltd in 227 ITR 172(SC) wherein it has been held that interest earned on short term deposits out of surplus funds is assessable under the head 'income from other sources'. Reliance was also placed on the decision of the Hon'ble Kerala High Court in the case of K Rajendranathan Nair in 265 ITR 35 (Ker) and various other decisions where it has been held that income from other sources cannot be considered for the purpose of deduction u/s 80HHC. The decision relied upon by the ld counsel of the assessee in the case of Jatin & Co and in the case of Opera Clothing (supra) were found distinguishable. Accordingly, the action of the AO was confirmed by the CIT(A).
9 Contention raised before the ld CIT(A) were reiterated by the ld counsel of the assessee before the Tribunal. It was further submitted that in a recent decision, the Hon'ble Bombay High Court in the case of Lok Holdings reported in 308 ITR 356 held that even on surplus funds, interest earned has to be treated as income from business. Alternatively, it was submitted that netting of interest has to be allowed as income on account of interest and expenditure on account of interest on account of the same activity. The ld DR, on the other hand placed strong reliance on the orders of the authorities below.
10 After considering the submissions and perusing the material on record, we find that the assessee deserves to succeed in this ground. The major portion of interest income is on account of margin money given by the assessee as FDRs which were obtained for the purpose of availing overdraft facility. Therefore, earning of interest has direct nexus with business activity of the assessee. Accordingly, in view of the decision of the Hon'ble Bombay High Court in the case of Indo Swis Jewels Ltd and in the case of Lok Holding (supra), the interest income has to be treated as income from business. The decision of the jurisdictional High Court is binding on the facts of the present case.
10.1 We further noted that the decision relied upon by the ld CIT(A) in the case of Tuticorn Alkali Chemicals and Chemicals and Fertilizers Ltd (supra) is distinguishable on facts. In that case, manufacturing was not started and the funds were kept in FDRs; therefore, they were treated as income from other sources.
11 In the present case, the funds were required for business purposes and as per pre-conditions of the Bank; margin money was deposited in the shape of FDRs for availing overdraft facility and therefore, it has direct nexus with business activity and accordingly, it has to be treated as income from business income and since there is a direct nexus between the earning of interest and expenditure of interest then netting of interest has also to be allowed in view of the decision of the Special Bench in the case of Lalsons Enterprises reported in 89 ITD 25. Therefore, these grounds of the assessee are allowed and the AO is directed to recalculate the deduction u/s 80HHC accordingly.
12 There is no other ground in appeal of the assessee for this assessment year.
ITA NO. 37/MUM/07( for AY 2003-04) (by the Department) 13 First ground in appeal of the department is against in deleting the disallowance on account of repair and maintenance at Rs. 3,52,147/-.
13.1 The assessee had incurred an expenditure of Rs. 22,06,258/- on repairs and maintenance of the building. On verification of the details, the AO was of the view that the amount of Rs. 3,52,147/- out of these expenses was of capital nature.
13.2 It was submitted before the CIT(A) that the entire expenditure was incurred on the existing assets and hence the same was revenue expenditure since no new asset came into existence. It was submitted that the expenses were incurred towards labour charges of painting, removing and re-fixing of false ceiling, repair & refurbishing of furniture and replacing of upholstery of sofas and chairs etc., and therefore, it is allowable as business expenditure. Reliance was placed on the decision in the case of Modi Spinning and Weaving Mills in 200 ITR 544 and in the case of Oxford University Press in 108 ITR 166 (Bom).
13.3 After examining these facts and case laws, the CIT(A) found that the AO disallowed 25% of the expenditure incurred on repairs and maintenance at Rs. 14,05,586/-; therefore, the CIT(A) inferred that the AO has disallowed 25% maintenance expenses on adhoc basis. It was observed by the CIT(A) that such adhoc disallowance is not justified since the assessee had provided complete details of repairs and maintenance expenses during the course of assessment proceedings. Accordingly, he allowed the relief to the assessee by deleting the addition of Rs. 3,52,147/-.
14 The ld DR placed reliance on the order of the AO and on the other hand, the ld counsel of the assessee placed reliance on the order of the CIT(A) 15 After considering the orders of the authorities below, we do not find any infirmity in the findings of the ld CIT(A) that the AO has disallowed the expenses on ad-hoc basis where the assessee has furnished complete details of repair and maintenance during the course of assessment proceedings. Adhoc disallowance cannot be taken for the purpose of characterising the nature of expenditure. If the AO was of the view that certain expenses are capital in nature then he should have pointed out that how these expenses are capital in nature. Undisputedly, the expenses were incurred in respect of carpentry work, interior work, polishing work, POP work, maintenance charges of AC's etc., and therefore, these cannot be characterised as capital in nature. Accordingly, we confirm the order of the ld CIT(A) on this issue.
16 Second issue relates to in deleting the disallowance made by the AO u/s 36(1)(iii) of the Act in respect of interest expenditure of Rs. 1,83,75,339/-.
16.1 The facts of the case in this regard are that the assessee had given interest free advances to the following parties:
i) Ashish Ship Breaking Ltd Rs. 45,00,000/-
ii) B V Metals Rs. 23,00,000/-
iii) Tien Yuan India P Ltd Rs. 47,95,24,949/-
16.2 The assessee had not charged any interest on these advances. On the other hand, it had paid interest on borrowings made from bank. During the assessment proceedings, the AO asked the assessee as to why interest expenditure to the extent of notional interest on interest free advances be not disallowed. It was submitted by the assessee that the advance of Rs. 75 lacs and Rs. 80 lacs were given to M/s Ashish Ship Breaking Ltd and M/s V B Metals respectively in the year 1999 and 2001 with a view to import some specified type of non ferrous metals. The two concerns belong to Shri Harikrishna Agarwal, an old business associate of the assessee company. It was stated that the assessee had earlier imported large quantities of non ferrous metal in the 1999s with his guidance and contacts. The materials were sold on consignment basis through their group concern M/s B V Metals. The total imports arranged through them exceeded Rs.250 crores. However, the business in non ferrous metals, for which advances were given to the two concerns, was not pursued by the assessee company due to adverse market conditions. The advances were paid back by these concerns in instalments. As regards the advance of Rs. 47,95,24,949/- given to M/s Tien Yuan India P Ltd, it was stated that the said party was supplying Menthol and other essential oil products to the assessee. According to the assessee, the advance was given to ensure uninterrupted supply of Menthol.
16.3 It was further submitted that the assessee had own funds of Rs. 165.25 crores as against the interest free advances of Rs. 48.63crores. It was, therefore, contended that the interest free advances have given wholly out of own funds of the assessee. It was further submitted that no borrowed funds have been diverted for making interest free advances. However, relying on the decision in the case of Phalton Sugar Works Ltd in 208 ITR 989(Bom), in the case of V I Baby and Co 254 ITR 248 (Ker); K Somsundaram & Bros in 238 ITR 939 (Mad), the AO did not accept the claim of the assessee that the interest free advances have been made for the purpose of business. Accordingly, he disallowed the whole of interest of Rs. 1,83,75,339/- claimed by the assessee as expenditure u/s 36(1)(iii) of the Act.
16.4 It was submitted before the CIT(A) that interest free advances of Rs. 48.63 crore have been made by the assessee out of its own funds. The availability of own funds were explained as under:
Particulars As on 31.3.2002 (Rs in cr) As on 31.3.2003 (Rs in Cr.) 1 Share capital 11.67 11.67 2 Reserve and Surplus 130.28 148.01 3 Own funds 141.95 159.68 4 Borrowed funds 24.36 28.71 16.5 Accordingly, it was submitted that since own funds at Rs. 159.68 as on 31.3.2003 are much more than the interest free advances of Rs. 48.63 crores, no disallowance can be made u/ 36(1)(iii) of the Act. It was further explained that the funds have been borrowed from the banks for specific purpose. The loan taken from the bank was a packing credit loan granted by Canara Bank to be utilised only for export and, therefore, there was no question of diversion of interest bearing business funds for interest free advances. Reliance was placed on various case laws reported in 74 ITR 723(Mum); 142 ITR 528 (MP); 37 TTJ 374(Ahd); 18 TTJ 199(Mum); 112 Taxman 187(Mum); 148 ITR 585(Mad) and various other decisions.
16.6 It was also explained that the advances to M/s Ashish Ship Breaking Ltd and M/s B V Metals were not given during the year as in fact these are running accounts and balances have been carried forward from year to year. The position of outstanding balances was also shown by the assessee. It was further explained that the advances to M/s Tien Yuan India P Ltd, Ashish Ship Breaking Ltd and B V Metals have been made for the purpose of business. The nature of business activity for which purposes the advances were given were also explained before the CIT(A). It was explained that M/s Tien Yuan India P Ltd is producing goods mostly for the assessee and it is also maintaining stock on behalf of the assessee so as to make the goods available throughout the year. The details of purchases and stock held by M/s Tien Yuan India P Ltd from AY 1998-99 to the year under consideration were filed.
17 After considering the submission and other material on record, the CIT(A) recorded is finding in para 4.3 at page 6 of his order as under:
"4.3 I have carefully considered the submissions made by the appellant. Similar issue also arose in the case of the appellant for AY 2002-03. In the said year, the appellant had made interest free advance to the three parties namely Ashish Ship Breaking Ltd, M/s B V Metals and M/s Tien Yuan India P Ltd,. The appellant had paid interest of Rs.1,59,64,440/- to the bank during the year. In view of the interest free advances made to the three parties, the AO did not allow deduction on account of interest paid to the bank. For the year under consideration the AO has made disallowance of interest on the basis of reasons which are similar to the reasons given by the AO in the preceding year. After elaborately dealing with the reasons given by the AO for making disallowance made after considering the submissions made by the appellant, the CIT(A) deleted the disallowance of interest in A Y 2002-03 vide his order dated 17.4.2006. I have carefully gone through the reasons given by my predecessor for deleting the disallowance made by the AO on account of interest. I am in agreement with the reasons given by him in his order for deleting the addition. Following the principle of consistency and keeping in view the fact that the facts in the current year are exactly similar to the facts in the preceding year, disallowance of Rs. 1,83,75,339/- made by the AO out of interest is deleted."
18 The ld DR placed reliance on the order of the AO. It was further submitted that closing balance on account of own funds and on account of advance free loans should be taken on the basis of funds available on day-to-day and not on the basis of last day's balance of the accounting year. It was further stated that if the details of own funds and the details of advancing of loans are taken into consideration on the basis of day-to-day balances then there was no fund available with the assessee from its own account. Therefore, it was submitted that the order of the AO should be confirmed on this point.
18.1 On the other hand, the ld counsel of the assessee strongly objected the contentions of the ld DR. It was further submitted that totality of the circumstances needs to be taken into consideration and the totality of the circumstances and the facts of the case are that the assessee was having much more funds of its own as much as of Rs. 159.68 crores as on 31.3.2003 whereas the total advance free funds were of Rs. 48.63 crores only. Therefore, there was no question of disallowance on account of interest u/s 36(1)(iii). Contentions raised before the CIT(A) were also reiterated before the Tribunal by the ld counsel.
19 We have heard the rival submissions and considered them carefully. We have also gone through the case laws on which out attentions were drawn by the respective parties. After considering the submissions and also taking into consideration the various case laws, we find that there is no infirmity in the findings of the ld CIT(A). The contention of the assessee that interest free advances were given to the sister concern for business purposes neither is incorrect nor false. The assessee advanced money on account of purchase of goods from sister concerns. The details of purchases and the purpose for giving advance free loans were explained before the CIT(A) and also before the AO. The AO merely disallowed the claim of the assessee following the decision of the jurisdictional High Court in the case of Phalton Sugar Works Ltd reported in 208 ITR 989 wherein it has been held that any funds given to the sister concern on interest free, the interest can be disallowed u/s 36(1)(iii). The decision of the Hon'ble Bombay High Court in the case of Phalton Sugar Works Ltd has been reversed by the Hon'ble Supreme Court in the case of S A Builders in 288 ITR 1. The Hon'ble Supreme Court has categorically held that if funds given to the sister concern or its subsidiary for the purpose of own business or their business, then no disallowance can be made u/s 36(1)(iii) as it has to be taken into consideration that those funds are to be treated as used for business purposes. The ratio of the decision of the Supreme Court is squarely applicable on the facts of the present case. Moreover, the assessee has its own funds on which no interest has been paid and they are much more than the amount given to its sister concern as interest free advances. The CIT(A) has considered this aspect then only came to the conclusion that the disallowance made by the AO was not justified.
19.1 The contentions of the ld DR that the funds available should be taken on day-to-day basis and not on the basis of closing balance at the end of the year; in our view, is not well founded on the facts of the present case. It has to be taken into consideration that what is the amount available with the assessee on the first day of the accounting year and what is the amount has been given to its sister concern and thereafter what is the closing balance at the end of the year. Therefore, in our considered view, the contention of the ld counsel of the assessee that totality of the circumstances has to be taken into consideration and not on day-to-day basis utilization of the funds. Moreover, as stated above, the department could not prove that these funds were not given for the purpose of business. Therefore, in view of these facts and circumstances, we confirm the findings of the ld CIT(A) on this issue.
20 The remaining ground in appeal of the department is against directing the AO that amount of Rs. 5,92,237/- representing sundry balances written back should form part of the profit of the business for the purpose of computing deduction allowable u/s 80HHC.
20.1 During the assessment proceedings, the AO noticed that the assessee has shown a sum of Rs. 5,92,237/- under the head 'other income'. The AO reduced 90% of other income amounting to Rs. 5,92,237/- while working out the profits of business for the purpose of computing deduction u/s 80HHC.
20.2 It was submitted before the CIT(A) that the income of Rs. 5,92,237/- has arisen to the assessee in the course of carrying on the business activity and hence needs to be considered for computing the profits of business. Since the income earned in the course of business, it should be treated as operational income in view of the decision in the case of Banglore Clothing reported in 260 ITR 371.
20.3 After considering the submissions and perusing the other material on record, the ld CIT(A) found that more than 95% of this amount relates to write back of sundry creditors which are the business liabilities of the assessee as at the time of creation of these sundry creditors, the income of the assessee went down since these credits represents purchases. Therefore, the income arisen to the assessee from writing back of these balance should form part of the profits of the assessee as these are intimately connected with the business of the assessee. Accordingly, the AO was directed to consider the amount of sundry balances written back as profit of the assessee for the purpose of computing deduction u/s 80HHC.
20.4 The findings of the ld CIT(A) neither could be controverted nor any other material was brought on record to establish otherwise. Therefore, we see no reason to interfere with the findings of the ld CIT(A). Accordingly, we confirm these findings of the ld CIT(A) on this issue also.
ITA No.137/Mum/07 ( AY 1999-00) ( By the Assessee)21 Ground nos.1 & 2 relate to in confirming the action of the AO in reopening the assessment u/s 147 after expiry of four years from the end of the assessment year.
21.1 The facts of the case are that the return of income declaring the total income of Rs. 1,42,40,150/- filed by the assessee was processed u/s 143(1). Later on the AO reopened the assessment u/s 147 of the Act by recording the following reasons:
" The assessment for AY 1999-00 was rectified u/s 154 on 9.10.2003 for reworking of deduction u/s 80HHC of I T Act which was allowed at Rs. 7,19,83,525/- as against Rs8,34,36,581/- claimed in return of income. No scrutiny assessment u/s 143(3) is made.
It is noticed from the Schedule II to P&L Account that the export incentives shown under the head Duty Drawbacks on Exports at Rs. 4,11,46,086/-includes realisations from credits under DEPB Scheme. The assessee has claimed deduction u/s 80HHC on 90% export incentive amounting to Rs. 3,70,31,477/-. The main section of 80 HHC provide for deduction from the total income in respect of profits derived from the export of goods or merchandise which are realised in convertible foreign exchange and not in respect of incidental income arsing through a government scheme. Further the elaborate scheme of computation of the deduction provided in 80HHC(3) of I T Act does not cover profit on sale of DEPB credits, such profits are not eligible for deduction u/s 80HHC of I T Act.
As per proviso to sec. 80HHC(3) profits computed under clause (a) or clause (b) or clause (c) of sub section (3) shall be further increased by the amount which bears to ninety percent of any of the sum referred to in clause (iiia) (not being profits on sale of a license acquired from any other persons), and clause (iiib) and clause (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee.
The amounts mentioned in clauses (iiia) (iiib) and (iiic) of sec. 28 are profit on sale of Import licenses, cash assistance received under Government Scheme and duty drawback under Customs and Central Excise Duty Drawback Rules respectively. Profits on sale of DEPB credits are not covered under clause (iiia), (iiib) and (iiic) of sec. 28. Therefore, the assessee is not entitled for deduction on profits on sale of DEPB credits. Rather, such profits are liable to tax under clause (iv) of sec. 28 being value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of a profession.
Contrary to the above position of law the assessee has availed excess deduction u/s 80 HHC t the extent of Rs. 3,70,31,477/-.
Therefore, I have reason to believe that excess relief u/s 80HHC has resulted in under assessment and escapement of income."
21.2 Thereafter the assessment of the assessee was completed by making various additions i.e. on account of DEPB profit, on account of disallowance of interest, on account of sale of special import license and also treating the some part of interest income as income from other sources.
22 Reopening of the assessments were challenged before the CIT(A). It was submitted before the CIT(A) that the power available u/s 147 cannot be resorted to for making roving enquiries based on the same facts and information available on record. The powers u/s 143(3) have been granted under the statue for assessing the income of the assessee. In case the return is not selected for scrutiny by invoking the powers as aforesaid, the provisions of sec. 147 cannot be invoked for extending the time limit for completing the assessment proceedings. It was further explained that complete information regarding the claim of deduction u/s 80HHC was available in the assessment records before the AO. If the AO was of the opinion that the claim u/s 80HHC was made at a higher amount, he could have selected the case for scrutiny within the statutory time available under the Act. Reliance was placed in the case of Vipan Khanna in 225 ITR 220 (P&H) wherein it has been held that 'if the return is processed u/s 143(1) without issuing notice u/s 143(2) thereafter within the time allowed under the Act, reassessment proceedings u/s 147 were not valid.' It was further explained that it is a well accepted proposition that the scope of reassessment can be extended only in respect of the items of under assessment.
22.1 In the instant case, the assessment was reopened over the issue of higher claim of deduction u/s 80HHC. Thereafter, in the reassessment u/s 143(3) r.w.s 147, only the issue relating to the excess claim of deduction u/s 80HHC should have been dealt with by the AO. However, while completing the reassessment, the AO has made various other disallowances also in addition to the lower deduction recomputed u/s 80HHC. In support of this proposition, reliance was placed on the decision in the case of Vipin Khanna (supra) and the decision of the Supreme Court in the case of Sun Engineering Works P Ltd in 198 ITR 297. It was also submitted that the AO has initiated the reopening proceedings merely on the basis of change of opinion on the same set of facts without there being any failure on the part of the assessee. Reliance was placed on various case laws i.e. in the case of Foramer France in 264 ITR 566 (SC) in the case of Parikh Petrol Chemicals Agencies in 266 ITR 196 (Bom); in the case of ONGC Ltd in 262 ITR 648 (Uttr) and various other decisions including in the case of Jindal Photo Films Ltd in 234 IR 170(Del) mentioned at page 3 of the order of the CIT(A).
22.2 After considering the submissions and other material on record, the CIT(A) found that there was valid reason for reopening the assessment. The CIT(A) observed that the reasons recorded for reopening the assessment are very clear and it is seen that excess deduction has been allowed to the assessee. Placing reliance on the decision in the case of Mahanagar Telephone Nigam Ltd in 246 ITR 173 (Del) and in the case of Abad Fisheries in 258 ITR 641 (Ker) and also Aditya & Co in 279 ITR 47 (P&H) held that in a case of intimation u/s 143(1)(a), reopening of assessment cannot be challenged on the ground of change of opinion.
22.3 In respect to the contention of the assessee that if the AO wants to verify the return filed by the assessee, he could have issued notice u/s 143(2) of the Act to the assessee within the stipulated time limit, the ld CIT(A), following the decision of the Hon'ble Allahabad High Curt in the case of Pradeep Kumar Har Saran Lal in 229 ITR 46 (All) wherein it has been held that so long as the ingredients of sec 147 are fulfilled, the AO is free to imitate reassessment proceedings and failure to take steps u/s 143(2) will not render the AO powerless to imitate the reassessment proceedings; therefore, the objection taken by the assessee in this regard was rejected.
22.4 Regarding the contention that there was no material, the ld CIT(A) observed that the assessee has claimed deduction u/s 80HHC on DEPB credits. The DEPB credits are not covered by sub section (iiia); (iiib) or (iiic) of Sec 28 of the Act. The proviso to section 8HHC (3) provides deduction only in respect of incentives specified in sec.28 (iiia), (28(iiib) or 28(iiic). Since DEPB credits being not covered by any of the three sections, the assessee was not justified in claiming deduction u/s 80HHC. Therefore, there was a material before the AO for reopening of the assessment by issuing notice u/s 148 of the Act. Accordingly, the action in respect of the reopening of the assessment was confirmed by the CIT(A). Thereafter, the CIT(A) adjudicated the other grounds.
23 Grounds in respect to DEPB profit and in respect to interest income treated as income from other sources were dismissed. However, the ground in respect to disallowance of interest u/s 36(1)(iii) and deduction u/s 80HHC in respect to sale of special import license were allowed.
24 As stated above, both i.e. the assessee and the department are in appeal here before the Tribunal.
25 In respect to ground nos 1 & 2, which relate to reopening of the assessment after expiry of four years, the ld counsel of the assessee reiterated its contention raised before the lower authorities. Reliance was placed on various case laws on which reliance was placed before the CIT(A). It was further added that change of opinion in fact is in respect to that there was no material and therefore, change of opinion for assuming any income does not empowered the ITO to reopen the assessment as all the material facts for the purpose of completing the assessment were disclosed by the assessee while filing its return. There was no material before the AO to reopen the assessment. It was further submitted the AO therefore, has reopened the assessment without any material and on account of change of opinion based on the basis of board instruction only. It was further submitted that the assessment was reopened after recording the reasons in respect to deduction u/s 80HHC on account of receipt of DEPB scheme; however, the AO has further examined the allowability of other deduction which is not permissible.
25.1 It was further submitted that the Hon'ble Punjab & Haryana High Court in the case of Vipan Khanna has categorically held that the AO cannot make roving enquiries in respect to other deduction claimed in P&L account except the point of issue on which basis the assessment has been reopened. It was further submitted this issue has been again discussed in detail in the case of ICICI Bank. Copy of the order in the case of ICICI is placed on record. Reliance was placed on some other case laws which are placed in the compilation. It was further submitted that on the basis of the Board instruction, the assessment cannot be reopened as held in the case of Sheorey Digital Systems Ltd in 2009 - TIOL - 564(Mum). Copy of the order of the Tribunal is placed at page 38 to 41 of the compilation. Accordingly, it was submitted that reopening of the assessment is bad in law.
26 Regarding ground nos. 3 to 7 which relates to deduction u/s 80HHC on account of DEPB license, it was submitted that the issue is now being decided by the Special Bench of the Tribunal in the case of Topman exports reported in 318 ITR 87(AT). Therefore, the same may be sent to the file of the AO to decide the issue accordingly.
27 Regarding the grounds no. 8 & 9 which are in respect of interest income treated as income from other sources, it was submitted that most of the deposits were for bank guarantee; therefore, interest income earned on FDRs which were for availing overdraft facility cannot be treated as income from other sources as held by the Hon'ble Bombay High Court in the case of Indo swiss Jewels Pv Ltd in 284 ITR 389(Bom).
27.1 The ld DR objected the contentions of the ld counsel in respect to the contention on reopening of the assessment. It was submitted that the assessment was completed u/s 143(1) and no opinion has been expressed; therefore, there cannot be any question of change of opinion. Reliance was placed on the decision of the Hon'ble Bombay High Court in the case of Dr Amin's Pathology Laboratory in 252 ITR 673 and in the case of Rajesh Zhaveri Stock Brokers Pvt Ltd in 291 ITR 500(SC). Reliance was also placed on the decision reported in 75 ITR 373; 213 ITR 805, 181 ITR 22 and 252 ITR 673 27.2 Regarding ground nos. 3 to 7, the ld DR fairly stated that the matter can be sent back to the file of the AO to decide the issue in light of the decision of the Special Bench in the case of Topman Exports (supra) 27.3 Regarding the ground nos. 8 & 9, it was submitted that interest income earned on FDRs have to be treated as income from other sources as the FDRs were obtained out of own funds available with the assessee.
28 After close of the hearing, the ld DR filed a letter dated 1.12.2009 in respect to the arguments of the ld counsel of the assessee in respect to the decision in the case of Dr Amin's Pathology Laboratory in 252 ITR 673 and placing various other decisions mentioned therein along with copies of the decisions. Copy of the letter dated 1.12.2009 filed by the ld DR was given to the ld AR also by the department. Thereafter, the ld counsel of the assessee has filed rejoinder to the ld DR's submission on validity of the reopening of the assessment vide letter dated 4.12.2009.Copy of the same was given to the department also. Thereafter, the ld DR vide letter dated 10.12.2009 filed counter reply in respect to reply filed by the ld counsel of the assessee. The submissions of the department as well as the rejoinder of the assessee have been taken into considered.
29 We have heard the rival submissions and considered them carefully. After considering the submissions and case laws filed by both the parties, we noted that there is no weight in the contention of the ld counsel of the assessee that after expiry of four years from the end of the year, the assessment completed u/s 143(1) cannot be reopened. The provisions of sec 147 are very clear whereby it has not been provided that after expiry of 4 years, assessment completed u/s 143(1) cannot be reopened. Expiry of four year is applicable in the cases where the assessment are completed u/s 143(3); therefore, this contention of the ld counsel of the assessee is not well founded and therefore, rejected.
29.1 Regarding the issue raised by the ld counsel of the assessee that the AO has reopened the assessment on account of change of opinion; again, we are of the considered view that these contentions of the ld counsel of the assessee are also not well founded for the reasons that the assessment was completed u/s 143(1) and no express opinion was given by the AO in respect of any deduction allowed on account of DEPB profits. Thereafter, the AO recorded the reasons which are reproduced somewhere above in this order and reopened the assessment. Therefore, the contention of the ld counsel of the assessee that there was change of opinion is liable to be rejected and accordingly, these contentions of the ld counsel of the assessee are also rejected.
30 The next contention of the ld counsel of the assessee that there was no material to form an opinion and therefore, there was no reason to believe that any income has escaped assessment. It was submitted that each and every detail were furnished along with return and they were on record. Thereafter, the AO issued notice u/s 154 in respect to deduction u/s 80HHC. Accordingly, it was submitted that the AO applied his mind. It was further submitted that in fact the AO has reopened the assessment on the basis of Board circular whereby it has been held that deduction on account of DEPB scheme cannot be allowed u/s 80HHC. The Board instruction cannot be treated as information for the purpose of reopening of the assessment. Accordingly, the ld counsel of the assessee submitted that there was no material to form an opinion that any income has escaped assessment and therefore, reopening the assessment is bad in law. On the other hand, the ld DR stated that the deduction on account of DEPB profit was not allowable as the same does not fall under clause 28(iiia) (iiib) or (iiic) and deduction u/s 80HHC is allowable only in view of provisions of sec 28(iiia), (iiib) or (iiic). Therefore, there was sufficient material for the AO to initiate reopening of the assessment proceedings.
31 We have considered the submissions along with various case laws and the written submissions filed on behalf of both the parties and after considering the same, we find that these contentions of the ld counsel of the assessee are also liable to be rejected. The ld counsel of the assessee has also stated through written submissions and in rejoinder that the AO has initiated proceedings on the basis of the Board instructions. However, after going through the reasons recorded, it is seen that the AO has not initiated reopening of the assessment proceedings on the basis of the Board circular but has initiated for the reasons that the amounts mentioned in the clause (iiia), (iiib) or (iiic) of sec. 28 are profits on which the deduction u/s 80HHC(3) are allowable. However, since the DEPB does not fall under either of the clauses (iiia),(iiib) or (iiic) of sec. 28; therefore, the assessee is not entitled for deduction and since the assessment was completed u/s 143(1). Therefore, the excess deduction has been allowed.
31.1 The Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P Ltd 291 ITR 500 (SC) has concluded that;
"u/s 147, as substituted w.e.f 1st April, 1989, if the AO, for whatever reason, has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment where the case is not covered by proviso to s. 143; initiation u/s 143(1) (a) cannot be treated to be an order of assessment and there being no assessment u/s 143(1)(a), the question of change of pinion does not arise."
31.2 While arriving at the above conclusion, the Hon'ble Supreme Court has held as under:
"The expressions "intimation" and "assessment order" have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes 'the computation of income', sometimes 'the determination of the amount of tax payable' and sometimes 'the whole procedure laid down in the Act for imposing liability upon the taxpayer'. In the scheme of things the intimation u/s 143(1) (a) cannot be treated to be an order of assessment. The distinction is also well brought out but the statutory provisions as they stood at different points of time. U/s 143(1)(a) as it stood prior to 1t ?April, 1989 the AO had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the CBDT spell out the intent of the legislature, i.e. to minimize the departmental work to scrutinise each and every return and to concentrate of selective scrutiny of returns. It may be noted above that under the first proviso to the newly substituted s. 143(1), w.e.f 1st Jun, 1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation u/s 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgement is not done by any AO, but mostly by ministerial staff. Can it be said that any 'assessment' is done by them? The reply is an emphatic 'no'. The intimation u/s 143(1) (a) was deemed to be a notice of demand under s 156 for the apparent purpose of makng machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment u/s 143(1)(a), the question of change of opinion does not arise.
Sec.147 authorises and permits the AO to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word 'reason' in the phrase 'reason to believe' would mean cause or justification. If the AO has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion. The scope and effect of s. 147 as substituted w.e.f 1st April, 1989, as also ss.148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of s. 147 separate cls. (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or re-assessed. To confer jurisdiction u/s 147(a) two conditions were required to be satisfied firstly the AO must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice u/s 148 r.w.s 147(a). But under the substituted s. 147 existences of only the first condition suffices. In other words, if the AO for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to s. 147. The case at hand is covered by the main provision and not the proviso. So long as the ingredients of s. 147 are fulfilled, the AO is free to initiate proceeding u/s 147 and failure to take steps u/s 143(3) will not render the AO powerless to initiate reassessment proceedings even when intimation u/s 143(1) had been issued. The appeal is allowed without any orders as to cost."
31.3 The decision of the Apex Court is squarely applicable on the facts of the present case. The Apex Court has clearly taken into consideration the word 'reasons' and 'reasons to believe'. It has been found by the Apex Court that if the AO's conclusion or justification to opinion or belief that income had escaped assessment then it cannot be said that there is no belief that an income had escaped assessment.
32 In the present case, in view of the provisions of sec. 80HHC (3), the AO has justification to his belief that excess deduction has been allowed by the assessee while completing assessment u/s 143(1). Therefore, this contention of the ld AR that there was no material before the AO for initiating reopening proceedings, is not well founded.
32.1 We have also gone through various case laws relied upon by the ld AR as well as ld DR and found that the cases on which reliance has been placed by the ld AR does not come into the rescue of the assessee. Therefore, following the decision of the Apex Court in the case of Rajesh Jhaveri Stock Brokers P Ltd (supra), we are of the considered view that the AO has rightly reopened the assessment of the assessee.
32.2 We have also taken into consideration the contention of the ld AR that the AO has already applied his mind because for the purpose of verification of deduction u/s 80HHC notice u/s 154 was issued. Issuance of notice u/s 154 is always for a limited purpose. In the present case, on other aspect the rectificatory notice was issued; therefore, it cannot be said that the AO has applied his mind in respect to DEPB profit for the purpose of deduction u/s 80HHC. Therefore, this contention of the ld AR is also rejected.
32.3 The ld counsel of the assessee has also raised contention that DEPB issue has been decided by the Special Bench in the case of Topman Export in favour of the assessee; therefore, reopening of the assessment was also bad in law. In our considered view, this contention of the ld AR are also not well founded for the reasons that the reopening of the assessment were started prior to the date of pronouncement of the decision of the Special Bench in the case of Topman Export (supra); therefore, these contentions of the ld AR are also rejected. In view of these facts and circumstances, the ground in respect of reopening of the assessment for AY 1999-00 is rejected.
33 Ground nos. 3 to 7 relate to deduction u/s 80HHC in respect to DEPB license.
34 This issues was involved in appeal for AY 2003-04 also and we have set aside the order of the CIT(A) to the file of the AO to deicide the same afresh in light of the decision of the Special Bench in the case of Topman Exports (supra). Therefore, for the same reasoning these grounds are also set aside to the file of the AO. We order accordingly.
35 Ground no. 8 & 9 relate to treating interest income as income from other sources against business income shown by the assessee.
36 This issue was also involved in appeal for AY 2003-04 and we have allowed this ground of the assessee while disposing the appeal for AY 2003-04. Therefore, following the same reasoning we allow this ground of the assessee for the year under consideration also.
ITA No. 7150/Mum/06 (AY 1999-00 - by the Department)37 Ground no.1 relates to disallowance of interest u/s 36(1)(iii) of the Act on account of interest free advance of Rs. 39 crores given to Tien Yuan India P Ltd .
38 Identical issue was involved in appeal of the department for AY 2003-04. We have already disposed off this issue by which the ground of the department has been rejected. Since the facts are similar; therefore, on the same reasoning, the ground of the department for the year under consideration is also rejected.
39 Ground no.2 relates to allowing deduction u/s 80HHC in respect to sale of special import license.
39.1 The assessee claimed deduction u/s 80HHC on the profit of Rs. 14,95,991/- arising from the sale of special import license. The AO disallowed the deduction as according to him the profit from sale of special import license is not covered by Import (Control) order, 1955 made under Imports & Exports (Control) Act, 1947.
39.2 It was submitted before the CIT(A) that section 80HHC was introduced to grant incentives to the exporters for earning valuable foreign exchange. To make the goods competitive in the global market, the Govt. Introduced various schemes/incentives whereby a part of the cost was shared by the government by paying incentives like CCS, DEPB licenses, duty drawback etc. The exporters are entitled to deduction u/s 80HHC on the export incentives received in whatever form. It was submitted that the assessee became entitled to special import licenses under Foreign Trade Regulation and Development Act, 1992. The said Act came into effect after the repeal of Imports and Exports (Control) Act, 1947. According to the ld AR, Section 8 of the General Clauses Act provides that where the General Clauses Act, repeals and re-enacts, with or without modification, any provision of a former enactment, then references on any other enactment or in any instrument to the provision so repealed shall unless a different intention appears, be construed as reference to the provisions re-enacted. Attention of the CIT(A) was also drawn on the circular no. 6/2006 dated 15.5.2006 of CBDT which was issued after references were received by the Board indicating that the AO's were denying the clam of deduction u/s 80HHC on account of duty draw back granted to the assessee's under Customs and Central Excise Duty Drawback Rules 1995 since clause (iiic) of sec. 28 referred to Customs and Central Excise Duty Drawback Rules 1971. Therefore, deduction of such amount is allowable to the assessee. The contents of the Board circular were also explained. Reliance was placed on the decision of the Tribunal in the case of Pink Star reported in 72 ITD 127(Mum).
39.3 After considering the submissions and other material on record, the CIT(A) allowed the issue in favour of the assessee.
40 The ld DR placed reliance on the order of the AO and on the other hand, the ld counsel of the assessee placed reliance on the order of the CIT(A).
41 After considering the submissions and other relevant material on record, we do not find any infirmity in the findings of the ld CIT(A). The findings of the ld CIT(A) are recorded in para 6.2 at page 8 of his order which are as under:
6.2 I have carefully considered the submissions made by the ld AR. It is seen that the appellant has got special import licenses under Foreign Trade (Development and Regulation) Act 1992. The said Act came into force after repeal of the Import & Export (Control Act) 1947. Section 8 of General Clause Act relied upon by the appellant is reproduced hereunder:
8(1) Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals and re-enacts with or without modification, any provision of a former enactment, then references in any other enactment or in any other instrument to the provisions so repealed shall, unless a different intention appears, be construed as references to the provision so enacted."
Section 20 of the Foreign Trade (Development and Regulation) Act, 1992 states that the Import & Export Control Act, 1947 is repealed. Therefore, in view of Section 8 of General Clauses Act and Board's Circular no. 6/2006 dated 15.5.2006, I am of the view that profit earned by the appellant from the sale of import licences received under Foreign Trade Regulation and Development Act, 1992, is similar to the profit from a license granted under the Import & Export (Control Act), 1947 referred to in section 28(iiia) of the I T Act. Accordingly, the profit of Rs. 14,95,991/- is required to be considered for working out deduction under section 80HHC of the I T Act under proviso to sec. 80HHC(3). Accordingly, the AO is directed to recompute the deduction allowable u/s 80HHC after giving the treatment to the amount of Rs. 14,95,991/- as laid down in the proviso to sec. 80HHC(3). Accordingly, the grounds of appeal at Sr No. 8 to 10 are allowed."
42 The above findings nether could be controverted by the ld DR nor any other material was brought on record to establish otherwise. Therefore, in view of the reasoning given by the ld CIT(A), we confirm his findings on this issue.ITA No. 138/Mum/2007 (AY 2001-02) (by the Assessee)
43 Ground no. 1 is against reopening of the assessment u/s 147 merely on the basis of change of opinion as the assessment was completed u/s 143(3).
43.1 The facts in this case are that the assessee had filed return of income declaring total income of 78,82,190/- on 22.10.2001. In the said return, deduction u/s 80HHC was claimed at Rs. 6,70,81,908/- . Subsequently, the assessee filed revised return showing the return of income at reduced figure of Rs. 67,13,040/- by claiming higher deduction u/s 80HHC at Rs.6,83,12,593/-. The assessment u/s 143(3) was completed on 28.3.2001 determining the total income at Rs. 1,28,26,532/-. The assessee filed appeal before the CIT(A) against certain additions made by the AO. The CIT(A) decided the appeal vide its order dated 17.12.2005. After giving effect to the order of the CIT(A), the AO assessed the income at Rs. 1,25,26,320/-. Later on, the AO after recording the reasons issued notice u/s 148 on 16.11.2004. The assessment was reopened on the basis of reasons recorded which were recorded on the point of deduction u/s 80HHC has been claimed excess by way of claiming deduction on 90% of DEPB value in addition to the export profit on trading goods amounting to Rs. 26,646/-. Thereafter, the assessment was completed and the AO while completing the reassessment u/s 143(3) r.w.s 147 of the Act, made certain other disallowances also. These disallowances were in respect to deduction u/s 36(1)(iii) in respect to deduction u/s 80HHC and in respect to sale of special import license. The assessee preferred appeal before the CIT(A), before whom, reassessment of the assessment and various other additions made were challenged.
43.2 The CIT(A) allowed the ground in respect to disallowance of interest u/s 36(1)(iii) and deduction u/s 80HHC in respect to sale of special import license. However, the ground relating to reopening of the assessment and relating to DEPB profit were rejected. Now, the assessee is in appeal here before the Tribunal.
44 After considering the submissions and perusing the relevant material on record in respect to reopening of the assessment, we find that the assessee deserves to succeed in this ground. In this case the assessment was completed u/s 143(3) and the issue in respect to deduction u/s 80HHC was examined by the AO. Deduction u/s 8HHC was reduced by the AO and the assessee filed appeal before the CIT(A). The CIT(A) has also decided the issue in respect to deduction u/s 80HHC. Part of the ground was rejected by the CIT(A) against which the assessee preferred appeal before the Tribunal. Copy of the order of the CIT(A), the order of the Tribunal are placed at pages 21 to 33 of the paper book. Thereafter, noticed u/s 148 on 16.11.2004 was issued.
45 The ld counsel of the assessee has vehemently argued that the issue in respect to deduction u/s 80HHC has already been discussed and decided during the original assessment proceedings and the issue of deduction u/s 8HHC has been merged with the order of the CIT(A). On the other hand, the ld DR stated that the issue in respect to DEPB profit was not examined by the AO and therefore, to this extent the issue has not been merged with the order of the CIT(A).
46 After considering various cases laws i.e in the case of Ramachandra Hatcheries in 305 ITR 117 (Mad); in the case of Marco Industries Ltd in 5 DTR 566 and in the case of Eurasia Publishing House P Ltd in 232 IT 381, we find that the AO cannot reopen the assessment on an issue which has already been taken into consideration. The issue in respect to deduction u/s 80HHC was examined by the AO; therefore, it cannot be said that DEPB profit was not taken into consideration as the case was selected for scrutiny and special enquiry in respect to profit on which deduction u/s 80HHC was claimed was enquired into and the assessee filed details and thereafter, discussing the issue of deduction u/s 80HHC, deduction was reduced against which the assessee filed appeal before the CIT(A), who has decided the issue in part in favour of the assessee. Therefore, it cannot be said that the issue has not been discussed either by the AO or by the CIT(A). Once it is found that the issue has already been discussed, then in our view, on merely change of opinion, the assessment cannot be reopened. This has been held by the Apex Court in the case of Foramer France in 264 ITR 566(SC); in the case of Jindal Photo Films Ltd in 234 ITR 170(Del); in the case of Garden Silk Mills in 237 ITR 668(Guj) and in the case of ICICI Ltd in ITA No. 2402/Mum/2002. The assessee has challenged this issue for AY 1999-90 also; however, we have rejected the ground of the assessee while disposing the ground for AY 1999-00 because in that case, the assessment was completed u/s 143(1) and we have said that there was no opinion was expressed while completing the assessment u/s 143(1).
46.1 The Supreme Court in the case of Rajesh Jhaveri Stock Brokers P Ltd (supra) have dealt with the issue wherein the assessments were completed u/s 143(1) and as said there was no express opinion; therefore, there was no question of change of opinion.
46.2 However, in the year under consideration, as stated above when an opinion has already been expressed for the reason that deduction u/s 80HHC was examined by the AO which was reduced by him and the assessee filed appeal before the CIT(A); therefore, the issue of deduction u/s 80HHC merged with the order of the CIT(A). Accordingly, in our considered view, for the year under consideration, initiations of proceedings u/s 147 were on the basis of change of opinion.
46.3 We have also gone through the decision of the Hon'ble Bombay High Curt in the case of Asian Paints Ltd in 308 ITR 195(Bom) wherein it has been held that;
"initiation of reassessment proceedings would amount to change of opinion of the AO as it was merely a fresh application of mind by the AO to the same set of acts. Since the AO had failed to apply his mind to the relevant material while framing the assessment order, he could not take advantage of his own wrong and re-open the assessment u/s 147 of the Act."
While holding so, the Hon'ble High Court has observed as under:
"It is clear from the observations made above that the full Bench of the Delhi High Court has taken a view that in a situation where according to the AO he failed to apply his mind to the relevant material in making the assessment order, he cannot take advantage of his own wrong and reopen the assessment by taking recourse to the provisions of section 147. We find, ourself, in respectful agreement with the view taken by the Full Bench of the Delhi High Court."
47 The ratio of the above decision of the Hon'ble Bombay High Court is applicable on the facts of the present case. In view of these facts and circumstances, we quash the assessment as reopening of the assessment was bad in law. Accordingly, the ground of the assessee is allowed.
48 Ground no.2 relates deduction u/s 80HHC in respect to DEPB licenses.
49 This issue was also involved in appeal for AY 2003-04 and we have set aside the order of the CIT(A) to the file of the AO to deicide the same afresh in light of the decision of the Special Bench in the case of Topman Exports (supra). Therefore, for the same reasoning the issue is also set aside to the file of the AO for the year under consideration. We order accordingly.
ITA No. 36/Mum/2007 (AY 2001-02) (by the Department)50 Ground no.1 in the appeal of the department is against in deleting the disallowance made by the AO amounting to Rs. 58,88,450/- claimed by the assessee u/s 36(1)(iii) 51 Identical issue was involved in appeal of the department for AY 2003-04. We have already disposed off this issue by which the ground of the department has been rejected. Since the facts are similar, therefore on the same reasoning, the ground of the department for the year under consideration is also rejected.
52 Ground no.2 is against directing the AO to allow deduction u/s 80HHC on the profit of Rs. 6,13,251/- arising from the sale of special import licenses.
53 Identical issue was involved in appeal of the department for AY 1999-00. We have already disposed off this issue by which the ground of the department has been rejected. Since the facts are similar, therefore on the same reasoning, the ground of the department for the year under consideration is also rejected.
54 In the result, the appeals of the assessee are allowed partly and partly for statistical purposes whereas the appeals of the department are dismissed.
Order pronounced on 24.12.2009
Sd/- Sd/-
(B RAMAKOTAIAH )
( R K GUPTA )
Accountant Member
Judicial Member
Place: Mumbai : Dated: 24th Dec 2009
Raj*
Copy forwarded to:
1
Appellant
2
Respondent
3
CIT
4
CIT(A)
5
DR
/TRUE COPY/
BY ORDER
Dy /AR, ITAT, Mumbai
ITA No. JINDAL DRUGS LTD
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