Gujarat High Court
Commissioner Of Income Tax-Iv vs Vishal Export Overseas on 17 June, 2013
Author: M.R. Shah
Bench: M.R. Shah
COMMISSIONER OF INCOME TAX-IV....Appellant(s)V/SVISHAL EXPORT OVERSEAS LTD....Opponent(s) O/TAXAP/1375/2011 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1375 of 2011 ================================================================ COMMISSIONER OF INCOME TAX-IV....Appellant(s) Versus VISHAL EXPORT OVERSEAS LTD....Opponent(s) ================================================================ Appearance: MS PAURAMI B SHETH, ADVOCATE for the Appellant(s) No. 1 NOTICE SERVED for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MS JUSTICE SONIA GOKANI Date : 17/06/2013 ORAL ORDER
(PER : HONOURABLE MS JUSTICE SONIA GOKANI)
1. Challenging the order of the Income Tax Appellate Tribunal ( the Tribunal for short) dated 13.5.2011, Revenue has preferred this appeal under section 260A of the Income Tax Act,1961 ( for short the Act ) proposing the following substantial questions of law for our consideration:-
[A] Whether the Appellate Tribunal is right in law and on facts in deleting the disallowance of Rs.6,08,326/- being exchange rate difference pertaining to earlier years for the purpose of export turnover?
[B] Whether the Appellate Tribunal is right in law and on facts in deleting the addition on account of cost of goods estimated by the Assessing Officer in the assessment order, without giving any reasons?
[C] Whether the Appellate Tribunal is right in law and on facts in deleting the disclaimer amount of Rs.4,76,10,309/-
worked out by the Assessing Officer for eligible deduction under section 80HHC?
[D] Whether the Appellate Tribunal is right in law and on facts in directing to allow freight expenses beyond custom point amounting to Rs.32,87,842/-?
Heard learned counsel Ms. Paurami Sheth and with her assistance examined the material on record.
As far as Question [A] is concerned, it pertains to disallowance of Rs.6,08,326/- being the exchange rate difference due to fluctuation in prices pertaining to earlier years for the purpose of export turnover.
The assessee is an exporter of various items like caster oil, garments etc. He received a sum being the difference between the booked amount of export in the previous year and higher amount of realization in the year under question.
The Tribunal noted that the Department had admitted that the sum belongs to the previous year and the assessment of the previous year could be rectified under the law.
In view of such specific consent either side had no objection if the allowance was made in the previous year and accordingly, direction was issued to the Assessing Officer to rectify under section 155 (13) of the Act and allow the claim of deduction under section 80HHC of the Act. This being the question decided on the basis of the consent accorded by both the sides shown see no reason as to why this issue should be entertained as nothing contrary or perverse is pointed out to us by the Department.
Question [B] concerns with regard to the addition on account of the goods estimated by the Assessing Officer. The Tribunal while dealing with this issue has held thus:-
We have heard the parties and carefully considered the material on record. In our considered view there is no case for interference in the order of ld.CIT(A). The reasons are that the basis being the sales in domestic market and export adopted by the AO is not logical. The direct cost related to purchases and, therefore, purchase cost has to be a reasonable basis. It is not identified that distinct types or purchases were made for export and for domestic sale. If purchase are made together both for export and domestic sales then direct cost of the purchases has to be on pro-rata basis of purchases for both the sales i.e. domestic sales and export sales. There can be several reasons for getting more profits in other domestic sales or in export sales and, therefore, sales cannot be a reasonable basis for working out direct cost of purchases. Once there are uniform purchases then this basis is reasonable and correct. We accordingly uphold the order of ld.CIT(A) and dismiss the ground of the Revenue.
We see no reason to interfere with the rational given by the Tribunal. It is rightly pointed out that when the purchases are made together for both export and domestic sales, direct cost of the purchase need to be bifurcated on pro rata basis. Nothing is pointed out for this Court to hold contrary to what the Tribunal has rationally held in favour of the assessee. The issue deserves no further consideration.
As far as Question [C] is concerned, it touches disclaimer amount of Rs.4.76 crores (rounded off) for eligible deduction under section 80HHC. The Tribunal has followed the earlier decision of the year 1999-2000 and restored the matter to the file of the Assessing Officer.
10. We have been informed by the learned counsel that such decision of the earlier year of the Tribunal has been accepted and no challenge has been made by the Department. As the Tribunal has merely followed its own order of the earlier year, which has been accepted by the Revenue. In the present challenge it is not being pointed out as to why this issue deserves any consideration. Moreover, what all the Tribunal has done is to restore the file to the Assessing Officer for working out deduction under section 80HHC considering the division-wise profitability on the basis of turnover/profit as adopted in the earlier years. Neither factually nor legally any reason is pointed out to us to interfere in this issue.
11. As far as Question [D] is concerned, it pertains to the freight expenses beyond the custom point amounting to Rs.32,87,842/-.
12. Assessee claimed the amount of Rs. 32,87,842/- and Rs.1,87,82,039/-
as freight expenses on export. Assessing Officer having held that sum of Rs.1.89 crores (rounded off) was expenditure beyond custom point was eligible for reduction from direct expenses but not the sum of Rs.32.87 lakhs which was the freight paid upto the custom point and hence not liable for reduction from direct expenses.
However, CIT(Appeals) clarified the entire issue and rendering correct decision directed Assessing Officer to work out necessary relief in favour of the assessee. It also further held that such amount was incurred beyond custom clearance point.
13. The Tribunal noted that the Assessing Officer out of confusion as to whether the said amount is the cost upto the custom clearance point or beyond it, was unable to adjudicate appropriately.
14. The Tribunal also said that the characteristics of both the amount i.e. Rs.1.89 crores and Rs.32.87 lakhs are the same and they are to be given equal treatment. Interpretation is made by the Tribunal keeping in mind Explanation (b) to section 80HHC(4C) and it held that any expense made on goods or merchandise beyond the custom point needs to be excluded from export turnover and not from direct cost.
15. We also noticed the absence of difference taken into account by CIT(Appeals) by a detailed reasoning while dealing with this issue. This is essentially based on the factual matrix presented before the Tribunal, which on correctly applying the law to the facts determined this issue which also therefore deserves no further consideration. Resultantly, Tax Appeal merits no application and is dismissed.
(M.R.SHAH, J.) (MS SONIA GOKANI, J.) SUDHIR Page 6 of 6