Nabros Pharma Pvt.Ltd., Ahmedabad V. The Jt.CIT.,(OSD)Circle-5, Ahmedabad

CO 40/AHD/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7573 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-07-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 07-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D P GUPTA
• Keywords: Competent authority
• Section: 14A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 3316/AHD/2011 ASSESSMENT YEAR :2009-10 & C.O. NO.40/AHD/2012 ASSESSMENT YEAR :2009-10 JT. COMMISSIONER OF INCOME TAX(OSD), CIR-5, ABAD NABROS PHARMA PVT. LTD. NABROS TOWER, OPP. ART GALLERY LAW GARDEN, ELLISBRIDGE, ABAD V/S . V/S. NABROS PHARMA PVT. LTD. NABROS TOWER, OPP. ART GALLERY LAW GARDEN, ELLISBRIDGE, ABAD JT. COMMISSIONER OF INCOME TAX(OSD), CIR-5, ABAD PAN NO. AA ACN 7886N (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI D.P. GUPTA CIT. D.R. /BY ASSESSEE SHRI S.N.SOPARKAR (SR.ADV.) WITH MRS. U. SHODHAN, A.R. /DATE OF HEARING 2 6 .0 7 .2012 /DATE OF PRONOUNCEMENT 31.08.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE AND C.O. OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF CIT(A )-XI, AHMEDABAD, ORDER DATED 19.10.2011 FOR ASSESSMENT YEAR 2009-10. THE REVENUES APPEAL AND ASSESSEES C.O. WERE HEARD TOGETHER AND ARE BEING D ISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 3316/AHD/2011 A.Y. 09-10 PAGE 2 ITA NO. 3316/AHD/2011 2. THERE ARE FIVE GROUNDS OF APPEAL. THESE ARE REV OLVING AROUND NOT ALLOWING THE DEDUCTION U/S.10B ON FOREIGN EXCHANGE REALIZED WITHIN THE EXTENDED PERIOD BY THE COMPETENT AUTHORITY. 3. THE A.O. DISALLOWED THE CLAIM U/S.10B OF RS.2,31 ,81,891/- ON THE GROUND THAT THE APPELLANT COULD NOT RECEIVE SALES I N CONVERTIBLE FOREIGN EXCHANGE WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR RELEVANT TO A.Y. 09-10. THE PERIOD WAS NOT FURTHER EXTENDED BY THE R.B.I. TILL THE DATE OF PASSING THIS ORDER. THEREFORE, HE ALLO WED THE PROPORTIONATE EXEMPTION U/S.10B AND MADE ADDITION OF RS.2,31,81,8 91/-. 4. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE WENT IN APPEAL BEFORE THE CIT(A) WHO HAS ALLOWED THE DEDUCTION BY OBSERVING AS UNDER: 4.2 I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I HA VE ALSO GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF THE LD.A.R. IT IS NOTICED THAT DURING THE APPELLATE PROCEEDINGS, APPE LLANT HAD FURNISHED COPIES OF ADVICES FROM CANARA BANK DT.28.12.2010, 2 9.12.2010, 5-1- 2011 AND 15-1-2011. THESE ADVICES INDICATE THAT FO REIGN EXCHANGE TO THE EXTENT OF RS.2,27,58,694/- WAS RECEIVED IN INDI A WITHIN THE EXTENDED PERIOD. THIS WAY, UNREALIZED FOREIGN EXCHANGE REMA INS AT RS.73,63,884/-. SINCE, THESE EVIDENCES WERE NOT FI LED BEFORE THE A.O. DURING THE ASSESSMENT PROCEEDINGS, THE APPELLANT IS DIRECTED TO FILE THESE EVIDENCES BEFORE THE A.O. NOW. THE A.O. IS D IRECTED TO VERIFY THESE EVIDENCES AND ALLOW DEDUCTION U/S.10B IF FORE IGN EXCHANGE WAS REALIZED WITHIN THE EXTENDED PERIOD BY THE COMPETEN T AUTHORITY. FOR THE STATISTICAL PURPOSE, THIS GROUND OF APPEAL IS TREAT ED AS PARTLY ALLOWED. ITA NO. 3316/AHD/2011 A.Y. 09-10 PAGE 3 5. NOW THE REVENUE IS BEFORE US. LD. D.R. CONTENDE D THAT THE APPELLANT HAD NOT FULFILLED THE CONDITION LAID DOWN IN SECTIO N 10B OF THE IT ACT AS CONVERTIBLE FOREIGN EXCHANGE HAD NOT BEEN RECEIVED WITHIN SIX MONTHS FROM THE END OF THE FINANCIAL YEAR OR IN EXTENDED PERIOD BY THE COMPETENT AUTHORITY, WHEREAS, FROM THE SIDE OF THE ASSESSEE, LD. SR. COU NSEL SHRI S.N. SOPARKAR CONTENDED THAT THE LD. CIT(A) HAS GIVEN SIMPLY DIRE CTION TO THE A.O TO RE- CONSIDER THE EVIDENCE PRODUCED BY THE APPELLANT BEF ORE HIM. THE APPELLANT HAD ALLOWED BY THE R.B.I. THROUGH CANARA BANK (PAGE NOS. 17 & 18 OF THE PAPER BOOK) TO EXTEND THE PERIOD FOR REALIZATION OF EXPORT SALES WHICH WAS EXTENDED VIDE LETTER DATED 28.12.2010 AND 29.12.201 0. THESE EVIDENCES COULD NOT BE PRODUCED BEFORE THE A.O. AS SAME WERE RECEIVED BY THE APPELLANT AFTER SCRUTINY ASSESSMENT. THE LD. COUNS EL ALSO RELIED ON R.B.I. CIRCULAR NO.91 DATED 1 ST APRIL, 2003 FOR REALIZATION OF EXPORT PROCEEDS AND ITAT, NEW DELHI F BENCH, IN CASE OF ITO VS. PCL EXPORTS IN ITA NO. 3563/DEL/2009 FOR A.Y. 05-06 . THE A.O. HAS TO RECTIFY THE EXEMPTION CLAIM U/S.155(11A) OF THE IT ACT ON RECEIPT OF ORDER OF T HE COMPETENT AUTHORITY FOR EXTENSION OF EXPORT PROCEEDS. 6. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND GONE THROUGH THE CASE LAW AND CIRCULAR CITED BY LD. COUNSEL FOR THE ASSESSEE. WE HAVE CONSIDERED VIEW THAT THE ASSESSEE IS FULLY ENTITLED TO GET THE EXEMPTION U/S10B OF THE IT ACT ON THE BASIS OF ORDER FOR EXTENSION O F COMPETENT AUTHORITY. THE LD. CIT(A) WAS ALSO JUDICIOUS IN GIVING THE DIRECTI ON TO THE A.O. TO ALLOW THE ASSESSEES CLAIM BY ACCEPTING EVIDENCE FOR EXTENSIO N OF COMPETENT AUTHORITY. ITA NO. 3316/AHD/2011 A.Y. 09-10 PAGE 4 THEREFORE, THE A.O. IS DIRECTED TO ALLOW THE EXEMPT ION U/S. 10B ON THE BASIS OF CANARA BANK LETTERS DATED 28.12.2010 AND 29.12.2010 FOR BILL AMOUNT USD28750 (RS.11,47,125/-), USD22500 (RS.11,11,500/ -), USD28750 (RS.12,21,875/-), USD90000 (RS.44,46,000/-), USD180 000 (RS.88,92,000/-) & USD23600 (RS.11,18,640/-) IN TOTAL 1,78,91,140/-. THE APPELLANT HAS NOT PRODUCED THE EVIDENCES FOR EXTENSION OF RS.52,90,75 1/- BEFORE US. 7. IN RESULT, THE REVENUES APPEAL IS PARTLY ALLOWE D. C.O. NO.40/AHD/2012 8. THERE ARE TWO GROUNDS IN C.O. FIRST GROUND IS A GAINST THE DEDUCTION CLAIMED U/S.10B WHICH HAS BEEN DISCUSSED IN REVENUE S APPEAL. THEREFORE, NO SEPARATE FINDING IS REQUIRED. 8. GROUND NO.2 IS AGAINST CONFIRMING DISALLOWANCE O F RS.2,66,058/- U/S. 14A OF THE IT ACT READ WITH RULE 8D OF I.T. RULES, 1962. THE LD. A.O. MADE DISALLOWANCE ON THE BASIS OF SECTION 14A READ WITH RULE 8D ON PAGE NOS. 2 & 3 OF THE ASSESSMENT ORDER. THE APPELLANT RAISED TH IS ISSUE BEFORE THE CIT(A) WHICH HAS BEEN DECIDED AGAINST THE APPELLANT ON PAG E NOS. 2 TO 5 AND OBSERVATION OF THE LD. CIT(A) IS AS UNDER: 2.3 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. I HAVE ALSO GONE THROUGH THE A.O. AND THE SUBMISSIONS OF THE LD . A.R. IT IS SEEN THAT DURING THE APPELLATE PROCEEDINGS APPELLANT REI TERATED ITS SUBMISSIONS MADE DURING THE ASSESSMENT PROCEEDINGS. IN THE APPELLATE PROCEEDINGS ALSO APPELLANT HAS MADE GENER AL SUBMISSIONS ITA NO. 3316/AHD/2011 A.Y. 09-10 PAGE 5 AND PLACED RELIANCE ON THE CASE OF RELIANCE UTILITI ES 313 ITR 340. HOWEVER, APPELLANT HAS FAILED TO PROVE THAT THESE I NVESTMENTS WERE MADE OUT OF NON INTEREST BEARING FUNDS. SINCE APPE LLANT IS CLAIMING THAT IT HAD NOT INCURRED ANY EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THIS HEAD, APPELLAN TS CASE IS FULLY AND SQUARELY COVERED WITH THE PROVISIONS OF SECTION 14A (3) OF I.T. ACT. ACCORDINGLY, THE DISALLOWANCE FOR EXPENDITURE INCUR RED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS HEAD IS TO BE MADE AS PER PROVISIONS OF SECTION 14A(2) R.W. RULE 8D OF INCOME- TAX RULES, 1962. IN VIEW OF THESE FACTS, I AGREE W ITH DISALLOWANCE MADE BY THE LD. A.O. UNDER RULE 8D OF INCOME-TAX ACT. 9. NOW THE ASSESSEE IS BEFORE US. THE LD. A.R. FOR THE APPELLANT CONTENDED THAT NO EXPENDITURE ON ACCOUNT OF INTERES T WAS INCURRED ON EXEMPTED INCOME. RULE 8D IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THEREFORE, CIT(A) ORDER MAY BE DELETED. 10. FROM THE SIDE OF THE REVENUE, LD. SR. D.R. VEHE MENTLY RELIED ON THE ORDER OF THE AUTHORITIES BELOW AND ARGUED THAT THE CALCULATION MADE BY THE A.O. AS PER RULE 8D IS PROPER AND IS TO BE UPHELD. 11. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORIT IES BELOW AND HEARD THE ARGUMENTS FROM BOTH SIDES. THE YEAR UNDER CONSIDER ATION IS A.Y. 09-10 IN WHICH RULE 8D IS APPLICABLE. THE APPELLANT HAD NOT ESTABLISHED THAT INVESTMENT HAD BEEN MADE OUT OF NON INTEREST BEARIN G FUND WITHOUT ANY EXPENDITURE. THE INCOME CANNOT BE GENERATED WITHOU T INVESTMENT OF FUND, ITA NO. 3316/AHD/2011 A.Y. 09-10 PAGE 6 MANAGERIAL SKILL AND MAINTAINING ACCOUNTS ARE REQUI RED TO JUDGE THE FUTURE BENEFIT OF THE INVESTMENT. THEREFORE, LD. A.O. RIG HTLY CALCULATED THE DISALLOWANCE UNDER RULE 8D READ WITH SECTION 14A OF THE IT ACT. THUS, WE UPHOLD THE ORDER OF THE CIT(A). 12. IN THE COMBINED RESULT, THE REVENUES APPEAL IS PARTLY ALLOWED AND THE ASSESSEES C.O. IS ALSO PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 31.08.2012 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. '#$ / APPELLANT 2. &'#$ / RESPONDENT 3. )*)+ ' ', / CONCERNED CIT 4. ' ',- ' / CIT (A) 5. 01'' +, ' ''' +, 34 * / DR, ITAT, AHMEDABAD 6. 167 89 / GUARD FILE. BY ORDER/ , :/3' )' ' ''' +, 34 * < STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 28 & 29.08.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 29.08.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 31.08.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 31.08.2012 ITA NO. 3316/AHD/2011 A.Y. 09-10 PAGE 7