S.P.G.Ramasamy Nadar & Sons, Virudhunagar V. DCIT, Virudhunagar

CO 62/CHNY/2010

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5072 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 20-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SRINIVASAN R
• Keywords: Retrospective amendment
• Section: 80HHC; 80G; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A : CHENNAI [BEFORE SHRI PRADEEP PARIKH, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO. 1040/MDS/2010 ASSESSMENT YEAR : 2001-02 THE DY. CIT CIRCLE I VIRUDHUNAGAR VS M/S SPG RAMASAMY NADAR & SONS SOUTH CAR STREET VIRUDHUNAGAR [PAN AAFFS3162E ] (APPELLANT) (RESPONDENT) C.O. NO. 62/MDS/2010 ASSESSMENT YEAR : 2001-02 M/S SPG RAMASAMY NADAR & SONS SOUTH CAR STREET VIRUDHUNAGAR VS THE DY. CIT CIRCLE I VIRUDHUNAGAR (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI SHAJI P. JACOB ASSESSEE BY : SHRI SRINIVASAN.R. O R D E R PER HARI OM MARATHA, JM: THE APPEAL BY THE REVENUE AND THE CROSS OBJECT ION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) , MADURAI, DATED 17.2.2010, PERTAINING TO ASSESSMENT YEAR 2001 -02. 2. THE GROUNDS RAISED IN THE REVENUES APPEAL ARE A S UNDER: ITA 1040/10 CO 62/10 :- 2 -: 1 . T HE ORDER OF THE COMMISS I ONE R OF IN C OME-TAX ( APPEA LS) IS C ONT R A RY TO TH E L AW ON T HE FACTS AND IN THE CIR C UMSTANCES OF THE CASE . 2 . THE C OM MISSION E R OF IN C OMETAX (APPEA LS) ERRED I N HOLD I NG TH AT ONLY PROF I T AR IS ING O N DE P B ALONE S H O U LD B E RE DU CED FROM THE PROFITS O F THE B U SIN ESS. 3 . THE COM MI SSI O NE R O F INCOMETA X (APPEA L S) FAILED T O N O T E TH AT THE 90 % OF E N T I RE S AL E P ROCEED S OF DEPB SHO U LD BE RED UCE D FROM T HE P ROFIT OF THE BU S IN ESS S IN CE TH E R E IS NO C OST TO TH E ASSESSEE I N R ESPECT OF D EP B . 4 . THE CO MM I S S IONE R OF I NCOMET A X (APPEALS) FAI L ED T O NOT E T H AT TH E ASS ES S E E IS NOT ENTITLED T O A V AIL THE ADDI T IONA L DE D U C T ION U NDE R SE C TION 80HH C( 3) A S PER T HI R D PROVISO TO SE C T I O N 80HC C (3) SI NC E T H E EX P ORT TU R NOV E R OF TH E A SSESSEE EXCEE D S R S.10 C ROR ES A ND THE A SSESS EE DID N O T FUL F IL L THE CON DI T I ONS ST I PU L A T ED IN THE TH I R D PROV I S O . 5. FOR T HES E AND SUCH O TH E R G RO UND S T HAT M A Y BE ADDU C TED AT T H E TIME OF HEA RING , IT IS PRAY E D T H A T THE O RDERS OF T H E C OMMIS S I ON E R OF INCOME TAX( A P PEAL S) MAY BE R EV E RSED AN D T HA T OF TH E A SSESS I N G OFFI CER RES T ORED. 3. THE GROUNDS RAISED IN THE CROSS OBJECTION BY THE AS SESSEE ARE AS UNDER: 1. T H E OR D E R O F T H E CO MM ISSI ON E R ( A PP EA L S) I S CONT R A R Y TO L A W ON TH E FACTS OF TH E CA SE 2. T H E C OMMI SS ION E R (A PPEAL S ) ER R E D IN DIR E CTIN G IN C L U S IO N OF E N TIRE SA L E PR OCEE D S OF D E PB I NC E NTI VE IN TH E TOT A L T URNOV E R IN C OMPUTIN G THE D E DUCT IO N UND E R SECTIO N 80H H C B Y R E L YI N G O N TH E SP E C I AL BENCH DECI S ION I N TO PM A N E XPO RT S C AS E , 3. T H E CO MMI SS ION ER ( APPEAL S) F AI L E D T O N O T E THAT I N C LU S IO N O F TH E DEP B SA L E P R OCEE D S WAS NOT A N ISS U E CO N SI D E R E D IN TH E CA SE OF TO PM A N EX P O RT S V I TO [ 125 T TJ 2 89 (SB) (MUM)] AND H E NC E TH E R E LIANC E ON T HAT D E CI S ION I S NOT A PP O SITE . ITA 1040/10 CO 62/10 :- 3 -: 4. T H E CO MMI S S ION E R ( APPEAL S ) F AIL E D T O N O T E T HAT TH E PR OVISO UND E R S UB C L AUSE (BA) U ND E R EX PL A NATI O N TO SE CTION 80HHC S P ECIF ICALL Y EXC LUD ES TH E S UM R E FE R R ED T O IN C L A U SES ( III A TO E) F ROM TOT A L TURNOVER A ND T H E REFORE TH E DIR E CTION TO IN C LUD E TH E E NTIR E SAL E PROCEED S O F DEPB INCENTIV E IN TOT A L TURNOVER I S C ONTR A R Y TO EX PR ESS PRO V I S IO N CITE D S UPR A . F OR TH ESE AND OTH E R R E A S ONS THAT M AY BE ADDUCED A T TH E TIM E O F H EA RIN G IN C LUDIN G A DDITION A L G ROUND S THAT MA Y B E PERMITT E D TO BE RA ISE D THE ORDER O F THE C O MM I S S ION ER (A PP E AL S) O N T H IS P OI NT MA Y B E R EVERS ED AND J U S TI CE RE ND E R E D . 4. THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF CAR RYING ON TRADE IN CARDAMOM AND OTHER COUNTRY DRUGS. IN THE RETURN FILED FOR ASSESSMENT YEAR 2001-02 ON 22.6.2002 THE ASSESSEE H AS DECLARED NIL INCOME AFTER CLAIMING DEDUCTION U/S 80HHC OF THE IN COME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHOR T) OF ` 25,39,143/- AND DEDUCTION U/S 80G OF ` 28,075/-. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED U/S 147 READ WITH SECTION 148 OF THE A CT ON 27.3.2008 ON THE GROUND THAT INCOME HAS ESCAPED ASSESSMENT T O THE EXTENT OF ALLOWANCE OF DEDUCTION U/S 80HHC ON 90% OF DEPB VAL UE, IN VIEW OF THE INSERTION OF THIRD PROVISO TO SECTION 80HHC(3) BY THE TAXATION LAWS(AMENDMENT) ACT 2005 WITH RETROSPECTIVE EFFECT FROM 1.4.1998. IN RESPONSE TO THE NOTICE ISSUES U/S 148, THE ASSES SEE FILED RETURN OF INCOME ON 25.4.2008 ADMITTING TOTAL INCOME OF ` 10,36,848/- ONLY AS AGAINST GROSS TOTAL INCOME OF ` 45,39,143/- ADMITTED IN THE ORIGINAL RETURN BY EXCLUDING DEPB VALUE OF ` 36,95,629/- WHICH WAS PREVIOUSLY OFFERED FOR TAXATION. FURTHER, THE ASSESSEE HAS COM PUTED DEDUCTION UN ITA 1040/10 CO 62/10 :- 4 -: 80HHC AT ` 12,01,427/- AFTER DEDUCTING 90% OF ` 1,65,260/- FOR ARRIVING AT PROFIT OF BUSINESS AND BY CLAIMING FURT HER DEDUCTION U/S 80HHC ON 90% OF ` 1,65,260/-. DURING ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT THE ASSESSEE HAD INCURRED NOTHING TO ACQUIRE THE DEPB CREDIT. SO, ACCORDING TO HIM, THE ENTIRE SALE VALU E OF DEPB CREDIT HAS TO BE TREATED AS PROFIT AND 90% OF THE SAME IS TO B E DEDUCTED FOR ARRIVING AT PROFIT OF BUSINESS. AGGRIEVED, THE ASS ESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF ITAT SPECIAL BENCH, MUMBAI, IN THE CASE OF M/S TOPMAN EXPORTS VS ITO IN I.T.A.NO. 5769/MUM/2006 DATED 11.9.2009 WHICH NOW STANDS REVERSED BY THE HO N'BLE MUMBAI HIGH COURT. THE ASSESSEE HAS RELIED ON THE REASONI NG WHICH ARE TAKEN AS GROUNDS IN THE CROSS OBJECTION BEFORE THE LD. CI T(A). 5. AT THE TIME OF HEARING, IT WAS BROUGHT TO OUR NOTI CE THAT SIMILAR ISSUE IS PENDING BEFORE THE HON'BLE MADRAS HIGH COU RT UNDER WHOSE JURISDICTION THE CHENNAI BENCHES FALL. THEREFORE, IT WAS THOUGHT PROPER THAT THE ENTIRE MATTER INCLUDING THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION SHOULD BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT HE SHALL TAKE INTO CONSIDERATION THE DECISION OF THE HON'BLE MADRAS HIGH COURT WHICH IS STATED TO BE LIKELY TO BE RENDERED SHORTLY. BOTH THE PARTIES WERE AGRE EABLE AND THERE WAS NO OBJECTION FROM ANY QUARTER. KEEPING IN VIEW TH E ENTIRETY OF THE ITA 1040/10 CO 62/10 :- 5 -: FACTS OF THIS CASE AND IN THE INTEREST OF JUSTICE, WE ALSO FEEL THAT THE ENDS OF JUSTICE WOULD MEET IN CASE BOTH THE MATTERS ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTI ON THAT HE SHALL DECIDE THE SAME AFTER HEARING THE ASSESSEE AND AFTER CONSI DERING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE MAT TER. 6. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AS WE LL AS THE CROSS OBJECTION OF THE ASSESSEE ARE ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8.9 .2010. SD/- SD/- (PRADEEP PARIKH) VICE-PRESIDENT ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 8 TH SEPTEMBER, 10 RD : COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR