ACIT, V. C.G. Lucy Switchgear Ltd.,

ITA 1037/PUN/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3330 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 04-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Section: 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRAKUMAR YADAV AND SHRI D. KARUN AKARA RAO ITA NO. 1037/PN/08 (ASST. YEAR 2002-03) ACIT, CIRCLE-2, NASHIK .... APPELLANT VS. C.G. LUCY SWITCHGEAR LTD., F-10 MIDC, AMBAD, NASHIK PAN NO. AAACC9268P . RESPONDENT APPELLANT BY : SHRI ABHAY DAMLE RESPONDENT BY : SHRI KISHOR PHADKE ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF TH E CIT(A)-II, NASHIK DATED 13-06-2008 FOR THE ASSESSMENT YEAR 2002-03. GROU ND NO. 4 WAS RAISED ON SAFER SIDE AND IT RELATES TO MAINTAINABILITY OF APPEA L. DURING THE PROCEEDINGS LD. DR FAIRLY MENTIONED THAT THE SAID GROUND IS SUPERFLUOU S AND THEREFORE, IT IS NOT PRESSED. ON CONSIDERING THE SAME, WE PROCEED TO DISMI SS THE SAME AS NOT PRESSED . FURTHER, THE GROUNDS 5 & 6 ARE GENERAL IN NATURE AND TH EREFORE, THEY DO NOT CALL FOR SPECIFIC ADJUDICATION. THAT LEAVES T HE FOLLOWING GROUNDS FOR ADJUDICATION AND THEY ARE REPRODUCED AS UNDER:- 1 . THE LD. CIT(A), NASHIK HAS ERRED IN LAW AND ON FA CTS IN ALLOWING DEDUCTION U/S. 80HHC, WITHOUT EXCLUDING INTEREST IN COME EARNED BY THE ASSESSEE, ON OVERDUE DEBTS , RELYING UPON THE HONBLE ITATS ORDER DATED 31.08.2007, CONFIRMING THE ORDER OF CIT(A) ON THE SIMILAR ISSUE FOR A.Y 2003-04. HOWEVER, ON THE SAME ISSUE A MISCELLANEOUS APPLIC ATION HAS BEEN FILED BEFORE THE ITAT, PUNE FOR AY 2003-04, IN THE CASE OF THIS ASSESSEE, AS THIS ISSUE HAS REMAINED TO BE DISCUSSE D BY THE HONBLE ITAT & THERE ARE NO FINDINGS OF THE ITAT ON THIS ISSUE I N ITS, APPELLATE ORDER. ITA NO. 1037/PN/08 A.Y 2002-03 PAGE 2 OF 4 THE SAID MISCELLANEOUS APPLICATION FOR 2003-4, IS P ENDING BEFORE THE HONBLE ITAT, PUNE BENCH, PUNE. 2. THE LD. CIT(A), NASHIK HAS ERRONEOUSLY ALLOWED THE RELIEF U/S. 80IB ON THE PROFITS BEFORE DEDUCTION U/S. 80HHC, AS PROV IDED U/S. 80IB(13) AND 80IA(9) OF THE I.T. ACT, 1961. 3 . THE CIT(A) HAS ALSO ERRED IN REDUCING THE PROFIT RATIO FOR RESALE, WHILE CALCULATING DEDUCTION U/S. 80IB, FROM 27.22% TO 15% AS THE A.O HAD CORRECTLY CALCULATED THE PROFIT ATTRIBUTABLE TO THE RESALE, ON THE BASIS OF NET PROFIT SHOWN BY THE ASSESSEE IN HIS FINAL AC COUNTS. 2. DURING THE PROCEEDINGS BEFORE US LD. COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT GROUND NO. 1 RELATES IF THE DEDUCTION U/S 80HHC OF THE ACT ARE AVAILABLE IN RESPECT OF THE INTEREST RECEIPTS EARNED ON THE DEBTS OVERDUE. IN THIS REGARD LD. COUNSEL MENTION THAT THE ISSUE IS COVERED I N FAVOUR OF THE ASSESSEE BY VIRTUE OF THE JURISDICTIONAL HIGH COURT JUDGMENT IN TH E CASE OF CIT VS. GRINDWELL NORTON LTD. (2009) 318 ITR 172 (BOM) FOR THE PROPOSITI ON THAT THE INTEREST RECEIVED BY THE ASSESSEE ON OVERDUE PAYMENT IN BUSI NESS IS ELIGIBLE FOR DEDUCTION U/S. 80HHC OF THE INCOME TAX ACT, 1961 LD. DR RELIED ON ORD ERS OF THE REVENUE. 3. WE HAVE PERUSED THE SAID JUDGMENT AND IT IS NOTIC ED THAT THE SAID RATIO DECIDENDI OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT DEC ISION IS BINDING ON OUR TRIBUNAL. IT IS ALSO NOTICED THAT THE SAID DECIS ION WAS TAKEN IN FAVOUR OF THE ASSESSEE RELYING UPON THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. GONVINDA CHOUDHURY AND SONS (1993) 203 ITR 881 AND A LSO OF ANOTHER TRIBUNAL HIGH COURT JUDGMENT CIT VS. BHANSALI ENGINEERING POLY MERS LTD. (2008) 306 ITR 194 (BOM). IN VIEW OF THE ABOVE CATEGORICAL JUDGMENT DIRECTLY RELEVANT TO THE ISSUE UNDER CONSIDERATION, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE FOR THESE REASONS. A CCORDINGLY GROUND NO. 1 OF THE REVENUE IS DISMISSED . 4. GROUND NO. 2 RELATES TO THE GRANTING OF SPECIAL REL IEF U/S. 80IB AND 80HHC AND THE INTERPRETATION OF PROVISIONS OF SEC. 80IA(9) A ND 80IB(13) OF THE INCOME TAX ACT, 1961. IN THIS REGARD LD. COUNSEL HAVE FAIRLY SUBMITTED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE IN VIEW OF THE SPECIAL BENCH DECISION IN THE CASE OF ROGINI GARMENTS (CHENNAI) (SB) 108 ITD 49 AND HINDUS TAN MINT & AGRO PRODUCTS (P) LTD. (2009) 119 ITD 107. FURTHER, LD. COUNSEL ME NTIONED THAT THE THESE DECISION ARE RELEVANT FOR THE PROPOSITION THAT THERE IS ABSOLUTELY NO JUSTIFICATION FOR ALLOWING REPEATED DEDUCTIONS ON PROFITS GAINS ON WHICH DEDUCTION HAS BEEN ITA NO. 1037/PN/08 A.Y 2002-03 PAGE 3 OF 4 ALREADY ALLOWED UNDER OTHER SECTIONS OF CHAPTER VI OF T HE ACT. THEREFORE, THE DEDUCTION ALLOWABLE UNDER ANY OTHER PROVISION OF PART C OF CHAPTER VI-A IS TO BE REDUCED BY AN AMOUNT OF DEDUCTION ALLOWED UNDER S. 80 -IA/80-IB. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE AT THE LEVEL O F THE HONBLE TRIBUNAL, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) HAS TO BE REVERSED IN THIS REGARD. IT IS ALSO NOTICED THAT THE DECISIONS RELIED UPON BY THE CIT(A) ARE NO LONGER RELEVANT ON THIS ISSUE. ACCORDINGLY GROUND NO. 2 IS ALLOWED . 5. GROUND 3 RELATES TO THE REASONABLE PROFIT PERCENTAGE ON THE RESALES. RELEVANT FACTS AS CULLED OUT IN PARA 5 OF THE IMPUGN ED ORDER ARE UNDER:- 5. THE THIRD AND LAST ISSUE IS RELATING TO RE-COM PUTATION OF DEDUCTION U/S. 80IB OF THE ACT WITH REGARD TO THE PROFIT EARN ED ON RESALE OF CERTAIN GOODS OF 80IB UNIT/ DURING THE COURSE OF THE ASSESS MENT PROCEEDINGS, THE AO NOTICED THAT THERE WAS RESALE OF RS. 2,50,023/- AND HELD THAT IT WAS IN THE NATURE OF TRADING AND PROPOSED TO TAX THE PROFI TS DENYING THE DEDUCTION U/S. 80IB OF THE ACT TO TAX EXTENT. ACCO RDINGLY, THE A.O ESTIMATED THE NET PROFIT ON RESALE @ 27.22% AND WOR KED-OUT THE PROFIT AT RS. 68,056/-. AFTER CONSIDERING THE DEDUCTION @ 30 % U/S. 80IB OF THE ACT, HE MADE A DISALLOWANCE OF THE DEDUCTION TO THE EXTENT OF RS. 20,417/-. THE APPELLANT OBJECTED TO THE ESTIMATION OF THE NET PROFIT @ 27.22% STATING THAT IT WAS VERY HIGH AND UNREASONAB LE. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT PRODUCED AN IN VOICE STATING THAT THE PROFIT IS AROUND 10%. THE INVOICE SUBMITTED BY THE APPELLANT IS ONLY ONE AND HAS NOT WORKED-OUT THE PROFIT SCIENTIFICALLY NO R ON AVERAGE BASIS. HOWEVER, THE PROFIT ESTIMATED BY THE A.O ALSO CANNO T BE TAKEN @ 27.22% AS HAS BEEN DONE. THEREFORE, THE PROFIT CAN BE ESTI MATED @ 15% WHICH WOULD BE REASONABLE AND FAIR. THEREFORE, THE AO IS DIRECTED TO RE-COMPUTE THE PROFIT ON RESALE ADOPTING THE PROFIT RATE @ 15% AND WORK OUT THE DISALLOWANCE OF DEDUCTION U/S. 80IB OF THE ACT. 6. FROM THE ABOVE IT IS EVIDENT, WHILE THE AO HAS ES TIMATED NET PROFIT ON RESALE @ 27.22%, THE ASSESSEE IS OF THE VIEW THAT TH E SAME IS ON HIGHER SIDE. DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE R ELIED ON THE COPIES OF INVOICES AND AS PER THE SAME THE PROFIT PERCENTAGE IS AROUND 10%. ON CONSIDERING THE FACT THAT THE ASSESSEE DID NOT PRODUC E THE INVOICES IN RESPECT ALL SUCH SALES, THE CIT(A) KEPT THE ESTIMATION @ 15% AG AINST THE 27.22% ADOPTED BY THE AO. WE HAVE HEARD THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AND THE PAPERS FILED BEFORE US. CONSIDERING THE FACT THAT THE PROFIT PERCENTAGE OF 15% IS BASED SOME REASONING, WHICH IS NOT REBUTTED BY THE ASSESSEES COUNSEL WITH EVIDENCES, THE ESTIMATION ADOPTED BY THE CIT(A ) IN OUR OPINION HAS SOME BASIS, AND THEREFORE, WE FIND NO REASON TO INTERFERE WI TH THE SAME. ACCORDINGLY, GROUND NO. 3 IS DISMISSED . ITA NO. 1037/PN/08 A.Y 2002-03 PAGE 4 OF 4 7. IN THE RESULT APPEAL OF REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 17 TH SEPTEMBER, 2010. SD/- SD/- (SHAILENDRAKUMAR YADAV) (D.KARUNAKAR A RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 17 TH SEPTEMBER, 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ACIT, CIRCLE -2 NASHIK 2. ASSESSEE 3. CIT(A)-II, NASHIK 4. CIT-I, NASHIK 5. D.R. ITAT A BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE