The ITO, Ward-4(2), Ahmedabad V. Visionspect Systems Pvt. Ltd. ( Now known as Jekson Vision Pvt. Ltd. ), Ahmedabad

ITA 1273/AHD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0113 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAMESH KURIANAR
• Keywords: Tax effect
• Section: 143(3); 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIPKUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA.NO.1273/AHD/2015 / ASSTT. YEAR: 2009-2010 ITO, WARD - 2(1)(2) AHMEDABAD. VS JEKSON VISION P.LTD. PLOT NO.394, SARKHEJ BAWLA HIGHWAY ROAD CHANGODAR, AHMEDABAD 382213. PAN : AACCV 0901 G ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI JAMESH KURIAN,AR ASSESSEE BY : NONE / DATE OF HEARING : 08/11/2016 / DATE OF PRONOUNCEMENT: 10/11/2016 $%/ O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST TH E ORDER OF THE LD.CIT(A)-2, AHMEDABAD DATED 11.2.2015 FOR THE ASST T.YEAR 2009-10. 2. REVENUE HAS PLEADED FOLLOWING GROUNDS OF APPEAL: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF MAT CREDIT RS.10,43,265/- AND ALSO IN DELETING THE REDUCTION OF RS.31,14,639/- IN THE DEDUCTION U/S 10 A MADE BY THE AO. ITA NO.1273/AHD/2015 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 3. IN RESPONSE TO THE NOTICE OF HEARING, THE ASSESS EE HAS FILED SUBMISSION VIDE LETTER DATED 5.2.2016. IN THE SUBMISSIONS, TH E ASSESSEE HAS PLEADED THAT TAX EFFECT INVOLVED IN THE APPEAL BY VIRTUE OF RELI EF GIVEN BY THE LD.CIT(A) IS LESS THAN RS.10 LAKHS, AND THEREFORE, IN VIEW OF LA TEST CBDT CIRCULAR INSTRUCTION NO.21/2015 DATED 10.12.2015 THE PRESENT APPEAL IS NOT MAINTAINABLE. THE LD.DR ALSO NOT DISPUTED WITH THI S SUBMISSION. HOWEVER, AFTER PERUSAL OF THE RECORD, WE FIND THAT SUBMISSIO NS OF THE ASSESSEE ARE TOTALLY SILENT AS TO HOW TAX EFFECT IS LESS THAN RS.10 LAKH S. SUBMISSIONS RUNNING INTO THREE PAGES BUT MORE ENERGY HAS BEEN DEVOTED TOWARD S EXPLAINING THE BOARD CIRCULAR THAN DEMONSTRATING AS TO HOW TAX EFFECT IS LESS THAN RS.10 LAKHS. THEREFORE, WE DO NOT TAKE COGNIZANCE OF THE SUBMISS ION AND PROCEED TO DECIDE THE APPEAL. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE OF SOFTWARE AND SERVICES. IT HAS FILED ITS RE TURN OF INCOME ELECTRONICALLY ON 29.9.2009 DECLARING TOTAL INCOME AT RS.5,14,420/ -. THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 10A OF THE INCOME TAX A CT. THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE ACT ON 20.4.2011. THE LD.AO HAS ALLOWED CLAIM OF EXEMPTION UNDER SECTION 10A FO R THE ENTIRE AMOUNT OF RS.2,78,00,624/- AS CLAIMED BY THE ASSESSEE. THEREA FTER, THE AO HAS RECORDED REASONS AND REOPENED THE ASSESSMENT ORDER. ACCORDI NG TO THE AO, EXEMPTION OF INCOME UNDER SECTION 10A IS ADMISSIBLE TO THE AS SESSEE AT RS.2,46,85,985/- AS AGAINST CLAIM OF RS.2,78,00,624/-. THUS, IN THE OPINION OF THE AO, THE ITA NO.1273/AHD/2015 3 EXCESS CLAIM OF RS.31,14,639/- WAS MADE. SIMILARLY , BOOK PROFIT OF THE ASSESSEE WAS CALCULATED AT A HIGHER FIGURE, AND HIG HER MAT CREDIT WAS GIVEN TO THE ASSESSEE. THE ASSESSEE CHALLENGED REOPENING OF THE ASSESSMENT AS WELL AS ADDITIONS ON MERIT. 5. THE LD.CIT(A) HAS UPHELD REOPENING OF THE ASSESS MENT. NONE ONE HAS CHALLENGED THIS FINDING OF THE LD.CIT(A). AS FAR A S ADDITIONS ON MERIT ARE CONCERNED, THE LD.CIT(A) HAS DELETED THE ADDITION M ADE BY THE AO IN THE RE- ASSESSMENT ORDER. THE FINDING OF THE LD.CIT(A) REA DS AS UNDER: 4.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS RECOMPUTED THE DEDUCTION UNDER SECTION 1OA AFTER REDUCING THE LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION FROM THE TOTAL TURNOVE R. THE AO HAS HELD THAT AS ON THE DATE OF RECEIPT OF FOREIGN EXCHANGE IN INDIA, THE APPELLANT HAS RECEIVED LESS AMOUNT OF MONEY AS COMPARED TO WH AT HAS BEEN CREDITED BY IT IN THE BOOKS OF ACCOUNT AT THE TIME OF MAKING THE SALE BY WAY OF EXPORT. HE ACCORDINGLY RECOMPUTED THE DEDUCT ION UNDER SECTION 10 A BY PROPORTIONATELY ALLOCATING THE PROFIT IN PR OPORTION TO THE TURNOVER OF EXPORT AND FOREIGN EXCHANGE LOSS. THE A PPELLANT HAS SUBMITTED THAT FOREIGN EXCHANGE LOSS HAS BEEN INCUR RED IN THE PROCESS OF BUSINESS AND THE SAME SHOULD BE CONSIDERED AS PA RT OF THE PROFIT AND LOSS ACCOUNT AND, THEREFORE, THE DEDUCTION CLAIMED BY IT WAS IN ORDER. ON A CAREFUL CONSIDERATION OF ENTIRE FACTS OF THE C ASE, IT IS NOTED THAT THE APPELLANT HAS FOLLOWED CORRECT PROCEDURE OF RECORDI NG THE EXPORT TURNOVER AT THE TIME OF EXPORT BY CONVERTING THE VA LUE OF DOLLAR AS ON THE DATE OF EXPORT. SUBSEQUENTLY, AT THE TIME OF RE ALIZATION, IF ANY LOSS OR PROFIT ARISES DUE TO FLUCTUATION OF FOREIGN EXCH ANGE THE SAME IS TAKEN INTO ACCOUNT IN THE PROFIT AND LOSS ACCOUNT. IT IS NOW A SETTLED PROPOSITION OF LAW THAT ANY LOSS OF PROFIT WHICH IS ARISING OUT OF FOREIGN EXCHANGE FLUCTUATION SUBSEQUENT TO THE DATE OF EXPO RT IS TO BE CONSIDERED AS PART OF THE RECEIPTS OF THE BUSINESS. IT IS NOT A CASE WHERE APPELLANT HAS RECEIVED THE EXPORT CONSIDERATION AND PLACED THE SAME IN A FOREIGN EXCHANGE ACCOUNT IN INDIA WHICH HAS BEEN SUBSEQUENTLY WITHDRAWN AS AT THAT TIME THERE IS A LOSS. THE APPE LLANT HAS CORRECTLY ITA NO.1273/AHD/2015 4 RECORDED IN ITS BOOKS OF ACCOUNTS, THE VALUE OF FOR EIGN EXCHANGE AS ON THE DATE OF EXPORT, HOWEVER, THERE IS DIFFERENCE AT THE TIME OF REALISATION AND, THEREFORE, THIS LOSS IS TO BE TAKEN AS A BUSIN ESS TURNOVER. THE APPELLANT HAS DEBITED TO PROFIT AND LOSS ACCOUNT, T HE FOREIGN EXCHANGE LOSS AND ACCORDINGLY THE PROFIT HAS ALSO BEEN REDUC ED. IN MY OPINION, THE PROCEDURE ADOPTED BY THE APPELLANT IS CORRECT, AND IT HAS CORRECTLY CLAIMED THE DEDUCTION UNDER SECTION IDA AND, SUBSEQ UENTLY, THE BOOK PROFIT HAS ALSO BEEN CALCULATED PROPERLY. THE DISALLOWANCE OF MAT CREDIT AND REDUCTION IN CAL CULATION OF DEDUCTION UNDER SECTION 10A IS, THEREFORE, DIRECTED TO BE DELETED. THE RELATED GROUNDS OF APPEAL ARE ACCORDINGLY ALLOW ED. 6. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTAN CES, WE FIND THAT THE ASSESSEE HAS FILED DETAILED WORKING OF DEDUCTION AD MISSIBLE UNDER SECTION 10A IN ITS REPLY TO THE AO. ALL THOSE WORKING HAVE BEE N REPRODUCED BY THE CIT(A) WHILE TAKING COGNIZANCE OF THE ASSESSEES SU BMISSIONS. A PERUSAL OF SUCH DETAILS WOULD INDICATE THAT AREA OF DIFFERENCE BETWEEN THE ASSESSEE AND THE AO IS ON ACCOUNT OF CONCEIVING FACTS UNDER TWO DIFFERENT METHODS. THERE IS NO DISPUTE WITH REGARD TO TOTAL TURNOVER OR EXPO RT TURNOVER. DISPUTE IS THAT ASSESSEE HAS BEEN CALCULATING THE DEDUCTION UNDER S ECTION 10A ON INVOICE TURNOVER, WHEREAS, AO WANTS TO CALCULATE IT ON EXPO RT TURNOVER. IN OTHER WORDS, THE ASSESSEE HAS BEEN RECOGNIZING THE SALE O F ITS PRODUCTS IN THE BOOKS OF ACCOUNTS AT THE TIME OF SALE. THEREAFTER, ON AC COUNT OF EXCHANGE FLUCTUATIONS, THE LOSS REALIZED AMOUNT IN FOREIGN E XCHANGE IS LESSER AMOUNT THAN THE ONE WHEN IT WAS RECOGNIZED AS A SALE. AO IS TAKING FIGURE OF REALIZED AMOUNT AND DID NOT RECOGNIZE THE SALES WHEN THEY WE RE EFFECTED. ONCE THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF AC COUNTANCY, ITS SALES ARE TO BE RECOGNIZED ON THE DATE WHEN THEY WERE MADE AND N OT AT THE TIME OF REALIZATION. IF THE ASSESSEE HAS RECOGNIZED LESSER AMOUNT ON ACCOUNT OF EXCHANGE FLUCTUATION, THEN, THAT BUSINESS LOSS OUGH T TO BE GIVEN EFFECTED IN THE ACCOUNTS. THE AO IS MAKING THE COMPUTATION BY TAKI NG THIS FIGURE AND THIS IS ITA NO.1273/AHD/2015 5 THE REASON THAT TWO FIGURES ARE GIVEN FOR ADMISSIBI LITY OF DEDUCTION. THE LD.CIT(A) HAS APPRECIATED THIS ASPECT ELABORATING I N THE FINDING (EXTRACTED SUPRA). THIS HAS A CONSEQUENTIAL EFFECT ON MAT CRE DIT ALSO. THIS FINDING IS BASED ON DETAILS NOTICED IN PARA-4.2 AT PAGE NOS.20 TO 25 OF THE IMPUGNED ORDER. AFTER GOING THROUGH ALL THESE DETAILS, WE D O NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 10 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- (PRADIPKUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER