ACIT, CHENNAI V. M/s. Sundaram Fastners Ltd., CHENNAI

ITA 129/CHNY/2005

• Counselvise Citation: 12921714 RSA 2005
• Duration Of Justice: 7 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 29-10-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 19-01-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURU BASHYAM IRS
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Valuation report; Revised return
• Section: 143(3); 80HHC; 80IB

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.129/MDS/2005 ASSESSMENT YEAR : 2001-02 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(4), AAYAKAR BHAVAN, NEW BLOCK, 121, M.G. ROAD, 7 TH FLOOR, CHENNAI 34. VS. M/S. SUNDARAM FASTNERS LTD., 98A, DR. RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI. [PAN:AAACS8779D] (APPELLANT) (RESPONDENT) A PPELLANT BY : SHRI GURU BASHYAM, IRS, JCIT RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 29.10.2012 DATE OF PRONOUNCEMENT : 29.10.2012 ORDER PER S.S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL HAS BEEN PREFERRED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) V, CHENNAI DAT ED 26.10.2004 IN ITA NO. 51/2004-2005 FOR THE ASSESSMENT YEAR 2001-02 IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. 2. THE SUBSTANTIVE/COMPREHENSIVE GROUNDS; INTER AL IA, AS RAISED BY THE REVENUE IN THE APPEAL ARE REPRODUCED AS UNDER: 2.1 THE LEARNED CIT(APPEALS) ERRED IN HOLDING THA T THE COST OF THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 2 WIND MILL FOR THE PURPOSE OF DEPRECIATION IN TERMS OF EXPLANATION 3 TO SECTION 43(1) SHOULD BE TAKEN AT ` .80 LAKHS AS AGAINST THE COST ADOPTED BY THE ASSESSING OFFICER AT ` .45 LAKHS. 2.2 2.4 XXXXXXXXXXXXX 3.1 THE LD. CIT(APPEALS) ERRED IN HOLDING THAT WHIL E COMPUTING RELIEF U/S. 80HHC, THE DEDUCTION ALLOWED U/S. 80IB CANNOT BE REDUCED FROM THE BUSINESS PROFITS IN RESPECT OF THE SOCKET HEAD SCREW CAP UNIT. 3.2 3.4 XXXXXXXXXXXXX 4.1 THE LEARNED CIT(A) ERRED IN HOLDING THAT EXCISE DUTY/SALES TAX SHOULD BE EXCLUDED FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING RELIEF U/S. 80HHC. 4.2 4.3 XXXXXXXXXXXXX GROUND NO. 2.1 3. BRIEF FACTS RELEVANT TO THE INSTANT GROUND ARE THAT THE ASSESSEE, WHO IS MANUFACTURER OF AUTOMOBILE COMPONENTS, FILED ITS RE TURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 31.10.2001 AND DECLARED TOTAL INCOME OF ` .20,90,16,408/-. THE SAME WAS FOLLOWED BY A REVISED RETURN. THIS TIME, THE ASSESSEE RETURNED INCOME OF ` .21,13,13,440/-. IN THE ENCLOSURES FILED WITH THE RETURN, THE ASSESSEE HAD SHOWN TO HAVE PURCHASE D TWO WIND MILLS FROM A FIRM NAMELY M/S. UPASANA FINANCE LTD., CHENNAI BY P AYING A CONSIDERATION OF ` .1.20 CRORES ON 31.08.2000. ON THE VERY NEXT DAY, I T STATED TO HAVE GIVEN THE SAID WIND MILLS ON LEASE TO ANOTHER GROUP ENTIT Y M/S. SUNDARAM NON- CONVENTIONAL ENERGY SYSTEMS LTD. HOWEVER, THE ASSES SING AUTHORITY DID NOT ACCEPT THE CONSIDERATION PRICE AS STATED BY THE ASS ESSEE AS CORRECT. IN HIS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 3 OPINION ARRIVED AT AFTER VERIFICATION, THE VENDOR N AMELY M/S. UPASANA FINANCE LTD. HAD PURCHASED THE VERY SAME WIND MILLS ON 15.08.2000 FOR A CONSIDERATION OF ` .45.00 LAKHS. ACCORDINGLY, IN HIS VIEW, THE ASSESSE E HAD OVERSTATED THE CONSIDERATION MONEY FROM ` .45.00 LAKHS TO ` .1.20 CRORES. THEREFORE, THE ASSESSING OFFICER INVOKED SECTION 43 (1) EXPLANATION 3 OF THE ACT AND ISSUED SHOW-CAUSE NOTICE TO THE ASSESSEE, WHO IN SUPPORT FILED VALUATION REPORT FROM A CHARTERED ENGINEER/VALUER A ND ATTRIBUTED THE HIKE IN CONSIDERATION TO GREAT DEMAND OF WIND MILLS AT THAT TIME IN THE MARKET. ITS FURTHER EXPLANATION OFFERED WAS THAT THERE WAS NO C LANDESTINE OPERATION IN PAYING THE MONEY AND IT WAS PURELY A BUSINESS DEAL. 4. THE ASSESSING OFFICER WAS NOT CONVINCED WITH AS SESSEES EXPLANATION AND EVIDENCES TENDERED IN SUPPORT OF THE CONSIDERAT ION MONEY OF ` .1.20 CRORES (SUPRA). THEREFORE, VIDE ASSESSMENT ORDER DA TED 24.03.2004, HE CAME TO THE CONCLUSION THAT THE PREVIOUS OWNER OF T HE MACHINES IN QUESTION I.E. M/S. UPASANA FINANCE LTD. HAD PURCHASED THE SA ME WIND MILLS ONLY FOR ` .45.00 LAKHS ON 15.08.2000, ONE OF THE MANAGING DIR ECTOR OF THE ASSESSEE WAS ALSO DIRECTOR OF THE SAID ENTITY AND THE WIND M ILLS HAD CHANGED HANDS BETWEEN GROUPS ENTITY CONCERNED. THE ASSESSING OFFI CER FURTHER OBSERVED THAT THE WIND MILLS IN QUESTION HAD ALSO BEEN UNDER THE OPERATING LEASE FROM THE YEARS 1995 TO 1998 RESPECTIVELY. IN THE LIGHT O F THE ABOVE CONCLUSION, THE ASSESSING OFFICER REJECTED THE VALUATION SUBMITTED BY THE ASSESSEE AND I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 4 TREATED THE PRICE OF THE SAME AS ` .45 LAKHS INSTEAD OF THAT STATED BY THE ASSESSEE AS ` .1.20 CRORES. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHEREIN THE VALUE OF THE WINDMILL HAS BEEN ENHANCED FROM ` .45 LAKHS AS HELD BY THE ASSESSING OFFICER TO ` .80.00 LAKHS. WE NOTICE THAT WHILST MODIFYING THE FINDINGS OF THE ASSESSING OFFICER, THE CIT(A) HAS C ONSIDERED THE FACT THAT THEY WERE 2 VALUATION REPORTS FILED BY THE ASSESSEE SUPPORTING THE COST STATED. FURTHER, IT HAS BEEN FOUND THAT THE ASSESSE E HAD PURCHASED TWO WINDMILLS OF 1996 MODEL FOR THE SAME YEAR FOR ` .1,48,69,000 FROM ANOTHER COMPANY, WHICH STOOD ACCEPTED BY THE DEPARTMENT AND THE ASSESSEE HAD ALSO ENCLOSED A COPY OF THE BROCHURE DULY EXPLAININ G THE PROSPECTS OF WIND ENERGY WITH VARIOUS OTHER FACETS OF THIS RENEWABLE ENERGY SECTOR. IN THIS BACKDROP OF THE FACTS, THE REVENUE IS AGGRIEVED AND IN APPEAL BEFORE US. 6. THE DR HAS VEHEMENTLY ARGUED THAT THE CIT(A) HA S ERRED IN DISTURBING THE FINDINGS OF THE ASSESSING OFFICER, WHO HAD RIGH TLY TREATED THE VALUE OF THE WINDMILLS IN QUESTION BY APPLYING SECTION 43(1) OF THE ACT. IN SUPPORT OF THE ARGUMENT, THE CASE LAW OF MUMBAI ITAT REPORTED AS ( 2005) 96 ITD 303 JCIT V. MAHINDRA SONA LTD. HAS BEEN CITED. IN THE LIGHT THEREOF, HE PRAYED FOR ACCEPTANCE OF THE GROUND. 7. ON THE OTHER HAND, THE AR REPRESENTING THE ASSE SSEE HAS PRODUCED I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 5 PAPER BOOK COMPRISING INVOICE RAISED BY M/S. UPASAN A FINANCE LTD., INVOICE RAISED BY THE WIND POWER LTD AND VALUATION CERTIFIC ATES TENDERED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. IN THE LIGHT THEREOF, IT IS THE SUBMISSION OF THE AR THAT THE CIT(A) HAD RIGHTLY IN TERFERED WITH THE FINDINGS OF THE ASSESSING AUTHORITY. ACCORDINGLY, HE PRAYED FOR UPHOLDING THE SAME. 8. WE HAVE HEARD RIVAL CONTENTIONS AND ALSO PERUSE D THE RELEVANT FINDINGS AS WELL AS CASE LAW CITED. UNDISPUTEDLY TH E ASSESSEE HAD PURCHASED THE WINDMILLS ON 31.08.2000 AND STATED TH E CONSIDERATION AS ` .1.20 CRORES. IT IS EVIDENT THAT ON THE VERY NEXT D AY, IT EXECUTED AN OPERATING LEASE IN FAVOUR OF ONE OF ITS GROUP ENTITY (SUPRA). BY INVOKING SECTION 43(1) OF THE ACT, THE ASSESSING OFFICER HELD THAT IT HAD O VERSTATED THE PRICE AFTER TAKING INTO CONSIDERATION ALL THE FACTS THAT BOTH T HE ENTITIES IN TRANSACTION NAMELY THE VENDOR AND THE VENDEE (ASSESSEE), WERE G ROUP ENTITIES AND ASSESSEES MANAGING DIRECTOR WAS ALSO DIRECTOR OF T HE VENDOR ENTITY. THE ASSESSING OFFICER HAD ALSO RECORDED A FINDING THAT ON 15.08.2000, THE VENDOR HAD PURCHASED THE WINDMILLS IN QUESTION FOR ` .45.00 LAKHS AND ON 31.08.2000 IT SOLD THE SAME TO THE ASSESSEE FOR ` .1.20 CRORES. WE NOTICE THAT THE CIT(A) HAS NOT DEALT SPECIFICALLY ON THESE FINDINGS OF THE ASSESSING OFFICER. AT THE SAME TIME, THE ASSESSEES PURCHASE PRICE OF TWO SIMILAR WIND MILLS (SUPRA) ALSO STANDS ACCEPTED BY THE DEPARTMEN T. THEREFORE, IN OUR OPINION, IN THIS CASE, THERE IS HARDLY ANY DISPUTE ON LEGAL PRINCIPLES AS IT IS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 6 ONLY A FACTUAL ASPECT PERTAINING TO THE COST OF THE WINDMILL, WHICH REQUIRES OUR ADJUDICATION. LOOKING THROUGH THE FINDINGS, THERE IS HARDLY ANY Q UARREL WITH BOTH ENTITIES ENTERING TRANSACTION IN QUESTION ARE RELAT ED TO EACH OTHER. EVEN THE MANAGING DIRECTOR OF THE ASSESSEE IS DIRECTOR OF TH E VENDER ENTITY. THEREFORE, POSSIBILITY OF OVERSTATEMENT OF PRICE OF THE MACHINES IN QUESTION COULD NOT BE ALTOGETHER RULED OUT, MORE SO, WHETHER MACHINES WERE PURCHASED ON 15.08.2000 FOR ` .45 LAKHS ONLY. IN THIS EVENTUALITY AND IN TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE FIND IT APPROPRIATE THAT THE VALUE OF THE WINDMILL IN QUESTION, DESERVES TO BE REDUCED FR OM ` .80 LAKHS AS HELD BY THE CIT(A) TO ` .70.00 LAKHS IN PECULIAR CIRCUMSTANCES OF THE CASE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO TRE AT THE COST OF THE WINDMILL STATED BY THE ASSESSEE AS ` .70.00 LAKHS. THIS GROUND IS PARTLY ALLOWED IN FAVOUR OF THE REVENUE. GROUND NO. 3.1 9. FACTS PERTAINING TO THIS GROUND ARE THAT IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE RAISED A CLAIM OF ` .11,781,278/- AS DEDUCTION UNDER SECTION 80IB REGARDING ITS SOCKETS HEAD CAP S CREW UNIT, WHICH HAD BEEN COMPUTED @ 30% OF ` .39,270,919/-. THE ASSESSING OFFICER WAS OF THE OPINION THAT IN VIEW OF THE PROVISIONS CONTAINED IN THE ACT I.E. SECTION 80IB(13) READ WITH SUB-SECTION (9) OF SECTION 80IA, THE ASSESSEES CLAIM I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 7 AMOUNTED TO DOUBLE DEDUCTION. THEREFORE, BY REFERRI NG TO COMMENTARY OF LD. AUTHORS CHATURVEDI & PITHISARIA, VOL. 2, FIFTH EDIT ION, THE ASSESSING OFFICER REDUCED AN AMOUNT OF ` .1,25,62,418/- FROM THE PROFITS OF THE BUSINESS AND RECOMPUTED THE DEDUCTION UNDER SECTION 80HHC. 10. IN APPEAL PREFERRED BY THE ASSESSEE, THE CIT(A ) HAS NOT DISPUTED THE FINDINGS OF THE ASSESSING OFFICER ON LEGAL PRINCIPL ES OF THE DOUBLE DEDUCTION (SUPRA). AT THE SAME TIME, THE CIT(A) HAS RETURNED FINDINGS THAT THE PROVISIONS INVOKED BY THE ASSESSING OFFICER ARE APP LICABLE ONLY TO PREVENT DOUBLE DEDUCTION IN RESPECT OF SAME PROFITS AND TO ENSURE THAT TOTAL DEDUCTION UNDER SECTION 80IB AND 80HHC TOGETHER DID NOT EXCEED 100% OF PROFITS AND GAINS OF THE UNITS. THEREAFTER, ON FACT S, THE CIT(A) HAS CONSIDERED THE CLAIM OF THE ASSESSEE AND HELD THAT IN ITS CASE , ONLY 30% PROFITS HAD BEEN DEDUCTED UNDER SECTION 80IB AND REST OF THE AM OUNT HAD BEEN INCLUDED IN THE TOTAL INCOME, WHICH WAS NOT A CASE OF DOUBL E DEDUCTION. ACCORDINGLY, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO RECOMP UTE THE DEDUCTION UNDER SECTION 80HHC WITHOUT REDUCING THE INCOME OF ` .1,25,62,418/- (SUPRA). THEREFORE, THE REVENUE IS AGGRIEVED. 11. ON BEHALF OF THE REVENUE, IT HAS BEEN ARGUED T HAT THE CIT(A) HAS WRONGLY UPSET THE FINDING OF ASSESSING OFFICER. THE DR FURTHER SUBMITTED THAT THE FINDINGS OF THE ASSESSING OFFICER ARE LIABLE TO BE RESTORED. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 8 12. ON BEHALF OF THE ASSESSEE, THE AR HAS STRONGLY SUPPORTED THE ORDER OF THE CIT(A) ON THIS ISSUE AND ALSO REFERRED TO THE C ASE LAW SCM CREATIONS V. ACIT 203 ITR 319 (MAD), CIT VS. MRF LTD. TC(A) NO. 1020 OF 2009 DATED 27.10.2009 OF THE HONBLE JURISDICTIONAL HIGH COURT AND ARGUED THAT THE CIT(A) HAD RIGHTLY HELD THAT THE PRESENT CASE OF TH E ASSESSEE IS NOT A DOUBLE DEDUCTION. IN THE LIGHT THEREOF, HE PRAYED FOR REJE CTION OF THE GROUND. 13. WE HAVE HEARD BOTH PARTIES AT LENGTH AND ALSO PERUSED THE RELEVANT FINDINGS OF THE ASSESSING OFFICER AS WELL AS CIT(A) . THE MOOT QUESTION BEFORE US IS AS TO WHETHER THE ASSESSEES CLAIM OF THE DEDUCTION IN HAND CAN BE CALLED AS A CASE OF DOUBLE DEDUCTION OR NOT. WE NOTICE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAD ONLY AP PLIED THE LEGAL PRINCIPLE AND NOT CONSIDERED THE FACTUAL ASPECT AS TO WHETHER ASSESSEE HAS CLAIMED TO DOUBLE DEDUCTION OR NOT. IN APPEAL, WE FIND THAT THE CIT(A) HAS RETURNED A CATEGORICAL FINDING THAT THE ASSESSEE HAD DEDUCTED 30% OF HIS PROFIT UNDER SECTION 80IB AND ONLY REST OF THE AMOUNT HAD BEEN I NCLUDED FOR DEDUCTION UNDER SECTION 80HHC. APART FROM RAISING THE ORAL PL EAS, THE REVENUE HAS NOT CONTROVERTED THE FINDINGS OF THE FACT ARRIVED A T BY THE CIT(A). MOREOVER, WE NOTICE THAT THE SAME VERY ISSUE HAS BEEN CONSIDE RED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SCM CREATI ONS V. ACIT (SUPRA), WHEREIN IT HAD BEEN HELD THAT RELIEF UNDER SECTION 80IA WAS NOT DEDUCTIBLE FROM PROFIT AND GAINS BEFORE COMPUTING RELIEF UNDER SECTION 80HHC. THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 9 RELEVANT PORTION OF JUDGMENT IS HEREBY REPRODUCED: THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF HOSIERY GARMENTS. THE ISSUE INVOLVED IN THESE TWO APPEALS ARE WHETHER THE RELIEF UNDER SECTION 80-IA SHOULD BE DEDUCTED FROM PROFITS AND GAINS OF BUSINESS BEFORE COMPUTING RELIEF UNDER SECTION 80HH C. COUNSEL ON EITHER SIDE SUBMITS THAT THE ISSUE HAS T O BE DECIDED IN FAVOUR OF THE ASSESSEE, AS THIS COURT ALREADY, BY F OLLOWING THE DECISION OF [2007] 292 ITR 1 (SC) (JOINT CIT V. MANDIDEEP EN GINEERING AND PACKAGING INDUSTRIES P. LTD.), HAS DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE IN T. C. NO. 344 OF 2004, (SINCE REPORTED AS DEPUTY CIT V. CHOLA TEXTILES P. LTD. [2008] 304 ITR 256 (MAD)) WH EREIN THIS COURT HAS HELD AS FOLLOWS (PAGE 257 SUPRA) : 5. IT IS SUBMITTED ACROSS THE BAR BY LEARNED COUNS EL APPEARING FOR EITHER SIDE THAT THE VERY ISSUE HAS BEEN CONSID ERED AND HELD AGAINST THE REVENUE BY THE MADHYA PRADESH HIGH COUR T IN THE CASE OF J. P. TOBACCO PRODUCTS P. LTD. V. CIT REPOR TED IN [1998] 229 ITR 123. IT HAS ALSO BEEN FURTHER SUBMITTED THA T THE BOMBAY HIGH COURT ALSO HAS TAKEN THE SAME VIEW IN THE CASE OF CIT V. NIMA SPECIFIC FAMILY TRUST REPORTED IN [2001] 248 I TR 29. THE JUDGMENT OF THE MADHYA PRADESH HIGH COURT HAS BEEN TAKEN TO THE SUPREME COURT AND THE SUPREME COURT IN JOINT CI T V. MANDIDEEP ENGINEERING AND PACKAGING INDUSTRIES P. L TD. [2007] 292 ITR 1, HAS REJECTED THE S. L. P. BY GIVI NG THE FOLLOWING REASONS : THE MADHYA PRADESH HIGH COURT IN J. P. TOBACCO PRO DUCTS P. LTD. V. CIT REPORTED IN [1998] 229 ITR 123 TOOK THE VIEW THAT BOTH THE SECTIONS ARE INDEPENDENT AND, THEREFORE, T HE DEDUCTIONS COULD BE CLAIMED BOTH UNDER SECTIONS 80HH AND 80-I ON THE GROSS TOTAL INCOME. AGAINST THIS JUDGMENT, A SPECIA L LEAVE PETITION WAS FILED IN THIS COURT WHICH WAS DISMISSE D ON THE GROUND OF DELAY ON JULY 21, 2000 (SEE [2000] 245 IT R (ST.) 71). THE DECISION IN J. P. TOBACCO PRODUCTS P. LTD. V. C IT REPORTED IN [1998] 229 ITR 123 (MP) WAS FOLLOWED BY THE SAME HIGH COURT IN THE CASE OF CIT V. ALPINE SOLVEX P. LTD. I N I. T. A. NO. 92 OF 1999 DECIDED ON MAY 2, 2000. SPECIAL LEAVE PE TITION AGAINST THIS WAS DISMISSED BY THIS COURT ON JANUARY 12, 2001, (SEE [2001] 247 ITR (ST.) 36). THIS VIEW HAS BEEN F OLLOWED I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 10 REPEATEDLY BY DIFFERENT HIGH COURTS IN A NUMBER OF CASES AGAINST WHICH NO SPECIAL LEAVE PETITIONS WERE FILED MEANING THEREBY THAT THE DEPARTMENT HAS ACCEPTED THE VIEW TAKEN IN THESE JUDGMENT. SEE CIT V. NIMA SPECIFIC FAMILY TRUST REPORTED IN [ 2001] 248 ITR 29 (BOM); CIT V. CHOKSHI CONTACTS P. LTD. [2001 ] 251 ITR 587 (RAJ); CIT V. AMOD STAMPING [2005] 274 ITR 176 (GUJ) ; CIT V. MITTAL APPLIANCES P. LTD. [2004] 270 ITR 65 (MP) ; CIT V. ROCHIRAM AND SONS [2004] 271 ITR 444 (RAJ) ; CIT V. PRAKASH CHANDRA BASANT KUMAR [2005] 276 ITR 664 (MP ) ; CIT V. S. B. OIL INDUSTRIES P. LTD. [2005] 274 ITR 495 (P & H) ; CIT V. S. K. G. ENGINEERING P. LTD. [2006] 285 ITR4 23 (DELHI); [2005] 119 DLT 676 AND CIT V. LUCKY LABORATORIES LT D. [2006] 284 ITR 435; [2006] 200 CTR (ALL) 305. SINCE THE SPECIAL LEAVE PETITIONS FILED AGAINST THE JUDGMENT OF THE MADHYA PRADESH HIGH COURT HAVE BEEN DISMISSED AND THE DEPARTMENT HAS NOT FILED THE SPEC IAL LEAVE PETITIONS AGAINST THE JUDGMENTS OF DIFFERENT HIGH C OURTS FOLLOWING THE VIEW TAKEN BY THE MADHYA PRADESH HIGH COURT, WE DO NOT FIND ANY MERIT IN THIS APPEAL. THE DEPARTMEN T HAVING ACCEPTED THE VIEW TAKEN IN THOSE JUDGMENTS CANNOT B E PERMITTED TO TAKE A CONTRARY VIEW IN THE PRESENT CASE INVOLVI NG THE SAME POINT. ACCORDINGLY, THE CIVIL APPEAL IS DISMISSED. NO COSTS. FOLLOWING THE SAME, THE APPEALS ARE ALLOWED TO THE EXTENT INDICATED ABOVE. CONSEQUENTLY, CONNECTED MISCELLANEOUS PETITI ONS ARE CLOSED. NO COSTS. WE NOTICE THAT THE VERY SAME LEGAL PRINCIPLES HAVE BEEN REITERATED BY THE HONBLE HIGH COURT IN THE CASE OF MRF LTD. (SUP RA). THE REVENUE HAS NOT BEEN ABLE TO DISPUTE THE ABOVE LEGAL PREPOSITIO N. TAKING CUE FROM THE SAME, WE ALSO HOLD THAT THE ASSESSEE WAS JUSTIFIED IN CLAIMING DEDUCTION UNDER SECTION 80HHC AFTER DEDUCTING ITS 30% PROFIT UNDER SECTION 80IB. THEREFORE, IN OUR OPINION, THE CIT(A) HAS RIGHTLY I NTERFERED IN THE FINDINGS OF THE ASSESSING OFFICER. CONSEQUENTLY, THE GROUND IS DECIDED AGAINST THE REVENUE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 11 GROUND NO. 4.1 14. FACTS RELEVANT TO THIS GROUND ARE THAT IN ASSE SSMENT PROCEEDINGS, THE ASSESSEE HAD SHOWN TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC AS ` .3,25,71,79,968/- EXCLUDING EXCISE DUTY COLLECTED O N ` .46,32,65,687/-. ITS EXPLANATION IN SUPPORT THEREOF WAS THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. SUDHARSHAN CHEMICALS LTD. REPORTED AS 245 ITR 749 SQUARELY COVERED THE CASE. THEREFORE, THE EXCISE DUTY COLLECTED WAS NOT LIABLE FOR INCLUSION REGARDI NG DEDUCTION UNDER SECTION 80HHC. THE ASSESSING OFFICER DID NOT ACCEPT THE ASS ESSEES EXPLANATION AND HELD THAT THE DEPARTMENTS SLP WAS ALREADY PEND ING BEFORE THE HONBLE SUPREME COURT AND THEREFORE, THE SAME WAS YET TO AT TAIN FINALITY. HENCE, HE ADDED BACK THE EXCISE DUTY COLLECTED FOR THE PURPOS E OF TOTAL TURNOVER IN COMPUTING DEDUCTION UNDER SECTION 80HHC. 15. IN APPEAL PREFERRED BY THE ASSESSEE, THE CIT(A ) HAS UPSET THE FINDINGS OF THE ASSESSING AUTHORITY AND HELD THAT THERE WAS NO ELEMENT OF PROFIT INVOLVED IN THE EXCISE DUTY PAID, THEREFORE, THE SA ME DID NOT FORM PART OF THE ASSESSEES TOTAL TURNOVER. IT IS IN THIS BACKGROUND THAT THE REVENUE HAS RAISED THE INSTANT GROUND. 16. BEFORE US, THE DR, ON BEHALF OF THE REVENUE HA S REITERATED THE FINDINGS OF THE ASSESSING AUTHORITY AND CONTENDED T HAT THE CIT(A) HAS ERRED I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 12 IN ACCEPTING THE ASSESSEES CONTENTION. HENCE, HE P RAYED FOR RESTORING THE ADDITION MADE BY THE ASSESSING OFFICER. 17. OPPOSING THE REVENUE, IT HAS BEEN ARGUED ON BE HALF OF THE ASSESSEE THAT THE CIT(A) HAS RIGHTLY UPHELD ITS CONTENTION. IN SUPPORT THEREOF, THE HONBLE SUPREME COURTS JUDGEMENT REPORTED AS 290 I TR 667 CIT VS. LAKSHMI MACHINE WORKS HAS BEEN REFERRED. 18. WE HAVE DULY HEARD BOTH PARTIES AND ALSO GONE THROUGH THE RELEVANT FINDINGS AS WELL AS CASE LAW CITED. THE ONLY STRIFE BETWEEN THE PARTIES IS THAT PER ASSESSEE, THE EXCISE DUTY ETC. DOES NOT FOUND P ART OF THE TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC, W HEREAS, THE REVENUE OPPOSES STAND OF THE ASSESSEE, IN WHOSE OPINION, TH E SAME DOES FORM PART OF THE TOTAL TURNOVER. WE NOTICE THAT IN SIMILAR CIRCUMSTANCES, THE HONBLE SUPREME COURT IN THE CASE LAW CIT V. LAKSHMI MACHIN E WORKS (SUPRA) HAS HELD AS UNDER: SECTION 80HHC OF THE INCOME-TAX ACT, 1961, IS A BE NEFICIAL SECTION: IT WAS INTENDED TO PROVIDE INCENTIVE TO PR OMOTE EXPORTS. THE INTENTION WAS TO EXEMPT PROFITS RELATABLE TO EXPORT S. JUST AS COMMISSION RECEIVED BY THE ASSESSEE IS RELATABLE TO EXPORTS AN D YET IT CANNOT FORM PART OF 'TURNOVER' FOR THE PURPOSES OF SECTION BOHH C, EXCISE DUTY AND SALES TAX ALSO CANNOT FORM PART OF 'TURNOVER'. JUST AS INTEREST, COMMISSION, ETC., DO NOT EMANATE FROM THE TURNOVER ' SO ALSO EXCISE DUTY AND SALES TAX DO NOT EMANATE FROM SUCH TURNOVE R. SINCE EXCISE DUTY AND SALES TAX DID NOT INVOLVE ANY SUCH TURNOVE R SUCH TAXES HAD TO BE EXCLUDED. COMMISSION, INTEREST, RENT, ETC., DO Y IELD PROFITS, BUT THEY DO NOT PARTAKE OF THE CHARACTER OF TURNOVER AND THE REFORE THEY ARE NOT INCLUDIBLE IN THE TOTAL TURNOVER'. IF SO, EXCISE D UTY AND SALES TAX ALSO CANNOT FORM PART OF THE TOTAL TURNOVER' UNDER SECT ION 80HHC(3). I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 12 22 29 99 9/M/ /M/ /M/ /M/05 0505 05 13 AFTER PERUSING THE ABOVE SAID OBSERVATIONS AND LAW SETTLED BY THE HONBLE APEX COURT, WE HOLD THAT THE ISSUE IN HAND IS NO MO RE RES INTEGRA AS THEIR LORDSHIPS HAVE CLEARLY INDICATED THAT THE EXCISE DU TY AND SALES TAX ETC. DO NOT FORM PART OF THE TOTAL TURNOVER FOR THE PURPO SE OF DEDUCTION UNDER SECTION 80HHC. THE REVENUE HAS NOT BEEN ABLE TO DIF FERENTIATE THE SAID CASE LAW BY WAY OF ANY OTHER JUDICIAL PRECEDENT BEF ORE US. ACCORDINGLY, WE ARE OF THE OPINION THAT THE CIT(A) HAS RIGHTLY INTE RFERED IN THE FINDINGS OF THE ASSESSING OFFICER. SO, THE GROUND IS DECIDED IN FAV OUR OF THE ASSESSEE. 19. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL IS PARTLY ACCEPTED QUA GROUND NO. 2.1 ONLY AND QUA GROUNDS 3.1 AND 4.1, OR DER OF CIT(A) IS CONFIRMED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON MONDAY, THE 29 TH OF OCTOBER, 2012 AT CHENNAI. SD/ - SD/ - (DR. O.K. NARAYANAN) VICE-PRESIDENT (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 29.10.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.