The DCIT, Circle-5, Ahmedabad V. Parikh Enterprises Ltd., Ahmedabad

ITA 1299/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5609 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-07-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 23-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D S CHAUDHARY
• Assessee Lawyers: J M SHAH
• Keywords: Business income; Depreciation; Opportunity of being heard; Audit objection; Period of limitation; Source of fund; Question of law; Difference of opinion; Tax effect; Capital receipt; Reason to believe; Change of opinion; Reassessment proceedings; Set aside
• Section: 143(3); 244A; 142(1); 80HHC; 80IB; 143(1); 250; 80IA; 80HH; 143(2); 264; 139(1); 147; 148; 263; 28; 144; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND N.S. SAINI, ACCOUNTANT MEMBER) ITA.NO.874/AHD/2010 ASSTT.YEAR : 2000-2001 PARIKH ENTERPRISES PVT. LTD. VINOD & NARENDRA, SHAILY 9, NEHRU PARK SOCIETY NR. OLD GUJARAT HIGH COURT NAVRANGPURA, AHMEDABAD-9. PAN : AAACP 9275 D VS. DCIT, CIR.5 AHMEDABAD. ITA.NO.1299/AHD/2010 ASSTT.YEAR : 2000-2001 DCIT, CIR.5 AHMEDABAD. VS. PARIKH ENTERPRISES PVT. LTD. VINOD & NARENDRA, SHAILY 9, NEHRU PARK SOCIETY NR. OLD GUJARAT HIGH COURT NAVRANGPURA, AHMEDABAD-9. PAN : AAACP 9275 D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI J.M. SHAH REVENUE BY : SHRI D.S.CHAUDHARY. O R D E R PER BHAVNESH SAINI, JUDICIAL MEMBER: BOTH THE ABOVE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LEARN ED COMMISSIONER OF INCOME- TAX (APPEALS)XI, AHMEDABAD DATED 25-2-2010 FOR A.Y .2000-2001. 2. WE HAVE HEARD LEARNED COUNSEL FOR THE ASSESSEE A ND THE LEARNED DR FOR THE REVENUE AND CONSIDERED THE FINDINGS OF THE AUTH ORITIES BELOW AND ALSO PERUSED THE MATERIAL ON RECORD POINTED OUT BY THE P ARTIES. ACCORDINGLY, BOTH THE APPEALS ARE DECIDED AS UNDER: ITA.NO.874 AND 1299/AHD/2010 -2- ITA NO.874/AHD/2010 (ASSESSEES APPEAL) 3. ON GROUND NO.1, THE ASSESSEE HAS CHALLENGED REOP ENING OF THE ASSESSMENT UNDER SECTIONS 147/148 OF THE INCOME TAX ACT. IT IS STATED IN THE GROUND NO.1 OF THE APPEAL THAT THE REASSESSMENT ORD ER IS INVALID AND BAD IN LAW. BRIEFLY STATED FACTS IN THIS CASE ARE THAT THE RETU RN OF INCOME WAS FILED ON 31-8- 2000 DECLARING TOTAL INCOME AT RS.1,14,37,110/- WHI CH WAS PROCESSED UNDER SECTION 143(1) ON 22-3-2002. LATER ON THE CASE OF THE ASSESSEE WAS REOPENED BY ISSUE OF NOTICE UNDER SECTION 148 ON 23-2-2008 A ND THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.1,72,17,880/- VIDE RE ASSESSMENT UNDER SECTION 143(3) R.W.S. SECTION 147 OF THE ACT ON 26-12-2006. THE REOPENING OF THE ASSESSMENT WAS ALSO CHALLENGED BEFORE THE LEARNED C IT(A) WHO VIDE HIS ORDER DATED 6-6-2007 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE ORDER GIVING EFFECT TO THE APPELLATE ORDER WAS PASSED ON 12-7-20 07 AND DETERMINED TOTAL INCOME AT RS.1,22,50,930/-. THE RECTIFICATION ORDE R UNDER SECTION 154 WAS PASSED ON 27-8-2007 DETERMINING TOTAL INCOME AT RS. 1,47,53,255/- RECTIFYING THE APPEAL EFFECT ORDER. AGAIN THE ORDER UNDER SEC TION 154 DATED 26-10-2007 WAS PASSED DETERMINING THE TOTAL INCOME AT RS.1,47, 44,254/-. THE DEPARTMENT AS WELL AS THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL AGAINST THE ABOVE ORDER OF THE LEARNED CIT(A). THE ITAT VIDE ITS ORD ER DATED 21-9-2007 HAS DISMISSED THE APPEAL FILED BY THE DEPARTMENT IN ITA NO.3502/AHD/2007 WHICH WAS FILED AGAINST THE DIRECTION OF THE LEARNED CIT( A) TO EXCLUDE NET INTEREST INCOME UNDER SECTION 80HHC AND IT WAS HELD THAT THE SAME IS NOT MAINTAINABLE AS THE TAX EFFECT WAS BELOW RS.2 LAKHS. THE ITAT H AS SET ASIDE THE APPEAL FILED BY THE ASSESSEE IN ITA NO.2955/AHD/2007 WHICH WAS F ILED AGAINST THE VALIDITY OF THE ASSESSMENT PROCEEDINGS AND ON OTHER GROUNDS. THE TRIBUNAL DIRECTED THE AO TO PROCEED WITH THE ASSESSMENT PROCEEDINGS AFRES H AFTER DISPOSING OF THE OBJECTION RAISED BY THE ASSESSEE CHALLENGING THE VA LIDITY OF THE REASSESSMENT PROCEEDINGS. AS PER THE DIRECTION OF THE TRIBUNAL, THE AO ISSUED NOTICE TO THE ASSESSEE UNDER SECTION 143(2) ON 12-8-2008. THE AS SESSEE RAISED MANY OBJECTIONS AGAINST THE REOPENING OF THE ASSESSMENT WHICH ARE INCORPORATED IN ITA.NO.874 AND 1299/AHD/2010 -3- THE REASSESSMENT ORDER AND AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, THE AO REJECTED THE OBJECTIONS AGAINST TH E REASSESSMENT PROCEEDINGS AND THE INCOME WAS DETERMINED AT RS.1,47,44,250/- A S WAS DETERMINED BY ORDER UNDER SECTION 154 DATED 26-10-2007. IT WAS SUBMIT TED BEFORE THE LEARNED CIT(A) THAT THE ASSESSMENT ORDER DATED 14-11-2008 W AS PASSED BY THE AO WITHOUT CONSIDERING THE DIRECTION OF THE TRIBUNAL, AS SUCH, THE ORDER IS BAD IN LAW. THE LEARNED CIT(A) HOWEVER NOTED THAT THE ASS ESSEES OBJECTIONS ARE NOTED IN THE ASSESSMENT ORDER AND THE AO DISCUSSED ALL THE OBJECTIONS WITH THE ASSESSEE AND THE SAME HAVE BEEN DISPOSED OF IN THE ASSESSMENT ORDER AND THEN THE AO PROCEEDED TO COMPLETE THE ASSESSMENT. THE L EARNED CIT(A) THEREFORE NOTED THAT THE AO COMPLIED WITH THE DIRECTIONS OF T HE TRIBUNAL IN THIS REGARD. COMING TO THE MERITS OF THE ASSESSEES OBJECTIONS R EGARDING REASSESSMENT OF THE ASSESSMENT, THE LEARNED CIT(A) NOTED THAT IN THIS C ASE ORIGINAL RETURN WAS ONLY THROUGH UNDER SECTION 143(1), THEREFORE, THERE IS N O CHANGE OF OPINION IN THIS MATTER AND THAT ANOTHER OBJECTION OF THE ASSESSEE T HAT THERE WERE NO INFORMATION OR MATERIAL ON RECORD INDICATING ESCAPEMENT THE INC OME OF THE ASSESSEE, THE OBJECTION IS ALSO NOT CORRECT BECAUSE THE AO WAS SA TISFIED THAT THE INCOME HAD ESCAPED ASSESSMENT, THEREFORE THE REASSESSMENT WAS CONDUCTED IN ACCORDANCE WITH THE LAW. THE LEARNED CIT(A) ALSO NOTED THAT A NOTHER OBJECTION OF THE ASSESSEE WAS THAT THE REASSESSMENT IS MADE ON THE B ASIS OF THE AUDIT OBJECTION, BUT SUCH OBJECTION IS NOT VALID, BECAUSE THERE IS N O MENTION OF SUCH AUDIT OBJECTION ANYWHERE. THE LEARNED CIT(A) THEREFORE N OTED THAT THE AO RIGHTLY INITIATED THE REASSESSMENT PROCEEDINGS BECAUSE OF T HE INCOME ESCAPED ASSESSMENT, THEREFORE, THERE IS NO MERIT IN ALL THE OBJECTIONS OF THE ASSESSEE. THE REASSESSMENT WAS HELD TO BE VALID AND WAS AS PE R THE DIRECTION OF THE TRIBUNAL AND THUS THIS GROUND OF THE ASSESSEE WAS A CCORDINGLY REJECTED BY THE CIT(A). 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO PB-4 W HICH IS THE EARLIER ORDER OF THE TRIBUNAL DATED 21-9-2007 VIDE WHICH THE TRIBUNA L RESTORED THE MATTER TO THE ITA.NO.874 AND 1299/AHD/2010 -4- FILE OF THE AO FOR DISPOSING OF THE OBJECTIONS OF T HE ASSESSEE UNDER SECTION 147 OF THE INCOME TAX ACT. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PB, PAGE NO.18 WHICH IS THE LETTER OF THE AO DATED 7-11 -2006 INTIMATING TO THE ASSESSEE THAT ON VERIFICATION OF THE CASE RECORD, I T WAS SEEN THAT WHILE COMPUTING THE DEDUCTION ALLOWABLE UNDER SECTION 80H HC OTHER INCOME UNDER HEAD INTEREST ON FIXED DEPOSITS OF RS.48,68,254/- H AS NOT BEEN EXCLUDED FROM THE PROFITS OF THE BUSINESS. LIKEWISE, THE EXCISE DUTY HAS NOT BEEN INCLUDED IN THE TURNOVER OF THE ASSESSEE. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT ON THESE REASONS, THE ASSESSMENT WAS REOPENED, HOWE VER, THE REOPENING WAS INVALID BECAUSE ALL THE OBJECTIONS OF THE ASSESSEE HAVE NOT BEEN DEALT WITH BY THE AO. HE HAS SUBMITTED THAT SINCE THE ASSESSEE W AS FAILED TO COMPLY WITH THE DIRECTION OF THE TRIBUNAL DATED 21-9-2007, THEREFOR E, THE ASSESSMENT ORDER IS INVALID AND BAD IN LAW. HE ALSO REFERRED TO THE OB JECTIONS RAISED BEFORE THE AO AS INCORPORATED IN PARA-7 OF THE REASSESSMENT ORDER . HOWEVER, NOTHING MATERIAL ARGUMENTS HAVE BEEN ADVANCED AS TO HOW THE OBJECTIO NS RAISED BEFORE THE AO WERE VALID UNDER THE LAW. 5. ON THE OTHER HAND, LEARNED DR RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAS COMPLIED WITH T HE DIRECTION OF THE TRIBUNAL AND DISPOSED OF THE OBJECTIONS RAISED BY T HE ASSESSEE CHALLENGING THE VALIDITY OF THE REASSESSMENT PROCEEDINGS. HE HAS S UBMITTED THAT THE LEARNED CIT(A) HAS ALSO DEALT WITH THE OBJECTIONS OF THE AS SESSEE IN THE IMPUGNED ORDER. THEREFORE, THERE WERE NO JUSTIFICATIONS TO RAISE ANY FURTHER OBJECTION IN THE MATTER. THE LEARNED DR SUBMITTED THAT IT IS TH E PREROGATIVE OF THE AO TO REOPEN THE ASSESSMENT, IF HE WAS OF THE OPINION THA T THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, WHICH HAS BEEN RIGHTLY DONE IN THE MATTER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD. SECTION 147 OF THE ACT PROVIDES THAT IF T HE AO HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT FOR ANY ASSESSMENT YEAR, HE MAY ASSESS OR REASSESS ANY SUCH INCOME AND ALSO ANY OTHER INCOME ITA.NO.874 AND 1299/AHD/2010 -5- CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION. IT IS THEREFORE PREROGATIVE OF THE AO TO REOPEN THE ASSESSMENT IF H E HAS REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESS MENT. IN THIS CASE, IT IS ADMITTED FACT THAT THE ORIGINAL RETURN WAS ONLY PRO CESSED UNDER SECTION 143(1) OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE F ILED COPY OF THE LETTER OF THE AO PLACE AT PB PAGE NO.18 IN WHICH THE AO INTIMATED THE ASSESSEE THAT SINCE INTEREST ON FIXED DEPOSIT IS INCOME FROM OTHER SOUR CES AND HAS NOT BEEN EXCLUDED FROM THE PROFITS OF THE BUSINESS FOR THE P URPOSES OF COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT, THEREFORE , THE INCOME HAS ESCAPED ASSESSMENT. THIS REASONS ITSELF WAS SUFFICIENT TO HOLD THE VIEW OF THE AO THAT THE AO WAS HAVING REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE LEARNED COUNSEL FOR THE AS SESSEE REFERRED TO HIS OBJECTIONS RAISED BEFORE THE AO AND INCORPORATED IN PARA-4 OF THE REASSESSMENT ORDER. HOWEVER, THE LEARNED COUNSEL FOR THE ASSESS EE HAS NOT POINTED OUT ANY JUSTIFICATION TO RAISE SUCH OBJECTIONS. THEREFORE, WE FEEL IT NECESSARY TO DISCUSS THOSE REASONS IN THIS ORDER. I) THE ASSESSEE RAISED OBJECTIONS THAT REOPENING IS MA DE ON AUDIT OBJECTIONS. THE LEARNED CIT(A) NOTED THAT THERE IS NO SUCH MENTION OF AUDIT OBJECTIONS. THE LEARNED COUNSEL H AVE NOT BEEN ABLE TO POINT AS TO FROM WHERE HE CAME TO KNOW THAT REOPENING IS DONE ON AUDIT OBJECTIONS. THIS OBJECTION IS THEREF ORE WITHOUT ANY BASIS. II) ANOTHER OBJECTION RAISED IS THAT THE AO WAS HAVING NO JURISDICTION TO REOPEN THE ASSESSMENT. HOWEVER, TH E LEARNED COUNSEL FOR THE ASSESSEE ADMITTED THAT HE HAS NOT F OLLOWED THE PROCEDURE PRESCRIBED UNDER SECTION 124(2)(3) OF THE I.T.ACT FOR RAISING ANY OBJECTION REGARDING JURISDICTION OF THE AO AT THE APPROPRIATE STAGE OR BEFORE THE PROPER FORUM. THIS PROVISION STIPULATES THAT SUCH OBJECTION SHOULD BE RAISED BEF ORE THE DIRECTOR ITA.NO.874 AND 1299/AHD/2010 -6- GENERAL/CHIEF COMMISSIONERS OR COMMISSIONERS AND TH E JURISDICTION OF THE AO CANNOT BE CALLED IN QUESTION AFTER EXPIRY OF ONE MONTH FROM THE DATE ON WHICH THE NOTICE IS SERV ED UNDER SECTION 142(1) OR 143(2) WHEN THE RETURN WAS FILED UNDER SECTION 139(1) OF THE I.T.ACT OR AFTER THE COMPLETION OF TH E ASSESSMENT WHICHEVER IS EARLIER. SINCE THE ASSESSEE DID NOT T AKE RECOURSE TO THE SPECIFIC PROVISION UNDER THE ABOVE LAW, THEREFO RE SUCH OBJECTIONS IS IMPROPER AND UNJUSTIFIED. III) THE ASSESSEE OBJECTED TO THE REASSESSMENT BECAUSE I T WAS MADE ON CHANGE OF OPINION. ADMITTEDLY, THE RETURN WAS O NLY PROCESSED UNDER SECTION 143(1) THEREFORE THERE IS NO FORMATIO N OF ANY OPINION OR ANY OF THE MATTER REGARDING ESCAPEMENT O F INCOME, THEREFORE, OBJECTIONS OF THE ASSESSEE IS NOT VALID. MOREOVER, IT IS NOW COVERED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME-TAX V. RAJESH JHAVERI STOCK BROKERS P. LTD., 291 ITR 500 IN WHICH IT WAS HELD THAT REOPENING IS VALID AND CHANGE OF OPINION WOULD NOT BE VALID REASONS WHEN THE RETURN IS PROCESSED UNDER SECTION 143(1) ONLY BECAUSE NO OPINION IS FORMED BY THE AO ON REOPENING OF THE ASSESSMENT. IV)(V) ASSESSEE OBJECTED TO REOPENING ON THE GROUND THAT THERE IS NO INFORMATION OR MATERIAL INDICATING THAT INCOME HAS ESCAPED ASSESSMENT. AS NOTED ABOVE, THE AO GAVE SPECIFIC R EASONS FOR REOPENING OF THE ASSESSMENT, THEREFORE, THIS OBJECT ION IS INVALID. VI) IT IS STATED THAT WHEN THERE ARE TWO VIEWS ARE POSS IBLE, THE REOPENING OF THE ASSESSMENT IS NOT VALID. HOWEVER, THE LAW IS SETTLED THAT THE INCOME FROM OTHER SOURCES WOULD NO T QUALITY FOR DEDUCTION UNDER SECTION 80HHC OF THE I.T. ACT AND T HEREFORE NO TWO VIEWS ARE POSSIBLE. ITA.NO.874 AND 1299/AHD/2010 -7- VII) THE ASSESSEE OBJECTED TO THE REOPENING ON THE BASIS OF LAW DECLARED BY THE COURT IS NOT VALID. HOWEVER, THE A O HAS GIVEN A SPECIFIC REASON FOR REOPENING OF THE ASSESSMENT THA T THE INTEREST ON FDR CANNOT BE TREATED AS INCOME ARISING OUT OF E XPORT AND THEREFORE IT WOULD NOT QUALIFY FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT. VIII) REASSESSMENT ORDER WAS OBJECTED ON THE GROUND THAT THE AO HELD THAT THE DEPRECIATION IS ALLOWED AT A HIGHER RATE. MAY BE THE AO HAS GIVEN SEVERAL REASON FOR REOPENING OF THE ASSES SMENT, THERE IS NO ILLEGALITY IN THE PROCEEDINGS. CONSIDERING ALL THE ABOVE OBJECTIONS OF THE ASSESSE E, IT IS CLEAR THAT THE ASSESSEE RAISED FRIVOLOUS AND UNJUSTIFIED OBJECTIONS AGAINST THE REASSESSMENT OF ASSESSMENT. NONE OF REASONS GIVEN BY THE ASSESSEE, AS STATED ABOVE, ARE MATERIAL FOR QUASHING OF THE ASSESSMENT PROCEEDINGS . THE AO AND THE LEARNED CIT(A) HAD DISCUSSED THIS ISSUE IN THE ORDERS THERE FORE THE DIRECTION OF THE TRIBUNAL IS COMPLIED WITH TO DISPOSE OF THE OBJECTI ONS OF THE ASSESSEE IN THIS REGARD. MAY BE THE AUTHORITIES BELOW HAVE NOT GIVE N SPECIFIC REASONS IN THE ORDERS, BUT THE CRUX OF THE MATTER WOULD SHOW THAT NONE OF THE OBJECTIONS OF THE ASSESSEE WAS VALID. EVEN DURING THE COURSE OF THE ARGUMENTS, THE LEARNED COUNSEL FOR THE ASSESSEE COULD NOT POINT OUT AS TO HOW THE OBJECTIONS DISCUSSED ABOVE ARE VALID UNDER THE LAW. CONSIDERING THE FAC TS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE REASSESSMENT OF T HE CASE IN THE MATTER IS JUSTIFIED IN LAW AND ACCORDINGLY WE DISMISS THIS GR OUND OF THE APPEAL OF THE ASSESSEE. 7. ON GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE VALIDITY IN TREATING BANK INTEREST OF RS.48,68,254/- AS INCOME FROM OTHE R SOURCES AND WOULD NOT QUALIFY FOR DEDUCTION UNDER SECTION 80HHC OF THE I. T.ACT. ITA.NO.874 AND 1299/AHD/2010 -8- 8. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT AMOUNT KEPT AS FIXED DEPOSITS IS AMOUNT EARNED AND PLOUGH BACK AND RETAI NED IN THE BUSINESS. INSTEAD OF BORROWING, LIQUIDITY IS MAINTAINED OF OW N EARNED INCOME. IT IS NOTHING BUT THE BUSINESS ACTIVITY. THE ASSESSEE IN SUPPORT OF THE SAME, RELIED UPON CERTAIN DECISIONS. IT IS ALSO EXPLAINED THAT THE AO HAS TREATED THE ABOVE INCOME AS BUSINESS INCOME THEREFORE HE COULD NOT TR EAT THEM AS INCOME FROM OTHER SOURCES FOR CALCULATING THE DEDUCTION UNDER S ECTION 80HHC OF THE ACT. CERTAIN DECISIONS IN SUPPORT WERE ALSO RELIED UPON. THE LEARNED CIT(A) NOTED THAT WHILE COMPUTING THE DEDUCTION UNDER SECTION 80 HHC IN THE ORDER DATED 26-12-2006 UNDER SECTION 143(3) R.W.S. 147 OF THE I .T. ACT, THE AO DEDUCTED 90% OF THE INTEREST RECEIVED OF RS.48,68,254/- (ON THE FIXED DEPOSITS WITH BANK) HOLDING THAT THE SAID INCOME IS NOT DERIVED FROM TH E EXPORT BUSINESS AND THEREFORE NOT ENTITLED FOR DEDUCTION. THE CIT(A) VIDE ORDER DATED 6-6-2007 DIRECTED THE AO TO ALLOW NETTING AND DIRECTED ONLY 90% OF THE NET INTEREST OF RS.15,53,677/- BE REDUCED. THE SAID ORDER WAS GIVE N EFFECT BY THE AO AND THE REVENUE PREFERRED APPEAL BEFORE THE TRIBUNAL WHICH WAS DISMISSED ON ACCOUNT OF LOW TAX EFFECT. THE LEARNED CIT(A) CONSIDERING THE FACTS OF THE CASE AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DISMISS ED THIS GROUND OF THE ASSESSEE. HIS COMMENTS IN PARA-4.3 OF THE IMPUGNED ORDER ARE REPRODUCED BELOW: 4.3 THE LAW IS WELL SETTLED NOW THAT INTEREST ON F IXED DEPOSITS WITH THE BANK CANNOT BE SAID TO HAVE BEEN DERIVED FROM THE EXPORT BUSINESS AND THEREFORE NOT ELIGIBLE FOR DEDUCTION U/S.80HHC. RE LIANCE IS PLACED IN THIS REGARD ON THE CASES OF CIT VS. RAVINDRANATHAN NAIR, 295 ITR 228 (SC) (200& AND CIT VS. LAXMI MACHINE WORKS, 290 ITR 667 (SC)(2007). SEVERAL OTHER DECISIONS WITH REFERENCE TO SECTION 80IA &80IB ALSO SUPPORT THE VIEW THAT INTEREST INCOME CA NNOT BE HELD TO BE DERIVED FROM THE BUSINESS, SUPREME COURTS DECISI ON IN THE CASE OF LIBERTY INDIA VS. CIT, 317 ITR 218 IS THE LATEST DE CISION ON THIS ISSUE. IN THE IMPUGNED ORDER THE AO ALLOWED THE DEDUCTION U/S .80HHC WITHOUT TAKING INTO CONSIDERATION THE NET INTEREST INCOME. IN VIEW OF THE FOREGOING DISCUSSION, I UPHOLD THE ACTION OF THE AO IN THIS REGARD. THIS GROUND OF APPEAL IS DISMISSED. ITA.NO.874 AND 1299/AHD/2010 -9- THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT INTEREST WAS E ARNED ON FDR MADE WITH THE BANK FOR THE PURPOSE OF DEVELOPING BUSINESS INCOME. HE HAS SUBMITTED THAT IN THIS CASE THE INTEREST WHICH THE ASSESSEE DERIVED F ROM BANK DEPOSITS HAD BEEN INCLUDED IN THE COMPUTATION OF INCOME UNDER THE HEA D PROFITS AND GAINS OF BUSINESS OR PROFESSION AND IS ALSO HELD ACCORDINGL Y, THEREFORE, THIS AMOUNT WOULD HAVE BEEN TREATED AS HAVING BEEN DERIVED FROM THE EXPORT EFFECTED BY THE ASSESSEE. IN SUPPORT OF THIS CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I) CIT VS. S.S.C. SHOES LTD., 275 ITR 46 (MAD); II) ITO VS. KENARAM SAHA & SUBHASH SAHA, 116 TTJ (KOL)( SB)289; III) COMMISSIONER OF INCOME-TAX V. CHINNA NACHIMUTHU CONSTRUCTIONS, 297 ITR 70 (KAR); IV) CIT VS. DRESSER RAND INDIA P. LTD., 232 CTR (BOM) 5 2 V) CIT VS. J.J.EXPORTERS LTD., 324 ITR 329 (CAL) HE HAS SUBMITTED THAT SINCE IT WAS THE BUSINESS INC OME OF THE ASSESSEE, THEREFORE, THE AO WAS NOT JUSTIFIED IN TREATING IT TO BE INCOME FROM OTHER SOURCES FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC OF THE I.T.ACT. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDE RS OF THE AUTHORITIES BELOW: 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE EARNED INTEREST INCOME ON FDR MADE WITH THE BANK. THE ASSESSEE MADE A CLAIM THAT THE INTEREST INCOME IS DERIVED FROM EXPORT BUSINESS. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. K. RAVINDRANATHAN NAIR, 295 ITR 228 (SC) HELD A S UNDER: THE FORMULA IN SECTION 80HHC(3) PROVIDED FOR A FRAC TION OF EXPORT TURNOVER DIVIDED BY THE TOTAL TURNOVER TO BE APPLIED TO BUSINESS PROFITS CALCULAT ED AFTER DEDUCTING 90 PER CENT. OF THE SUMS MENTIONED IN CLAUSE (BAA) OF THE EXPLANATION. PROFI T INCENTIVES LIKE RENT, COMMISSION, BROKERAGE CHARGES, ETC., THOUGH THEY FORMED PART OF THE GROSS TOTAL INCOME, HAD TO BE EXCLUDED AS THEY WERE INDEPENDENT INCOMES WHICH HAD NO ELEMENT OF EXPORT TURNOVER. ALL THE FOUR VARIABLES IN THE SECTION WERE REQUIRED TO BE KEPT IN MIND. IF AL L THE FOUR VARIABLES ARE KEPT IN MIND, IT BECOMES CLEAR THAT EVERY RECEIPT IS NOT INCOME AND EVERY INCOME WOULD NOT NECESSARILY INCLUDE THE ELEMENT OF EXPORT TURNOVER. ITA.NO.874 AND 1299/AHD/2010 -10- CLAUSE (BAA) OF THE EXPLANATION STATES THAT 90 PER CENT. OF THE INCENTIVE PROFITS OR RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT CHARGE S OR ANY OTHER RECEIPT OF LIKE NATURE INCLUDED IN BUSINESS PROFITS HAVE TO BE DEDUCTED FR OM BUSINESS PROFITS COMPUTED IN TERMS OF SECTIONS 28 TO 44D. IN OTHER WORDS, RECEIPTS CONSTI TUTING INDEPENDENT INCOME HAVING NO NEXUS WITH EXPORTS WERE REQUIRED TO BE DEDUCTED FROM BUSI NESS PROFITS UNDER CLAUSE (BAA). A BARE READING OF CLAUSE (BAA)(1) INDICATES THAT RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT CHARGES, ETC., FORMED PART OF THE GROSS TOTAL INCOME BEING BUSINESS PROFITS. BUT FOR THE PURPOSE OF WORKING OUT THE FORMULA AND IN ORDER TO AVOID DISTORTION IN ARRIVING AT THE EXPORT PROFITS CLAUSE (BAA) STOOD INSERTED TO SAY THAT ALT HOUGH INCENTIVE PROFITS AND INDEPENDENT INCOMES CONSTITUTED PART OF THE GROSS TOTAL INCOME , THEY HAD TO BE EXCLUDED FROM GROSS TOTAL INCOME BECAUSE SUCH RECEIPTS HAD NO NEXUS WITH THE EXPORT TURNOVER. PROCESSING CHARGES, WHICH ARE PART OF GROSS TOTAL I NCOME, FORM AN ITEM OF INDEPENDENT INCOME LIKE RENT, COMMISSION, BROKERAGE, ETC., AND, THEREF ORE, 90 PER CENT. OF THE PROCESSING CHARGES HAS ALSO TO BE REDUCED FROM THE GROSS TOTAL INCOME TO ARRIVE AT THE BUSINESS PROFITS AND, THEREFORE, IT HAS ALSO TO BE INCLUDED IN THE TOTAL TURNOVER IN THE FORMULA FOR ARRIVING AT THE BUSINESS PROFITS IN TERMS OF CLAUSE (BAA) OF THE EX PLANATION TO SECTION 80HHC(3). THE HONBLE SUPREME COURT IN THE CASE OF PANDIAN CH EMICALS LTD. VS. CIT, 262 ITR 278 HELD THAT INTEREST DERIVED BY THE INDUS TRIAL UNDERTAKING OF THE ASSESSEE ON DEPOSITS MADE WITH THE ELECTRICITY BOAR D FOR THE SUPPLY OF ELECTRICITY FOR RUNNING THE INDUSTRIAL UNDERTAKING COULD NOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF AND WAS NOT PROFITS OR GAINS DERIVED BY THE UNDERTAKING FOR THE PURPOSE OF THE S PECIAL DEDUCTION UNDER SECTION 80HH. IN CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT, 227 ITR 172, THE HONBLE SUPREME COURT HELD AS UNDER: UNDER THE INCOME-TAX ACT, 1961, THE TOTAL INCOME O F A COMPANY IS CHARGEABLE TO TAX UNDER SECTION 4. THE TOTAL INCOME HAS TO BE COMPUTE D IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. SECTION 14 LAYS DOWN THAT FOR THE PURPOSE OF COMPUTATION, INCOME OF AN ASSESSEE HAS TO BE CLASSIFIED UNDER SIX HEADS. IT IS POSSIBL E FOR A COMPANY TO HAVE SIX DIFFERENT SOURCES OF INCOME, EACH ONE OF WHICH WILL BE CHARGE ABLE TO INCOME-TAX. PROFITS AND GAINS OF BUSINESS OF PROFESSION IS ONLY ONE OF THE HEADS UNDER WHICH A COMPANY'S INCOME IS LIABLE TO BE ASSESSED TO TAX. IF A COMPANY HAS NOT COMMENCED BUSINESS, THERE CANNOT BE ANY QUESTION OF ASSESSMENT OF ITS PROFITS AND GAINS OF BUSINESS. THAT DOES NOT MEAN THAT UNTIL AND UNLESS THE COMPANY COMMENCES ITS BUSINESS , ITS INCOME FROM ANY OTHER SOURCE WILL NOT BE TAXED. THE COMPANY MAY KEEP THE SURPLUS FUNDS IN SHORT-TERM DEPOSITS IN ORDER TO EARN INTEREST. SUCH INTERESTS WILL BE CHARGEABLE UNDER SECTION 56. IN OTHER WORDS, IF THE CAPITAL OF A COMPANY IS FRUITFULLY UTILISED, INSTEA D OF BEING KEPT IDLE, THE INCOME THUS GENERATED WILL BE OF A REVENUE NATURE AND NOT AN AC CRETION TO CAPITAL. WHETHER THE COMPANY RAISED THE CAPITAL BY ISSUE OF SHARES OR DE BENTURES OR BY BORROWING, WILL NOT MAKE ANY DIFFERENCE TO THIS PRINCIPLE. IF BORROWED CAPITAL IS USED FOR THE PURPOSE OF EARNING INCOME, THAT INCOME WILL HAVE TO BE TAXED IN ACCORD ANCE WITH LAW. INCOME IS SOMETHING WHICH FLOWS FROM THE PROPERTY. SOMETHING RECEIVED I N PLACE OF THE PROPERTY WILL BE A CAPITAL RECEIPT. THE AMOUNT OF INTEREST RECEIVED BY THE COM PANY FLOWS FROM ITS INVESTMENTS AND IS ITS INCOME AND IS CLEARLY TAXABLE EVEN THOUGH THE I NTEREST AMOUNT IS EARNED BY UTILISING BORROWED CAPITAL. IT IS TRUE THAT THE COMPANY WILL HAVE TO PAY INTEREST ON THE MONEY BORROWED BY IT. BUT THAT CANNOT BE A GROUND FOR EXE MPTION OF INTEREST EARNED BY THE COMPANY BY UTILISING THE BORROWED FUNDS AS ITS INCO ME. ANY SET-OFF OR DEDUCTION OF ANY EXPENDITURE CAN ONLY BE MADE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. ITA.NO.874 AND 1299/AHD/2010 -11- THE HONBLE APEX COURT, RECENTLY, IN THE CASE OF LI BERTY INDIA VS. CIT, 317 ITR 218 HELD THAT SECTION 80IB PROVIDES FOR THE ALL OWING OF DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE ELIGI BLE BUSINESS. THE CONNOTATION OF THE WORDS DERIVED FROM IS NARROWER AS COMPARED TO THAT OF THE WORDS ATTRIBUTABLE TO. BY USING THE EXPRESSION DERIVE D FROM PARLIAMENT INTENDED TO COVER SOURCES NOT BEYOND THE FIRST DEGREE. CONS IDERING THE FACTS OF THE CASE AND IN THE LIGHT OF THE ABOVE DECISIONS, IT IS CLEA R THAT THE INTEREST ON FDR IS AN INDEPENDENT INCOME WHICH HAD NO ELEMENT OF EXPORT T URNOVER. SINCE THE INTEREST ON FDR HAS NO NEXUS WITH THE EXPORT ACTIVI TY OF THE ASSESSEE, THEREFORE, AS PER THE DECISION IN THE CASE OF LIBERTY INDIA (S UPRA) THE EXPRESSION DERIVED FROM THE PARLIAMENT INTENDS TO COVER SOURCE NOT BE YOND THE FIRST DEGREE. THE SOURCE OF EARNING OF THE INTEREST INCOME IS THE DEP OSITS WITH THE BANK THEREFORE IT COULD NOT BE TREATED TO BE EQUATED WITH EXPORT T URNOVER OF THE ASSESSEE. THEREFORE, THE AUTHORITIES BELOW WERE JUSTIFIED IN HOLDING THAT THE INTEREST IN FDR IS INCOME FROM SOURCES FOR THE PURPOSE OF COMPU TATION UNDER SECTION 80HHC OF THE ACT. HOWEVER. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF KARANATAKA HIGH COURT IN THE CASE O F CHINNA NACHIMUTHU CONSTRUCTIONS (SUPRA) IN WHICH THE INTEREST ACCRUED ON FDR WAS TREATED AS BUSINESS INCOME BUT IT WAS NOT CONNECTED WITH DEDUC TION UNDER SECTION 80HHC OF THE I.T.ACT. IN THE CASE OF DRESSER RAND INDIA P. LTD. (SUPRA) HONBLE BOMBAY HIGH COURT CONSIDERING THE DECISION IN THE C ASE OF K. RAVINDRANATHAN NAIR (SUPRA) HELD THAT WHILE COMPUTING DEDUCTION UN DER SECTION 80HHC, INDEPENDENT INCOMES LIKE RECOVERY OF FREIGHT, INSUR ANCE, PACKING RECEIPTS, SALES TAX SET OFF/REFUND AND SERVICE FEES WHICH HAVE NO E LEMENT OF EXPORT PROFIT ARE LIABLE TO BE EXCLUDED IN TERMS OF EXPLANATION (BAA) TO SECTION 80HHC. THIS JUDGMENT IS IN FAVOUR OF THE REVENUE AND WOULD NOT SUPPORT THE CASE OF THE ASSESSEE. IN THE CASE OF JJ EXPORTERS LTD., (SUPRA ), THE CALCUTTA HIGH COURT DISMISSED THE DEPARTMENTS APPEAL FINDING NO SUBSTA NTIAL QUESTION OF LAW AND IN THIS DECISION THE HONBLE HIGH CURT HAD NOT CONSIDE RED THE DECISION OF K. RAVINDRANATHAN NAIR (SUPRA). SIMILAR DECISION WAS TAKEN IN THE CASES OF S.S.C. ITA.NO.874 AND 1299/AHD/2010 -12- SHOES LTD. (SUPRA) AND KENARAM SAHA & SUBHASH SAHA (SUPRA) DECISION OF KOLKATTA SPECIAL BENCH OF ITAT. THEREFORE, NONE OF THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE WOULD BE APPLICABL E ON THE FACE OF THE DECISIONS OF THE HONBLE SUPREME COURT REFERRED TO THE ABOVE. 10. CONSIDERING ALL FACTS OF THE CASE, WE FIND NO I NFIRMITY IN THE ORDER OF THE LEARNED CIT(A). WE ACCORDINGLY, CONFIRM HIS ORDER AND DISMISS THIS GROUND OF THE ASSESSEES APPEAL. 11. ON GROUND NO.3, THE ASSESSEE CHALLENGED CHARGIN G OF INTEREST UNDER SECTION 234A AND 234B. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT INTEREST HAS BEEN WRONGLY CHARGED. THE LEARNED CIT (A) HOWEVER NOTED THAT THE CHARGING OF INTEREST IS MANDATORY AND CONSEQUENTIAL IN NATURE AND ACCORDINGLY DISMISSED APPEAL OF THE ASSESSEE. HOWEVER, THE AO WAS DIRECTED TO RECALCULATE ONLY AFTER GIVING EFFECT TO THE FINDING GIVEN IN HI S ORDER. 12. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INTEREST UNDER SECTION 234A WOULD NOT BE CHARGED BECAUSE THE RETUR N OF INCOME WAS FILED ON TIME AND AS SUCH THERE WAS NO FAILURE IN FURNISHING THE RETURN OF INCOME ON TIME. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THIS GROUND OF THE ASSESSEE BECAUSE CHARGI NG OF INTEREST IS MANDATORY AS SETTLED PROPOSITION OF LAW. HOWEVER, THE AO MAY CHARGE INTEREST AFTER GIVING APPEAL EFFECT. AT THE TIME OF CHARGING INTE REST, THE AO MAY VERIFY IF THE RETURN WAS FILED WITHIN THE PERIOD OF LIMITATION AS ARGUED BY THE LEARNED COUNSEL. WITH THESE OBSERVATIONS THIS GROUND OF TH E ASSESSEE IS DISMISSED. 13. ON GROUND NO.4, THE ASSESSEE CHALLENGED THE ORD ER OF THE LEARNED CIT(A) IN NOT ACCEPTING THE CONTENTION THAT THE WITHDRAWAL OF INTEREST UNDER SECTION 244A IS BAD IN LAW. THE LEARNED CIT(A) DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE BECAUSE WITHDRAWAL OF INTEREST UNDER S ECTION 234A IS CONSEQUENTIAL IN NATURE. ITA.NO.874 AND 1299/AHD/2010 -13- 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS OF THE PARTIES, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THIS GROUND OF THE APPEAL OF THE ASSESSEE. SECTION 244A (3) OF THE READS AS UNDER: (3) WHERE, AS A RESULT OF AN ORDER UNDER SUB-SECTI ON (3) OF SECTION 115WE OR SECTION 115WF OR SECTION1 115WG OR 143 OR SECTION 144 OR SECTION 147 OR SECTION 154 OR SECTION 155 OR SEC TION 250 OR SECTION 254 OR SECTION 260 OR SECTION 262 OR SECTIO N 263 OR SECTION 264 OR AN ORDER OF THE SETTLEMENT COMMISSION UNDER SUB-SECTION (4) OF SECTION 245D, THE AMOUNT ON WHICH INTEREST WAS P AYABLE UNDER SUB-SECTION (1) HAS BEEN INCREASED OR REDUCED, AS T HE CASE MAY BE, THE INTEREST SHALL BE INCREASED OR REDUCED ACCORDIN GLY, AND IN A CASE WHERE THE INTEREST IS REDUCED, THE ASSESSING OFFICE R SHALL SERVE ON THE ASSESSEE A NOTICE OF DEMAND IN THE PRESCRIBED F ORM SPECIFYING THE AMOUNT OF THE EXCESS INTEREST PAID AND REQUIRING HI M TO PAY SUCH AMOUNT; AND SUCH NOTICE OF DEMAND SHALL BE DEEMED T O BE A NOTICE UNDER SECTION 156 AND THE PROVISIONS OF THIS ACT SH ALL APPLY ACCORDINGLY. SINCE IN THIS CASE, EARLIER RETURN WAS PROCESSED UN DER SECTION 143(1) AND THE ORDER UNDER SECTION 143(3) R.W.S. 147 HAVE BEEN PAS SED AND THE DEMAND IS RAISED AGAINST THE ASSESSEE, THEREFORE, THE AO WAS JUSTIFIED IN WITHDRAWING THE INTEREST AS PER SECTION 244A(3) OF THE I.T.ACT THI S GROUND OF THE ASSESSEE IS ACCORDINGLY DISMISSED. AS A RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO.1299/AHD/2010 (REVENUES APPEAL) 15. THE REVENUE HAS RAISED THE ONLY GROUND IN ITS A PPEAL CHALLENGING THE ORDER OF THE LEARNED CIT(A) IN DIRECTING THE AO NOT TO EXCLUDE EXCISE DUTY REBATE OF RS.48,30,650/- WHILE WORKING OUT DEDUCTIO N UNDER SECTION 80HHC OF THE I.T.ACT. 16. BRIEFLY STATED FACTS ARE THAT IN THE ORDER UNDE R SECTION 143(3) R.W.S. 147, THE AO EXCLUDED THE EXCISE DUTY REBATE OF RS.48,30, 650/- WHILE CALCULATING DEDUCTION UNDER SECTION 80HHC BY HOLDING THAT THE S AID RECEIPT WAS NOT DERIVED FROM EXPORT BUSINESS. IN THE IMPUGNED ORDE R ALSO THE AO EXCLUDED THIS ITA.NO.874 AND 1299/AHD/2010 -14- AMOUNT WHILE ALLOWING DEDUCTION UNDER SECTION 80HHC . IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) ON MERITS THAT MOST OF TH E SALES OF THE ASSESSEE ARE EXPORT SALES AND WHEN THE ASSESSEE RAISED BILL ON P ARTY IT INCLUDED EXCISE DUTY AMOUNT PAYABLE TO THE GOVERNMENT. AS PER RULES OF THE GOVERNMENT, FOR EXPORT SALE COMPLIANCE, THE ASSESSEE RECEIVES BACK THE AMO UNT OF THE SAID EXCISE DUTY PAYMENT. THE ASSESSEE FILED THE DETAILS TO SHOW TH AT DURING THE YEAR THE ASSESSEE HAS PAID EXCISE DUTY OF RS.48,43,416/- AND HAVE RECEIVED BACK THE SAID EXCISE DUTY AMOUNTING TO RS.48,30,650/-. THE ASSES SEE HAS ALSO FILED COPIES OF FEW PAYMENTS ALONG WITH COPY OF FORM NO.AR-4 WHICH INDICATES PAYMENT OF EXCISE DUTY AND ALSO ENCLOSED FORM RG 23A WHICH SHO WS THAT DEBIT OF SAID DUTY. IT WAS ALSO STATED THAT ON MAKING APPLICATIO N AND COMPLIANCES, THE GOVERNMENT WILL REFUND THE AMOUNT BY CHEQUE WHICH I S CREDITED TO EXCISE DUTY REBATE ACCOUNT. THE LEARNED CIT(A) CONSIDERING SUB MISSION OF THE ASSESSEE, MENTIONED IN THE IMPUGNED ORDER THAT THERE WAS NO D ETAILED DISCUSSION MADE BY THE AO. HOWEVER, THE LEARNED CIT(A) ALLOWED THE AP PEAL OF THE ASSESSEE. THE RELEVANT IN PARA 5.2. OF THE IMPUGNED ORDER READS A S UNDER: 5.2 BOTH IN THE ASSESSMENT ORDER U/S.143(3) R.W.S. 147 AND ALSO IN THE IMPUGNED ORDER THERE IS NO DETAILED DISCUSSION ON THE ISSUE. AS SEEN FROM THE WRITTEN SUBMISSIONS FILED AND ARGUMEN TS ADVANCED BY A.R., THE APPELLANT IS GETTING REIMBURSED FROM THE GOVERNMENT THE EXCISE DUTY PAID TO THE GOVERNMENT (IN RESPECT OF E XCISE DUTY RELATABLE TO EXPORTS). EVEN THE NOMENCLATURE USED BY THE APPELLANT IS EXCISE DUTY REBATE. AS SEEN FROM EXPLANATION (B AA) BELOW SECTION 80HHC (4C) PROFITS OF THE BUSINESS ARE TO BE REDUCE D BY 90% OF ANY SUM REFERRED TO ANY CLAUSES (IIIA), (IIIB), (IIIC), (IIID) & (IIIE) OF SECTION 28 OR ANY RECEIPTS BY WAY OF BROKERAGE, COM MISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF SIM ILAR NATURE. IN OTHER WORDS EXCISE DUTY REBATE, WHICH IS TO BE DIST INGUISHED FROM EXCISE DUTY DRAW BACK IS NOT COVERED BY THE SAID EX PLANATION. FURTHER THE APPELLANT IS ONLY GETTING REIMBURSED OF THE EXCISE DUTY PAID. FURTHER THE PAYMENT OF EXCISE DUTY AND THE R ECEIPT OF EXCISE DUTY REBATE ARE INTRINSICALLY LINKED TO THE EXPORT BUSINESS OF THE ASSESSEE. THEREFORE, I HOLD THAT 90% EXCISE DUTY R EBATE NEED NOT BE DEDUCTED WHILE COMPUTING THE DEDUCTION U/S.80HHC. I AM OF THE CONSIDERED OPINION THAT THE AOS ACTION IN THIS REG ARD IS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE LAW. AO IS D IRECTED TO RE- ITA.NO.874 AND 1299/AHD/2010 -15- COMPUTE THE DEDUCTION ACCORDINGLY. THIS GROUND OF APPEAL IS ALLOWED. 17. THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE DETAILS FILED BY THE ASSESSEE ARE NOT SUFFICIENT TO UPHOLD THE ORDER OF THE CIT(A) HE HAS SUBMITTED THAT THE ASSESSEE HAS NOT FILED AN Y ORDER OF THE GOVERNMENT TO SHOW UNDER WHICH SCHEME THE EXCISE DUTY REBATE IS G IVEN TO THE ASSESSEE. HE HAS SUBMITTED THAT IN THE ABSENCE OF ANY SPECIFIC M ATERIAL ON RECORD AND IN THE ABSENCE OF THE FINDING GIVEN BY THE AO, IT IS APPRO PRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE AO FOR RECONSIDERATION. ON THE OTH ER HAND, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). 18. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL PLACED ON RECORD. IT IS NOT IN DISPUTE THAT IN THE REASS ESSMENT DATED 14-11-2008, THE AO FIRST DECIDED THE OBJECTION OF THE ASSESSEE REGA RDING INITIATION OF THE REASSESSMENT PROCEEDINGS AND AT THE END OF THE ASSE SSMENT ORDER, HE HAS COMPUTED THE INCOME OF THE ASSESSEE AS PER THE ORDE R PASSED UNDER SECTION 154 DATED 26-10-2006 AT RS.1,47,44,250/-. NO REASONS H AVE BEEN GIVEN BY THE AO IN THE ASSESSMENT ORDER. THE LEARNED CIT(A) HOWEVE R, CONSIDERING THE EXPLANATION OF THE ASSESSEE NOTED THAT THE ASSESSEE WAS GETTING REIMBURSEMENT FROM THE GOVERNMENT OF THE EXCISE DUTY PAID TO THE GOVERNMENT IN RESPECT OF EXCISE DUTY RELATABLE TO THE EXPORTS. THE LEARNED CIT(A) WITHOUT EXAMINING THE ORDER OF THE GOVERNMENT OR RELEVANT MATERIAL NOT ON RECORD DECIDED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT THE EXPLANATION (BAA) TO SECTION 80HHC OF THE I.T.ACT WOULD NOT APPLY TO THE CASE OF THE ASSE SSEE. THE LEARNED CIT(A) HAS NOT DECIDED THE APPEAL ON FACTS AND HAS NOT GIV EN ANY FACT FINDING AS TO WHAT WAS THE NATURE OF EXCISE DUTY REBATE/REFUND TO THE ASSESSEE. IT IS ALSO NOT CLEAR WHETHER THE ASSESSEE HAS DEBITED THE EXCISE D UTY OF RS.48,43,146/- IN THE PROFIT AND LOSS ACCOUNT BEFORE RECEIVING THE AMOUNT OF RS.48,30,650/-. ON THIS ISSUE, THE ASSESSEE PLEADED BEFORE THE LEARNED CIT( A) AS PER THE DETAILS ENCLOSED, IT HAS PAID EXCISE DUTY OF RS.48,43,416/- DURING THE YEAR. THE DETAILS OF THE SAME FILED AT PAGE NO.52 OF THE PB, HOWEVER, WOULD SHOW THAT THERE ARE ITA.NO.874 AND 1299/AHD/2010 -16- SO MANY DETAILS OF EXCISE DUTY WHICH ARE STATED TO BE PAID DURING THE YEAR, BUT ONLY FIVE TO SIX ARE RELEVANT WHICH ARE FALLING IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR IN QUESTION. ACCORDINGLY, THE DETAILS FILED AT PB-52, EXCISE DUTY PAID ON SEVERAL OCCASIONS PERTAINED TO THE YEA RS 1997, 1998 AND 1999 PRIOR TO THE COMMENCEMENT OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR IN QUESTION. THEREFORE, IT WOULD SHOW THAT THE LEARNE D CIT(A) WITHOUT VERIFYING THE FACTS ALLOWED THE APPEAL OF THE ASSESSEE ON THI S ISSUE. HOWEVER, IT IS CLEAR FROM THE STATEMENT PB-52 THAT THE DATES OF RECEIPTS OF EXCISE DUTY ARE FALLING IN THE ASSESSMENT YEAR UNDER APPEAL. THE EXPLANATION (BAA) OF SECTION 80HH (4C) OF THE IT READS AS UNDER: (BAA) 'PROFITS OF THE BUSINESS' MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION' AS REDUCED BY- (1) NINETY PER CENT. OF ANY SUM REFERRED TO IN CLAU SES (IIIA), (IIIB), (IIIC), (IIID) AND (IIIE) OF SECTION 28 OR OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES O R ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFIT S ; AND (2) THE PROFITS OF ANY BRANCH, OFFICE, WAREHOUSE O R ANY OTHER ESTABLISHMENT OF THE ASSESSEE SITUATE OUTSIDE INDIA ; THE ABOVE EXPLANATION REFERRED TO 90% OF ANY SUM REFERRED TO CLAUSE (IIIA), (IIIB), (IIIC), (IIID) AND (IIIE) OF SECTION 28 AND THE SECTION 28(IIIC) PROVIDES OF ANY DUTY OF CUSTOM OR EXCISE REPAID OR REPAYABLE AS DUTY DRAW BACK TO ANY PERSONS AGAINST EXPORTS UNDER THE CUSTOMS AND CENTR AL EXCISE DUTIES DRAWBACK RULES, 1971. THE LEARNED CIT(A) HAS ALSO NOT EXAMINED WHETHER CLAIM OF THE ASSESSEE THROUGH WHICH THE EXCISE REBA TE WAS RECEIVED WAS FALLING IN ANY OF THE SCHEME AS REFERRED TO IN SECTION 28(I IIC) OF THE I.T. ACT. CONSIDERING THE FACTS OF THE CASE AND IN THE ABSENC E OF ADEQUATE MATERIALS BEFORE THE LEARNED CIT(A), THE CIT(A) WAS NOT JUSTI FIED IN DELETING THE ADDITION ON THIS ISSUE. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THIS ISSUE TO HIS FILE WITH DIRECTION TO RE -DECIDE THIS ISSUE BY BRINGING ENTIRE FACTS ON RECORD. THE LEARNED CIT(A) SHALL A LSO EXAMINE DATES OF EXCISE ITA.NO.874 AND 1299/AHD/2010 -17- DUTY PAID AND THE RECEIPTS WITH REFERENCE TO THE DE TAILS GIVEN IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE IN DIFFERENT ASSESSMENT YE ARS. THE LEARNED CIT(A) SHALL ALSO EXAMINE THE ORDER FOR THE CLAIM THROUGH WHICH THE ASSESSEE RECEIVED THE EXCISE DUTY REBATE/REFUND. THE LEARNED CIT(A) SHALL ALSO EXAMINE WHETHER THE CASE OF THE ASSESSEE WOULD BE FALLING IN SECTIO N 28(IIIC) OF THE ACT OR NOT. SINCE THE AO HAS NOT GIVEN ANY SPECIFIC FINDING ON THIS ISSUE, THEREFORE, LEARNED CIT(A) BEFORE DECIDING THE ABOVE ISSUE, SHALL GIVE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS WELL AS TO THE AO AN D IN CASE ANY NEED ARISES, THE LEARNED CIT(A) MAY CALL FOR REMAND REPORT FROM THE AO. IN VIEW OF THESE OBSERVATIONS, THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. DEPARTMENTS APPEAL IS ALLOWED FOR STATISTICAL PURP OSE. 19. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISS ED AND THE REVENUES IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 23 RD JULY, 2010. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 23-07-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER AR, ITAT, AHMEDABAD