Smt. T.C. Usha, Kollam V. The ACIT, Kollam

ITA 13/COCH/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4024 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-08-2016
• Assessment Year: 1995-1996
• Appeal Filed On: 18-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJA
• Assessee Lawyers: T V HARIHARAN
• Keywords: Opportunity of being heard
• Section: 80HHC; 234B

Judgement Text

ITA NO S. 13 TO 16/C/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH KOCHI BEFORE S/ SHRI B P JAIN , AM & GEORGE GEORGE K, JM ITA NO 13/COCH/2016 (A SST YEAR 1995 - 96 ) SMT T C USHA CHETANA CASHEW CORPORATION KOCHUPILAMMODU KOLLAM PAN NO. ACDPC7638P VS THE ASST COMMR OF INC OME TAX CIRCLE 1 KOLLAM ( APPELLANT) (RESPONDENT) ITA NO S 14 & 15/COCH/2016 (A SST YEAR S 1994 - 95 & 1997 - 97 ) SMT PREETHA S NAIR PROP: NUT PRODUCE COMPANY KOCHUPILAMMODU KOLLAM PAN NO. ABDPN1379H VS THE ASST COMMR OF INCOME TAX CIRCLE 1 KOLLAM ( APP ELLANT) (RESPONDENT) ITA NO 16/COCH/2016 (A SST YEAR 1994 - 95 ) SHRI R PRAKASH PROP: DHANYA FOODS KOCHUPILAMMODU KOLLAM PAN NO. ABFPN4424P VS THE ASST COMMR OF INCOME TAX CIRCLE 1 KOLLAM ( APPELLANT) (RESPONDENT) ASSESSEE BY SH T V HARIHARAN REV ENUE BY SH A DHANARAJA, SR DR DATE OF HEARING 10 TH AUG 2016 DATE OF PRONOUNCEMENT 11 TH AUG 2016 ORDER PER BENCH: THESE ARE FOUR APPEALS BY DIFFERENT ASSESSEE S AGAINST SEPARATE ORDERS OF THE CIT(A), ALL DATED 18.11.2015. THE RELEVANT ASSESSMENT YEARS ARE 1994 - 95, 1995 - 96 & 1997 - 98. ITA NO S. 13 TO 16/C/2016 2 2 SINCE COMMON ISSUES ARE RAISED I N THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE DISPOSED OFF BY THIS CONSOLIDATED ORDER. 3 BOTH THE LD AR AND THE LD DR REQUESTED THAT THE APPEAL IN ITA NO. 16/COCH/2016 MAY BE TAKEN FOR ADJUDICATION S AND SUBMITTED THAT THE DECISION TAKEN THEREIN WOULD BE APPLICABLE TO THE OTHER APPEALS. 4 THE GROUNDS RAISED IN APPEAL ITA NO.16/COCH/2016 READ AS FOLLOWS: 1) THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) TRIVANDRUM, IS AGAINST LAW, OPPOSED TO FACTS AND THE WEIGHT OF EVIDENCE . 2) LEARNED COMMISSIONER OF INCOME TAX (APPEALS) , TRIVANDRUM ERRED IN CONFIRMING THE PROCEEDINGS OF THE AS S ESSING OFFICER GIV I NG E FF EC T T O OR D ER O F H ON 'B L E HI GH COURT OF KERALA. 3(A) O RIGINALLY THE DEPARTMENT APPEAL WAS DISM I SSED BY THE HON ' BLE I TA T , COCHIN BENCH RELYING ON ITS EARLIER DECISION IN T . C . USHA (ITA 637/COCH/ 98) WHICH WAS LATER CONFIRMED BY JURISDICTIONAL HIGH COURT IN ITA NO . 96/1999. (B) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE OBSERVED THAT THE ONLY ISSUE RAISED BY THE DEPARTMENT BEFORE THE HIGH COURT WAS WHETHE R PROCESSING CHARGES RECEIVED BY THE APPELLANT WAS TO BE EXCLUDED FROM THE TOTAL TURNOVER U/S . 80HHE . THE H I GH COURT INSTEAD OF RES PECTING THE CO - ORDINATE BENCH DECISION IN T. C . USHA IN ITA/96 TOOK A CONTRARY VIEW BY ALLOWING REVENUE ' S APPEAL RELYING ON SUPREME COURT DE CISI ON IN CIT V S K . R AVIN DR AN ATH AN N AIR IN ( 2007 ) 2 9 5 ITR 228, PRONOUNCED ON IS ' NOVEMBER 200 7 . 4(A) THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE BEEN CONVINCED THAT THE LIMITED ISSUE BEFORE SUPREME COURT IN 295 ITR 228 WAS ON TH E QUESTION OF INCLUSION OR OTHERWISE OF RAW CASHEW NUT (RCN) PROCESS I NG CHARGES IN THE TOTAL TURNOVER FOR COMPUTING 80 HHC BENEFIT . THE OPERATIVE PART OF JUDGMENT BY SUPREME COURT CONFIRMED THAT IT FORMS PART OF TOTAL TURNOVER FOR PURPOSE OF 80HHC THIS WAS FOLLOWED BY HIGH COURT . (B) THERE WAS NO FURTHER DIRECTION IN THE ORDER OF HIGH COURT THAT 90 % OF PROCESSING CHARGES ALSO TO BE EXCLUDED INVOKING EXPLANATION (BAA) TO SECTION 80 HHC ACCORDINGLY THE CLT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION TAKEN BY ASSESSING OFFICER TO INCLUDE PROCESSING CHARGES IN TOTAL TURNOVER A N D A L S O T O EXCLUDE 90% THEREOF FROM PROFITS OF BUSINESS FOR 80 H HC ITA NO S. 13 TO 16/C/2016 3 (C) THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE NOTED THAT 80HHC WAS AN INCE NTIVE PROVISION IN THE ACT TO ENCOURAGE EXPORTS AND EARN VALUABLE FOREIGN EXCHANGE FOR THE NATION AND SO HAS TO BE L I BERALLY CO NS T R U E D . 5(A) THE AMENDED/MODIFIED PROCEEDINGS AFTER A LONG GAP OF TEN OR TWELVE YEARS HAD THE ADVERSE EFFECT OF APPELLANT BEI NG DE PRIVED OF 80 HHC BENEFIT WHICH PARLIAMENT HAD NEVER INTENDED WHILE ENACTING FINANCE AMENDMENT (N02) ACT 1991 - CBDT NOT I F I CATION NO . 621 DATED 19 . 12 . 1991(1992) 195 ITR (ST)176 . ( B) WHEREAS THERE WAS NO L I ABILITY TO INTEREST UNDER SECTION 234A AND 2 34B IN THE ORIGINAL PROCEEDINGS BASED ON THE ORIGINAL ASSESSMENT ORDER, THE REVISED AND MODIFIED ORDER AFTER GIVING EFFECT TO THE HIGH COURT DECISION FASTENED A HUGE LIABILITY OF RS . 43 LAKHS TO INTEREST UNDER SECT I ONS 234 A AND 234B . C) THE ASSESSEE COULD NEVER HAVE ANTICIPATED A FUTURE D E CI S I O N O F THE AP EX COURT WHILE PAYING HIS ADVANCE TAX INSTALLMENTS . THE LAW WAS VERY CLEAR THAT ASSESSEE SHOULD NOT BE SADDLED WITH ADDITIONAL LIABILITY UNDER SECTION 234A AND 234B DETERMINED ON ENHANCED TAX LIABILITY CONSEQUENT TO A JUDICIAL DECISION OF THE HIGHEST COURT OF THE LAND. THE TAX LIABILITY AROSE FOR NO FAULT ON THE PART OF THE ASSESSE E. HENCE HE SHOULD NOT BE PENALIZED BY WAY OF LIABILITY TO PAY INTEREST UNDER SECTION 234A AND 234B (2001) 252 ITR (AT) 34 (DEL TM) & (2008) 299 ITR (AT) 286(MUM). 6) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT 90 % OF GROSS VA LUE OF LICENSES TO BE EXCLUDED FROM PROFITS FOR 80 HHC IN TOTAL DISREGARD TO SUPREME COURT DECISIONS IN (2012) 342 ITR 49, 343 ITR 89 & 345 ITR 557 THAT MANDATE EXCLUSION OF 90% NET VALUE OF LICENSES . 7) THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRED I N CONFIRMING THE ADDITION ON ACCOUNT OF INTEREST U/S.244(A) AS PER 143(1) A INTIMATION DISREGARDING THE CONSISTENT POLICY FOLLOWED BY THE ASSESSEE IN THE PAST TO TREAT THE SA ME AS IN COME UPON REGULAR ASSESSMENT . THE COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE APPRECIATED THAT THE DEPARTMENT HAD ACCEPTED THE SAME IN EARLIER YEARS (2013) (153 TIJ (MUM) 257) & (2012) 349 ITR 309(MUM) . FOR THE ABOVE AND OTHER ADDITIONAL GROUNDS THAT MAY BE ADVANCED AND FURTHER EVIDENCE OR RECORDS THAT MAY BE PRODUCED A T THE TIME OF HEARING , THE APPELLANT PRAYS THAT THE APPEAL BE ALLOWED . 5 THE BRIEFLY STATED THE FACTS PERTAINING TO ITA NO.16/COCH2016 ARE AS FOLLOWS: THIS APPEAL IS DIREC TED AGAINST THE CIT(A)S ORDER DATED 18.11.2015 PERTAINING TO AY 1994 - 95. THE ORDER OF THE CIT(A) ARISE S OUT OF THE ORDER OF THE ITA NO S. 13 TO 16/C/2016 4 ACIT IN GIVING EFFECT TO THE JUDGMENT OF THE HONBLE KERALA HIGH COURT DELIVERED IN ASSESSEES OWN CASE IN ITA NO. 246 OF 2009 (JUDGMENT DATED 3.7.2009). THE HONBLE KERALA HIGH COURT ALLOWED THE APPEAL FILED BY THE REVENUE BY HOLDING THAT THE IS S U E IN QUESTION IS COVERED IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS K RAVINDRANANTHAN NAIR REPO RTED IN 295 ITR 228. THE HONBLE HIGH COURT OF KERALA REMANDED THE MATTER TO THE AO AND DIRECTED THE AO TO RECOMPUTE THE DEDUCTION U/S 80HHC OF THE I T ACT. THE ACIT, VIDE ORDER DATED 5.3.2012 GAVE EFFECT TO THE JUDGMENT OF THE HONBLE KERALA HIGH COURT BY COMPUTING THE DEDUCTION U/S 80HHC AT NIL. 6 AGGRIEVED BY THE ORDER OF THE ACIT IN COMPUTING THE DEDUCTION U/S 80HHC OF THE I T ACT, THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE COMPUTATION MADE BY THE AO. 7 AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. THE LD COUNSEL FOR THE ASSESSEE HAD SUBMITTED WRITTEN SUBMISSI ONS . THE CONTENT OF THE SAME READ AS FOLLOWS: CIT(A) HAD ALLOWED OUR APPEAL HOLDING THAT RAW CASHEW NUT(RCN) PROCESSING CHARGES DO NOT FORM PART OF TURNOVER FOR PURPOSE OF SECTION 80HHC . ITAT DISMISSED APPEAL OF THE REVENUE PLACING RELIANC E ON ITS ORDER IN TC USHA(ITA 637/(COCH) 95 DATED 12.3.1999 WHICH WAS SUBSEQUENTLY UPHELD BY KERALA HIGH COURT IN ITA 96 OF (1999) HOLDING THAT RCN PROCESSING CHARGES DO NOT FORM PART OF TURNOVER FOR 80HHC . IT IS BELIEVED THAT HIGH COURT ORDER ATTAINED FINALITY . AGAINST THIS ORDER, DEPT. MOVED HIGH COURT IN 2004 WHICH WAS ALLOWED BY HIGH COURT ON IO' JULY 2009 FOLLOWING SUPREME COURT DECISION IN CIT VS. K.RAVINDRANANTHAN NAIR (2007) 295 ITR 228 DATED 13TH NOVEMBER 2007 TO THE EFFECT THAT RCN PROCESSI NG CHARGES FORM PART OF TURNOVER FOR PURPOSE OF 80HHC . FROM THE ORDER OF ITA NO S. 13 TO 16/C/2016 5 HON ' BLE HIGH COURT IT IS CLEAR BEYOND AN IOTA OF DOUBT THAT THE ISSUE RAISED BY DEPT . WAS WHETHER ITAT WAS RIGHT IN EXCLUDING RCN PROCESSING CHARGES FROM TOTAL TURNOVER FOR 80HHC . NOW ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, KOLLAM WHILE RECTIFYING HIS EARLIER ORDER TO GIVE EFFECT TO THE ORDER OF HIGH COURT HAS GONE ONE STEP FURTHER TO EXCLUDE ALSO 90% OF 'GROSS PROCESSING CHARGES' FROM BUSINESS PROFITS FOR ARRIVING AT 'P ROFITS OF BUSINESS' FOR COMPUTING DEDUCTION U/S.80HHC THEREBY NULLIFYING THE BENEFITS ALREADY GRANTED BY AD IN THE ORIGINAL ASSESSMENT ORDER AS WELL AS SUBSEQUENT PROCEEDINGS GIVING EFFECT TO APPELLATE ORDERS. 80HHC BEING AN INCENTIVE PROVISRON HAS TO BE LIBERALLY CONSTRUED. THE LIMITED ISSUE RAISED BY THE REVENUE IN SUPREME COURT IN 295 ITR 228 WAS WHETHER PROCESSING CHARGES FORM PART OF TURNOVER FOR 80H HC TO WHICH APEX COURT DECIDED AFFIRMATIVELY. THERE ENDS THE MATTER. THE IS SUE OF 90% EXCLUSION WAS NEVER BEFORE SUPREME COURT AND HENCE BEFORE HIGH COURT . ACCORDINGLY HIGH COURT DECIDED ON THIS ISSUE ALONE OF INCLUSION IN THE TOT AL TURNOVER FOR 80HHC STRICTLY FOLLOWING SUPREME COURT DECISION . ASSESSING OFFICER OUGHT NOT TO HAVE OVER STEPPED HIS BOUNDARY TO ARTIFICIALLY WHITTLE DOWN THE BENEFIT TO ASSESSEE BY MISINTERPRETING JURISDICTIONAL HIGH COURT DECISION. IN FACT EXPLANATION {BAA} TO 80HHC APPLIED ONLY TO ITEMS THAT DO NOT HAV E ELEMENT OF TURNOVER VIDE [CBDT NOTIFICATION NO.621 DATED 19.12 . 1991 - {1992} 195 ITR {ST} 176] IT IS PERTINENT THAT IN {2016} 380 ITR 33 APEX COURT OBSERVED THAT IN {2007} 295 ITR 228, THIS COURT WAS NOT DECIDING ON WHETHER 90% OF DEDUCTION WAS TO BE M ADE FROM GROSS OR NET INCOME. OBSERVATIONS IN SUPREME COURT VERDICT ARE NOT BINDING PRECEDENTS - VAT & SERVICE TAX CASES - VOL . 21 DATED 20 . 3.2009 , PAGE 9. THE LD AR ALSO RELIED ON THE FOLLOWING DECISIONS: I ) CIT VS KAR MOBILES LTD 233 ITR 478 (KE) II ) AUROBINDO PHARMA LTD VS CIT 370 ITR 221 (T &AP) RELYING ON SUPREME COURT IN 343 ITR 89(PARA 16) 7.1 THE LD DR PRESENT, WAS DULY HEARD. 8 WE HAVE HEARD THE RIVAL SUBMISSION S AND PERUSED THE MATERIAL ON RECORD. IT IS THE CASE OF THE LD AR THAT THE DEPARTMENT HAD FILED APPEAL TO THE HONBLE KERALA HIGH COURT ONLY WITH REGARD TO THE ISSUE OF INCLUSION OF PROCESSING CHARGE S IN THE TOTAL TURNOVER FOR COMPUTATION OF DEDUCTION U/S 80H HC OF THE I T ITA NO S. 13 TO 16/C/2016 6 AC . ACCORDING TO THE LD AR , THE ACIT WHILE GIVING EFFECT TO THE JUDGMENT OF THE HONBLE HIGH COURT, HAS GONE A STEP FURTHER TO EXCLUDE ALSO 90% OF GROSS PROCESSING CHARGES FROM THE PROFITS OF TH E BUSINESS FOR COMPUTING DEDUCTION U/S 80HHC OF THE ACT. FROM THE MATERIAL ON RECORD, IT IS NOT CLEAR, WHAT WAS THE DEPARTMENTS CONTENTION BEFORE THE HONBLE KERALA HIGH COURT. IF THE SPECIFIC PLEA OF THE DEPARTMENT IS ONLY TO INCLUDE THE PROCESSING CHAR GES IN THE TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION U/S 80HHC OF THE ACT, THEN, NECESSARILY , THE ORDER OF THE ACIT, WHICH HAD REDUCED 90% OF THE GROSS PROCESSING CHARGES FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S 80HHC OF THE ACT , WOULD BE BEYOND THE SCOPE OF THE JUDGMENT OF THE HONBLE HIGH COURT OF KERALA. SINCE THERE IS NO CLARIFY WITH REGARD TO THE ISSUE RAISED BEFORE US, IN THE INTEREST OF JUSTICE AND EQUITY, WE ARE OF THE VIEW THAT THE MAT T ER NEEDS RECONSIDERATION BY THE AO. THE AO SHALL AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND SHALL PASS FRESH ORDER AS EXPEDITIOUSLY AS POSSIBLE. IT IS ORDERED ACCORDINGLY. 9 SINCE THE MAIN ISSUE OF COMPUTATION OF DEDUCTION U/S 80HHC IS RESTORED, THE ISSUE RAISED WITH REGARD T O COMPUTATION OF INTEREST U/S 234B IS ALSO RESTORED TO THE AO. THE AO SHAL L TAKE A DECISION IN THE MATTER AFTER HEARING ALL THE CONTENTIONS OF THE ASSESSEE. 10 IN THE RESULT, THE APPEAL IN ITA NO.16/COCH2016 IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO S. 13 TO 16/C/2016 7 ITA NO. 13 /COCH/2016 ; ITA NO.14/COCH/2016 & ITA NO.15/COCH2016 11 SINCE THE FACTS IN THESE APPEALS ARE IDENTICAL TO THE FACTS IN ITA NO.16/COCH/2016, WE RESTORE TH ESE APPEALS ALSO TO THE AO FOR DE - NOVA CONSIDERATION. IT IS ORDERED ACCORDINGLY. 12 IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. 1 3 TO SUM - UP, THE APPEALS FILED BY THE ALL ASSESSEES ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF AUG 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTAN T MEMBER JUDICIAL MEMBER COCHIN: DATED 11 TH AUG 2016 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN