MANEK METAL (I) P. LTD, MUMBAI V. ITO 4(2)(4), MUMBAI

ITA 1325/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7550 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 26-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA; T T JACOB
• Assessee Lawyers: A H DALAL
• Section: 22; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI R.S.PADVEKAR, JM ITA NO.1325/MUM/2009 : ASST.YEAR 2004-2005 M/S.MANEK METAL (INDIA) PRIVATE LIMITED 262, K-1, INSIDE MEHTA ESTATE THAKURDWAR MAIN ROAD MUMBAI 400 002. PA NO.AABCM8872A. VS. THE INCOME TAX OFFICER WARD 4(2)(4) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.H.DALAL RESPONDENT BY : S/SHRI SATISHCHANDRA AND T.T.JACOB O R D E R PER : R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 13.8.2008 I N RELATION TO THE ASSESSMENT YEAR 2004-2005. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST REDUCTION IN THE AMOUNT OF DEDUCTION U/S.80HHC FROM RS.5,01,996 CLAIMED BY THE ASSESSEE TO RS.27,061 AS APPROVED BY THE LEARNED CIT(A). BRIEFLY STATED THE FACTS OF THE CASE ARE THAT ASSESSEE HAD BUSINESS LOSS OF RS.1,56,61,292 WITH TOTAL TURNOVER AT RS.8,84,99,507 AND EXPORT TURNOVER (FOB) AT RS.7,97,44,455. THE AS SESSEE CLAIMED DEDUCTION BY PROPORTIONATELY REDUCING THE BUSINESS LOSS WITH EXP ORT TURNOVER TO TOTAL TURNOVER AND THEREAFTER ADDING PROPORTIONATE INCENTIVES. THE ASSESSING OFFICER HOWEVER COMPUTED THE DEDUCTION BY CONSIDERING THE BUSINESS LOSS OF RS.1.56 CRORE WITHOUT PROPORTIONATELY REDUCING IT. THE LEARNED CIT(A) APP ROVED THE ACTION OF THE ASSESSING OFFICER BY TAKING NOTE OF PROVISO TO SUB- SECTION (3) OF SECTION 80HHC. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE IS A MANUFACTURING EXPORTER C OVERED WITHIN CLAUSE (A) TO ITA NO.1325/MUM/2009 M/S.MANEK METAL (INDIA) PVT. LTD. 2 SECTION 80HHC(3). BOTH THE SIDES ARE IN AGREEMENT THAT THE ONLY CONTROVERSY RAISED IN THIS APPEAL IS TO DETERMINE WHETHER OR NO T THE BUSINESS LOSS SHOULD BE PROPORTIONATELY REDUCED U/S.80HHC(3)(A). THE RELEVA NT PART OF CLAUSE (A) IS AS UNDER:- (3) FOR THE PURPOSES OF SUB-SECTION (1) (A) WHERE THE EXPORT OUT OF INDIA IS OF GOODS OR MERCHANDISE MANUFACTURED [OR PROCESSED] BY THE ASSESSEE, THE PR OFITS DERIVED FROM SUCH EXPORT SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH GOODS BEARS TO THE TOTA L TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE; 4. A BARE PERUSAL OF THE ABOVE PROVISION REVEALS TH AT THE FIGURE TO BE CONSIDERED FOR CALCULATING DEDUCTION U/S.80HHC IS THE PROPORTI ONATE PART OF PROFITS (LOSS) IN THE RATIO OF EXPORT TURNOVER IN RESPECT OF GOODS E XPORTED TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. INSERTION OF FIRST, SECOND AND THIRD PROVISO BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 WITH RET ROSPECTIVE EFFECT FROM 1.4.1998 ARE TOWARDS THE FURTHER ADJUSTMENT OF DED UCTION ON ACCOUNT OF INCENTIVES, WHICH ARE NOT DISPUTED IN THIS APPEAL. THE LANGUAGE OF CLAUSE (A) TO SUB-SECTION (3) IS CRYSTAL CLEAR ACCORDING TO WHICH THE AMOUNT OF P ROFITS NEEDS TO BE CONSIDERED ON A PROPORTIONATE BASIS. SINCE THE ASSESSING OFFICER HAD ADDED 90% OF ONLY INCENTIVES IN THE RATIO OF EXPORT TURNOVER TO TOTAL TURNOVER TO THE BUSINESS PROFIT (LOSS) WITHOUT PROPORTIONATELY REDUCING THE EARLIER FIGURE AS PER CLAUSE (A), THE COURSE ADOPTED IN OUR CONSIDERED OPINION, IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (3) OF SECTION 80HHC. FROM THE WORK ING OF THE ASSESSEE, AS REPRODUCED IN THE IMPUGNED ORDER, IT IS SEEN THAT THE ASSESSEE HAD PROPORTIONATELY REDUCED BOTH THE INCENTIVES AS WELL AS BUSINESS LOS S FOR WORKING OUT THE DEDUCTION U/S.80HHC. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT BRING TO OUR NOTICE ANY PRECEDENT JUSTIFYING THE VIEW TAKEN BY THE AUTH ORITIES BELOW. WE, THEREFORE, ITA NO.1325/MUM/2009 M/S.MANEK METAL (INDIA) PVT. LTD. 3 OVERTURN THE IMPUGNED ORDER ON THIS ISSUE AND DIREC T THE ASSESSING OFFICER TO COMPUTE DEDUCTION IN ACCORDANCE WITH OUR AFORE-NOTE D OBSERVATIONS. 5. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THIS 22 ND DAY OF FEBRUARY, 2010. SD/- SD/- ( R.S.PADVEKAR ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI : 22 ND FEBRUARY, 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) XX, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI. ITA NO.1325/MUM/2009 M/S.MANEK METAL (INDIA) PVT. LTD. 4 DATE INITIAL 1. DRAFT DICTATED ON 18.02.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 18.02.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER. *