Sri K Sarat Kumar, L/R of K Pattabhi Rama Reddy, Visakhapatnam V. The ACIT, Circle-1(1), Vinkonda

ITA 135/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50320 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 18-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Keywords: Period of limitation
• Section: 263; 154

Judgement Text

ITA NO135/V/2011 K. SARAT KUMAR, VSKP. 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 135 /VIZAG/ 20 11 ASSESSMENT YEAR : 2006 - 07 K. SARAT KUMAR L/R OF K. PATTABHI RAMA REDDY VISAKHAPATNAM VS. ACIT CIRCLE - 1(1) VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.ABBPK 8884E APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI TH.L. PETER, CIT(DR) ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT PASSED U/S 263 OF THE I.T. ACT (HEREIN AFTER CALLED AS AN ACT) SETTING ASIDE THE ASSESSMENT ORDER AND DIRECTING THE A.O. TO FINALISE THE ASSESSMENT DE-NOVO BY BRINGING THE FOREIGN PROJECT RESERVE ACCOUNT OF RS.5,52,46,648/- TO TAX IN THE IMPUGNED ASSESSMENT YEARS IN THE HANDS OF THE A SSESSEE, AS THE ASSESSEE HAS NOT FULFILLED THE TERMS & CONDITIONS O F SECTION 80 HHB OF THE I.T. ACT. THIS ORDER OF THE CIT IS ASSAILED BY THE ASSE SSEE ON VARIOUS GROUNDS STATING THEREIN THAT IN THE ASSESSMENT ORDER ASSESS ING OFFICER HAS EXAMINED THIS ISSUE AND THE CIT HAS SET ASIDE THE ASSESSMENT ORDER WITHOUT ESTABLISHING THAT THE VIEW TAKEN BY THE A.O. IS PER VERSE AND ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2. DURING THE COURSE OF HEARING OF THIS APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION THAT THE ASSESSE E HAD EXECUTED AN ELIGIBLE FOREIGN PROJECT UNDERTAKEN IN PURSUANCE OF A CONTRA CT ENTERED INTO BY HIM DURING THE ASSESSMENT YEAR 2001-02 AND AFTER CREATI NG A RESERVE AS REQUIRED U/S 80HHB(3)(II) OF THE ACT, ASSESSEE HAS CLAIMED D EDUCTION U/S 80HHB(1) OF THE ACT. HAVING EXAMINED THIS ISSUE, THE ASSESSING OFFICER HAS ALLOWED THE DEDUCTION TO THE ASSESSEE BUT THE CIT HAS SET ASIDE THE ORDER OF THE A.O. ITA NO135/V/2011 K. SARAT KUMAR, VSKP. 2 AFTER INVOKING HIS POWER U/S 263 OF THE ACT ON THE GROUND THAT THE FOREIGN RESERVE CREATED BY THE ASSESSEE WAS NOT UTILIZED FO R THE PURPOSE OF HIS BUSINESS DURING THE PERIOD OF 5 YEARS. THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80HHB OF THE ACT. 3. IN RESPONSE TO SHOW CAUSE NOTICE ISSUED TO THE A SSESSEE, THE ASSESSEE HAS REPRESENTED BEFORE THE CIT WITH THE SUBMISSIONS THAT RESERVE WAS CREATED IN THE PREVIOUS YEAR 2000-01 IN HIS BUSINES S TO FULFILL THE CONDITION STIPULATED IN CLAUSE (II) OF SUB-SECTION 3 OF SECTI ON 80HHB OF THE I.T. ACT. THERE AFTER THE CLAIM OF DEDUCTION U/S 80HHB WAS AL LOWED TO THE ASSESSEES. REJECTING THE CONTENTION OF THE ASSESSEE, THE CIT S ET ASIDE THE ASSESSMENT ORDER AFTER HAVING OBSERVED THAT THE AMOUNT CREDITE D TO THE AFORESAID RESERVE ACCOUNT WAS NOT UTILIZED BY THE ASSESSEE DURING THE PRESCRIBED PERIOD FOR THE PURPOSE OF HIS BUSINESS, THEREFORE, THE CLAIM OF DE DUCTION U/S 80HHB CANNOT BE ALLOWED. 4. AGGRIEVED, THE ASSESSEE HAD PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT EVEN ON MERIT, DEDUCTION A LLOWED TO THE ASSESSEE CANNOT BE WITHDRAWN ON NON-UTILISATION OF THE AMOUN T CREDITED TO THE AFORESAID RESERVE ACCOUNT. IN SUPPORT OF THIS CONT ENTION, HE HAS INVITED OUR ATTENTION TO THE PROVISIONS OF SUB-SECTION 4 OF SEC TION 80HHB AND THE PROVISIONS OF SUB-SECTION 5 OF SECTION 80HHD AND SU B-SECTION 4 OF SECTION 33AC AND SUBMITTED THAT AS PER SUB-SECTION 4 OF SEC TION 80HHB, DEDUCTION CAN ONLY BE WITHDRAWN ONCE IT IS NOTICED THAT BEFOR E THE EXPIRY OF 5 YEARS FROM THE END OF THE PREVIOUS YEAR IN WHICH THE DEDU CTION WAS ALLOWED UNDER SUB-SECTION (1), THE ASSESSEE UTILIZES THE AMOUNT C REDITED TO THE FOREIGN PROJECT RESERVE ACCOUNT FOR DISTRIBUTION BY WAY OF DIVIDENDS OR PROFITS OR FOR ANY OTHER PURPOSE WHICH IS NOT A PURPOSE OF THE BUS INESS OF THE ASSESSEE. THE DEDUCTION ORIGINALLY ALLOWED UNDER SUB-SECTION 1 SHALL BE DEEMED TO HAVE BEEN WRONGLY ALLOWED AND THE A.O. MAY NOTWITHSTANDI NG CONTAINED IN THIS ACT RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE FOR THE RELEVANT PREVIOUS YEAR AND MAKE THE NECESSARY AMENDMENT THEREIN. THE TIME LIMIT PRESCRIBED UNDER SUB-SECTION 7 OF SECTION 154 SHALL BE RECKONED FROM THE END OF THE PREVIOUS YEAR IN WHICH THE MONEY WAS SO UTILIZED. IN THE EN TIRE SECTION NOTHING HAS ITA NO135/V/2011 K. SARAT KUMAR, VSKP. 3 BEEN STATED ABOUT THE WITHDRAWAL OF EXEMPTION/DEDUC TION ON NON-UTILISATION OF THE FUNDS CREDITED TO THE FOREIGN PROJECT RESERV E ACCOUNT. THE LD. COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION TO T HE SUB-SECTION 5 OF SECTION 80HHD AND SUB-SECTION 4 OF SECTION 33 AC IN WHICH A SPECIFIC PROVISION WAS MADE FOR WITHDRAWAL OF THE DEDUCTION IF THE FUNDS C REDITED IN A RESERVE ACCOUNT WAS NOT UTILIZED FOR A SPECIFIED PURPOSE DU RING THE PRESCRIBED PERIOD. THEREFORE, WHEREVER THE LEGISLATURE INTENDED TO WIT HDRAW THE EXEMPTION OR DEDUCTIONS ORIGINALLY ALLOWED ON ITS NON-UTILISATIO N WITHIN A PRESCRIBED PERIOD, A SPECIFIC PROVISION WAS INSERTED IN THE RELEVANT S ECTION. IN SECTION 80HHB SINCE NO PROVISION HAS BEEN MADE WITH REGARD TO THE WITHDRAWAL OF DEDUCTION ON NON-UTILISATION OF THE AMOUNT CREDITED TO THE RE SERVE ACCOUNT WITHIN A SPECIFIED PERIOD, THE DEDUCTION ORIGINALLY ALLOWED CANNOT BE WITHDRAWAN ON ITS NON-UTILISATION. MOREOVER, THIS ISSUE IS A DEBATAB LE ONE AND IF ONE VIEW IS TAKEN BY THE ASSESSING OFFICER, THE ORDER OF THE A. O. CANNOT BE REVISED ONLY ON THE GROUND THAT CIT DOES NOT AGREE WITH IT. 5. THE LD. D.R. ON THE OTHER HAND BESIDES PLACING S TRONG RELIANCE UPON THE ORDER OF THE CIT, HAS SUBMITTED THAT UTILIZATIO N OF THE AMOUNT CREDITED TO THE RESERVE ACCOUNT WITHIN A PRESCRIBED PERIOD WAS A CONDITION PRECEDENT FOR THE ALLOWANCE OF DEDUCTION UNDER SUB-SECTION 1 OF S ECTION 80HHB OF THE ACT. IF THE FUNDS ARE NOT UTILIZED FOR THE PURPOSE OF BU SINESS WITHIN THE PRESCRIBED PERIOD, THE DEDUCTION ORIGINALLY ALLOWED HAS TO BE WITHDRAWN FOR WHICH NO SPECIFIC PROVISION IS REQUIRED TO BE INSERTED IN TH E ACT. SINCE THE ASSESSEE HAS NOT FULFILLED THE REQUISITE CONDITIONS FOR THE ALLO WANCE OF DEDUCTION, THE CIT HAS RIGHTLY SET ASIDE THE ORDER OF THE A.O. AND DIR ECTED HIM TO WITHDRAW THE DEDUCTIONS ORIGINALLY ALLOWED TO THE ASSESSEES. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACE D ON RECORD AND FROM THE CAREFUL PERUSAL OF THE ASSESSMENT ORDER, WE FIND TH AT THE ASSESSING OFFICER HAS ADJUDICATED THE ISSUE OF DEDUCTION U/S 80HHB OF THE ACT, THOUGH HE HAS NOT MADE A DETAILED DISCUSSION IN THIS REGARD IN HI S ASSESSMENT ORDER. MEANING THEREBY, THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THIS ISSUE. ITA NO135/V/2011 K. SARAT KUMAR, VSKP. 4 7. NOW THE QUESTION ARISE WHETHER THE VIEW TAKEN BY THE ASSESSING OFFICER IS PERVERSE AND ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE. WE HAVE ALSO EXAMINED THE ISSUE ON MERIT AND WE FIND THAT FOR CLAIMING THE DEDUCTION U/S 80HHB(1), THE ASSESSEE I S REQUIRED TO CREATE A RESERVE IN THE NAME OF FOREIGN PROJECTS RESERVE ACC OUNT AND CREDIT THE AMOUNT THEREIN AS PER PROVISIONS OF CLAUSE (II) OF SUB-SECTION 3 OF SECTION 80 HHB OF THE ACT. NO DOUBT THE DEDUCTION IS TO BE AL LOWED ONLY AFTER CREATION OF RESERVE WHICH IS TO BE UTILIZED BY THE ASSESSEE DURING THE PERIOD OF 5 YEARS NEXT FOLLOWING FOR THE PURPOSE OF HIS BUSINESS. TH E OTHER CONDITION FOR ALLOWING A DEDUCTION IS ALSO THAT THE RESERVE FUND SHOULD NOT BE UTILIZED FOR DISTRIBUTION BY WAY OF DIVIDENDS OR PROFITS. SUB-S ECTION 4 OF SECTION 80HHB FURTHER DEALS WITH THE CONSEQUENCES WHERE THE RESER VE IS UTILIZED FOR DISTRIBUTION BY WAY OF DIVIDENDS OR PROFITS. ACCOR DING TO THE SUB-SECTION 4, IF THE RESERVE IS UTILIZED AT ANY TIME BEFORE THE EXPI RY OF 5 YEARS FROM THE END OF THE PREVIOUS YEAR IN WHICH THE DEDUCTION UNDER SUB- SECTION 1 IS ALLOWED, THE DEDUCTIONS ORIGINALLY ALLOWED UNDER SUB-SECTION 1 S HALL BE DEEMED TO HAVE BEEN WRONGLY ALLOWED AND THE ASSESSING OFFICER MAY NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, RE-COMPUTE THE TOTA L INCOME OF THE ASSESSEE FOR THE RELEVANT PREVIOUS YEAR AND MAKE NECESSARY A MENDMENTS IN THE ASSESSMENT ORDER. THE LIMITATION PRESCRIBED UNDER SUB-SECTION 4 OF SECTION 154 SHALL BE RECKONED FROM THE END OF THE PREVIOUS YEAR IN WHICH THE MONEY WAS SO UTILIZED. IN SUB-SECTION 4, NOTHING HAS BEE N STATED WITH REGARD TO THE CONSEQUENCES IF THE RESERVE AMOUNT WAS NOT UTILIZED FOR THE PURPOSE OF BUSINESS. NO DOUBT PROPER UTILIZATION OF THE RESERV E AMOUNT FOR THE PURPOSE OF BUSINESS IS A CONDITION PRECEDENT FOR ALLOWING A DEDUCTION UNDER SUB- SECTION 1 OF SECTION 80HHB OF THE ACT. BUT FOR NON -UTILISATION OF THE RESERVE FUND FOR THE PURPOSE OF BUSINESS, NO CONSEQUENCES A RE AVAILABLE IN THE ENTIRE SECTION. 8. AT THE MOST IT CAN BE SAID THAT ON NON-FULFILLME NT OF A PARTICULAR CONDITION THE DEDUCTION ORIGINALLY ALLOWED UNDER SU B-SECTION 1 SHALL BE DEEMED TO HAVE BEEN WRONGLY ALLOWED BUT NOTHING HAS BEEN STATED IN THIS SECTION AS TO HOW THE RECTIFICATION IS TO BE MADE I N THAT ASSESSMENT YEAR IN WHICH THE DEDUCTION IS ALLOWED. THE TIME LIMIT FOR UTILIZATION OF THE RESERVE ITA NO135/V/2011 K. SARAT KUMAR, VSKP. 5 FUND WAS PROVIDED AS 5 YEARS. MEANING THEREBY, THE ASSESSEE IS AT LIBERTY TO UTILIZE THE FUNDS WITHIN 5 YEARS FOLLOWING THE ASSE SSMENT YEAR IN WHICH THE DEDUCTION WAS ALLOWED. WHEREAS, FOR RECTIFICATION UNDER SECTION 154 TIME LIMIT IS ONLY 4 YEARS. THEREFORE, ONCE THE ASSESSE E DOES NOT UTILIZE THE FUNDS UPTO THE PERIOD OF 5 YEARS, THOUGH THE DEDUCTION OR IGINALLY ALLOWED MAY BE DEEMED TO HAVE BEEN WRONGLY ALLOWED BUT RECTIFICATI ON U/S 154 IS NOT POSSIBLE AS TIME LIMIT HAS ALREADY EXPIRED. BUT IN CASE OF UTILIZATION OF THE FUND FOR DISTRIBUTION OF DIVIDEND OR PROFITS, THE RECTIFICAT ION IS POSSIBLE AS TIME STARTS FROM THE END OF THE PREVIOUS YEAR IN WHICH THE MONE Y WAS SO UTILIZED. THE WITHDRAWAL OF A DEDUCTION EARLIER ALLOWED IS SIMILA R TO A PENAL PROVISIONS FOR WHICH A SPECIFIC PROVISIONS ARE REQUIRED TO BE AVAI LABLE IN THE PARTICULAR SECTION. ONCE IT IS NOT AVAILABLE IN THE SECTION, THE WITHDRAWAL OF DEDUCTION CANNOT BE ALLOWED. WE HAVE ALSO EXAMINED THE PROVI SIONS OF SECTION 33AC AND 80HHD AND WE FIND THAT SUB-SECTION 5 OF SECTION 80HHD AND SUB-SECTION 4 OF 33 AC DEALS WITH THIS TYPE OF SITUATION WHERE THE RESERVE FUND WAS NOT UTILIZED WITHIN A SPECIFIED PERIOD FOR A SPECIFIC P URPOSE. BUT THE RELEVANT PROVISIONS IS CONSPICUOUSLY ABSENT IN SECTION 80HHB OF THE ACT. FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT PROVISIONS OF SECTION 80HHB, 80HHD & 33AC OF THE ACT AS UNDER: [DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM PRO JECTS OUTSIDE INDIA. 80HHB (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE BEI NG AN INDIAN COMPANY OR A PERSON (OTHER THAN A COMPANY) W HO IS RESIDENT IN INDIA INCLUDES ANY PROFITS AND GAINS DERIVED FROM THE BUS INESS OF (A) THE EXECUTION OF A FOREIGN PROJECT UNDERTAKEN BY TH E ASSESSEE IN PURSUANCE OF A CONTRACT ENTERED INTO BY HIM, OR (B) THE EXECUTION OF ANY WORK UNDERTAKEN BY HIM AND FOR MING PART OF A FOREIGN PROJECT UNDERTAKEN BY ANY OTHER PERSON IN PURSUANCE OF A CONTRACT ENTERED INTO BY SUCH OTHER PERSON. WITH THE GOVERNMENT OF A FOREIGN STATE OR ANY STATU TORY OR OTHER PUBLIC AUTHORITY OR AGENCY IN A FOREIGN STATE, OR A FOREIG N ENTERPRISE, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, [A DEDU CTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO (I) FORTY PERCENT THEREOF FOR AN ASSESSMENT YEAR BEGINN ING ON THE 1 ST DAY OF APRIL, 2001; (II) THIRTY PERCENT THEREOF FOR AN ASSESSMENT YEAR BEGIN NING ON THE 1 ST DAY OF APRIL, 2002; (III) TWENTY PER CENT THEREOF FOR AN ASSESSMENT YEAR BEGI NNING ON THE 1 ST DAY OF APRIL, 2003; ITA NO135/V/2011 K. SARAT KUMAR, VSKP. 6 (IV) TEN PERCENT THEREOF FOR AN ASSESSMENT YEAR BEGINNIN G ON THE 1 ST DAY OF APRIL, 2004. PROVIDED THAT THE CONSIDERATION FOR THE EXECUTION O F SUCH PROJECT OR, AS THE CASE MAY BE, OF SUCH WORK IS PAYABLE IN CONVERTIBLE FOREIGN EXCHANGE. (2) FOR THE PURPOSES OF THIS SECTION, -- (A) CONVERTIBLE FOREIGN EXCHANGE MEANS FOREIGN E XCHANGE WHICH IS FOR THE TIME BEING TREATED BY THE RESERVE BANK OF I NDIA AS CONVERTIBLE FOREIGN EXCHANGE FOR THE PURPOSES OF THE FOREIGN EXCHANGE R EGULATION ACT, 1973 (46 OF 1973), AND ANY RULES MADE THEREUNDER; (B) FOREIGN PROJECT MEANS A PROJECT FOR (I) THE CONSTRUCTION OF ANY BUILDING, ROAD, DAM, BR IDGE OR OTHER STRUCTURE OUTSIDE INDIA; (II) THE ASSEMBLY OR INSTALLATION OF ANY MACHINERY OR PLANT OUTSIDE INDIA; (III) THE EXECUTION OF SUCH OTHER WORK (OF WHATEVER NATURE) AS MAY BE PRESCRIBED. (3) THE DEDUCTION UNDER THIS SECTION SHALL BE ALLOW ED ONLY IF THE FOLLOWING CONDITIONS ARE FULFILLED, NAMELY:- (I) THE ASSESSEE MAINTAINS SEPARATE ACCOUNTS IN RE SPECT OF THE PROFITS AND GAINS DERIVED FROM THE BUSINESS OF THE EXECUTIO N OF THE FOREIGN PROJECT, OR, AS THE CASE MAY BE, OF THE WORK FORMING PART OF THE FOREIGN PROJECT UNDERTAKEN BY HIM AND, WHERE THE ASSESSEE IS A PERS ON OTHER THAN AN INDIAN COMPANY OR A CO-OPERATIVE SOCIETY, SUCH ACCOUNTS HA VE BEEN AUDITED BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB- SECTION (2) OF SECTION 288 AND THE ASSESSEE FURNISHES, ALONG WITH HIS RETURN O F INCOME, THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND V ERIFIED BY SUCH ACCOUNTANT: [(IA) THE ASSESSEE FURNISHES, ALONG WITH HIS RETUR N OF INCOME, A CERTIFICATE IN THE PRESCRIBED FORM FROM AN ACCOUNTA NT AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288, D ULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT, CERTIFYING THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION;] (II) AN AMOUNT EQUAL TO [SUCH PERCENTAGE OF THE PR OFITS AND GAINS AS IS REFERRED TO IN SUB-SECTION (1) IN RELATION TO THE R ELEVANT ASSESSMENT YEAR] IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE PREVI OUS YEAR IN RESPECT OF WHICH THE DEDUCTION UNDER THIS SECTION IS TO BE ALLOWED A ND CREDITED TO A RESERVE ACCOUNT (TO BE CALLED THE FOREIGN PROJECTS RESERVE ACCOUNT) TO BE UTILIZED BY THE ASSESSEE DURING A PERIOD OF FIVE YEARS NEXT FOLLOWING FOR THE PURPOSES OF HIS BUSINESS OTHER THAN FOR DISTRIBUTION BY WAY OF DIVIDENDS OR PROFITS; (III) . . (4) IF AT ANY TIME BEFORE THE EXPIRY OF FIVE YEARS FROM THE END OF THE PREVIOUS YEAR IN WHICH THE DEDUCTION UNDER SUB-SECT ION (1) IS ALLOWED, THE ITA NO135/V/2011 K. SARAT KUMAR, VSKP. 7 ASSESSEE UTILIZES THE AMOUNT CREDITED TO THE FOREIG N PROJECTS RESERVE ACCOUNT FOR DISTRIBUTION BY WAY OF DIVIDENDS OR PROFITS OR FOR ANY OTHER PURPOSE WHICH IS NOT A PURPOSE OF THE BUSINESS OF THE ASSESSEE, T HE DEDUCTION ORIGINALLY ALLOWED UNDER SUB-SECTION (1) SHALL BE DEEMED TO HA VE BEEN WRONGLY ALLOWED, AND THE [ASSESSING] OFFICER MAY, NOTWITHST ANDING ANYTHING CONTAINED IN THIS ACT, RECOMPUTED THE TOTAL INCOME OF THE ASS ESSEE FOR THE RELEVANT PREVIOUS YEAR AND MAKE THE NECESSARY AMENDMENT; AND THE PROVISIONS OF SECTION 154 SHALL, SO FAR AS MAY BE, APPLY THERETO, THE PERIOD OF FOUR YEARS PREVIOUS YEAR IN WHICH THE MONEY WAS SO UTILIZED. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS CHAPTER UNDER THE HEADING C. DEDUCTIONS IN RESPEC T OF CERTAIN INCOMES, NO PART OF THE CONSIDERATION OR OF THE INCOME COMPRISE D IN THE CONSIDERATION PAYABLE TO THE ASSESSEE FOR THE EXECUTION OF A FORE IGN PROJECT REFERRED TO IN CLAUSE (A) OF SUB-SECTION (1) OR OF ANY WORK REFERR ED TO IN CLAUSE (B) OF THAT SUB-SECTION SHALL QUALIFY FOR DEDUCTION FOR ANY ASS ESSMENT YEAR UNDER ANY SUCH OTHER PROVISIONS]. SECTION 80HHD: [ DEDUCTION IN RESPECT OF EARNINGS IN CONVERTIBLE FOR EIGN EXCHANGE. (1) WHERE AN ASSESSEE, BEING AN INDIAN COMPANY OR A PER SON (OTHER THAN A COMPANY) RESIDENT IN INDIA, IS ENGAGED IN TH E BUSINESS OF A HOTEL OR OF A TOUR OPERATOR, APPROVED BY THE PRESCR IBED AUTHORITY IN THIS BEHALF OR OF A TRAVEL AGENT, THERE SHALL, IN A CCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOW ED, [IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE (A) .. .. .. (5) WHERE ANY AMOUNT CREDITED TO THE RESERVE ACCOUN T UNDER CLAUSE (B) OF SUB-SECTION (1), -- (A) HAS BEEN UTILIZED FOR ANY PURPOSE OTHER THAN TH OSE REFERRED TO IN SUB-SECTION (4), THE AMOUNT SO UTILIZED; OR (B) HAS NOT BEEN UTILIZED IN THE MANNER SPECIFIED I N SUB-SECTION (4), THE AMOUNT NOT SO UTILIZED, SHALL BE DEEMED TO BE THE PROFITS,-- (I) IN A CASE REFERRED TO IN CLAUSE (A), IN THE YEAR IN WHICH THE AMOUNT WAS SO UTILIZED; OR (II) IN A CASE REFERRED TO IN CLAUSE (B), IN THE YEAR IMMEDIATELY FOLLOWING THE PERIOD OF FIVE YEARS SPEC IFIED IN SUB-SECTION (4), AND SHALL BE CHARGED TO TAX ACCORDINGLY. (5A) .. ITA NO135/V/2011 K. SARAT KUMAR, VSKP. 8 (6). (7). SECTION 33AC: (1) IN THE CASE OF AN ASSESSEE, BEING A GOVERNMENT COMP ANY OR A PUBLIC COMPANY FORMED AND REGISTERED IN INDIA WITH THE MAI N OBJECT OF CARRYING ON THE BUSINESS OF OPERATION OF SHIPS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOW ED A DEDUCTION OF AN AMOUNT NOT EXCEEDING FIFTY PER CENT OF PROFITS DERI VED FROM THE BUSINESS OF OPERATION OF SHIPS (COMPUTED UNDER THE HEAD PROFIT S AND GAINS OF BUSINESS OR PROFESSION AND BEFORE MAKING ANY DEDUC TION UNDER THIS SECTION), AS IS DEBITED TO THE PROFIT AND LOSS ACCO UNT OF THE PREVIOUS YEAR IN RESPECT OF WHICH THE DEDUCTION IS TO BE ALLOWED AND CREDITED TO A RESERVE ACCOUNT, TO BE UTILIZED IN THE MANNER LAID DOWN IN SUB-SECTION (2):] . . . (4) WHERE THE SHIP IS SOLD OR OTHERWISE TRANSFERRED (OTHER THAN IN ANY SCHEME OF DEMERGER) AFTER THE EXPIRY OF THE PERIOD SPECIFI ED IN CLAUSE (C) OF SUB- SECTION (3) AND THE SALE PROCEEDS ARE NOT UTILIZED FOR THE PURPOSE OF ACQUIRING A NEW SHIP WITHIN A PERIOD OF ONE YEAR FR OM THE END OF THE PREVIOUS YEAR IN WHICH SUCH SALE OR TRANSFER TOOK P LACE, [SO MUCH OF SUCH SALE PROCEEDS WHICH REPRESENT THE AMOUNT CREDITED T O THE RESERVE ACCOUNT AND UTILIZED FOR THE PURPOSES MENTIONED IN CLAUSE ( C) OF SUB-SECTION (3)] SHALL BE DEEMED TO BE THE PROFITS OF THE ASSESSMENT YEAR IMMEDIATELY FOLLOWING THE PREVIOUS YEAR IN WHICH THE SHIP IS SO LD OR TRANSFERRED.' 9. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS E XAMINED THIS ISSUE AND HAS ALLOWED THE DEDUCTIONS, THOUGH HE HAS NOT MADE A DETAILED DISCUSSION ON THIS ISSUE IN HIS ASSESSMENT ORDER. BUT IT DOES NO T MEAN THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND ON THIS ISSUE. MO REOVER, ON MERIT, WE FIND FORCE IN THE CONTENTION OF THE ASSESSEE THAT IN THE ABSENCE OF A SPECIFIC PROVISIONS, THE DEDUCTIONS ORIGINALLY ALLOWED CANNO T BE WITHDRAWAN EVEN ON NON-UTILISATION OF RESERVE FUNDS WITHIN A SPECIFIED PERIOD OF 5 YEARS. IN THE INSTANT CASE, IT WAS NOTICED AFTER THE EXPIRY OF 5 YEARS THE RESERVE WAS NOT UTILIZED. EVEN IF WE HOLD THAT FOR VIOLATION OF NO N-COMPLIANCE OF REQUISITE CONDITIONS, THE DEDUCTION ORIGINALLY ALLOWED IS DEE MED TO HAVE BEEN WRONGLY ALLOWED BUT EVEN THEN NO RECTIFICATION IS POSSIBLE IN THAT ASSESSMENT YEAR BECAUSE THE PERIOD OF LIMITATION PRESCRIBED U/S 154 IS ALREADY EXPIRED. MORE ITA NO135/V/2011 K. SARAT KUMAR, VSKP. 9 OVER, THE ISSUE APPEARS TO BE A DEBATABLE ONE AS TH E PROVISIONS OF SECTION 80HHB ARE NOT CLEAR AS TO HOW THE DEDUCTION ORIGINA LLY ALLOWED IS TO BE WITHDRAWN ON ITS NON-UTILISATION OF FUNDS. UNDER T HESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT HAS WRONGLY EXERCISED HIS JURISDICTION U/S 263 OF THE ACT. WE THEREFORE SET ASIDE HIS ORDER. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 13.7.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 13 TH JULY, 2011 COPY TO 1 K. SARAT KUMAR, FLAT NO.111, VAISAKHI RESIDENCY, FA COR LAYOUT, WALTAIR UPLANDS, VISAKHAPATNAM-3 2 ACIT, CIRCLE - 1(1), VISAKHAPATNAM 3 THE CI T, VISAKHAPATNAM 4 THE CIT (A) , VISAKHAP ATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM