M/S MEGA FINE PHARMA P. LTD, V. THE ITO WD-4(2)(4),

ITA 1600/MUM/2005

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6716 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 18-07-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 28-02-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Question of law
• Section: 80HHC; 80IB; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1600/MUM /2005 (ASSESSMENT YEAR: 2001-02) M/S. MEGA FINE PHARMA P. LTD., MEGAFINE PHARMA P. LTD., 4 TH FLOOR, SETHNA. 55, M.K. ROAD, MARINE LINES, MUMBAI -400 002 ....... APPELLANT VS INCOME-TAX OFFICER WD 4(2)(4), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ..... RESPONDENT PAN: AAACM 7472 M APPELLANT BY: SHRI C.V. JAIN RESPONDENT BY: SHRI S.K. SINGH O R D E R PER R.S. PADVEKAR, JM THIS APPEAL WAS EARLIER DISPOSED OFF BY THE TRIBUNA L VIDE ORDER DATED 4.1.2007. THE ASSESSEE CHALLENGED THE ORDER OF THE TRIBUNAL IN THE HONBLE HIGH COURT BY FILING THE APPEAL BEING I TA NO.603 OF 2009. THE HONBLE HIGH COURT HAS FRAMED THE FOLLOWING SUB STANTIAL QUESTION OF LAW:- A) WHETHER DEDUCTION AS COMPUTED UNDER SECTION 80I B SHOULD BE REDUCED FROM THE DEDUCTION COMPUTED UNDER SECTIO N 80HHC ? B) WHETHER DEDUCTION AS COMPUTED UNDER SECTION 80IB SHOULD BE REDUCED FROM THE ELIGIBLE PROFIT AND GAINS OF BU SINESS BEFORE DEDUCTION UNDER SECTION 80HHC CAN BE COMPUTE D ? ITA 1600/MUM/2005 M/S. MEGA FINE PHARMA P. LTD. 2 C) WHETHER SECTION 80HHC IS A SEPARATE CODE WITHIN ITSELF AND DEDUCTION WORKED OUT AS PER THE PROVISIONS OF S ECTION 80HHC ITSELF AND THAT NOTHING CONTAINED IN CLAUSE ( 9) OF SECTION 80IA CAN BE READ TO AMEND THE PROVISIONS OF SECTION 80HHC ? AND DIRECTED THE TRIBUNAL TO RECOMPUTE THE DEDUCTIO N IN THE LIGHT OF THE DECISION OF THE HONBLE HIGH COURT IN THE CASE ASSOCIATED CAPSULES PRIVATE LIMITED VS. DCIT IN ITA 3036 OF 20 10 DATED 10.1.2011. AS PER THE DIRECTIONS OF THE HONBLE HI GH COURT THE APPEAL WAS RESTORED AND HEARD. IN THE APPEAL THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND:- 1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT (A) HAS ERRED IN UPHOLDING THE REDUCTIO N MADE BY THE LEARNED ASSESSING OFFICER (LD. AO) IN RESPEC T OF CLAIM OF DEDUCTION MADE BY THE APPELLANT U/S.80HHC ON ACC OUNT OF THE PROCEEDS OF DEPB AND DEDUCTION ALLOWED U/S.8 0IB BY RELYING ON IRRELEVANT FACTS AND WITHOUT PROPERLY CONSIDERING THE FACTS ON RECORD. THE LEARNED CIT (A ) HAS FAILED TO APPRECIATE THAT THE LD. AO HAS ERRONEOUSL Y REDUCED THE AMOUNT OF DEPB AND THE AMOUNT OF DEDUCT ION ALLOWED U/S.80IA / 80IB FROM THE PROFITS OF BUSINES S FOR COMPUTING DEDUCTION U/S.80HHC(3). 2. BRIEFLY STATED THE FACTS ARE AS UNDER. THE ASSE SSEE-COMPANY IS IN THE MANUFACTURING & DEALING IN BULK DRUGS & CHEM ICALS. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y. 20 01-02 AND CLAIMED THE DEDUCTION U/S.80IA AND 80HHC. THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80IA AT RS 62,22,799/-. THE A.O. WAS OF THE OPINION THAT THE PROFIT CONSIDERED FOR CLAIMING THE DEDUCTI ON U/S.80IA HAS TO BE EXCLUDED FOR COMPUTING THE DEDUCTION U/S.80HHC I N VIEW OF THE ITA 1600/MUM/2005 M/S. MEGA FINE PHARMA P. LTD. 3 PROVISIONS OF SECTION (9) OF SECTION 80IA. HE, THE REFORE, WORKED OUT THE ALLOWABLE DEDUCTION U/S.80HHC AFTER EXCLUDING THE P ROFIT, WHICH WAS CONSIDERED FOR CLAIMING THE DEDUCTION U/S.80IA. NO W, THE HONBLE HIGH COURT HAS DIRECTED TO RE-COMPUTE THE DEDUCTION IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF ASSOCIATED CAPSULES PRIVATE LIMITED (SUPRA). 3. IN THE CASE OF ASSOCIATED CAPSULES PRIVATE LIMIT ED (SUPRA) THE IDENTICAL ISSUE HAS BEEN CONSIDERED BY THEIR LORDSH IPS AND HELD AS UNDER:- 39. IN THE RESULT, WE HOLD THAT SECTION 80IA(9) DO ES NOT AFFECT THE COMPUTABILITY OF DEDUCTION UNDER VARIOUS PROVIS IONS UNDER HEADING C OF CHAPTER VI-A, BUT IT AFFECTS T HE ALLOWABILITY OF DEDUCTIONS COMPUTED UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTER VI-A, SO TH AT THE AGGREGATE DEDUCTION UNDER SECTION 80IA AND OTHER PROVISIONS UNDER HEADING C OF CHAPTER VI-A DO NOT EXCEED 100% OF THE PROFITS OF THE BUSINESS OF THE ASSESSEE . OUR ABOVE VIEW IS ALSO SUPPORTED BY THE CBDT CIRCULAR N O.772 DATED 23.12.1998, WHEREIN IT IS STATED THAT SECTION 80IA(9) HAS BEEN INTRODUCED WITH A VIEW TO PREVENT THE TAX- PAYERS FROM CLAIMING REPEATED DEDUCTIONS IN RESPECT OF THE SAME AMOUNT OF ELIGIBLE INCOME AND THAT TOO IN EXCESS OF THE ELIGIBLE PROFITS. THUS, THE OBJECT OF SECTION 80IA (9) BEING NOT TO CURTAIL THE DEDUCTIONS COMPUTABLE UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTER, IT IS REAS ONABLE TO HOLD THAT SECTION 80IA(9) AFFECTS ALLOWABILITY OF D EDUCTION AND NOT COMPUTATION OF DEDUCTION. TO ILLUSTRATE, IF RS 100/- IS THE PROFITS OF THE BUSINESS OF THE UNDERTA KING, RS 30/- IS THE PROFITS ALLOWED AS DEDUCTION UNDER SECT ION 80IA(1) AND THE DEDUCTION COMPUTED AS PER SECTION 8 0HHC IS RS 80/-, THEN, IN VIEW OF SECTION 80IA(9), THE D EDUCTION ITA 1600/MUM/2005 M/S. MEGA FINE PHARMA P. LTD. 4 UNDER SECTION 80HHC WOULD BE RESTRICTED TO RS 70/-, SO THAT THE AGGREGATE DEDUCTION DOES NOT EXCEED THE PR OFITS OF THE BUSINESS. 4. WE, ACCORDINGLY, DIRECT THE A.O. TO RE-COMPUTE T HE DEDUCTION U/S.80HHC IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE HONBLE HIGH COURT IN THE CASE OF ASSOCIATED CAPSULES PRIVATE LI MITED (SUPRA), WHEREBY, THE AGGREGATE DEDUCTION DOES NOT EXCEEDS T HE PROFIT OF THE BUSINESS. ACCORDINGLY, WE SET ASIDE THE OF THE LD. CIT (A) AND ASSESSEES APPEAL IS ALLOWED IN THE ABOVE TERMS. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 2ND JULY 2011. SD/- SD/- ( B. RAMAKOTAIAH ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 22ND JULY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)4, MUMBAI. 4) THE CIT-4, MUMBAI. 5) THE D.R. J BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 1600/MUM/2005 M/S. MEGA FINE PHARMA P. LTD. 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 18.07.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 20.07.2011 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/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER