M/S. FAMY CARE LTD, MUMBAI V. THE JCIT 2(1), MUMBAI

ITA 1800/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8640 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 16-11-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 12-03-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABAMNI KANTA NAYAK
• Section: 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, F, MUMBAI BEFORE SHRI S V MEHROTRA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1800/MUM/2008 (ASSESSMENT YEAR 2003-04) FAMY CARE LIMITED BRADY HOUSE, 3 RD FL, 12/14, VEER NARIMAN ROAD, FORT, MUMBAI-400001 PAN: AAACF-1663R APPELLANT VS JCIT RANGE-2(1), MUMBAI RESPONDENT APPELLANT BY : SHRI YOGESH THAR RESPONDENT BY : SHRI ABAMNI KANT A NAYAK O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31.12.2007 OF THE CIT(A) FOR THE ASSES SMENT YEAR 2003-04. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN ALLOWING DEDUCTION U/S 80HHC AFTER REDUCING DEDUCTION U/S 80IB FROM ADJUSTED PROFITS OF THE BUSINESS. ITA NO. 1800/MUM/2008 (ASSESSMENT YEAR 2003-04) 2 1.2 THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO RESTORE THE CALCULATION OF DEDUCTION U/S 80HHC BEFO RE REDUCING DEDUCTION U/S 80IB WITHOUT PREJUDICE TO GROUND 1 ABOVE GROUND NO.II 2.1 ON THE FACTS AN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN INCLUDING THE TURNOVER OF GOA AND DAMAN UNI TS IN THE TOTAL ADJUSTED TURNOVER 2.2 THE APPELLANT PRAYS THAT AO BE DIREC4ED TO DEDUCT FROM THE ADJUSTED TOTAL TURNOVER THE TURNOVE R OF GOA AND DAMAN UNITS.; 2.1. GROUNDS OF APPEAL NO.1 IS REGARDING DEDUCTION UNDER SECTION 80HHC AFTER REDUCING THE DEDUCTION U/S 80IB FROM THE ADJUSTED PROFIT OF BUSINESS. 2.2. WE HAVE HEARD THE LEARNED AR AS WELL AS THE LE ARNED DR AND CONSIDERED THE RELEVANT RECORD. THE LEARNED AR OF THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE ISSU E RAISED IN THIS GROUND IS SQUARELY COVERED BY THE DECISION OF THE HONOURABLE JURISDICTIONAL HIGH COURT IN THE CASE OF ASSOCIATED CAPSULES PRIVATE LIMITED V/S DCIT IN ITA NO.3036 OF 2010 ORDER DATED 10.01.2011. HE HAS POINTED OUT THAT T HE JURISDICTIONAL HIGH COURT HAS FRAMED THE QUESTION IN PARAGRAPH 1 OF THE JUDGMENT WHICH READS AS UNDER : ITA NO. 1800/MUM/2008 (ASSESSMENT YEAR 2003-04) 3 WHETHER THE TRIBUNAL WAS JUSTIFIED IN HOLDING THA T SECTION 80IA(9) OF THE IT ACT, 1961 MANDATES THAT THE AMOUNT OF PROFITS ALLOWED AS DEDUCTION UNDER SECTION 80IA(1) OF THE ACT HAS TO BE REDUCED FR OM THE PROFITS OF THE BUSINESS OF THE UNDERTAKING WHI LE COMPUTING DEDUCTION UNDER ANY OTHER PROVISIONS UNDER HEADING C IN CHAPTER A OF THE IT ACT, 1961 ? 2.3 UP TILL NOW THE ISSUE WAS DECIDED AGAINST THE A SSESSEE BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNA L IN THE CASE OF ROGINI GARMENT REPORTED IN 108 ITD 49, CHE NNAI. THE CIT(A) HAS DECIDED THIS ISSUE BY FOLLOWING THE DECI SION OF THE SPECIAL BENCH IN THE CASE OF ROGINI GARMENTS AS WELL AS THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNA L IN THE CASE OF ACIT V/S HINDUSTAN MINT AND AGRO PRODUCTS (P) LIMITED REPORTED IN 2009 (119) ITD 107(DEL). SINCE, THE I SSUE IS NOW COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE CITED SUPRA, WHEREIN THE HONOURABLE JURISDICT IONAL HIGH COURT HAS ADJUDICATED THE ISSUE AFTER CONSIDERING T HE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL AS WELL AS THE DECISION OF THE HON. DELHI HIGH COURT IN THE CASE OF M/S GR EAT EASTERN EXPORTS V/S CIT (TAX APPEAL NO.267 OF 2008) DECIDE D ON 29.11.2010, THE RELEVANT PARAGRAPHS OF THE JUDGMENT IS REPRODUCED BELOW: ITA NO. 1800/MUM/2008 (ASSESSMENT YEAR 2003-04) 4 39. IN THE RESULT, WE HOLD THAT SECTION 80IA(9) DO ES NOT AFFECT THE COMPUTABILITY OF DEDUCTION UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTER VIA , BUT IT AFFECTS THE ALLOWABILITY OF DEDUCTIONS COMPU TED UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPT ER VIA, SO THAT THE AGGREGATE DEDUCTION UNDER SECTION 80IA AND OTHER PROVISIONS UNDER HEADING C OF CHAPTER VIA DO NOT EXCEED 100% OF THE PROFITS OF TH E BUSINESS OF THE ASSESSEE. OUR ABOVE VIEW IS ALSO SUPPORTED BY THE C.B.D.T. CIRCULAR NO.772 DATED 23121998, WHEREIN IT IS STATED THAT SECTION 80IA(9) HAS BEEN INTRODUCED WITH A VIEW TO PREVENT THE TAXPAYERS FROM CLAIMING REPEATED DEDUCTIONS IN RESPECT OF THE SAME AMOUNT OF ELIGIBLE INCOME AND THAT TOO IN EXCESS OF THE ELIGIBLE PROFITS. THUS, T HE OBJECT OF SECTION 80IA(9) BEING NOT TO CURTAIL THE DEDUCTIONS COMPUTABLE UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTER, IT IS REASONABLE TO H OLD THAT SECTION 80IA(9) AFFECTS ALLOWABILITY OF DEDUCT ION AND NOT COMPUTATION OF DEDUCTION. TO ILLUSTRATE, IF RS.100/IS THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, RS.30/IS THE PROFITS ALLOWED AS DEDUCT ION UNDER SECTION 80IA(1) AND THE DEDUCTION COMPUTED AS PER SECTION 80HHC IS RS.80/, THEN, IN VIEW OF SECTI ON 80IA(9), THE DEDUCTION UNDER SECTION 80HHC WOULD BE RESTRICTED TO RS.70/, SO THAT THE AGGREGATE DEDUCTI ON DOES NOT EXCEED THE PROFITS OF THE BUSINESS. 40. ACCORDINGLY, THE APPEAL IS ALLOWED BY ANSWERING THE QUESTION RAISED HEREIN IN THE NEGATIVE, THAT IS , IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THERE SHALL BE NO ORDER AS TO COSTS. 2.4 . RESPECTFULLY FOLLOWING THE DECISION OF THE JURIS DICTIONAL HIGH COURT, WE DECIDE THIS ISSUE IN FAVOUR OF THE A SSESSEE. THE AO IS ACCORDINGLY DIRECTED NOT TO REDUCE THE DE DUCTION U/S 80IB WHILE COMPUTING THE DEDUCTION U/S 80HHC 2.5. GROUNDS OF APPEAL NO.1 IS ALLOWED. ITA NO. 1800/MUM/2008 (ASSESSMENT YEAR 2003-04) 5 3. GROUNDS OF APPEAL NO.2 IS AN ALTERNATIVE GROUND RAISED BY THE ASSESSEE. SINCE, WE HAVE DECIDED THE ISSUE N O.1 IN FAVOUR OF THE ASSESSEE, THEREFORE, THERE IS NO NEED TO ADJUDICATE UPON THE GROUNDS OF APPEAL NO.2. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH JAN, 2011 SD SD (S V MEHROTRA ) (VIJAY PAL R AO) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI, DATED 28 TH JAN 2011 SRL:25111 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI