UNITED APPARELS (INDIA), MUMBAI V. ASST.C.I.T.-20(3), MUMBAI

ITA 1887/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79279 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 12-05-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 07-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS NEERAJA PRADHAN
• Assessee Lawyers: DEVANG SHAH
• Section: 80HHC; 148

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ./I.T.A. NO. 1887/M/2011 ( AY: 2000 - 2001 ) UNITED APPARELS (INDIA), 34/141, LAXMI INDUSTRIAL ESTATE, NEW LINK ROAD, ANDHERI (W), MUMBAI - 400058. / VS. ACIT - 20(3), PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI - 400012. ./ PAN : AAAFU0702F ( / APPELLANT) .. ( / RESPONDENT ) / A PPELLANT BY : MR. DEVANG SHAH / RESPONDENT BY : MRS. NEERAJA PRADHAN, DR / DATE OF HEARING :30 .6.2014 / DATE OF PRONOUNCEMENT :30 .6.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 7.3.2011 IS AGAINST THE ORDER OF THE CIT (A) - 31, DATED 17.12.2010 FOR THE ASSESSMENT YEAR 2000 - 01. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT ERRED IN HOLDING THAT THE NOTICE DATED 8.7.2005 ISSUED BY THE AO UNDER SECTION 148 OF THE ACT FOR REOPENING THE ASSESSMENT OF THE ASSESSEE IS VALID. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN C ONFIRMING THE ORDER OF THE ASSESSING OFFICER WHEREIN THE DEDUCTION CLAIMED UNDER SECTION 80HHC OF THE ACT IS ALLOWED ONLY OF RS. 47,43,620/ - AS AGAINST THE CLAIM OF THE ASSESSEE OF RS. 60,98,709/ - . 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT (A) ERRED IN HOLDING THAT AS THERE IS LOSS IN EXPORT OF TRADING GOODS IT CANNOT BE ADDED TO THE PROFITS OF THE BUSINESS TO COMPUTE ADJUSTED PROFITS OF THE BUSINESS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) FAILED TO APPRECIATE THAT THE LOSS INCURRED IN EXPORT OF TRADING GOODS ARE EITHER TO BE CONSIDERED FOR CALCULATION OF ADJUSTED PROFITS OF BUSINESS AS WELL AS CALCULATION OF TOTAL DEDUCTION OR IF THE LOSS IS NOT TO BE CONSIDERED FOR CALCULATION OF ADJUSTED PROFITS THAN THE SAME SHOULD ALSO BE IGNORED FOR THE COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. 2 3. AT THE OUTSET, SHRI DEVANG SHAH, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE GROUNDS AND MENTIONED THAT GROUNDS NO.1, 3 AND 4 ARE NOT PRESSED. AFTER HEARING THE LD DR, THE SAID GROUNDS ARE DISMISSED AS NOT PRESSED . THAT LEAVES THE GROUND NO.2 TO BE ADJUDICATED BY THE TRIBUNAL. 4. REFERRING TO THE GROUND NO.2 , LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SAID GROUND RELATES T O WHETHER LOSSES ON EXPORT OF TRADING GOODS ARE TO BE ADDED TO PROFIT OF BUSINESS TO ARRIVE AT ADJUSTED PROFIT OF BUSINESS FOR COMPUTING DEDUCTION UNDER SECTION 80HHC. IN THIS REGARD, LD COUNSEL FILED COPY OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF CIT VS. V.M. SALGAONKAR & BROTHERS LTD [2012] 21 TAXMANN.COM 178 (BOM) AND ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. EXCEL INDUSTRIES LTD VIDE ITA NO.773/M/2009, DATED 23.12.2009 AND MENTIONED THAT AN IDEN TICAL ISSUE WAS ADJUDICATED AND DECIDED AGAINST THE REVENUE BY THE HONBLE HIGH COURT (SUPRA) AS WELL AS BY THE ITAT. BRINGING OUR ATTENTION TO THE SAID ORDER OF THE TRIBUNAL (SUPRA) , LD COUNSEL FOR THE ASSESSEE READ OUT THE RELEVANT PARAS 3 TO 6 IN SUPPO RT OF HIS CONTENTION. 5. ON THE OTHER HAND, LD DR RELIED ON THE OR DERS OF THE REVENUE AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDERS OF THE HONBLE HIGH COURT AND THE ITAT. ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL IN THE CASE OF EXCEL INDUSTRIES LTD (SUPRA), WE FIND THAT THE SAME IS RELEVANT FOR THE PROPOSITION THAT THE LOSS, BEING NEGATIVE PROFIT, IS ALLOWED FOR ADJUSTMENT OF THE BOOK PROFITS. CONSIDERING THE SAME, WE FIN D PARA 5 & 6 OF THE SAID ORDER OF THE TRIBUNAL ARE RELEVANT IN THIS REGARD AND FOR THE SAKE OF COMPLETENESS OF THIS ORDER THE SAID PARAS ARE REPRODUCED HERE UNDER: 5. AFTER HEARING BOTH THE SIDES, WE FIND THE CIT (A) WHILE ALLOWING THE APPEAL OF THE ASSESSEE HAS FOLLOWED THE DECISION OF HIS PREDECESSOR FOR THE AYS 1992 - 93 AND 2000 - 01. WE FIND THE CIT (A) IN HIS ORDER DATED 14.7.2008 FOR AY 1992 - 93 AT PARA 7 OF THE ORDER HAS HELD AS UNDER: 7. I HAVE CONSIDERED THE FACTS OF THE ISSUES AS WELL AS THE W RITTEN SUBMISSIONS MADE BY THE AR OF THE APPELLANT AND FIND MERIT IN THEM. WITHOUT GOING INTO THE TECHNICAL ISSUES, THIS ISSUE IS CLEARLY COVERED BY THE ORDER OF MY PREDECESSOR QUOTED BY THE AR OF THE APPELLANT IN THEIR FAVOUR. I ALSO FIND MERIT IN THE SUBMISSIONS OF THE APPELLANT RELYING ON THE RATIO OF THE DECISION OF THE SUPREME COURT IN THE CASE OF A.M. MOOSA VS. CIT (294 ITR 1) WHEREIN AFTER CONSIDERING THE PROVISIONS OF SECTION 80AB, IT HAD HELD AS UNDER: EVEN UNDER SECTION 80HHC(3)(C)(I) THE PRO FIT IS TO BE THE ADJUSTED PROFIT OF BUSINESS. THE ADJUSTED PROFIT OF THE BUSINESS MEANS A PROFIT AS 3 REDUCED BY THE PROFIT DERIVED FROM BUSINESS OF EXPORTS OUT OF INDIA OF TRADING GOODS . THUS, IN CALCULATING THE PROFITS UNDER SUB - SECTION (3)(C)(I) ONE NECE SSARILY HAS TO REDUCE THE PROFITS UNDER SUB - SECTION (3)(C)(I I ) . AS SEEN ABOVE, THE TERM PROFIT MEANS POSITIVE PROFIT. THUS, IF THERE IS LOSS THEN THE LOSSES IN EXPORT OF TRADING GOODS HAVE TO BE ADJUSTED. THEY CANNOT BE IGNORED . IN VIEW OF THE ABO VE, IT IS HELD THAT THE LOS DERIVED FROM EXPORT OF TRADED GOODS SHOULD BE ADDED BACK TO THE PROFITS OF THE BUSINESS WHILE COMPUTING THE ADJUSTED PROFITS OF THE BUSINESS AS REQUIRED BY CLAUSE (B) OF THE EXPLANATION BELOW 80HHC(3) FOR ARRIVING AT THE AMOUNT OF DEDUCTION ELIGIBLE UNDER SUB - SECTION 3(C)(I). HENCE, THIS GROUND OF APPEAL IS ALLOWED. 6. THE LD DR COULD NOT CONTROVERT THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT NO APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT (A) FO R AYS 1992 - 93, WHICH HAS BEEN FOLLOWED IN 2000 - 01. THUS, THE DEPARTMENT HAS ACCEPTED THE ORDER OF THE CIT (A) ON THE SAME ISSUE FOR THE AYS 1992 - 93 AND 2000 - 01. IN ABSENCE OF ANY CONTRARY MATERIAL AGAINST THE ORDER OF THE CIT (A) FOR THE AYS 1992 - 93 AND 2000 - 01 AND CONSIDERING THE FACT THAT THE CIT (A) IN THE IMPUGNED ASSESSMENT YEAR HAS FOLLOWED THE ORDERS OF HIS PREDECESSOR FOR THE ABOVE ASSESSMENT YEARS WHICH HAS ATTAINED FINALITY, WE DO NOT FIND ANY INFIRMITY IN THE SAME. ACCORDINGLY, THE SAME IS UPH ELD. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 6. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE, WE ARE OF THE OPINION THAT THE DECISION OF THE CIT (A) ON THIS ISSUE IS REQUIRED TO BE REVERSED. ACCORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED . 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2014. S D / - S D / (SANJAY GARG ) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 30/06/2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 4 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI