ACIT, Circle - 35, Kolkata, Kolkata V. M/S. N.M. Exports, Kolkata

ITA 2018/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1532 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 03-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Section: 40A(3); 80IB

Judgement Text

1 ITA NO.2018/KOL/2014 M/S. N. M. EXPORTS, AY 2010-11 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE .., /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] I.T.A. NO. 2018 /KOL/2014 ASSESSMENT YEAR: 2010-11 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-35, KOLKATA. VS. M/S. N. M. EXPORTS (PAN: AACFN4966A) APPELLANT RESPONDENT DATE OF HEARING 29.06.2017 DATE OF PRONOUNCEMENT 13.09.2017 FOR THE APPELLANT SHRI SAURABH KUMAR, ADDL. CIT(DR) FOR THE RESPONDENT SHRI SUNIL SURANA, FCA ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-XX, KOLKATA DATED 09.07.2014 FOR AY 2010-11. 2. THE FIRST GROUND OF APPEAL OF REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN DIRECTING THE AO TO RECOMPUTE THE QUANTUM OF DEDUCT ION U/S. 80IB OF THE INCOME-TAX ACT (HEREINAFTER REFERRED TO AS THE ACT) ON THE PROFI TS OF ELIGIBLE UNDERTAKING INCLUDING THE EXPORT INCENTIVE. 3. LD. DR AT THE OUTSET ITSELF, DREW OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008-09 IN ITA NO. 2313/ KOL/2013 AND CO NO. 130/KOL/2013, WHEREIN THE TRIBUNAL VIDE PARA 6.2 HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE AND HELD THE ISSUE AGAINST IT IN ASSESSEES CO WHICH WAS PREFERR ED AGAINST THE DECISION BY THE LD. CIT(A), WHO ALSO DID NOT ACCEPT THE CLAIM OF THE AS SESSEE IN THIS REGARD. THE COORDINATE BENCH OF THIS TRIBUNAL AFFIRMED THE DECISION OF LD. CIT(A) BY HOLDING AS UNDER: 6.2. BASED ON THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE PROFITS DERIVED BY WAY OF INCENTIVES SUCH AS DEPB/DUTY DRAWBACK CANNOT BE CRE DITED AGAINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PROFITS AND LOSS ACCOUNT AN D THEY DO NOT FALL WITHIN THE EXPRESSION 2 ITA NO.2018/KOL/2014 M/S. N. M. EXPORTS, AY 2010-11 PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING UNDER SECTION 80IB OF THE ACT. THAT IS THE DUTY DRAWBACK AND DEPB BENEFITS DO NOT FORM PART OF THE NET PROFIT OF THE ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF DEDUCTION UNDER SECT ION 80I/80I/80IB OF THE ACT. IN VIEW OF THE AFORESAID DECISION OF THE TRIBUNAL, WE OVERTURN THE ORDER OF THE LD. CIT(A) AND THEREBY UPHOLD THE DECISION OF THE AO ON THIS I SSUE. 4. THE NEXT GROUND OF APPEAL IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.37,000/- AND RS. 2 LACS MADE BY THE AO BY APPLYING THE PROVISION OF SECTION 40A(3) OF THE ACT. 5. BRIEF FACTS OF THE CASE ARE THAT THE AO WHILE EX AMINING THE EXPENDITURE CLAIMED BY THE ASSESSEE TOOK NOTE OF THE FACT THAT THE ASSESSE E HAS CLAIMED AN EXPENDITURE OF RS.37,000/- WHICH THE ASSESSEE CLAIMED TO HAVE BEEN GIVEN TO MR . DEBU AMOUNTING TO RS.37,000/- WHICH THE AO HELD TO HAVE BREACHED THE LIMITS PRESCRIBED IN RESPECT OF CASH TRANSACTION IN SECTION 40A(3) OF THE ACT AND HE DISALLOWED IT. LIKEWISE, THE AO NOTED THAT ON 13.10.2009 THE ASSESSEE HAD MADE A PAYMENT OF RS. 2 LACS TO SHRI V IKRAMJI WHICH WAS ALSO HIT BY SECTION 40A(3)OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DELETE THE SAME. AGGRIEVED, THE REVE NUE IS BEFORE US. 6. ACCORDING TO THE ASSESSEE, BOTH THE PAYMENTS WER E MADE TO THE RESPECTIVE PARTIES WERE IN THE NATURE OF ADVANCE TO STAFF FOR INCURRIN G EXPENSES ON BEHALF OF ASSESSEE AND SO, IS NOT HIT BY SECTION 40A(3) OF THE ACT. AND THE ASSES SEE RELIED ON CLAUSE (K) OF RULE 6DD OF THE INCOME-TAX RULES, 1962 (HEREIN AFTER THE RULES) . WE NOTE THAT SAID CLAUSE STATES THAT WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGEN T WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON . ACCORDING TO THE ASSESSEE, THE ADVANCE PAYMENT MADE TO MR. DEBU AND MR. VIKRAMJI F OR PERFORMING DUTIES ON BEHALF OF THE ASSESSEE AND THEY WERE REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF THE ASSESSEE HAS TO BE GIVEN THE BENEFIT OF RULE 6DD(K) OF THE RULES TO GET OUT OF THE KEN OF SEC. 40A(3) OF THE ACT. WE NOTE THAT THE LD. CI T(A) HAS MADE A FINDING THAT THE PAYMENTS WERE IN THE NATURE OF PETTY CASH EXPENSES GIVEN TO THESE TWO EMPLOYEES FOR DISBURSAL OF THE CASH FOR GOODS OR SERVICES AND, TH EREFORE, HE MADE A FACTUAL FINDING THAT THE AMOUNT DISBURSED BY THESE TWO PERSON HAS NOT EXCEED ED ON A DAY TO DAY BASIS THE LIMIT PRESCRIBED U/S. 40A(3) OF THE ACT. THIS FACTUAL FIN DING OF THE LD. CIT(A) COULD NOT BE 3 ITA NO.2018/KOL/2014 M/S. N. M. EXPORTS, AY 2010-11 CONTROVERTED BEFORE US BY THE LD. DR. IN THE SAID FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE NOT INCLINED TO INTERFERE IN THE ORDER PASSED B Y THE LD. CIT(A) AND, THEREFORE, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY A LLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13.09.2017 SD/- SD/- (M. BALAGANESH) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13TH SEPTEMBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ACIT, CIRCLE-35, KOLKATA 2 RESPONDENT M/S. N. M. EXPORTS, 99A, PARK STREET, SIDDHA PARK, 3 RD FLOOR, KOLKATA-700 016. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, K OLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY