The ACIT,Bharuch Circle, Bharuch V. Heubach Colour Pvt.Ltd.,

ITA 2023/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5516 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-07-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 29-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Keywords: Depreciation; Set aside
• Section: 143(3); 80HHC; 10B; 143(1); 143(2); 6; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI MUKUL SHRAWAT, JM & SHRI A N PAHUJA,AM AM ITA NO.2023/AHD/2008 (ASSESSMENT YEAR:-2003-04) ASSISTANT COMMISSIONER OF INCOME-TAX, BHARUCH CIRCLE, BHARUCH V/S HEUBACH COLOUR PVT. LTD., ANKLESHWAR, DIST: BHARUCH [PAN: AAACH 2578 P] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI RAJEEV AGARWAL, DR ASSESSEE BY:- WRITTEN SUBMISSIONS O R D E R A N PAHUJA: THIS APPEAL BY REVENUE AGAINST AN ORDER DATED 13- 03- 2008 OF THE LD. CIT(APPEALS)-VI, BARODA, RAISES TH E FOLLOWING GROUNDS:- 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN LAW IN HOLDING THAT THE RE-COMPUTATION OF DEDUCT ION U/S 10B MADE BY THE AO U/S 154 WAS NOT A MISTAKE APPARENT FROM RECO RD. 2 THE CIT(A) HAS ERRED IN COMPLETELY DISREGARDING T HE FACT THAT THE ASSESSEE ITSELF, THROUGH ITS STATUTORY AUDITOR, HAD FURNISHED THE FIGURES OF TOTAL TURNOVER AT RS.1,14,05,06,773/- AND EXP ORT TURNOVER AT RS.1,04,88,19,003/- IN FORM NO.56G FILED ALONG WITH THE RETURN OF INCOME WHICH FIGURES WERE USED AS BENCH MARK FOR RE -COMPUTING THE DEDUCTION UNDER SECTION 10B OF THE ACT. 3 THE CIT(A) HAS ALSO ERRED IN HOLDING THAT THE ISS UE IS A DEBATABLE ONE NOT CAPTURE OF BEING RECTIFIED UNDER SECTION 154 OF THE ACT, WHEREAS, THE FACTS AND FIGURES SUPPLIED BY THE ASSESSEE DO NOT R EVEAL ANY DEBATABLE OR AMBIGUOUS INTERPRETATION. RELIEF CLAIMED IN APPEAL THE ORDER OF THE LD. CIT(A) IN THE INSTANT CASE BE SET ASIDE AND THAT OF THE AO BE RESTORED. 2 AT THE OUTSET, NONE APPEARED ON BEHALF OF THE ASS ESSEE. HOWEVER, THE LEARNED AR ON BEHALF OF THE ASSESSEE F ILED WRITTEN SUBMISSIONS AND REQUESTED THEREIN TO DECIDE THE APP EAL AFTER ITA NO.2023/AHD/2008 FOR AY 2003-04 HEUBACH COLOUR PVT. LTD., ANKLESHWAR 2 CONSIDERING THESE WRITTEN SUBMISSIONS. ACCORDINGLY , WE DECIDED TO DISPOSE OF THE APPEAL AFTER HEARING THE LD. DR. 3 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.9,72,340/-AFTER CLAIMING DED UCTION OF RS.15,61,77,848/- U/S 10B OF THE INCOME-TAX ACT, 19 61 [HEREINAFTER REFERRED TO AS THE ACT] AND SET OFF OF UNABSORBE D DEPRECIATION OF RS.2,76,47,303/-,FILED ON 28.11.2003 BY THE ASSESSE E, MANUFACTURING PIGMENTS AND CHEMICALS, ON BEING PROC ESSED ON 23.3.2004 U/S 143(1) WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT. SUBSEQUENTLY, THE ASS ESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 24-03-2006, DET ERMINING TOTAL INCOME OF RS.2,86,81,960/-, AFTER ALLOWING DEDUCTIO N OF RS.15,65,38,165/- U/S 10B OF THE ACT . WHILE COMPUT ING DEDUCTION U/S10B OF THE ACT, THE ASSESSING OFFICER[AO IN SHOR T] ADOPTED THE FIGURE OF TOTAL TURNOVER OF RS.111.10 CRORES I.E. A FTER EXCLUDING FREIGHT AND INSURANCE OF RS.2,94,78,526/- FROM TURN OVER OF RS.114.05 CRORES, EVEN WHEN THE ASSESSEE COMPANY IN ITS WORKI NG HAD ADOPTED THE TOTAL TURNOVER OF RS.114.05 CRORES. SINCE THE A SSESSEE ITSELF ADOPTED TURNOVER OF RS.114.05 CRORES, A NOTICE U/S . 154 WAS ISSUED BY THE AO, PROPOSING TO RECTIFY THE MISTAKE. IN RES PONSE, THE ASSESSEE SUBMITTED THAT THE DIFFERENCE BETWEEN THE TWO TURNOVERS WAS BECAUSE OF FREIGHT & TRANSIT INSURANCE ON EXPOR T & EXCISE DUTY DEDUCTED FROM TOTAL TURNOVER. SINCE TOTAL TURNOVER HAD NOT BEEN DEFINED U/S 10B OF THE ACT, THE SAME HAS TO BE BORR OWED FROM SECTION 80HHC. APPLYING THE PRINCIPLES OF MATCHING CONCEPT, THE AO HAD CORRECTLY ALLOWED DEDUCTION U/S 10B OF THE ACT IN THE ASSESSMENT ORDER, THE ASSESSEE PLEADED. HOWEVER, TH E AO DID NOT ACCEPT THE PLEA OF THE ASSESSEE AND ADOPTING THE TO TAL TURNOVER AS DISCLOSED BY THE ASSESSEE IN ITS WORKING, RESTRICT ED THE DEDUCTION U/S 10B OF THE ACT TO RS.15,24,92,145/-. ITA NO.2023/AHD/2008 FOR AY 2003-04 HEUBACH COLOUR PVT. LTD., ANKLESHWAR 3 4. ON APPEAL, THE LD. CIT(A) WHILE REFERRING TO DEC ISIONS IN THE CASE OF CIT VS. LAKSHMI MACHINE TOOL WORKS REPORTED IN 290 ITR 667(SC) , CIT VS. SUDARSHAN CHEMICALS INDUSTRIES LTD., 245 ITR 76 9 (BOM), CIT VS. CHLORIDE INDIS LTD. 256 ITR 625(CAL.)/ CIT VS. BHARAT EARTH MOVERS LTD.,268 ITR 232(KARNATAKA) AND IFB AGRO INDUSTRIES VS. DCIT,83 ITD 96 (CAL) IN THE CONTEXT OF PROVISIONS OF SEC. 80HHC OF THE ACT ,CONCLUDED T HAT THE ISSUE BEING DEBATABLE, THE ACTION OF AO IN INCLUDING FREIGHT A ND INSURANCE CHARGES IN TOTAL TURNOVER IN PROCEEDINGS U/S 154 OF THE ACT WAS NOT CORRECT . 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED DR MERELY S UPPORTED THE ORDER OF THE AO .ON THE OTHER HAND, THE LD. AR ON B EHALF OF THE ASSESSEE WHILE REFERRING TO THE DECISION OF THE ITA T SPECIAL BENCH IN THE CASE OF ITO VS. SAK SOFT LTD. (2009) 313 ITR (AT) 353 (CHENNAI) (SB) CONTENDED THAT THE ISSUE AS TO WHETH ER OR NOT FREIGHT AND INSURANCE WOULD FORM PART OF TOTAL TURNOVER WAS NOW DIRECTLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF CHENNAI SPECIAL BEN CH IN THE CASE OF ITO V SAK SOFT LTD., 313 ITR (AT) 353 (CHENNAI)(SB). THE VER Y FACT THAT A SPECIAL BENCH WAS CONSTITUTED TO RESOLVE THE ISSUE AS TO WHETHER OR NOT FREIGHT AND INSURANCE FORMED PART OF TOTAL TURNOVER FOR THE PURPOSE OF DE DUCTION U/S 10B, ITSELF SUGGESTED THAT ISSUE WAS DEBATABLE AND OUTSIDE THE PURVIEW OF RECTIFICATION U/S 154 OF THE ACT, IT WAS SUBMITTED. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. THE ISSUE BEFORE US IS AS TO WHETHER AFTER EXCLUDING FR EIGHT AND INSURANCE FORM THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 10B OF THE ACT IN THE ASSESSMENT ORDER U/S 143(3) OF THE ACT, THE AO CAN RESORT TO PROVISIONS OF SECTION 154 OF THE ACT IN ADOPTING THE FIGURE OF TOTAL TURNOVER REFLEC TED IN THE COMPUTATION FILED BY THE ASSESSEE ALONG WITH THE RETURN. IN COMPUTING THE D EDUCTION U/S 10B OF THE ACT, SINCE THE FREIGHT AND INSURANCE WAS EXCLUDED FROM T HE EXPORT TURNOVER AS DEFINED IN EXPLANATION 2(III) BELOW SECTION 10B OF THE ACT, THE AO ALSO EXCLUDED THE ITA NO.2023/AHD/2008 FOR AY 2003-04 HEUBACH COLOUR PVT. LTD., ANKLESHWAR 4 AFORESAID EXPENDITURE ON FREIGHT AND INSURANCE FROM THE TOTAL TURNOVER WHILE APPLYING THE FORMULA PRESCRIBED BY SUB-SECTION (4) OF SECTION 10B OF THE ACT. THE TERM TOTAL TURNOVER IS NOT DEFINED IN THE ACT. UN DISPUTEDLY, THERE WAS NO ELEMENT OF TURNOVER IN THE CASE OF FREIGHT OR INSURANCE ATT RIBUTABLE TO THE DELIVERY OF THE GOODS OUTSIDE INDIA; THESE RECEIPTS CAN AT BEST BE RECEIVED BY THE ASSESSEE AS REIMBURSEMENT OF SUCH EXPENSES INCURRED BY HIM. MER E REIMBURSEMENT OF EXPENSES CANNOT HAVE AN ELEMENT OF TURNOVER. IT IS ONLY IN RECOGNITION OF THIS POSITION IN THE DEFINITION OF 'EXPORT TURNOVER' IN SECTION 10B OF THE ACT THAT THE AFORESAID TWO ITEMS WERE ALSO EXCLUDED FROM TOTAL TURNOVER IN ORDER TO MAINTAIN PARITY. THE FACT THAT THE ASSESSEE HAD ADOPTED THE FIGURE OF TOTAL TURNOVER BY INCLUDING THE FREIGHT AND INSURANCE THEREIN, DOES N OT IMPLY THAT THE AO IS DEBARRED FROM APPLYING THE CORRECT PROVISIONS OF LA W. IT IS THE STATUTORY DUTY OF THE AO TO DETERMINE THE QUANTUM OF DEDUCTION IN ACCORDA NCE WITH LAW. WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT, TH E AO AFTER APPLYING HIS MIND TO THE FACTS OF THE CASE, EXCLUDED THE AMOUNT OF FR EIGHT AND INSURANCE. THEREAFTER IN PROCEEDINGS U/S 154 OF THE ACT, HE AGAIN REVERTE D BACK TO THE FIGURE ADOPTED BY THE ASSESSEE IN THE COMPUTATION FILED WITH THE RETU RN. THE TRUE SCOPE OF THE EXPRESSION 'TOTAL TURNOVER' WHICH IS NOT DEFINED IN SECTION 10B CAN NOT BE DETERMINED IN PROCEEDINGS U/S 154 OF THE ACT. IT I S SETTLED LAW THAT A MISTAKE APPARENT FROM THE RECORD IS ONE THAT IS PATENT, MAN IFEST AND SELF-EVIDENT AND WHICH DOES NOT REQUIRE ELABORATE DISCUSSION OF EVID ENCE OR ARGUMENT TO ESTABLISH IT. A PERUSAL OF SECTION 154 SHOWS THAT THE INTERVE NTION OR ASSUMPTION OF JURISDICTION UNDER SECTION 154 CAN BE MADE ONLY TO CORRECT AN ERROR OR A MISTAKE, WHICH WAS APPARENT AND NOT WHERE A DEBATABLE ISSUE COULD BE CONSIDERED. IN OTHER WORDS, A LOOK AT THE RECORD MUST SHOW THAT TH ERE HAS BEEN AN ERROR AND THAT ERROR MAY BE RECTIFIED. SECTION 154 OF THE ACT PROVIDES FOR RECTIFICATION O F MISTAKES, WHICH ARE APPARENT FROM THE RECORD. THE P HRASEOLOGY 'MISTAKE APPARENT FROM THE RECORD' HAS BEEN CONSIDERED BY SE VERAL JUDICIAL OPINIONS AND ALL THOSE JUDICIAL OPINIONS UNIFORMLY HELD THAT AN ERROR, WHICH IS NOT SELF-EVIDENT, AND HAS TO BE DETECTED BY A PROCESS OF REASONING, C AN HARDLY BE SAID TO BE AN ERROR APPARENT ON THE FACE OF THE RECORD. THE HONB LE APEX COURT HAVE ITA NO.2023/AHD/2008 FOR AY 2003-04 HEUBACH COLOUR PVT. LTD., ANKLESHWAR 5 CONSISTENTLY HELD THAT WHERE IN RELATION TO INTERPR ETATION OF A PROVISION THERE ARE CONCEIVABLY TWO OPINIONS, RECTIFICATION CANNOT BE R ESORTED TO. IN THIS CONNECTION, HONBLE SUPREME COURT HELD IN THE CASE OF T.S.BALAR AM, ITO VS. VOLKART BROTHERS& OTHERS,82 ITR 50(SC) THAT .IT WAS NOT OPEN TO THE INCOME-TAX OFFICER TO GO IN TO THE TRUE SCOPE OF THE RELEVANT PROVISIONS OF THE ACT IN A PROCEEDING UNDE R SECTION 154 OF THE INCOME- TAX ACT, 1961. A MISTAKE APPARENT ON THE RECORD MUS T BE AN OBVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH, CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY CONCEIVABLY BE TWO OPINIONS. AS SEEN EARLIER, THE HIGH COURT OF BOMBAY OPINED, THAT THE ORIGINAL ASSESSMENTS WERE IN ACCORDANCE WITH LAW THOUGH IN OUR OPINION THE HIGH COURT WAS NOT JUSTIFIED IN GOING INTO THAT QUESTION. IN SATYANARAYAN LAXMINARA N HEGDE V. MALLIKARJUN BHAVANAPPA TIRUMALE, THIS COURT WHILE SPELLING OUT THE SCOPE OF THE POWER OF A HIGH COURT UNDER ARTICLE 226 OF THE CONSTITUTION RU LED THAT AN ERROR WHICH HAS TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS WHERE THERE MAY CONCEIVABLY BE TWO OPINIONS CANNOT BE SAID TO BE AN ERROR APPARENT ON THE FACE OF THE RECORD. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE RECORD--SEE SIDHRAMAPPA ANDANNAPPA MANVI V. COM MISSIONER OF INCOME- TAX. THE POWER OF THE OFFICERS MENTIONED IN SECTION 154 OF THE INCOME-TAX ACT, 1961 TO CORRECT ' ANY MISTAKE APPARENT FROM THE REC ORD ' IS UNDOUBTEDLY NOT MORE THAN THAT OF THE HIGH COURT TO ENTERTAIN A WRIT PET ITION ON THE BASIS OF AN ' ERROR APPARENT ON THE FACE OF THE RECORD. ' 6.1. FOLLOWING THE DICTUM LAID DOWN IN T.S. BALA RAM, ITO'S CASE [1971] 82 ITR 50 (SC), THE HONBLE CALCUTTA HIGH COURT IN VIJAY MAL LYA V. ASSTT. CIT [2003] 263 ITR 41 HELD AS UNDER: 'SECTION 154 CAN BE INVOKED FOR RECTIFICATION OF A MISTAKE APPARENT FROM THE RECORD. THE MISTAKE CONTEMPLATED UNDER SECTION 154 MUST BE A MISTAKE APPARENT ON THE FACE OF THE RECORDS. IT MUST BE OBVIOUS, CLE AR AND PATENT. IT MUST NOT BE A MISTAKE, TO ESTABLISH WHICH A LONG AND ELABORATE RE ASONING AND ARGUMENTS IS REQUIRED ON POINTS ON WHICH THERE MAY CONCEIVABLY B E TWO OPINIONS. IT MUST NOT BE A DEBATABLE POINT OF LAW. IT MUST BE A PATENT AN D APPARENT MISTAKE IN THE ASSESSMENT. IT MUST NOT BE A QUESTION WITH REGARD T O WHICH TWO DIFFERENT VIEWS MAY BE POSSIBLE OR WITH REGARD TO WHICH TWO DIFFERE NT OPINIONS CAN BE FORMED. IT MUST BE A GLARING, OBVIOUS OR SELF-EVIDENT MISTAKE OF FACT OR A MISTAKE OF LAW, IN RESPECT OF WHICH THERE CANNOT BE ANY TWO OPINIONS A ND IT SHOULD NOT BE ONE IN ORDER TO ESTABLISH WHICH A LONG-DRAWN PROCESS OF AR GUMENT OR REASONING IS TO BE ADVANCED.' 6.2 IN THE LIGHT OF AFORESAID DECISIONS, IT IS APPARENT THAT IF THE ISSUE REQUIRES DEBATE AND DISCUSSION, IT CANNOT BECOME A SUBJECT-M ATTER OF RECTIFICATION UNDER ITA NO.2023/AHD/2008 FOR AY 2003-04 HEUBACH COLOUR PVT. LTD., ANKLESHWAR 6 SECTION 154 OF THE ACT BECAUSE UNDER THIS SECTION O NLY PATENT AND OBVIOUS MISTAKES OF LAW AND FACTS CAN BE RECTIFIED. IN VIEW OF DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF VOLKART BROTHERS& OTHE RS(SUPRA), IT IS NOT OPEN TO THE AO TO GO INTO THE TRUE SCOPE OF THE RELEVANT PR OVISIONS OF THE ACT IN PROCEEDINGS UNDER SECTION 154 OF THE INCOME-TAX ACT , 1961 . IT IS CLEAR FROM THE FACTS OF THE CASE THAT THERE WAS A DEBATABLE QUESTI ON RELATING TO INTERPRETATION OF THE EXPRESSION TOTAL TURNOVER IN THE CONTEXT OF PROVISIONS OF SEC.10B OF THE ACT. AS POINTED OUT BY THE LD. AR, THE VERY FACT THAT A SPECIAL BENCH WAS CONSTITUTED IN THE CASE OF SAK SOFT LTD.(SUPRA) TO RESOLVE THE CO NTROVERSY IN QUESTION, ITSELF SUGGESTS THAT ISSUE WAS DEBATABLE AND OUTSIDE THE PURVIEW OF RECTIFICATION U/S 154 OF THE ACT. 6.3 IN VIEW OF THE FOREGOING, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL IN ORDER TO CONTROVERT THE F INDINGS OF THE LD. CIT(A) NOR EVEN POINTED OUT ANY CONTRARY DECISION, WE ARE NOT INCLINED TO TAKE A DIFFERENT VIEW IN THE MATTER. THEREFORE, WE UPHOLD THE FINDIN GS OF THE LD. CIT(A) AND REJECT GROUNDS RAISED BY THE REVENUE. 7. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 30-7-2010 SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 30-7-2010 COPY OF THE ORDER FORWARDED TO: 1. HEUBACH COLOUR PVT. LTD., PLOT NOS. 9903-9010, P HASE-VI, GIDC INDL. ESTATE, ANKLESHWAR, DIST: BHARUCH 2. THE ACIT, BHARUCH CIRCLE, BHARUCH 3. CIT CONCERNED 4. CIT(A)-VI, BARODA 5. THE DR, BENCH-A, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD