WATSON PHARMA P. LTD ( SUCCESSOR TO SEKHSARIA CHEMICALS LTD ON AMALGAMATION W.E.F 01-04-2006), MUMBAI V. DCIT CIR 3(3), MUMBAI

ITA 2035/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7314 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2004-2005
• Appeal Filed On: 02-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI A.L.GEHLOT, AM & SMT. P.MADHAVI DEVI, JM I.T.A.NO.2035/MUM/2009 - A.Y 2004-05 WATSON PHARMA PRIVATE LTD. [SUCCESSOR TO SEKHSARIA CHEMICALS LTD ON AMALGAMATION W.E.F. 1-4-06] 301, CORPORATE ENCLAVE, B.D.SAWANT MARG, CHAKKALA, ANDHERI [E], MUMBAI 400 099. PAN NO.AAACW 6074 D DY. COMMISSIONER OF I.T., CIRCLE 3(3), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. PARAS SAVLA. REVENUE BY : MR. MOHD. USMAN. O R D E R PER P.MADHAVI DEVI, JM: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST CI T(A)S ORDER DATED 22/9/2008. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL- 1. DEDUCTION U/S.80HHC - (A)(I) THE LD. CIT[A] ERRED IN LAW AND FACTS IN UPHOLDING THE ORDER OF THE LD. AO IN REDUCING THE CLAIM OF DEDUCTION U/S.8 0HHC BY MAKING VARIOUS ADJUSTMENTS. THE REASONS GIVEN BY HI M FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISIONS O F LAW. (II) THE LD. CIT[A] FAILED TO APPRECIATE THAT THE ASSESSEE BEING MANUFACTURER EXPORTING MORE THAN 95% OF ITS PRODUCT S IS ELIGIBLE FOR DEDUCTION U/S.80HHC ON THE ACTUAL PROF IT FROM THE EXPORTS INCLUDING DEPB. (B) EXCHANGE FLUCTUATION 2 THE LD. CIT[A] ERRED IN LAW AND FACTS IN CONFIRMING THE ORDER OF THE LD. AO IN REDUCING THE ASSESSEE S CLAIM U/S.80HHC OF THE ACT BY TREATING EXCHANGE FLUCTUATION RS.50,76,278/- AS INC OME IN THE NATURE SPECIFIED UNDER EXPLN. [BAA] U/S.80HHC OF THE ACT A ND REDUCING 90% THEREOF FROM PROFITS & GAINS OF BUSINESS TO ARRIVE AT PROFIT OF THE BUSINESS. DEPB BENEFIT RS.1,24,20,482/- THE LD. CIT[A] FAILED TO PASS SPEAKING ORDER THAT DEPB BENEFIT IS INCOME U/S.29(IV) OF THE ACT AND WOULD NOT FALL WIT HIN THE AMBIT OF WORDS ANY OTHER RECEIPTS OF A SIMILAR NATURE AND HE NCE CANNOT BE EXCLUDED FROM PROFIT OF BUSINESS COMPUTED UNDER CLA USE [BAA] TO SEC.80HHC OF THE ACT. 2. THE HON'BLE CIT[A] ERRED IN LAW AND FACTS IN CONFIRMING ORDER OF LD. AO REJECTING THE CLAIM FOR DEDUCTION OF EXPE NSES OF RS.6,08,085 ACCOUNTED IN A.Y 2005-06 AS PRIOR PERIOD EXPENSES B UT PERTAINING TO A.Y 2004-05. 3. AS REGARDS GROUNDS NO.1(A) AND 1(C), BOTH THE P ARTIES AGREED THAT THIS ISSUE NEEDS RECONSIDERATION IN VIEW OF TH E DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S TO PMAN EXPORTS REPORTED IN 318 ITR [AT] 87. IN VIEW OF THE SAME, T HE ISSUE IS SET ASIDE TO THE FILE OF THE AO WITH A DIRECTION TO RECOMPUTE THE DEDUCTION U/S.80HHC IN ACCORDANCE WITH THE DECISION OF THE SP ECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S TOPMAN EXPORTS [CITED SU PRA]. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 4. AS REGARDS GROUND NO.1(B), THE LD. COUNSEL FOR T HE ASSESSEE PLACED RELIANCE UPON THE DECISION OF THE SPECIAL BE NCH OF THE TRIBUNAL IN THE CASE OF SUJATA GROVER REPORTED IN 74 TTJ 347 , WHEREIN IT HAS BEEN HELD THAT EXCHANGE FLUCTUATION IS ALSO PART OF EXPORTS TURNOVER AND THEREFORE 90% THEREOF CANNOT BE REDUCED FROM TH E PROFITS AND 3 GAINS OF BUSINESS TO ARRIVE AT PROFITS OF THE BUSIN ESS. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF SUJA TA GROVER [CITED SUPRA] AND RESPECTFULLY FOLLOWING THE SAME THIS GRO UND OF APPEAL IS ALLOWED. 6. AS REGARDS GROUND NO.2 BRIEF FACTS ARE THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS.6,08,085/- AS EXPENSES PERT AINING TO ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2004-05 WH ICH WERE PAID AND ACCOUNTED AS PRIOR PERIOD EXPENSES IN F.Y 2004-05. THE ASSESSEE CLAIMED THESE EXPENSES PERTAINING TO F.Y 2003-04 AS ALLOWABLE U/S.37 AS THEY ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. AO DISALLOWED THE SAME AND ON APPEAL CIT[ A] ALSO DISALLOWED THE SAME HOLDING THAT THE ASSESSEE HAS N OT CLAIMED THESE EXPENSES BY FILING A REVISED RETURN. AGGRIEVED, ASS ESSEE IS IN APPEAL BEFORE US. 7. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE ASSESSEE HAS NOT CLAIMED THESE EXPENSES IN ITS RETURN OF INCOME NOR HAS IT FILED THE REVISED RETURN BUT CLAIMED IT DURING THE ASSESSMENT PROCEEDINGS AND, THEREFORE, AO HAS NOT CONSIDERED THE SAME. BUT THE ASSESSEE HAS RAISED THE ISSUE BEFORE THE CIT[A] WHO REJECTED TH E SAME BY FOLLOWING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF GOETZ INDIA LTD. 4 REPORTED IN 284 ITR 323. IN THIS DECISION THE HON'B LE SUPREME COURT HAS SAID THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF THE AO AND DOES NOT IMPINGE ON THE POWER OF THE ITAT UNDER SEC.254 OF THE INCOME TAX ACT. WE ADMIT THIS ISSUE AS AN ADDITIONA L GROUND OF APPEAL AND REMAND THE ISSUE TO THE FILE OF THE CIT[A] WIT H A DIRECTION TO CONSIDER THE SAME IN ACCORDANCE WITH LAW. THIS GROU ND OF APPEAL IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 9 TH DAY OF MARCH, 2010. SD/- SD/- (A.L.GEHLOT) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI:9 TH MARCH, 2010. P/-*