ACIT Rg. - 7(2), MUMBAI V. M/s. SULPHUR MILLS LTD., MUMBAI

ITA 2062/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1001 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Bench Allotted: J
• Next Hearing Date: 07-07-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 09-03-2007
• Court: TRIBUNAL
• Department Lawyers: N K BALODIA
• Assessee Lawyers: K S CHOKSI
• Keywords: Bad and doubtful debts
• Section: 80HHC; 80IB; 80IA

Judgement Text

ITA NO. 2061 & 2062/M/2007 A.Y : 02-03, 03-04 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH, MUMBAI BEFORE SHRI D. K. AGARWAL, (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) ITA NO. 2061 AND 2062/MUM/2007 ASSESSMENT YEAR 2002-03 AND 2003-04 DATE OF HEARING : 15.7.2010 ASSISTANT COMMISSIONER O INCOME TAX .. APPELL ANT RANGE 7(2) AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 VS. SULPHUR MILLS LIMITED .... RESPONDENT 604/605, 349, BUSINESS POINT WESTERN EXPRESS HIGHWAY ANDHERI (E), MUMBAI 400 069 PAN AABCS8736K ASSESSEE BY : SHRI K.S. CHOKSI REVENUE BY : SHRI N.K. BALODIA O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THESE APPEALS, THE ASSESSING OFFICER HAS CALLED INTO QUESTION CORRECTNESS OF LD. CIT(A)S ORDERS OF EVEN DATED 19 TH DECEMBER 2006, FOR ASSESSMENT YEAR 2002-03 AND 2003-04. SINC E ALL THESE APPEALS PERTAIN TO THE SAME ASSESSEE, THEREFORE, THESE APPE ALS WERE HEARD ITA NO. 2061 & 2062/M/2007 A.Y : 02-03, 03-04 PAGE 2 OF 8 TOGETHER AND, AS A MATTER OF CONVENIENCE, THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER. 2. FIRST, WE TAKE UP ASSESSING OFFICERS APPEAL IN ITA NO.2061/MUM. /2007, FOR ASSESSMENT YEAR 2002-03. GRIEVANCE ARISI NG IN GROUND NO.1, IS AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO ALLOW THE DISALLOWANCE ON ACCOUNT OF DELAYED PAYMENT OF EMPLO YEES AND EMPLOYERS CONTRIBUTION TOWARDS PROVIDENT FUND MADE AFTER THE DUE DATE. 3. THERE IS NO DISPUTE ABOUT THE FACT THAT THE PAYM ENTS HAVE BEEN MADE WELL WITHIN THE GRACE PERIOD PERMITTED UNDER T HE LAW. AS HELD BY A COORDINATE BENCH IN THE CASE OF PINK PEN PVT LTD V S ITO (ITA NO. 6847/MUM/08; ORDER DATED 28 TH JANUARY 2010), FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASEOF CIT VS ALOM EX TRUSIONS LTD (319 ITR 306), THE PAYMENTS MADE WITHIN GRACE PERIOD AND PRI OR TO FILING OF RETURN, CONSTITUTE ADMISSIBLE DEDUCTION. THE GRIEVANCE OF T HE ASSESSING OFFICER IS, THEREFORE, DEVOID OF ANY SUBSTANCE, AND WE REJECT T HE SAME. 4. GROUND NO. 1 IS THUS DISMISSED. 5. GRIEVANCE ARISING OUT OF GROUND NO.2, IS AS FOLL OWS:- 2A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT DEDUCTION U/S 80IB SHOULD NOT HAVE BEEN REDUCED BY DEDUCTION U/S 80HHC OF RS.75,90,545/-. 2B. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT DEDUCTION ELIGIBLE FOR DEDUCTION U/S 80IB IS REQUIRED TO BE REDUCED FROM T OTAL ITA NO. 2061 & 2062/M/2007 A.Y : 02-03, 03-04 PAGE 3 OF 8 BUSINESS PROFIT FOR COMPUTING DEDUCTION U/S 80HHC A ND THUS NOT FOLLOWING TRIBUNAL B ORDER IN THE CASE OF M/S. LEBEN LABORATORIES LTD. 6. LEARNED REPRESENTATIVES AGREE BEFORE US THAT THI S ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THIS TRIBUN AL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1999-2000, WHEREIN, THE T RIBUNAL, IN AN APPEAL FILED BY THE REVENUE IN ITA NO.4662/MUM./2003, VIDE ORDER DATED 6 TH DECEMBER 2007, HAS DECIDED THIS ISSUE AGAINST THE A SSESSEE BY OBSERVING AS FOLLOWS:- THE LD. DR SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE REVENUE WITH THE DECISION OF CHENNAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS ROGINI GARMENTS, RE PORTED IN 108 ITD 49 (CHEN.) (SB). LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE ISSUE WAS DECIDED IN FAVOUR OF T HE ASSESSEE BY THE TRIBUNAL IN EARLIER ASSESSMENT YEAR 1998-99. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SPE CIAL BENCH DECISION IN THE CASE OF RAGINI GARMENTS IS NOT APPL ICABLE AS THAT WAS A REVERSE CASE. WE HAVE CONSIDERED THE RIV AL SUBMISSIONS. WE FIND THAT THE DECISION OF SPECIAL B ENCH OF CHENNAI TRIBUNAL IN THE CASE OF ACIT VS ROGINI GARM ENTS (SUPRA) SQUARELY COVERS THE ISSUE OF REDUCTION OF D EDUCTION FROM SEC. 80IA PROFITS FOR DEDUCTION GRANTED U/S 80 HHC OF THE ACT IN FAVOUR OF THE REVENUE AND ACCORDINGLY, THE I SSUE IS DECIDED IN FAVOUR OF THE REVENUE AND THE GROUND OF APPEAL NO.3 IS ALLOWED. 7. THE SAME IS THE VIEW TAKEN BY SPECIAL BENCH IN T HE CASE OF ACIT VS HINDUSTAN MINT & AGRO PRODUCTS PVT LTD (119 ITD SB 107). IN VIEW OF THESE JUDICIAL PRECEDENTS, INCLUDING IN ASSESSEES OWN CASE, WE VACATE THE ORDER OF THE LD. CIT(A) AND ALLOW THE GROUND OF APP EAL RAISED BY THE ASSESSING OFFICER. LEARNED COUNSEL, HOWEVER, SUBMIT S THAT EVEN AFTER GIVING EFFECT TO THE DECISION OF HINDUSTAN MINT (SU PRA), CERTAIN ISSUES WILL HAVE TO BE CONSIDERED BY THE ASSESSING OFFICER. IN ANY CASE, ACCORDING TO THE LEARNED COUNSEL, THIS ISSUE HAS COME UP FOR CON SIDERATION BEFORE HONBLE BOMBAY HIGH COURT AND THE JUDGMENT IS EXPEC TED SHORTLY. HE, ITA NO. 2061 & 2062/M/2007 A.Y : 02-03, 03-04 PAGE 4 OF 8 THEREFORE, URGES US TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH IN THE LIGHT OF SPECIAL BEN CH DECISION IN THE CASE OF HINDUSTAN MINT (SUPRA) AND OR SUCH OTHER JUDICIA L PRECEDENTS AS MAY BY THEN BE AVAILABLE FOR CONSIDERATION. LEARNED DEP ARTMENTAL REPRESENTATIVE DOES NOT SERIOUSLY OPPOSE THIS PLEA. THE MATTER IS THUS RESTORED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDI CATION AS SUCH. 8. GROUND NO. 2 IS THUS ALLOWED IN THE TERMS INDICA TED ABOVE. 9. IN GROUND NO.3, THE GRIEVANCE RAISED BY THE ASSE SSING OFFICER IS AS FOLLOWS:- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT FOR THE P URPOSE OF 80HHC TURNOVER OF THE COMPANY SHALL EXCLUDE EXCISE DUTY OF RS.4,99,32,872/- AND SALES TAX OF RS.1,44,14,398/-. 10. BOTH THE LEARNED REPRESENTATIVES AGREE BEFORE US THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE CIT VS LAXMI MACHINE WORKS, 290 ITR 667 (SC), WHEREIN IT HAS BEE N HELD THAT SALES TAX AND EXCISE DUTY COMPONENTS CANNOT BE INCLUDED IN TH E TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80-HHC. RESP ECTFULLY FOLLOWING THE SAID DECISION, WE APPROVE THE CONCLUSION SO ARR IVED AT BY THE LD. CIT(A). REVENUE FAILS ON THIS GROUND ALSO. 11. GROUND NO. 3 IS, THEREFORE, DISMISSED. 12. IN GROUND NO.4, THE GRIEVANCE OF THE ASSESSING OFFICER IS AS FOLLOWS:- ITA NO. 2061 & 2062/M/2007 A.Y : 02-03, 03-04 PAGE 5 OF 8 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT FOR T HE PURPOSE OF 80HHC TURNOVER OF THE COMPANY SHALL EXCLUDE SUNDRY CREDITORS W/ BACK OF RS.2,04,341/-, SALES TAX REFUND OF RS.21 ,13,318/-, IMPORT EXCHANGE RATE DIFFERENCE OF RS.5,164/-, DOUB TFUL DEBTS RECOVERED OF RS.86,453/- AND EXCISE DUTY REFUND OF RS.90,554/-. 13. BOTH THE LEARNED REPRESENTATIVES AGREE BEFORE U S THAT THE ISSUES WITH RESPECT TO SUNDRY CREDITORS WRITTEN BACK, SALE S TAX REFUND, DOUBTFUL DEBTS RECOVERED AND EXCISE DUTY REFUND, ARE COVERED AGAINST THE REVENUE AND IN FAVOUR OF ASSESSEE BY THE DECISION OF THIS T RIBUNAL IN ASSESSEES OWN CASE DECIDED IN ITA NO.2533 AND 6586/MUM./2004 FOR ASSESSMENT YEARS 2000-01 AND 2001-02, VIDE ORDER DATED 16 TH DECEMBER 2007, WHEREIN, THE TRIBUNAL, DISMISSING THE GROUND OF APP EAL RAISED BY THE REVENUE, OBSERVED AS FOLLOWS:- THE LD. DR HAS RELIED ON THE ORDER OF THE ASSESSIN G OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION IN THE CASE OF BANGAORE CLOTHING CO. IN 260 ITR 371. WE HAVE CO NSIDERED THE RIVAL SUBMISSIONS. THE ISSUE OF EXCLUSION FROM THE TURNOVER OF THE ASSESSEE FOR THE PURPOSE OF DEDUCTION U/S 80 HHC OF THE SUNDRY CREDITORS WRITTEN BACK, SALES TAX REFUND, DO UBTFUL DEBTS RECOVERED AND EXCISE DUTY REFUND IS COVERED IN FAVO UR OF THE ASSESSEE IN THE CASE OF BANGALORE CLOTHING CO. (SUP RA) AND ACCORDINGLY THE GROUND OF APPEAL NO.6 OF REVENUE IS DISMISSED. 14. SINCE THE ISSUES FOR OUR ADJUDICATION ARE COVER ED AGAINST THE REVENUE BY THE AFORESAID DECISION OF THE TRIBUNAL I N ASSESSEES OWN CASE, WE CONFIRM THE ORDER OF THE LEARNED CIT(A). THUS, T HESE ISSUES ARE DECIDED AGAINST THE REVENUE. 15. GROUND NO. 4 IS THUS DISMISSED. ITA NO. 2061 & 2062/M/2007 A.Y : 02-03, 03-04 PAGE 6 OF 8 16. IN THE RESULT, REVENUES APPEAL FOR THE ASSESSM ENT YEAR 2002-03 IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 17. NOW, WE TAKE UP REVENUES APPEAL IN ITA NO.2062 /MUM./2007, FOR ASSESSMENT YEAR 2003-04. 18. GRIEVANCE RAISED BY THE REVENUE ARE AS FOLLOWS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO ALLOW THE DISALLOWANCE ON ACCOUNT OF DELAYED PAYMENT OF EMPLO YEES AND EMPLOYERS CONTRIBUTION TOWARDS PROVIDENT FUND MADE AFTER THE DUE DATE. 2A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT DEDUCTION U/S 80IB SHOULD NOT HAVE BEEN REDUCED BY DEDUCTION U/S 80HHC OF RS.87,67,960/-. 2B. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT DEDUCTION ELIGIBLE FOR DEDUCTION U/S 80IB IS REQUIRED TO BE REDUCED FROM T OTAL BUSINESS PROFIT FOR COMPUTING DEDUCTION U/S 80HHC A ND THUS NOT FOLLOWING TRIBUNAL B BENCH ORDER IN THE CASE OF M/S. LEBEN LABORATORIES LTD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT FOR THE P URPOSE OF 80HHC TURNOVER OF THE COMPANY SHALL EXCLUDE EXCISE DUTY OF RS.4,11,15,969/- AND SALES TAX OF RS.96,40,638/-. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT FOR T HE PURPOSE OF 80HHC TURNOVER OF THE COMPANY SHALL EXCLUDE SUNDRY CREDITORS W/ BACK OF RS.72,156/-, SALES TAX REFUND OF RS.38,9 9,983/-, IMPORT EXCHANGE RATE DIFFERENCE OF RS.5,09,521/-, D OUBTFUL DEBTS RECOVERED OF RS.2,04,968/-. 19. WE FIND THAT ALL THE AFORESAID GROUNDS RAISED B Y THE REVENUE FOR THE YEAR UNDER ASSESSMENT ARE IDENTICAL TO THE GROUNDS RAISED BY THE REVENUE ITA NO. 2061 & 2062/M/2007 A.Y : 02-03, 03-04 PAGE 7 OF 8 FOR ASSESSMENT YEAR 2002-03 EXCEPT VARIATION IN FIG URES. SINCE ALL THE GROUNDS RAISED BY THE REVENUE ARE COVERED BY OUR AF ORESAID DECISION IN ITA NO.2061/MUM./2007, FOR ASSESSMENT YEAR 2002-03, SIMILAR DIRECTIONS ARE ISSUED ON THESE GROUNDS ALSO. GROUND NOS. 1, 3 AND 4 ARE ACCORDINGLY DISMISSED AND GROUND NO. 2A AND 2B ARE ALLOWED IN P RINCIPLE IN THE TERMS INDICATED ABOVE. THE OBSERVATIONS MADE FOR THE ASSE SSMENT YEAR 2002-03 IN EARLIER PARAGRAPHS WILL APPLY MUTATIS MUTANDI FOR THIS YEAR AS WELL. 20. IN THE RESULT, REVENUES APPEAL FOR THE ASSESSM ENT YEAR 2003-04 IS ALSO PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 21. TO SUM UP, BOTH THE APPEAL ARE PARTLY ALLOWED I N TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF JULY 2010. SD/XX SD/XX (D. K. AGARWAL) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 23 RD DAY OF JULY 2010. COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX, MUMBAI 4. COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, J BENCH, ITAT, MUMB AI 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR PRADEEP J. CHOWDHURY INCOME TAX APPELLATE TRIBUNAL SR. PRIVATE SECRETARY MUMBAI BENCHES, MUMBAI ITA NO. 2061 & 2062/M/2007 A.Y : 02-03, 03-04 PAGE 8 OF 8 DATE INITIAL 1. DRAFT DICTATED ON 15.7.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 19.7.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 19.7.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 19.7.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 23.7.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 23.7.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER