Pioneer Furnaces Pvt. Ltd., Anand V. The Income tax Officer, Ward-4(2), Baroda

ITA 2387/AHD/2011

• Counselvise Citation: 238720514 RSA 2011
• Duration Of Justice: 3 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-02-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 21-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANTOSH KARNANI SR DR
• Assessee Lawyers: M V JHAVERI
• Section: 80HHC; 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .. , , BEFORE SHRI BEFORE SHRI G.D. AGARWAL,VICE PRESIDEN T (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.2387/AHD/2011 ( / ASSESSMENT YEAR : 1997-98) PIONEER FURNACES PVT.LTD. 146-148, GIDC, VITHAL UDYOGNAGAR-388 121 VIA ANAND,GUJARAT / VS. THE INCOME TAX OFFICER WARD-4(2) BARODA ! '# ./ ./ PAN/GIR NO. : AABCP 1359 N ( !% / APPELLANT ) .. ( &'!% / RESPONDENT ) !%(' / APPELLANT BY : SHRI M.V. JHAVERI, A.R. &'!%)(' / RESPONDENT BY : SHRI SANTOSH KARNANI, SR.DR * +) ,# / DATE OF HEARING 23/02/2015 -./0 ) ,# / DATE OF PRONOUNCEMENT 27/02/2015 '/ O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-III, BARODA (CIT(A) IN SHORT) DATED 06/07/2011 PERTAINING TO ASSESSMENT Y EAR (AY) 1997-98. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE COMM ISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THAT ONLY ONE-SIXTH OF THE PAYMENT MADE TO INDUGA FOR ACQUIRING KNOW-HOW WAS A LLOWABLE ITA NO.2387 /AH D/2011 PIONEER FURNACES PVT.LTD. VS. ITO ASST.YEAR 1997-98 - 2 - UNDER S.35AB OF THE INCOME TAX ACT AND NOT THE TOTA L AMOUNT CLAIMED BY THE ASSESSEE UNDER S.37(1) OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE COMM ISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THAT 90 PE RCENT OF THE GROSS INTEREST ON FIXED DEPOSIT KEPT FOR AVAILING B ANK FACILITIES FROM CASH CREDIT ACCOUNT IS DEDUCTIBLE UNDER CLAUSE (BAA ) OF EXPLANATION TO S. 80HHC OF THE ACT FOR DETERMINING PROFITS OF T HE BUSINESS INSTEAD OF 90 PERCENT OF THE NET AMOUNT DETERMINED AFTER DEDUCTING THE INTEREST PAID ON THE CASH CREDIT ACCOUNT. 3. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER OR ADD T O THE ABOVE GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS ARE THAT THIS IS THE SECOND ROUND OF LITIGATION. THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143(3) R.W.S.254 OF THE INCOME TAX A CT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED BY THE ASSESSI NG OFFICER (AO IN SHORT) VIDE ORDER DATED 24/12/2010. 3. GROUND NO.1 OF THE ASSESSEES APPEAL HAS NOT BEE N PRESSED BY THE LD.COUNSEL FOR THE ASSESSEE AND, THEREFORE, THE SAM E IS REJECTED AS SUCH. 4. APROPOS TO GROUND NO.2, THE LD.COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE APEX COURT RENDERED IN THE CASE OF M/S.ACG ASSOCIATED CA PSULES PVT.LTD. VS. THE CIT, MUMBAI AND IN THE CASE OF THE CIT, NEW DE LHI VS. BHARAT ITA NO.2387 /AH D/2011 PIONEER FURNACES PVT.LTD. VS. ITO ASST.YEAR 1997-98 - 3 - RASAYAN LTD. IN CIVIL APPEAL NO.1914 OF 2012 AND CI VIL APPEAL NO.4534 OF 2008 RESPECTIVELY. 4.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE I N PARA-7 OF HIS ORDER BY OBSERVING AS UNDER:- 7. VIDE GROUND NO.2, THE APPELLANT HAS CHALLENGED THE ACTION OF THE A.O. IN HOLDING THAT 90 PER CENT OF THE GROSS A MOUNTS OF INTEREST RECEIVED ON RS.4,42,258/- ON BANK FIXED DE POSITS IS TO BE DEDUCTED UNDER JK CLAUSE (BAA) OF SECTION 80HHC OF THE ACT IN COMPUTING THE PROFIT DERIVED FROM EXPORTS, RELYING ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. TAJ INTERNATIONAL [170 TAXMAN 490] INSTEAD OF RELYING ONLY ON THE DEL HI HIGH COURT DECISION IN CIT VS. SHRI RAM HONA POWER EQUIPMENT [ 289 ITR 475] AS DIRECTED BY THE ITAT IN ITS ORDER. IT MAY BE NOTED HERE THAT THE ITAT HAD REMANDED BACK THE ISSUE OF INTERE ST ON FIXED DEPOSITS TO THE FILE OF THE A.O. TO DECIDE THE ISSU E IN ACCORDANCE WITH LAW AND AS PER THE DECISION OF DELHI HIGH COUR T IN THE CASE OF CIT VS. SHRIRAM HONDA POWER EQUIPMENT (SUPRA). THE DECISION OF SHRIRAM HONDA POWER EQUIPMENT WAS UNDER CONSIDERATI ON BY DELHI HIGH COURT IN THE CASE OF M/S.TAJ INTERNATION AL REPORTED IN 170 TAXMAN 490. WHILE, ANALYZING THE DECISION OF S HRIRAM HONDA POWER EQUIPMENT, HONBLE DELHI HIGH COURT HAS HELD THAT 90 PER CENT OF GROSS INTEREST IS TO BE EXCLUDED FROM THE P ROFITS OF THE BUSINESS WHILE CALCULATING THE DEDUCTION U/S.80HHC R.W.EXPLANATION BAA OF THE INCOME-TAX ACT. THIS BE ING A LATTER DECISION OF THE SAME HIGH COURT AND HAS BEEN PASSED AFTER ITA NO.2387 /AH D/2011 PIONEER FURNACES PVT.LTD. VS. ITO ASST.YEAR 1997-98 - 4 - CONSCIOUS CONSIDERATION OF THE EARLIER DECISION, HE NCE A.O. HAS RIGHTLY FOLLOWED THE LATTER DECISION. ACCORDINGLY, THE A.O.S ACTION IS UPHELD AND THIS GROUND OF APPEAL IS DISMISSED. 5.1. THE CONTENTION OF THE LD.COUNSEL FOR THE ASSES SEE IS THAT THIS DECISION OF THE CIT(A) IS CONTRARY TO THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF M/S.ACG ASSOCIATED CAPSULES PV T.LTD.(SUPRA). 5.2. THE HONBLE SUPREME COURT IN THE CIVIL APPEAL NO.1914 OF 2012 AND CIVIL APPEAL NO.4534 OF 2008 IN THE CASE OF M/S .ACG ASSOCIATED CAPSULES PVT.LTD. (FORMERLY M/S.ASSOCIATED CAPSULES PVT.LTD.) VS. THE CIT, MUMBAI AND IN THE CASE OF THE CIT, NEW DELHI VS. BHARAT RASAYAN LTD. RESPECTIVELY ORDER DATED 08/02/2012, HAS HELD AS UNDER:- 2. THE FACTS OF THIS CASE VERY BRIEFLY ARE THAT BH ARAT RASAYAN LIMITED (FOR SHORT THE ASSESSEE) FILED A RETURN O F INCOME TAX CLAIMING A DEDUCTION OF RS.72,76,405/- UNDER SECTIO N 80HHC OF THE ACT. IN THE ASSESSMENT ORDER, THE ASSESSING OF FICER HELD THAT NINETY PER CENT OF THE GROSS INTEREST HAS TO BE EXC LUDED FROM THE PROFITS OF THE BUSINESS OF THE ASSESSEE UNDER EXPLA NATION (BAA) TO SECTION 80HHC OF THE ACT AND DEDUCTED NINETY PER CE NT OF THE GROSS INTEREST OF RS.50,26,284/- FROM THE PROFITS OF THE BUSINESS OF THE ASSESSEE. THE ASSESSEE PREFERRED AN APPEAL CON TENDING THAT ONLY NINETY PER CENT OF THE NET INTEREST SHOULD HAV E BEEN DEDUCTED FROM THE PROFITS OF THE BUSINESS OF THE ASSESSEE UN DER EXPLANATION (BAA) TO SECTION 80HHC, BUT THE COMMISSIONER OF INC OME TAX (APPEALS) REJECTED THIS CONTENTION OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE INCOME TAX APPE LLATE TRIBUNAL ITA NO.2387 /AH D/2011 PIONEER FURNACES PVT.LTD. VS. ITO ASST.YEAR 1997-98 - 5 - (FOR SHORT THE TRIBUNAL) AND THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE AND HELD THAT THE ASSESSEE WAS ENTITLE D TO DEDUCT THE EXPENSES FROM THE INTEREST RECEIVED AND ONLY NINETY PER CENT OF THE NET AMOUNT OF INTEREST COULD BE EXCLUDED UNDER EXPL ANATION (BAA) TO SECTION 80HHC AND REMITTED THE MATTER TO THE ASS ESSING OFFICER TO EXAMINE WHETHER THERE IS FACTUALLY AN EXCESS BET WEEN THE INTEREST PAID AND INTEREST RECEIVED AND TAKE A FRES H DECISION. THE REVENUE FILED AN APPEAL AGAINST THE ORDER OF THE TR IBUNAL BEFORE THE HIGH COURT, BUT BY THE IMPUGNED ORDER THE HIGH COURT FOLLOWING ITS DECISION IN COMMISSIONER OF INCOME-TA X V. SHRI RAM HONDA POWER EQUIP (SUPRA) SUSTAINED THE ORDER OF TH E TRIBUNAL AND DISMISSED THE APPEAL. 3. WE HAVE HELD IN OUR JUDGMENT IN THE CASE OF M/S. ACG ASSOCIATED CAPSULES PVT.LTD. VS. COMMISSIONER OF IN COME TAX THAT NINETY PER CENT OF NOT THE GROSS INTEREST BUT ONLY THE NET INTEREST, WHICH HAS BEEN INCLUDED IN THE PROFITS OF THE BUSIN ESS OF THE ASSESSEE AS COMPUTED UNDER THE HEADS PROFITS AND G AINS OF BUSINESS OR PROFESSION IS TO BE DEDUCTED UNDER CLA USE (1) OF EXPLANATION (BAA) TO SECTION 80HHC FOR DETERMINING THE PROFITS OF THE BUSINESS. SINCE, THE VIEW TAKEN BY THE HIGH CO URT IN THE IMPUGNED ORDER IS CONSISTENT WITH OUR AFORESAID VIE W, WE FIND NO MERIT IN THIS APPEAL AND WE ACCORDINGLY DISMISS THE SAME. THERE SHALL BE NO ORDER AS TO COSTS. 5.3. THEREFORE, AFTER CONSIDERING THE TOTALITY OF T HE FACTS OF THE CASE AND THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF M/S.ACG ASSOCIATED CAPSULES PVT.LTD. AND OF BHARAT RASAYAN LIMITED(SUPRA), WE HEREBY SET ASIDE THE ISSUE TO TH E FILE OF THE ASSESSING OFFICER FOR RECOMPUTATION OF DEDUCTION U/S.80HHC OF THE ACT. THE ASSESSING OFFICER IS HEREBY DIRECTED TO VERIFY THE CLAIM OF DEDUCTION ITA NO.2387 /AH D/2011 PIONEER FURNACES PVT.LTD. VS. ITO ASST.YEAR 1997-98 - 6 - U/S.80HHC OF THE ACT AND RECOMPUTE THE SAME IN THE LIGHT OF JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF M/S.ACG ASS OCIATED CAPSULES PVT.LTD.(SUPRA). THUS, GROUND NO.2 RAISED IN THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND NO.3 IS GENERAL IN NATURE REQUIRE NO INDE PENDENT ADJUDICATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 27 TH DAY OF FEBRUARY, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 27/ 02 /2015 4,..* , .*../ T.C. NAIR, SR. PS ITA NO.2387 /AH D/2011 PIONEER FURNACES PVT.LTD. VS. ITO ASST.YEAR 1997-98 - 7 - !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. !% / THE APPELLANT 2. &'!% / THE RESPONDENT. 3. 567 8 / CONCERNED CIT 4. 8 ( ) / THE CIT(A)-III, BARODA 5. 9 :&*67 , ,670 , 5 / DR, ITAT, AHMEDABAD 6. : <= + / GUARD FILE. / BY ORDER, ' 9& //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 23.2.15(DICTATION-PAD 2- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..24.2.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.27.2.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27.2.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER