The ACIT, Vapi Circle, Vapi V. M/s. Mitsu Ltd., Vapi

ITA 2443/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1935 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-12-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 07-06-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: M K PATEL
• Keywords: Reopening of assessment; Opportunity of being heard; Set aside
• Section: 80HHC; 80IB; 147; 148; 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' (BEFORE S/SHRI T K SHARMA AND D C AGRAWAL) ITA NO.2443/AHD/2007 (ASSESSMENT YEAR:- 2000-01) THE ASSISTANT COMMISSIONER OF INCOME- TAX, VAPI CIRCLE, VAPI V/S MITSU LIMITED, 304/2, IIND PHASE, GIDC, VAPI [APPELLANT] [RESPONDENT] APPELLANT BY :- SHRI C K MISHRA, DR RESPONDENT BY:- SHRI M K PATEL, ADVOCATE O R D E R PER D C AGRAWAL (ACCOUNTANT MEMBER): THIS IS AN APPEAL FILED BY THE REVENUE RAISING THE FOLLOWING GROUNDS: 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE NON-COMPETE FEES AS B USINESS RECEIPT AND ELIGIBLE FOR DEDUCTION U/S 80HHC. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE DEDUCTIONS U/S 80HHC AND 80IB SHOULD BE GRANTED SIMULTANEOUSLY ON THE GROSS TOTAL INCOME WHICH IS IN CONTRADICTION OF THE PROVISIONS OF SECT ION 80IA(9) R. W. SECTION 80IB(13) OF THE ACT. 3 IT IS, THEREFORE, PRAYED THAT THE DECISION OF THE L EARNED CIT(A) MAY BE SET ASIDE AND THE ORDER OF THE AO MAY BE RESTORE D. 2 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF INTERMEDIATES LIKE CHLORAL, ICAC A ND OTHER PRODUCTS. IN RESPECT OF FIRST ISSUE I.E. NON-COMPET E FEES, THE FACTS 2 ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PRO CEEDINGS FOUND THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.10 CRORES FROM M/S HOECHST SCHERING AGREVO SA, FRANCE, WITH WHICH IT HAD ENTERED INTO JOINT VENTURE AGREEMENT. THAT COMPANY REQUIRED THIS ASSESSEE-COMPANY AND ITS DIRECTORS AND THEIR F AMILY MEMBERS TO UNDERTAKE AN OBLIGATION FOR NON-COMPETIT ION IN THE AREA IN WHICH JOINT VENTURE AGREEMENT WAS ENTERED I NTO AND FOR WHICH THE ASSESSEE-COMPANY WAS PAID A SUM OF RS.10 CRORES. THE AO HELD THAT THE NON-COMPETE FEES RECEIVED BY THE A SSESSEE HAS NO DIRECT NEXUS WITH THE EXPORT ACTIVITY OF THE ASS ESSEE AND, THEREFORE, THEY ARE NOT PART OF BUSINESS PROFITS. H E ACCORDINGLY HELD ONLY 10% OF NON-COMPETE FEES WAS TREATED AS PA RT OF THE BUSINESS PROFITS APPARENTLY IN ACCORDANCE WITH EXPL ANATION (BAA) TO SECTION 80HHC. 3 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HELD THAT SUCH RECEIPTS AROSE OUT OF CARRYING OF TH E BUSINESS AND IS ELIGIBLE FOR DEDUCTION U/S 80HHC. THE LEARNED CO MMISSIONER OF INCOME-TAX (APPEALS) FOLLOWED THE ORDER OF HIS P REDECESSOR IN THE SAME CASE AGAINST THE ORIGINAL ASSESSMENT ORDER U/S 143 DATED 28-11-2002. 4 AGAINST THIS, THE LEARNED DR SUBMITTED THAT THE RECEIPT ON ACCOUNT OF NON-COMPETE FEES HAS NOT BEEN TAKEN A S PART OF THE TURNOVER BY THE ASSESSEE FOR THE PURPOSE OF COMPUTA TION OF DEDUCTION U/S 80HHC. THIS NON-COMPETE FEES NEITHER FORMS PART OF EXPORT PROFITS NOR OF TOTAL TURNOVER. 3 5 REGARDING THE SECOND ISSUE, THE LEARNED DR SUBMI TTED THAT IT IS NOW FULLY COVERED IN FAVOUR OF THE REVEN UE BY THE DECISION OF THE ITAT IN THE CASE OF ACIT V HINDUSTAN MINT & AGRO PRODUCTS (P) LTD. 119 ITD 107 (DEL) (SB). 6 AGAINST THIS, THE LEARNED AR SUBMITTED THAT BEFO RE TRIBUNAL PROCEEDS TO DECIDE THE ISSUE ON MERIT, IT SHOULD CONSIDER THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) HAS NOT DISPOSED OF THE GROUNDS RAISED BY THE ASSESSEE BEFO RE HIM AGAINST REOPENING OF THE ASSESSMENT. HE REFERRED TO GROUND NOS.1 TO 4 RAISED BEFORE THE LEARNED COMMISSIONER OF INCOME-TA X (APPEALS). THE LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS) RESTRAINED HIMSELF FROM DISPOSING OF THESE GROUNDS BY OBSERVING AS UNDER: 7.2 I HAVE PERUSED THE FACTS OF THE CASE. THIS GRO UND OF APPEAL RAISED BY THE APPELLANT COMPANY IS IN REGARD TO THE JURISDICTION OF THE ASSESSING OFFICER TO RE-OPEN THE ASSESSMENT AFTER A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR U/S 14 7 R. W. S. 148 OF THE ACT. SINCE I AM ADJUDICATING THE GROUND NOS.6, 7, 8 , 9 AND 10 AFTER CONSIDERING THE MERITS OF THE CASE I AM NOT ADJUDIC ATING THIS GROUND SEPARATELY BEING ONLY CONSEQUENTIAL IN NATURE. SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE AY 2001-02 WHICH WAS DECIDED ON 04-09-2009 WHEREIN THE TRIBUNAL HAS RESTORED THE MATTER TO THE FILE OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FOR DISPOSING OF THE GROUNDS RELATING TO REOPENING OF ASSESSMENT, AS UND ER:- 4 6. IN THE IMPUGNED ORDER THE LEARNED CIT(A) REFUSE D TO DECIDE THE AFORESAID GROUND FOR THE REASONS GIVEN IN PARA 7.2 AT PAGE 4 WHICH ARE AS UNDER: 1 HAVE PERUSED THE FACTS OF THE CASE. THIS GROUND OF APPEAL RAISED BY THE APPELLANT COMPANY IS IN REGARD TO THE JURISDICTION OF THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT A FTER A PERIOD OF 4 YEARS FORM THE END OF THE RELEVANT ASSESSMENT YEAR U/S 147 R.W.S. 148 OF THE ACT. SINCE I AM ADJUDICATING THE GROUND NOS 5,6,7 & 8 AFTER CONSIDERING THE MERITS OF THE CASE, I AM NOT ADJUDICATING THIS GROUND SEPARATELY BEING ONLY CONS EQUENTIAL IN NATURE. 7 CONTINUING HIS ARGUMENTS THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAS FLIED A CROSS OBJECTION NO. 208/A/2007. THE CROSS OBJECTION (CO.) IS REQUIRED TO DISPOSED OFF LIKE AN APPEAL. HOWEVER, TRIBUNAL WHIL E DECIDING THE CO. IGNORED THAT C.O. AND APPEAL WERE REQUIRED TO BE AD JUDICATED SIMULTANEOUSLY AS HELD BY THE HONBIE SUPREME COURT IN THE CASE OF CST VS VIJAI INT UDYOG (1955) 152 ITR 111 (SC). IN THAT JUDGMENT, HONBLE SUPREME COURT DIRECTED THE TRIBUNAL TO HEAR BOTH THE APPEALS AFRESH ON THE SAME DAY AND DISPOSE OF BY COMMON JUD GMENT. SINCE THE TRIBUNAL COMMITTED A MISTAKE, IT MAY SUO MOTO RECAL L THE ORDER IN THE CROSS OBJECTION, ADMIT THE ADDITIONAL GROUND AND DE CIDE THE APPEAL AND CROSS OBJECTION AFRESH IN ACCORDANCE WITH LAW. ALTERNATIVELY, COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS CASE MA Y KINDLY BE ADJOURNED TO SOME OTHER DATE SO THAT ASSESSEE MAY M AKE A REQUEST TO RECALL THE ORDER IN CROSS OBJECTION. 8 WITHOUT PREJUDICE TO AFORESAID CONTENTION, THE CO UNSEL OF THE ASSESSEE SUBMITTED THAT POSITION OF THE TRIBUNAL IS SAME AS A COURT OF APPEAL UNDER THE CIVIL PROCEDURE CODE AND ITS POWER S ARE IDENTICAL WITH THAT OF AN APPELLATE COURT UNDER THE CIVIL PRO CEDURE CODE AS HELD BY L3OMBAY HIGH COURT IN THE CASE OF NEW INDIA LIFE INSURANCE COMPANY LTD VS CIT [1983] 143 ITR 69 AND CIT VS RAJ NARAIN TIWARI [1978] 113 ITR 163 (ALL.). IT WAS SUBMITTED THAT IT IS A BASIC DUTY OF THE CIT(A) TO DECIDE ALL THE GROUNDS OF APP EAL. HE CANNOT REFUSE TO DECIDE ANY GROUND, OF APPEAL RAISED BEFOR E HIM PARTKULAI1Y THE GROUND. CHALLENGING THE JURISDICTION OF ASSESSI NG OFFICER TO REOPEN ARID FRAME THE ALREADY COMPLETED ASSESSMENT U/S 143 (3). WHEN A PRELIMINARY POINT IS RAISED AS POINTED OUT EARLIER, THE TRIBUNAL BEING A 5 COURT CAN ACCEPT THE SAME AND REMAND THE MATTER AS HELD BY HONBIE SUPREME COURT IN THE CASE OF BHAVNA CHEMICAL LTD V3 CIT 231 ITR 507 (SC). FOLLOWING THIS PRINCIPLE, WHEN THE LEARNE D CJT(A) COMMITTED A MISTAKE IN NOT ADJUDICATING THE GROUND CHALLENGING THE RE-OPENING OF THE ASSESSMENT, IN THAT EVENT, ON A P LEA RAISED BY RESPONDENT ASSESSEE, TRIBUNAL CAN SET ASIDE THE ORD ER OF LEARNED CIT(A) AND ___ HIM TO FIRST DECIDE THE GROUND CHALL ENGING THE JURISDICTION U/S 147 R. W. S. 148 AND THEREAFTER, I F REQUIRED, ADJUDICATE OTHER GROUNDS OF APPEAL. COUNSEL OF THE ASSESSEE AC CORDINGLY SUBMITTED THAT EVEN WITHOUT ADMITTING THE ADDITIONA L GROUND UNDER RULE 27 OF THE INCOME TAX RULES, (APPELLATE TRIBUNA L) RULES, 1963, THE RESPONDENT CAN SUPPORT THE ORDER ON GROUND DECI DED AGAINST IT EVEN WHEN IT MIGHT NOT HAVE FILED AN APPEAL. IN THI S VIEW OF THE MATTER, COUNSEL OF THE ASSESSEE SUBMITTED THAT THE IMPUGNED ORDER OF LEARNED CIT(A) BE SET ASIDE, HE BE DIRECTED TO DECIDE THE A PPEAL OF THE ASSESSEE AFRESH, INCLUDING GROUND NO.3 WHICH HE REFUSED TO A DJUDICATE IN THE IMPUGNED ORDER. 9. ON THE OTHER HAND, LEARNED COUNSEL FOR THE REVEN UE SHRI BATRA CONTENDED THAT IN THIS CASE THE ASSESSEE FILED THE CROSS OBJECTION WHICH HAVE BEEN DISMISSED. THEREFORE, IN THE REVENUES AP PEAL THE ASSESSEE HAS NO LOCUS STANDI TO RAISE ADDITIONAL GROUND, THE REFORE, ITS ADDITIONAL GROUND NOW RAISED CANNOT BE ADMITTED. WI TH REGARD TO RULE 27 OF THE LT. RULES (APPELLATE TRIBUNAL RULES) 1963 , LEARNED DR POINTED OUT THAT SAID RULE HAS NO ROLE TO PLAY BECA USE THE ASSESSEE HAS FILED THE CROSS OBJECTION WHEREIN NO SUCH GROUND WA S TAKEN. ON MERIT ALSO, LEARNED DR ARGUED AT LENGTH. 10 IN REPLY, COUNSEL OF THE ASSESSEE SUBMITTED THAT THERE IS NOT NECESSITY TO DECIDE THE TWO GROUNDS RAISED BY THE R EVENUE IN ITS APPEAL ON MERIT UNLESS GROUND CHALLENGING THE VALID ITY OF ASSESSMENT FRAMED U/S 147 R.W.S. 148 IS ADJUDICATED. HE ACCORD INGLY SUGGESTED THAT EITHER THE TRIBUNAL DECIDE THE ADDITIONAL GROU NDS OR THE IMPUGNED ORDER OF LEARNED CIT(A) BE SET ASIDE AND HE BE ASKE D TO FIRST DECIDE THE GROUND NO.3 CHALLENGING THE VALIDITY OF ASSESSM ENT AND THEREAFTER IF NECESSARY HE MAY ADJUDICATE OTHER GROUNDS OF APP EAL IN ACCORDANCE WITH LAW ALTER GIVING OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. 11. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDER OF THE AUTHORITIES BELOW. RIVAL SUBMISSIONS W ERE ALSO 6 CONSIDERED, IT IS PERTINENT TO NOTE THAT BEFORE LEA RNED CIT(A) ASSESSEE SPECIFICALLY CHALLENGED THE REOPENING OF ASSESSMENT U/S 147 R.W.S. 148 OF THE ACT VIDE GROUND NO. 3 WHICH IS REPRODUCED BY US HEREIN ABOVE. THE LEARNED CIT(A) REFUSED TO ADJUDICATE THE SAID G ROUND ON THE GROUND THAT HE HAS ADJUDICATED GROUND NOS. 5, 6, 7 & 8 AFTER CONSIDERING THE MERITS OF THE CASE, THEREFORE, THE GROUND CHALLENGING REOPENING OF THE ASSESSMENT U/S 147 R,W.S 148 IS NO T ADJUDICATED BECAUSE THIS GROUND IS ONLY CONSEQUENTIAL IN NATURE . IT IS WELL SETTLED LAW THAT A GROUND CHALLENGING THE REOPENING OF ASSE SSMENT PERTAINING TO JURISDICTION OF THE ASSESSING OFFICER TO MAKE TH E ORDER, IT GOES TO ROOT OF MATTER, THEREFORE, IT CAN NEVER BE CONSEQUE NTIAL. IT IS NOT PROPER FOR ID CIT(A) TO BY PASS THAT GROUND OF APPE AL, TAKING SHELTER THAT THIS BEING CONSEQUENTIAL IN NATURE. AS A MATTE R OF FACT, BEFORE ADJUDICATING THE REMAINING GROUNDS OF APPEAL, IT WA S THE DUTY OF THE LEARNED CIT(A) FIRST TO ADJUDICATED THE GROUND NO. 3 CHALLENGING THE REOPENING OF ASSESSMENT U/S 147 R.W.S. 148 AND THER EAFTER IF NECESSARY TO ADJUDICATE THE REMAINING GROUND OF APPEAL. WE FO UND CONSIDERABLE FORCE IN THE SUBMISSIONS MADE BY THE LEARNED COUNSE L FOR THE ASSESSEE AND THEREFORE, PRELIMINARY OBJECTION RAISED BY HIM IS REQUIRED TO BE ACCEPTED. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORD ER OF LEARNED CIT(A) WITH THE DIRECTION THAT HE SHOULD FIRST ADJU DICATE THE GROUND NO.3 CHALLENGING THE REOPENING OF ASSESSMENT U/S 14 7 R.W.S 148. AFTER ADJUDICATING THE SAID GROUND, IF REQUIRED, HE WILL ADJUDICATE THE REMAINING GROUNDS OF APPEAL AFTER GIVING OPPORTUNIT Y OF HEARD TO BOTH THE SIDES AND IN ACCORDANCE WITH LAW. 12 IN THE RESULT FOR STATISTICAL PURPOSES, THE APPE AL OF THE REVENUE IS AS ALLOWED. 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS) SHOULD DISPOSE OF THE GROUNDS RELATING TO REOPENING OF THE ASSESSMENT BEF ORE PROCEEDING TO DECIDE THE APPEAL ON MERIT. RESPECTFU LLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASS ESSEE REFERRED TO ABOVE, WE SET-ASIDE THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME-TAX (APPEALS) AND RESTORE THE MATTER TO THE FILE OF THE 7 LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FOR DI SPOSING OF THE GROUNDS RELATING TO REOPENING OF THE ASSESSMENT . 8 IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 31-12-2 009 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (D C AGRAWAL) ACCOUNTANT MEMBER DATE : 31-12-2009 COPY OF THE ORDER FORWARDED TO : 1. MITSU LIMITED, 304/2, IIND PHASE, GIDC, VAPI 2. THE ACIT, VAPI CIRCLE, VAPI 3. CIT CONCERNED 4. CIT(A), VALSAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABA