The ACIT, Vapi Circle, Vapi V. M/s. Bilag Industries Pvt.Ltd., Vapi

ITA 2446/AHD/2007

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2074 (ITAT-SURAT)
• Duration Of Justice: 14 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-05-2022
• Assessment Year: 2004-2005
• Appeal Filed On: 06-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Question of law
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकरअपीलसं./ITA No.2446/AHD/2007 (Ǔनधा[रणवष[ / Assessment Year: (2004-05) (Virtual Court Hearing) The ACIT, Vapi Circle, Vapi. Vs. Bayer Vapi Pvt. Ltd., (Formerly Known as M/s. Bilag Industries Pvt. Ltd.), 306/3, II Phase G.I.D.C, Vapi, Gujarat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCB 2100L (Appellant)/(Revenue) (Respondent)/(Assessee) Assessee by Shri A. Gopalkrishnan, CA Respondent by Shri H. P. Meena, CIT(DR) Date of Hearing 04/05/2022 Date of Pronouncement 17/05/2022 आदेश / ORDER PER DR. A. L. SAINI, AM: Captioned appeal filed by the Revenue, pertaining to assessment year 2004- 05, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), Valsad (in short “ld. CIT(A)”], in Appeal No. CIT(A)/VLS/371/06- 07, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2. At the outset, we note that appeal in ITA no.2446/Ahd/2007 for assessment year 2004-05 was filed by the Revenue before the Tribunal, which was adjudicated by this Tribunal, vide order dated 28.06.2018. While adjudicating the Revenue`s appeal, in ITA no.2446/Ahd/2007, the Tribunal committed certain factual errors, therefore, assessee filed Miscellaneous Application (in short “MA”), vide MA No.44/SRT/2018 dated 07.06.2021. The Tribunal has recalled the said order for two issues. First issue, for which the order of the Tribunal was recalled, reads as follows: “4. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee. We note that there is incorrect correlation of sales Page | 2 2446/AHD/2007/AY.2004-05 Bayer Vapi Pvt. Ltd. made and commission paid vide para no.27 of the order of the Tribunal and para no. 30 of the order of the Tribunal. Apart from these, the typographical errors of Rs.11.07 crores vs 1.107 cores to be rectified. Therefore for limited purpose, only to adjudicate the issue mentioned in grounds of appeal no.6 the order of the Tribunal is hereby recalled. 3. We have heard learned Counsel as well as Learned DR for the Revenue, so far the above first issue is concerned. We note that so far merit of the above issue is concerned, we are of the view that Tribunal has adjudicated the issue involved on merits, by passing a detailed and speaking order therefore, we do not interfere in the order of Tribunal, so far decision on merits is concerned. However, we observe that Tribunal has committed typographical error in quoting amount (figure), that is, Tribunal has mentioned wrong figure at Rs.11.07crores, instead of correct figure to the tune of Rs.1.107 crores, therefore, we direct the assessing officer, that in para no. 27 and 30 of the order of this Tribunal in ITA No.2446/AHD/2007 for AY.2004-05, the figure should be read as “Rs.1.107 crores”. 4. Second issue, for which the order of the Tribunal was recalled, reads as follows: “7. We have heard both the parties. We note that issue raised in ground no.7 has not been adjudicated by the Tribunal and there is adjudication on a different issue which was not at all the ground of Revenue. Apart from this, the Tribunal has not considered the decision of the Coordinate Bench in assessee’s own case for AY.2002-03. We note that since, there was adjudication on a different issue which was not the ground of appeal by the Revenue, hence for limited purpose, the order of the Tribunal is recalled to adjudicate ground no.7 hence the Registry is directed to fix the appeal in due course.” 5. Learned Counsel pleads that a part of ground no.7 raised by the Revenue has been adjudicated on different footing by the Tribunal, therefore to adjudicate the remaining part of ground no.7 in respect of written back provision, to the tune of 22,70,062/- ( Rs. 33,97,072 -Rs.11,27,010), the order of the Tribunal was recalled. The ld Counsel argued that provision written back to the tune of Rs. 22,70,062/- is eligible for deduction under section 80HHC of the Act. This proposition was bolstered by ld Counsel with the help of a judgment from the Hon’ble Gujarat High Court in the case of Mistu Ltd. in Tax Appeal No. 658 of 2009, order dated 29.06.2010. Page | 3 2446/AHD/2007/AY.2004-05 Bayer Vapi Pvt. Ltd. 6. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 7. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. Succinct facts of the issue under consideration are that during the financial year 2003-04, assessee has included amount the provision written back of Rs.33,97,072/- in profit eligible for deduction under section 80HHC of the Act. The provision written back includes the following items: (Amount are in Rs.): a) Export commission accrued but not paid written back Rs.6,16,380/- b) Creditors Written back Rs.4,18,431/- c) Rebate received from banks of loan Rs.1,05,157/- d) Misc. income (Rent) Received from Bajaj Alliance Rs.11,27,010/- e) Rebate received from creditors Rs.10,41,092/- f) Difference in excise duty A/c Rs.16,312/- g) Excess remittance from customers Rs.72,690/- Total Rs.33,97,072/- Less: rent Received from Bajaj Alliance Rs.11,27,010/- The amount sustained by Ld CIT(A) 22,70,062/- The assessee argued before assessing officer that all the above credits written back have direct nexus with the manufacturing business. However, assessing officer held that aforesaid amount has no nexus with business of assessee hence excluded the same from profit of the business for the purpose of granting deduction under section 80HHC of the Act. On appeal by assessee, the Ld. CIT(A) had directed the assessing officer not to include any of the items except rent from Bajaj Alliance Rs.11,27,010/- for the purpose of granting deduction under section 80HHC of the Page | 4 2446/AHD/2007/AY.2004-05 Bayer Vapi Pvt. Ltd. Act. That is, ld CIT(A) was of the view that net amount of provision written back at Rs.22,70,062/- is not eligible for the purpose of deduction under section 80HHC of the Act. 8. After giving our thoughtful consideration to the submission of the parties and perusing the judicial decisions relied upon by the Ld. Counsel, we find that the issue involved in the present appeal is no longer res integra. The question as to whether provision written back is eligible for deduction under section 80HHC of the Act was considered by various judicial forums across India. We note that Coordinate Bench of ITAT, Delhi in the case of Class India Ltd. vs ACIT, in ITA No.608/Del/2006 for AY.2001-02, held that provision written back should not be excluded from profits, therefore these are eligible for deduction under section 80HHC of the Act. The findings of the Coordinate Bench are reproduced below: “18. As regards provision written back, the same is part of business income as per provisions of section 41(1) of the Act. However, there is no specific mention of such sum to be reduced from profits of the business. Thus, the issue to be considered is whether the provision written back can be considered as receipt by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature. Applying the principle of ejusdem generis, the receipts in the nature of miscellaneous income or receipts not connected with the business of export is to be excluded while computing profits of the business. However, in respect of provisions written back, the same cannot be considered of the nature like miscellaneous income or inter-connected with the business of the exports. Earlier when the assessee anticipated certain expenditure, the same were debited to profit and loss account and claimed as business expenditure. The provision no longer require merely reduces the expenditure and is not a receipt or income simpliciter. Such provision written back merely reduces the expenditure claimed and hence, cannot be excluded while computing profits of the business under clause (baa) of Explanation to section 80HHC. We, therefore, direct the Assessing Officer not to exclude 90 per cent of the provision written back for the purpose of computing profits of business in arrive at deduction under section 80HHC.” 9. On the identical facts, our view is fortified by the Judgment of the Hon'ble Jurisdictional Gujarat High Court in the case of Mistu Ltd. in Tax Appeal No. 658 of 2009, order dated 29.06.2010, wherein it was held as follows: “9. In relation to proposed question [D], the Assessing Officer disallowed deduction under section 80HHC in respect of recovery of bad debts, excess provisions written back, etc. On behalf of the assessee it has been claimed that recovery of bad debts and sundry balances written back are directly relatable to the business profit of the assessee. Commissioner (Appeals) found that writing Page | 5 2446/AHD/2007/AY.2004-05 Bayer Vapi Pvt. Ltd. back of provisions/liability for expenses payable was merely a reversal of liabilities created in the previous year as a result of which manufacturing profit of the previous year got reduced. Accordingly, it should also be treated as part of manufacturing profits eligible for deduction under section 80HHC. The Tribunal upon appreciating the evidence on record has concurred with the findings recorded by Commissioner (Appeals). Thus, in light of the concurrent findings of fact recorded by commissioner (Appeals) and the Tribunal, no question of law can be stated to arise, as proposed of otherwise, in relation to the said ground.” 10. Respectfully following the binding judgment of Hon'ble Jurisdictional High Court of Gujarat in the case of Mistu Ltd. (supra), we direct the Assessing Officer to treat these ‘provisions written back’ as a part of manufacturing profit eligible for deduction under section 80HHC of the Act. Therefore, second issue mentioned in the miscellaneous application is allowed in favour of assessee. 11. In the result, a part of ground no.7 raised by the Revenue is dismissed to the extent indicated above. Order is pronounced in the open court on 17/05/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 17/05/2022 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat