The ACIT, V. Shri Indranarayan Jhalani,

ITA 274/IND/2003

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54025 (ITAT-INDORE)
• Duration Of Justice: 8 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-10-2011
• Assessment Year: 1992-1993
• Appeal Filed On: 03-04-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: V N KULKARNI ITP
• Keywords: Reassessment proceedings
• Section: 80HHC; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. I.T.A.NO. 274/IND/2003 A.Y. : 1992-93 ACIT, SHRI INDRA NARAYAN JHALANI, RATLAM VS SHRI RAM BHAWAN, 60, GOSHALA ROAD, RATLAM APPELLANT RESPONDENT APPELLANT BY : SHRI ARUN DEWAN, SR. DR RESPONDENT BY : SHRI V. N. KULKARNI, ITP DATE OF HEARING : 20.10.2011 DATE OF PRONOUNCEMENT : 31.10.2011 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 27.01.2003 FOR THE ASSESSMENT YEAR 1992-93. 2. THE ONLY GRIEVANCE OF THE REVENUE RELATES TO ALLOWI NG DEDUCTION U/S 80HHC. -: 2: - 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE WAS CARRYING ON TWO BUSINESSES. THE BUSINESS OF COTTON AND OIL S EEDS WERE CARRIED ON UNDER THE NAME AND STYLE OF M/S. M.L.JHA LANI & SONS, HAVING ITS HEAD OFFICE AT RATLAM. SECOND BUSI NESS OF MANUFACTURING AND EXPORT OF GARMENTS UNDER THE NAME AND STYLE OF M/S. JHALANI INTERNATIONAL, DELHI. THESE T WO BUSINESS CONCERNS OF THE ASSESSEE ARE AT TWO DIFFERENT PLACE S I.E. DELHI AND RATLAM. THESE TWO BUSINESS CONCERNS OF THE ASSE SSEE ARE SEPARATE FROM EACH OTHER AND SEPARATE BOOKS OF ACCO UNT ARE MAINTAINED FOR EACH BUSINESS. IN CASE OF EXPORT BUS INESS BOOKS OF ACCOUNT WERE AUDITED BY A CHARTERED ACCOUN TANT. SINCE DELHI BUSINESS WAS 100% EXPORT BUSINESS, DEDU CTION U/S 80HHC WAS CLAIMED AT RS. 10,62,456/- I.E. THE E NTIRE 100% EXPORT BUSINESS DEDUCTION U/S 80HHC WAS CLAIME D AT RS. 10,62,456/- I.E. ENTIRE EXPORT PROFIT. THE AO P ROCESSED THE RETURN U/S 143(1)(A) OF THE ACT VIDE ORDER DATED 06 .04.1993 AND MADE ADJUSTMENT THEREBY REDUCING THE CLAIM TO R S. 3,13,633/-. AS PER THE PROCEDURE THEN PREVAILING A PETITION FOR RECTIFICATION U/S 154 OF THE ACT DATED 12.5.1993 WA S MADE. -: 3: - 3 THE AO, HOWEVER, REJECTED THE ABOVE PETITION VIDE O RDER DATED 19.7.1993. AGAINST THIS ORDER OF AO AN APPEAL WAS F ILED BEFORE THE CIT(A) INDORE, WHO VIDE ORDER DATED 12.4.1994 S TRUCK DOWN THE ADJUSTMENT AND CONSEQUENTIAL DEMAND RAISED BY THE ASSESSING OFFICER. IN THE MEANWHILE THE AO ISSUED A NOTICE U/S 148 OF THE ACT DATED 23.8.1994 TO REASSESS THE INCOME. NOTICE WAS ISSUED ON THE GROUND THAT SINCE ADJUSTME NT HAS BEEN CANCELLED BY CIT(A) IT IS CLEAR THAT THE INCOM E OF THE ASSESSEE HAS BEEN UNDER ASSESSED TO THE EXTENT OF R S. 7,48,823/-. HE, THEREFORE, WAS OF THE VIEW THAT IT SHOULD BE REASSESSED. 4. IN THE REASSESSMENT PROCEEDINGS, THE AO RECOMPUTED THE DEDUCTION U/S 80HHC BY ADDING THE TURNOVER OF B OTH THE BUSINESS OF COTTON AND OIL AS WELL AS BUSINESS OF MANUFACTURING AND EXPORT OF GARMENTS. BY THE IMPUGN ED ORDER, THE LD. CIT(A) HELD THAT SINCE BOTH THE BUSI NESS WERE SEPARATE AND INDEPENDENT, THE BOOKS OF ACCOUNT WAS ALSO MAINTAINED INDEPENDENTLY THERE WAS NO REASON FOR AD DING THE TURNOVER OF BOTH THE INDEPENDENT BUSINESS WHILE COM PUTING -: 4: - 4 DEDUCTION U/S 80HHC. FOLLOWING WAS THE PRECISE OBSE RVATION OF THE CIT(A) :- I HAVE CAREFULLY GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE WITH PARTICULAR REFERENCE TO SECTION 80HHC. I HAVE ALSO GONE THROUGH THE PRINCIPLES OF INTERPRETATION OF THE STATUTE AS STATED BY ME ABOVE AND THE CASE LAW RELIED ON BY THE APPELLANT AS ABOVE AND I AM OF THE OPINION THAT THE APPELLANTS CASE IS ONE WHERE THE NON-80HHC ELIGIBLE UNIT OF A BUSINESS IS ENTIRELY INDEPENDENT AND FREE FROM ANY INTER-CONNECTION OR INTER-LACING. SEPARATE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED IN RESPECT OF EXPORT BUSINESS (ELIGIBLE FOR 80-HHC) AND IN RESPECT OF TRADING BUSINESS ALTOGETHER DIFFERENT FROM THE EXPORT BUSINESS. I HA VE GIVEN A CAREFUL THOUGHT TO PRACTICALLY ALL ASPECTS OF INTERPRETATION, STATUTE LAW AND THE EXACT TERMINOLOGY OF SECTION 80HHC AND I AM OF THE OPINION THAT THE TURNOVER OF THE TRADING BUSINESS O F THE APPELLANT (IN THE NAME AND STYLE OF M/S. -: 5: - 5 M.K.JHALANI & SONS WITH HEAD OFFICE AT RATLAM) IS NOT REQUIRED TO BE AGGREGATED TO THE TURNOVER OF TH E APPELLANTS EXPORT BUSINESS, NAMELY, M/S. JHALANI INTERNATIONAL, AS WAS TO WORK OUT THE TOTAL TURNOVE R, AS REQUIRED IN SECTION 80HHC(3)/THE FORMULA STATED ABOVE. AS A RESULT THE AO IS DIRECTED TO TAKE THE TOTAL TURN-OVER OF THE APPELLANTS BUSINESS, FOR T HE PURPOSE OF SECTION 80HHC AT RS. 22,84,975/- AND THE DEDUCTION U/S 80HHC IS DIRECTED TO COMPUTE AT RS. 9,23,942/- (+) RS. 1,28,614/- = RS. 10,62,456/- .ACCORDINGLY, THIS GROUND OF APPEAL, THEREFORE, SUCCEEDS. 5. AGAINST ABOVE ORDER, THE REVENUE IS IN FURTHER AP PEAL BEFORE US. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT THE AO HAS WRONGLY CLUBB ED THE TURNOVER OF BOTH INDEPENDENT BUSINESS WHILE COMPUTI NG CLAIM OF DEDUCTION IN RESPECT OF ASSESSEES EXPORT BUSINE SS, WHICH WAS ENTIRELY INDEPENDENT FROM ITS TRADING BUSINESS AND FOR WHICH SEPARATE BOOKS OF ACCOUNT WERE BEING MAINTAIN ED BY THE -: 6: - 6 ASSESSEE. RATLAM BUSINESS AND DELHI BUSINESS ARE INDEPENDENT AND THERE IS NO INTER-CONNECTION, INTER -LACING AND INTERDEPENDENCY. THE ISSUE IS ALSO SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. SHRI VENKATESHWAR COTTON COMPANY, 76 ITJ 672, WHERE IN IT WAS HELD THAT WHERE THE ASSESSEE HAD BOTH ELIGIBLE BUSINESS AND NON-ELIGIBLE BUSINESS, DEDUCTION U/S 80HHC IS T O BE CALCULATED AS PER THE SEPARATE BOOKS OF ACCOUNT MAI NTAINED FOR ELIGIBLE AND NON-ELIGIBLE BUSINESS, THE FORMULA U/S 80HHC(3) SHALL NOT BE APPLICABLE. 7. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :31 ST OCTOBER, 2011. CPU* 1831