M/s. Kemrock Industries & Exports Ltd., Baroda V. The Dy.CIT.,Circle-1(2), Baroda

ITA 2745/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76805 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-04-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 27-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Section: 143(3); 80HHC; 115JB; 10B; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 2745 /AHD/2010 (ASSESSMEN T YEAR:2006-07) KEMROCK INDUSTRIES AND EXPORTS LTD., AT VILLAGE ASOJ, VADODARA- HALOL EXPRESS WAY, TA. WAGHODIA, DIST. VADODARA 391 510] V/S THE DCIT, CIRCLE 1(2), BARODA (APPELLANT) (RESPONDENT) PAN: AAACK 8810B APPELLANT BY : SHRI MUKUND BAKSHI A.R. RESPONDENT BY : SHRI K.C. MATHEWS, SR. D.R. ( )/ ORDER DATE OF HEARING : 17-04-2014 DATE OF PRONOUNCEMENT : 30-05-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-I, BARODA DATED 30.07.2010 FOR A.Y. 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS MANUFACTURING OF FIBERGLASS REINFORCED ARTICLES AND CHEMICALS. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 06-07 ON 16.02.2007 ITA NO 2745/ AHD/2010 . A.Y. 2006- 07 2 SHOWING LOSS OF RS. 22,64,390/-. THE CASE WAS SELE CTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 29.12.2009 AND THE TOTAL INCOME ASSESSABLE UN DER SECTION 115JB WAS DETERMINED AT RS. 5,33,36,163/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) V IDE ORDER DATED 30.07.2010 PARTLY ALLOWED THE APPEAL OF THE ASSESSE E. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFO RE US AND HAS RAISED THE FOLLOWING GROUNDS. 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, BAR ODA HAS ERRED IN LAW AND IN FACTS IN NOT ALLOWING DEDUCTION U/S 10A, BEING THE PROFIT OF EOU , OF RS. 4,09,99,868/- IN ACCORDANCE WITH CLAUSE (II) TO EXPLANATION 1 OF SEC. 115 JB IN THE COMPUTATION OF BOOK PROFITS U/S. 115JB OF THE ACT. 2. THE LD. CIT(A)-I, BARODA HAS FURTHER ERRED IN LAW A ND IN FACTS IN HOLDING THAT THE PROVISIONS WITH REGARD TO THE DETERMINATION OF ELIGIBLE DEDUCTION O F THE PROFIT OF EOU IS SIMILAR TO THE PROVISIONS WITH RESPECT TO THE DEDUCTION OF PROFITS U/S. 80HHC AS PER CLAUSE (IV) TO EXPLANATION 1 OF SEC. 1 15JB OF THE ACT. 3. THE ID. CIT(A)-I, BARODA HAS THUS ERRED IN LAW AND IN FACTS IN DENYING THE REDUCTION OF THE INCOME OF RS. 4,09,99,868/- TO WHICH THE PROVISIONS OF SEC . 10A APPLY IN THE COMPUTATION OF TAXABLE BOOK PROFITS U/S. 1 15JB OF THE ACT. THE LD. CIT( A) OUG HT TO HAVE HELD THE CLAIM OF THE APPELLANT WHICH MAY PLEASE BE DIRECTED TO BE ALLOWED. 4. THOUGH THE ASSESSEE HAS RAISED 3 GROUNDS BUT THE ON LY EFFECTIVE GROUND IS WITH RESPECT TO COMPUTATION OF TAXABLE PROFIT UN DER SECTION 115JB OF THE ACT. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD REDUCED THE PROFIT OF RS. 4,09,99,868/- BEING T HE PROFIT OF EOU UNIT FROM THE BOOK PROFIT U/S 115JB OF THE ACT. A.O ALS O NOTICED THAT THE RETURN OF INCOME WAS NOT FILED WITHIN THE TIME PRES CRIBED U/S 139 (1) OF THE ACT. ASSESSEE WAS THEREFORE ASKED TO JUSTIFY IT S CLAIM OF ADJUSTMENT OF PROFIT OF UNIT UNDER SECTION 10B OF THE ACT. THE A SSESSEE INTERALIA SUBMITTED THAT THE AMOUNT OF PROFIT OF EOU UNITS IS TO BE CALCULATED WITH REFERENCE TO BOOK PROFITS U/S 115 JB AND NOT AS PER THE REGULAR PROVISIONS ITA NO 2745/ AHD/2010 . A.Y. 2006- 07 3 OF THE ACT AND ALSO RELIED ON THE CIRCULARS AND VAR IOUS DECISIONS. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABL E TO THE A.O. A.O RELYING ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF AJANTA PHARMA LTD. 223 CTR 441 (MUM) WAS OF THE VIEW THAT THE DEDUCTION OF PROFIT OF THE EOU UNIT FROM BOOK PROFIT U/S. 115 JB IS REQUIRED TO BE CALCULATED WITH REFERENCE TO THE PROFIT AS PER NORM AL PROVISIONS OF THE ACT. A.O THEREAFTER NOTED THAT SINCE THERE IS NO P ROFIT LEFT OUT WHICH IS ELIGIBLE FOR DEDUCTION, THE CLAIM OF ASSESSEE WAS R EJECTED. HE FURTHER NOTED THAT ASSESSEE HAD FILED ITS RETURN OF INCOME ON 22.02.2007 WHEREAS THE DUE DATE OF FILING OF RETURN OF INCOME AS PER S ECTION 139(1) OF THE ACT WAS 31.12.2006 AND SINCE THE ASSESSEE HAS FILED THE RETURN OF INCOME AFTER THE DUE DATE AND THEREFORE ON THIS GROUND ALS O THE CLAIM OF ASSESSEE WAS REJECTED. AGGRIEVED BY THE ORDER OF A.O, ASSES SEE CARRIED THE MATTER BEFORE CIT(A). CIT DISMISSED THE APPEAL OF THE ASSE SSEE BY HOLDING AS UNDER;- 5.8 THE DECISIONS IN THE CASE OF INDO-FUJI INFORMAT ION TECHNOLOGY AND MOSER BAER INDIA LTD. V DCIT CITED BY THE APPELLANT RELIED UPON THE DECISION IN THE CASE OF BHUSHAN STEEL 108 TTJ105 (SB) MUMBAI, COMMONLY KNOWN AS DY. CITV. SYNCOME FORMULATIONS (I ) LTD. [2007] 106ITD 193 (MUM.) AND THE LATTER DECISION HAS BEEN OVERRULED BY AJANTA PHARMA DECISION. THE DECISION IN THE CASE OF CIT V FUTURA POLYESTER LTD., 186 TAXMAN 51 (MADRAS) WAS R ENDERED PRIOR TO THE DECISION IN THE CASE OF AJANTA PHARMA LTD, THUS IN EFFECT AS ON DATE THE LA TEST DECISION IN THE CONTEXT IN THE CASE OF CIT V A L- KABHEER EXPORTS LTD., ITA NO 2619 OF 2010, DT. JULY 8, 2010, (WHICH AFFIRMED THE DECISION IN THE CASE OF AJANTA PHARMA LIMITED) HOLDS THE FORT. IN MY HUM BLE VIEW THUS THE AO WAS JUSTIFIED IN NOT' ALLOWING THE PROFIT OF EOU OF RS. 4,09,99,868/- COMPUTED BY TAKING PER BOOK PROFITS AS THE BASE OUT OF THE INCOME UNDER SECTION 115JB. THE OTHER PLEA REGARDIN G FILING OF RETURN BEYOND TIME HAS THUS BECOME INFRUCTUOUS. GROUND NO. 2 IS DISMISSED. 6. BEFORE US, THE LD. A.R. SUBMITTED THAT CIT(A) WHILE DISALLOWING THE CLAIM OF THE ASSESSEE HAD RELIED ON THE DECISION IN THE C ASE OF AJANTA PHARMA (SUPRA). HE FURTHER SUBMITTED THAT THE AFORESAID D ECISION HAS BEEN REVERSED BY THE HONBLE SUPREME COURT AND THEREFORE THE ASSESSEE IS ELIGIBLE FOR DEDUCTION. HE ALSO PLACED RELIANCE ON THE DECISION IN THE CASE ITA NO 2745/ AHD/2010 . A.Y. 2006- 07 4 OF J.P. MORGAN SERVICES INDIA PVT. LTD. VS. DCIT IT A NO. 5547/MUM/2009 ORDER DATED 23.04.2013 ORDER OF AHMED ABAD TRIBNUNAL IN THE CASE OF GUJARAT AMBUJA EXPORTS LTD. ITA NO. 2137/AHD/2007 ORDER DATED 24.12.2010. 7. THE LD. D.R. ON THE OTHER HAND POINTED OUT THAT AS SESSEE HAD NOT FILED THE RETURN BEFORE THE DUE DATE OF FILING OF RETURN FOR WHICH HE POINTED OUT TO THE RELEVANT FINDING OF THE A.O. HE THEREFORE SU BMITTED THAT WHEN THE ASSESSEE HAS NOT FILED THE RETURN IN TIME, THE ASSE SSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 10B. HE FURTHER SUBMITTED THAT CIT(A ) WHILE DECIDING THE APPEAL HAS NOT ADJUDICATED ON THE ELIGIBILITY OF DE DUCTION WHEN THE RETURN OF INCOME IS FILED AFTER THE DUE DATE PRESCRIBED U/ S. 139(1). HE FURTHER SUBMITTED THAT SPECIAL BENCH OF TRIBUNAL IN THE CAS E OF SAFFIRE GARMENTS (2012) 28 TAXMAN. COM 27 (RAJKOT) (SB) HAS HELD THA T THE CONSEQUENCE OF FAILURE TO FILE RETURN OF INCOME BEFORE THE DUE DATE WILL LEAD TO DISALLOWANCE OF DEDUCTION U/S 10A AND THUS FILING O F RETURN OF INCOME BEFORE DUE DATE IS MANDATORY. HE THEREFORE SUBMITT ED THAT SINCE THE GROUND WITH RESPECT TO LATE FILING OF RETURN BY THE ASSESSEE HAS NOT BEEN ADJUDICATED BY CIT(A), THE MATTER MAY BE REMITTED T O THE FILE CIT(A) FOR HIS ADJUDICATION. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE UPHOLDING THE ORDER OF A. O HAD RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F AJANTA PHARMA LTD. WHICH HAS BEEN SUBSEQUENTLY OVERRULED BY THE H ONBLE APEX COURT, IN THE CASE OF AJANTA PHARMA LTD. VS. CIT 327 ITR 3 05. WE ALSO FIND THAT CIT(A) DID NOT DECIDED THE ISSUE WITH RESPECT TO AVAILABILITY OF ITA NO 2745/ AHD/2010 . A.Y. 2006- 07 5 DEDUCTION WHEN THE RETURN OF INCOME HAS BEEN FILED BEYOND THE DUE DATE AS ACCORDING TO CIT(A), THE ISSUE WAS INFRUCTUOUS. WE ARE THEREFORE OF THE VIEW THAT IN VIEW OF THE HONBLE SPECIAL BENCH DECISION THE TRIBUNAL IN THE CASE OF SAFFIRE GARMENTS VS. ITO (SUPRA) AND THE DECISION OF HONBLE APEX COURT IN THE CASE OF AJANTA PHARMA (SU PRA) THE MATTER NEEDS RE-EXAMINATION. WE THEREFORE REMIT THE ISSUE BACK TO THE FILE OF CIT(A) TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF T HE FOREGOING. NEEDLESS TO STATE THAT CIT(A) SHALL GRANT ADEQUATE OPPORTUNI TY OF HEARING TO BOTH THE PARTIES BEFORE DECIDING THE ISSUE. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 30 - 05 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, AHMEDABAD