The ACIT, Circle-4, Ahmedabad V. Freshtrop Fruits Ltd., Ahmedabad

ITA 2838/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0002 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-10-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 18-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K D RATNOO
• Assessee Lawyers: S N DIVATIA
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 10B; 10

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ./ ITA NO. 2838/AHD/2012 / ASSESSMENT YEAR: 2005-2006 ACIT, CIRCLE-4, AHMEDABAD VS. FRESHTROP FRUITS LIMITED, A-603, SAPATH IV, OPP. KARNAVATI CLUB, S.G. HIGHWAY, AHMEDABAD 380054 PAN : AAACF 2885 P / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI K.D. RATNOO, SR DR ASSESSEE BY : SHRI S.N. DIVATIA, AR / DATE OF HEARING : 20/10/2016 / DATE OF PRONOUNCEMENT: 29/11/2016 / O R D E R PER SHRI S.S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2005-06, ARISES FROM ORDER DATED 18.09.2012 PASSED BY THE CIT(A)-VIII, AHMEDAB AD IN CASE NO.CIT(A)- VIII/DCIT/CIR.4/529/10-11, IN PROCEEDINGS U/S.143(3 ) R.W.S. 147 OF THE INCOME-TAX ACT, IN SHORT THE ACT. 2. THE REVENUES FIRST SUBSTANTIVE GROUND PLEADS TH AT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWA NCE OF EXCESS DEDUCTION U/S 10B OF THE ACT AMOUNTING TO RS.68,70,492/- ALLE GEDLY WITHOUT APPRECIATING THE FACT THAT THERE WERE CERTAIN DISCR EPANCIES IN TURNOVER, EXPORT TURNOVER VIS-A-VIS THE CORRESPONDING DETAILS SUBMITTED AT ASSESSEES BEHEST DURING ASSESSMENT PROCEEDINGS AND THOSE STAT ED IN ITS FORM 56G. 3. WE COME TO RELEVANT FACTS. THE ASSESSING OFFICE R NOTED IN ASSESSMENT ORDER DATED 25.11.2010 THAT ASSESSEES EXPORT TURNO VER QUA ITS ELIGIBLE UNDERTAKING WAS RS.11,20,08,430/- ALONG WITH TOTAL TURNOVER OF ITA NO. 2838/AHD/2012 ACIT VS. FRESHTROP FRUITS LIMITED AY 2005-06 2 RS.17,17,47,004/- WHEREAS ITS AUDITORS CERTIFICATE WOULD SHOW THE TOTAL EXPORT PROFITS IN ANNEXURE-A AS RS.2,56,04,678/- FO LLOWED BY TOTAL PROFITS OF RS.3,53,32,580/-; RESPECTIVELY. THIS MADE THE ASSE SSING OFFICER TO DISALLOW THE EXCESS DEDUCTION IN QUESTION OF RS.68,79,492/-. 4. THE CIT(A) REVERSES ASSESSING OFFICERS FINDINGS AS FOLLOWS:- 2.4. IT IS TO BE NOTED THAT THE APPELLANT COMPANY IS CLAIMING THE DEDUCTION U/S 10B ON THE UNIT OF TASGAON AT SANGLI IN MAHARASTRA. THE APPELLANT IS NOT CLAIMING THE DEDUCTION FROM NASIK UNIT AS IT IS NOT AN ELIGIBLE UNIT FOR DEDUCTION U/S 10B IN THE YEAR UNDER APPEAL EVEN THE RE ARE EXPORTS FROM THIS UNIT. THE APPELLANT HAS ALSO MAINTAINED UNIT WISE P &L ACCOUNTS AS WELL AS CONSOLIDATED ACCOUNTS. IT APPEARS FROM THE FACTS TH AT AO HAS NOT PROPERLY VERIFIED THE DETAILS GIVEN IN THE PAPER BOOK SENT T O HIM AT THE TIME OF REMAND REPORT AND THE AO HAS ONLY CONFIRMED WITHOUT ANY JU STIFICATION THE ADDITION MADE BY THE EARLIER ASSESSING OFFICER. AFTER GOING THROUGH THE ASSESSMENT ORDER SUBMISSION OF THE APPELLANT AND THE COMPARATI VE CALCULATION U/S 10B OF THE APPELLANT AND THE AO, IT IS CLEAR THAT THE A.O. HAS CORRECTLY TAKEN THE FIGURE OF EXPORT TURNOVER OF UNDERTAKING BUT IN THE DENOMINATOR THE AO HAS ERRONEOUSLY TAKEN THE FIGURE OF TOTAL TURNOVER OF T HE COMPANY INSTEAD OF THE UNDERTAKING. I AM IN AGREEMENT WITH THE CALCULATION OF THE APPELLANT REGARDING THE DEDUCTION OF THE SANGLI UNIT U/S 10B OF THE IT ACT WHICH IS AS UNDER: - PROFIT OF THE UNDERTAKING X EXPORT TURNOVER OF UNDERTAKING --------------------------------------- TOTAL TURNOVER OF UNDERTAKING = 19778378 X 112008430 -------------- 112008430 = RS. 19778378/- IN VIEW OF THE DISCUSSION, THE FACTS OF THE CASE AN D ACCORDING TO THE SCHEME OF THE SECTION 10B OF THE IT ACT, THE APPELLANT IS ENT ITLED TO THE DEDUCTION OF RS.1,97,78,378/. THEREFORE, THE ADDITION OF RS. 687 9492/- IS HEREBY DIRECTED TO BE DELETED. THE GROUND OF THE APPELLANT IS ALLOWED. 5. HEARD RIVAL CONTENTIONS. THE SOLE DISPUTE BETWE EN THE PARTIES IS QUA RELEVANT CORRECT FIGURES OF ASSESSEES EXPORT AND T OTAL TURNOVER FOR THE PURPOSE OF COMPUTING SECTION 10B DEDUCTION. WE NOT ICE THAT THE CIT(A) HAS DULY AFFORDED OPPORTUNITY OF HEARING TO THE ASSESSI NG OFFICER BY CALLING ITA NO. 2838/AHD/2012 ACIT VS. FRESHTROP FRUITS LIMITED AY 2005-06 3 REMAND REPORT QUA ASSESSEES RELEVANT DETAILS/ADDIT IONAL SUBMISSIONS MADE IN COURSE OF LOWER APPELLATE PROCEEDINGS. HE FINDS THAT THE ASSESSING OFFICER HAS ADOPTED TOTAL TURNOVER AS DENOMINATED F IGURES TO BE THAT OF THE COMPANYS INSTEAD OF THE ELIGIBLE UNDERTAKING IN QU ESTION. THIS CRUCIAL FINDING GOES UNREBUTTED AT REVENUES BEHEST IN THE COURSE OF HEARING BEFORE US. WE THUS DO NOT SEE ANY JUSTIFIABLE REASON TO I NTERFERE IN THE CIT(A)S CONCLUSION EXTRACTED HEREINABOVE. THIS FIRST SUBST ANTIVE GROUND FAILS. 6. THE REVENUES SECOND SUBSTANTIVE GROUND AVERSE T HAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN EXCLUDING UNABSORBED D EPRECIATION OF RS.72,91,470/- WHILST COMPUTING SECTION 10B DEDUCTI ON WITHOUT APPRECIATING THAT ITS UNABSORBED DEPRECIATION WAS I N THE NATURE OF CURRENT YEARS DEPRECIATION LIABLE TO BE SET OFF AS PER HON BLE KERALA HIGH COURT DECISION IN (2011) 15 TAXMAN.COM 122 (KER), CIT VS. PATSPIN INDIA LTD. 7. THERE DOES NOT APPEAR TO BE ANY DISPUTE THAT THE ASSESSEE HAD CLAIMED THE IMPUGNED DEDUCTION OF RS.1,97,78,378/- U/S 10B WITHOUT ADJUSTING BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS.72,91 ,470/-. THE ASSESSING OFFICER OBSERVED THAT UNABSORBED DEPRECATION OF EAR LIER ASSESSMENT YEARS IS TO BE TREATED AS CURRENT YEARS DEPRECIATION LIABLE TO BE SET OFF AGAINST PROFITS OF THE ELIGIBLE UNDERTAKINGS. 8. THE CIT(A) ACCEPTS ASSESSEES ARGUMENTS AS FOLLO WS:- THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APP ELLANT ALONG WITH CASE LAWS HAVE BEEN SEEN CAREFULLY. IT IS TO BE NOTED TH AT THE APPELLANT COMPANY IS CLAIMING THE DEDUCTION U/S 10B ON THE UNIT OF TASGA ON AT SANGLI IN MAHARASTRA. IT APPEARS FROM THE FACTS THAT AO HAS N OT PROPERLY VERIFIED THE DETAILS GIVEN IN THE PAPER BOOK SENT TO HIM AT THE TIME OF REMAND REPORT AND THE AO HAS ONLY CONFIRMED WITHOUT ANY JUSTIFICATION THE ADDITION MADE BY THE EARLIER ASSESSING OFFICER. AFTER GOING THROUGH THE ASSESSMENT ORDER SUBMISSION OF THE APPELLANT AND THE CASE LAWS CITED BY THE APPELLANT, IT BECOMES CLEAR THAT LOSSES ARE FROM THE UNITS ON WHICH APPEL LANT IS NOT CLAIMING DEDUCTION U/S 10B OF THE IT ACT. THEREFORE, THE CAS E OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS. HIMATASINGKE SEIDE LTD. IS N OT APPLICABLE TO THE FACTS OF ITA NO. 2838/AHD/2012 ACIT VS. FRESHTROP FRUITS LIMITED AY 2005-06 4 THE CASE WHERE BROUGHT FORWARD UNABSORBED DEPRECIAT ION OF ELIGIBLE UNIT WAS DEDUCTED FROM THE INCOME FROM OTHER SOURCES WHERE T HE ASSESSEE WAS NOT HAVING INCOME FROM EXPORT PROFIT, HOWEVER, IN APPEL LANT'S CASE THE UNABSORBED DEPRECIATION OF NON-ELIGIBLE UNIT WHICH HAS BEEN SE T OFF BY AO AGAINST PROFIT OF THE ELIGIBLE UNIT. IN RECENT JUDGEMENT OF A SPEC IAL BENCH OF THE CHENNAI TRIBUNAL IN THE CASE OF SCIENTIFIC ATLANTA (129 TTJ 273), HELD THAT- (I) S. 10A ALLOWS A DEDUCTION OF THE 'PROFITS AND G AINS DERIVED BY THE UNDERTAKING FROM THE EXPORT OF COMPUTER SOFTWARE' ' FROM THE TOTAL INCOME OF THE ASSESSEE'. THE EFFECT IS THAT THE DEDUCTION HAS TO BE MADE AT THE STAGE OF COMPUTING THE INCOME UNDER HEAD 'PROFITS & GAINS' A ND NOT AT THE STAGE OF COMPUTING THE GROSS TOTAL INCOME; (II) S. 80AB IS CONFINED TO DEDUCTIONS GRANTED UNDE R CHAPTER VI-A. AS S. 10A DOES NOT FALL IN CH. VI-A, S. 80AB HAS NO APPLICATI ON; (III) S. 10A GRANTS A DEDUCTION TO THE 'PROFITS OF THE UNDERTAKING' AND NOT TO THE 'PROFITS OF THE ASSESSEE'. THERE IS A WELL KNOW N DISTINCTION BETWEEN THE 'UNDERTAKING' AND THE 'ASSESSEE' AS ALSO NOTED BY T HE CBDT IN CIRCULAR F. NO. 15/563 DATED 13.12.1963. THE DEDUCTION U/S 10A ATTACHES TO THE UNDERTAKING AND NOT TO THE ASSESSEE; (IV) CONSEQUENTLY, THE LOSSES OF A NON-ELIGIBLE UNI T CANNOT BE SET OFF AGAINST THE PROFITS OF AN ELIGIBLE UNIT AND ARE ELIGIBLE TO BE SET-OFF AGAINST OTHER INCOME OR TO BE CARRIED FORWARD. THE POSITION OF LOSSES OF AN ELIGIBLE UNIT MAY BE ON A DIFFERENT FOOTING. IN VIEW OF THE ABOVE DISCUSSION, THE FACTS OF THE C ASE AND THE RATIOS OF CASE LAWS CITED(SUPRA) BY THE APPELLANT, IT IS HELD THAT AO W AS NOT CORRECT IN SETTING OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION OF NON-E LIGIBLE UNIT AGAINST THE PROFIT OF THE ELIGIBLE BUSINESS FOR DEDUCTION U/S 1 0B OF THE IT ACT. THE AO IS DIRECTED TO DELETE THE SAME ADDITION AND IS ALSO DI RECTED TO VERIFY THE AMOUNT OF SETTING OFF OF BROUGHT FORWARD UNABSORBED DEPRECIAT ION OF OTHER NON ELIGIBLE UNIT. THE GROUND OF THE APPELLANT IS ALLOWED. 9. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS REITERATING THEIR RESPECTIVE STANDS. IT HAS ALREAD Y COME ON RECORD THAT ASSESSEES ABOVE DEDUCTION CLAIM U/S 10B OF THE ACT PERTAINS TO ITS ELIGIBLE UNDERTAKING, WHEREAS THE UNABSORBED DEPRECATION SOU GHT TO BE SET OFF RELATES TO ITS OVERALL BUSINESS. LEARNED COUNSEL F OR THE ASSESSEE CITES HONBLE BOMBAY HIGH COURT DECISION IN (2012) 20 TAXMANN.COM 270 (BOM), CIT VS. BLACK AND VEATCH CONSULTING PRIVATE LTD, HOLDING TH AT SECTION 10A DEDUCTION ( PARI MATERIA TO SECTION 10B) HAS TO BE COMPUTED BEFORE SETTING OFF ITA NO. 2838/AHD/2012 ACIT VS. FRESHTROP FRUITS LIMITED AY 2005-06 5 ANY BROUGHT FORWARD UNABSORBED DEPRECATION. THE RE VENUE AT THIS STAGE QUOTES HONBLE KERALA HIGH COURTS DECISION AS WELL AS THAT OF THE HONBLE APEX COURT IN (2014) 266 CTR 141 (SC), HIMATSINGKA SEIDE LTD VS. CIT THAT UNABSORBED DEPRECIATION IS TO BE ADJUSTED AGAINST I NCOME OF EXPORT UNIT ONLY, THEREBY UPHOLDING KARNATAKA HIGH COURTS DECI SION IN APPEAL UNDER CHALLENGE THEREIN. SHRI DIVATIA SUBMITS THAT HONB LE KARNATAKA HIGH COURT THEREAFTER HAS DECIDED YET ANOTHER CASE IN CIT VS. YOKOGAWA INDIA (2011) 341 ITR 356, CONCLUDING THAT LOSS OF NON SECTION 10 A UNIT IS NOT TO BE SET OFF AGAINST INCOME OF AN ELIGIBLE UNIT U/S 72 OF THE AC T. THE REVENUE FAILS TO DISPUTE THIS LATTER DECISION AS WELL AS THE LAW THA T SECTION 10A DEDUCTION IS AN UNDERTAKINGS SPECIFIC PROVISION AND NOT APPLICAB LE IN CASE OF ENTIRE BUSINESS OF AN ASSESSEE. WE THUS HOLD THAT THE LD. CIT(A) HAS RIGHTLY ACCEPTED THE ASSESSEES ARGUMENTS, THEREBY REVERSIN G ASSESSING OFFICERS FINDINGS IN QUESTION. THIS LATTER SUBSTANTIVE GROU ND IS ALSO REJECTED. 10. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 29 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER AHMEDABAD; DATED 29/11/2016 BIJU T., SR. PS !#$ %$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! # / CONCERNED CIT 4. # ( ) / THE CIT(A ) 5. & ! , ! , / D R, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD