LT Foods Limited, New Delhi V. DCIT, New Delhi

ITA 2936/DEL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52957 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 19-09-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 18-06-2009
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: SANAT KAPOOR ARS
• Keywords: Business income; Principle of natural justice
• Section: 143(3); 80HHC; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI D BENC H BEFORE SHRI C.L. SETHI, JM & SHRI A.N. PAHUJA, AM ITA NO.2936/DEL/2009 ITA NO.2936/DEL/2009 ITA NO.2936/DEL/2009 ITA NO.2936/DEL/2009 ASSESSMENT YEAR:2003-04 M/S L.T. OVERSEAS LTD.[FORMERLY LT OVERSEAS LTD.],A-21, GREEN PARK, AURBINDOMARG, DELHI-16 [PAN:AAACL 0259 K] [PAN:AAACL 0259 K] [PAN:AAACL 0259 K] [PAN:AAACL 0259 K] V/S V/S V/S V/S. DEPUTY CIT CIRCLE 4(1), 4 TH FLOOR, CR BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY S/SHRI SALIL KAPOOR & SANAT KAPOOR, ARS REVENUE BY MS. Y. KAKKAR, DR DATE OF HEARING 26-09-2011 DATE OF PRONOUNCEMENT 30-09-2011 O R D E R O R D E R O R D E R O R D E R A.N.PAHUJA: A.N.PAHUJA: A.N.PAHUJA: A.N.PAHUJA:- -- - THIS APPEAL BY THE ASSESSEE FILED ON 18.6.2009 AGAIN ST AN ORDER DATED 10.02.2009 OF THE LEARNED CIT(A)-VII , NEW DELHI, RAISES THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN UPHOLDING THE DECISIO N OF THE ASSESSING OFFICER IN REJECTING APPLICATION U/S 154 OF THE INCOME-TAX ACT, 1961 FOR RECTIFICATION O F MISTAKE IN COMPUTING DEDUCTION U/S 80HHC OF THE INCOME-TAX ACT, 1961 WHEREIN BUSINESS INCOME FROM THE FOLLOWING SOURCES IS NOT TAKEN IN THE COMPUTATION OF DEDUCTION U/S 80HHC:- INSURANCE CLAIM RECEIVED `1,00,061/- SALE OF SCRAP ` 57,949/- PROCESSING & FOBBING CHARGES `1,33,90,655/- 2. THE ABOVE ACTION BEING ARBITRARY, MISCONCEIVED, ERRONEOUS, AGAINST PRINCIPLE OF NATURAL JUSTICE AND ITA NO.29 36/DEL./2009 2 THEREFORE, IS ILLEGAL AND BAD BOTH ON FACTS AND LAW AND MUST BE QUASHED WITH DIRECTION FOR GRANTING RELIEF. 3. THE APPELLANT CRAVES YOUR HONOURS LEAVE TO ADD, ALTER OR MODIFY, CHANGE, SUBSTITUTE, WITHDRAW ANY OF THE GROUNDS AT ANY STATE OF APPELLANT PROCEEDINGS. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT ASSE SSMENT IN THIS CASE WAS COMPLETED VIDE ORDER DATED 29 TH MARCH, 2006 U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) DETERMINING INCOME OF `3,09,33,761/- IN PURSUANCE TO RETURN DECLARING INCOME OF `25,55,011/- FILED ON 02.12.2003 BY THE ASSESSEE, MANUFACTURING AND PROCESSING RICE FOR EXPORT, INTER A LIA, DEDUCTION U/S 80HHC OF THE ACT WAS RESTRICTED TO `1,92,73,253/- AS A GAINST CLAIM OF `3,84,66,784/- AND OTHER INCOME OF RS.1,48,36,503/- WAS EXCLUDED WHILE COMPUTING THE SAID DEDUCTION ON THE GROUND THA T THE AMOUNT OF RS.1,48,36,503/- WAS NOT DERIVED FROM THE CORE ACTIV ITY OF EXPORTS. IN THIS CONNECTION THE ASSESSING OFFICER[AO IN SHORT] RELIED UPON DECISIONS IN CIT VS. STERLING FOODS,237 ITR 579(SC) AND CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978] 113 ITR 84 113 ITR 84 113 ITR 84 113 ITR 84 .[SC]. ON APPEAL, THE LD. CIT(A),VIDE HIS ORDER DATED 26.9.2006, UPHELD THE FI NDINGS OF THE AO IN DETERMINING DEDUCTION U/S 80HHC OF THE ACT. SUBSEQUEN TLY, THE ASSESSEE FILED AN APPLICATION DATED 24 TH SEPTEMBER, 2007 BEFORE THE AO U/S 154 OF THE ACT, CLAIMING THAT THE FOLLOWING A MOUNTS WERE BUSINESS RECEIPTS, ENTITLED TO DEDUCTION U/S 80HHC OF TH E ACT:- A) RECEIPTS FROM STATE TRADING CORPORATION- `1,33,9 0,655/-. B) INSURANCE CLAIM- `1,00,061/- AND C) SALE OF SCRAP- `57,949/-. 2.1 HOWEVER, THE AO REJECTED THE APPLICATION OF THE ASSESSEE VIDE ORDER DATED 18.12.2007. ITA NO.29 36/DEL./2009 3 3. ON APPEAL, THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE HOLDING AS UNDER:- THE FINDINGS OF THE ASSESSING OFFICER IN ITS RECTIFICATI ON ORDER U/S 154 DATED 18.12.2007 AND THE SUBMISSION MADE BY THE LEARNED AR OF THE APPELLANT HAVE CAREFULLY B EEN CONSIDERED. AFTER CONSIDERING THE TOTALITY OF ALL TH E FACTS AND CIRCUMSTANCES I AM OF THE VIEW THAT THE VARIOUS CONTENTIONS RAISED BY THE LEARNED AR OF THE APPELLANT IN ITS RECTIFICATION APPLICATION IS NOT TENABLE BOTH IN LAW AND ALSO ON THE FACTS. ON THE FACTS, ALL THE THREE RECEIPTS BE ING A RECEIPT FROM INSURANCE CLAIM RECEIVED, SALE OF SCRAP A ND PROCESSING AND FOBBING CHARGES RECEIVED FROM STC UNDOUBTEDLY WERE THE BUSINESS RECEIPTS BUT SAME FALL UNDER CLAUSE (BAA) OF SECTION 80HHC. THIS VIES HAS BEEN TAKEN BY THE ASSESSEE COMPANY ITSELF AT THE TIME OF THE FILING OF THE RETURN OF INCOME WHICH WAS ACCEPTED BY THE ASSESSING OFFICER AND ALSO BY THE CIT(A) AT THE TIME, OF EXAMINING ITS CLAIM OF DEDUCTION U/S 80HHC OF THE INC OME- TAX ACT, 1961. IN FACT, HONBLE SUPREME COURT IN T HE CASE OF CIT VS. R. RAVINDRANATH NAIR (2000) 295 ITR 228 H AD CLEARLY HELD THAT THE PROCESSING CHARGES WERE THE BUSIN ESS RECEIPTS FALLING UNDER CLAUSE (BAA) AND SHOULD, THEREF ORE, BE REDUCED TO THE EXTENT OF 90% FROM ITS BUSINESS PROF IT AND SHOULD BE INCLUDED IN THE TOTAL TURNOVER IN THE FORMULA GIVEN IN SECTION 80HHC(3). IN FACT, THERE ARE VARI OUS DECISIONS WHERE SALE OF SCRAP AND INSURANCE CLAIM RECEIV ED HAVE ALSO BEEN CONSIDERED AS BUSINESS RECEIPT FALLING UNDER CLAUSE (BAA) TO SECTION 80HHC. HOWEVER, THERE WERE CONTRARY DECISIONS ALSO WHERE INSURANCE CLAIM RECEIVED AND SALE OF SCRAP HAVE BEEN CONSIDERED THE BUSINESS RECEIPT NOT FALLING UNDER CLAUSE (BAA) TO SECTION 80HHC. THE TREATMENT OF THESE RECEIPTS HAD BEEN HIGHLY DEBATABLE BEFORE VARIOUS COURTS OF LAW. THEREFORE, TREATMENT O F THESE RECEIPTS AS BUSINESS RECEIPTS FALLING UNDER CLAUSE (BAA) T O SECTION 80HHC BY THE ASSESSEE COMPANY ITSELF AT THE TIME OF THE FILING OF THE RETURN WHICH WAS ACCEPTED BY TH E ASSESSING OFFICER AND ALSO BY THE APPELLATE AUTHORITY CA N NOT BE CONSIDERED A MISTAKE APPARENT FROM THE RECORD. FURTHERMORE, THE PROVISIONS OF SECTION 154(1A) ARE ALSO CLEARLY APPLICABLE TO THE ISSUE INVOLVED IN THE APPEA L. THE ASSESSEE COMPANYS CLAIM UNDER SECTION 80HHC WAS DULY SCRUTINIZED BY THE ASSESSING OFFICER AND ALSO BY THE APPELLATE AUTHORITY. HOWEVER, AT ALL THE STAGES, THE TREATMENT OF THESE RECEIPTS FALLING UNDER CLAUSE (BAA) WAS ITA NO.29 36/DEL./2009 4 ACCEPTED BOTH BY THE ASSESSEE COMPANY AND ALSO BY THE REVENUE. THEREFORE, IN VIEW OF THE SPECIFIC PROVISIO NS OF SECTION 154(1A), REVIEW OF THESE RECEIPTS CANNOT BE CONSIDERED AT ALL. THE CONTENTION OF THE LEARNED AR OF THE APPELLANT THAT TREATMENT OF THESE RECEIPTS HAD NOT BE EN CONSIDERED BY THE ASSESSING OFFICER AT THE TIME OF THE PASSING OF THE ORDER DOES NOT FIND ANY MERIT OF THE FA CTS BECAUSE ITS CLAIM U/S 80HHC WAS DULY SCRUTINIZED BY THE ASSESSING OFFICER WHEREIN THE TREATMENT BY THESE RECEIPT S FALLING UNDER CLAUSE (BAA) WAS DULY ACCEPTED. THEREF ORE, THE PROVISIONS OF SECTION 154(1A) ARE CLEARLY APPLICAB LE. AFTER CONSIDERING THE TOTALITY OF ALL THE FACTS AND CIRCUMSTANCES I DO NOT FIND ANY MERIT IN THE APPLICAT ION MOVED BY THE LEARNED AR OF THE APPELLANT U/S 154 OF THE INCOME-TAX ACT, 1961 FOR TREATING THREE RECEIPTS AS ST ATED ABOVE AS BUSINESS RECEIPT NOT FALLING UNDER CLAUSE (BAA) TO SECTION 80HHC OF THE INCOME-TAX ACT, 1961. THEREFOR E, APPELLANTS APPEAL STANDS DISMISSED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFO RESAID FINDINGS OF LEARNED CIT(A). THE LEARNED AR ON BEHAL F OF THE ASSESSEE WHILE REFERRING TO CIRCULAR NO.14 DATED 11 TH APRIL, 1955 ISSUED BY THE CBDT AND DECISION OF THE HONBLE BOMBAY HIGH COURT I N CIT VS. BANGALORE CLOTHING CO.,260 ITR 371(BOMBAY) CONTENDE D THAT THE AMOUNT OF `133,90,655/- BEING OPERATIONAL INCOME, W AS ENTITLED TO DEDUCTION U/S 80HHC OF THE ACT. SINCE THE ASSESSING OFF ICER WAS AWARE OF THE FACTS, HE COULD HAVE GRANTED THE DEDUCTION U/ S 80HHC OF THE ACT SUO MOTTO IN RELATION TO THE SAID AMOUNT. N THE OTHE R HAND, LEARNED DR CONTENDED THAT THE AFORESAID DECISION OF THE HONBLE BOMBAY HIGH COURT WAS NOT APPLICABLE TO THE FACTS OF THE CASE, TH E ASSESSEE HAVING NEVER EXPLAINED BEFORE THE AO THAT THE AMOUNTS ON AC COUNT OF INSURANCE CLAIM, SALE OF SCRAP OR PROCESSING & FOBBING CHARGES WERE OPERATIONAL INCOME NOR ESTABLISHED THAT THESE AMOUNTS H AD ANY RELATION WITH THE EXPORT ACTIVITIES OF THE ASSESSEE COMP ANY. THE LEARNED DR WHILE REFERRING TO PARA 5 OF AFORESAID CI RCULAR DATED 11.04.1955 RELIED UPON THE DECISION IN T.S. BALARAM, ITO V. VOLKART BROS. [1971] 82 ITR 50 82 ITR 50 82 ITR 50 82 ITR 50 (SC) AND ARGUED THAT DEDUCTION U/S 80HHC ON ITA NO.29 36/DEL./2009 5 THE AFORESAID AMOUNT OF OTHER INCOME COULD NOT BE A LLOWED U/S 154 OF THE ACT. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH T HE FACTS OF THE CASE. INDISPUTABLY AND AS POINTED OUT BY THE LD. C IT(A), THE AFORESAID AMOUNT OF INSURANCE CLAIM , SALE OF SCRAP AND PROCESSING AND FOBBING CHARGES RECEIVED FROM STC, WERE EXCLUDED BY THE ASSESSEE ITSELF WHILE COMPUTING PROFITS OF THE BUSINESS IN TERMS O F EXPLANATION(BAA) TO SEC. 80HHC OF THE ACT. THE AO ME RELY ACCEPTED THE CLAIM OF THE ASSESSEE. THERE IS NOTHING TO SUGGEST AS T O WHETHER THE ASSESSEE EVEN MADE A WHISPER BEFORE THE AO DURING TH E ASSESSMENT PROCEEDINGS THAT THE AFORESAID AMOUNTS FORMED PART OF PROFITS OF THE BUSINESS FOR THE PURPOSE OF DEDUCTION U/S 80HHC OF THE ACT. IT IS WELL SETTLED THAT THE ONUS IS ON THE ASSESSEE, CLAIMING DEDUCTION TO ESTABLISH THAT THE AFORESAID AMOUNT HAD A NY RELATION WITH EXPORTS AND FORMED PART OF PROFITS OF THE BUSINESS FOR T HE PURPOSE OF DEDUCTION U/S 80HHC OF THE ACT. WHAT TO TALK OF DISCH ARGING ANY SUCH ONUS, ASSESSEE ITSELF EXCLUDED THE AMOUNT FROM THE PROFIT S OF THE BUSINESS WHILE DETERMINING DEDUCTION U/S 80HHC OF THE A CT AND THE AO MERELY ACCEPTED THE CLAIM OF THE ASSESSEE. ON APPEAL, THE ASSESSEE RAISED THE ISSUE OF TREATMENT OF OTHER INCOME AS INCOM E FROM OTHER SOURCES INSTEAD OF BUSINESS RECEIPT, ELIGIBLE FOR DEDUC TION U/S 80HHC OF THE ACT. HOWEVER, THE LD. CIT(A) ,VIDE HIS ORDER DATED 26.9.2006, FOLLOWING A NUMBER OF DECISIONS INCLUDING THAT OF THE HONBLE APEX COURT IN CIT VS. PANDIAN CHEMICALS LTD.,262 ITR 278(S C) UPHELD THE FINDINGS OF THE AO. THUS, THE ISSUE HAD ALREADY MERGED WITH THE ORDER OF THE LD. CIT(A) AND THE AO HAD NO JURISDICTION TO RECTIFY HIS ORDER. THE LD. CIT(A), WHILE REFERRING TO PROVISIONS OF SEC. 154( 1A) OF THE ACT, REJECTED THE CLAIM OF THE ASSESSEE IN THE IMPUGNED ORDE R, ON THAT SCORE ALSO. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE LD. CI T(A) HAD UPHELD THE FINDINGS OF THE AO IN QUANTUM APPEAL, RELIANCE ON THE AFORESAID ITA NO.29 36/DEL./2009 6 CIRCULAR DATED 11.4.1955 OR DECISION IN BANGALORE CL OTHING CO.(SUPRA) IN PROCEEDINGS U/S 154 IS TOTALLY MISPLACED. IT WAS ONL Y AFTER THE AFORECITED ORDER DATED 26.9.2006 OF THE LD. CIT(A) THAT THE ASSESSEE IN ITS APPLICATION DATED 24.9.2007 U/S 154 OF THE ACT C LAIMED THAT THE AFORESAID AMOUNT ON ACCOUNT OF INSURANCE CLAIM ,SCRA P OR AMOUNT OF `1,33,90,665/- RECEIVED FROM STC IN PURSUANCE TO AN AGREEMENT, WERE BUSINESS RECEIPTS. IN INDRA CO.'S CASE [1971] 80 ITR 400 80 ITR 400 80 ITR 400 80 ITR 400 (CAL), THE HONBLE CALCUTTA HIGH COURT HELD THAT WHEN AN APPEA L PREFERRED FROM AN ORDER OF ASSESSMENT IS DECIDED BY THE AAC, THE ITO'S O RDER UNDER APPEAL MERGES IN THE APPELLATE ORDER AND, THEREAFTER , THE OPERATIVE ORDER IS THE ORDER OF THE APPELLATE AUTHORITY AND TH E ITO HAS NO JURISDICTION TO RECTIFY SUCH AN ORDER UNDER S. 35 OF T HE ACT, AS IT WOULD HAVE THE EFFECT OF RECTIFYING THE ORDER PASSED BY THE AAC. IN S. SEWA SINGH GILL V. ITO [1968] 70 ITR 534 70 ITR 534 70 ITR 534 70 ITR 534 , THE HONBLE DELHI HIGH COURT ALSO TOOK THE SAME VIEW THAT WHERE THE ASSESSMENT ORDER WAS AF FIRMED ON APPEAL BY THE TRIBUNAL, THE ONLY ORDER THAT COULD B E RECTIFIED WAS THE ORDER OF THE TRIBUNAL AND 'THE ITO HAD NO JURISDICTI ON TO RECTIFY HIS OWN ORDER, WHICH HAD ULTIMATELY MERGED IN THE ORDER OF THE TRIBUNAL. IN J. K. SYNTHETICS LTD. V. ADDL. CIT [1976] 105 ITR 344 105 ITR 344 105 ITR 344 105 ITR 344 , THE HONBLE ALLAHABAD HIGH COURT ALSO HELD THAT WHERE THE ASSESSMENT ORDER WAS APPEALED AGAINST, THAT ORDER MERGED IN THE APPELLATE ORDER PA SSED BY THE AAC AND THE ONLY OPERATIVE DECISION IN LAW, WHICH IS EFFE CTIVE AND CAN BE ENFORCED, IS THE DECISION OF THE APPELLATE AUTHORITY. IN T.S. BALARAM, ITO V. VOLKART BROS. [1971] 82 ITR 50 82 ITR 50 82 ITR 50 82 ITR 50 (SC), HONBLE SUPREME COURT HELD THAT A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOUS AN D PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY BE CO NCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NO T A MISTAKE APPARENT FROM THE RECORD. IN VIEW OF THE FOREGOING AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE CLEARLY OF THE VIEW THAT THE AO HAD NO JURISDICTION TO PASS AN ORDER UNDER SECTI ON 154 OF THE ITA NO.29 36/DEL./2009 7 ACT ,THE ISSUE AS TO WHETHER OR NOT A PARTICULAR RECE IPT WAS RELATED TO THE EXPORT ACTIVITY OF THE ACTIVITY OR FORMED PART OF PROFITS OF THE BUSINESS IN TERMS OF EXPLANATION (BAA) TO SEC. 80HHC OF THE ACT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80H HC ,BEING A DEBATABLE ISSUE. EVEN OTHERWISE, THE FINDINGS OF THE AO HAVING ALREADY MERGED WITH THE ORDER DATED 26.9.2006 OF THE LD. CI T(A) IN QUANTUM APPEAL, THE APPLICATION FILED ON 24.9.2007 WAS MISCON CEIVED. CONSEQUENTLY, GROUND NOS. 1 & 2 IN THE APPEAL ARE DISM ISSED. 6. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFOR E US IN TERMS OF RESIDUARY GROUND NO.3 IN THE APPEAL, ACCORDINGLY, TH IS GROUND IS DISMISSED. 7. NO OTHER PLEA OR SUBMISSION WAS MADE BEFORE US. 8. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (C.L. SETHI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. M/S L.T. OVERSEAS LIMITED, A-21, GREEN PARK, AURBIN DO MARG, DELHI-16 2. DY. CIT, CIRCLE 4(1), NEW DELHI. 3. CIT (APPEALS), NEW DELHI 4. THE CIT CONCERNED. 5. THE DR, ITAT,D BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY/ // /ASSTT.REGISTRAR ITAT, DELHI