ALP Overseas Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 3007/DEL/2010

• Counselvise Citation: 300720114 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-02-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 15-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRADR
• Assessee Lawyers: BALJIT SINGHAR
• Keywords: Depreciation; Principle of natural justice
• Section: 43B; 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI C BENC H BEFORE SHRI R.P. TOLANI, JM & SHRI A.N. PAHUJA, AM ITA NO.3007/DEL/2010 ASSESSMENT YEAR:2004-05 A.L.P. OVERSEAS PVT. LTD., [FORMERLY KNOWN AS M/S GTP OVERSEAS PVT. LTD.], 25/31, EAST PATEL NAGAR, NEW DELHI-110060 V/S. DCIT,CIRCLE 12(1), NEW DELHI [PAN NO.: AAACG 6366 L] ITA NO.4445/DEL/2010 ASSESSMENT YEAR:2004-05 INCOME TAX OFFICER, WARD-1(3),ROOM NO. 380B,3 RD FLOOR,CR BUILDING,IP ESTATE NEW DELHI V/S. A.L.P. OVERSEAS PVT. LTD., [FORMERLY KNOWN AS M/S GTP OVERSEAS PVT. LTD.], 25/31, EAST PATEL NAGAR, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI BALJIT SINGH,AR REVENUE BY SHRI SALIL MISHRA,DR DATE OF HEARING 08-02-2012 DATE OF PRONOUNCEMENT 10-02-2012 O R D E R A.N.PAHUJA:- THESE CROSS APPEALS- FILED ON 15 TH JUNE, 2010 BY THE ASSESSEE AND ON 5 TH OCTOBER, 2010 BY THE REVENUE AGAINST AN ORDER DAT ED 18.03.2010 OF THE LD. CIT(A)-XII, NEW DELHI, RAISE THE FOLLOWING GROUNDS:- I.T.A. NO.3007/D/2010[ASSESSEE] 1. THE LD.CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN ADDING THE CUSTOM DUTY AND FREIGHT INWARD TO THE CLOSING STOCK OF THE BRANCH AT SHARJAH, EVEN THOUGH THERE IS NO CUSTOM DUTY IN SHARJAH. ITA N OS.3007&4445 /DEL./2010 2 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD.AO CALCULATING THE INDIRECT EXPENSES AND EXCLUDI NG 90% OF THE DEPB FOR DEDUCTION U/S 80HHC AND ADDING AN AMOUNT OF ` `31,50,552/- TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE ORDER OF THE LD. CIT(A) IS BAD IN LAW AND ON THE FACTS OF THE CASE AND IS BASED ON SURMISES AND CONJECTURE S ONLY. 4. THAT WE BE ALLOWED TO ADD FRESH GROUNDS OF APPEA L AT THE TIME OF HEARING. 5. THAT APPELLANT PRAYS THAT THE ADDITION BE DELETE D. I.T.A. NO.4445/D/2010[REVENUE] 1. THE LD. CIT(A) HAS ERRED ON FACTS AND I N LAW IN DELETING ADDITION OF ` ` 13,07,292/- ON ACCOUNT OF NOTIONAL FOREIGN EXCHANGE FLUCTUATION LOSS IGNORING THAT: A) AS PER THE PROVISIONS OF SECTION 43B OF THE INCO ME-TAX ACT, 1961,AS AMENDED BY THE FINANCE ACT,2002 WITH EFFECT FROM 01.04.2003, THE FOREIGN EXCHANGE FLUCTU ATIONS ARE TO BE CONSIDERED ONLY AT THE TIME OF PAYMENT AN D THERE IS NO SCOPE FOR BOOKING ANY NOTIONAL LOSS ON THIS ACCOUNT. B) THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF CIT VS. WOOD WORD GOVERNOR INDIA P. LTD. (2009) 312 ITR 254 (SC) RELIED UPON BY LEARNED CIT(A) HAS SINC E BEEN REVERSED BY THE APEX COURT IN ONGC LTD. VS. CI T 322 ITR 180 (SC) WHEREIN COGNIZANCE HAS BEEN TAKEN TO THE AMENDMENT TO SECTION 43B INCOME-TAX ACT, 1961 W ITH EFFECT FROM 01.04.2003. 2) THAT APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY ALTER, ADD OR FORGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL OF THE ASSESSEE, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DE CLARING INCOME OF ` 45,28,876/- FILED ON 29.10.2004 BY THE ASSESSEE, ENGAGED IN EXP ORT OF AUTOMOBILE PRODUCTS ITA N OS.3007&4445 /DEL./2010 3 AND OTHER ITEMS, WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 (HEREAFTER REFERRED TO AS THE ACT) ISSUED ON 12.08.2005. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE EXCLUDED LOSS INCU RRED IN ITS BRANCH OFFICE AT SHARJAH WHILE COMPUTING DEDUCTION U/S 80HHC OF THE ACT. THE CLOSING STOCK INVENTORY OF BRANCH OFFICE REVEALED THAT THE CUSTOM DUTY PAID BY THE ASSESSEE WAS NOT CONSIDERED FOR THE VALUATION OF CLOSING STO CK NOR FREIGHT INWARDS. SINCE THE CUSTOM DUTY AND FREIGHT INWARDS PAID BY THE ASS ESSEE WAS INCURRED IN RELATION TO THE GOODS IN THE BRANCH OFFICE, THE AO WAS OF THE OPINION THAT VALUATION OF CLOSING STOCK SHOULD HAVE BEEN DONE AF TER INCLUDING PROPORTIONATE CUSTOM DUTY AND FREIGHT INWARD. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE AO ADDED PROPORTIONATE EXPENSES TOWARDS CUSTOM DUTY AND FREIGHT INWARD EXPENSES RESULTING IN ADDITION OF ` `885765/-. 2.1 THE AO FURTHER NOTICED THAT THE ASSESSEE HAD R EFLECTED LOSS OF ` `28,43,743/- ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUA TION. THIS INCLUDED FOREIGN EXCHANGE LOSS OF ` ` 13,07,292/- DUE TO REINSTATEMENT OF ITS ACCOUNTS AS ON 31.3.2004. TO A QUERY BY THE AO, THE ASSESSEE EXPL AINED THAT LOSS ON ACCOUNT OF EXCHANGE FLUCTUATION WAS TRADING LOSS AND SHOULD BE ALLOWED. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE O N THE GROUND THAT SUCH LOSS WAS NOTIONAL AND, THEREFORE, NOT ALLOWABLE, THERE B EING NO EVIDENCE THAT SUCH LOSS RELATED TO REVENUE TRANSACTIONS. INTER ALIA, THE AO RELIED UPON TWO DECISIONS IN THE CASE OF INDIAN OVERSEAS BANK 246 ITR 206 (MA D) AND KARAM CHAND THAPAR & BROS (1969). 2.2 THE AO ALSO NOTICED THAT THE ASSESSEE CLAIMED DEDUCTION U/S 80HHC OF THE ACT ON THE PROFIT OF ` 1,95,14,787/- WHILE THE DETAILS REVEALED PROFIT RELATING TO INDIA OFFICE OF ONLY ` `1,38,77,141/-. SINCE THE ASSESSEE DID NOT ATTRIBUTE INDIRECT COST OF EXPORTS CORRECTLY, THE A O WHILE REFERRING TO THE DEFINITION OF INDIRECT COST UNDER SECTION 80HHC(3) OF THE ACT AND THE FACT THAT INDIRECT COST OF THE INDIAN OPERATIONS WAS ` `3,46,07,600/- WHILE EXPORT TURNOVER OF TRADING GOODS WAS ` `14,65,09,881/- VIS-A-VIS TOTAL TURNOVER OF ` `15,79,51,683/-, WORKED ITA N OS.3007&4445 /DEL./2010 4 OUT INDIRECT COST OF EXPORT OF TRADING GOODS AT ` `3,21,00,673/- IN ACCORDANCE WITH FORMULA LAID DOWN U/S 80HHC(3)(B) OF THE ACT AND RE COMPUTED THE DEDUCTION U/S 80HHC OF THE ACT. 2.21 THE AO FURTHER NOTICED THAT THE ASSESSEE SOLD DEPB BENEFITS FOR ` ` 11,11,397/-. SINCE EXPORT TURNOVER OF THE ASSESSEE EXCEEDED ` `10 CRORES, THE AO ASKED THE ASSESSEE TO EXPLAIN WHY DEPB BENEFITS SHOULD NOT BE EXCLUDED WHILE COMPUTING DEDUCTION U/S 80HHC OF THE ACT. IN RESPONSE, THE ASSESSEE EXPLAINED THAT THERE WAS NO PROFIT ON SALE OF DEPB BENEFITS WHILE RATE OF DUTY DRAW BACK WAS NOT AVAILABLE IN RESPECT OF THE GOODS EXPORTED BY IT AND, THEREFORE, THIRD PROVISO TO SECTION 80HHC(3) OF THE ACT WAS NO T APPLICABLE. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE O N THE GROUND THAT THE ASSESSEE DID NOT FULFILL THE CONDITIONS STIPULATED UNDER THE THIRD PROVISO TO SECTION 80HHC(3) OF THE ACT. ACCORDINGLY, DEDUCTION U/S 80 HHC OF THE ACT WAS WORKED OUT TO ` ` 29,82,932/- AS AGAINST CLAIM OF ` 61,33,484/-, RESULTING IN DISALLOWANCE OF ` `31,50,552/-. 3. ON APPEAL, THE LD. CIT(A) ADJUDICATED THE AFORE SAID ISSUES IN THE FOLLOWING MANNER:- 5. THE FIRST GROUND OF APPEAL PERTAINS TO AN ADDIT ION OF ` ` 8,85,765/- ON ACCOUNT OF CUSTOM DUTY AND FREIGHT IN WARD, TO THE AMOUNT OF CLOSING STOCK AR HAS PLEADED THAT THERE IS NO CUSTOM DUTY IN SHAR JAH AND THIS AMOUNT REPRESENTS AN AMOUNT CHARGED IN THE SALES IN VOICE BUT IS COLLECTED FROM THE CUSTOMERS. AR HAS PLEADED THAT THE ADDITION SHOULD BE ON PROPORTIONATE BASIS FOR THE CLOSING ST OCK AND NOT ON THE WHOLE AMOUNT. WHILE MAKING THE SAID DISALLOWANCE, ASSESSING OFFIC ER HAS BROUGHT ON RECORD THAT THE ASSESSEE EXCLUDED THE LOSS OF BR ANCH OFFICE AT SHARJAH FROM THE COMPUTATION OF DEDUCTION U/S 80HHC . HE HAS BROUGHT ON RECORD THAT:- IT IS SEEN FROM THE DETAILS OF BRANCH OFFICE FILED BY THE ASSESSEE THAT CUSTOM DUTY PAID BY THE ASSESSEE HAS NOT BEEN INCLUDED FOR THE VALUATION OF CLOSING STOCK. MOREOVER, THE FREI GHT INWARD I.E. ITA N OS.3007&4445 /DEL./2010 5 THE EXPENSES INCURRED FOR PROCURING THE GOODS, HAS ALSO NOT BEEN INCLUDED FOR THE VALUATION OF CLOSING STOCK. IN TH E BRANCH OFFICE, ONLY TRADING OF GOODS IS DONE BY THE ASSESSEE. SIN CE, CUSTOM DUTY AND FREIGHT INWARD PAID BY THE ASSESSEE ARE THE EXP ENSES INCURRED BY IT FOR PROCURING THE GOODS IN THE BRANCH OFFICE, THE VALUATION OF THE CLOSING STOCK SHOULD HAVE BEEN DONE AFTER INCLU DING THE CUSTOM DUTY AS WELL AS THE FREIGHT INWARD PAID BY T HE ASSESSEE. THEREFORE, THE CLOSING STOCK OF THE BRANCH OFFICE I S TO BE COMPUTED AFTER INCLUDING THE CUSTOM DUTY AND FREIGHT INWARD PAID BY THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN PURCHASES OF ` `30,46,960/- ON WHICH CUSTOM DUTY AMOUNTING TO `4,57,696/- AND FREIGHT INWARD EXPENSE S AMOUNTING TO ` ` 3,78,600/- WERE PAID BY THE ASSESSEE. THE CLOSING STOCK AS ON 31.03.2004 IS SHOWN AT ` ` 32,27,194/-. AFTER INCLUDING THE CUSTOM DUTY AND FREIGHT INWARD ON PROPORTIONATE BASIS, THE EXPENSES RELATING TO THE CLOSING STOCK ON ACCOUNT OF CUSTOM DUTY AND FREIGHT INWARD EXPENSES WORKS OUT TO ` 8,85,765/-. THEREFORE, THE CLOSING STOCK A WELL AS THE INCOME OF THE BRANCH OFFICE, WI LL INCREASE BY ` `8,85,765/-. IN VIEW OF THE ABOVE FACTS, THE STAND OF THE ASSESS ING OFFICER IS CONFIRMED HOWEVER, ASSESSING OFFICER IS DIRECTED TO MAKE THE ADDITION ON PROPORTIONATE BASIS FOR THE CLOSING STO CK. 6. THE 2 ND GROUND OF APPEAL PERTAINS TO NOTIONAL ADDITION OF ` ` 13,07,292/- PERTAINING TO FOREIGN CURRENCY FLUCTUAT ION. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR HAS PLEADED THAT THESE WERE EXPENSES OF REVENUE IN NATURE. THE HONBLE APEX COURT IN CIT VS. WOODWORD GOVERNOR INDIA P. LTD. (2 009) 312 ITR 254(SC) HAS HELD THAT FOREIGN EXCHANGE FLUCTUATION ON REVENUE ITEM IS A ALLOWABLE. FOLLOWING THE SAID CASE, THE SAID ADDITION IS DELETED. 7. THE 3 RD GROUND OF APPEAL PERTAINS TO CALCULATION OF INDIRECT AND 90% OF THE DEPB FOR DEDUCTION U/S 80HH C LEADING TO ADDITION OF ` `31,50,552/-. WHILE MAKING THE SAID DISALLOWANCE, ASSESSING OFFICER HAS BROUGHT ON RECORD THAT :- .. A R HAS PLEADED THAT AO HAS ERRED IN NOT MAKING A DED UCTION FOR FREIGHT, CHARITY, DONATIONS, DEFERRED REVENUE EXPEN DITURE, PRIOR PERIOD EXPENSES, EXCHANGE RATE FLUCTUATION AND ADDI TION OF DEPRECIATION. THE CONTENTION OF THE AR CANNOT BE AC CEPTED IN VIEW OF THE SPECIFIC PROVISIONS OF SECTION 80HHC PERTAIN ING TO DIRECT COST ITA N OS.3007&4445 /DEL./2010 6 AS ENUMERATED IN THE ACT.AR HAS PLEADED THAT INDIRE CT COST HAVE T BE COST WHICH ARE ATTRIBUTABLE TO EXPORT. SINCE THE SAME IS TAKEN AS FOB VALUE, COST HAVE ALSO TO BE TAKEN ON THE SAME P RINCIPLE. IT HAS BEEN PLEADED THAT FOREIGN EXCHANGE FLUCTUATION SHOU LD BE TAKEN AS COST AND NOT ATTRIBUTABLE TO EXPORT SALES. HOWEVER, THIS CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED IN VIEW OF THE S PECIFIC PROVISIONS OF THE SAID SECTION AND REASONING GIVEN BY THE AO IN THE ASSESSMENT ORDER. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE U S AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSE SSEE SUBMITTED THAT ONLY THE NOMENCLATURE USED IS CUSTOMS DUTY, BUT ACTUALLY IT IS LOCAL SALES TAX WITHIN UAE. CUSTOM DUTY WAS NOT PAYABLE EVEN ON EXPORTS MADE FR OM SHARJAH. THERE WAS NO STOCK ON WHICH CUSTOMS DUTY COULD BE CHARGED. BE SIDES, GOODS WERE IMPORTED ON CIF BASIS AND THE OCEAN FREIGHT WAS BO RNE BY THE HEAD OFFICE. THE BRANCH OFFICE DID NOT HAVE ANY FREIGHT EXPENSES, TH E LD. AR ARGUED. WHILE REFERRING TO DETAILS AT PAGE 16 OF THE PAPER BOOK, THE LD. AR CONTENDED THAT THE CUSTOM DUTY AMOUNT COULD NOT BE ADDED TO CLOSING ST OCK. IN RESPECT OF FREIGHT, THE LD. AR CONTENDED THAT FREIGHT WAS PAID ON DELIV ERY OF GOODS TO THE CUSTOMERS AND BY MISTAKE IT WAS SHOWN AS FREIGHT INWARDS. IT COULD NOT BE ADDED TO THE VALUATION OF THE CLOSING STOCK, THE LD. AR SUBMITTE D. AS REGARDS ISSUE RAISED IN GROUND NO.2 IN THE APPEAL OF THE ASSESSEE, THE LD. AR WHILE REFERRING TO PAGE 62 OF THE PAPER BOOK CONTENDED THAT THE ENTIRE INDIRE CT COST ATTRIBUTABLE TO TRADING GOODS COULD NOT BE CONSIDERED WHILE COMPUTING DEDUC TION U/S 80HHC OF THE ACT. ONLY INDIRECT COST ATTRIBUTABLE TO TRADING GOODS EX PORTED COULD BE REDUCED. SINCE FOREIGN EXCHANGE FLUCTUATION WAS NOT AN EXPENDITURE BUT ONLY LOSS, THE LD. AR CONTENDED THAT FOREIGN EXCHANGE FLUCTUATION COULD N OT BE CONSIDERED WHILE COMPUTING DEDUCTION U/S 80HHC OF THE ACT. AS REGA RDS FREIGHT, THE LD. AR RELIED UPON DECISION OF HONBLE CALCUTTA HIGH COURT IN CIT VS. H.M. EXPORTS LTD. (2005) 276 ITR 299 (CAL). REGARDING DEDUCTION U/S 80HHC IN RELATION TO DEPB BENEFITS, THE LD. AR DID NOT MAKE ANY SUBMISSIONS W HILE IN RESPECT OF GROUND RAISED IN THE APPEAL OF THE REVENUE, THE LD.AR POI NTED OUT THAT FOREIGN EXCHANGE FLUCTUATION RELATED TO EXPORT MADE BY THE ASSESSEE. ITA N OS.3007&4445 /DEL./2010 7 5. ON THE OTHER HAND, LEARNED DR SUPPORTED THE CONC LUSION THE LD. CIT(A) ON THE INCLUSION OF CUSTOM DUTY AND FREIGHT INWARDS W HILE VALUING CLOSING STOCK . THE LD. DR FURTHER SUBMITTED THAT IN THE EVENT FOREIG N EXCHANGE FLUCTUATION RELATED TO EXPORTS MADE DURING THE YEAR, THE SAID AMOUNT HAD T O BE CONSIDERED WHILE DETERMINING DEDUCTION U/S 80HHC OF THE ACT. WHILE CARRYING US THROUGH PARA 5.3 OF THE ASSESSMENT ORDER, THE LD. DR SUBMITTED THAT THE AO WAS JUSTIFIED IN REWORKING THE INDIRECT COST .AS REGARDS DEPB BENEFI TS, THE LD. DR POINTED OUT THAT THE ASSESSEE HAVING NOT FULFILLED THE CONDITIO NS STIPULATED IN 3 RD PROVISO TO SEC. 80HHC(3) OF THE ACT, THE AO RIGHTLY DENIED DED UCTION IN RELATION TO DEPB BENEFITS. INTER ALIA, LEARNED DR RELIED UPON THE D ECISION OF HONBLE BOMBAY HIGH COURT IN COMMISSIONER OF INCOME TAX VS. KALPATARU C OLOURS AND CHEMICALS, 328 ITR 451 (BOM). REGARDING DEDUCTION ON ACCOUNT OF N OTIONAL FOREIGN EXCHANGE LOSS, THE LD. DR POINTED OUT THAT WITHOUT ASCERTAIN ING THE NATURE OF FOREIGN EXCHANGE FLUCTUATION, THE LD. CIT(A) WAS NOT JUSTIF IED IN FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN CIT VS. WOODWORD GOVERNOR P. LTD. 312 ITR 254 (SC).THE LD. DR ARGUED THAT NEITHER THE AO NOR THE LEARNED CIT(A) EXAMINED THE NATURE OF FOREIGN EXCHANGE FLUCTUATION. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS RELIED UPON BO TH THE SIDES. AS REGARDS INCLUSION OF CUSTOM DUTY AND FREIGHT INWARD IN THE VALUATION OF CLOSING STOCK, THE AO ADDED THE PROPORTIONATE AMOUNT OF THESE EXPENSES TOWARDS CLOSING STOCK OF BRANCH OFFICE AT SHARJAH. THE LD.CIT(A) WITHOUT RE CORDING ANY FINDINGS AS TO THE NATURE OF CUSTOM DUTY OR FREIGHT INWARDS UPHELD THE FINDINGS OF THE AO. THE LEARNED AR NOW CONTENDED BEFORE US THAT ONLY THE NO MENCLATURE USED IS CUSTOMS DUTY, BUT ACTUALLY IT IS SIMILAR TO SALES T AX. REGARDING INCLUSION OF FREIGHT, THE LD. AR SUBMITTED THAT THE HEAD FREI GHT INWARDS WAS WRONGLY MENTIONED IN THE ACCOUNTS AND ACTUALLY THE AMOUNT W AS ON ACCOUNT OF FREIGHT PAID FOR DELIVERY OF GOODS TO THE CUSTOMERS. HOWEV ER, WE FIND THAT THERE IS NO WHISPER IN THE IMPUGNED ORDER ON THESE ASPECTS NOR THE LD. AR EXPLAINED THAT PLEA NOW BEING TAKEN BEFORE US WAS RAISED BEFORE TH E LOWER AUTHORITIES. IN ANY ITA N OS.3007&4445 /DEL./2010 8 CASE, NEITHER THE AO NOR THE LD. CIT(A) RECORDED AN Y FINDINGS ON THE NATURE OF CUSTOM DUTY OR FREIGHT ADDED TOWARDS VALUATION OF CLOSING STOCK. IN RESPECT OF DEDUCTION U/S 80HHC OF THE ACT, THE AO RECOMPUTED INDIRECT COST AND EXCLUDED DEPB BENEFITS, THE ASSESSEE HAVING NOT FULFILLED CO NDITIONS STIPULATED UNDER THIRD PROVISO TO SECTION 80HHC(3) OF THE ACT. THE LD. CI T(A) WITHOUT RECORDING ANY FINDINGS ON EXCLUSION ON DEPB BENEFITS FROM THE COM PUTATION U/S 80HHC OF THE ACT NOR RECORDING ANY FINDINGS AS TO HOW INDIRECT C OST OF EXPENSES MENTIONED IN SCHEDULE 14 TO 17 OF THE BALANCE SHEET RELATED TO E XPORT TURNOVER AND WHETHER OR NOT FOREIGN EXCHANGE LOSS WAS IN RELATION TO EXPORT S AND WAS NOT A COST AND MERELY A LOSS, AS CONTENDED BY THE LEARNED AR, UPHE LD THE FINDINGS OF THE AO. LIKEWISE, IN FOLLOWING THE DECISION OF HONBLE APE X COURT IN WOODWORD GOVERNOR P. LTD. (SUPRA), THE LD. CIT(A) DID NOT EV EN ANALYSE THE NATURE OF FOREIGN EXCHANGE FLUCTUATION NOR ADVERTED TO THE APPLICABI LITY OR OTHERWISE OF THE AMENDED PROVISIONS OF SEC. 43A OF THE ACT AND NOR EVEN RECORDED ANY FINDINGS AS TO WHETHER OR NOT THE AMOUNT RELATED TO EXPORTS MADE DURING THE YEAR. A COPY OF LEDGER ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION PLACED BEFORE US AT THE FAG END OF THE HEARING, DOES NOT REVEAL THE NATURE OF FLUC TUATION. IN NUTSHELL, A MERE GLANCE AT THE IMPUGNED ORDER REVEALS THAT THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE, NAMELY, THAT EVERY JUDICI AL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS REASONED ORDER, WHICH SHOU LD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO T HE ISSUES/POINTS RAISED BEFORE IT. THE APPLICATION OF MIND TO THE MA TERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. SECTION 250(6) OF THE ACT MANDATES THAT THE ORDER OF THE CIT(A) WHIL E DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POIN TS FOR DETERMINATION, THE DECISION THEREON AND THE REASONS FOR THE DECISION. THE REQUIREMENT OF RECORDING OF REASONS A ND COMMUNICATION THEREOF BY THE QUASI-JUDICIAL AUTHORI TIES HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PRO CEDURE AND IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RUL E OF LAW. IT ITA N OS.3007&4445 /DEL./2010 9 INTRODUCES CLARITY, CHECKS THE INTRODUCTION OF EXTR ANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINE SS IN THE DECISION-MAKING PROCESS. HONBLE JURISDICTIONAL HIG H COURT IN THEIR DECISION IN VODAFONE ESSAR LTD. VS. DRP,196 TAXMAN423(DELHI) HELD THAT WHEN A QUASI JUDICIAL AUTHORITY DEALS WITH A LIS, IT IS OBLIGATORY ON IT S PART TO ASCRIBE COGENT AND GERMANE REASONS AS THE SAME IS THE HEART AND SOUL O F THE MATTER AND FURTHER, THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORDER I S CALLED IN QUESTION BEFORE THE SUPERIOR FORUM. WE MAY POINT OUT THAT A DECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS . STATE OF PUNJAB,(1995)1SCC 760(SC)].AS ALREADY OBSERVED, THE IMPUGNED ORDER SUFFERS FROM LACK OF REASONING AND IS NOT A SPEAKING ORDER ON ANY OF THE THREE ISSUES ADJUDICATED BY THE LD. CIT( A). IN VIEW OF THE FOREGOING, ESPECIALLY WHEN THE LD. CIT(A) HAVE NOT PASSED A SPEAKING ORDER ON VARIOUS ISSUES RAISED IN THE APP EAL BEFORE HIM, WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE TH E ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECID ING THE AFORESAID ISSUES, AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THOSE REFERRED TO ABOVE, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLES S TO SAY THAT WHILE REDECIDING THE APPEAL, THE LD. CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISI ONS OF SEC. 250(6) OF THE ACT. WITH THESE OBSERVATIONS, GROUND NOS. 1 & 2 IN THE APPEAL OF THE ASSESSEE AS ALSO GROUND NO.1 IN THE APPEAL OF THE REVENUE ARE DISPOSED OF. 7.. GROUND NOS.3 AND 5 IN THE APPEAL OF THE ASSESS EE, BEING GENERAL IN NATURE NOR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US ON THESE GROUNDS, DO NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDI TIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERM OF RESIDUARY GROUND NO.4 I N THE APPEAL OF THE ASSESSEE ITA N OS.3007&4445 /DEL./2010 10 AS ALSO GROUND NO.2 IN THE APPEAL OF THE REVENUE, A CCORDINGLY, ALL THESE GROUNDS ARE DISMISSED. 8.. NO OTHER SUBMISSION OR ARGUMENT WAS MADE BEF ORE US. 9.. IN THE RESULT, BOTH THE APPEAL THE ASSESSEE A S ALSO OF THE REVENUE ARE ALLOWED BUT FOR STATISTICAL PURPOSES. SD/- SD/- (R.P. TOLANI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. A.L.P. OVERSEAS PVT. LTD.,(FORMERLY KNOWN AS M/S GTP OVERSEAS PVT. LTD.,25/31, EAST PATEL NAGAR,NEW DEL HI 2. INCOME TAX OFFICER, WARD (3),NEW DELHI 3. CIT(A)-XII, NEW DELHI. 4. CIT CONCERNED. 5. DR, ITAT,C BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT