S. MANSUKHLAL & CO., V. ACIT CIR 26(3),

ITA 3051/MUM/2001

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8727 (ITAT-MUMBAI)
• Duration Of Justice: 11 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 1998-1999
• Appeal Filed On: 14-05-2001
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Assessee Lawyers: SHEETAL SH AH
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC : MUMBAI BEFORE SHRI H.L.KARWA, HONBLE PRESIDENT ITA. NO. 3051/MUM/2001 ASSESSMENT YEAR 1998-1999 SHRI S.MANSUKHLAL & CO. MUMBAI 400 002 PAN AAHFS9459A/(169-S) VS. ACIT , CIR. 26 (3) MUMBAI (APPELLANT) (RESPONDENT) FOR APPELLANT : MS. SHEETAL SHAH FOR RESPONDENT : SHRI OM PRAKASH MEENA DATE OF HEARING : 01-10-2012 DATE OF PRONOUNCEMENT : 01-10-2012 ORDER PER H.L.KARWA, PRESIDENT THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-XXI, MUMBAI DATED 15 TH MARCH, 2001 RELATING TO THE ASSESSMENT YEAR 1998-99. THE ONLY GROUND RAISED BY THE ASSESSE E IN THIS APPEAL READS AS UNDER : THE CIT(A)-XXI, MUMBAI ERRED IN HOLDING THAT THE A SSESSING OFFICER HAD RIGHTLY COMPUTED THE DEDUCTION U/S. 80HHC AT RS .2,10,61,375/- AS AGAINST RS.2,13,85,204/- COMPUTED BY THE APPELLA NT. THE SAID CIT(A) FAILED IN NOT APPRECIATING THAT IN THE COMPU TATION OF DEDUCTION U/S 80HHC THE INDIRECT COST SHOULD HAVE BEEN REDUCE D BY THE INDIRECT COST ALLOCATED TO EXPORT INCENTIVE (10% OF GROSS EX PORT INCENTIVE INCOME) AND THE NET AMOUNT OF INDIRECT COST SHOULD HAVE BEE N DEDUCTED FROM THE INCOME TO ARRIVE AT THE PROFIT FROM EXPORTS. TH E APPELLANT SUBMITS THAT THE EARNING OF EXPORT INCENTIVE ALSO INVOLVES CERTAIN EXPENDITURE WHICH HAVE BEEN FIXED AT THE ADHOC FIGURE OF 10% OF SUCH INCOME AND THEREFORE OUT OF THE TOTAL INDIRECT COST INCURRED B Y THE APPELLANT, THAT PORTION OF THE EXPENSES ALLOCATED TO EARNING OF EXP ORT INCENTIVE, SHOULD BE REDUCED FROM THE INDIRECT EXPENSES INCURRED IN R UNNING THE EXPORT BUSINESS. 2 2. AT THE VERY OUTSET, MS. SHEETAL SHAH, LEARNED CO UNSEL FOR THE ASSESSEE POINTED OUT THAT THE ISSUE IS SQUARELY COV ERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF I.T.A.T. J BENCH, MUMBAI DATED 14 TH JULY, 2002 IN ASSESSEES OWN CASE IN ITA.4370/MUM/2000 RELATING TO ASSESSMENT YEAR 1997- 1998. THE TRIBUNAL WHILE DECIDING THE IDENTICAL ISSUE HELD AS UNDER : THE LEARNED REPRESENTATIVE OF THE ASSESSEE SUBMITT ED BEFORE US THAT IN COMPUTATION OF DEDUCTION HE INDIRECT COST SHOULD HA VE BEEN REDUCED BY THE INDIRECT COST ALLOCATED TO EXPORT INCENTIVE AND NET AMOUNT OF INDIRECT COST SHOULD HAVE BEEN DEDUCTED FROM THE INCOME TO A RRIVE AT THE PROFIT FROM EXPORT. IT WAS FURTHER SUBMITTED THAT THE EARN ING OF EXPORT INCENTIVE ALSO INVOLVES CERTAIN EXPENDITURE WHICH H AVE BEEN FIXED AT THE ADHOC FIGURE OF 10% OF SUCH INCOME AND THEREFORE, O UT OF THE TOTAL INDIRECT COST THE PORTION OF THE EXPENSES ALLOCATED TO EARNING OF SUPPORT INCENTIVE SHOULD BE REDUCED FROM THE INDIRECT EXPEN SES RELATING TO THE EXPORT BUSINESS. TO SUPPORT THE CONTENTION, THE LEA RNED A.R. CARRIED US TO THE COMPUTATION PART IN THE ASSESSEES PAPER BOO K PAGE 4 AND 4A. HE FURTHER ARGUED THAT THE DISALLOWANCE OF ENTIRE I NDIRECT COST OF NOT JUSTIFIABLE. HE, BESIDES REITERING ARGUMENTS THAT W ERE ADVANCED BEFORE THE AUTHORITIES RELIED ON THE DECISION OF MUMBAI TR IBUNAL E BENCH IN ITA.NO. 155/MUM/97 DATED 16.03.2001 CONTAINED IN TH E ASSESSEES PAPER BOOK PAGE NO. 16 & 17 AND ANOTHER I.T.A.T. DE CISION OF MUMBAI B BENCH IN I.T.A.NO. 1916/MUM/99 DATED 8.10.2001 AND ALSO YET ANOTHER MUMBAI SMC-4 DECISION IN ITA.NO. 5348/MUM/2 001 DATED 15.1.2002. IN SUM AND SUBSTANCE THE TRIBUNAL HAS AG REED THAT THE INDIRECT COST SHOULD BE REDUCED OF SUCH EXPENSES OF 10% AS CONTENDED BY THE ASSESSEE. THE FACTS BEING SIMILAR AND WE ARE IN THE VIEW THAT THE TRIBUNAL ORDER SQUARELY APPLICABLE IN THE CASE PRESENT BEFORE US. ON THE OTHER HAND THE LEARNED D.R. SUPPORTED THE ORDER OF THE AUTHORITIES AND HE RELIED UPON THE CASE LAW OF RAJ EXPORTS WHIC H IS NOT DIRECTLY ON THIS ISSUE, IT RELATES TO THE VALIDITY OF THE ORDER UNDER SECTION 154. WE, THEREFORE REJECT THE ARGUMENTS OF LEARNED D.R. AND WE ARE IN FULL AGREEMENT WITH THE CONTENTION OF THE ASSESSEE. THER EFORE, WE DECIDE THIS GROUND IN FAVOUR OF THE ASSESSEE THEREBY SET A SIDE THE ORDER OF THE 3 CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW 10 % OF THE INDIRECT COST AS DISCUSSED ABOVE. 3. I FIND THAT THE ISSUE IS IDENTICAL AND THEREFORE , RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA), I ALLOW THE APPE AL OF THE ASSESSEE. 4. I MAY ALSO ADD HERE THAT THE VIEW TAKEN BY THE T RIBUNAL IN ASSESSEES CASE IS ALSO SUPPORTED BY THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF HERO EXPORTS VS. CIT (2007) 29 5 ITR 454 (S.C.). 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT, ON 01 ST OCTOBER, 2012. SD/- (H.L.KARWA) PRESIDENT MUMBAI, DATE 01 ST OCTOBER, 2012 VBP/- COPY TO 1. SHRI S.MANSUKHLAL & CO., POST BOX. NO. 2366, RUIA BUILDING, 395, KALBADEVI ROAD, MUMBAI 400 002 PAN AAHFS9459A/(169-S) 2. ACIT, CIR. 26 (3), AAYAKAR BHAVAN, MUMBAI 400 020 3. CIT(A) - XXI , MUMBAI 4. CIT , M.C.VIII, MUMBAI 5. DR SMC BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, I.T.A.T. MUMBAI