The DCIT, Circle-5, Ahmedabad V. Nabros Pharma Pvt. Ltd., Ahmedabad

ITA 3244/AHD/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9797 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-09-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 02-08-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI MUKUL KR. SHRAWAT, JM AND N.S. SAINI, AM DY. CIT, CIR.5, AHMEDABAD. VS. NABROS PHARMA (P) LTD. LTD., NABROS TOWER, 3 RD FLOOR, B/H BRITISH LIBRARY, OPP. ART GALLERY, LAW GARDEN, ELLISBRIDGE, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SHELLEY JINDAL, CIT, DR RESPONDENT BY:- SHRI TUSHAR HEMANI, AR O R D E R O R D E R O R D E R O R D E R P PP PER ERER ER N. S. SAINI, N. S. SAINI, N. S. SAINI, N. S. SAINI, ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XI , AHMEDABAD DATED 7.5.2007 PASSED IN APPEAL NO. CIT(A)-XI/287/2 006-07. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE I N THIS APPEAL READS AS UNDER:- (1) THE LD. CIT(A)XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO REDUCE 90% OF OTHER INCOME OF `.1,37,99,868/- (FDR INTEREST `.99,44,574/-, OTHER INTEREST `.28,46,180/-, PROFIT ON SALE OF SHARES `.8,70,108/ - AND DIVIDEND INCOME `.1,39,006/-) FROM THE PROFITS OF T HE BUSINESS FOR WORKING OUT THE DEDUCTION UNDER SECTIO N 80 HHC OF THE INCOME-TAX ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS IN THE BUSINESS OF EXPORT OF PHARMACEUTICAL GOODS. THE ASS ESSEE IN THE RETURN OF INCOME CLAIMED DEDUCTION UNDER SECTION 80 HHC OF THE ACT INTEREST ON FDR FROM BANK OF `.99,44,574/- AND OTHER INTEREST INCOME OF `.28,46,180/-, PROFIT ON SALE OF SHARES ` .8,70,108/- AND DIVIDEND INCOME OF `.1,39,006/-. THE LEARNED ASSESS ING OFFICER OBSERVED THAT ALL THESE INCOME ARE IN THE NATURE OF INCOME FROM OTHER SOURCES. DEDUCTION UNDER SECTION 80 HHC IS AL LOWABLE FROM ITA NO.3244/AHD/2007 ASST. YEAR :2004-05 2 PROFITS DERIVED BY THE ASSESSEE FROM THE EXPORT OF GOODS OR MERCHANDISE. THERE IS NO DIRECT NEXUS BETWEEN THE I NCOME FROM THE EXPORT BUSINESS AND THE AFORESAID INCOME. THE A BOVE INCOME IS TREATED AS INCOME FROM OTHER SOURCES AS IN THE PAST AND IS NOT CONSIDERED AS PROFIT DERIVED FROM THE EXPORT OF GOO DS AND MERCHANDISE. THEREFORE, THE DEDUCTION UNDER SECTION 80 HHC WAS NOT AVAILABLE ON THIS INCOME. THE LEARNED ASSESSING OFFICER FURTHER NOTED THAT ON PERUSAL OF RETURN OF INCOME AND FORM NO.10CCAC FILED ALONG WITH THE RETURN IT IS OBSERVED THAT THE ASSESSEE SUOMOTO HAS REDUCED THE ABOVE REFERRED AMOUNT FOR THE PURPO SE OF DERIVING PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 HHC . ON APPEAL BEFORE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE TOOK GROUNDS OF APPEAL NOS.4 TO 7 WHEREIN IT WAS CONTENDED THAT THE LEARNED ASSESSING OFFICER DISAL LOWED CLAIM OF DEDUCTION UNDER SECTION 80HHC ON THE ITEMS OF INTER EST OF `.1,27,90,754/-, PROFIT ON SALE OF SHARES `.8,70,10 8/- AND DIVIDEND OF `.1,39,006/-. IT WAS CONTENDED BEFORE THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) THAT ONLY 90% OF NET INTEREST INCOME IS REQUIRED TO BE REDUCED FROM THE BUSINESS PROFITS. F INANCE EXPENSES ARE `.60,229/- AND, THEREFORE, 90% OF THE NET INTER EST INCOME OF `.1,27,30,525/- WAS TO BE REDUCED FROM THE BUSINESS PROFITS. AS REGARDS OTHER INTEREST AND PROFITS ON SALE OF SHARE S ALSO ONLY 90% WAS REQUIRED TO BE REDUCED. THE ACTION OF THE LEARN ED ASSESSING OFFICER REJECTING THE ASSESSEES CLAIM ON THE ABOV E ITEMS IN THE FULL IS NOT JUSTIFIED AND IT WAS PLEADED THAT DEDUCTION UNDER SECTION 80 HHC ON THE ABOVE ITEMS MAY BE ALLOWED AS CLAIMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD AS UNDER :- 6.2.1 THEREFORE, HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO AS PER FINDINGS GIVEN BY ME IN THE APPELLANTS OWN CASE FOR EARLIER ASSESSME NT YEARS, I AM OF THE OPINION THAT ONLY 90% OF THE ABOVE RECE IPTS TO BE REDUCED FROM THE TOTAL BUSINESS PROFIT FOR WORKING OUT DEDUCTION U/S 80 HHC OF THE ACT. THE AO IS THEREFOR E, DIRECTED ACCORDINGLY. 3 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDER OF LEARNED ASSESSING OFFICER WHEREAS THE LEAR NED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE IN ITS RETURN OF INCOME HAS SHOWN INTEREST ON FDR `.99,44, 574/-, OTHER INTEREST INCOME OF `.28,46,180/-, PROFIT ON SALE OF SHARES `.8,70,108/- AND DIVIDEND INCOME OF `.1,39,006/- AS INCOME FROM OTHER SOURCES AND ACCORDINGLY NOT CLAIMED DEDUCTION UNDER SECTION 80HHC WITH REFERENCE TO ABOVE INCOME. THE LEARNED A SSESSING OFFICER OBSERVED THAT IN THE AUDIT REPORT THE AUDIT OR OF THE ASSESSEE HAS ALSO OPINED THAT NO DEDUCTION UNDER SECTION 80H HC IS ALLOWABLE TO THE ASSESSEE IN RESPECT OF THE ABOVE I NCOME AND ACCORDINGLY THE LEARNED ASSESSING OFFICER ALLOWED D EDUCTION UNDER SECTION 80HHC. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD THAT 90% OF THE ABOVE RECEIP TS ARE ONLY TO BE EXCLUDED FOR COMPUTING DEDUCTION UNDER SECTION 8 0HHC. HE ACCORDINGLY DIRECTED THE LEARNED ASSESSING OFFICER TO RE-COMPUTE THE DEDUCTION ALLOWABLE UNDER SECTION 80HHC. 7. WE FIND THAT EXPLANATION (BAA) TO SECTION 80HHC READS AS UNDER:- [(BAA) 'PROFITS OF THE BUSINESS' MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GA INS OF BUSINESS OR PROFESSION' AS REDUCED BY (1) NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUS ES (IIIA), (IIIB) 1080C [, (IIIC) (IIID) AND (IIIE)] OF SECTIO N 28 OR OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE IN CLUDED IN SUCH PROFITS; AND (2) THE PROFITS OF ANY BRANCH, OFFICE, WAREHOUSE OR ANY OTHER ESTABLISHMENT OF THE ASSESSEE SITUATE OUTSIDE INDIA ;] 8. THUS A BARE READING OF THE ABOVE EXPLANATION SHO WS THAT WHEN INTEREST INCOME ETC., FORMS PART OF PROFITS A ND GAINS OF BUSINESS OR PROFESSION THEN 90% OF SUCH INCOME IS TO BE REDUCED 4 FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION TO ARRIVE AT PROFITS OF THE BUSINESS WITH REFERENCE TO WHICH DED UCTION UNDER SECTION 80HHC IS TO BE ALLOWED. IN THE INSTANT CAS E IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS ITSELF ADMITTED IN TH E RETURN OF INCOME THAT INTEREST INCOME ON FDR, OTHER INTEREST INCOME, PROFIT ON SALE OF SHARES AND DIVIDEND INCOME ARE ASSESSABL E UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. NO MATERIAL W AS BROUGHT EITHER BEFORE THE LOWER AUTHORITIES OR BEFORE US TO SHOW THAT THE ABOVE INCOME FORMS PART OF INCOME ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THUS , AS THE ABOVE INCOME DOES NOT FORM PART OF PROFITS AND GAINS OF BUSINESS OR PROFESSION, THEREFORE, 90% OF SUCH INCOME CANNOT B E REDUCED FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION TO AR RIVE AT PROFITS OF THE BUSINESS WITH REFERENCE TO WHICH DEDUCTION UNDE R SECTION 80HHC IS TO BE ALLOWED. IN THE CIRCUMSTANCES, IN OU R CONSIDERED OPINION THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) WAS NOT JUSTIFIED IN DIRECTING THE LEARNED ASSESSING OF FICER TO REDUCE 90% OF THE ABOVE INCOME TO COMPUTE PROFITS OF THE B USINESS FOR ALLOWING DEDUCTION UNDER SECTION 80HHC OF THE ACT. WE THEREFORE, SET ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORE BACK THE ORDER OF THE LEARNED ASSESSING OFFICER. 9. THUS, THE APPEAL OF THE REVENUE IS ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 24 TH DAY OF SEPTEMBER, 2010. SD/- SD/- (MUKUL SHRAWAT) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: ON THIS 24 TH DAY OF SEPTEMBER, 2010 COMPILED AND COMPARED BY: PATKI 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS)-XI, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 20-9-2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 21-9-2010 ------ ------------- 3. DRAFT PROPOSED & PLACED 21-9-2010 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 23-9-2010 ----------- --------JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 24-9-2010 ------ -------------- 6. KEPT FOR PRONOUNCEMENT ON 24-9-2010 ------- ------------- 7. FILE SENT TO THE BENCH CLERK 24-9-2010 ---- ---------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- -- ------------------