M/s. Ace Manufacturing Systems Ltd., Bangalore V. CIT, Bangalore

ITA 333/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9517 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-08-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 16-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P A GHATGE
• Keywords: Set aside
• Section: 143(3); 80HHC; 80IB; 80IA; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI K.K.GUPTA, AM AND SHRI SHAILENDRA KUMAR YADAV, JM ITA NO.333(BANG.)/2009 (ASSESSMENT YEAR : 2004-05) M/S ACE MANUFACTURING SYSTEMS LIMITED, PLOT NOS.467-469, 12 TH CROSS, 4 TH PHASE, PEENYA INDUSTRIAL AREA, BANGALORE APPELLANT VS THE COMMISSIONER OF INCOME-TAX (LTU) JSS TOWERS, 100 FT RING ROAD, BANASHANKARI III STAGE, BANGALORE RESPONDENT APPELLANT BY : SHRI P.A.GHATGE RESPONDENT BY : SMT. PREETI GARG / SMT. JACINTA ZIMIK VASHAI O R D E R PER SHAILENDRA KUMAR YADAV,JM: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(LTU), BANGALORE ON THE FOLLOWING GROUNDS: 1. THAT THE ORDER OF THE CIT(LTU), BANGALORE IN SO FAR AS IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT . 2. THAT THE APPELLANT IS ENTITLED TO THE DEDUCTION U/S 80HHC AS PER THE ORIGINAL ORDER OF THE AO PASSED U/S 143(3) OF THE ACT, AND THE CONTRARY DECISION OF THE CIT IS LEGALLY NOT TENABLE. 3. THAT THE CIT IS NOT JUSTIFIED IN DIRECTING THE A O TO RE-COMPUTE THE DEDUCTION U/S 80HHC BY REDUCING ITA NO.333(B)/09 2 THE AMOUNT OF PROFITS FOR DEDUCTION U/S 80IB, INSTE AD OF THE RELIEF U/S 80IB OF THE IT ACT. 2. IN THIS CASE, THE ASSESSMENT FOR THE ASSESSMENT YEAR 2004-05, WAS COMPLETED U/S 143(3) ON 27-12-2006 DETERMINING TAXABLE INCOME OF RS.6,24,47,967/-. IN THE ASSESSMENT, THE AO HAD AL LOWED DEDUCTION U/S 80HHC AND 80IB AMOUNTING TO RS.20,85,770/- AND RS.2 ,56,08,261/- RESPECTIVELY. ACCORDING TO CIT, AS PER PROVISIONS O F SEC.80IB(13) R.W.S.80IA(9) WHERE ANY AMOUNT OF PROFIT AND GAINS OF AN UNDERTAKING IS CLAIMED AND ALLOWED U/S 80IB FOR ANY ASSESSMENT YEA R, DEDUCTION TO THE EXTENT OF SUCH PROFITS AND GAINS SHALL NOT BE ALLOW ED UNDER ANY OTHER PROVISIONS OF CHAPTER VI-A OF IT ACT. IF DEDUCTION IS ALLOWED U/S 80IB, SUCH PROFITS AND GAINS SHOULD BE EXCLUDED IN THE CO MPUTATION OF ANY OTHER DEDUCTION UNDER THIS CHAPTER INCLUDING DEDUCT ION U/S 80HHC. IN OTHER WORDS, WHEN DEDUCTION U/S 80IB IS ALLOWED, TH E PROFITS AND GAINS ON WHICH THIS DEDUCTION IS ALLOWED SHOULD BE REDUCE D FROM THE INCOME FOR THE COMPUTATION OF DEDUCTION UNDER ANY OTHER SE CTION UNDER CHAPTER VI-A. MOREOVER, SUB-SECTION-4B OF SECTION 80HHC AL SO ENVISAGES THAT FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME UNDER SUB -SECTION(1) OR SUB- SECTION(1A) ANY INCOME NOT CHARGED TO TAX UNDER THI S ACT SHALL BE EXCLUDED. THAT IS TO SAY THE PROFITS OR THE INCOM E OF THE BUSINESS WHICH ENJOY THE BENEFIT OF DEDUCTION U/S 80IB SHOULD BE E XCLUDED FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S 80HHC OF THE IT ACT, 1961. IN ITA NO.333(B)/09 3 THIS BACKGROUND, THE CIT ANALYSED THE ASSESSMENT OR DER WHEREIN, THE AO HAD COMPUTED DEDUCTION U/S 80HHC WITHOUT MAKING ANY SUCH EXCLUSION. THE ASSESSMENT ORDER WAS FOUND ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE BY CIT. ACC ORDINGLY, PROVISIONS OF SEC.263 WERE INVOKED. AFTER TAKING INTO CONSIDERAT ION, THE OBJECTIONS RAISED IN RESPONSE TO THE NOTICE U/S 263, THE CIT O BSERVED THAT IN COMPUTING THE DEDUCTION U/S 80IB SUB-SEC.13 THE PRO VISIONS OF SUB- SECTIONS 5 AND 7 TO 12 OF SEC.80IA ARE APPLICABLE A ND ORDER OF AO WAS SET ASIDE U/S 263 OF ACT. SAME HAS BEEN OPPOSED ON BEH ALF OF ASSESSEE. 3. ACCORDING TO LEARNED AR THE RELIEF ON DEDUCTION ALLOWED U/S 80IA/80IB TO BE REDUCED AND NOT ON THE ENTIRE PROFI T OF BUSINESS ITSELF. THE LEARNED AR ALSO POINTED OUT THAT THIS WAS A DEB ATABLE ISSUE AT THE RELEVANT POINT OF TIME, SO ORDER OF CIT U/S 263 IS NOT JUSTIFIED. ON THE OTHER HAND, LEARNED DR SUPPORTED THE ORDER OF CIT. 4. WE FIND THAT IN CASE OF M/S LEBEN LABORATORIES L TD., VS DCIT(2007) 294 ITR(AT)1, WHEREIN MUMBAI BENCH OF IT AT HELD THAT SEC.80HHC FALLS UNDER THE HEADING C DEDUCTIONS IN RESPECT OF CERTAIN INCOMES IN CHAPTER VI-A. THEREFORE, WHILE COMPUTI NG THE RELIEF U/S 80HHC, EFFECT HAD TO BE GIVEN TO BOTH THE LIMBS PRO VIDED IN SEC.80-IA(9). THEREFORE, THE LOWER AUTHORITIES WERE JUSTIFIED IN REDUCING THE PROFITS OF BUSINESS OF THE UNDERTAKING BY THE AMOUNT OF PROFIT S ALLOWED AS DEDUCTION U/S 80-IA WHILE COMPUTING THE DEDUCTION U /S 80HHC. WE ALSO FIND THAT THE SPECIAL BENCH IN THE CASE OF ACI T VS ROGINI ITA NO.333(B)/09 4 GARMENTS(2007) 294 ITR (AT)15 (CHENNAI), WHEREIN IT WAS HELD THAT RELEVANT TO SEC. 80IA SHOULD BE DEDUCTED FROM PROFI T AND GAIN OF BUSINESS BEFORE COMPUTING RELIEF U/S 80HHC. THUS, THE ISSUE AT HAND HAS BEEN SETTLED. UNDER THE PREVAILING CIRCUMSTANC ES, THE CIT WAS JUSTIFIED IN SETTING ASIDE THE ORDER OF AO AS DISCU SSED ABOVE. SAME IS UPHELD. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 28 TH AUGUST, 2009. (K.K.GUPTA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: BANGALORE DATED:28-08-2009 AM * COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI AR, ITAT, BANGALORE