DCIT, Hyderabad V. M/s Vasant Chemicals Ltd., Hyderabad

ITA 334/HYD/2007

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5997 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-02-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 27-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E S NAGENDRA PRASAD
• Keywords: Revision of order; Depreciation
• Section: 143(3); 80HHC; 80IB; 263; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA NO.334/HYD/07 : ASST. YEAR: 2004- 05 ITA NO.1109/HYD/06 ASST. YEAR: 2000-01 ITA NO.1110/HYD/06 ASST. YEAR: 2003-04 DCIT, CIRCLE 3[3], HYDERABAD VS M/S. VASANT CHEMICALS LIMITED, HYDERABAD DEPARTMENT BY : SHREE. E. S. NA GENDRA PRASAD, DR ASSESSEE BY : SHREE. SAMUEL NA GADESI, CA O R D E R PER AKBER BASHA, ACCOUNTANT MEMBER THESE THREE APPEALS PREFERRED BY THE REVENUE ARE DI RECTED AGAINST THE SEPARATE ORDERS OF THE CIT(A) IV, HYDERAB AD FOR THE ASSESSMENT YEARS 2000-01, 2003-04 AND 2004-05. SINCE COMM ON ISSUES ARE INVOLVED IN THESE APPEALS, THEY ARE HEARD TOG ETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIE NCE. ITA NO.1109/HYD/2006-ASST.YEAR: 2000-01 : 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PUBLI C LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF CHEMICALS AND SOFTWARE DEVELOPMENT. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE'S TOTAL INCOME WAS ASSESSED U/S 143(3 ) READ WITH SEC.263 OF THE ACT ON 20-3-2006. IN THE ASSESSMENT, THE DEDUCTION U/S 80HHC WAS RE-WORKED BY THE ASSESSING OFFICER AFTER DEDUCT ING THE BASE PROFITS OF THE INDUSTRIAL UNDERTAKING ON WHICH DE DUCTION U/S 80IB WAS ALSO CLAIMED AND ALLOWED. AGGRIEVED BY THIS ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND THE CIT(A) AGREED WITH THE ASSESSEE'S SUBMISSION AND DIRECTED THE ASSESSI NG OFFICER TO ARRIVE AT THE GROSS TOTAL INCOME AFTER REDUCING THE AMOUNT OF DEDUCTION ALLOWED U/S 80IB OF THE ACT AND NOT FROM THE BASE PROFITS. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE I S IN APPEAL BEFORE US. 3. WE FIND THAT THIS TRIBUNAL IN ITA NO.453/HYD/05 DA TED 5-12-2008, QUASHED THE ORDER OF THE CIT PASSED U/S 263 OF THE ACT F OR THE ASSESSMENT YEAR UNDER APPEAL. SINCE THE ORDER OF THE C IT DOES NOT SURVIVE, THE ASSESSING OFFICER DID NOT HAVE ANY JURISDICT ION TO PASS ORDER CONSEQUENT TO THE ORDER OF THE CIT. HENCE, THE PRESENT APPEAL FILED BY THE REVENUE ALSO DOES NOT SURVIVE. HENCE, THE APPEAL FI LED BY THE REVENUE IS DISMISSED AS NOT MAINTAINABLE. ITA NO.334/HYD/07 AND ITA NO.1110/HYD/06 ASST.YEARS : 2004- 05 & 2003-04 : 4. IN BOTH THE YEARS UNDER CONSIDERATION, THE INCOME OF THE ASSESSEE WAS ASSESSED U/S 143(3) OF THE ACT. IN THE SAID ASSESSMENT, DEDUCTION U/S 80HHC OF THE ACT WAS RE-WORKED BY THE ASSESSING OFFICER R ESTRICTING 3 IT WITH RESPECT TO DUTY DRAW BACK. THE ASSESSING OFFICER A LSO RESTRICTED THE DEPRECIATION TO 25% ON COMPUTER PERIPHERALS AND RE LATED SOFTWARE AS AGAINST THE CLAIM OF THE ASSESSEE AT 60%. AGGRIEVED B Y THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT (A). THE CIT (A) FOLLOWING THE DECISION OF THE ITAT, KOLK ATA IN THE CASE OF ITO V. SAMIRAN MAJUMDAR REPORTED IN 98 ITD 119 (KOL) DI RECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION AT 60% ON THE ITEMS INVOLVED AT ISSUE. THE CIT (A) ALSO DIRECTED THE ASSESSING OFFICER TO R E-WORK OUT THE DEDUCTION IN RESPECT OF DUTY-DRAWBACK AS PER PROVISO TO SEC.80HHC WHICH PROVIDES FOR AN ADDITIONAL DEDUCTION REGARDING T HE EXPORT INCENTIVE. AGGRIEVED BY THIS ORDER OF THE CIT (A), T HE REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE ASSESSING OFFICER RELATING TO THE ISSUE OF DEPRECIATIO N AND SUBMITTED THAT THE CIT WAS WRONG IN DIRECTING THE ASSESSING OFFICER TO ALLOW 90% OF THE DUTY-DRAWBACK ALSO IN ADDITION TO SALE OF DEPB LIC ENSE ALREADY ALLOWED IN COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. THE ASSESSEE WAS ASKED TO EXERCISE THE OPTION VIDE CIRCULAR NO.2 /2006 DT.17-10-2006 WHICH WAS TAKEN INTO ACCOUNT IN THE ASSESSMEN T ORDER AND THE SAME WAS DISCUSSED AT PAGE 4 OF THE ASSESSMENT ORDER . HENCE, THERE IS NO MISTAKE IN THE COMPUTATION OF DEDUCTION U/ S 80HHC OF THE ACT. HE RELIED ON THE FOLLOWING CASE LAWS IN SUPPORT OF HIS CONTENTION. A) CIT V. STERLING FOODS 237 ITR 579 (SC) B) ACIT V. K.S.INTERNATIONAL 293 ITR 39 (DEL) (AT) 4 6. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORD ERS OF THE CIT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WITH REGARD TO THE DISPUTE ARISING ON ACCOUNT OF RATE OF DEPRECIATION, WE FIND THAT THE DECISION RELIED UPON BY THE CIT (A) IN THE CASE OF SAMIRAN MUJAMDAR (SUPRA), SQUARELY APPLIES TO THE POINT AT ISSUE IN FAVOR OF THE ASSESSEE. IN THAT CASE, THE TRIBUNAL HELD THAT PRINTER AND SCANNER CANNOT BE USED WITHOUT THE COMPUTER THAT IS THEY ARE INTEGRAL PART OF THE COMPUTER SYSTEM AND THEREFORE , THEY ARE TO BE TREATED AS COMPUTER FOR THE PURPOSE OF HIGHER RATE OF DEPRECIATION AT 60%. ACCORDINGLY, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE CIT (A) ON THIS ISSUE AND THE SAME IS CONFIRMED. THE GROUND RAISED BY THE REVENUE FAILS AND IS DISMISSED AS SUCH. WITH REGARD TO THE RE-WORKING OF DEDUCTION U/S 80HHC BY THE ASSESSING OFFICER RESTRICTING IT WI TH RESPECT TO DUTY-DRAWBACK, WE FIND THAT S.28 [IIID] PROVIDES F OR CHARGEABILITY OF ONLY THE PROFITS ON TRANSFER OF DEPB AND NOT THE WHOL E VALUE OF SALE RECEIPTS. THE FACE VALUE OF THE ENTITLEMENT WILL HAVE TO BE TAXED UNDER SECTION 28 [IV] OF THE ACT. THEREFORE, WHAT HAS TO BE R EDUCED UNDER CLAUSE [BAA] TO EXPLANATION BELOW SECTION 80HHC OF THE ACT IS ONLY THE SAID PROFIT OR PREMIUM ON TRANSFER OF DEPB AND NOT TH E FULL FACE VALUE OF ITS CONSIDERATION. HENCE, WE HOLD THAT 90% OF ONLY THE PROFIT ON TRANSFER OF DEPB SHOULD BE CONSIDERED FOR EXCLUSION UNDER CLAUSE [ BAA] TO EXPLANATION BELOW SECTION 80HHC OF THE ACT. ALSO, SINCE TH E EXPORT TURNOVER OF THE ASSESSEE COMPANY IS ABOVE RS.10 CRORES AND THE ASSESSEE COMPANY UNABLE TO SATISFY THE TWO CONDITIONS PRESCRI BED IN THE THIRD PROVISO TO SECTION 80HHC [3] OF THE ACT, THE PROFI T ON TRANSFER OF DEPB SHALL NOT BE ELIGIBLE FOR DEDUCTION. WE FIND FRO M THE ORDER OF THE 5 ASSESSING OFFICER THAT THE ASSESSING OFFICER EXCLUDED FROM THE INCENTIVE SHOWN IN THE COMPUTATION STATEMENT OF THE ASSESSEE WHICH A RE RELATED ONLY TO PREMIUM/PROFIT ON SALE OF DEPB LICENSE AND NOT THE TOTAL INCENTIVE ON EXPORTS (DEPB). THAT MEANS THE ASSESSING OFF ICER HAS CONSIDERED THE INCENTIVE ON EXPORTS ONLY FOR WORKING OU T THE DEDUCTION U/S 80HHC. HENCE, THE RE-WORKING DONE BY THE ASSESSING OFFI CER IS IN LINE WITH THE TAXATION LAWS (AMENDMENT) ACT, 2005 AND CIRCULAR NO.2/2006 DT.17-1-2006. HENCE, THE GROUND RAISED BY T HE REVENUE ON THIS ISSUE IS ALLOWED. ACCORDINGLY, THE ORDER OF THE ASSE SSING OFFICER ON THIS ISSUE FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 IS UPHELD. 6. IN THE RESULT, ITA NO.1109/HYD/06 IS DISMISSED AND TH E OTHER TWO APPEALS BY THE REVENUE ARE PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18-2-2010 SD/- (N.R.S.GANESAN) SD/- (AKBER BASHA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 18TH FEB. 2010. COPY FORWARDED TO: 1. VASANT CHEMICALS LATD., 2B, VAARUN TOWERS, 3RD FLOOR , BEGUMPET, HYDERABAD-16. 2. ACIT, CIR-3(3), IT TOWERS, AC GUARDS, HYDERABAD. 3. CIT, AP, HYDERABAD. 4. CIT (A) IV,, HYDERABAD. 5. THE D.R., ITAT, HYDERABAD. *VNR 6