DCIT, New Delhi V. M/s. Maharashtra Seamless Ltd, New Delhi

ITA 3544/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2152 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 25-11-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 12-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Depreciation; Wrong claim
• Section: 271(1)(c); 80HHC; 80IB; 274; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : I NEW DELHI BEFORE SHRI RAJPAL YADAV,JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A. NO. 3544/DEL./09 ASSESSMENT YEAR 2003-04 DY. COMMISSIONER OF INCOME TAX CIRCLE-6 (1), NEW DELHI VS. M/S. MAHARASHTRA SEAMLESS LTD. 1/23-B, 1 ST FLOOR, ASAF ALI ROAD, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY BY : SHRI M.MOHSIN ALAM, DR RESPONDENT BY : SHRI VED JAIN, CA, SH. V.MOHAN, AD VOCATE ORDER PER RAJPAL YADAV, JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LD. CIT(A) DATED 1 ST JUNE, 2009 PASSED IN ASSTT. YEAR 2003-04. THE SOLI TARY GRIEVANCE OF THE REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING TH E PENALTY AMOUNTING TO RS. 2,20,48,312/- LEVIED U/S 271(1)(C) OF THE INCOME TA X ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE AT THE RELEVANT TIME WAS MANUFACTURING PIPES AND TUBES AND WIND POWER GENERA TION. IT WAS TRADING IN PIPE AND TUBES ALSO. IT HAS TWO DIVISION NAMELY SEAMLESS DIVISION AND ERW PIPES AND TUBES. IT HAS ALSO FILED ITS RETURN OF INCOME O N 31.10.2003 DECLARING AN INCOME OF RS. 64,00,14,646/-. THE ASSESSEE HAD CLAI MED DEDUCTION U/S 80HHC FOR AN AMOUNT OF RS. 5,99,71,358/-. IN SUPPORT OF I TS CLAIM IT HAS FILED REPORT IN FORM NO. 10CCAC UNDER RULE 18 BBA (3) OF INCOME TAX RULES. THE AO ITA NO.3544/DEL/09 ASSTT. YEAR 2003-04 2 DISALLOWED THE CLAIM OF DEDUCTION ON THE GROUND THA T IT HAS EXPORTED THE GOODS THROUGH AN EXPORT HOUSE NAMELY M/S. JAGUAR OVERSEAS LTD. IN THE CASE OF M/S. JAGUAR OVERSEAS LTD. PROFITS ARE ARISING ON ACCOUNT OF DEPB INCENTIVES OTHERWISE THE EXPORT HOUSE HAS A LOSS AND THEREFORE IT WAS NOT ENTITLED FOR DEDUCTION U/S 80HHC. THE ASSESSEE HAS BEEN CLAIMING THE DEDUCTION ON THE BASIS OF EXPORTS MADE BY IT THROUGH THE EXPORT HOUS E AND EXPORT HOUSE ON SUCH EXPORT HAS ISSUED A DISCLAIMER CERTIFICATE TO THE A SSESSEE. LD. AO PUTTING RELIANCE UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF M/S. IPCA LABORATORIES LTD. REPORTED IN 266 ITR 521 DISALLOWE D THE CLAIM OF ASSESSEE. THIS DISALLOWANCE HAS BEEN UPHELD UP TO THE TRIBUNAL. 3. THE AO HAD ISSUED NOTICE U/S 271(1)(C) READ WITH SECTION 274 INVITING THE EXPLANATION OF ASSESSEE AS TO WHY PENALTY FOR WILLF UL FURNISHING OF INACCURATE PARTICULARS SHOULD NOT BE LEVIED UPON IT U/S 271(1) (C) OF THE ACT. IN RESPONSE TO THE SHOW CAUSE NOTICE OF THE AO IT WAS CONTENDED BY THE ASSESSEE THAT AO HAS MISERABLY FAILED TO APPLY THE JUDGMENT OF HONBLE S UPREME COURT IN THE CASE OF IPCA LABORATORIES UPON THE ASSESSEE. THAT WAS A CAS E OF AN EXPORT HOUSE WHERE THE ASSESSEE IS A SUPPORTING MANUFACTURER. TH E ASSESSEE FURTHER CONTENDED THAT AO HAS ERRED IN CONSTRUING THE ASSES SEE AS AN EXPORT HOUSE INSTEAD OF TREATING IT AS A SUPPORTING MANUFACTURER . APART FROM POINTING OUT THESE WRONG APPRECIATION OF FACTS AT THE END OF AO, THE A SSESSEE HAS POINTED OUT THAT IT HAS SUBMITTED THE COMPLETE DETAILS AND IN ITS UNDER STANDING OF LAW DEDUCTION U/S 80HHC WAS ADMISSIBLE TO IT. THE RELIANCE PUT UPON B Y THE AO ON THE JUDGMENT OF ITA NO.3544/DEL/09 ASSTT. YEAR 2003-04 3 HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATOR Y HAS COME ON 11 TH MARCH, 2004 I.E. MUCH AFTERWARDS OF THE DATE OF FILING THE RETURN OF INCOME BY THE ASSESSEE. THE CLAIM OF ASSESSEE IS SUPPORTED BY THE OPINION OF EXPERT IN THE SHAPE OF CERTIFICATE ISSUED BY THE CHARTERED ACCOUN TANT. IT IS NOT THE CASE THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OR CO NCEALED ANY PARTICULARS. THE DEDUCTION HAS BEEN DISALLOWED TO THE ASSESSEE ON TH E BASIS OF INTERPRETATION OF LAW. ACCORDING TO THE ASSESSEE IT HAS OVERALL PROFI T AND IT IS ELIGIBLE FOR DEDUCTION U/S 80HHC. THE LD. AO HAS REJECTED THE CONTENTION O F ASSESSEE AND IMPOSED A PENALTY OF RS. 2,22,48,312/-. 4. AGGRIEVED WITH THE ORDER OF AO ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND REITERATED ITS CONTENTION . THE LD. CIT (A) HAS CONSIDERED THE SUBMISSION OF ASSESSEE IN DETAIL AN D DELETED THE PENALTY. IN THE OPINION OF LD. FIRST APPELLATE AUTHORITY ASSESSEE C ANNOT BE CHARGED WITH THE CHARGE OF FURNISHING INACCURATE PARTICULARS. IT HAS SUBMITTED THE COMPLETE DETAILS IN SUPPORT OF ITS CLAIM. IT HAS NOT MADE ANY WRONG STATEMENT OF FACTS. 5. LD. DR RELIED UPON THE ORDER OF AO AND CONTENDED THAT ASSESSEE WAS AWARE ABOUT THE FACTS THAT EXPORT HOUSE HAS A NEGAT IVE PROFIT AND IT WAS NOT ENTITLED FOR DEDUCTION U/S 80HHC BY INCLUDING THE B ENEFIT OF INCENTIVE IN THE SHAPE OF DEPB THUS ASSESSEE HAS FURNISHED INACCURA TE PARTICULARS BY MAKING A WRONG CLAIM OF DEDUCTION. THE AO HAS RIGHTLY IMPOSE D THE PENALTY. IN SUPPORT OF ITA NO.3544/DEL/09 ASSTT. YEAR 2003-04 4 HIS CONTENTION LD. DR RELIED UPON THE DECISION OF H ONBLE KERALA HIGH COURT IN THE CASE OF KUTTOOKARAN MACHINE TOOLS VS. ACIT REPO RTED IN 313 ITR 413. 6. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND S UBMITTED THAT THOUGH THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 80HHC HAS BEE N UPHELD UPTO THE TRIBUNAL BUT ASSESSEE DOES NOT DESERVE TO BE VISITED WITH PE NALTY. WHILE APPRISING US WITH THE FACTS HE POINTED OUT THAT AO HAS CONSIDERED MAI NLY THREE ISSUES WHILE EXAMINING THE FACTS REGARDING THE ADMISSIBILITY OF DEDUCTION U/S 80HHC. FIRST ISSUE RAISED BY THE AO IS THAT ASSESSEE HAS MADE A CLAIM ADMISSIBLE U/S 80HHC BY WORKING OUT THE PROFIT OF TWO DIFFERENT DIVISION S INDEPENDENTLY. ACCORDING TO THE AO THE CLAIM HAS TO BE COMPUTED ON THE AGGREGATE EX PORT SALES AND NOT ON DIVISION WISE. WITH REGARD TO THIS OBSERVATION OF T HE AO IT WAS THE STAND OF THE ASSESSEE THAT IT HAS BEEN MAINTAINING SEPARATE BOOK S OF ACCOUNTS FOR THE TWO UNITS AND THE DEDUCTION IS ADMISSIBLE ON UNIT WISE. THE SECOND ISSUE RAISED BY THE AO IS REGARDING TOTAL TURN OVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC. IN THIS ISSUE AO WAS OF THE OPINION THAT EXC ISE DUTY IS TO BE INCLUDED IN THE TOTAL TURN OVER. THE HONBLE BOMBAY HIGH COURT IN THE CIT VS. SUDERSHAN CHEMICALS INDUSTRIES LTD. WHICH HAS BEEN APPROVED BY THE HONBLE SUPREME COURT IN THE CASE OF LAXMI MACHINES TOOLS REPORTED IN 292 ITR 667, HAS HELD THAT EXCISE DUTY WILL NOT FORM PART OF THE TOTAL TU RN OVER. THE THIRD ISSUE IS REGARDING THE INCOME IN THE HANDS OF EXPORT HOUSE M /S. JAGUAR OVERSEAS LTD. THROUGH WHOM THE ASSESSEE HAS EXPORTED THE GOODS MA NUFACTURED BY IT. THE AO HAS CONSTRUED MS/ JAGUAR OVERSEAS AS SUPPORTING MA NUFACTURE WHEREAS IN FACT THE ASSESSEE IS THE SUPPORTING MANUFACTURER. IN THI S TRADING BY THE ASSESSEE ITA NO.3544/DEL/09 ASSTT. YEAR 2003-04 5 THROUGH EXPORT HOUSE IT HAS OVER ALL PROFIT AND TH US IT WAS ENTITLED TO DEDUCTION U/S 80HHC. WHEN THE ASSESSEE HAS FILED THE RETURN J UDGMENT OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES WA S NOT AVAILABLE. THERE WAS NO CONTRARY OPINION ON THE ADMISSIBILITY OF DEDUCTI ON AT THE TIME OF FILING OF THE RETURN, THEREFORE, IT CANNOT BE SAID THAT ASSESSE E HAS MADE WRONG CLAIM INTENTIONALLY. HE FURTHER CONTENDED THAT THE ISSUE OF COMPUTATION OF DEDUCTION ADMISSIBLE U/S 80HHC IS ALWAYS DEBATABLE ISSUE AND COMPLICATED ONE. WHILE CALCULATING DEDUCTION U/S 80HC, NEGATIVE OR POSITI VE FIGURES ARE TO BE TAKEN INTO ACCOUNT REMAINED CONTENTIOUS AND THIS RESULTED INTO AN AMENDMENT TO SECTION 80HHC BY THE TAXATION AMENDMENT BILL NO. 2 OF 2005 WHEREBY NEGATIVE AS WELL AS POSITIVE FIGURES HAVE TO BE TAKEN INTO ACCOUNT T O ITS LOGICAL CONCLUSION TO COMPUTE THE DEDUCTION U/S 80HHC. HE ALSO REFERRED T O THE CIRCULAR NO. 2 OF 2006 WHEREIN IT HAS BEEN OBSERVED THAT IN PURSUANCE OF T HE COMPUTATION MADE WITH REGARD TO ADMISSIBILITY OF DEDUCTION U/S 80HHC ON T HE BASIS OF AMENDED PROVISION WHICH BROUGHT ON THE STATUTE BOOK VIDE AM ENDMENT ACT 2005, NO PENALTY SHALL BE LEVIED OR INTEREST SHALL BE CHARGE D IN RESPECT OF ANY FRESH DEMAND RAISED CONSEQUENT TO THE ENACTMENT OF TAXATI ON LAW AMENDMENT ACT 2005. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THIS INDICATE THE COMPLEXITY OF THE PROVISION. HE FURTHER RELIED UPON THE ORDER OF THE ITAT DELHI IN THE CASE OF ORIENTAL RUG COMPANY WHEREIN THE DEDUCTION U/S 80IB WAS DISALLOWED ON DEPB RECEIPT. THE AO VISITED THE ASSESSEE WITH PENALTY. THE TRIBUNAL HAS DELETED THE PENALTY. HE PLACED ON RECORD A COPY OF THE TRIBUNAL ORDER IN ITA NO. 3629/DEL/2008 & 3630/DEL/2008. WITH REGARD TO THE J UDGMENT RELIED UPON BY THE ITA NO.3544/DEL/09 ASSTT. YEAR 2003-04 6 REVENUE REPORTED IN 313 ITR 413, HE POINTED OUT THA T IN THAT CASE A BOGUS CLAIM OF INVESTMENT ALLOWANCE AND DEPRECIATION WAS MADE. THE FACTS ARE QUITE DISTINGUISHABLE FROM THE FACTS OF THE ASSESSEES CA SE. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE ON THE FACTS THAT AS SESSEE HAS DISCLOSED COMPLETE DETAILS OF ITS CLAIM IN THE RETURN OF INCOME. IT HA S MADE THE CLAIM ON THE BASIS OF ADVICE GIVEN BY THE EXPERT ON THIS SUBJECT. THE AUD IT REPORT AND THE CLAIM IN NECESSARY PROFORMA WERE SUBMITTED ALONGWITH THE RET URN. THERE IS NO MALAFIDE IN THIS CLAIM. THE ASSESSEE WAS HAVING A PROFIT IN ITS TRADING ACCOUNT. IT IS THE EXPORT HOUSE WHO HAS A NEGATIVE PROFIT AND ON THE BASIS OF INTERPRETATION GIVEN BY THE HONBLE SUPREME COURT IN THE CASE OF M/S. IPCA LABO RATORIES THIS DISALLOWANCE HAS BEEN MADE. THE JUDGMENT OF HONBLE SUPREME COUR T CAME MUCH AFTERWARDS OF THE DATE OF FILING OF THE RETURN OF INCOME. IT INDICATE THAT ISSUE WAS CONTENTIOUS ONE. THE ITAT JAIPUR IN THE CASE OF HAR ASHVARDHAN CHEMICALS & MINERALS LTD. VS DCIT REPORTED IN 58 TAXMAN 234 HAS HELD THAT IF AN ASSESSEE INTERPRETS THE LAW IN A PARTICULARS WAY DISCLOSING ALL THE RELEVANT FACTS IN THE RETURN SO THAT IF THE LEGAL POSITION TAKEN BY HIM I S NOT ACCEPTED, FULL TAX COULD BE IMPOSED, IT COULD NOT BE SAID THAT THE ASSESSEE HAD FILED A FALSE RETURN. THE MERE REJECTION OF THE EXPLANATION OR CLAIM OF THE ASSESS EE DOES NOT SHOW THAT IT WAS FALSE. DEDUCTION UNDER SECTION 80HHC COULD BE ARGUA BLE CONTESTABLE OR DEBATABLE. IN SUCH A SITUATION, THE CLAIM COULD NOT BE SAID TO BE FALSE. IF THIS WAS NOT SO, IT WOULD BECOME IMPOSSIBLE FOR ANY ASSESSEE TO RAISE ANY CLAIM OR CLAIM ITA NO.3544/DEL/09 ASSTT. YEAR 2003-04 7 ANY DEDUCTIONS WHICH ARE DEBATABLE. IT IS NOT CERTA INLY THE INTENTION OF THE LEGISLATURE TO MAKE SUCH CLAIM OR DEDUCTIONS PUNISH ABLE UNDER SECTION 271 (1) (C) IF THEY ARE NOT ACCEPTED. 8. THE ABOVE VIEW OF THE ITAT JAIPUR HAS BEEN UPHEL D SUBSEQUENTLY IN A LARGE NUMBER OF CASES AND GAINFULLY A REFERENCE CAN BE MADE TO THE DECISION OF HONBLE P & H HIGH COURT IN THE CASE OF CIT VS. BUD HEWAL CO-OPERATIVE SUGAR MILLS LTD. (2008) 6 DTR 31, CIT VS. TEK RAM (HUF) 3 00 ITR 354, ACIT VS. VIJAY KIRAN HOTELS (P) LTD., ITAT CHANDIGARH 10 DTR 225. APART FROM THE ABOVE DISCUSSION WE FIND THAT LD. CIT (A) HAS CONSIDERED THE ISSUE ELABORATELY. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAX I NDIA HAS REFUSED TO UPHELD THE ACTION OF LD. CIT U/S 263 OF THE ACT WHEREBY LD . COMMISSIONER SOUGHT TO TAKE ACTION U/S 263 ON THE BASIS OF COMPUTATION OF DEDUCTION AVAILABLE U/S 80HHC. ACCORDING TO THE LD. COMMISSIONER SUCH COMP UTATION MADE BY THE AO IS NOT IN ACCORDANCE WITH THE LAW AND HE HAS TO HEL D THE ORDER OF THE AO AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. HIS VIEW WAS NOT UPHELD BY THE ITAT AND THEREAFTER BY THE HONBLE HIGH COURT. ON APPEAL HONBLE SUPREME COURT OBSERVED THAT COMPUTATION OF DEDUCTION ADMISS IBLE U/S 80HHC HAS BECOME SO COMPLICATED OVER THE YEARS AND TWO VIEWS WERE INHERENTLY POSSIBLE. THEREFORE, NO ACTION U/S 263 IS ADVISABLE. THUS ON PERUSAL OF THE DETAILED ORDER OF LD. CIT(A) AS WELL AS OF THE ASSTT. RECORDS WE A RE OF THE OPINION THAT ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULARS OR HAS NOT MADE ANY WRONG CLAIM OF DEDUCTION INTENTIONALLY. ITS CLAIM WAS DISALLOWED O N THE BASIS OF INTERPRETATION OF ITA NO.3544/DEL/09 ASSTT. YEAR 2003-04 8 SECTION 80HHC WHICH IS BASED ON THE BASIS OF DECISI ON OF HONBLE SUPREME COURT WHICH CAME SUBSEQUENT TO THE FILING OF THE RE TURN. LD. FIRST APPELLATE AUTHORITY HAS APPRECIATED THE FACTS AND CIRCUMSTANC ES IN RIGHT PERSPECTIVE NO INTERFERENCE IS CALLED FOR. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON [K.G. BANSAL] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER VEENA DATED : COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, D EPUTY REGISTRAR, ITAT