DCIT, Hyderabad V. M/s Divi's Laboratories Ltd, Hyderabad

ITA 359/HYD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1360 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2000-2001
• Appeal Filed On: 12-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S V JHADAV
• Assessee Lawyers: S RAMA RAO
• Section: 80HHC; 115JB; 154

Judgement Text

1 INCOME TAX APPALLETE TRIBUNAL, HYDERABAD BENCH A BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHR I CHANDRA POOJARI, ACCOUNTANT MEMBER ITA 359/HYD/2009 ASST. YEAR:2000-01 DY. CIT, CIRCLE 1 (2), HYDERABAD VS. M/S DIVI'S L ABORATORIES LTD HYDERABAD ((AAACD 6745 J) (APPALLETE) (RESPONDENT) APPELLATE BY : SHRI S.V. JHADAV, DR RESPONDENT BY : SHRI. S. RAMA RAO ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) II, HYDERABAD DATED 2/ 1/2009 AND IT PERTAINS TO THE ASSESSMENT YEAR 2000-2001. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF CIT(A) IS ERRONEOUS ON THE FACTS A ND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) OUGHT TO HAVE UPHELD METHOD OF COPUT ATION ADOPTED BY ASSESSING OFFICER FOR ARRIVING BOOK PROFIT U/S 115J B WHICH IS THE PROFIT BEFORE TAX AS PER COMPANY'S ACT 1956. 3. THE CIT(A) OUGHT TO CONFIRM THE ORDER U/S 154 P ASSED BY THE ASSESSING OFFICER. 3. THE LEARNED DR SUBMITTED THAT THIS ISSUE COVER ED AGAINST BY THE JUDGEMENT OF BOMBAY HIGH COURT IN THE CASE OF C IT VS. AJENTA FIRM LTD., WHEREIN IT WAS HELD THAT FOR THE PURPOSE OF C ALCULATING BOOK PROFIT U/S 115JB UNDER EXPRESSION (1), SUB CLAUSE (IV), TH E EXPORT PROFITS TO BE EXCLUDED FROM THE BOOK PROFIT WOULD BE THE EXPORT P ROFITS ALLOWED AS DEDUCTION U/S 80HHC OF THE INCOME TAX ACT AFTER R ESTRICTING THE 2 DEDUCTION AS PER PROVISIONS OF SUB SECTION (1B) OF THE SECTION 80HHC AND NOT THE EXPORT PROFITS CALCULATED AS PER SUB SECTIO N (3) AND (3A) OF SECTION 80HHC BEFORE APPLYING THE RESTRICTION CONTAINING IN SUB SECTION (I) (B) OF 80HHC. 4. ON THE OTHER HAND, THE LEARNED DR SUBMITTED TH AT THE JUDGEMENT IN THE CASE OF CIT VS. GTN TEXTILES LTD. (164 CTR 185) IS IN FAVOUR OF THE ASSESSEE AND IN VIEW OF THE JUDGEMENT IN THE CASE O F CIT VS. VEGETABLE PRODUCTS (88 ITR 192) WHEREIN IT WAS HELD THAT WHIL E IN STATUTES, IF TWO REASONABLE CONSTRUCTION OF THE TAXING PROVISIONS AR E POSSIBLE THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADO PTED. THIS IS A WELL ACCEPTED RULE OF CONSTRUCTION. FURTHER, HE RELIED ON THE JUDGEMENT IN THE CASE OF M/S T.S. BALRAM ITO VS. VOLKART BROTHERS AN D OTHERS (82 ITR 51) (SC). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. U/S 154 OF THE INCOME TAX ACT, THE ASSESSI NG OFFICER EMPOWERS TO RECTIFY THE MISTAKE APPARENT FROM REPORT. ON THE O THER HAND, SOMETHING WHICH CAN BE ESTABLISHED BY LONG DRAWN PROCESS OF R EASONING OF POINTS ON WHICH THERE MAY BE CONSUMABLY TWO OPINIONS OR A DEC ISION ON A DEBATABLE POINT OF LAW CANNOT BE APPARENT ON RECORD WHICH CAN BE U/S 154 OF THE IT ACT. IN THE PRESENT CASE, ISSUES ARE RELATING TO DEDUCTION U/S 80HHC. WHILE COMPUTING THE BOOK PROFIT, THIS ISSUE WAS DEC IDED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF TRIBUNAL, MUMBAI SPEC IAL BENCH IN THE CASE OF DCIT VS. SYNACOME FORMULATIONS INDIA LTD. (106 ITD 193) (MUM) (SB) WHEREIN IT WAS HELD THAT THEY DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE BY OBSERVING AS FOLLOWS : 'THE DEDUCTION U/S 80HHC IN A MAT SCHEME IS FROM TH E TAXABLE INCOME, WHICH IS OTHERWISE THE ADJUSTED BOOK PROFIT. IF NO DEDUCTION IS AVAILABLE TO AN ASSESSEE, THE GROSS TOTAL INCOME ITSELF IS TH E TAXABLE INCOME OF THE ASSESSEE. MAT SCHEME DOES NOT PROVIDE FOR DEDUCTIO NS. THEREFORE, THE INTERPRETATION IS THAT THE ADJUSTED BOOK PROFIT OF A COMPANY ITSELF IS THE 3 GROSS TOTAL INCOME OF THAT ASSESSEE COMPANY. THE D EDUCTION U/S 80HHC IS IN THAT WAY GIVEN OUT OF GROSS TOTAL INCOME IN A CASE FALLING UNDER MAT, WHICH MEANS THAT SECTION 80HHC SHOULD BE COMPUTED O N THE ADJUSTED BOOK PROFIT. SECTION 115J, 115JA AND 115JB COME IN TO OPERATION, AS THE REGULAR PROFIT HAS BEEN SUBSTITUTED BY THE BOOK PRO FIT. ONCE THE SUBSTITUTION IS OVER, THERE IS NO WAY TO GO BACK TO THE NORMAL COMPUTATION PROCESS OF STATUTORY PROFIT WHICH HAS ALREADY BEEN OVERWHELMED BY SECTIONS 115J, 115JA AND 115JB. THE SAME WOULD REC ONCILE THE ALLEGED INCOMPATIBILITY POINTED OUT BY THE REVENUE THAT THE DEDUCTION AVAILABLE TO AN ASSESSEE UNDER CHAPTER VIA IS SUBJECT TO SECTION 80AB. THEREFORE, THE DEDUCTION U/S 80HHC IN A CASE OF MAT ASSESSMENT IS TO BE WORKED OUT ON THE BASIS OF THE ADJUSTED BOOK PROFIT AND NOT ON TH E BASIS OF THE PROFIT COMPUTED UNDER THE REGULAR PROVISIONS OF LAW APPLIC ABLE TO THE COMPUTATION OF PROFIT AND GAINS OF BUSINESS OR PROF ESSION.' 5.1. FURTHER, THIS JUDGEMENT WAS OVER RULED BY THE BOMBAY HIGH COURT CITED SUPRA. 6. ON THE OTHER HAND, THERE IS A JUDGEMENT IN FAVO UR OF THE ASSESSEE FROM KERALA HIGH COURT CITED SUPRA. AS S UCH, AT PRESENT, TWO DIFFERENT JUDGEMENTS ARE AVAILABLE ONE IS IN FAVOUR OF THE ASSESSEE AND ANOTHER AGAINST THE ASSESSEE . SO IN VIEW OF THE J UDGEMENT OF THE SUPREME COURT IN THE CASE OF M/S VEGETABLE PRODUCTS CITED SUPRA , THE JUDGEMENT IN FAVOUR OF THE ASSESSEE TO BE FOLLOWED . MORESOVER, THE ASSESSING OFFICER CANNOT TAKE UP THE IMPUGNED ISSU E IN THE PROCEEDINGS U/S 154 OF THE ACT. U/S 154 OF THE IT ACT, THE POW ER OF ASSESSING OFFICER IS VERY LIMITED. IT IS WELL SETTLED THAT MISTAKE A PPARENT ON RECORD MUST BE OBVIOUS AND PATTED MISTAKE NOT LONG DRAWN PROCESS O F REASONING ON POINTS ON WHICH THERE MAY BE CONSUMABLY TWO OPINION S. IN THE PRESENT CASE, THERE ARE TWO DIFFERENT JUDGEMENTS ARE AVAILA BLE ONE IN FAVOUR OF THE ASSESSEE AND THE OTHER ONE AGAINST THE ASSESSEE . AS SUCH IN OUR OPINION, SUCH DEBATABLE ISSUE CANNOT BE CONSIDERED U/S 154 OF THE IT ACT. RECTIFICATION U/S 154 OF THE IT ACT ONLY MEAN REVIE W OF THE ORDER OF THE 4 ASSESSING OFFICER FOR WHICH THE ASSESSING OFFICER H AS NO POWER. IN OUR OPINION, AND IN VIEW OF THE JUDGEMENTS CITED SUPRA, THE LEARNED AR SUPPORTS OUR VIEW. ACCORDINGLY, WE DISMISS THE APP EAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE COURT ON: 20. 11.2009 SD/- SD/- (N.R.S. GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 20TH NOVEMBER, 2009 COPY FORWARDED TO: 1. SHRI K. RAJASHEKHAR, DY.CIT, CIRCLE 1 (2), 4TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S DEVI'S LABORATORIES LTD. 7-1-77/E/1/303, D EVI TOWERS, DHARAM KARAM ROAD, AMEERPET, HYDERABAD.59 3. THE CIT(A)-I, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, HYDERABAD NP/