The DCIT, Circle-4, Baroda V. M/s. Transmetal Ltd., Baroda

ITA 3650/AHD/2007

• Counselvise Citation: 365020514 RSA 2007
• Duration Of Justice: 3 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 07-09-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Section: 143(3); 80HHC

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , , , , !' !' !' !', , , , #$ #$ #$ #$ %% % & %% % & %% % & %% % &, , , , ' ' ' ' ( ' ( ' ( ' ( ' BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KR. SHRAWAT, JUDICIAL MEMBER) ITA NO.3650/AHD/2007 [ASSTT.YEAR : 2003-2004] DCIT, BARODA CIR.4 BARODA. /VS. M/S.TRANSMETAL LTD. ALKAPURI ARCADE R.C. DUTT ROAD BARODA. ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ' . / (/ REVENUE BY : SHRI P.L. KUREEL 1& . / (/ ASSESSEE BY : SHRI SANJAY R. SHAH DATE OF HEARING : 23 RD AUGUST, 2011 DATE OF PRONOUNCEMENT : 23 RD AUGUST, 2011 (2 / O R D E R PER G.D. AGARWAL , VICE-PRESIDENT : THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, AHMEDABAD DATED 25.5.2007 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THIS APPEAL WAS DECIDED BY THE ITAT VIDE ORDER D ATED 24-3-2010. HOWEVER, IN THE MISC. APPLICATION VIDE MA NO.209/AH D/2010 ORDER DATED 30- 6-2011, THE ORDER WAS PARTLY RECALLED TO RE-ADJUDIC ATE GROUND NO.3 OF THE REVENUES APPEAL. THE FINDING OF THE ITAT IN THE M A READS AS UNDER: 3. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THERE APPEAR MISTAKES APPARENT ON RECORD. THE LEARNED DR RIGHTLY CONTENDED BY REFERRING TO PARA 19, 20 AND 21 OF THE TRIBUNAL S ORDER DATED 24-03- 2010 THAT PART OF THE ISSUES HAVE NOT BEEN ADJUDICA TED BY THE TRIBUNAL WITH REGARD TO CLAIM OF DEDUCTION U/S 80 HHC OF THE IT ACT ON THE ITEMS OF OTHER INCOME I.E. DIVIDEND, INTEREST ON ICD, INT EREST ON MARGIN MONEY DEPOSIT, INTEREST ON FD, INTEREST ON INCOME TAX REF UND AND OTHER INCOME. THE TRIBUNAL RELIED UPON THE DECISION OF THE HONBL E SUPREME COURT IN ITA NO.3650/AHD/2007 -2- THE CASE OF LAXMI MACHINE WORKS (SUPRA) IN WHICH IT WAS HELD THAT EXCISE DUTY AND SALES TAX ARE NOT TO INCLUDE IN THE TOTAL TURNOVER AS THERE IS NO ELEMENT OF PROFIT AS EMBEDDED THEREON. THE DE PARTMENTAL APPEAL WAS DISMISSED BY THE TRIBUNAL. IT WOULD, THEREFORE, SHOW THAT THE ABOVE ITEMS OF OTHER INCOME HAVE NOT BEEN CONSIDERED AND ADJUDICATED BY THE TRIBUNAL WHILE CONSIDERING THE GROUND NO.3 OF THE A PPEAL OF THE REVENUE. SINCE THE ISSUE OF OTHER INCOME QUA THE DE DUCTION U/S 80 HHC OF THE IT ACT NOTED ABOVE HAVE NOT BEEN DECIDED, TH EREFORE, THERE IS A MISTAKE APPARENT FROM RECORD. TO THIS EXTENT WE REC ALL THE ORDER OF THE TRIBUNAL AND DIRECT THE REGISTRY TO FIX THE APPEAL OF THE REVENUE ON THE ABOVE LIMITED ISSUE FOR FURTHER HEARING. THE MISC. APPLICATION FILED BY THE REVENUE IS, THEREFORE, ALLOWED. OFFICE IS DIREC TED TO FIX THE MAIN APPEAL FOR HEARING FOR LIMITED PURPOSE IN DUE COURS E BY GIVING NOTICE TO BOTH THE PARTIES. IN VIEW OF THE ABOVE, THE APPEAL WAS FIXED FOR LIMI TED PURPOSE OF ADJUDICATING THE PART OF GROUND NO.3 WHICH REMAINS TO BE CONSIDE RED BY THE ITAT. THE GROUND NO.3 OF THE REVENUES APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE ID. CIT(A) ERRED IN DIRECTING TO EXCLUDE THE INCOME FROM OTHER SOURCES OF RS.31,56,195 FROM TOTAL TURNOVER FOR THE PURPOSE OF WORKING OUT DEDUCTION U/S. 8OHHC, THOUGH AFORESAID EXCLUSIONS A RE NOT DEFINED, WHEREAS SPECIFIC EXCLUSIONS ARE DEFINED IN EXPLANAT ION (BA) TO SUB- SECTION 4C TO SECTION 80 HHC. 3. AT THE TIME OF HEARING BEFORE US, IT WAS STATED BY THE LEARNED DR THAT THE AO ADDED THE AMOUNT OF OTHER INCOME OF RS.38,42,152 /- IN THE TOTAL TURNOVER. THE DETAILS OF WHICH IS AS UNDER: AMOUNT (RS.) A) DIVIDEND 4,15,738 B) INTEREST ON ICD 18,18,573 C) INTEREST ON MARGIN MONEY DEPOSIT 1,08,366 D) INTEREST ON FD PUBLIC DEPOSITS 2,52,750 E) INTEREST OF INCOME TAX REFUND 5,03,810 F) GAIN ON FOREIGN EXCHANGE FLUCTUATION 96,694 G) EXCESS/SHORT PROVISION 4,500 H) OTHER INCOME 56,958 I) INSURANCE CLAIM RECEIVED 2,93,611 J) SCRAP MATERIAL SALES 2,91,153 ITA NO.3650/AHD/2007 -3- TOTAL 39.42.152 THAT THE CIT(A) WAS OF THE OPINION THAT THE DIVIDEN D AND INTEREST WOULD NOT FORM PART OF THE TOTAL TURNOVER. HE ALSO HELD THAT EXCESS/SHORT PROVISIONS OF EXPENSES AMOUNTING TO RS.4,500/- WAS NOT RELATED TO THE SALES AND THEREFORE THE SAME CANNOT BE INCLUDED IN THE TOTAL TURNOVER. THE REVENUE AGGRIEVED WITH THE ORDER OF THE CIT(A) WAS IN APPEAL BEFORE THE CIT(A) VIDE GROUND NO.3 OF THE REVENUES APPEAL. THAT HOWEVER, THE ITAT IN ITS OR DER DATED 24-3-2010 REJECTED THE GROUND NO.3 OF THE REVENUES APPEAL FO LLOWING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. LAXMI MAC HINE WORKS, 290 ITR 667. THE FINDING OF THE ITAT READS AS UNDER: 21. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES. WE FIND THAT ISSUE IN CONTROVERSY IS COVERED BY THE DECISIO N OF THE HONBLE SC IN THE CASE OF CIT VS. LAXMI MACHINE WORKS, 290 ITR 66 7 WHEREIN IT IS HELD THAT EXCISE DUTY AND SALES ARE NOT INCLUDED IN TOTAL TURNOVER AS THERE IS NO ELEMENT OF PROFIT AS EMBEDDED THEREIN. WE RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE DEPARTMENTAL APP EAL. HE THEREFORE STATED THAT THE ISSUE RAISED BY THE RE VENUE IN GROUND NO.3 WAS WITH REGARD TO THE DIVIDEND AND INTEREST ETC AND NO T EXCISE DUTY AND SALES-TAX. THEREFORE, EFFECTIVELY, GROUND NO.3 WAS NOT PROPERL Y ADJUDICATED BY THE ITAT. HE FURTHER STATED THAT THE AO RIGHTLY INCLUDED THE DIVIDEND AS WELL AS INTEREST IN THE TOTAL TURNOVER AND THEREFORE THE GROUND NO.3 OF THE REVENUES APPEAL SHOULD BE ALLOWED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, POINTED THAT IN THE CASE OF LAXMI MACHINE WORKS (SUPRA), THE HONBL E APEX COURT HAS ALSO OBSERVED THAT THE INTEREST DOES NOT HAVE AN ELEMENT OF TURNOVER. IN THIS REGARD HE REFERRED TO PAGE NO.687 OF THE REPORT. HE ALSO SUBMITTED THAT RATIO OF THIS DECISION WOULD BE APPLICABLE TO THE DIVIDEND AND EX CESS/SHORT PROVISION OF THE EXPENSES. ITA NO.3650/AHD/2007 -4- 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF LAXMI MACHINE WORKS (SUPRA). AT PAGE NO.687 OF THE ITR 2 90, THEIR LORDSHIPS OF THE APEX COURT HELD AS UNDER: ...... THEREFORE, JUST AS COMMISSION RECEIVED BY AN ASSESSEE IS RELATABLE TO EXPORTS AND YET IT CANNOT FORM PART OF TURNOVE R, EXCISE DUTY AND SALES TAX ALSO CANNOT FORM PART OF THE TURNOVER. SIMILARLY, INTEREST EMANATES FROM EXPORTS AND YET INTEREST DOES NOT INVOLVE AN ELEMENT OF TURNOVER. THE OBJECT OF THE LEGISLATURE IN ENAC TING SECTION 80HHC OF THE ACT WAS TO CONFER A BENEFIT ON PROFITS ACCRUIN G WITH REFERENCE TO EXPORT TURNOVER. THEREFORE, TURNOVER WAS THE REQU IREMENT. COMMISSION, RENT, INTEREST, ETC. DID NOT INVOLVE A NY TURNOVER. THEREFORE, 90 PER CENT. OF SUCH COMMISSION, INTEREST ETC. WAS EXCLUDED FROM THE PROFITS DERIVED FROM THE EXPORT. THEREFORE, EVEN W ITHOUT THE CLARIFICATION SUCH ITEMS DID NOT FORM PART OF THE F ORMULA IN SECTION 80HHC(3) FOR THE SIMPLE REASON THAT THEY DID NOT EM ANATE FROM THE EXPORT TURNOVER, MUCH LESS ANY TURNOVER. EVEN IF THE ASSESSEE WAS AN EXCLUSIVE DEALER IN EXPORTS, THE SAID COMMISSION WA S NOT INCLUDIBLE AS IT DID NOT SPRING FROM THE TURNOVER. JUST AS INTERES T, COMMISSION ETC. DID NOT EMANATE FROM THE TURNOVER, SO ALSO EXCISE DUT Y AND SALES TAX DID NOT EMANATE FROM SUCH TURNOVER. FROM THE ABOVE, IT IS EVIDENT THAT THE APEX COURT H AS OBSERVED THAT THE COMMISSION, RENT, INTEREST ETC. DO NOT INVOLVE ANY ELEMENT OF TURNOVER. THE RATIO OF ABOVE DECISION WOULD BE SQUARELY APPLICABL E TO DIVIDEND AS WELL AS THE WRITE BACK OF THE EXCESS PROVISION BECAUSE THESE IT EMS ALSO DO NOT INVOLVE ANY ELEMENT OF TURNOVER. IN VIEW OF THE ABOVE, WE HOLD THAT THE CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO EXCLUDE DIVIDEND I NTEREST AND EXCESS PROVISION OF EXPENSES FROM THE TOTAL TURNOVER. ACCORDINGLY, GROUND NO.3 OF THE REVENUES APPEAL IS REJECTED. 6. IN THE RESULT, GROUND NO.3 OF THE REVENUES APPE AL IS REJECTED. ORDER PRONOUNCED IN OPEN COURT ON 23 RD AUGUST, 2011 ( %% % & %% % & %% % & %% % & /MUKUL KR. SHRAWAT ) ' ' ' ' /JUDICIAL MEMBER ( . .. . . .. . G.D. AGARWAL) !' !' !' !' /VICE-PRESIDENT