M/s. Bhavin, Surat V. The Dy.CIT.,Cent.Circle-3, Surat

ITA 3759/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6628 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 18-11-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 80HHC

Judgement Text

ITA NO.3759/AHD/2008 . ASSESSMENT YEAR 2004-05. 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH,AHM EDABAD. ( BEFORE SHRI BHAVNESH SAINI AND SHRI A. K. GARODIA) I.T .A. NO. 3759/AHD/2008 (ASSESSMENT YEAR: 2004 -2005) M/S. BHAVIN, SURVEY NO.241, G.I.D.C. PANDESARA, SURAT. (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, AAYAKAR BHAVAN, MAJURA GATE, SURAT. (RESPONDENT) PAN: AACFB6356 J APPELLANT BY : NONE (WRITTEN SUBMISSION) RESPONDENT BY : SHRI BHUVNESH KULSHRESTHA, SR. D.R. ( )/ ORDER PER: SHRI A.K. GARODIA , A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LD. CIT (A)- II, AHMEDABAD DATED 16-9-2008 FOR ASSESSMENT YEAR 2 004-05. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF SERVICE OF NOTICE AS PER THE ACKNOWLEDGEMENT ON RECORD. A WRITTEN SUBMIS SION IS AVAILABLE ON RECORD AND HENCE, WE PROCEED TO DECIDE THIS APPEAL AFTER HEARING LD. D.R. OF THE REVENUE AND AFTER CONSIDERING THE WRITTEN SUBMI SSIONS. 3. GROUND NO.1 RAISED BY THE ASSESSEE IS AS UNDER:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OUT OF BROKERA GE EXPENSES OF RS.5,61,023/-. . ITA NO.3759/AHD/2008 . ASSESSMENT YEAR 2004-05. 2 4. REGARDING GROUND NO.1, BRIEF FACTS ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS DEBITED BROKERAGE EXPENSES TO THE EXTENT OF RS.19,06,892/- AS AGAINST RS.2,60,352/- IN THE IMMEDIATELY PRECEDING YEAR. IT IS ALSO NOTED BY THE A.O. THAT THE TOTAL TURNOVER HAS INCREASED TO RS. 14,39,40,820/- AS AGA INST RS.13,02,44,555/- IN THE PRECEDING YEAR. THE AO HAS NOTED THAT THE BROKE RAGE EXPENSES HAVE INCREASED MANIFOLD IN COMPARISON TO THE INCREASE IN TOTAL TURNOVER. THE AO ASKED THE ASSESSEE TO JUSTIFY THE INCREASE IN COMPA RISON TO PRECEDING YEAR. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO THAT THE FIRM HAS PURCHASED VARITIES OF CLOTH WHEREAS IN THE EARLIER YEAR, THE PURCHASE OF GREY FABRICS WERE DIRECTLY MADE. IT WAS ALSO SUBMITTED T HAT IN THE CURRENT YEAR, EXPORT OF VALUE ADDED SYNTHETIC DRESS MATERIAL HAS BEEN MADE TO FETCH BETTER PRICE IN THE INTERNATIONAL MARKET. IT WAS ALSO SUBM ITTED THAT THERE IS INCREASE IN THE GROSS PROFIT IN COMPARISON TO EARLIER YEAR. AO WAS NOT SATISFIED. IT IS NOTICED BY THE A.O. THAT NO EVIDENCE WAS PRODUCED R EGARDING THE NATURE OF SERVICES RENDERED BY VARIOUS COMMISSION AGENTS TO W HOM THE COMMISSION PAYMENT WAS MADE,. IT IS ALSO OBSERVED BY THE A.O. THAT THE ASSESSEE HAS MADE ALL THE PURCHASES OF GREY CLOTH FROM LOCAL MAR KET BUT THE PAYMENT OF BROKERAGE WERE MADE TO THE PARTIES AT BOMBAY AND DU BAI ALSO. THERE IS NO REASON FOR PAYMENT OF BROKERAGE TO THE PARTIES AT M UMBAI OR DUBAI BECAUSE NO GREY HAS BEEN PURCHASED FROM THOSE PLACES. ON TH IS BASIS, HE REACHED TO THE CONCLUSION THAT THE BROKERAGE TO THE PARTIES AT BOMBAY AND DUBAI, IS THEREFORE NOT ALLOWABLE. THE A.O. HAS NOTED THE NAM ES OF 7 PARTIES ON PAGE-3 OF THE ASSESSMENT ORDER OUT OF WHICH ONE IS OF DUBA I, 3 ARE OF BOMBAY AND 3 ARE OF SURAT. TOTAL PAYMENT TO THESE 7 PARTIES IS O F RS. 5,61,023/-, AND THE A.O. MADE DISALLOWANCE OF BROKERAGE PAYMENT TO THIS EXTENT. BEING ITA NO.3759/AHD/2008 . ASSESSMENT YEAR 2004-05. 3 AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE LD. CIT (A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURT HER APPEAL BEFORE US. 5. IN THE WRITTEN SUBMISSION AVAILABLE ON RECORD, I T IS THE CONTENTION OF THE ASSESSEE THAT OUT OF THE 7 PARTIES, TDS IS DEDU CTED FROM 5 PARTIES AND FOR THE REMAINING 2 PARTIES, NO TDS WAS DEDUCTIBLE BECA USE IN ONE CASE I.E. IN THE CASE OF SHRI RASIK CHAWLA, THE PAYMENT WAS OF R S.1145/- ONLY AND IN THE REMAINING ONE CASE I.E. FIOUNTAIN TEXTILE OF DUBAI, TDS IS NOT DEDUCTIBLE AS THE PAYMENT WAS MADE OUTSIDE INDIA. EVEN IN THE WRI TTEN SUBMISSION, THERE IS NO SUBMISSION REGARDING THE NATURE OF SERVICES R ENDERED BY THESE PARTIES. RELIANCE WAS PLACED ON THE TRIBUNAL DECISION OF AHM EDABAD BENCH RENDERED IN THE CASE OF DETROX CORPORATION VS. ACIT IN ITA NO.2270/AHD/2007 DATED 25-1-2008, A COPY OF WHICH H AS BEEN SUBMITTED ALONG WITH THE WRITTEN SUBMISSIONS. 6. AS AGAINST THIS, LD. D.R. OF THE REVENUE DRAWN O UR ATTENTION TO PARAGRAPH 4.2 AND 4.3 OF THE ASSESSMENT ORDER WHERE IN THE AO. HAS DISCUSSED THIS ISSUE. HE HAS ALSO DRAWN OUR ATTENTION TO PAR AGRAPH 7 TO 7.2 OF THE ORDER OF THE LD. CIT (A) AND IT IS POINTED OUT THAT A CLE AR FINDING HAS BEEN GIVEN BY LD. CIT (A) THAT THE APPELLANT HAS NOT ESTABLISHED THE WORK DONE BY THE PERSONS CLAIMING BROKERAGE AND JUSTIFICATION OF IT. HE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IT IS NOTED BY THE AO IN PARAGRAPH 4.2 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS MADE ALL THE PURCHASES OF GREY FRO M LOCAL MARKET BUT THE PAYMENTS OF COMMISSION HAVE BEEN SHOWN TO THE PARTI ES AT BOMBAY AND DUBAI ALSO. BEFORE THE LD. CIT (A) ALSO NOTHING HAS BEEN BROUGHT ON RECORD ITA NO.3759/AHD/2008 . ASSESSMENT YEAR 2004-05. 4 REGARDING THE NATURE OF SERVICES RENDERED BY THESE COMMISSION AGENTS. IN THE WRITTEN SUBMISSION FILED BEFORE US ALSO, THE ONLY C ONTENTION OF THE ASSESSEE IS THAT TDS WAS DEDUCTED FROM 5 PARTIES OUT OF 7 PARTI ES AND IN THE CASE OF ONE PARTY, THERE IS NO REQUIREMENT OF TDS AS THE PAYMEN T MADE IS VERY SMALL OF RS.1145/- ONLY AND IN THE CASE OF ONE PARTY OF DUBA I, TDS WAS NOT REQUIRED TO BE DEDUCTED BECAUSE PAYMENT WAS OUTSIDE INDIA. T HERE IS NO EXPLANATION OF THE ASSESSEE REGARDING NATURE OF SERVICES RENDER ED BY THESE PARTIES. REGARDING THE TRIBUNAL DECISION CITED BY THE ASSESS EE IN THE WRITTEN SUBMISSION I.E. RENDERED IN THE CASE OF DETROX CORP ORATION VS. ACIT (SUPRA), WE FIND THAT IN THAT CASE ALSO, THE A.O. ASKED THE ASSESSEE TO EXPLAIN THE NATURE OF SERVICES RENDERED BY THE AGENTS TO WHOM T HE COMMISSION WAS PAID IN THAT CASE AND IT WAS EXPLAINED BEFORE THE A.O. I N THAT CASE THAT THE PARTY IN QUESTION HAD PROCURED CONTRACT OF SEWAGE TREATMENT PLANT FROM HAZIRA LNG PVT. LTD., FOR THE ASSESSEE OF THE VALUE OF RS.94,1 9,090/- FOR A PERIOD OF ONE YEAR FOR WHICH COMMISSION WAS PAID. THIS SHOWS THAT IN THAT CASE, THE ASSESSEE HAD EXPLAINED THE NATURE OF SERVICES RENDE RED BY THE PARTY TO WHOM PAYMENT OF COMMISSION WAS MADE WHEREAS IN THE PRESE NT CASE, NO SUCH EXPLANATION HAS BEEN RENDERED BY THE ASSESSEE BEFOR E AUTHORITIES BELOW OR BEFORE US AS TO WHAT WAS THE SERVICE RENDERED BY TH E COMMISSION AGENTS IN QUESTION TO WHOM THE DISPUTED AMOUNT WAS PAID BY TH E ASSESSEE. HENCE, THE TRIBUNAL DECISION CITED BY THE ASSESSEE IS OF NO HE LP IN THE PRESENT CASE. IN THE ABSENCE OF ANY EXPLANATION REGARDING ANY SERVIC E RENDERED BY THE 7 PARTIES TO WHOM THIS COMMISSION AMOUNT OF RS.5,61,0 23/- WAS PAID, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF TH E LD. CIT(A) ON THIS ISSUE. HENCE, GROUND NO.1 IS REJECTED. ITA NO.3759/AHD/2008 . ASSESSMENT YEAR 2004-05. 5 8. GROUND NOS.2 TO 6 ARE INTER-CONNECTED REGARDING DISALLOWANCE OF DEDUCTION U/S. 80HHC CLAIMED BY THE ASSESSEE AND GR OUND NO.7 IS GENERAL. 9. REGARDING THIS ISSUE, THE FACTS ARE THAT IT IS N OTED BY THE A.O. IN PARAGRAPH 5 OF THE ASSESSMENT ORDER THAT THE ASSESS EE HAS CLAIMED DEDUCTION U/S. 80-HHC OF THE ACT TO THE EXTENT OF RS.3,91,036 /-. IT IS ALSO NOTED BY THE A.O. THAT THE TOTAL TURNOVER OF THE ASSESSEE IS IN EXCESS OF RS.10 CRORES AND HENCE, ASSESSEE WAS ASKED TO FURNISH THE REVISED WO RKING OF DEDUCTION U/S. 80HHC OF THE ACT. IT IS ALSO NOTED BY THE A.O. THA T THE ASSESSEE SUBMITTED REVISED WORKING WITHOUT PREJUDICE AND WITHOUT ADMIT TING THE REVISED WORKING AS PER AMENDED PROVISIONS OF SECTION 80HHC, AS THE MATTER IS SUB- JUDICED BEFORE THE APEX COURT. THE A.O. HAS REPRODU CED REVISED WORKING OF DEDUCTION U/S. 80HHC AS HAS BEEN SUBMITTED BY THE A SSESSEE. IN THIS WORKING, IT IS NOTED THAT THE DEDUCTION U/S. 80HHC IS NEGATIVE AS NOTED BY THE A.O. IN PARAGRAPH 5.1 OF THE ASSESSMENT ORDER. HENCE, THE A.O. DID NOT ALLOW ANY DEDUCTION TO THE ASSESSEE U/S. 80HHC OF T HE ACT. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE LD. CIT (A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FUR THER APPEAL BEFORE US. 10. VARIOUS SUBMISSIONS ARE MADE BY THE ASSESSEE IN THE WRITTEN SUBMISSION FILED BEFORE US BUT WE FIND THAT NOW THI S ISSUE IS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HONBLE BOMBAY HI GH COURT RENDERED IN THE CASE OF CIT VS. KALPTARU COLOURS & CHEMICALS LT D., AS REPORTED IN 328 ITR 451(BOM.). HENCE, RESPECTFULLY FOLLOWING THIS J UDGMENT OF HON. BOMBAY HIGH COURT, WE HOLD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80HHC BECAUSE THE ENTIRE AMOUNT OF DEPB RECEIV ED BY THE ASSESSEE IS TO BE TREATED AS PROFIT ON SALE OF DEPB AND THE SAM E HAS TO BE REDUCED FROM THE BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING TH E DEDUCTION ALLOWABLE U/S. ITA NO.3759/AHD/2008 . ASSESSMENT YEAR 2004-05. 6 80HHC AND WHEN THIS IS DONE, THERE IS NEGATIVE PROF IT AND HENCE, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80HHC. THIS ISSUE IS ALSO DECIDED AGAINST THE ASSESSEE AND ALL THE GROUND I.E. GROUND NO.2 TO 6 ARE REJECTED. 11. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 05 - 2011. SD/- SD/- (BHAVNESH SAINI) (A. K. GARODIA) JUDICIAL MEMBER. ACCOUNTANT MEMBER. AHMEDABAD. DATED: 13 - 05 - 2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO.3759/AHD/2008 . ASSESSMENT YEAR 2004-05. 7 1.DATE OF DICTATION 11 - 5 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 12 / 5 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..