LUPIN LTD, MUMBAI V. ADDL CIT RG 10(1), MUMBAI

ITA 3860/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62704 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-04-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 13-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAVIN VARMA
• Keywords: Business income
• Section: 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI G.E.VEERABHADRAPPA, PRESIDENT & SHRI I.P.BANSAL (J.M) ITA NO. 3860/MUM/2010(A.Y.2004-05) LUPIN LIMITED, 159, C.S.T. ROAD, KALINA, SANTACRUZ (EAST), MUMBAI 400 098 PAN: AAACL 1069K (APPELLANT) VS. THE ACIT - LTU, CENTER NO.1, WORLD TRADE CENTRE, 28 TH FLOOR, CUFFE PARADE, MUMBAI - 05 (RESPONDENT) APPELLANT BY : MS. VASANTI PATEL RESPONDENT BY : SHRI PRAVIN VARMA DATE OF HEARING : 09/07/2012 DATE OF PRONOUNCEMENT : 18.7.2012 ORDER PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS D IRECTED AGAINST THE ORDER DATED 31/03/2010 OF CIT(A)-24, MUMBAI FOR T HE ASSESSMENT YEAR 2004-05. THE GROUNDS OF APPEAL READ AS UNDER: 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN COMPUTING DEDUCTION UNDER SECT ION 8OHHC ON THE BASIS OF THE COMPANY AS A WHOLE AS AGAINST ON THE BASIS O F EACH BUSINESS UNIT SEPARATELY. 2. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAD MAINTAINED SEPARATE BOOKS OF ACCOUNTS AND EMPLOYED SEPARATE STAFF AND THEREFORE EACH UNIT WAS SEPARATE UNDERTAK ING ELIGIBLE FOR DEDUCTION UNDER SECTION 8OHHC. 3. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT SECTION 8OHHC IS A BENEFICIAL PROVISION AND SHOULD BE CONSTRUED LIBERALLY. 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN EXCLUDING EXPORT TURNOVER AND TOTAL TURNOVER OF 100% ITA NO. 3860/MUM/2010(A.Y.2004-05) 2 PRIL EOU FROM EXPORT TURNOVER AND TOTAL TURNOVER OF THE COMPANY, WHILE COMPUTING DEDUCTION UNDER SECTION 8OHHC. 5. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN EXCLUDING 90% OF GROSS INTERES T OF RS. 1,88,72,260, INTEREST OF RS.10,22,435 RECEIVED ON STAFF LOANS AN D RS. 67,653 RECEIVED FROM CUSTOMERS ON DELAYED PAYMENT WHILE COMPUTING DEDUCT ION UNDER SECTION 8OHHC. 6. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT SINCE THE INTEREST PAID WAS IN EXCESS OF INTEREST RECEIVE D NO INTEREST WAS EXCLUDIBLE WHILE COMPUTING THE DEDUCTION UNDER SECTION 8OHHC. 7. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT FOLLOWING THE ORDER OF THE HONBLE ITAT THAT INTEREST ON ICD, INTEREST ON BANK DEPOSIT AND INTEREST RECEIVED FROM CUSTOMER ON DELAY PAYMENT WAS TO BE S ET OFF AGAINST INCOME WHEN THE ICDS WERE GIVEN IN THE EARLIER YEARS OUT O F CC A/C. 8. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN EXCLUDING OF 90% OF INSURANCE CLAIM RECEIVED OF RS.35.06 LAKHS FROM BUSINESS PROFIT WHILE CALCULATING DEDUCT ION U/S. 80HHC 9. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN REDUCING 90% OF THE BUSINESS R ECEIPTS NAMELY VAT REFUND OF RS.12,07,330 WHILE COMPUTING PROFITS OF T HE BUSINESS FOR THE PURPOSE OF CLAUSE (BAA) OF EXPLANATION TO SECTION 8 OHHC 2. THE LD. COUNSEL FOR THE ASSESSEE HAS FILED A CHA RT FOR THE ABOVE MENTIONED GROUNDS STATING THEREIN THE RELEVANT DIS CUSSIONS IN THE ORDERS PASSED BY A.O & LD. CIT(A) AND ALSO THE PARTICULARS THAT HOW THE ISSUES RAISED ARE COVERED BY CERTAIN JUDICIAL PRONOUNCEMEN TS. THE SAID CHART WAS TAKEN INTO CONSIDERATION WHILE DECIDING THIS APPEAL . 3. GROUND NO.1 TO 3 ARE STATED TO BE RAISED ON AN ISSUE ACCORDING TO WHICH A QUESTION HAS BEEN RAISED THAT WHETHER DEDUC TION UNDER SECTION 80 HHC SHOULD BE ALLOWED ON THE COMPANY AS A WHOLE A S AGAINST EACH BUSINESS UNIT SEPARATELY. THIS GROUND IS STATED T O BE COVERED ORIGINALLY BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FO R ASSESSMENT YEAR 2000- 01, WHEREIN THIS ISSUE HAS BEEN DEALT VIDE PARA 8 TO 11. IT HAS BEEN HELD BY THE TRIBUNAL THAT ASSESSEE IS ENTITLED TO ALLOWABI LITY OF DEDUCTION U/S. 80 ITA NO. 3860/MUM/2010(A.Y.2004-05) 3 HHC QUA BUSINESS AND NOT QUA ASSESSEE, WHEN ASSES SEE HAVING MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR DIFFERENT BUSINESS. 3.1 ON THE OTHER HAND, IT WAS SUBMITTED BY LD. D.R THAT WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT AND SUBMIS SION OF FORM 10CCAC NO SEPARATE UNIT WISE ALLOCATION HAS BEEN SHOWN BY THE ASSESSEE, THEREFORE, THE EARLIER DECISION OF THE TRIBUNAL WILL NOT BE APPLICABLE IN THE FACTS OF THE PRESENT CASE. LD. A.R ADMITTED THE POSITION THAT I N FORM NO.10CCAC NO SUCH ALLEGATION WAS MADE. 3.2 IN THIS VIEW OF THE SITUATION FINDING THAT NO S EPARATE UNIT WISE ACCOUNTS WERE SUBMITTED EVEN IN FORM 10CCAC, COPY O F WHICH HAS BEEN FILED BEFORE US, WE HOLD THAT THE ISSUE IS NOT COVE RED BY THE EARLIER DECISION OF THE TRIBUNAL AND SINCE UNIT WISE ALLOCATION IS NOT PLACED ON RECORD, WE DISMISS THESE GROUNDS. 4. APROPOS GROUND NO.4, THE ASSESSEE HAS AGITATED THE DECISION OF LD. CIT(A) VIDE WHICH HE HAS CONFIRMED THE ACTION OF AO IN EXCLUDING THE EXPORT TURN OVER AND TOTAL TURNOVER OF 100% PRILL EOU FRO M EXPORT TURNOVER AND TOTAL TURNOVER OF THE COMPANY FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80 HHC OF THE ACT,. WHILE HOLDING SO LD. CIT(A) HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F ESCORTS LTD. VS. UOI, 193 ITR 43 (SC). IT WAS SUBMITTED THAT THIS ISSU E IS NOW COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F HINDUSTAN UNILIVER LTD. VS. ACIT, 325 ITR 102 (BOM) AND IT WAS SUBMITT ED THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO FOR RECOMPUTING THE DEDUCTION BY KEEPING IN VIEW THE AFOREMENTIONED DECISION OF HONBLE BOM BAY HIGH COURT. 4.1 ON THE OTHER HAND, LD. D.R SUBMITTED THAT THE MATTER IF RESTORED BACK TO THE FILE OF AO, THE AO MAY BE DIRECTED TO R ECOMPUTE THE DEDUCTION BY ITA NO. 3860/MUM/2010(A.Y.2004-05) 4 TAKING INTO ACCOUNT THE LAW AS EXISTED ON THE DATE OF COMPUTING THE DEDUCTION. 4.2 WE HAVE HEARD BOTH THE PARTIES AND AFTER CAREFU L CONSIDERATION OF THE FACTS AND LAW, WE RESTORE THIS ISSUE TO THE FILE OF AO FOR RECOMPUTING THE DEDUCTION AFTER GIVING THE ASSESSEE A REASONABLE OP PORTUNITY OF HEARING AND IN ACCORDANCE WITH THE AFOREMENTIONED DECISION OF T HE HONBLE BOMBAY HIGH COURT AND ANY OTHER DECISION AVAILABLE ON THE SUBJE CT. WE DIRECT ACCORDINGLY. THIS GROUND IS ALLOWED FOR STATISTICA L PURPOSES. 5. APROPOS GROUND NO.5,6 & 7, IT WAS SUBMISSION OF LD. A.R THAT DIRECTIONS MAY BE ISSUED TO THE AO TO RECOMPUTE THE DEDUCTION UNDER SECTION 80 HHC BY REDUCING THE 90% OF THE NET AMOUN T AND NOT GROSS AMOUNT MENTIONED IN THE GROUNDS. AS PER CHART THE ISSUE RAISED IN THE GROUNDS OF APPEAL IS AS UNDER: DIRECTION TO REDUCE 90% OF THE NET AND NOT GROSS A MOUNT OF INTEREST INCOME OF (I) RS.85.74 LACS FROM BANK FD, (II) RS. 98.49 LACS FROM ICD, (III) RS.0.67 LACS FROM CUSTOMER, (IV) RS. 188.72 LACS FR OM OTHERS, (V) INTEREST OF RS. 10.22 LACS RECEIVED ON STAFF LOANS AND INTER EST PAID IN EXCESS OF INTEREST RECEIVED, NO INTEREST EXCLUDIBLE WHILE COM PUTING DEDUCTIONS UNDER SECTION80HHC. IT WAS SUBMITTED THAT AFOREMENTIONED DIRECTIONS WIL L BE IN ACCORDANCE WITH THE DIRECTION OF THE HONBLE SUPREME COURT IN THE C ASE OF ACG CAPSULES (P) LTD. VS. CIT, 343 ITR 89(SC), WHEREIN IT HAS BEEN H ELD THAT NINETY PERCENT OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY THE N ET INTEREST OR NET RENT, WHICH HAD BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION, WAS TO BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA ) TO SECTION 80 HHC FOR DETERMINING THE PROFITS OF THE BUSINESS. 5.1 IN THIS VIEW OF THE SITUATION AND AFTER HEARING BOTH THE PARTIES WE DIRECT THE AO THAT WHILE COMPUTING DEDUCTION UNDER SECTION 80 HHC WHAT IS ITA NO. 3860/MUM/2010(A.Y.2004-05) 5 REQUIRED TO BE REDUCED IS 90% OF THE NET AMOUNT. WE DIRECT ACCORDINGLY. THESE GROUNDS ARE PARTLY ALLOWED FOR STATISTICAL PU RPOSES. 6. APROPOS GROUND NO.8, IT WAS CONTENDED THAT THIS ISSUE IS NOW COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PFIZER LTD. 330 ITR 62(BOM), WHEREIN IT HAS BEEN HELD THAT INSURANCE CLAIM ON STOCK IN TRADE IS NEITHER INDEPENDENT INCOME NOR RE CEIPT OF A NATURE SIMILAR TO BROKERAGE, COMMISSION, INTEREST, RENT OR CHARGES AND INSURANCE CLAIM BEING PART OF BUSINESS INCOME IS NOT LIABLE TO BE R EDUCED TO THE EXTENT OF 90% WHILE CALCULATING ELIGIBLE PROFITS UNDER SECTION 80 HHC. IT IS ALSO THE CASE OF THE ASSESSEE THAT IN ITS OWN CASES ALSO THE TRIBUN AL HAS HELD THAT INSURANCE CLAIM RECEIVED BY THE ASSESEE BEING PART OF BUSINES S INCOME IS NOT LIABLE TO BE REDUCED TO THE EXTENT OF 90% AND REFERENCE IN T HIS REGARD WAS MADE TO THE FOLLOWING DECISIONS: - THE APPELLANT INTER- ALIA, RELIES ON HONBLE MUMB AI ITAT DECISION IN ITS OWN CASE FOR THE A.Y 2000-01 A BENCH VIDE ORD ER, DATED 23-09- 08, APPEAL NO.3314/3242/M/05(PARA 26-28, PG 12 OF I TAT ORDER) - THE APPELLANT INTER-ALIA, RELIES ON HONBLE MUMB AI ITAT DECISION IN ITS OWN CASE FOR THE A.Y 2001-02 I BENCH VIDE O RDER, DATED 15-04- 09, APPEAL NO.8627/9180/M/04 (PARA 27, PG 11 OF ITA T ORDER) - THE APPELLANT RELIES ON ITS OWN CASE IN THE CASE OF DCIT SPECIAL RANGE 6 VS. LUPIN LAB. LTD. & LUPIN LAB LTD. VS. DCIT SP. RANGE 6 (A.Y 1988- 89) ITA NO.2739/BOM/92 MUMBAI B BENCH, ORDER DATED 03/12/199 (PARA 29, PG.6) 6.1 ACCORDINGLY AFTER HEARING BOTH THE PARTIES WE H OLD THAT INSURANCE CLAIM RECEIVED BY THE ASSESSEE ON STOCK IN TRADE I S NOT LIABLE TO BE REDUCED TO THE EXTENT OF 90% RECEIVED WHILE CALCULATING THE ELIGIBLE PROFITS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80 HHC. IT MAY BE MADE CLEAR THAT IT HAS BEEN THE SUBMISSION OF ASSESSEE BEFORE LD. CI T(A) THAT INSURANCE CLAIM IS RECEIVED ON DAMAGE OF GOODS/RAW MATERIAL A ND HAS DIRECT NEXUS WITH THE BUSINESS INCOME AND THIS STATEMENT OF THE ASSESSEE HAVE NOT BEEN DENIED AS LD. CIT(A) HAS ONLY DISMISSED THIS ISSUE ON THE BASIS OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY IN DIA LTD. VS. CIT, 317 ITR ITA NO. 3860/MUM/2010(A.Y.2004-05) 6 218(SC). AS THE ISSUE CONSIDERED BY THEIR LORDSHI P OF HONBLE SUPREME COURT WAS RELATING TO DEDUCTION UNDER SECTION 80I-8 0IA & 80IB AND AS AGAINST THAT IN THE PRESENT CASE IT RELATES TO DEDU CTION UNDER SECTION 80 HHC. THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT ( THE JURISDICTIONAL HIGH COURT) IS DIRECTLY ON THE ISSUE . THEREFORE, WE ALLOW THIS GROUND OF THE ASSESSEE. 7. APROPOS GROUND NO.9, IT WAS CLAIMED THAT THIS IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING DECISIONS : A) CIT VS. PFIZER LTD. 330 ITR 62 (BOM) B) MUNJAL SHOWA LTD. VS. DCIT 94 TTJ 227 (DEL) (RE LATED TO 80 IA) C) ALFA LAVAL INDIA LTD. VS. DCIT , 266 ITR 418 (B OM) D) AMAR RAJA BATTERIES LTD. VS. ACIT 85 TTJ 20 / 91 ITD 280 (HYD) (RELATED TO 80I) A VAT REFUND OF RS. 12,07,330/- WAS RECEIVED BY T HE ASSESSEE VIDE LETTER DATED 21/12/2006. IT WAS THE SUBMISSION OF THE AS SESSEE THAT THE SAID INCOMES ARE ON REVENUE ACCOUNT AND ROUTED THROUGH P ROFIT AND LOSS ACCOUNT. THE EXPENSES ON THESE ACCOUNTS HAVE EARLIER INFLATE D THE COST OF PURCHASES / PRODUCTION COST AND, THEREFORE, THESE RECEIPTS ARE NOTHING BUT ABATEMENT OF PURCHASE / PRODUCTION COST AND IS THUS INTEGRAL PAR T OF THE MANUFACTURING OPERATIONS AND HAS TO BE ASSESSED UNDER THE HEAD P ROFITS AND GAINS OF BUSINESS. IT WAS SUBMITTED THAT VAT REFUNDS WAS TOWARDS TARIFFS PAID ON PURCHASE OF RAW MATERIALS AND INTERMEDIATES. VAT ON INPUTS RAISES THE COST OF PRODUCTION AND ON REFUND BRINGS DOWN THE P URCHASE COST. HENCE, VAT REFUND IS INTEGRAL PART OF THE MANUFACTURING O PERATIONS AND HAS TO BE TREATED AS INCOME DERIVED FROM MANUFACTURING OPERAT IONS. REFERENCE WAS MADE TO SEVERAL DECISIONS INTER-ALIA INCLUDING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ALFA LAVAL INDIA LTD. VS. DCIT (SUPRA), WHEREIN IT HAS BEEN HELD THAT WHERE SALES TAX REMI SSION HAS BEEN INCLUDED AS BUSINESS PROFITS IT IS ELIGIBLE FOR DEDUCTION UN DER SECTION 80 HHC OF THE ITA NO. 3860/MUM/2010(A.Y.2004-05) 7 ACT. HOWEVER, LD. CIT(A) HAS REJECTED SUCH SUBMISS IONS OF ASSESSEE ON THE BASIS OF DECISION OF HONBLE SUPREME COURT IN THE C ASE OF LIBERTY INDIA VS. CIT (SUPRA). 7.1 WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. IN OUR OPINION THE ISSUE IS COVERED BY THE AFOREMENTIONED DECISION OF HONB LE BOMBAY HIGH COURT IN THE CASE OF ALFA LAVAL INDIA LTD. (SUPRA) AS THE FA CTS SUBMITTED BY THE ASSESSEE HAVE NOT BEEN CONTROVERTED. THEREFORE, AFT ER HEARING BOTH THE PARTIES WE ALLOW THIS CLAIM OF THE ASSESSEE. THIS GROUND IS ALLOWED. 8. GROUND NO.10 & 11 WERE STATED TO BE GENERAL IN N ATURE AND WERE ALSO NOT ARGUED, THEREFORE, THEY ARE NOT REQUIRED TO BE ADJUDICATED SEPARATELY. 9. IN THE RESULT, FOR STATISTICAL PURPOSES THE APPE AL IS PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THE 18 TH DAY OF JULY, 2012 SD/- SD/- ( G.E.VEERABHADRAPPA ) (I.P.BANSAL) PRESIDENT JUDICIAL MEMBER MUMBAI, DATED 18 TH JULY, 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RA BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO. 3860/MUM/2010(A.Y.2004-05) 8 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 12&13/7/2012 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 13/7/2012 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER