Cello Pens & Stationery Pvt. Ltd., Daman V. The ACIT., Vapi Circle, Vapi

ITA 39/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1901 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-11-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 03-01-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation
• Section: 143(3); 80HHC; 115JB; 80IB; 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI (DR.)O.K. NARAYANAN, VICE-PRESIDENT AND MAHAVIR SINGH, JUDICIAL MEMBER) ITA NO.39/AHD/2007 [ASSTT.YEAR : 2003-2004] CELLO PENS & STATIONERY PVT. LTD. PLOT NO.D-16, RINGANWADA GIDC, DAMAN. VS. ACIT, VAPI CIRCLE VAPI. ASSESSEE BY : SHRI M.K.PATEL REVENUE BY : SHRI GOVIND SINGHAL DATE OF ORDER RESERVED : 30-11-2009 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT : THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2 003-2004. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (APPEALS) AT VALSAD DATED 21.09.2006 AND ARISES OUT OF THE ASSES SMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE FIRST GROUND RAISED BY THE ASSESSEE IS AGAIN ST THE IMPOST OF DEPRECIATION IN COMPUTING THE DEDUCTION UNDER SECTI ON 80IB. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE MANUFAC TURE OF BALL PENS, FOUNTAIN PENS, ROLLER PENS, NIBS, REFILLS AND OTHER SIMILAR WRITING MATERIALS AND STATIONERY ITEMS. THE MANUFACTURING UNIT OF THE AS SESSEE COMPANY IS LOCATED IN THE UNION TERRITORY OF DAMAN WHICH IS DECLARED AS A BACKWARD-AREA FOR THE PURPOSE OF INCOME TAX ACT AND AS SUCH THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. THE ASSESSEE COMPANY BEING AN EXPORTER IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80HHC AS WELL. PAGE - 2 ITA NO.39/AHD/2007 -2- 4. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO HELD THAT THE ASSESSEE HAS CLAIMED DEDUCTIONS BOTH UNDER SECTION 80HHC AND SECTION 80IB, WHICH COULD NOT BE ALLOWED IN THE LIGHT OF THE PROV ISIONS OF LAW CONTAINED IN SECTION 80IA(9). WHEN THIS MATTER WAS BROUGHT TO N OTICE OF THE ASSESSEE COMPANY, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAS CLAIMED DEDUCTION ONLY UNDER SECTION 80HHC. THE ASSESSEE EX PLAINED THAT PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC ARE ELIG IBLE FOR DEDUCTION TO DETERMINE THE BOOK PROFITS FOR THE PURPOSE OF SECTI ON 115JB. BUT FOR THAT, THE ASSESSEE EXPLAINED THAT NO DEDUCTION HAS BEEN CLAIM ED UNDER SECTION 80IB FOR DETERMINING THE PROFITS FOR THE PURPOSE OF SECTION 115JB. 5. THE EXPLANATIONS OFFERED BY THE ASSESSEE WERE NO T ACCEPTABLE TO THE AO AND HE COMPLETED THE ASSESSMENT AS ORIGINALLY PROPO SED BY HIM. THE AO WORKED OUT THE TOTAL INCOME OF THE ASSESSEE AT THE FIRST INSTANCE, AND THEREFROM DEDUCTED THE PROFIT UNDER SECTION 80IB. HE FURTHER MADE A DEDUCTION UNDER SECTION 80HHC. BUT WHILE COMPUTING THE DEDUCTION U NDER SECTION 80HHC, THE AO HAS REDUCED THE PROFIT UNDER SECTION 80IB FR OM THE BOOK PROFITS OF THE ASSESSEE-COMPANY, PRESUMABLY UNDER THE INFLUENCE OF SECTION 80IA(9). THIS POSITION WAS CONFIRMED IN FIRST APPEAL. THE ASSESS EE IS AGGRIEVED AND THEREFORE HAS RAISED THIS ISSUE OF DILUTING THE BOOK PROFITS UNDER SECTION 115JB BY THE AMOUNT ELIGIBLE UNDER SECTION 80IB. THIS ISSUE IS RAISED BY THE ASSESSEE AS GROUND NO.2 IN ITS APPEAL. 6. THE ASSESSEE HAS ALSO RAISED AN ALTERNATIVE GROU ND THAT SECTION 80HHC AND SECTION 80IB ARE INDEPENDENT PROVISIONS AND THE REFORE DEDUCTION OF EITHER OF THEM CANNOT BE EXCLUDED. 7. WE HAVE HEARD SHRI M.K.PATEL, LEARNED COUNSEL FO R THE ASSESSEE AND SHRI GOVIND SINGHAL, THE LEARNED ADDL. COMMISSIONER APPE ARING FOR THE REVENUE. PAGE - 3 ITA NO.39/AHD/2007 -3- 8. AT THE OUTSET ITSELF, THE LEARNED COUNSEL FOR TH E ASSESSEE HAS FAIRLY CONCEDED THAT THE FIRST GROUND REGARDING THE IMPOST OF DEPRECIATION FOR THE PURPOSE OF COMPUTING PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB HAS TO BE DECIDED AGAINST THE ASSESSEE. FULL BENCH OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PLASTIBLENDS INDIA LTD. VS. AC IT, 318 ITR 352 (BOM)(FB) HAS HELD THAT PROFITS CANNOT BE ENHANCED BY THE DEV ICE OF DISCLAIMING THE CURRENT DEPRECIATION IN COMPUTING THE BENEFITS AVAI LABLE TO THE ASSESSEE UNDER SECTION 80IA. AS THE ISSUE IS SQUARELY COVERED BY THE ABOVE JUDGMENT OF HONBLE BOMBAY HIGH COURT, WE HOLD THAT THE FIRST G ROUND RAISED BY THE ASSESSEE-COMPANY IS LIABLE TO BE DISMISSED. 9. REGARDING THE SECOND GROUND RELATING TO THE DEDU CTION UNDER SECTION 80HHC VIS--VIS SECTION 80IB, IN THE CONTEXT OF SEC TION 115JB, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE HAS RELIED ON TH E DECISION OF ITAT, MUMBAI SPECIAL BENCH IN THE CASE OF DCIT VS. SYNCOME FORMU LATIONS (I) LTD., 106 ITD 193 (MUM) (SB). THE LEARNED COUNSEL HAS ALSO R ELIED ON THE PROVISIONS OF THE STATUTE ITSELF TO BRING HOME THE POINT THAT THA T THE BOOK PROFIT AS COMPUTED BY THE ASSESSEE IN ACCORDANCE WITH THE SCHEDULE-VI TO THE COMPANIES ACT COULD BE ADJUSTED ONLY TO THE EXTENT PROVIDED IN TH E EXPLANATION GIVEN UNDER SECTION 115JB. HE HAS POINTED OUT THAT ITEM-IV PRO VIDED IN THE SECOND PART OF THE EXPLANATION DIRECTS TO REDUCE THE BOOK PROFITS BY THE AMOUNT O F PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC. THE ST ATUTE DOES NOT PROVIDE FOR ANY ADJUSTMENT IN RESPECT OF THE AMOUNT OF PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. HE THEREFORE SUBMITTED THAT BOOK PRO FITS FOR THE PURPOSE OF ASSESSMENT IN THE PRESENT CASE HAS TO BE REDUCED ON LY BY THE ELIGIBLE AMOUNT OF SECTION 80HHC AND THE SAID AMOUNT ELIGIBLE UNDER SE CTION 80HHC SHOULD NOT FURTHER BE REDUCED BY THE DEDUCTION THAT MIGHT BE A VAILABLE TO THE ASSESSEE UNDER SECTION 80IB. PAGE - 4 ITA NO.39/AHD/2007 -4- 10. THE LEARNED ADDL.COMMISSIONER, ON THE OTHER HAN D, SUBMITTED THAT THE ASSESSEE CANNOT BE GIVEN TWIN ADVANTAGES OF DEDUCTI ON BOTH UNDER SECTION 80HHC AND SECTION 80IB IN VIEW OF THE RESTRICTION I MPOSED BY SECTION 80IA(9). THE LEARNED ADDL. COMMISSIONER FURTHER EX PLAINED THAT THE FINE LAW DEPICTED IN SECTION 115J AND SECTION 115JB ARE DIFF ERENT AND THE PROVISIONS CONTAINED IN SECTION 115JB MAKE IT CLEAR THAT AN AS SESSEE IS NOT ENTITLED FOR CLAIMING SIMULTANEOUS DEDUCTIONS, EVEN IN AN ASSESS MENT UNDER THE MAT SCHEME. 11. WE HEARD BOTH SIDES IN DETAIL. SECTION 80HHC P ROVIDES FOR DEDUCTION TO AN ASSESSEE IN RESPECT OF HIS EXPORT BUSINESS. SEC TION 80IB PROVIDES DEDUCTION TO AN ASSESSEE IN RESPECT OF ITS PROFIT DERIVED FRO M AN INDUSTRIAL UNDERTAKING SITUATED IN A NOTIFIED BACKWARD AREA. 12. WHILE AN ASSESSEE IS CLAIMING DEDUCTION UNDER B OTH THE ABOVE PROVISIONS, THE QUESTION THAT AROSE FOR CONSIDERATI ON WAS WHETHER SIMULTANEOUS DEDUCTION COULD BE ALLOWED UNDER BOTH THE ABOVE PRO VISIONS WITHOUT ONE DILUTING THE EXTENT OF THE OTHER. THE ITAT, CHENN AI SPECIAL BENCH IN THE CASE OF ACIT VS. ROGINI GARMENTS, 294 (AT) ITR 15 (CHENN AI)(SB) HELD THAT SUCH LIBERAL DEDUCTION IS NOT AVAILABLE. THE DEDUCTION UNDER SECTION 80IA HAS TO BE MADE PRIOR TO THE GRANTING OF RELIEF UNDER SECTION 80HHC. THEREAFTER AN ECLIPSE PREVAILED ON THE SUBJECT MATTER IN VIEW OF THE SUBSEQUENT JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SCM CR EATIONS VS. ACIT, 304 ITR 319 (MAD). BUT THE ECLIPSE HAS NOW BEEN CLEARE D BY THE DECISION OF LARGER BENCH OF ITAT, DELHI RENDERED IN THE CASE OF ACIT V S. HINDUSTAN MINT AND AGRO PRODUCTS, 315 (AT) ITR 401 (DEL)(SB) IN WHICH THE FIVE MEMBERS BENCH HAS DISTINGUISHED THE JUDGMENT OF HONBLE MADRAS HI GH COURT IN THE CASE OF SCM CREATIONS (SUPRA) FROM THE SPECIAL BENCH DECISI ON OF ITAT, CHENNAI IN ROGINI GARMENTS CASE AND AGREED WITH THE DECISION O F ITAT, CHENNAI SPECIAL BENCH. THEREFORE, THE POSITION OF LAW AS OF NOW IS THAT AN ASSESSEE CANNOT PAGE - 5 ITA NO.39/AHD/2007 -5- CLAIM MUTUALLY EXCLUSIVE DEDUCTIONS WITH REFERENCE TO THE BENEFITS AVAILABLE UNDER SECTION 80IA AND 80HHC. THIS POSITION IS EQU ALLY APPLICABLE TO A SITUATION ARISING OUT OF SECTION 80IB AS WELL ON TH E GROUND OF ANALOGY. 13. THE ISSUE NOW RAISED IN THE PRESENT CASE HAS TO BE EXAMINED IN THE LIGHT OF THE ABOVE LEGAL POSITION. 14. WE HAVE ALSO TO MAKE A REFERENCE TO THE RELIANC E MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE DECISION OF ITAT, M UMBAI SPECIAL BENCH DECISION IN THE CASE OF SYNCOME FORMULATIONS (I) LT D. (SUPRA). IN THE SAID CASE, THE EXACT QUESTION WAS, WHAT IS THE PROFIT TO BE CONSIDERED FOR COMPUTING THE DEDUCTION UNDER SECTION 80HHC; WHETHER THE DEDU CTION HAS TO BE MADE WITH REFERENCE TO THE PROFITS COMPUTED UNDER THE NO RMAL PROVISIONS OF LAW OR WITH REFERENCE TO THE BOOK PROFITS ARRIVED AT UNDER SECTION 115JA. THE SPECIAL BENCH HELD THAT ONCE THE BOOK PROFIT IS ADOPTED FOR THE PURPOSE OF ASSESSMENT, THE DEDUCTION UNDER SECTION 80HHC ALSO HAS TO BE AL LOWED WITH REFERENCE TO THE SAID BOOK PROFIT. THEREFORE, THE SAID DECISI ON RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE DOES NOT DIRECTLY COVER TH E ISSUE RAISED IN THE PRESENT APPEAL BEFORE US. 15. BUT THE ABOVE DECISION OF MUMBAI SPECIAL BENCH IN THE CASE OF SYNCOME FORMULATIONS (I) LTD. HAS RELEVANCE IN CONS IDERING ONE OF THE ARGUMENTS MADE BY THE REVENUE THAT THE TEXTURE OF L AW CONTAINED IN SECTION 115JB IS DIFFERENT FROM THE TEXTURE OF LAW CONTAINE D IN EARLIER SECTIONS 115J AND 115JA. THE SPECIAL BENCH HAS HELD THAT THE REASONI NG GIVEN FOR SECTION 115J CONTINUOUS TO BE GOOD EVEN IN THE CASE OF SECTION 1 15JA/115JB. THEREFORE, THE ARGUMENT ADVANCED BY THE REVENUE ON THE ABOVE LINE DOES NOT HOLD IN THIS CONTEXT. 16. NOW LET US EXAMINE THE EXACT ISSUE RAISED IN TH E PRESENT CASE WHETHER THE QUANTUM OF BOOK PROFIT COULD BE REDUCED BY THE AMOUNT OF PROFITS ELIGIBLE PAGE - 6 ITA NO.39/AHD/2007 -6- FOR DEDUCTION UNDER SECTION 80IB WHILE COMPUTING TH E DEDUCTION UNDER SECTION 80HHC. AN EXPLANATION REGARDING ADJUSTMENTS PERMIS SIBLE IN LAW PROVIDED UNDER SECTION 115JB TAKES CARE OF SECTION 80HHC ALO NE. IT DOES NOT TOUCH UPON THE BENEFITS AVAILABLE TO AN ASSESSEE UNDER SE CTION 80IB. THEREFORE, ONCE THE BOOK PROFIT IS ARRIVED AT BY THE ASSESSING AUTH ORITY, THE ONLY RELEVANT ADJUSTMENT PERMITTED IS THE DEDUCTION OF BENEFITS A VAILABLE UNDER SECTION 80HHC. IT SHOWS THAT THE BENEFIT AVAILABLE TO AN A SSESSEE UNDER SECTION 80IB HAS NO ROLE TO PLAY IN COMPUTING THE QUANTUM OF DED UCTION AVAILABLE TO AN ASSESSEE UNDER SECTION 80HHC IN THE CONTEXT OF A MA T ASSESSMENT. IN THE PRESENT CASE, IT HAS TO BE AGAIN MADE CLEAR FOR THE PURPOSE OF CLARITY THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION UNDER SECTIO N 80IB. THE ASSESSEE HAS CLAIMED DEDUCTION ONLY UNDER SECTION 80HHC. THE AO HAS DILUTED THE QUANTUM OF DEDUCTION AVAILABLE UNDER SECTION 80HHC BY REDUCING IT WITH THE BENEFITS AVAILABLE UNDER SECTION 80IB. HE HAS INDI RECTLY REDUCED THAT MUCH AMOUNT FROM THE BOOK PROFITS AVAILABLE FOR COMPUTIN G THE DEDUCTION UNDER SECTION 80HHC, RESULTING IN DILUTING THE QUANTUM OF BENEFIT AVAILABLE UNDER SECTION 80HHC. 17. AS THE LAW DOES NOT PERMIT ANY SORT OF ADJUSTME NT WITH REFERENCE TO SECTION 80IB IN THE CONTEXT OF ASSESSMENT UNDER SEC TION 115JB, THE AO HAS ERRED IN DEDUCTING SECTION 80IB BENEFITS FROM THE T RADING PROFIT OF THE ASSESSEE WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC. THEREFORE, THE DEDUCTION MADE BY THE AO TOWARDS 80IB UNDER THE LAS T PORTION OF THE ASSESSMENT ORDER IS DELETED. THE AO IS DIRECTED TO RE-COMPUTE THE BENEFITS AVAILABLE TO THE ASSESSEE UNDER SECTION 80HHC IN LI GHT OF THE BOOK PROFITS COMPUTED UNDER SECTION 115JB WITHOUT MAKING ANY DED UCTION UNDER SECTION 80IB. 18. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. PAGE - 7 ITA NO.39/AHD/2007 -7- 19. AS THE PRINCIPAL GROUND REGARDING THE DEDUCTION UNDER SECTION 80HHC HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE, THE THIRD GROUND RAISED AS AN ALTERNATE GROUND IS REJECTED AS OTIOSE. 20. IN RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY THIS FOURTH DAY OF DECEM BER, 2009. SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (DR.O.K. NARAYANAN) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 04-12-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD