The ACIT, Circle-2(1)., Guntur V. M/s BommidalEnterprises Pvt Ltd, Guntur

ITA 423/VIZ/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7061 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 23-10-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Assessee Lawyers: C V K PRASAD
• Section: 80HHC

Judgement Text

PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 423/VIZAG/2006 ASSESSMENT YEAR: 2003-05 ACIT, CIRCLE-2(1) VS BOMMIDALA ENTERPRISES GUNTUR (P) LTD., GUNTUR PAN NO: AAACB 9064 G ITA NO.425/VIZAG/2006 ASSESSMENT YEAR: 2003-04 ACIT, CIRCLE-2(1) VS BOMMIDALA INTERNATIONAL GUNTUR (P) LTD., GUNTUR PAN NO.AAACB 9095 P APPELLANT BY: SHRI G.S.S. GOPINATH, DR RESPONDENT BY: SHRI C.V.K. PRASAD, ADVOCATE ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED AT THE INSTANCE OF THE REV ENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE LD CIT (A ) GUNTUR AND THEY RELATE TO THE ASSESSMENT YEAR 2003-04. SINCE THE ISSUE AGITAT ED IN THESE TWO APPEALS IS IDENTICAL IN NATURE AND FURTHER SINCE BOTH THE APPE ALS WERE HEARD TOGETHER, WE FIND IT CONVENIENT TO DISPOSE THEM OFF BY THIS COMM ON ORDER. 2. THE ONLY ISSUE CONTESTED IN THESE TWO APPEALS IS WHETHER THE LD CIT (A) IS JUSTIFIED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO TREAT THE 10% OF OTHER INCOME, VIZ., INTEREST AND BILL DISCOUNTING CHARGES AND EXPORT INCENTIVES FROM THE TOTAL INDIRECT COST, WHILE CALCULATING THE DEDUCTIO N U/S 80HHC OF THE ACT. PAGE 2 OF 3 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. BOTH THE ASSESSEES ARE ENGAGED IN THE TOBACCO BUSINESS. BOTH THE ASSESSEE S CLAIMED DEDUCTION U/S 80HHC OF THE ACT ALLOWABLE FOR THE EXPORT TURNOVER. FOR CALCULATING THE DEDUCTION U/S 80HHC OF THE ACT IN RESPECT OF THE TR ADING EXPORTS, THE ASSESSEE HAS TO DEDUCT THE DIRECT AND INDIRECT COSTS RELATIN G TO THE TRADING EXPORT FROM THE RELEVANT EXPORT TURNOVER. HOWEVER, WHILE ARRI VING AT THE AMOUNT OF INDIRECT COSTS, THE ASSESSEE DEDUCTED 10% OF THE OTHER INCOM E, VIZ., EXPORT INCENTIVES AND INTEREST AND BILL DISCOUNTING CHARGES FROM THE INDIRECT COSTS AND THE AMOUNT SO REDUCED WAS TAKEN INTO ACCOUNT FOR THE PURPOSE O F COMPUTATION OF DEDUCTION ALLOWABLE U/S 80HHC OF THE ACT. THE AO DID NOT ACC EPT THE CLAIM OF THE ASSESSEE AND HELD THAT THE ASSESSEE IS NOT ENTITLED TO DO SO AND ACCORDINGLY RECOMPUTED THE DEDUCTION LIABLE U/S 80HHC. IN THE APPEAL PREFERRED BY THE ASSESSEE, LD CIT (A) ALLOWED THE CLAIM OF THE ASSE SSEE BY FOLLOWING THE DECISION OF ITAT MUMBAI SPECIAL BENCH IN THE CASE OF SURENDR A ENGINEERING CORPORATION VS. ASSTT. COMMISSIONER OF INCOME-TAX (2003) 78 TTJ (MUMBAI)(SB) 347: (2003) 86 ITD 121 (MUMBAI) (SB). AGGRIEVED BY THE ORDER OF THE LD CIT (A) THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. WE NOTICE THAT THE LD CIT (A) HAS FOLLOWED THE DECISIO N OF THE SPECIAL BENCH CITED ABOVE TO DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE . IN THE ABOVE CITED CASE, THE SPECIAL BENCH OF THE TRIBUNAL HELD THAT THE ASS ESSEE WAS JUSTIFIED IN CLAIMING THAT 10% OF THE EXPORT INCENTIVES IS TO BE TREATED AS INDIRECT COST INCURRED TO EARN THE SAME AND TO THAT EXTENT THE INDIRECT EXPEN SES SHOULD BE REDUCED FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S 80HHC(3) . IT IS A WELL SETTLED PROPOSITION THAT THE DECISION RENDERED BY THE SPECI AL BENCH IS BINDING ON THE COORDINATE BENCHES. THE LD DR DID NOT REFER ANY OT HER DECISION OF THE HIGH COURT, WHEREIN A CONTRARY DECISION HAS BEEN TAKEN. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS PASSED BY T HE LD CIT(A) AND ACCORDINGLY UPHOLD THE SAME. PAGE 3 OF 3 5. IN THE RESULT BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 09-03-2010 SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 9 TH MARCH, 2010. COPY TO 1 THE ACIT, CIRCLE-2(1), GUNTUR 2 M/S BOMMIDALA ENTERPRISES (P) LTD., MANGALAGIRI ROA D, GUNTUR . 3 M/S BOMMIDALA INTERNATIONAL (P) LTD., CHANDRAMOUL I NAGAR, GUNTUR 4 THE CIT(A), GUNTUR 5 THE CIT, GUNTUR 6 THE DR, ITAT, VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM