DCIT, Hyderabad V. M/s HBL Nife Power Systems Ltd, Hyderabad

ITA 44/HYD/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3147 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-06-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 12-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H PHANI RAJU; B SENTHIL KUMAR
• Assessee Lawyers: M V R PRASAD
• Keywords: Reassessment proceedings
• Section: 80HHC; 80IB; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI G.C.GUPTA, VICE PESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA NOS.550/HYD/2007, 44 & 45/HYD/2009 ASSTT. YEARS : 2000-2001,2001-02 AND 2002-03 DCIT, CIRCLE 2 (2), HYDERABAD VS. M/S HBL NIFE POWER SYSTEMS LTD., HYDERABAD. PAN AAACH8421K (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI B.SENTHIL KUMAR CIT-DR AND H.PHANI RAJU, DR RESPONDENT BY : SHRI M.V.R.PRASAD, ADVOCATE O R D E R PER AKBER BASHA , ACCOUNTANT MEMBER: THESE THREE APPEALS BY THE REVENUE ARE DIRECTED AGAIN ST THE SEPARATE ORDERS OF THE CIT (A) DT.28-2-2007 FOR ASSESSMEN T YEAR 2002- 03 AND A COMMON ORDER DT.3-11-2008 FOR ASSESSMENT YEARS 2 000-01 AND 2001-02 RESPECTIVELY. AS THE ISSUES INVOLVED IN AL L THESE APPEALS ARE COMMON, THEY ARE HEARD TOGETHER FOR DISPOSAL BY THIS COM MON ORDER. 2. THE ASSESSEE M/S HBL NIFE POWER SYSTEMS LIMITED IS IN TH E BUSINESS OF MANUFACTURE AND SALE OF BATTERIES AND POWER SY STEMS. FOR ASSESSMENT YEAR 2000-01 AND 2001-02, THE ASSESSEE COMPANY CL AIMED DEDUCTION U/S 80HHC AS WELL AS 80IA OF THE ACT. THE ASSESSING OFFICER NOTICED IN THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE 2 INCOME TAX ACT, 1961 (THE ACT) THAT THE ASSESSEE FAILED TO APPLY THE PROVISIONS OF SECTION. 80IA [9]/80IB [13] OF THE ACT, W HILE CLAIMING DEDUCTION UNDER SECTION 80HHC OF THE ACT AND REDUCED THE DEDUCTIONS UNDER S.80IA [9] FROM THE PROFITS FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE CIT [A]. THE CIT(A) ALLOWED THE GROUND RAISED BY THE ASSESSEE ON THE ISSUE OF IMPOSING RESTRICTION U/S 80IA(9) OF THE ACT, BY FOLLOWI NG THE JUDGEMENT OF THE MADRAS HIGH COURT IN THE CASE OF SCM CREATIONS V . ACIT. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE I S IN APPEAL BEFORE US. 3. WE WILL NOW TAKE UP THE APPEALS OF THE REVENUE I N ITA NOS. 44 AND 45/HYD/2009 FOR ASSESSMENT YEARS 2000-01 AND 2001-02. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT TH E ISSUE IS SQUARELY COVERED IN FAVOUR OF THE DEPARTMENT AND AGAI NST THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. HINDUSTAN MINT AGRO PRODUCTS AND OTHERS REPORTED IN 315 ITR 411 (AT) (DEL), WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ASSESSEE HAD NOT CLAIMED ANY DOUBLE DEDUCTION ON THE SAME PROFIT OF A PARTICULAR UNIT UNDER THE PROVISIONS OF THE ACT. HE DEMONSTRATED THIS FACT FROM THE PAPER BOOK THAT WHEREVER DEDUCTION U/S 80IA WAS CLAIMED, NO DEDUCTION U/S 80HHC WAS CLAIMED IN THE SAME UN IT. HENCE, THE RESTRICTION IMPOSED UNDER SEC.80IA (9) IS NOT ATTRACTE D IN THIS CASE UNDER CONSIDERATION. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE AGREE THAT THE ISS UE WHETHER THE AMOUNT OF DEDUCTION UNDER S.80IA OF THE ACT IS TO BE REDUCED FROM THE ELIGIBLE PROFITS OF THE BUSINESS FOR PURPOSES OF COMPUTING THE DEDUCTION UNDER S. 80HHC OF THE ACT IS SETTLED IN FAVOUR OF THE D EPARTMENT BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. 3 HINDUSTAN MINT AGRO PRODUCTS REPORTED IN 315 ITR 411 (A T) (DEL). HOWEVER, WE FIND MERIT IN THE ARGUMENTS OF THE LEARNE D COUNSEL FOR THE ASSESSEE, AS DEMONSTRATED FROM THE PAPER BOOK FILED BY HI M BEFORE US IN THE CASE UNDER CONSIDERATION, THAT WHEREVER DEDUCTION UNDER S.80IA WAS CLAIMED, NO DEDUCTION UNDER S. 80HHC WAS CLAIMED. LIK EWISE, IN THOSE UNITS WHEREVER DEDUCTION UNDER S.80HHC WAS CLAIMED, NO DEDUCTION UNDER S. 80IA WAS CLAIMED. IN OTHER WORDS, THERE WAS NO OVERLAPPING OF DEDUCTIONS ON THE SAME PROFITS UNDER THE SAID TWO SECTIONS IN A PARTICULAR UNIT. EVEN IN THE SPECIAL BEN CH CASE CITED SUPRA, THE SPECIAL BENCH CLARIFIED THAT IF THE PROFITS ARE D ERIVED FROM SEPARATE UNDERTAKINGS, THE RESTRICTION CONTAINED IN S.80IA(9) WO ULD NOT BE APPLICABLE. IN OTHER WORDS, RESTRICTION OF S.80IA (9) APPLIES ONLY IF THERE ARE EXPORTS FROM THE INDUSTRIAL UNDERTAKING WHICH QUAL IFIES FOR BOTH THE DEDUCTIONS. BY IMPLICATION, IF THE ASSESSEE HAS NOT CLAIMED DEDUCTION UNDER S.80HHC ON THE EXPORTS OF THE INDUSTRIAL UNDERTAK ING, AND THE ASSESSEE CLAIMS ONLY DEDUCTION UNDER S.80IA ON THE SAME UNI T, THEN THE RESTRICTION IMPOSED UNDER SEC.80IA [9] WOULD NOT BE APPL ICABLE. 5. IN THE RESULT, IN VIEW OF THE ABOVE FINDINGS AND AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT RESTRICTION IMPOSED UNDER S.80IA [9] OF THE ACT IS NOT A TTRACTED FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE ARE DISMISSED. 6. WITH REGARD TO THE ISSUE RELATING TO CALCULATION O F BOOK PROFIT UNDER SECTION 115JA OF THE ACT, THE DEDUCTION UNDER SECTI ONS 80IB AND 80HHC SHOULD BE WORKED OUT WITH REFERENCE TO THE BOOK P ROFITS AND NOT WITH REFERENCE TO THE PROFITS COMPUTED UNDER THE NORMA L PROVISIONS OF THE ACT. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE DEPARTMENT BY THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AJANTA PHARMA LIMITED REPORTED IN 318 ITR 252 ( BOM.). RESPECTFULLY 4 FOLLOWING THE SAME, WE ALLOW THE GROUNDS RAISED BY THE DEPARTMENT ON THIS ISSUE. 7. NOW, WE WILL TAKE UP THE REVENUES APPEAL FOR ASSE SSMENT YEAR 2002-03. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E M/S HBL NIFE POWER SYSTEMS LIMITED IS IN THE BUSINESS OF MANUFACTURE AN D SALE OF BATTERIES AND POWER SYSTEMS. FOR ASSESSMENT YEAR UNDER CONSI DERATION, THE ASSESSEE COMPANY CLAIMED DEDUCTION UNDER S. 80HHC OF THE ACT, AFTER INCLUDING MISCELLANEOUS INCOME FROM THE PROFITS EL IGIBLE FOR DEDUCTION UNDER S.80HHC OF THE ACT. HOWEVER, THE ASSESSIN G OFFICER WHILE ALLOWING DEDUCTION UNDER S.80HHC EXCLUDED THE MISCE LLANEOUS INCOME FROM THE PROFIT. ON APPEAL, THE CIT (A) DIRE CTED THE ASSESSING OFFICER THAT FOR PURPOSES OF COMPUTING DEDUCTION UNDER S .80HHC OF THE ACT, MISCELLANEOUS INCOME SHOULD BE INCLUDED TO THE ELIGIB LE PROFIT AND GAVE A DIRECTION ACCORDINGLY TO THE ASSESSING OFFICER. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF ACIT V. RAVINDRANATHAN NAIR REPORTED IN 295 ITR 228 (SC) IN SUPPORT OF ITS GROUNDS RAISED IN THE APPEAL, WHEREA S THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CASE MAY BE DECI DED ON MERIT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. THE ONLY ISSUE ARISING OUT OF THIS APPEAL IS WHETHER MISCELLANEOUS INCOME IS TO BE EXCLUDED FROM PROFITS ELI GIBLE FOR DEDUCTION UNDER S. 80HHC OF THE ACT OR NOT. WE FIND TH AT THIS ISSUE IS SQUARELY COVERED IN FAVOR OF THE DEPARTMENT AND AGAIN ST THE ASSESSEE BY THE DECISION OF THE APEX COURT IN THE CASE OF CIT V. R AVINDRANATHAN NAIR (SUPRA) EXCEPT THAT THE INCOME ARISING FROM FOREIGN EXCH ANGE VARIATION OF VARIOUS EXPORT BILLS. ADMITTEDLY, SINCE THE ASSESSING OFFICER CONSIDERED THE INCOME ON ACCOUNT OF FOREIGN EXCHANGE VARIATION AS DERIVED FROM EXPORT TURNOVER, THERE IS NO REASON WHY THE SAME SHOUL D NOT BE TREATED 5 AS PART OF BUSINESS PROFITS FOR PURPOSES OF COMPUTING DEDUCT ION UNDER S. 80HHC OF THE ACT. HENCE, WE HOLD, THE CIT (A) WAS RIGHT IN HOLDING THAT THE INCOME ON ACCOUNT OF FOREIGN EXCHANGE VARIATION WOU LD ALSO QUALIFY FOR DEDUCTION UNDER S.80HHC OF THE ACT. AS REGARDS THE OTHER MISCELLANEOUS INCOME OTHER THAN GAIN ON FOREIGN EXCHANGE VARIATION, THE BALANCE AMOUNT IS TO BE EXCLUDED FROM THE PROFITS OF TH E BUSINESS AS PER CLAUSE (BAA) TO S.80HHC OF THE ACT. WE DIRECT ACCORDINGLY. 9. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON: 30.6. 2010. SD/- SD/- G.C.GUPTA AKBER BASHA VICE PRESIDENT ACCOUNTANT MEMBER. DT/- 30-6-2010. *VNR COPY FORWARDED TO: 1. M/S HBL NIFE POWER SYSTEMS LTD., 8-2-601, ROAD NO.10 , BANJARA HILLS, HYDERABAD. 2 DCIT, CIRCLE 2(2), HYDERABAD 3. 4 CIT(A) III, HYDERABAD CIT, AP., HYDERABAD. 4. THE D.R., ITAT, HYDERABAD.