Sri B Kotaiah, Tanguturu, Ongole V. The DCIT, Special Range, Guntur

ITA 455/VIZ/1998

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0643 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-05-2010
• Assessment Year: 1996-1997
• Appeal Filed On: 30-08-1998
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Assessee Lawyers: U L N SUDHAKAR
• Keywords: Business income; Rectification of order
• Section: 80HHC; 154

Judgement Text

ITA NO.455/VIZAG/1998 BELLAM KOTAIAH, TAGUTUR PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 455/VIZAG/1998 ASSESSMENT YEAR: 1996-97 BELLAM KOTAIAH, TAGUTUR DCIT, SR- GUNTUR (APPELLANT) GIR NO: K-716/96-97 VS. (RESPONDENT) APPELLANT BY: SHRI U.L.N. SUDHAKAR, ADVOCATE RESPONDENT BY: SHRI G.S.S. GOPINATH, (DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE AGAINST THE ORDER DATED 26.6.1998 PASSED BY LD CIT (A)-I, HYDERABAD AND IT RELATES TO THE ASSESSMENT YEAR 1996-97. 2. THE MAIN ISSUE URGED IN THIS APPEAL IS WHETH ER THE ASSESSEE IS ENTITLED TO DEDUCTION OF ENTIRE EXPORT PROFIT U/S 80HHC OF T HE ACT. 3. THE ASSESSEE IS A SUPPORTING MANUFACTURER AN D DERIVED A PROFIT OF RS.9,09,210/- FROM SUPPLY OF TOBACCO TO M/S ITC LTD FOR THE PURPOSES OF EXPORT. IT IS ON RECORD THAT HE DID NOT CARRY ON T HE BUSINESS OF TOBACCO IN DOMESTIC MARKETS. BESIDES THE ABOVE, THE ASSESSEE ALSO DEALS IN SHARES AND DEBENTURES AND HAS DECLARED INCOME THERE FROM A S BUSINESS INCOME. IT IS ON RECORD THAT THE ASSESSEE HAS MAINTAINED SEPAR ATE BOOKS OF ACCOUNT FOR ITA NO.455/VIZAG/1998 BELLAM KOTAIAH, TAGUTUR PAGE 2 OF 4 BOTH THE BUSINESSES. THE ASSESSEE CLAIMED DEDUCTIO N OF ENTIRE PROFIT DERIVED ON SUPPLY OF TOBACCO AS SUPPORTING MANUFACT URER. ORIGINALLY IT WAS ALLOWED BY THE AO IN THE ASSESSMENT PASSED U/S 143( 3) OF THE ACT. HOWEVER, BY PASSING A RECTIFICATION ORDER U/S 154 O F THE ACT, THE AO CLUBBED THE PROFIT AND TURNOVER OF BOTH TOBACCO BUSINESS AN D SECURITIES BUSINESS AND COMPUTED THE DEDUCTION U/S 80HHC PROPORTIONATELY AT RS.1,38,982/-. THE ASSESSEE COULD NOT SUCCEED IN THE APPEAL FILED BEFO RE LD CIT(A). HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND ALSO CAREFULLY PERUSED THE RECORD. THE MAIN ISSUE IN THIS APPEAL OF THE ASSESSEE IS WHETHE R THE TURNOVER PERTAINING TO THE SECURITIES (SHARES & DEBENTURES),, BEING DOM ESTIC TURNOVER, IS INCLUDIBLE IN THE TOTAL TURNOVER OR NOT FOR THE P URPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC. AN IDENTICAL ISSUE WAS CONSID ERED BY THIS BENCH IN THE CASE OF B.CHITTI BABU IN ITA NO.253/VIZAG/2006 AND ITA NO.112 & 113/VIZAG/2007. IN THAT CASE, THIS BENCH BY ITS OR DER DATED 18-09-2009 HAS HELD AS UNDER:- IF WE READ BOTH THE JUDGMENTS OF THE HONBLE MADRA S HIGH COURT AS WELL AS KERALA HIGH COURT, WE WILL FIND TH AT ONE COMMON VIEW HAS BEEN TAKEN BY BOTH THE HIGH COURTS THAT AT LEAST THE LOCAL SALES OF THE SAME ITEM WHICH WAS EX PORTED BY THE ASSESSEES SHOULD BE TAKEN INTO ACCOUNT AS PART OF THE TOTAL TURNOVER. THE DIFFERENCE IN BOTH THE JUDGMENTS IS W ITH REGARD TO THE TURNOVER OF LOCAL SALES OF THOSE ITEMS WHICH AR E NOT AT ALL RELATED TO THE EXPORTED ITEMS. BUT IN THE INSTANT C ASE, THE ASSESSEE HAS NOT TAKEN INTO ACCOUNT THE LOCAL SALE OF THE GRANITES AS A PART OF THE LOCAL TURNOVER DESPITE A FACT THAT ASSESSEE IS INVOLVED IN EXPORTING OF THE GRANITES. IN THE LIGHT OF THE AFORESAID JUDGMENTS REFERRED TO BY THE PARTIES WE ARE OF THE VIEW THAT CIT (A) HAS PROPERLY ADJUDICATED THE ISSUES AND CONFIRM THE ORDER OF THE AO BECAUSE THE ASSESSEE WA S ENGAGED IN EXPORT AS WELL AS LOCAL SALES OF THE GRA NITE ITEMS. AT THE MOST THE TRANSPORT CHARGES AND STOCK YARD CH ARGES CAN ITA NO.455/VIZAG/1998 BELLAM KOTAIAH, TAGUTUR PAGE 3 OF 4 BE EXCLUDED FROM THE TOTAL TURNOVER. BUT BEFORE DOI NG SO IT IS TO BE ESTABLISHED WHETHER THE TRANSPORT CHARGES AND TH E STOCK YARD CHARGES HAVE ANY LINK OR RELATION WITH THE EXP ORT ACTIVITIES OF THE ASSESSEES. IF IT IS FOUND TO BE INTERCONNECT ED WITH THE EXPORT ACTIVITIES, THESE CAN BE TAKEN AS A PART OF TOTAL TURNOVER. OTHERWISE, IT CAN BE EXCLUDED IN THE LIGHT OF THE J UDGMENT OF THE MADRAS HIGH COURT. SINCE THE COMPLETE FACTS ARE NOT AVAILABLE BEFORE US, WE SET ASIDE THE ORDER OF THE CIT (A) IN THIS REGARD AND RESTORE IT TO THE FILE OF THE AO TO RE-ADJUDICATE THE ISSUES AND RECOMPUTED THE TOTAL TURNOVER IN ORD ER TO COMPUTE DEDUCTION U/S 80HHC OF THE I.T.ACT THE DECISIONS OF HONBLE MADRAS HIGH COURT REFERRED ABOVE ARE CIT V MADRAS MOTORS LTD. 257 ITR 60 AND CIT V ASHOK LEYLA ND LTD. 297 ITR 107. THE DECISIONS OF HONBLE KERALA HIGH COURT ARE INDI AN SPICE COMPANY VS CIT 267 ITR 445 AND CIT V JOSH THOMAS 253 ITR 553. 5. IN THE INSTANT CASE, THERE IS NO DISPUTE WI TH REGARD TO THE FACT THAT THE PRODUCT EXPORTED AS A SUPPORTING MANUFACTURER AND T HE PRODUCTS DEALT WITH IN THE LOCAL MARKET ARE ENTIRELY DIFFERENT PRODUCTS . HENCE THE DECISION OF HONBLE MADRAS IN THE CASE OF MADRAS MOTORS LTD (25 7 ITR 60) IS APPLICABLE TO THE FACTS OF THE CASE. IN THE CASE O F M/S LAVANYA ENTERPRISES IN ITA NO. 505/VIZAG/2004, THIS BENCH, VIDE ITS ORD ER DATED 07-12-2009, HAS FOLLOWED THE DECISION OF HONBLE MADRAS HIGH COURT AND HAS HELD THAT THE DEDUCTION U/S 80HHC HAS TO BE CALCULATED BY NOT CLU BBING THE EXPORT AND DOMESTIC TURNOVER IN THE CASE OF UNRELATED PRODUCTS . SINCE A PARTICULAR VIEW HAS ALREADY BEEN TAKEN BY THIS BENCH, WE DO NO T WISH TO TAKE A CONTRARY VIEW IN THIS CASE. HENCE CONSISTENT WITH THE VIEW TAKEN IN THE CASES CITED ABOVE, WE HOLD THAT THE ASSESSEE IS ENT ITLED TO CLAIM DEDUCTION U/S 80HHC ON THE TOBACCO BUSINESS WITHOUT CLUBBING THE PROFIT AND TURNOVER OF THE SECURITIES BUSINESS. ACCORDINGLY WE REVERSE THE ORDER OF LD CIT(A) AND DIRECT THE AO TO ALLOW THE DEDUCTION U/S 80HHC AS STATED ABOVE. ITA NO.455/VIZAG/1998 BELLAM KOTAIAH, TAGUTUR PAGE 4 OF 4 6. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GRO UND QUESTIONING THE VALIDITY OF INVOKING SECTION 154 FOR RECTIFYING THE ORDER PASSED U/S 143(3). SINCE WE HAVE ALREADY DECIDED THE ISSUE ON MERITS I N FAVOUR OF THE ASSESSEE, WE DO NOT FIND IT NECESSARY TO EXAMINE TH E ADMISSIBILITY OF THE ADDITIONAL GROUND. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. PRONOUNCED IN THE OPEN COURT ON 29.6.2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 29 TH JUNE, 2010 COPY TO 1 SHRI BELLAM KOTAIAH C/O SHRI KURAPATI SUBBA RAO, CHARTERED ACCOUNTANT, 11-1-4(1) JAMEDAR STREET, ONGOLE 523 00 2 2 THE DCIT (ASSTS), SPECIAL RANGE, GUNTUR 3 4. THE CIT (A)-I, HYDERABAD THE CIT(A.P), HYDERABAD 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM