BRAHMA DRUGS P. LTD, MUMBAI V. ITO 10(3)(1), MUMBAI

ITA 4865/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1180 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-04-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 29-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C TIWARI; MEGHANA BUTALA
• Keywords: Retrospective amendment; Corroborative evidences; Set aside
• Section: 80HHC; 28; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B : MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND A.L. GE HLOT, A.M. ITA. NO. 4865/MUM/2008 ASSESSMENT YEAR 2002-2003 BRAHMA DRUGS PVT. LTD. MUMBAI 76 PAN AAACB-5795-L VS. ITO 10 (3) (1) MUMBAI. (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI S.C. TIWARI & MS. MEGHANA B UTALA FOR RESPONDENT : SHRI AARSI PRASAD (DR) ORDER PER D. MANMOHAN, V.P. 1. THIS APPEAL IS FILED AT THE INSTANCE OF THE ASS ESSEE AND IT PERTAINS TO THE ASSESSMENT YEAR 2002-2003. ELIGIBIL ITY TO CLAIM DEDUCTION UNDER SECTION 80HHC OF THE ACT, IS THE SUBJECT MATT ER OF DISPUTE BEFORE US. 2. ASSESSEE IS A MANUFACTURER OF PHARMACEUTICAL PR ODUCTS AND ALSO CARRYING ON TRADING ACTIVITY. IT IS A 100% EXP ORT ORIENTED UNIT. IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESS MENT YEAR 2002-2003 ASSESSEE DECLARED NIL INCOME ON 3-10-2002, AFTER CL AIMING DEDUCTION UNDER SECTION 80HHC OF THE ACT. ORIGINALLY RETURN W AS PROCESSED UNDER SECTION 143 (1) OF THE ACT BY ACCEPTING THE CLAIM O F DEDUCTION UNDER SECTION 80HHC OF THE ACT. SUBSEQUENTLY, THE ASSESSI NG OFFICER NOTICED THAT IN FORM 10CCAC THE ASSESSEE DECLARED NEGATIVE PROFIT OF RS.1,79,60,812/- FROM TRADING AND MANUFACTURING GOO DS. IT IS WELL SETTLED THAT IF THERE IS OVERALL LOSS ASSESSEE IS N OT ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80HHC OF THE ACT. HAVING RE GARD TO THE SAID LEGAL POSITION THE ASSESSING OFFICER PASSED AN ORDE R ON 28-02-2005 WHEREIN HE HAS DISALLOWED THE CLAIM OF DEDUCTION UN DER SECTION 80HHC 2 OF THE ACT MAINLY ON THE GROUND THAT INCENTIVE/BENE FITS RECEIVED IN THE FORM OF DEPB HAS TO BE CONSIDERED AS AN INCIDENTAL INCOME ARISING THROUGH A GOVERNMENT SCHEME AND COMPUTATION OF DEDU CTION PROVIDED UNDER SECTION 80HHC (3) OF THE ACT DOES NOT COVER P ROFIT ON SALE OF DEPB CREDITS AND IF THAT IS NOT TAKEN INTO CONSIDERATION THE NET FIGURE DECLARED BY THE ASSESSEE FROM TRADING AS WELL AS MANUFACTURI NG SEGMENTS RESULTS IN LOSS AND HENCE ASSESSEE IS NOT ELIGIBLE FOR DEDU CTION UNDER SECTION 80HHC OF THE ACT. 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) CONTENDING, INTER ALIA, THAT CONSEQUENT TO THE AMENDMENT WITH RETROSPECTIVE FROM 1-4-1998 RECEIPTS IN THE FORM OF DEPB HAS TO BE CONSIDERED AS INCOME FROM BUSINESS AND IF THAT IS T AKEN INTO CONSIDERATION THERE IS OVERALL NET PROFIT IN WHICH EVENT ASSESSEE IS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80HHC OF THE ACT. HAVING REGARD TO THE SUBMISSION OF THE ASSESSEE, THE LEARN ED CIT(A), VIDE HIS ORDER DATED 15-2-2006 DIRECTED THE ASSESSING OFFICE R TO VERIFY THE APPELLANTS CLAIM IN LINE WITH THE AMENDED PROVISIO NS OF THE ACT AND TO RECOMPUTE THE DEDUCTION ACCORDINGLY. 4. IN THE PROCESS OF GIVING EFFECT TO THE ORDER OF THE LEARNED CIT(A), THE ASSESSING OFFICER PASSED AN ORDER UNDER SECTION 154 OF THE ACT AND, VIDE ORDER DATED 10-01-2007, HE DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80HHC BY OBSERVING AS UNDER : 2. IT IS NOTICED THAT WHILE GIVING EFFECT TO THE O RDER OF THE LEARNED CIT(A)-X, MUMBAI, THE DEDUCTION U/S. 80HHC OF RS.55,11,088/-. IF THE EXPORT PROFIT IS IN NEGAT IVE 90% DEPB TO BE DEDUCTED FROM NEGATIVE PROFIT AND DEDUCTION U/S 80HHC IS TO BE WORKED OUT @ 70% ON THE BALANCE AMOUNT. BUT AS THE BALANCE AMOUNT IS A NEGATIVE FIGURE, THEREFORE, THE ASSESSEE IS NOT ELI GIBLE 3 FOR DEDUCTION U/S. 80HHC. THUS, THE DEDUCTION U/S. 80HHC WAS WRONGLY ALLOWED AND THIS BEING A MISTAKE APPARENT FROM THE RECORD. IN THIS CONNECTIO N, NOTICE U/S. 154 WAS ISSUED TO THE ASSESSEE-COMPANY AND DULY SERVED ON 07-12-2006 WHEREBY THIS MISTAKE BEING APPARENT FROM RECORD WAS POINTED OUT TO THE ASSESSEE COMPANY. IN RESPONSE, THE ASSESSEE- COMPANY HAS NOT SUBMITTED ANY EXPLANATION AND/OR OBJECTION TO THE PROPOSED RECTIFICATION IN ABSENCE OF THE ASSESSEES EXPLANATION, IT IS PRESUMED THAT THE ASSESSEE-COMPANY HAS NO OBJECTION TO THE PROPOSED RECTIFICATION. HENCE, THE MISTAKE BEING APPARENT FR OM RECORD IS RECTIFIED U/S. 154 OF THE INCOME TAX ACT, 1961. 5. AGGRIEVED BY THE SAID ORDER, ASSESSEE IS IN APP EAL BEFORE US. LEARNED COUNSEL, APPEARING ON BEHALF OF THE ASSESSE E, ADVERTED OUR ATTENTION TO PAGES 41 AND 61 OF THE PAPER BOOK TO S UBMIT THAT INCENTIVE RECEIVED IN THE FORM OF DEPB SHOULD BE ADDED TO THE BUSINESS PROFITS IN WHICH EVENT THERE WOULD BE NET INCOME AND, BY VIRTU E OF THE PROVISIONS AS AMENDED BY TAXATION LAWS (AMENDMENT) ACT, 2005 W .E.F. 1-4-1998, ASSESSEE WOULD BE ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80HHC OF THE ACT ON POSITIVE INCOME. VIDE LETTER DATED 26-3- 2008 ASSESSEE FILED A FRESH COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT WHEREIN IT WAS HIGHLIGHTED THAT THOUGH PROFIT OF THE BUSINE SS WAS WRONGLY DECLARED AS LOSS, BY APPLYING THE PROPER LEGAL PROC EDURE TO THE SET OF FACTS WHICH ARE ALREADY AVAILABLE ON RECORD THERE WOULD B E POSITIVE PROFIT OF RS.52,26,161/-, IF DEPB AND EXCISE REFUND IS TAKEN INTO CONSIDERATION AND 90% THEREOF IS ADDED TO THE INCOME FROM BUSINES S, IN WHICH EVENT ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 HHC OF THE ACT. HE 4 FURTHER SUBMITTED THAT LEARNED CIT(A) HAS ARBITRARI LY NOT TAKEN INTO CONSIDERATION THE CORRECT COMPUTATION OF RECORD. 6. ON THE OTHER HAND LEARNED DR STRONGLY RELIED UP ON THE ORDERS PASSED BY THE TAX AUTHORITIES. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. IN MY OPINION, THE ASSESSING OF FICER WAS WRONGLY OF THE OPINION THAT THERE WAS A NEGATIVE PROFIT. AS PE R THE AUDITED P & L ACCOUNT, DEPB AND EXCISE REFUND WAS SHOWN AS OTHER INCOME IN SCHEDULE-I AND IT WAS NOT TAKEN INTO CONSIDERATIO N AS INCOME FROM BUSINESS. EXPORT PROFITS FROM MANUFACTURING AND TRA DING WERE ADDED WITHOUT TAKING INTO CONSIDERATION AMOUNTS RECEIVED IN THE FORM OF DEPB WHEREAS SECTION 28 (IIID) OF THE I.T. ACT READ WITH SECTION 80HHC (3) AS AMENDED WITH RETROSPECTIVE EFFECT STATES THAT 90% O F THE AMOUNTS RECEIVED IN THE FORM OF DEPB ETC., HAS TO BE TAKEN AS THE TOTAL TURNOVER OF THE BUSINESS. LEARNED CIT(A) HAS NOT DISPUTED THE L EGAL PROPOSITION BUT MERELY PROCEEDED ON THE ASSUMPTION THAT ASSESSEE HA S NOT OBJECTED TO THE COMPUTATION OF THE ASSESSING OFFICER IN THE PRO CEEDINGS UNDER SECTION 154 OF THE ACT AND HENCE FRESH COMPUTATION CANNOT BE FILED BEFORE THE APPELLATE AUTHORITY. IT IS WELL SETTLED THAT THERE CANNOT BE ANY ESTOPPEL AGAINST STATUTE ARTICLE 265 OF THE CONSTIT UTION OF INDIA PROVIDES THAT NO TAX SHALL BE LEVIED OR COLLECTED EXCEPT BY AUTHORITY OF LAW. EVEN IF THE ASSESSEE HAS MADE CERTAIN WRONG CALCULATIONS IT IS OBLIGATORY ON THE PART OF THE ASSESSING OFFICER TO APPLY HIS MIND TO THE FACTS DISCLOSED IN THE RETURN AND MAKE A PROPER ASSESSMENT BY KEEPING IN MIND THE LAW HOLDING THE FIELD. HONBLE BOMBAY HIGH COURT IN THE CASES OF NIRMALA L . MEHTA VS. CIT AND OTHERS (2004) 269 ITR 1 (BOM.) AS WELL AS BALMUKUND ACHARYA VS. DCIT AND OTHERS (2009) 310 ITR 310 (BOM .) OBSERVED THAT ONLY CORRECT INCOME HAS TO BE BROUGHT TO TAX AND IT IS THE DUTY OF THE ASSESSING OFFICER TO MAKE A CORRECT COMPUTATION EVE N IF THE ASSESSEE HAS 5 NOT PROPERLY BROUGHT OUT THE FACTS. IN THE INSTANT CASE, IT APPEARS THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) PROCEED ED TO DISALLOW THE CLAIM OF DEDUCTION UNDER SECTION 80HHC OF THE ACT M ERELY ON THE STRENGTH OF FIGURES MENTIONED IN FORM 10CCAC OF THE ACT WITHOUT EXAMINING THE CORRECT METHOD OF COMPUTATION, AS COU LD BE SEEN FROM THE ANNEXURES TO THE AUDITED PROFIT AND LOSS ACCOUNT. I N THE INTEREST OF JUSTICE, BEARING IN MIND THE PRINCIPLE LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASES CITED (SUPRA), WE HEREBY SE T ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO IS DIRECTED T O RE-EXAMINE THE FACTS IN THE LIGHT OF COMPUTATION GIVEN BY THE ASSESSEE AND CONSIDER THE MATTER IN ACCORDANCE WITH LAW. NEEDLESS TO OBSERVE THAT BURDE N IS UPON THE ASSESSEE TO PRODUCE SUPPORTING EVIDENCE TO SHOW THA T BASED ON A CORRECT COMPUTATION THERE WOULD BE A POSITIVE INCOME AND TH E DEDUCTION UNDER SECTION 80HHC IS PERMISSIBLE UNDER LAW. WITH THESE REMARKS, WE HEREBY SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING O FFICER. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ACCORDINGLY IN THE OPEN COURT. SD/- SD/- (ANANDI LAL GEHLOT) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATE 09 TH JULY, 2010. VBP/- 6 COPY TO 1. BRAHMA DRUGS PVT. LTD., A/504, DELPHI, HIRANANDA NI GARDENS, POWAI, MUMBAI 76 PAN AAACB-5795-L 2. INCOME TAX OFFICER 10 (3) (1), MUMBAI. 3. CIT (A)-X, MUMBAI. 4. CIT, M.C-X, MUMBAI. 5. D.R. B BENCH 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI.