Appeal details
Counselvise Citation
[2011] 140 COUNSELVISE.COM (IT) 55160 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 year(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-09-2011
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
B
Next Hearing Date
08-09-2011
Assessment Year
2001-2002
Appeal Filed On
11-09-2006
Judgement Text
IN THE INCOME TAX APPELLATE TRIB UNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI VIJAY PAL RAO, JM ITA NO.4879/MUM/2006 : ASST.YEAR 2001-2002 THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 10(2) MUMBAI. VS. M/S.MULTIFORM MACHINERY (BOM) PVT.LTD. 14/15 LAXMI BHAVAN, 1 ST FLOOR OGHADBHAI LANE, GHATKOPAR (EAST) MUMBAI 400 077. PAN : AAACM4747R. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.C.MAURYA RESPONDENT BY : SHRI R.V.SHAH DATE OF HEARING : 08.09.2011 DATE OF PRONOUNCEMENT :14.09.2011 O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 10.07.2006 IN RELATION TO THE ASSESSMENT YEAR 2001-2002. 2. THE MEMO OF APPEAL CONTAINS ONE EFFECTIVE GROUND ASSAILING ABOUT BRINGING TO TAX THE INTEREST RECEIVED ON RS.20,94,733 ( SIC RS.92,43,939) UNDER THE HEAD `INCOME FROM OTHER SOURCES. THEREAFTER THE DEPART MENT FILED MODIFIED GROUNDS OF APPEAL. BOTH THE SIDES HAVE AGREED NOT TO RAISE ANY OBJECTION ABOUT THE MODIFICATION IN THE AMOUNT OF RS.20,94,733 IN THE G ROUND OF APPEAL AS NOTED ABOVE. AS THE MODIFIED GROUNDS ARE ELABORATION OF VARIOUS ASPECTS OF THE GROUND AS PER MEMO OF APPEAL, WHICH EVEN DOES NOT PROPERLY PR ESENT THE VIEW POINT OF THE DEPARTMENT, WE ARE, THEREFORE, TAKING UP THE REVI SED GROUNDS WITH CONSENT OF THE PARTIES. 3. THE FIRST ISSUE IS AGAINST NOT ALLOWING OF NET TING OF INTEREST U/S 80-IB / 80HHC. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSIN G THE RELEVANT MATERIAL ON ITA NO.4879/MUM/2006 M/S.MULTIFORM MACHINERY (BOM) PVT.LTD. 2 RECORD IT IS OBSERVED THAT THE ASSESSING OFFICER HA S ACCEPTED THAT THE INTEREST INCOME IS INCLUDIBLE UNDER THE HEAD `PROFITS AND GA INS OF BUSINESS OR PROFESSION. UNDER SUCH CIRCUMSTANCES WE PROCEED TO DECIDE ABOUT THE QUESTION OF NETTING OF INTEREST BY CONSIDERING THE AMOUNT OF INTEREST INCO ME AS FALLING UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION. INSO FAR AS THE GRANTING OF DEDUCTION U/S 80-IB ON INTEREST INCOME IS CONCERNED, THE LEAR NED A.R. HAS PLACED ON RECORD COPIES OF THE ORDERS PASSED BY THE TRIBUNAL IN ITS OWN CASE IN ASSESSMENT YEARS 1996-97 AND 1999-2000. IN THE ORDER FOR ASSESSMENT YEAR 1996-97, THE TRIBUNAL HAS RECTIFIED THE MISTAKE IN THE ORIGINAL ORDER BY WAY OF PASSING ORDER U/S 254(2). VIDE ITS ORDER IN MA NO.566/MUM/2006 DATED 3 RD MARCH, 2006, THE TRIBUNAL VIDE PARA 10 HAS RESTORED THE MATTER TO THE FILE OF A.O. FOR EXAMINING THE NEXUS BETWEEN THE INTEREST PAID AND INTEREST SPENT. SIMILAR VIEW HAS BEEN FOLLOWED IN APPEAL FOR ASSESSMENT YEAR 1999-2000 IN ITA NO.6178/MUM/2002. VIDE ORDER DATED 11.10.2006, THE TRIBUNAL HAS RESTORED THE MATTER T O THE FILE OF A.O. SINCE NO DISTINGUISHING FACTS HAVE BEEN BROUGHT TO OUR NOTIC E, RESPECTFULLY FOLLOWING THE PRECEDENTS, WE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND REMIT THE MATTER TO THE FILE OF A.O. FOR EXAMINING IT AFRESH IN ACCORDA NCE WITH THE DIRECTIONS CONTAINED IN THE AFORE-NOTED ORDERS OF THE TRIBUNAL PASSED IN ASSESSEES OWN CASE IN EARLIER YEARS. 4. THE SECOND SEGMENT OF THIS GROUND IS ABOUT THE N ETTING OF INTEREST U/S.80HHC. THE LEARNED A.R. CONTENDED THAT THE TRIB UNAL IN EARLIER YEARS DECIDED THIS ISSUE IN ITS FAVOUR. WE ARE UNABLE TO APPLY TH E VIEW TAKEN IN THE EARLIER YEAR FOR THE REASON THAT RECENTLY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. ASIAN STAR CO. LTD. (2010) 326 ITR 56 HAS HELD THAT NO NE TTING OF INTEREST IS PERMISSIBLE FOR THE PURPOSE OF DEDUCTION U/S 80HHC. THE SAME VI EW HAS BEEN ONCE AGAIN REITERATED IN CIT VS. GEM PLAST JEWELLERY INDIA LTD. [(2011) 330 ITR 175 (BOM.)]. IN VIEW OF THESE BINDING PRECEDENTS, WE VACATE THE ACTION OF THE LEARNED FIRST ITA NO.4879/MUM/2006 M/S.MULTIFORM MACHINERY (BOM) PVT.LTD. 3 APPELLATE AUTHORITY AND RESTORE THE OPINION OF THE ASSESSING OFFICER BY HOLDING THAT NETTING OF INTEREST IS NOT ALLOWED FOR THE PURPOSES OF DEDUCTION U/S 80HHC. 5. SECOND ISSUE RAISED IN THIS APPEAL IS ABOUT THE GRANTING OF DEDUCTION U/S 80-IB AND 80HHC ON PROFIT ON ACCOUNT OF EXCH ANGE FLUCTUATION. THIS GROUND HAS TWO COMPONENTS VIZ. THE PROFIT DUE TO FLUCTUATI ON IN EEFC ACCOUNT AMOUNTING TO RS.10,22,487 AND PROFIT DUE TO EXCHANGE RATE FLU CTUATION ON EXPORT TRANSACTIONS AMOUNTING TO RS.6,38,551. 6. INSOFAR AS THE PROFIT DUE TO FLUCTUATION IN EEFC ACCOUNT IN THE CONTEXT OF SECTION 80HHC IS CONCERNED, WE FIND THAT THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHAH ORIGINALS [(2010) 327 ITR 19 (BOM.)] HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE. WE, THEREFORE, HOLD THA T THE AMOUNT OF RS.10,22,487 IS NOT ELIGIBLE FOR DEDUCTION U/S 80HHC. AS REGARDS TH E OTHER SUM OF RS.6,38,551 WHICH REPRESENTS PROFIT ON FLUCTUATION DUE TO EXPOR T TRANSACTIONS, IT IS SEEN THAT THE SPECIAL BENCH OF THE TRIBUNAL IN ACIT VS. PRAKASH L.SHAH [(2008) 115 ITD 167 (MUM.) (SB)] HAS DECIDED THIS ISSUE BY HOLDING THAT THE FOREIGN EXCHANGE RATE GAIN IS ADMISSIBLE FOR DEDUCTION FOR THE FIRST YEAR AND NOT IN THE SECOND YEAR. IT HAS ALSO HELD THAT SUCH INCOME IS TO BE REDUCED FROM THE SEC OND YEAR. THIS ISSUE HAS BEEN DISCUSSED IN DETAIL IN THIS ORDER. WE, THEREFORE, S ET ASIDE THE IMPUGNED ORDER ON THIS SCORE AND RESTORE THE MATTER TO THE FILE OF A.O. FO R DECIDING IT AFRESH IN CONSONANCE WITH THE DECISION TAKEN BY THE SPECIAL BENCH IN PRAKASH L.SHAH (SUPRA). 7. INSOFAR AS DEDUCTION U/S 80-IB ON PROFIT ON RATE FLUCTUATION IS CONCERNED, IT IS NOTICED THAT THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. RACHNA UDHYOG [(2010) 230 CTR (BOM.) 72] HAS HELD THAT EXCHANGE RATE DIFFERENCE ARISE OUT I S AND IS DIRECTLY RELATED TO SALES TRANSACTION INVOLVING EXPORT OF GOODS OF THE INDUSTRIAL UNDERTAKING AND THEREFORE THE DIFFERENCE ON ACCOUNT OF EXCHANGE RATE FLUCTUATION IS ENTITLED TO DEDUCTION U/S 80-IB. TO THIS EXTENT WE UPHOLD THE IMPUGNED ORDER. ITA NO.4879/MUM/2006 M/S.MULTIFORM MACHINERY (BOM) PVT.LTD. 4 8. THE LAST ISSUE IN THIS APPEAL IS AGAINST THE GRA NTING OF DEDUCTION U/S 80-IB ON THE INCOME COMPUTED BEFORE ALLOWING DEDUCTION U/S 8 0HHC. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELEVANT MATERIAL ON RECO RD WE FIND THAT THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE JUDGEMENT OF THE HONBLE JURISDICTI ONAL HIGH COURT IN ASSOCIATED CAPSULES PRIVATE LIMITED VS. DCIT & ANR. [(2011) 332 ITR 42 (BOM.)] IN WHICH IT HAS BEEN HELD THAT SECTION 80-IA(9) DO ES NOT AFFECT THE COMPUTABILITY OF DEDUCTION UNDER VARIOUS PROVISIONS UNDER THE HEAD C. OF CHAPTER VI-A AND ONLY AFFECTS THE ALLOWABILITY OF SUCH DED UCTION UNDER OTHER PROVISIONS SO THAT THE AGGREGATE DEDUCTIONS U/S 80-IA AND OTHE R PROVISIONS, DO NOT EXCEED 100% OF THE PROFIT OF THE BUSINESS. IN VIEW OF THIS BINDING PRECEDENT, THIS GROUND IS LIABLE TO BE REJECTED. WE ORDER ACCORDINGLY. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF SEPTEMBER, 2011. SD/- SD/- (VIJAY PAL RAO) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 14 TH SEPTEMBER, 2011. DEVDAS*` COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - X, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. ITA NO.4879/MUM/2006 M/S.MULTIFORM MACHINERY (BOM) PVT.LTD. 5 TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.
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