ADDL CIT RG 14(1), MUMBAI V. KAMALA OVERSEAS, MUMBAI

ITA 5077/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 5242 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR HARGOVIND

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, MUMBAI. BEFORE S/SHRI S.V.MEHROTRA, AM & VIJAY PAL RAO,JM I.T.A NO. 5077/MUM/2009 ASSESSMENT YEAR: 2006-07 THE ADDL. CIT, RANGE 14(1), V. KAMALA OVERSEAS, EARNEST HOUSE, 2 ND FLOOR, 101, NIRANJA, LST FLOOR, MARINE MUMBAI. DRIVE ROAD, MUMBAI. PA NO.AADFK 2426 M (APPELLANT) (RESPONDENT) APPELLANT BY: DR HARGOVIND RESPONDENT BY : SHRI VIJAY MEHTA O R D E R PER S.V.MEHROTRA, AM THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 26.6.2009 OF LD CIT (A)-XIV, MUMBAI FOR THE ASSESSMENT YEAR 2006-07. GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.30,12,363/- ON ACCOUNT OF SALE OF DEPB LICENSE. THE LD CIT (A) HAS FAILED TO APPRECIATE THAT 1(A) TILL A.Y. 2005-06, THE ASSESSEE HAS BEEN SHOWI NG INCOME FROM DEPB LICENSE WHEN THE LICENSES WERE PHYSICALLY RECEIVED. IN THE YEAR OF SALE THE PROFIT OR LOSS WAS SEPARATELY CREDITED OR DEBITED DEPENDING ON SAL E VALUE BEING MORE OR LESS THAN FACE VALUE. 1(B) FROM A.Y. 2006-07,IT CHANGED THE METHOD OF ACC OUNTING AND STARTED SHOWING THE INCOME ON THE BASIS OF LICENSES SOLD U/ S.28(IIID) OF THE I.T.ACT. THE INCOME AS PER EARLIER METHOD OF ACCOUNTING OF RS.37 ,07,481/- HAS NOT BEEN CREDITED AS PER PARA 11(B) OF THE TAX AUDIT REPORT. THE ASSESSEE HAS SHOWN AN INCOME OF RS..5,08,579/- (SALE PROCEEDS OF LICENCE OF FACE VALUE RS.6,95,118/-) SHOWN BY THE ASSESSEE. THEREFORE, THE CHANGE OF ME THOD HAS RESULTED IN INCOME REDUCTION OF RS.30,12,363/- (37,07,481 6,95,118). 1(C) IF THE LICENSE ARE TAXED ON ACCRUAL BASIS WORK ED OUT ON THE BASIS OF EXPORT MADE DURING THE YEAR IRRESPECTIVE OF THE YEAR IN WH ICH THE LICENSES WERE ACTUALLY RECEIVED OR SOLD, THE AMOUNT COMES TO RS.36,43,738/ - AND IN THAT CASE THE INCOME SHOWN IS LESS BY RS.29,48,620 (36,43,738 6 ,95,118). 2 2. FOR THESE AND OTHER REASONS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT (A) BE QUASHED AND THAT OF THE AO RESTORED. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE FIRM, IN TH E RELEVANT ASSESSMENT YEAR, CARRIED ON THE BUSINESS AS EXPORTER OF PHARMACEUTICAL PRODU CTS. IT HAD FILED ITS RETURN OF INCOME DECLARING AN INCOME OF RS.1,18,69,643/-. THE ASSES SING OFFICER NOTICED THAT TILL A.Y. 2005-06, THE ASSESSEE HAD BEEN SHOWING INCOME FROM DEPB LICENSES WHEN THE LICENCES WERE PHYSICALLY RECEIVED. IN THE YEAR OF SALE, THE PROFIT OR LOSS WAS SEPARATELY CREDITED OR DEBITED DEPENDING ON SALE VALUE BEING MORE OR LE SS THAN FACE VALUE. HOWEVER, FROM A.Y. 2006-07, THE ASSESSEE CHANGED ITS METHOD OF AC COUNTING AND STARTED SHOWING INCOME ON THE BASIS OF LICENCES SOLD U/S.28(IIID) O F THE I.T.ACT. HE NOTED VARIOUS DISCREPANCIES ON ACCOUNT OF THE SAME AND AFTER DETA ILED DISCUSSION MADE A PROTECTIVE ADDITION OF RS.30,12,363/-. 3. THE CIT (A), WHILE PARTLY ALLOWING THE ASSESSEE S APPEAL, DELETED THE ADDITION OBSERVING THAT THE AO WAS NOT JUSTIFIED IN MAKING T HE ADDITION OF RS.30,12,363/- BY IGNORING THE METHOD OF ACCOUNTING FOLLOWED BY THE A SSESSEE AS PER THE DECISION FOR A.Y. 2003-04 TAKEN BY THE DEPARTMENT, BOTH BY THE AO AN D THE CIT(A). 4. AFTER HEARING BOTH THE SIDES, WE ARE OF THE OPIN ION THAT THE MATTER NEEDS TO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AS PER THE PRINCIPLES LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF CIT V. KALPATARU COLOURS AND CHEMICALS ( INCOME TAX APPEAL (LODG.) NO.2887 OF 20 09) ORDER DATED 28/29.6.2010. WE, THEREFORE, SET ASIDE THE ORDER O F THE CIT (A) AND RESTORE THE MATTER BACK TO THE FILE OF THE AO TO REDECIDE THE ISSUE AF RESH IN VIEW OF THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF KALPATARU COLOURS AND CHEMICALS (SUPRA). 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 13 TH AUGUST, 2010 SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) SD/- (S.V. MEHROTRA) (ACCOUNTANT MEMBER) MUMBAI, DATED 13 TH AUGUST, 2010 3 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-XIV, MUMBA I 4. COMMISSIONER OF INCOME TAX-14, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH A, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI 4