M/s. S.K. EXPORTS, MUMBAI V. DCIT. 12(2), MUMBAI

ITA 5131/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1310 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 15-12-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 12-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Keywords: Opportunity of being heard; Question of law
• Section: 80HHC; 28; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH: MUMBAI BEFORE SHRI R S SYAL, ACCOUNTANT MEMBER AND SHRI V D RAO, JUDICIAL MEMBER ITA NO 5131/MUM/2008 (ASSESSMENT YEAR: 2002-03) M/S S K EXPORTS, 11, CHURCHGATE CHAMBERS, 5, NEW MARINE LINE, CHURCHGATE, MUMBAI -400 049 PAN: AAAFS 3572 B VS DCIT -12(2), MUMBAI APPELLANT RESPONDENT APPELLANT BY: MR ANIL SATHE RESPONDENT BY: MR D SONGATE ORDER PER R S SYAL, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE CIT (A) ON 29.5.2008 IN RELATION TO THE ASSESSMENT YEAR 2002-03. 2. FIRST GROUND HAS TWO COMPONENTS. FIRST PART IS A GAINST THE CONFIRMATION OF DISALLOWANCE OF RS 4,21,634/- OUT OF FOREIGN TRA VELLING EXPENSES. THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE CLAIMED FOREIG N TRAVELLING EXPENSES AMOUNTING TO RS 10,88,793/-. FROM THE DETAILS OF E XPENSES, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE PARTNERS SHRI SANJAY J KHANNA AND SHAILESH J KHANNA MADE SEVEN TRIPS ABROAD TO JAPAN, ITALY AND FRANCE EITHER ALONE OR ON CERTAIN OCCASIONS ACCOMPANIED BY THEIR WIVES. A DE TAILED CHART HAS BEEN DRAWN AT PARA 4.1 OF THE ASSESSMENT ORDER GIVING BI FURCATION OF EXPENSES INCURRED ON FOREIGN TRIPS BY THE PARTNERS AND THEIR WIVES. RELYING ON HIS ACTION IN ASSESSMENT YEAR 2003-04, THE ASSESSING OF FICER DISALLOWED AIR FARE ITA 5131/MUM/2008 M/S S K EXPORTS 2 RELATING TO VISITS OF PARTNERS WIVES AND 1/3RD OF THE OTHER EXPENSES HOLDING THAT PART TO BE ATTRIBUTABLE TO THE VISITS OF LADIE S ABROAD. THIS LED TO THE ADDITION OF RS 4,21,364/-. THE LEARNED CIT (A) APP ROVED THE VIEW TAKEN BY THE ASSESSING OFFICER ON THIS POINT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL PLACED ON RECORD A COPY OF THE ORDER PASSED BY THE CIT (A) DATED 11.7.2008 IN RELATION TO THE A SSESSMENT YEAR 2003-04 IN WHICH APART FROM UPHOLDING THE DISALLOWANCES TOWARD S COST OF AIR TICKETS OF WIVES, FURTHER 15% OF OTHER EXPENSES HAVE ALSO BEE N HELD TO BE RIGHTLY DISALLOWED. ON A SPECIFIC QUESTION, THE LEARNED AU THORISED REPRESENTATIVE STATED THAT NO SECOND APPEAL WAS FILED BY THE REVEN UE AGAINST THIS ORDER. THE LEARNED AUTHORISED REPRESENTATIVE COULD NOT PLACE O N RECORD ANY EVIDENCE TO SHOW THAT THE FOREIGN VISITS OF WIVES WERE AIMED AT ENHANCING THE BUSINESS IN ANY MANNER. WE, THEREFORE, HOLD THAT THE VISITS OF LADIES CANNOT BE DESCRIBED AS FOR THE PURPOSE OF BUSINESS. NOW, COMING TO T HE AMOUNT OF DISALLOWANCE, WE FIND 1/3RD OF THE OTHER EXPENSES DISALLOWED BY T HE ASSESSING OFFICER IS JUSTIFIED IN THE PRESENT CIRCUMSTANCES FOR THE REAS ON THAT THE LADIES ACCOMPANIED THEIR RESPECTIVE HUSBANDS ON FIVE TRIPS OUT OF SEVEN UNDERTAKEN BY THE PARTNERS OF THE FIRM. THE IMPUGNED ORDER IS , THEREFORE, UPHOLD ON THIS ISSUE. 4. THE SECOND PART OF THIS GROUND ABOUT THE CONFIRM ATION OF ADDITION OF RS 50,722/- TOWARDS REPAIR AND MAINTENANCE EXPENSES WA S NOT PRESSED BY THE LEARNED AUTHORISED REPRESENTATIVE. THE SAME IS, TH EREFORE, DISMISSED. ITA 5131/MUM/2008 M/S S K EXPORTS 3 5. AN ADDITIONAL GROUND HAS BEEN RAISED BY THE ASSE SSEE, WHICH READS AS UNDER:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED, IN CONFIRMING THE DISALLOWANCES OF 90% OF DEPB CREDIT AMOUNTING TO RS 63,74,642/- WHILE COMPUTING THE DEDUCTION UNDER SEC TION 80HHC AND CONSEQUENTLY GRANTING OF DEDUCTION OF RS 13,94,000/ - AS AGAINST RS 50,81,689/- AS CLAIMED BY THE APPELLANT. 6. IT WAS PRAYED ON BEHALF OF THE ASSESSEE THAT DUE TO INADVERTENCE THIS GROUND COULD NOT BE RAISED IN THE APPEAL FORM. WE FIND THAT THE GROUND SO RAISED INVOLVES A QUESTION OF LAW FOR WHICH NO FRES H INVESTIGATION OF FACTS IS REQUIRED. RELYING ON THE JUDGMENT OF HONBLE SUPRE ME COURT IN THE CASE OF NTPC LTD VS CIT (1998) 229 ITR 383 (SC) WE ADMIT TH IS GROUND FOR DISPOSAL ON MERITS. 7. THE ASSESSEE CLAIMED DEDUCTION OF RS 50,81,6 89/- U/S 80HHC. THE ASSESSING OFFICER REDUCED THE AMOUNT ON SUCH DEDUCT ION TO RS 13,94,900/-. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 8. BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS A ND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO THOSE CONSIDERED BY THE SPECI AL BENCH OF THE TRIBUNAL IN THE CASE OF M/S TOPMAN EXPORTS VS. ITO [(2009) 318 ITR (AT) 87 (MUM BAI) (SB)]. THE SPECIAL BENCH VIDE ITS ORDER DATED 11. 08.2009 HAS RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR CON SIDERING THE FACE VALUE OF DEPB AS COVERED UNDER SECTION 28 (IIIB) AND THE PRO FIT ON TRANSFER OF DEPB I.E., EXCESS OF SALE PRICE OVER THE FACE VALUE OF DEPB AS FALLING UNDER SECTION 28 (IIID). IT HAS FURTHER BEEN HELD THAT THERE IS NO SCOPE FOR ALLOWING SEPARATE DEDUCTION FOR INDIVIDUAL EXPENSES CONNECTED WITH TH E SALE OF DEPB DUE TO THE SCHEME OF SECTION 80HHC. WE, THEREFORE, SET ASIDE T HE IMPUGNED ORDER ON ITA 5131/MUM/2008 M/S S K EXPORTS 4 THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO RECO MPUTE THE DEDUCTION UNDER SECTION 80HHC IN ACCORDANCE WITH THE VIEW TAKEN BY THE SPECIAL BENCH IN THE AFORE NOTED CASE. NEEDLESS TO SAY THE ASSESSEE WI LL BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD BY THE AO IN THE FRESH P ROCEEDINGS. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT TODAY ON THE 25TH DAY OF JUNE 2010. SD/- (V D RAO) JUDICIAL MEMBER SD/- (R S SYAL) ACCOUNTANT MEMBER MUMBAI, DATE: 25TH JUNE 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) -XII, MUMBAI. 4) THE CIT-12, MUMBAI. 5) THE D.R. E BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA 5131/MUM/2008 M/S S K EXPORTS 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 22.05.2010 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 22.05.2010 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER *