SANGAM INDIA LTD, MUMBAI V. ADDL CIT RG 8(3), MUMBAI

ITA 5367/MUM/2010

• Counselvise Citation: 536719914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 15-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 30-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Keywords: Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H,MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI R.K. PANDA (A M) I.T.A. NO.5367/MUM/2010 (A.Y. 2007-08) M/S. SANGAM INDIA LTD., 306, B-WING, DYNASTY CORPORATE PARK, A.K. ROAD, ANDHERI (E), MUMBAI-400 059. PAN: AAACS3862E. VS. ADDL. COMMR. OF INCOME-TAX, RANGE 8(3), MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI VIPUL JOSHI. RESPONDENT BY SHRI V .V. SHASTRI. DAT E OF HEARING 15 - 11 - 2011 DATE OF PRONOUNCEMENT 18 - 11 - 2011 O R D E R PER D.K. AGARWAL, JM : THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 16-04-2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSM ENT YEAR 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF YARN, FABRICS, FLOCK F ABRIC, TEXTILE FABRIC, SYNTHETIC FABRIC PROCESSING AND GENERATION OF WIND POWER. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS CLA IMED DEDUCTION U/S.80IA OF THE INCOME-TAX ACT, 1961 (THE ACT) AMOUNTING TO RS. 6,84,14,033/- AND IN SUPPORT THE ASSESSEE HAS FILED AUDIT REPORT IN FORM NO. 10CCB CLAIMING DEDUCTION U/S.80IA OF THE ACT FOR ITS POWER DIVISION. ON BEIN G ASKED, THE ASSESSEE FILED ITA NO. 5367/M/2010 SANGAM INDIA LTD. 2 SEPARATE P & L ACCOUNT FOR ITS ELIGIBLE UNIT FOR TH E PURPOSE OF DEDUCTION U/S.80IA. ON PERUSAL OF THE SAME, THE AO NOTED THAT THE ASSES SEE HAS CLAIMED ADMINISTRATIVE EXPENSES OF RS.9,31,93,781/- ENTIREL Y AGAINST ITS OTHER BUSINESS INCOME, WHICH ARE NOT ELIGIBLE FOR DEDUCTION U/S.80 IA, WITH A VIEW TO REDUCE THE TAX LIABILITY. ACCORDINGLY, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY PROPORTIONATE AMOUNT OF ADMINISTRATIVE EXPENSES SHO ULD NOT BE ALLOCATED TO THE ELIGIBLE 80IA UNIT. IN RESPONSE, THE ASSESSEE SUBMI TTED THAT ALL THE EXPENSES RELATING TO POWER GENERATION UNIT HAVE BEEN DEBITED TO THE RESPECTIVE ACCOUNTS. HOWEVER, THE AO DID NOT ACCEPT THE ASSESEES EXPLAN ATION. THE AO PROPORTIONATELY ALLOCATED THE ADMINISTRATIVE EXPENS ES IN THE RATIO OF TURNOVER AND, ACCORDINGLY, WORKED OUT PROPORTIONATE EXPENSES IN RELATION TO POWER UNIT AMOUNTING TO RS.42,05,029/- AS PER WORKING APPEARIN G AT PAGE 3 OF THE ASSESSMENT ORDER AND THEREBY REDUCED THE DEDUCTION U/S.80IA TO RS.6,42,09,004/- AS AGAINST RS.6,84,14,033/- CLAIME D BY THE ASSESSEE. ON APPEAL, THE LD. CIT(A), OBSERVED THAT THE EXPENDITU RE AND TURNOVER OF THE UNITS, NAMELY, SUITING, WIND POWER, SPBL, HAVE NOTHING TO DO WITH 80IA UNIT, THEREFORE, HE REALLOCATED THE HEAD OFFICE EXPENSES IN PROPORTI ON TO TURNOVER OF SPINNING UNIT AND WORKED OUT THE ADMINISTRATIVE EXPENSES AT RS.45,26,470/- AND THEREBY REDUCED THE DEDUCTION U/S.80IA TO RS.6,38,87,562/- AS AGAINST RS.6,42,09,004/- ALLOWED BY THE AO. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SUSTEN ANCE OF ALLOCATION OF ADMINISTRATIVE EXPENSES AND ENHANCEMENT OF SUCH EXP ENSES BY THE LD. CIT(A) THEREBY REDUCING THE DEDUCTION U/S.80IA. 4. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT SINCE THE LD. CIT(A), WITHOUT GIVING ANY PROPER OPPORTUNI TY OF BEING HEARD TO THE ITA NO. 5367/M/2010 SANGAM INDIA LTD. 3 ASSESSEE, HAS ENHANCED THE DISALLOWANCE OF DEDUCTIO N U/S.80IA, THEREFORE, IN THE INTEREST OF JUSTICE, THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE LD. CIT(A). 5. ON THE OTHER HAND, THE LD. D.R., WHILE RELYING O N THE ORDERS OF THE AO AND THE LD. CIT(A), SUBMITS THAT HE HAS NO OBJECTION IF THE ISSUE IS RESTORED TO THE FILE OF LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND M ERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE LD. CIT(A), WITHO UT PROVIDING ANY REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, HAS ENH ANCED THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES TO RS.45,26,470/- AS AGAINS T RS.42,05,029/- COMPUTED BY THE AO AND THEREBY REDUCED THE DEDUCTION U/S.80I A TO RS.6,38,87,562/- AS AGAINST RS.6,42,09,004/- ALLOWED BY THE AO AND RS.6 ,84,14,033/- CLAIMED BY THE ASSESSEE. UNDER SEC. 251(2) OF THE ACT, IT HAS BEEN PROVIDED THAT THE COMMISSIONER (APPEALS) SHALL NOT ENHANCE ANY ASSESS MENT UNLESS THE APPELLANT HAS HAD A REASONABLE OPPORTUNITY OF SHOWING CAUSE A GAINST THE ENHANCEMENT OR REDUCTION. IN THE ABSENCE OF ANY MATERIAL TO SHOW T HAT ANY SUCH OPPORTUNITY WAS PROVIDED BY THE LD. CIT(A), WE ARE OF THE VIEW THAT THERE IS A VIOLATION OF THE STATUTORY PROVISIONS OF SEC. 251(2) AND, ACCORDINGL Y, IN THE INTEREST OF JUSTICE, WE CONSIDER IT FAIR AND REASONABLE THAT THE MATTER SHO ULD GO BACK TO THE FILE OF THE LD. CIT(A) AND ACCORDINGLY WE SET ASIDE THE ORDER PASSE D BY THE LD. CIT(A) AND RESTORE THE ISSUE TO HIS FILE TO DECIDE THE SAME AF RESH IN THE LIGHT OF OUR OBSERVATIONS HEREINABOVE AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GRO UNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, PARTLY ALLOWED FOR STATISTICAL PURP OSES. ITA NO. 5367/M/2010 SANGAM INDIA LTD. 4 7. IN THE RESULT, THE ASSESSEES APPEAL STANDS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 18TH DAY OF NOVEMBER, 2011. SD/- SD/- (R.K. PANDA) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 18TH NOVEMBER , 2011. NG: COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-18,MUMBAI. 4 CIT,CITY-8,MUMBAI. 5.DR,H BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO. 5367/M/2010 SANGAM INDIA LTD. 5 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 15-11-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 16-11-2011 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/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER