DCIT OSD 1(1), MUMBAI V. WEIZMANN LTD, MUMBAI

ITA 5640/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62444 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 13-03-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 12-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Deemed to accrue or arise in india
• Section: 143(3); 80HHC; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, G, MUMBAI BEFORE S/SHRI DINESH KUMAR AGARWAL (JM) AND N.K. BILLIAYA (A.M ) ITA NO.5640/MUM/2010 (ASSESSMENT YEAR 2002-03) DEPUTY COMMISSIONER OF INCOME TAX -1(3), ROOM NO. 540/564, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, NEW MARINE LINES, MUMBAI 400 020. M/S WEIZMANN LTD., EMPIRE HOUSE, 214, DR. D.N. ROAD, A.K. NAYAK MARG, FORT, MUMBAI 400 001. PAN: AAACW1260H APPELLANT V/S RESPONDENT DATE OF HEARING :15.5 .2012 DATE OF PRONOUNCEMENT : 23.5.201 2 REVENUE BY :SHRI PAVAN VED ASSESSEE BY :SHRI VIJAY MEHTA O R D E R PER DINESH KUMAR AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DTD. 18.05.2010 PASSED BY THE LD. CIT(A) - 2, MUMBA I FOR THE A.Y. 2002-03. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN MANUFACTURING AND EXPORTS OF TEXTILES AND OTHER GOODS ETC. IN THIS CASE THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT 1961 (T HE ACT) WAS COMPLETED ON 30-3-2005 AT AN INCOME OF RS. 3,36,50,223/- U/S 115 JB AS AGAINST RETURNED LOSS OF RS. 18,16,10,897/-AND BOOK PROFIT OF RS.1,1 0,48,350/-. THE A.O. HAD ITA 5640/MUM/2010 2 DISALLOWED DEDUCTION U/S 80HHC OF THE ACT WHILE COM PUTING THE BOOK PROFIT U/S 115JB OF THE ACT WHICH WAS CONFIRMED BY THE LD. CIT(A). AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE ITAT AGAINST THE O RDER OF THE CIT(A). THE ITAT SET ASIDE THE ISSUE TO THE FILE OF THE A.O. IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN DCIT V. SYNCOME FORMULATIO NS REPORTED IN (2007) 13 SOT 414 (MUM)[SB]. PURSUANT TO THE ORDER OF THE IT AT, THE ASSESSEE WAS PROVIDED OPPORTUNITY OF BEING HEARD. IN RESPONSE, THE ASSESSEE COMPANY FILED DETAILS REGARDING THE COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. HOWEVER, THE A.O. FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN CIT VS. AJANTA PHARMA LTD. (2009) 318 ITR 252 (BOM) DISALLOWED THE CLAIM OF THE ASSESSEE. 3. ON APPEAL, THE LD. CIT(A) WHILE OBSERVING THAT T HE A.O. WAS DIRECTED BY THE TRIBUNAL TO FOLLOW THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN SYNCOME FORMULATIONS (SUPRA), ALLOWED THE CLAIM OF THE ASSESSEE. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, AND IN LAW THE CIT(A) ERRED IN DIRECTING THE A.O. TO FOLLOW TH E DECISION IN THE CASE OF SYNCOME FORMULATIONS 13 SOT 144 FOR COMPUTATION OF DEDUCTION U/S HHC. 2. THE LD. CIT(A) HAS FURTHER OVERLOOKED THE FACT THAT THE HONBLE BOMBAY HIGH COURT HAS OVERRULED THE DECISION IN THE CASE O F SYNCOME FORMULATIONS AND THE A.O. WAS BOUND TO FOLLOW THE LAW AS LAID DO WN BY THE BOMBAY HIGH COURT. 5. AT THE TIME OF HEARING THE LD. D.R. SUPPORTS THE OR DER OF THE A.O. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE SUBMITS THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF THE HONBLE SUPREME COURT IN AJANTA PHARMA LTD. V. CIT (2010) 3 27 ITR 305 (SC), ITA 5640/MUM/2010 3 THEREFORE, THE ORDER PASSED BY THE LD. CIT(A) IN AL LOWING THE CLAIM OF THE ASSESSEE BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THERE IS NO DISPUTE THAT THE TRIBUNAL WHILE SETTING ASIDE THE ISSUE HAS DIRE CTED THE A.O. TO DECIDE THE ISSUE IN THE LIGHT OF THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN DCIT V. SYNCOME FORMULATIONS (I) LTD. [2007] 13 SOT 414 (MU M) [SB] : (2007) 292 ITR (AT) 144 (MUMBAI). IT IS ALSO NOT IN DISPUTE THAT THE A.O. FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N AJANTA PHARMA LTD. (SUPRA) HAS REJECTED THE CLAIM OF THE ASSESSEE. SUB SEQUENTLY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN AJANTA PHARMA LTD. (SUPRA) HAS BEEN REVERSED BY THE HONBLE SUPREME COURT IN AJANTA PHA RMA LTD. (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER (HEADNOTE):- HELD, REVERSING THE DECISION OF THE HIGH COURT AND RESTORING THAT OF THE APPELLATE TRIBUNAL, (I) THAT SECTION 115JA WAS A SELF-CONTAINED CODE AND APPLIED NOTWITHSTANDING ANY PROVISION IN THE AC T. SECTION 115JB IS THE SUCCESSOR SECTION TO SECTION 115JA. SECTION 115 JB CONTINUES TO REMAIN A SELF-CONTAINED CODE. (II) THAT ALL ASSESSABLE ENTITIES WERE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC(1B). SIMILARLY, ONLY ELIGIBLE GOODS W ERE ENTITLED TO SUCH SPECIAL DEDUCTION UNDER SECTION 80HHC(1). SECTION 8 0HHC(3) WAS GEARED TO THE EXPORTS, WHEREAS THE LEVY UNDER SECTI ON 115JB WAS ON THE DEEMED INCOME. THE IDEA WAS TO EXCLUDE 'EXPORT PROF ITS' FROM THE COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB. (III) THAT IF THE DICHOTOMY BETWEEN 'ELIGIBILITY' O F PROFITS AND 'DEDUCTIBILITY' OF PROFITS WAS NOT KEPT IN MIND SEC TION 115JB WOULD CEASE TO BE A SELF-CONTAINED CODE. (IV) THAT, THEREFORE, THE APPELLATE TRIBUNAL WAS RI GHT IN HOLDING THAT THAT 100 PER CENT. OF THE EXPORT PROFITS EARNED BY THE A SSESSEE AS COMPUTED UNDER SECTION 80HHC(3) WAS ELIGIBLE FOR REDUCTION U NDER CLAUSE (IV) OF THE EXPLANATION TO SECTION 115JB. ITA 5640/MUM/2010 4 8. RECENTLY IN CIT V. BHARI INFORMATION TECH.SYS. P . LTD. (2012) 340 ITR 593 (SC) IT HAS BEEN HELD (HEADNOTE): HELD THAT THE DEDUCTION UNDER SECTION 80HHE OF THE INCOM E-TAX ACT, 1961, IN THE CASE OF EXPORT OF COMPUTER SOFTWARE HAS GOT TO BE WORKED OUT ON THE BASIS OF ADJUSTED BOOK PROFITS UNDER SECTION 115JA AND NOT O N THE BASIS COMPUTED UNDER THE REGULAR PROVISIONS OF LAW APPLICABLE TO THE COM PUTATION OF PROFITS AND GAINS OF BUSINESS. 9. HAVING REGARD TO THE ABOVE DICTUM OF THE HONBLE SUPREME COURT, WE HOLD THAT THE DEDUCTION U/S 80HHC OF THE ACT HAS TO BE WORKED OUT ON THE BASIS ADJUSTED BOOK PROFIT U/S 115JB OF THE ACT AND NOT ON THE BASIS OF PROFITS COMPUTED UNDER THE REGULAR PROVISIONS OF LAW APPLIC ABLE TO COMPUTATION OF PROFIT AND GAINS OF BUSINESS. ACCORDINGLY, THE GROU NDS TAKEN BY THE REVENUE ARE REJECTED. 10. IN THE RESULT, THE REVENUES APPEAL STANDS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2012. SD/- SD/- (N.K. BILLIAYA) (DINESH KUMAR AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 23 RD MAY 2012 RK.: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT -1, MUMBAI 4. CIT(A) 2, MUMBAI 5. DR G BENCH 6. GUARD FILE. BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI