THE ACIT 14(3), MUMBAI V. M/S. AMBER TEXTILES, MUMBAI

ITA 5697/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7737 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 23-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 31-08-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL K MISHRA
• Assessee Lawyers: NITESH SHAH
• Keywords: Question of law
• Section: 80HHC

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K MUMBAI BEFORE SMT. P.MADHAVI DEVI, JM & SHRI B.RAMAKOTAIAH, AM I.T.A.NO.5697/MUM/2007 - A.Y 2004-05 ASST. COMMISSIONER OF I.T. 14(3), MUMBAI VS. M/S AMBER TEXTILES, 323, MANGALDAS MARKET, 4 TH LANE, MUMBAI 400 002 PAN NO.AAAFA 2383C (APPELLANT) (RESPONDENT) REVENUE BY : MR. ANIL K. MISHRA. ASSESSEE BY : MR. NITESH SHAH. O R D E R PER P.MADHAVI DEVI, JM: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST CIT (A)S ORDER DATED 29-6-2007. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- 1. (I) THE ORDER OF THE CIT[A] IS OPPOSED TO LAW AND FACTS OF THE CASE. (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT[A] WAS RIGHT IN ALLOWING THE DEDUCTION ON THE ONLY GROUND THAT THE TRIBUNAL HAS DECIDED THE ISSUE IN Q UESTION IN ITS ORDER IN THE CASE OF SURENDRA ENGINEERING, PARTICUL ARLY WHEN THE SAID DECISION OF THE TRIBUNAL IS CHALLENGED AND IS SUB JUDICE BEFORE THE HIGH COURT. (III) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT[A] WAS RIGHT IN DIRECTING TO REDUCE THE IN DIRECT COSTS BY 10% OF THE EXPORT INCENTIVES WITHOUT APPRECIATING T HE FACT THAT THE SAID AMOUNT REPRESENTS DEEMED EXPENDITURE AND N OT ACTUAL EXPENDITURE, AND THERE IS NO PROVISION IN THE SECTI ON 80HHC FOR REDUCING THE INDIRECT COSTS BY THE AMOUNT OF DEEMED EXPENDITURE. (IV) THE CIT[A] ERRED IN DIRECTING THE AO TO INCLU DE A SUM OF RS.1,18,964/- BEING SALES TAX @ 5% SURCHARGE @ 10% AND TURNOVER TAX @ 1% AS PART OF THE PROFITS FROM THE S ALE OF DEPB WHILE COMPUTING THE DEDUCTION U/S.80HHC. (V) THE CIT[A] OUGHT TO HAVE NOTED THAT AS PER THE SECOND PROVISO TO SEC.80HHC(3) WHAT IS TO BE CONSIDERED IS 90% OF THE SUM 2 REFERRED TO IN SEC.28(IID), BEING L90% OF ANY PROFI T ON THE TRANSFER OF THE DEPB SCHEME AND HENCE SALES TAX AND OTHER RE LATED TAXES SHOULD HAVE BEEN EXCLUDED FROM THE PROFITS ON THE TRANSFER OF DEPB NOT BEING PART OF PROFITS. 2. THIS APPEAL IS BEING MADE BEFORE THE ITAT IN VIE W OF THE FACT THAT THE MONETARY CEILING IS NOT APPLICABLE AS PER PARA 3 OF THE INSTRUCTION NO.02/2005 DTD. 24-10-2004 WHICH PROVIDES FOR THE F ILING OF APPEALS UNHINDERED BY THE MONETARY CEILING WHERE RECURRING QUESTION OF LAW ARISE. 3. 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 BE RESTORED. 3. AS REGARDS GROUNDS NO.1 (I), 1(II) AND 1 (III) BRIEF FACTS ARE THAT THE ASSESSEE FIRM WHICH IS ENGAGED IN THE BUSINESS OF EXPORT OF TOWELS FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME A T RS.11,26,230/-. THE ASSESSEE ALSO CLAIMED DEDUCTION U/S.80HHC OF THE IN COME TAX ACT. DURING THE ASSESSMENT PROCEEDINGS U/S.143[3], AO OB SERVED THAT IN ITS WORKING OF PROFIT & LOSS FROM EXPORT OF TRADING GOO DS HAS REDUCED 10% OF THE EXPORT INCENTIVES OF RS.5,52,627/- FROM THE TOTAL INDIRECT COST. AO DISALLOWED THE SAME ON THE GROUND THAT IT IS NOT IN CONFORMITY WITH THE PROVISIONS OF LAW. 4. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE C IT[A] WHO ALLOWED THE SAME BY FOLLOWING THE DECISION OF THE S PECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SURENDRA ENGG. REPORTED IN 86 ITD 121 (S.B) (MUM). AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 5. THE LD. DR RELIED ON THE ORDER OF THE AO WHILE T HE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT[A] AND ALSO SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF HERO EXPORTS REPORTED IN 295 ITR 464 , WHEREIN IT HAS 3 BEEN HELD THAT THE ASSESSEE WAS ENTITLED TO EXCLUDE THE COST ATTRIBUTABLE TO EXPORT INCENTIVES, COMMISSION, INTE REST ETC. IN ARRIVING AT THE EXPENSES ATTRIBUTABLE TO THE EXPORT TRADING. RE SPECTFULLY FOLLOWING THE DECISION OF THE APEX COURT THIS GROUND OF APPEA L IS REJECTED. 6. AS REGARDS GROUNDS NO.1 (IV) AND 1(V), WE FIND T HAT THIS ISSUE NEEDS RECONSIDERATION IN THE LIGHT OF THE GUIDELINE S GIVEN BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S TOPMAN EXP ORTS REPORTED IN 318 ITR [AT] 87. IN VIEW OF THE SAME WE REMAND THE MATTER BACK TO THE FILE OF THE AO FOR RECONSIDERATION IN ACCORDANC E WITH THE SAID DECISION. NEEDLESS TO MENTION THAT THE ASSESSEE SHA LL BE GIVEN A FAIR OPPORTUNITY OF HEARING. 7. GROUND NO.2 IS ONLY ACADEMIC IN NATURE AND NEEDS NO ADJUDICATION. 4. IN THE RESULT, REVENUES APPEAL IS ACCORDINGLY P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 24 TH DAY OF FEBRUARY, 2010. SD/- SD/- (B.RAMAKOTAIAH) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 24 TH FEBRUARY, 2010. P/-*