ITO 15(1)(4), MUMBAI V. FREEDOM FRAGRANCES, MUMBAI

ITA 5900/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93160 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 18-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N V NADKARNI
• Assessee Lawyers: GOVIND JHAVERI
• Keywords: Revised return
• Section: 143(3); 10AA

Judgement Text

M/S FREEDOM FRAGRANCES ITA NO. 5900 /M/201 2 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F , MUMBAI . . , , BEFORE SHRI G S PANNU , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIA L MEMBERITA ITA NO. : 5900 /MUM/20 1 2 ( ASSESSMENT YEAR: 200 9 - 1 0 ) INCOME TAX OFFICER 1 5 ( 1 ) (4) , MATRU MANDIR, MUMBAI - 400 007 VS M/S FREEDOM FRAGRANCES , 234A, NAGREE COMPOUND, 1 ST FLOOR, M A ROAD, NEAR NAGPADA SINGANAL, MADANPURA, MUMBAI - 400 008 .: PAN : AABFF 5374 R (APPELLANT) (RESPONDENT) APPELLANT BY : SMT N V NADKARNI RESPONDENT BY : SHRI VIJAY MEHTA & SHRI GOVIND JHAVERI /DATE OF HEARING : 11 - 05 - 20 15 / DATE OF PRONOUNCEMENT : 08 - 07 - 2015 ORDER PER AMIT SHUKLA , J.M. : THE A FORESAID APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST IMPUGNED ORDER DATED 04 . 07 .201 2 , PASSED BY CIT(A) - 26 , MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 2009 - 10 ON THE FOLLOWING GROUNDS: 1 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF DEDUCTION U/S 10AA AS THE ASSESSEE FAILED TO MAKE CLAIM U/S 10AA IN THE RETURNS OF INCOME, BOTH ORIGINAL AS WELL AS REVISED AND AS PER SPECIFIC PROVISIONS OF SEC. 80A(5) SUCH CLAIM IS ESSENTIALLY TO BE MADE IN THE RETURN OF INCOME. 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF DEDUC TION U/S 10AA THOUGH THE ASSESSEE FAILED TO FURNISH AN AUDIT REPORT AS PRESCRIBED IN SECTION 10AA(8) OF THE ACT. M/S FREEDOM FRAGRANCES ITA NO. 5900 /M/201 2 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSES S EE - FIRM IS ENGAGED IN THE BUSINESS OF TRADING, MANUFACTURING, IMPORTING & EXPORTING OF ATT A RS, PERFUME S, SPRAY PERFUMES , CHEMICALS, PERFUMERY & A ROMATIC COMPOUNDS, AGARBATTIS, COSMETICS AND SIMILAR OTHER PRODUCTS. IN THE COMPUTATION OF TOTAL INCOME FILED ALO N G WITH THE RETURN OF INCOME , THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IA O N THE PROFIT EARN ED AT RS. 2,07,69,580/ - . 3. BEFORE THE AO, THE ASSESSEE LATER ON CLAIMED THAT INSTEAD OF DEDUCTION U/S 80IA , T HE ASSE S SEE IS LIABLE FOR DEDUCTION U/S 10AA , AS ALL THE CONDITIONS LAID DOWN FOR CLAIMING OF DEDUCTION U/S 10AA ARE DULY AVAILABLE FROM RECORD. THE ASSES S EE ADMITTED THAT IN THE TAX AUDIT REPORT THERE WAS A MISTAKE IN FORM 3CD, WHICH WAS LATER ON RECTIFIED AND REVISE D TAX AUDIT REPORT WAS FILED BEFORE THE AO . DURING THE ASSESSMENT PROCEEDING, HOWEVER, THE AO DISAGREED WITH THE CONTENTION OF THE AS SESSEE AND HELD THAT BENEFIT OF SECTION 10AA CANNOT BE ENTERTAINED. THE GROUNDS FOR SUCH A REJECTION OF CLAIM WAS THAT , THE ASSESSEE HAD CLAIM ED DEDUCTION U/S 10AA ONLY AFTER RECEIVING SHOW CAUSE NOTICE, WHICH CANNOT BE ENTERTAINED AND SECONDLY, THE ASSESS EE SHOULD HAVE A RESERVE IN THE NAME OF SPECIAL ECONOMIC ZONE (SEZ) I NVEST M E NT R ESERVED A CCOUNT IN THE BALANCE SHEET. SINCE THE ASSESSEE HAS VIOLATED THIS CONDITION, THEREFORE, BENEFIT OF SECTION 10AA CANNOT BE ENTERTAINED. 4. BEFORE THE CIT(A), BESIDES REITERATING FACT THAT ASSE S SEE HAD DULY RECTIFIED THE AUDIT REPORT AND THAT CORRECT CLAIM SHOULD BE ALLOWABLE TO THE ASSESSEE, SUBMITTED THAT THE ASSESSEES UNIT IS LOCATED SEZ AT SURAT (GUJARAT) AND NATURE OF THE ACTIVITY OF THE ASSESSEE IS THAT OF MANUF ACTU RING AND EXPORT S OF PERFUME S . THE ASSESSEE HAD GIVEN ALL THE DETAILS , SUCH AS LOCATION OF THE FACTORIES, COPIES OF ELIGIBLE CERTIFICATES ISSUED BY THE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY AND ENTIRE SE T OF DOCUMENTS/ CERTIFICATES ISSU ED BY THE OFFICE OF THE DEVELOPMENT COMMISSIONER, SURAT, SPECIAL ECONOMIC ZONE. ALL THESE PARTICULAR S AND M/S FREEDOM FRAGRANCES ITA NO. 5900 /M/201 2 3 DOCUMENTS AND EVIDENCES GO TO SHOW THAT THE ASSESSEES CLAIM SQUARELY FALLS WITHIN THE PROVISIONS OF SECTION 10AA. ASSESSEES DETAIL SUBMISSION IN THI S REGARD BEFORE THE CIT(A) HAS BEEN INCORPORATED FROM PAGES 3 TO 9 OF THE APPELLATE ORDER. THE LD. CIT(A), ACCEPTED THE ASSESSEES CONTENTION AND DIRECTED THE AO TO ALLOW THE CLAIM U/S 10AA AFTER OBSERVING AND HOLDING AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT. AFTER CONSIDERING THE RIVAL SUBMISSIONS, IT IS NOTED THAT THE A.O HAS DENIED THE C LAIM OF THE APPELLANT U/S. 10AA OF THE LT ACT WHICH WAS MADE DURING THE ASSESSMENT PROCEEDINGS ON TWO TECHNICAL GROUNDS OF NON FILING OF REVISED RETURN AND NOT MAINTAINING THE 'SEZ REINVESTMENT RESERVE ACCOUNT'. ON BOTH THE GROUNDS, THE FINDINGS OF THE A.O ARE NOT TENABLE. AS REGARDS THE NON FILING OF REVISED RETURN, I DO AGREE WITH THE CONTENTION OF THE LEARNED A.R OF THE APPELLANT THAT FOR MAKING A NEW CLAIM OF DEDUCTION, IT IS NOT NECESSARY TO FILE A REVISED RETURN AS HAS BEEN HELD BY THE HON BLE JURISDI CTIONAL ITAT, MUMBAI, IN THE CASE OF M/S. NITCO PAINTS PVT. LTD.(SUPRA). IN THE SAID CASE, IT WAS HELD THAT THE ASSESSEE HAS THE RIGHT TO MAKE A NEW CLAIM DURING ASSESSMENT PROCEEDINGS WITHOUT RECOURSE TO REVISED RETURN AND IT WAS FURTHER HELD THAT THE DE CISION IN THE CASE OF GOETZ (INDIA) LTD. 284 ITR 323 DID NOT IMPINGE ON THE POWER OF THE APPELLANT TRIBUNAL U/S. 254 OF THE I.T ACT, 1961. THEREFORE, UNDER THESE CIRCUMSTANCES, IT IS HELD THAT THE CLAIM OF EXEMPTION U/S. 10AA OF THE I.T ACT MADE VIDE REVIS ED COMPUTATION DURING THE ASSESSMENT PROCEEDINGS WAS A GENUINE CLAIM WHICH DESERVES TO BE ALLOWED IF OTHER CONDITIONS OF SECTION 10AA ARE FULFILLED. AS REGARDS THE SECOND OBJECTION OF THE A0 THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 10AA BY NOT CREATING SEZ REINVESTMENT RESERVE ACCOUNT', I AGREE WITH THE CONTENTION OF THE APPELLANT THAT CREATION OF SUCH RESERVE IS NOT REQUIRED IN THE INITIAL M/S FREEDOM FRAGRANCES ITA NO. 5900 /M/201 2 4 YEARS. IN THIS REGARD, THE PROVISION OF SECTION 10AA ARE QUITE CLEAR WHEREIN AS PER THE PROVISIONS OF SECTION 10AA(1)(II), FOR FIRST TEN YEARS THE ASSESSEE IS NOT REQUIRED TO CREATE ANY RESERVE AND THE REQUIREMENT FOR CREATING THE RESERVE IS AFTER THE TEN YEARS WHICH IS PRESCRIBED UNDER THE PROVISIONS OF SECTION 10AA(1)(II). THEREFORE, BOTH THE OBJECTIONS FOR WHICH THE A.0 HAS DISALLOWED THE CLAIM OF THE APPELLANT U/S. 10AA OF THE I.T ACT HAVE NO GROUND. ACCORDINGLY, IT IS HELD THAT THE ASSESSEE HAS FULFILLED THE CRITERIA FOR AVAILING THE BENEFIT OF SECTION 10AA OF THE I.T ACT. ACCORDINGLY, IT IS HELD THAT DENIAL OF EXEMPTION IS NOT JUSTIFIED AND THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE SAME. 5. BEFORE US THE LD. DR SUBMITTED THAT SUCH A REVISED CLAIM CANNOT BE MADE WITHOUT FILING OF REVISED RETURN OF INCOME AND MOREOVER, THE AO HAS CATEGORICALLY OBS ERVED THAT SUCH A CLAIM WAS MADE ONLY WHEN SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AND CERTAIN CONDITIONS WERE ALSO NOT FULFILLED. HE THUS STRONGLY RELIED UP ON THE ORDER OF THE AO. 6. BEFORE US, THE LD. COUNSEL STRONGLY RELIED UPON THE ORDER OF THE C IT(A) AND SUBMITTED THAT IN THE SUBSEQUENT YEARS, THE AO HIMSELF HAS ALLOWED THE CLAIM OF DEDUCTION U/S 10AA WHICH IS EVIDENT FROM THE ASSESSMENT ORDER S PLACED IN PAPER BOOK FROM PAGES 39 TO 43. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL O F THE IMPUGNED ORDERS AND MATERIAL PLACED ON RECORD, WE FIND THAT FIRSTLY, AS REGARDS NON - CREATING OF SEZ INVESTMENT RESERVE ACCOUNT , T HE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT SUCH A RESERVE IS NOT ACQUIRED IN INITIAL YEARS AND SUCH A CONCLUSION AND FINDING OF CIT(A) IS LEGALLY CORRECT , BECAUSE THE PROVISION OF SECTION 10A A ( 1 )(II) PRES CRIBES THAT SUCH A CREATION OF RESERVE SHOULD BE MADE AFTER THE PERIOD OF TEN YEARS. REGARDING CLAIM MADE DURING M/S FREEDOM FRAGRANCES ITA NO. 5900 /M/201 2 5 THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE FIRST T IME, WE AGREE WITH THE CONTENTION OF THE ASSESSEE AS WELL AS FINDING OF THE CIT(A) THAT SUCH A CLAIM CAN BE MADE EVEN AT A LATER STAGE , PROVIDED ALL THE RELEVANT MATERIALS ARE AVAILABLE ON RECORDS. THE LD. CIT(A) HAS NOTED THAT ALL THE RELEVANT EVIDENCES A ND THE CONDITIONS FOR GRANTING BENEFITS/DEDUCTION U/S 10AA HAVE BEEN PLACED ON RECORD. FURTHER , AS POINTED OUT BY LD. COUNSEL THAT , FOR THE AY S 2010 - 11 AND 2011 - 12, THE AO HIMSELF HAS ALLOWED THE CLAIM U/S 10AA TO THE ASSESSEE . THUS , ON THESE FACTS, WE UPH OLD THE ORDER OF THE CIT(A) THAT ASSESSEE IS ELIGIBLE FOR CLAIM OF BENEFIT OF DEDUCTION U/S 10AA. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JU LY , 2015. SD/ - SD/ - ( . . ) ( ) ( G S PANNU ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 8 TH JU LY , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 26 , MUMBAI 4 ) THE CIT 1 5 , MUMBAI . 5 ) , , / THE D.R. F BENC H, MUMBAI. 6 ) COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS