KROMBACH INDIA P. LTD, MUMBAI V. ITO WD 9(2)(2), MUMBAI

ITA 5996/MUM/2010

• Counselvise Citation: 599619914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 02-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Keywords: Reassessment proceedings
• Section: 80HHC; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: MUMBAI BEFORE SHRI G.E. VEERABHADRAPPA, PRESIDENT AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.5996/MUM/2010 (ASSESSMENT YEAR: 2003-04) KROMBACH INDIA PVT. LTD., A.K. INDUSTRIAL ESTATE, OPP. A.K. TOWER, VEER SARVARKAR FLYOVER, S.V. ROAD, GOREGAON (WEST), MUMBAI -400 062 ..........APPELLANT VS INCOME TAX OFFICER WARD NO.9(2)(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ..... RESPONDENT PAN: AAACK 9150 A APPELLANT BY: SHRI JITENDRA SANGHVI RESPONDENT BY: SHRI P.K.B. MENON DATE OF HEARING: 23.11.2011 DATE OF PRONOUNCEMENT: 28.12.2011 O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A) -20, MUMBAI DATED 17.05.2010 FOR THE A.Y. 2003-04. 2. IN THE FIRST GROUND THE ASSESSEE HAS CHALLENGED THE NOTICE ISSUED U/S.148 TO THE ASSESSEE. THE LD. COUNSEL SU BMITS THAT AS PER THE INSTRUCTIONS OF THE ASSESSE, HE IS NOT PRESSING GROUND NO.1 ON THE VALIDITY OF THE REASSESSMENT PROCEEDINGS, AS ALL OT HER GROUNDS ARE COVERED ON MERIT IN FAVOUR OF THE ASSESSEE. AS GRO UND NO.1 IS NOT PRESSED THE SAME IS DISMISSED AS NOT PRESSED. 3. GROUND NOS.2, 3 & 4 READ AS UNDER:- ITA 5996/MUM/2010 KROMBACH INDIA PVT. LTD. 2 2. THE LEARNED CIT (A) ERRED IN NOT DIRECTING THE ASSESSING OFFICER, WHILE COMPUTING BOOK PROFIT, TO CALCULATE PROFITS ELIGIBLE FOR DEDUCTION U/S.80HHC UNDER CLAUSE (IV) OF EXPLANATION TO SECTION 115JB WITH REFERENCE TO PROF ITS AS PER THE PROFIT AND LOSS ACCOUNT AND THEREBY CONFIRM ING THE ACTION OF ASSESSING OFFICER COMPUTING THE PROFITS A S PER WORKING UNDER THE HEAD PROFITS AND GAINS OF BUSINE SS OR PROFESSION. YOUR APPELLANT SUBMITS THAT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT (A) OUGHT TO HAVE HELD THAT WHILE COMPUTING BOOK PROFITS, DEDUCTION U/S.80 HHC IS TO E WORKED OUT BASED ON PROFITS AS PER PROFIT AND LOSS ACCOUNT 3. THE LEARNED CIT (A) ERRED IN NOT DIRECTING THE A SSESSING OFFICER TO WORK OUT PROFITS ELIGIBLE FOR DEDUCTION U/S.80HHC UNDER CLAUSE (IV) OF EXPLANATION TO SECT ION 115JB WITH REFERENCE TO PROFITS AS PER THE PROFIT & LOSS ACCOUNT AND THEREBY ERRED IN CONFIRMING THE DEDUCTI ON U/S.80HHC AT RS.4,58,268 WHILE APPLYING THE WORKING OF THE SAME UNDER THE NORMAL PROVISIONS OF THE ACT. YOUR APPELLANT SUBMITS THAT UNDER THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE THE CIT (A) OUGHT TO HAVE HELD THAT PROFITS ELIGIBLE FOR DEDUCTION U/S.80HHC OUG HT TO HAVE BEEN WORKED OUT AT RS.32,51,803 BASED ON THE P ROFITS AS PER THE BOOKS AND ACCORDINGLY A SUM OF RS.32,51, 803 OUGHT TO HAVE BEEN DECIDED WHILE WORKING DOWN OF TH E DEDUCTION U/S.80HHC TO 50%. 4. THE LEARNED CIT (A) ERRED IN NOT DIRECTING THE A SSESSING OFFICER TO COMPUTE PROFITS ELIGIBLE FOR DEDUCTION U/S.80HHC WHILE COMPUTING BOOK PROFITS BY APPLYI NG THE PROVISIONS OF SECTION 80HHC(3) OR SECTION 80HHC (3A) INSTEAD OF SECTION 80HHC(1B) AND THEREBY ERRED IN ITA 5996/MUM/2010 KROMBACH INDIA PVT. LTD. 3 CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF S CALING DOWN OF THE DEDUCTION U/S.80HHC TO 50%. YOUR APPELLANT SUBMITS THAT SUBMITS THAT WHILE COM PUTING BOOK PROFITS PROVISIONS OF SECTION 80HHC(1B) ARE NOT APPLICABLE AND THEREFORE SUBMITS THAT THE LEARNED C IT (A) OUGHT TO HAVE HELD THAT THE DEDUCTION IN RESPECT OF PROFITS ELIGIBLE FOR DEDUCTION U/S.80HHC OUGHT TO BE GRANT ED AT 100% AS AGAINST 50% WORKED OUT BY THE ASSESSING OFFICER. 4. THE ISSUE IN CONTROVERSY IS WHETHER FOR COMPUTI NG THE BOOK PROFIT U/S.115JB, THE QUANTUM OF DEDUCTION U/S.80HH C IS TO BE WORKED OUT WITH REFERENCE TO THE PROFIT AS PER THE PROFIT & LOSS ACCOUNT DETERMINED OR AS DETERMINED UNDER NORMAL PROVISIONS OF THE ACT. 5. BRIEFLY STATED THE FACTS ARE AS UNDER. THE ASSE SSEE FILED ITS RETURN OF INCOME FOR THE A.Y. 2003-04 ON 15.10.2003 DECLARING BOOK PROFIT U/S.115JB AT ` 8,36,563/-, AFTER REDUCING THE DEDUCTION WORKED OUT U/S.80HHC OF ` 31,64,146/-. THE ASSESSEES CASE WAS ORIGINALLY COMPLETED U/S.143(3) VIDE ASSESSMENT ORDER DATED 17 .10.2005 AND WHILE DETERMINING THE BOOK PROFIT U/S.115JB, DEDUCT ION U/S.80HHC WAS WORKED OUT AT ` 32,52,803/-, AFTER CONSIDERING THE PROFIT AS PER THE PROFIT AND LOSS ACCOUNT. SUBSEQUENTLY, THE ASS ESSMENT WAS REOPENED ON WORKING OUT DEDUCTION U/S.80HHC FOR THE PURPOSE OF COMPUTING THE BOOK PROFIT U/S.115JB. THE A.O. CONS IDERED THE PROVISIONS OF SEC.80HHC AS PER THE NORMAL PROVISION S OF THE INCOME- TAX ACT AND WORKED OUT DEDUCTION U/S.80HHC TO THE E XTENT OF ` 4,58,268/-. THE LD. COUNSEL SUBMITS THAT NOW THE I SSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE ON BOTH COUNTS- ( I) THE ELIGIBLE PROFIT IS TO BE CONSIDERED AS PER THE PROFIT & LOSS ACCOUN T FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S.80HHC WHILE DETERMINING THE BOOK PROFIT U/S.115JB AND (II) SUNSET CLAUSE, I.E. PHASE -WISE WITHDRAWAL OF THE DEDUCTION INSERTED BY WAY OF SUB-SEC.(1B) TO SE C.80HHC HAS NO ITA 5996/MUM/2010 KROMBACH INDIA PVT. LTD. 4 APPLICATION AND 100% PROFIT AS PER THE PROFIT & LOS S ACCOUNT HAS TO BE REDUCED WHILE COMPUTING THE ALLOWABLE DEDUCTION U/S .80HHC TO DETERMINE THE BOOK PROFIT. HE PLACED HIS RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF AJANTA PHA RMA LTD. VS. CIT 327 ITR 305. THE LD. D.R. FAIRLY CONCEDED THAT THE ISSUE FAIRLY STANDS COVERED IN FAVOUR OF THE ASSESSEE. 6. WE FIND THAT IN THE CASE OF AJANTA PHARMA LTD. V S CIT 327 ITR 305(S.C), HONBLE SUPREME COURT HAS CONSIDERED BOTH THE ISSUES ARISING IN THIS APPEAL I.E. (I) THE ELIGIBLE PROFIT IS TO BE CONSIDERED AS PER THE PROFIT & LOSS ACCOUNT FOR THE PURPOSE OF CO MPUTING THE DEDUCTION U/S.80HHC WHILE DETERMINING THE BOOK PROF IT U/S.115JB AND (II) SUNSET CLAUSE, I.E. PHASE-WISE WITHDRAWAL OF THE DEDUCTION INSERTED BY WAY OF SUB-SEC.(1B) TO SEC.80HHC HAS NO APPLICATION AND 100% PROFIT AS PER THE PROFIT & LOSS ACCOUNT IS TO BE CONSIDERED WHILE COMPUTING DEDUCTION U/S.80HHC TO DETERMINE THE BOO K PROFIT. IN THE SAID DECISION, THEIR LORDSHIPS HAVE MADE THE DI STINCTION BETWEEN ELIGIBILITY AND THE DEDUCTIBILITY. IT IS FURTH ER HELD THAT THE ELIGIBLE PROFIT CANNOT BE REDUCED TO 80% AS PROVIDED IN SUB- SEC.(1B) TO SEC.80HHC WHICH IS POPULARLY KNOWN AS SUNSET CLAUSE . WE, THEREFORE, RESPECTFULLY FOLLOWING THE PRINCIPLES LA ID DOWN IN THE CASE OF AJANTA PHARMA LTD. (SUPRA,) ALLOW GROUND NO.2, 3 & 4 AND DIRECT THE A.O. TO ALLOW THE DEDUCTION ACCORDINGLY. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 8TH DECEMBER, 2011. SD/- SD/- ( G.E. VEERABHADRAPPA ) PRESIDENT ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE : 28TH DECEMBER, 2011 ITA 5996/MUM/2010 KROMBACH INDIA PVT. LTD. 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) -8, MUMBAI. 4) THE CIT-4, MUMBAI. 5) THE D.R. A BENCH, MUMBAI. BY ORDER ASSTT. REGISTRAR I.T.A.T., MUMBAI ORDER PRONOUNCED IN THE OPEN COURT ON 28.12.2011. SD/- SD/- (JSR) (RSP) *CHAVAN