COMPUTREE INFOTECH P. LTD, MUMBAI V. ITO 8(1)(2), MUMBAI

ITA 6119/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8196 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 18-07-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 09-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N SATHAY MOORTHY
• Keywords: Retrospective amendment
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C , MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NO.6119/MUM/2010 ASSESSMENT YEAR : 2001-02 M/S. COMPUTREE INFOTECH PVT. LTD. 17-AB/122, SAMHITA COMPLEX, SAKINAKA, ANDHERI (E) MUMBAI-400 072. PAN NO. AAACC 4487 C INCOME TAX OFFICER WARD 8(1)(2) MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI SANJAY C. SHAH RESPONDENT BY : SHRI N. SATHAY MOORTHY DATE OF HEARING : 18.7.2012 DATE OF PRONOUNCEMENT : 01.08.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 20.5.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2001-02. TH E DISPUTES RAISED BY THE ASSESSEE IN THIS APPEAL RELATE TO CLAIM OF D EDUCTION UNDER SECTION 80HHC AND UNDER SECTION 80HHE. THE ASSESSEE HAS ALSO RAI SED ITA NO.6119/M/10 A.Y.01-02 2 AN ADDITIONAL GROUND REGARDING COMPUTATION OF INDIRE CT EXPENSES IN RELATION TO THE EXPORT BUSINESS FOR DEDUCTION UNDER SECTI ON 80HHC. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FOR THE ASSESSMEN T YEAR 2001-02 HAD DECLARED NIL INCOME IN THE RETURN FILED O N 8.10.2001 AFTER CLAIMING DEDUCTION OF RS.4,94,310/- UNDER SECTION 80HHC. IN THE ORIGINAL ASSESSMENT MADE UNDER SECTION 143(3) ON 31.12.20 02, THE AO REJECTED THE CLAIM OF DEDUCTION UNDER SECTION 80HHC AND ASSE SSED THE TOTAL INCOME AT RS.4,94,310/-. IN APPEAL, CIT(A) HAD GIVEN PART RELIEF TO THE ASSESSEE. IN FURTHER APPEAL BY THE DEPARTMENT AG AINST THE ORDER OF CIT(A), THE TRIBUNAL IN ORDER DATED 10.5.2006 IN ITA NO.1783/M/2004 OBSERVED THAT THE GROUND RAISED BY THE REVENUE RELATED TO DEDUCTION UNDER SECTION 80HHC IN RESPECT OF DE PB INCOME AS THERE WERE LOSSES FROM EXPORT BUSINESS. THE TRIBUNAL HE LD THAT IN VIEW OF RETROSPECTIVE AMENDMENTS MADE TO SECTION 80HHC AL LOWING DEDUCTION IN RESPECT OF INCENTIVES EVEN IN CASE OF LOSSES, TH E CLAIM OF THE ASSESSEE REQUIRED FRESH EXAMINATION IN THE LIGHT OF AMENDED PROVISIONS. 3. IN THE FRESH ASSESSMENT PROCEEDINGS, ASSESSEE SUBMITTED THA T IT HAD TRADING EXPORT OF RS.60,25,320/- OUT OF TOTAL TU RNOVER OF RS.71,11,585/-, AND ASSESSEE HAD ALSO RECEIVED DEPB INCOME OF RS.7,55,153/-. IT WAS POINTED OUT THAT IN VIEW OF AM ENDED PROVISIONS, ITA NO.6119/M/10 A.Y.01-02 3 THE ASSESSEE WAS ENTITLED TO ADJUST THE DEPB INCOME AGAINST LOSSES IN TRADING OF EXPORT. THE AO HOWEVER, NOTED THAT THE A SSESSEE WHILE COMPUTING LOSSES FROM TRADING EXPORT HAD TAKEN THE INDI RECT EXPENSES AT A LESSER FIGURE BY REDUCING THEREFROM THE DIRECT EXP ENSES OF OTHER ACTIVITIES. THE AO DID NOT ACCEPT THE COMPUTATION MADE BY ASSESSEE AND OBSERVED THAT ALL EXPENSES OTHER THAN DIRECT EXPENSE S RELATING TO EXPORT OF TRADING GOODS WAS REQUIRED TO BE CONSIDERED A S INDIRECT EXPENSES. THE AO THUS COMPUTED THE LOSSES FROM TRADING EXP ORT AT RS.10,75,057/- UNDER SECTION 80HHC(3) AND THEREAFTER ADD ED 90% OF DEPB INCOME AT RS.7,55,753/- IN THE RATIO OF EXPORT TURNOVER TO TOTAL TURNOVER WHICH CAME TO RS.5,75,019/-. HE, THUS DETERMINE D THE PROFIT DERIVED FROM EXPORT AT RS.(-)5,00,038/-(1075057 75 5753). HE, THUS DENIED CLAIM OF DEDUCTION UNDER SECTION 80HHC. 4. THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED B EFORE CIT(A) THAT THE TRIBUNAL HAD DIRECTED THE AO TO RE-CO MPUTE DEDUCTION AS PER THE AMENDED PROVISIONS BUT THE AO EXCEEDED HIS JURISDICTION AND RE-COMPUTED INDIRECT COST OF TRADING GOODS WHICH HAD ALREADY BEEN COMPUTED IN THE ORIGINAL ASSESSMENT. ASSESSEE HAD ALSO RAISED AN ADDITIONAL GROUND BEFORE CIT(A) REQUESTING FOR CLA IM OF DEDUCTION UNDER SECTION 80HHE IN RESPECT OF EXPORT OF SOFTWARE PROD UCTS. CIT(A) REJECTED THE ADDITIONAL GROUND AND OBSERVED THAT NO S UCH CLAIM HAD BEEN MADE BY ASSESSEE IN THE RETURN AND, THEREFORE, THE RE WERE NO ITA NO.6119/M/10 A.Y.01-02 4 GOOD REASONS FOR ENTERTAINING SUCH CLAIM. AS REGARDS THE MERIT OF CLAIM, CIT(A) OBSERVED THAT THE AO HAD RIGHTLY COMPUTE D INDIRECT COST BY APPLYING RATIO OF EXPORT TURNOVER AND TOTAL TURN OVER AND SINCE THERE WAS NET LOSS DEDUCTION UNDER SECTION 80HHC HAD BEEN RIGHTLY DISALLOWED BY AO. AGGRIEVED BY THE DECISION OF CIT(A) ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL IN WHICH THE DECISION OF A UTHORITIES BELOW TO RE-COMPUTE INDIRECT COST HAS BEEN CHALLENGED. THE ASSESSEE HA S ALSO CHALLENGED THE ORDER OF CIT(A) REFUSING TO ENTERTAIN ADDITIONAL GROUND. FURTHER, ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND BEF ORE THE TRIBUNAL IN WHICH IT HAS BEEN PLEADED THAT DIRECT EXPE NSES ATTRIBUTABLE TO SOFTWARE BUSINESS SHOULD BE REDUCED FROM INDIRECT COST RE LATING TO EXPORT OF TRADING GOODS. 5. WE HAVE HEARD BOTH THE PARTIES IN THE MATTER. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL HAD RESTORED THE MAT TER TO THE AO FOR THE LIMITED PURPOSE OF CONSIDERING DEDUCTION UND ER SECTION 80HHC IN RESPECT OF INCENTIVES AS PER AMENDED PROVISIONS, BUT AO HAD EXCEEDED THE MANDATE AND PROCEEDED TO RE-COMPUTE INDIR ECT COST WHICH HAD ALREADY BECOME FINAL. THE AO HAD THUS EXCEEDE D THE JURISDICTION. IT WAS STRONGLY ARGUED THAT THE AO WAS NO T JUSTIFIED IN GOING BEYOND THE SCOPE OF DIRECTION GIVEN BY THE TRIBU NAL. HE, PLACED RELIANCE ON THE JUDGMENT OF HONBLE HIGH COURT OF ALLA HABAD IN CASE OF HARSINGAR GUTKHA (P) LTD. VS. INCOME TAX APPELLATE TRIB UNAL & ORS. ITA NO.6119/M/10 A.Y.01-02 5 (219 CTR 479) IN WHICH IT WAS HELD THAT WHEN DIRECTION IS ISSUED TO ANY AUTHORITY TO DO A CERTAIN THING IN CERTAIN MANNER THE THING MUST BE DONE IN THAT MANNER AND IN NO OTHER MANNER. SIMILAR LY REFERENCE WAS MADE TO JUDGMENT OF HONBLE HIGH COURT OF ALLAHABAD I N CASE OF SRI VINDHYA VASINI PRASAD GUPTA VS. CIT (186 ITR 253) IN W HICH IT WAS HELD THAT WHEN THE TRIBUNAL HAD REMANDED THE MATTER TO CONSIDER ONE ISSUE, THE AAC WAS NOT EMPOWERED TO GO INTO OTHER QUE STIONS. THE SAME VIEW HAD BEEN FOLLOWED BY THE TRIBUNAL IN THE CA SE OF ACIT VS. SRI RANGANATHA TRADERS (94 ITD 227 (HYD.)). SEVERAL O THER JUDGMENTS WERE ALSO CITED IN SUPPORT OF THE PLEA. IT WAS ACCORDIN GLY URGED THAT THE AO MAY BE DIRECTED TO ACCEPT INDIRECT COST COMPUTED AS PER ORIGINAL ASSESSMENT. THE LD. AR ALSO ARGUED THAT ADDITIO NAL GROUND RAISED BEFORE CIT(A) REGARDING DEDUCTION UNDER SECTION 80HHE WAS LEGAL GROUND WHICH WAS REQUIRED TO BE ADMITTED BY CI T(A) AND, THEREFORE, ORDER OF CIT(A) NOT ENTERTAINING THE ADD ITIONAL GROUND WAS NOT CORRECT. IT WAS SUBMITTED THAT THE ASSESSEE WAS LEGALLY ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80HHE. AS REGARDS ADDITIONA L GROUND RAISED BEFORE THE TRIBUNAL, IT WAS SUBMITTED THAT THE SAME AROSE FROM THE ORDERS OF AUTHORITIES BELOW AS THEY HAD RE-COMPUTED INDIRECT COST WHICH SHOULD BE COMPUTED CORRECTLY BY EXCLUDING DIRECT EXP ENSES OF OTHER ACTIVITIES. IT WAS ARGUED THAT IN CASE ASSESSEE WAS NOT ITA NO.6119/M/10 A.Y.01-02 6 SUCCEEDING ON THE MAIN GROUND THE AUTHORITIES BELOW MAY BE DIRECTED TO COMPUTE INDIRECT COST CORRECTLY AS CLAIMED IN THE ADDITI ONAL GROUND. 5.1 THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAD NOT CLAIMED DEDUCTION UND ER SECTION 80HHE IN RETURN OF INCOME NOR ANY DISPUTE HAD BEEN RAISE D BEFORE CIT(A) IN THE FIRST GROUND OF APPEAL. THEREFORE, SUCH GROUND COULD NOT BE ADMITTED IN THE SECOND ROUND OF APPELLATE PROCEEDIN GS. AS REGARDS DEDUCTION UNDER SECTION 80HHC, IT WAS SUBMITTED THAT THE T RIBUNAL HAD REMANDED THE MATTER FOR FRESH EXAMINATION AFTER CONSID ERING THE AMENDED PROVISIONS AND THEREFORE, AO WAS ENTITLED TO L OOK INTO COMPUTATION OF INDIRECT COST. IT WAS ACCORDINGLY URGED TH AT THE APPEAL FILED BY THE ASSESSEE SHOULD BE DISMISSED. 6. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE RAISED IS IN RELATION TO CLAIM OF DEDUCTION UNDER SECTION 80HHC AND ALSO UNDER SECTION 80HHE O N WHICH ADDITIONAL GROUNDS HAVE ALSO BEEN RAISED, ONE BEF ORE CIT(A) AND THE OTHER BEFORE THE TRIBUNAL. THE ASSESSEE WAS IN THE B USINESS OF TRADING INCLUDING EXPORT OF TRADING GOODS. THE ASSESSEE HAD ALSO EXPORTED SOFTWARE PRODUCTS. TOTAL TURNOVER OF THE ASSESSEE WAS RS.71,11,585/- WHICH INCLUDED TRADING EXPORT OF RS.60,2 5,320/-. ASSESSEE IN THE RETURN OF INCOME HAD CLAIMED DEDUCTION UN DER SECTION ITA NO.6119/M/10 A.Y.01-02 7 80HHC. SINCE ASSESSEE WAS IN TRADING OF GOODS, THE PROFIT F ROM EXPORT OF TRADING GOODS UNDER SECTION 80HHC(3) IS REQUIRED TO BE COMPUTED BY REDUCING DIRECT COST AND INDIRECT COST RELATING TO TR ADING GOODS FROM EXPORT TURNOVER. THE AO COMPUTED THE PROFIT FROM EXP ORT OF TRADING GOODS BY THE ABOVE METHOD WHICH CAME TO LOSS. THE AO, TH EREFORE, DID NOT ALLOW CLAIM OF DEDUCTION UNDER SECTION 80HHC IN THE ORIGINAL ASSESSMENT. CIT(A) HAD ALLOWED PART RELIEF AGAINST WHIC H REVENUE HAD FILED APPEAL BEFORE THE TRIBUNAL. A PERUSAL OF THE O RDER OF THE TRIBUNAL DATED 10.5.2006 IN ITA NO.1783/M/2004 SHOWS THAT THE GROUND RAISED BY THE REVENUE RELATED TO ALLOWABILITY OF DEDUCTION UNDER SECTION 80HHC IN RESPECT OF DEPB WHEN THERE WAS LOSS FROM EXPORT O F TRADING GOODS. 6.1 THE TRIBUNAL RESTORED THE ISSUE TO THE AO FOR RE-E XAMINATION IN THE LIGHT OF AMENDED PROVISIONS AS PER WHICH DEDUCTION UNDER SECTION 80HHC WAS ALLOWABLE IN RESPECT OF INCENTIVES EVEN IF THERE WAS LOSS FROM EXPORT BUSINESS. THUS THE LIMITED ISSUE RESTORED BY THE TRIBUNAL WAS COMPUTATION OF DEDUCTION UNDER SECTION 80HHC IN TERMS O F AMENDED PROVISIONS WHICH ONLY RELATED TO ALLOWANCE OF D EDUCTION UNDER SECTION 80HHC IN RESPECT OF INCENTIVES SUCH AS DEPB. T HE AMENDED PROVISIONS DID NOT COVER COMPUTATION OF INDIRE CT COST IN RELATION TO EXPORT OF TRADING GOODS UNDER SECTION 80HHC( 3). THE AO IN THE ORIGINAL ASSESSMENT HAD COMPUTED THE DIRECT AND INDI RECT COST IN A ITA NO.6119/M/10 A.Y.01-02 8 PARTICULAR MANNER WHILE COMPUTING PROFIT/LOSS FROM THE EXPORT OF TRADING GOODS WHICH HAD BECOME FINAL AS THIS ASPECT HAD NOT BEEN DISPUTED BY THE REVENUE BEFORE THE TRIBUNAL. THEREFO RE, IN THE FRESH ASSESSMENT IN PURSUANCE OF DIRECTION OF ITAT, AO IS NOT EM POWERED TO DISTURB INDIRECT COST COMPUTED IN THE ORIGINAL ASSESSMENT. T HIS POSITION IS SETTLED BY OTHER JUDGMENTS SOME OF WHICH HAVE BEEN RE FERRED BY THE LD. AR AS MENTIONED EARLIER. WE ARE, THEREFORE, UNAB LE TO SUSTAIN THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO RE-WORKIN G THE INDIRECT COST. THE ORDER OF CIT(A) IS, THEREFORE, SET ASIDE ON TH IS POINT AND CLAIM OF THE ASSESSEE IS ALLOWED. AS WE HAVE ALLOWED THE CLAIM OF THE ASSESSEE ON MERIT, IT IS NOT NECESSARY FOR US TO GO INTO THE ADDITIONAL GROUNDS RAISED BEFORE THE TRIBUNAL REGARDING EXCLUSION OF DIRECT EXPENSES RELATING TO OTHER ACTIVITIES WHILE COMPUTING I NDIRECT COST OF TRADING GOODS. AS REGARDS THE ADDITIONAL GROUND RAISED BEFORE CIT(A) REGARDING CLAIM OF DEDUCTION UNDER SECTION 80 HHE, WE F IND, THAT SUCH CLAIM HAD NEITHER BEEN MADE IN THE RETURN OF INCOME N OR AT THE TIME OF ORIGINAL ASSESSMENT OR IN APPEAL AGAINST THE ORIGINAL ASSE SSMENT. THEREFORE, SUCH CLAIM CAN NOT BE MADE IN THE FRESH PROCEE DINGS IN PURSUANCE OF DIRECTION OF ITAT WHICH WAS LIMITED TO EXAM INATION OF CLAIM OF DEDUCTION IN RELATION TO INCENTIVES AS PER AMEN DED PROVISIONS. THE GROUND RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL ON THIS ISSUE IS, THEREFORE, REJECTED. ITA NO.6119/M/10 A.Y.01-02 9 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 1.8.2012. SD/- SD/- (D. MANMOHAN) VICE PRESIDENT (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 1.8.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.