TOTAL PACKAGING SERVICES, MUMBAI V. ITO WD 15(1)(3), MUMBAI

ITA 6231/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4285 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 26-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 08-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JOTNILAKSHMI NAYAK
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, M UMBAI . . , . . '# '# '# '# , $ $ $ $ % % % % BEFORE SHRI R.K. GUPTA, JM, AND SHRI N. K. BILLAIYA , AM /. I.T.A. NO.6231/MUM/2011 ( & & & & '& '& '& '& / ASSESSMENT YEAR: 2007-2008) TOTAL PACKAGING SERVICES, BLUE ROSE INDUSTRIAL ESTATE, GALA NO. 41 GROUND FLOOR, NEXT TO JAYA PETROL PUMP, WESTERN EXPRESS HIGHWAY BORIVALI (EAST) MUMBAI- 400 066 / VS. INCOME TAX OFFICER- 15(1) (3) MUMBAI. ( $ /. )* /. PAN/GIR NO. : AADFT0749C ( (+ / APPELLANT ) : ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY : SHRI SATISH R. MODY ,-(+ . / RESPONDENT BY : SHRI JOTNILAKSHMI NAYAK 0$ / DATE OF HEARING : 26.06. 2013 23' 0$ /DATE OF PRONOUNCEMENT : 10 .07.2013 4 4 4 4 / O R D E R PER : R.K. GUPTA, JM THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF LD. CIT(A) -26, DATED 18.08.2011, RELATING TO THE ASSESSMENT YEAR 2007-0 8. 2 ITA 6231 M 2011 (AY-2007-08) TOTAL PACKAGING SERVICE VS. ITO 2. THE ASSESSEE IS OBJECTING, CONFIRMING THE DISALL OWANCE U/S 80IB ON ACCOUNT OF AN EXCHANGE RATE DIFFERENCE AT RS. 23,90,608/- ON ACCO UNT OF VAT REFUND OF RS. 8,63,017/-. 3. THE AO DISALLOWED THE DEDUCTION U/S 80IB ON EXCH ANGE RATE DIFFERENCE AND ON VAT REFUND BY OBSERVING THAT THE INCOME UNDER THESE TWO HEADS HAVE NOT BEEN DERIVED DIRECTLY FROM THE INDUSTRIAL UNDERTAKING AND THE SA ME CANNOT BE SAID TO HAVE FIRST DEGREE NEXUS WITH THE PROFIT OF INDUSTRIAL UNDERTAKING. TH E AO HAS RELIED UPON THE DECISION IN CASE OF M/S LIBERTY INDIA 317 ITR, 218, AND IN CASE OF STERLING FOODS 237 ITR 579. THE AO ALSO OBSERVED IN ORDER THAT VAT REFUND RELATES T O ASSESSMENT YEAR 2005-06 AND 2006-07. SINCE, THE VAT REFUND DOES NOT RELATE THE CURRENT YEAR, THEREFORE, IT CANNOT BE SAID TO BE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKI NG DURING THE YEAR. THE CIT(A) WAS ALSO IN AGREEMENT WITH THE FINDING OF LD. AO. ACCO RDINGLY, HE CONFIRMED HIS ORDER. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE MATERIAL ON RECORD, WE FOUND THAT THE ISSUE IN RESPECT OF FOREIGN EXCHANGE RATE IS DECIDED BY THE HONBLE BOMBAY HIGH IN THE CASE OF CIT VS. RACHNA UDHYOG 23 0 CTR(BOM) 72 BY WHICH IT HAS BEEN HELD THAT:- HELD: THE DIFFERENCE ON ACCOUNT OF EXCHANGE RATE FLUCTUAT ION IS LIABLE TO BE ALLOWED U/S. 80-IB. THE EXCHANGE RATE FLUCTUATION ARISES OUT OF AND IS DIRECTLY RELATED TO THE SALE TRANSACTION INV OLVING THE EXPORT OF GOODS OF THE INDUSTRIAL UNDERTAKING. THE EXCHANGE RATE FL UCTUATION BETWEEN THE RUPEE EQUIVALENT OF THE VALUE OF THE GOODS EXPORTED AND THE ACTUAL RECEIPTS WHICH ARE REALIZED ARISES ON ACCOUNT OF THE SALE TR ANSACTION. THE DIFFERENCE ARISES PURELY AS A RESULT OF A FLUCTUATION IN THE R ATE OF EXCHANGE BETWEEN THE DATE OF EXPORT AND THE DATE OF RECEIPT OF PROCEEDS, SINCE THERE IS NO VARIATION IN THE SALE PRICE UNDER THE CONTRACT. S YNTEL LTD. (IT APPEAL NOS. 1974, 1976 AND 1976 OF 2008, DECIDED ON 15 TH DECEMBER, 2009) FOLLOWED. 5. RESPECTIVELY FOLLOWING THE DECISION OF THE HONB LE JURISDICTION HIGH COURT, WE DIRECT TO THE AO TO ALLOW DEDUCTION 80-IB ON EXCHAN GE RATE ITSELF. 3 ITA 6231 M 2011 (AY-2007-08) TOTAL PACKAGING SERVICE VS. ITO 6. REGARDING VAT REFUND, WE FOUND THAT NO INFIRMITY IN THE FINDING OF THE LOWER AUTHORITY AS VAT REFUND DOES NOT RELATE TO THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THIS GROUND IS REJECTED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. 06 &0470 )0 8' ORDER PRONOUNCED ON 10 TH DAY JULY, 2013 . 4 23' 6 10. 07. 2013 3 SD/- SD/- ( N. K. BILLAIYA ) ( R.K. GUPTA ) $ / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI: DATED : 10. 07. 2013 . /. PRAMOD KUMAR, PS 4 4 4 4 ,0 ,0 ,0 ,0 :'0 :'0 :'0 :'0 / COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT 3. ; ) ( / THE CIT(A) 4. ; / CIT - CONCERNED 5. < ,0 , , / DR, ITAT, MUMBAI 6. =& > / GUARD FILE 4 4 4 4 / BY ORDER, ? ?? ? / 8 8 8 8 ) ) ) ) (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI