DCIT Cent Cir - 13, Mumbai V. Mexin Medicaments Pvt Ltd, Mumbai

ITA 6496/MUM/2003

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1351 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 21-06-2010
• Assessment Year: misc
• Appeal Filed On: 03-10-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Keywords: Retrospective amendment; Tax effect
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I BEFORE SHRI N.V. VASUDEVAN (JM) & PRAMOD KUMAR (AM) I.T.A.NO. 6496/MUM/2003 (ASSESSMENT YEAR : 1998-9 9) DCIT CENTRAL CIRCLE-13 C.R. 3, 11 TH FLOOR OLD CGO BUILDING ANNEXE M.K. ROAD MUMBAI-400 020. VS. MEXIN MEDICAMENTS P. LTD. 142 AB, KANDIVALI INDL. ESTATE KANDIVLI WEST MUMBAI. APPELLANT RESPONDENT PAN/GIR NO. : AAACH3580G ASSESSEE BY : NONE DEPARTMENT BY : SHRI SUMEET KUMAR ORDER PER N.V. VASUDEVAN, JM :- THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 19.6.2003 OF LEARNED CIT(A)-CENTRAL CIRCLE-13, MUMB AI RELATING TO A.Y. 1998-99. 2. THERE IS A DELAY OF 6 DAYS IN FILING THE PRESENT APPEAL. ORIGINALLY THE TRIBUNAL PASSED AN ORDER DATED 26.9.2008 CONDON ING THE DELAY IN FILING THE APPEAL, BUT ULTIMATELY DISMISSED THE APP EAL ON THE GROUND THAT THE TAX EFFECT INVOLVED IN THE APPEAL WAS LESS THAN RS. 2 LAKHS; AND THEREFORE REVENUE COULD NOT HAVE FILED THE APPEAL B EFORE THE TRIBUNAL. LATER ON, THE REVENUE HAD FILED A MISCELLANEOUS APP LICATION NO. 22/MUM/2009 POINTING OUT THAT SINCE A LEGAL ISSUE I S INVOLVED AND SUCH ISSUE WAS RECURRING ISSUE IN THE CASE OF THE ASSESS EE, APPEAL COULD BE FILED EVEN THOUGH TAX EFFECT WAS LESS THAN RS. 2 LA KHS. THE TRIBUNAL ACCEPTED THIS MISCELLANEOUS APPLICATION AND PASSED THE ORDER DATED 25.9.2009 RECALLING ITS EARLIER ORDER DATED 26.9.20 08. MEXIN MEDICAMENTS P. LTD. 2 3. THE ONLY GROUND OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS :- LEARNED CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S . 80HHC IN THE CASE OF THE ASSESSEE WITHOUT APPRECIATING THE F ACT THAT THE ASSESSEE HAS INCURRED LOSS IN ITS BUSINESS AND THE PRINCIPLES LAID DOWN BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/ S. IPCA LABORATORIES LTD., 251 ITR 420. THE ORDER OF LEARN ED CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 4. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF PHARMACEUTICALS AND FORMULATIONS. TH E ASSESSEE CLAIMED DEDUCTION U/S. 80HHC OF THE ACT IN RESPECT OF THE V ALUE OF GOODS EXPORTED BY THE ASSESSEE AS A SUPPORTING MANUFACTUR ER THROUGH M/S. IPCA LABORATORIES AS A EXPORT HOUSE OR TRADING HOUS E. THE ASSESSEE HAD FILED DISCLAIMER CERTIFICATE FROM IPCA LABORATORIES IN RESPECT OF THE EXPORTS BY THE ASSESSEE THROUGH IT. THE ASSESSING O FFICER, HOWEVER, NOTICED THAT M/S. IPCA LABORATORIES THE EXPORT HOUS E OR TRADING HOUSE, HAD INCURRED A LOSS. THE ASSESSING OFFICER WAS OF T HE VIEW THAT THE EXPORT HOUSE WHICH HAD GIVEN DISCLAIMING CERTIFICATE WAS I TSELF NOT ENTITLED FOR DEDUCTION U/S. 80HHC; AND THEREFORE THE ASSESSEE SH OULD NOT BE ALLOWED BENEFIT OF DEDUCTION U/S. 80HHC. 4. BEFORE LEARNED CIT(A), THE ASSESSEE SUBMITTED TH AT DEDUCTION U/S. 80HHC WHICH THE ASSESSEE WAS CLAIMING AS A SUPPORTI NG MANUFACTURER IS NOT INTERLINKED WITH THE EXISTENCE OF PROFIT IN THE HANDS OF THE EXPORT HOUSE. IT WAS CONTENDED THAT ONCE VALID DISCLAIMER CERTIFICATE IS ISSUED, DEDUCTION HAS TO BE ALLOWED TO THE ASSESSEE. REFERE NCE TO THE PROVISIONS OF SECTION 80HHC(1A), (3A) & (4A) WERE MADE BY THE ASSESSEE. IT WAS SUBMITTED THAT U/S. 80HHC(1A), ENTITLEMENT OF SUPPO RTING MANUFACTURER IS DEPENDENT ON PROFITS DERIVED BY THE SAID SUPPORT ING MANUFACTURER FROM THE SALE OF GOODS AND MERCANTILE TO EXPORT HOU SE OR TRADING HOUSE, IN RESPECT OF WHICH, CERTIFICATE HAS BEEN ISSUED TO THE ASSESSEE. U/S. 80HHC(3A), PROFITS DERIVED BY THE SUPPORTING MANUFA CTURER HAS TO BE ARRIVED AT ON THE BASIS OF PROFITS EARNED BY THE SU PPORTING MANUFACTURER ON THE BASIS OF EXPORT TURNOVER GIVEN IN DISCLAIMER CERTIFICATE IN FAVOUR OF THE SUPPORTING MANUFACTURER. IT WAS ALSO SUBMITTED THAT IN EARLIER MEXIN MEDICAMENTS P. LTD. 3 ASSESSMENT YEARS, THE ASSESSEE HAS BEEN ALLOWED BEN EFIT OF SECTION 80HHC ON THE BASIS OF DISCLAIMER CERTIFICATE WHEN I T HAD PROFIT ON SUCH ACTIVITY. ON CONSIDERATION OF THE ABOVE SUBMISSIONS , LEARNED CIT(A) HELD AS FOLLOWS :- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE FACTS ON RECORD AS ALSO THE RELEVANT STATUTORY PROV ISIONS. IT IS A MATTER OF RECORD THAT THE APPELLANT TO BEGIN WITH H AD FILED A LOSS RETURN AND THE INCOME HAS BEEN ASSESSED FOR THE YEA R AT A SUBSTANTIALLY LARGE POSITIVE INCOME. IT IS A MATTER OF RECORD THAT IN VIEW OF THE LOSS RETURN THE APPELLANT WAS NOT ENTIT LED TO ANY DEDUCTION UNDER CHAPTER VIA WHICH INCLUDES THE DEDU CTION U/S. 80HHC. AS PER THE FIGURES OF ASSESSED INCOME, AND I N VIEW OF SECTION 80HHC(1A) THE APPELLANT HAD PROFIT DERIVED FROM SALE OF GOODS TO THE EXPORT HOUSE OR THE TRADING HOUSE IN R ESPECT OF WHICH THE DISCLAIMER CERTIFICATE HAS BEEN ISSUED BY THE S AID EXPORT HOUSE OR TRADING HOUSE. IN VIEW OF SUB-SECTION 3A(B) THE PROFIT DERIVED BY THE ASSESSEE, A SUPPORTING MANUFACTURER BEING A POS ITIVE FIGURE (AS PER ASSESSED INCOME) IT WAS ENTITLED TO APPROPR IATE DEDUCTION U/S. 80HHC. IT IS ALSO A MATTER OF RECORD THAT IN E ARLIER YEARS UNDER IDENTICAL CIRCUMSTANCES THE APPELLANT HAS BEE N ALLOWED BENEFIT OF DEDUCTION U/S. 80HHC AS A SUPPORTING MAN UFACTURER. I HAVE ALSO GIVEN A THOUGHT ON THE APPELLANTS ARGUME NT THAT THE ENTITLEMENT OF THE APPELLANT FOR DEDUCTION U/S. 80H HC IS GOVERNED BY PROVISIONS OF SUB-SECTION 1A AND SUBSECTION 3A(B ) AND THE SAME IS NO WAY AFFECTED BY THE PROFIT/LOSS ON THE E XPORT ACTIVITY OF THE PRINCIPAL. DURING THE HEARING THE APPELLANT HAD FILED A DETAILED WORKING OF CLAIM OF DEDUCTION U/S. 80HHC ON THE BAS IS OF THE ASSESSED INCOME WHICH MAY YET BE MODIFIED WHILE GIV ING EFFECT TO THE PRESENT APPELLATE ORDER. CONSEQUENTLY, A GROSS TOTAL INCOME AND THE DEDUCTION U/S. 80HHC WILL GET SUITABLY MODI FIED. CONSIDERING THE RELEVANT PROVISION, THE APPELLANTS ARGUMENT AND THE FACT REMAINING THAT IN EARLIER YEARS UNDER IDEN TICAL CIRCUMSTANCES THE CLAIM HAVING BEEN ALLOWED BY THE ASSESSING AUTHORITIES. I FEEL THE CLAIM OF THE APPELLANT ON T HIS ISSUE SHOULD BE CONSIDERED FAVOURABLY AND THE APPELLANT WOULD BE ENTITLED TO APPROPRIATE RELIEF U/S. 80HHC BEING A SUPPORTING M ANUFACTURER. HOWEVER, SUCH RELIEF WOULD HAVE TO BE CALCULATED ON THE REVISED TOTAL INCOME AFTER GIVING EFFECT TO THE PRESENT APP ELLATE ORDER. 5. AGGRIEVED BY THE AFORESAID ORDER OF LEARNED CIT( A), THE REVENUE HAS RAISED AFORESAID GROUND OF APPEAL BEFORE THE TRIBUN AL. MEXIN MEDICAMENTS P. LTD. 4 6. WE HAVE HEARD THE SUBMISSIONS OF LEARNED DR, WHO REITERATED THE STAND OF THE REVENUE AS REFLECTED IN THE GROUNDS OF APPEAL. WE NOTICE THAT IN THE CASE OF IPCA LABORATORIES, 251 ITR 420, HON' BLE BOMBAY HIGH COURT HAS HELD THAT FOR BEING ELIGIBLE FOR DEDUCTIO N U/S. 80HHC(1), THERE SHOULD BE POSITIVE PROFIT U/S. 80HHC(3) AND ONLY TH EN, THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S. 80HHC OF THE AC T. THIS VIEW OF HON'BLE BOMBAY HIGH COURT HAS LATER ON BEEN AFFIRME D BY HON'BLE SUPREME COURT. HOWEVER, A STATUTORY AMENDMENT WAS B ROUGHT IN TO THE PROVISIONS OF SECTION 80HHC(3) BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT FROM 1.4.1998. THE A FORESAID STATUTORY AMENDMENT PROVIDES THAT IN THE CASE OF COMPUTATION U/S. 80HHC(3), CLAUSE (A), CLAUSE (B) OR CLAUSE ( C) IS A LOSS, TH EN, SUCH LOSS SHALL BE SET OFF AGAINST 90% OF EXPORT INCENTIVE REFERRED TO IN SECTION 28(IIIA), (IIIB), (IIIC). IN OUR VIEW, THE DISPUTE IN THE PRESENT APP EAL AS IT EMERGES FROM THE ORDER OF THE LEARNED CIT(A) IS ONLY AS TO WHETH ER IN A CASE WHERE EXPORT HOUSE DOES NOT HAVE PROFIT, DEDUCTION U/S. 8 0HHC CAN BE DENIED IN THE HANDS OF THE SUPPORTING MANUFACTURER IN RESP ECT OF EXPORT TURNOVER DISCLAIMED BY THE EXPORT HOUSE IN FAVOUR O F THE SUPPORTING MANUFACTURER. THIS ISSUE HAS GOT NOTHING TO DO WITH THE GRIEVANCE PROJECTED BY THE REVENUE IN THE GROUND OF APPEAL. H OWEVER, IN THE FINDINGS OF LEARNED CIT(A), WHICH WE HAVE EXTRACTED ABOVE, WE NOTICE THAT ORIGINALLY THE ASSESSEE DID NOT CLAIM DEDUCTION U/S . 80HHC BECAUSE OF LOSS AND LATER ON THE ASSESSED INCOME WAS POSITIVE AND THEREFORE DEDUCTION U/S. 80HHC WAS CLAIMED. WE DO NOT FIND AN YTHING WITH REGARD TO OTHER CONDITIONS BEING SATISFIED BY THE ASSESSEE TO CLAIM DEDUCTION U/S. 80HHC OF THE ACT. WE THEREFORE SET ASIDE THE O RDER OF LEARNED CIT(A) AND REMAND THE ISSUE WITH REGARD TO COMPUTATION OF DEDUCTION U/S. 80HHC IN THE LIGHT OF LAW AS AMENDED WITH RETROSPEC TIVE EFFECT. WE ALSO MAKE IT CLEAR THAT IN OTHER ASPECTS NAMELY, ON THE ASPECT OF THE ASSESSEE NOT BEING ENTITLED TO CLAIM DEDUCTION U/S. 80HHC BE CAUSE OF ABSENCE OF POSITIVE PROFIT IN THE HANDS OF EXPORT HOUSE IS AN IRRELEVANT CONSIDERATION AND HAS NOTHING TO DO WITH ALLOWABILITY OF THE CLA IM IN THE ASSESSMENT OF THE ASSESSEE AND ORDER OF LEARNED CIT(A) IN THIS RE GARD IS UPHELD. MEXIN MEDICAMENTS P. LTD. 5 7. FOR STATISTICAL PURPOSES APPEAL IS TREATED AS PA RTLY ALLOWED. ORDER PRONOUNCED ON 30 TH DAY OF JUNE, 2010. SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 30 TH JUNE, 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS