M/s. Uvaiz Exports, Tiruppur V. JCIT, Tiruppur

ITA 658/CHNY/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5308 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 04-04-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RUPA J THARAYIL
• Keywords: Business income; Retrospective amendment
• Section: 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 658/MDS/2008 ASSESSMENT YEAR : 2004-05 M/S. UVAIZ EXPORTS, 8A, SASTHRI NAGAR, SAK LAYOUT, ANAGERIPALAYAM ROAD, TIRUPUR-641603. V. THE JOINT COMMISSIONER OF INCOME TAX, TIRUPUR RANGE, TIRUPUR. (PAN: AAAFU7620C) (APPELLANT) (RESPONDENT) APPELLANT BY : MS. RUPA J. THARAYIL RESPONDENT BY : SHRI SHAJI P. JACOB O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED CIT(APPEALS)-II, COIMBATORE IN APPEAL NO. 435C/2006 -07 DATED 15-5-2007 FOR THE ASSESSMENT YEAR 2004-05. I.T.A. NO.658/MDS/2008 2 2. MS. RUPA J. THARAYIL, ADVOCATE REPRESENTED ON BE HALF OF THE ASSESSEE AND SHRI SHAJI P. JACOB, LEARNED SR. DR REPRESENTED ON BEHALF OF THE REVENUE. 3. IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRE SENTATIVE THAT IN REGARD TO GROUND NO.1 RAISED IN THE APPEAL THE ISSUE WAS A GAINST THE ACTION OF THE LEARNED CIT(A) IN NOT DIRECTING THE ASSESSING OFFIC ER TO GRANT THE ASSESSEE THE SIMULTANEOUS DEDUCTION U/S. 80IB AND SECTION 80HHC OF THE INCOME TAX ACT,. 1961. IT WAS THE SUBMISSION THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD OBSERVED THAT THE ASSESSEE HA D CLAIMED DEDUCTION U/S. 80IB AND WHILE COMPUTING THE DEDUCTION U/S 80HHC IT HAD ADOPTED A FIGURE OF PROFIT AND GAINS WITHOUT REDUCING THE AMOUNT OF DED UCTION ALLOWABLE U/S. 80IB OF THE ACT. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD CONSEQUENTLY APPLIED THE PROVISIONS OF SECTION 80IA(9) OF THE AC T AND HAD RECOMPUTED THE DEDUCTION U/S 80HHC BY REDUCING THE DEDUCTION ALLOW ED U/S 80-IB OF THE ACT. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD UPHE LD THE ACTION OF THE ASSESSING OFFICER. IT WAS THE SUBMISSION THAT THE ISSUE WAS COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF MRF LTD. IN TAX CASE (APPEAL) NO. 1020 OF 2009 DATED 27-10-2009 WHEREIN THE JURISDICTIONAL HIGH COURT FOLLOWING THE DECISION OF THE HON'BLE JURISD ICTIONAL HIGH COURT IN THE CASE OF SCM CREATIONS V. ASSISTANT COMMISSIONER OF INCOM E-TAX REPORTED IN 304 ITR 319) (MAD) HAD HELD THE ISSUE AGAINST THE REVENUE. WHILE DECIDING THE ISSUE THE QUESTION BEFORE THE HON'BLE HIGH COURT WAS, WHETHE R ON THE FACTS AND IN THE I.T.A. NO.658/MDS/2008 3 CIRCUMSTANCES OF THE CASE, THE APPELLATE TRIBUNAL W AS RIGHT IN HOLDING THAT WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC, THE DE DUCTION ALLOWED UNDER SECTION 80IB NEED NOT BE REDUCED FROM THE BUSINESS PROFITS? IT WAS THE SUBMISSION THAT IN VIEW OF THE DECISION OF THE HON' BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MRF LTD. AS ALSO THE DECISION IN THE CA SE OF SCM CREATIONS THE ISSUE WAS LIABLE TO BE HELD IN FAVOUR OF THE ASSESSEE. 4. IN REPLY, THE LEARNED DR RELIED UPON THE DECISIO N OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GENERAL OP TICS (ASIA) LTD. V. DEPUTY COMMISSIONER OF INCOME-TAX, REPORTED IN 315 ITR 400 . 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE DECISION RELIED UPON BY THE LEARNED DR IS OF DECEMB ER, 2008 AND AS IT IS NOTICED THAT THE DECISION RELIED ON BY THE LEARNED AUTHORIS ED REPRESENTATIVE IN THE CASE OF MRF LTD. IS OF OCTOBER, 2009 AND AS THE ISSUE DE CIDED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MRF LTD. I S A SUBSEQUENT DECISION AND COVERS IDENTICAL ISSUE, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MRF LTD., REFERRED TO SUPRA, THE ASSESSING OFFICER IS DIRECTED TO GRANT THE ASSESSEE DEDUCTION U/S 80HHC AND 80IB INDEPENDENTLY AND THE DEDUCTION COMPUTED U/S 80HHC IS TO BE CALCULATED WITHOUT REDUCING THE DEDUCTION COMPUTED AND ALLOWED U/S 80IB OF THE ACT. IN THE CIRCUMSTANCES, GROUND NO.1 OF THE ASSESSEES AP PEAL STANDS ALLOWED. I.T.A. NO.658/MDS/2008 4 6. IN REGARD TO GROUND NO.2 IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSUE WAS AGAINST THE ACTIO N OF THE LEARNED CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN T REATING THE DUTY DRAW BACK AS NON-BUSINESS INCOME. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE SUP REME COURT IN THE CASE OF LIBERTY INDIA V. CIT, REPORTED IN 317 ITR 218 WHERE IN THE HON'BLE SUPREME COURT HAS CATEGORICALLY HELD THAT DUTY DRAW BACK RECEIPTS AND DEPB BENEFITS DID NOT FORM PART OF THE NET PROFIT FOR THE PURPOSE OF DEDU CTION U/S 80IB OF THE ACT. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA, REFERRED TO SUP RA, THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. 7. IN THE COURSE OF HEARING THE LEARNED AUTHORISED REPRESENTATIVE HAS RAISED AN ADDITIONAL GROUND WHEREIN THE ASSESSEE HAS CHALL ENGED THE ACTION OF THE LEARNED CIT(A) IN HOLDING THAT THE AMOUNT OF INTERE ST PAID BY THE ASSESSEE SHOULD NOT BE DEDUCTED FROM THE INTEREST RECEIVED F ROM FIXED DEPOSITS. THE ASSESSEE HAS ALSO RAISED THE GROUND THAT THE INTERE ST RECEIVED WAS TO BE TREATED AS INCOME DERIVED FROM THE BUSINESS OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 80HHC. IT WA S SUBMITTED THAT THE ASSESSEE HAD RECEIVED INTEREST OF ` 2,38,243/- ON FIXED DEPOSITS AND THIS RECEIPT HAD BEEN NETTED AGAINST THE INTEREST PAYMENTS ON TH E BORROWED FUNDS. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD FOLLOWED THE DECISION OF THE HON'BLE I.T.A. NO.658/MDS/2008 5 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. V. CHINNAPANDI REPORTED IN 282 ITR 389 TO HOLD THAT THE INTEREST PAID BY THE ASSES SEE SHOULD NOT BE DEDUCTED FROM THE INTEREST RECEIVED FROM THE FIXED DEPOSITS. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD ALSO HELD THAT INTEREST INCO ME WAS LIABLE TO BE ASSESSED ONLY UNDER THE HEAD OTHER SOURCES AND NOT UNDER T HE HEAD BUSINESS INCOME. FOR THIS THE LEARNED CIT(A) HAD HELD THE INTEREST WAS EARNED ON THE DEPOSITS AND THE DEPOSITS WERE MADE NOT FOR RUNNING THE BUSI NESS OR FOR THE CONDUCT OF THE BUSINESS. IT WAS THE SUBMISSION THAT FIXED DEP OSITS WERE MADE FOR THE CREDIT FACILITIES TO BE OBTAINED FROM BANKS AS PER THE TER MS AND CONDITIONS OF THE BANKERS. IT WAS THE SUBMISSION THAT THE INTEREST I NCOME WAS LIABLE TO BE TREATED AS BUSINESS INCOME. 8. IN REPLY, THE LEARNED DR RELIED UPON THE DECISIO N OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF AMBATTUR C LOTHING CO. LTD. V. ASSISTANT COMMISSIONER OF INCOME-TAX REPORTED IN 326 ITR 245 (MAD) WHEREIN THE HON'BLE JURISDICTIONAL HIGH COURT HAS HELD THAT 90% OF THE GROSS INTEREST WITHOUT DEDUCTING EXPENSES INCURRED HAS TO BE EXCLUDED FROM THE BUSINESS PROFIT WHILE COMPUTING DEDUCTION U/S. 80HHC OF THE ACT. HE ALSO RELIED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF V. CHI NNAPANDI, REFERRED TO SUPRA. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE AS TO WHETHER THE SET OFF OF THE INTEREST EARNED AG AINST THE INTEREST PAID IS IN COVERED BY THE DECISION OF THE HON'BLE JURISDICTION AL HIGH COURT IN THE CASE OF V. I.T.A. NO.658/MDS/2008 6 CHINNAPANDI, REFERRED TO SUPRA. THIS ISSUE IS HELD AGAINST THE ASSESSEE. INA REGARD TO THE ISSUE AS TO WHETHER THE INTEREST INCO ME IS TO BE ASSESSED AS BUSINESS INCOME OF THE ASSESSEE IT IS NOTICED THAT THE ISSUE IS COVERED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF AMBATTUR CLOTHING CO. LTD., REFERRED TO SUPRA. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF AMBATTUR CLOTHING CO. LTD., THE ASSESSING OFFICER IS DIRECTED TO EXCL UDE 90% OF THE GROSS INTEREST, WITHOUT DEDUCTING THE EXPENSES INCURRED, FROM THE B USINESS PROFITS WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC OF THE ACT. 10. IN REGARD TO THE LEVY OF INTEREST UNDER SECTION S 234B, 234C AND 234D OF THE ACT, THE LEARNED AUTHORISED REPRESENTATIVE RELI ED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V. REVATHI EQUIPMENT LTD REPORTED IN 298 ITR 67. IT WAS THE SUBMISSION THAT THE ISSUE AS TO WHETHER DUTY DRAW BACK WAS TO BE TREATED AS BUSINESS INCOME OR N OT WAS DECIDED IBY THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA, REFERRED TO SUPRA, ONLY IN AUGUST, 2009 AND WHEN THE ASSESSEE FILED ITS APPEAL FOR THE ASSESSMENT YEAR 2004-05 THE ISSUE WAS DEBATABLE AND AS THE ISSUE HA S CRYSTALLIZED ONLY ON A SUBSEQUENT DATE, THE ASSESSEE SHOULD NOT BE HELD LI ABLE FOR INTEREST UNDER SECTIONS 234B, 234C & 234D OF THE ACT. 11. IN REPLY, THE LEARNED DR SUBMITTED THAT IN THE CASE OF REVATHI EQUIPMENT LTD., REFERRED TO SUPRA, THE HON'BLE JURISDICTIONAL HIGH COURT HAD LAID DOWN A I.T.A. NO.658/MDS/2008 7 PRINCIPLE THAT IT WAS ONLY WHEN THE LEVY HAS COME O N THE ASSESSEE ON ACCOUNT OF A RETROSPECTIVE AMENDMENT TO THE LAW THAT THE INTER EST UNDER SECTION 234B, 234C & 234D WAS NOT LIABLE TO BE LEVIED. IT WAS THE SUB MISSION THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY IN DIA, REFERRED TO SUPRA, WAS NOT THE LAYING DOWN OF A LAW. IT WAS THE SUBMISSIO N THAT THE DECISION OF THE HON'BLE SUPREME COURT ONLY INTERPRETED THE LAW AS I T ALWAYS STOOD AND WAS TO BE UNDERSTOOD AS SUCH. IT WAS THE SUBMISSION THAT THE LEVY OF INTEREST UNDER SECTIONS 234B, 234C AND 234D WAS LIABLE TO BE CONFI RMED. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F REVATHI EQUIPMENT LTD., REFERRED TO SUPRA, CLEARLY SHOWS THAT THE HON'BLE J URISDICTIONAL HIGH COURT HAD CATEGORICALLY RECOGNISED THAT SECTION 35DDA WAS INT RODUCED BY THE FINANCE ACT, 2001 WITH EFFECT FROM 01-04-2001 WHICH RECEIVED THE ASSENT ONLY ON 11-05-2001 AND CONSEQUENTLY THE ASSESSEE COULD NOT HAVE ENVISA GED THAT IT WOULD BECOME LIABLE FOR PAYMENT OF TAX IN THE SAID CASE. IN THE PRESENT CASE THIS IS NOT SO. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F LIBERTY INDIA, REFERRED TO SUPRA, HAS NOT MADE ANY RETROSPECTIVE AMENDMENT TO THE STATUTE. THE HON'BLE SUPREME COURT HAS EXPLAINED THE LAW AS IT SHOULD BE UNDERSTOOD AND THE LAW IT WAS AND IT IS. WRONG INTERPRETATION BY THE ASSESSE E OF ANY STATUTE CANNOT CONTROL THE LEVY OF INTEREST UNDER SECTIONS 234B, 2 34C AND 234D. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LEVY OF INTEREST UNDER SECTONS 234B, I.T.A. NO.658/MDS/2008 8 234C AND 234D OF THE ACT BEING MANDATORY IN NATURE IS LEVIABLE. IN THE CIRCUMSTANCES, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 13. THE ORDER WAS PRONOUNCED IN THE COURT ON 01/04/ 2011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 01/04/2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE