THE ACIT CIR 6(2), MUMBAI V. M/S. K. UTTAMLAL EXPORTS PVT. LTD, MUMBAI

ITA 6585/MUM/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4511 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 09-09-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 31-10-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAVA
• Assessee Lawyers: D M SHAH
• Keywords: Sale consideration of property below Jantri Value; Additional evidence; Speculation loss; Valuation report
• Section: 143(3); 80HHC; 147; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER. I.T.A. NO.6585/MUM/2007 ASSESSMENT YEAR : 2002-03. ASSTT. COMMISSIONER OF INCOME-TAX, K. UTTAMLAL EXPORTS P.LTD., CIRCLE-6(2), MUMBAI. VS. 196/198, 1 ST FLOOR, BHAVWAN BHUVAN, SAMUEL STREET, MASJI D BUNDER, MUMBAI 400 009. PAN AAACK9486B. (APPELLANT) (RESP ONDENT) I.T.A. NO.7571/MUM/2007 ASSESSMENT YEAR : 2002-03. I.T.A. NO.2252/MUM/2007 ASSESSMENT YEAR : 2003-04 I.T.A. NO.2718/MUM/2007 ASSESSMENT YEAR : 200718. K. UTTAMLAL EXPORTS P.LTD., VS. ITO-6(2)-2/ASSTT. COMMISSIONER OF MUMBAI. INCOME-TAX, CIRCLE6(2), MUMBAI. (APPELLANT) RESPONDENT. . DEPARTMENT BY : SHRI R.S. SRIVASTAVA. ASSESSEE BY : SHRI D.M. SHAH. 2 O R D E R PER J.SUDHAKAR REDDY, A.M. ALL THESE APPEALS PERTAIN TO THE SAME ASSESSEE. F OR THE SAKE OF CONVENIENCE, THEY ARE HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS COMMON ORDER. 2. FACTS IN BRIEF : THE ASSESSEE IS A COMPANY AND IS IN THE BUSINESS OF EXPORT OF TRADED GOODS BEING AGRICULTURAL PRODUCES, DRUGS AND DRUGS INTERMEDIATES, DYES INTERMEDIATES, PHARMACEUTICAL CHEMICALS, GUMS, MARB LES ETC. THE ISSUES ARISING IN EACH OF THE YEARS ARE DIFFERENT AND WE WOULD DEAL W ITH THEM IN SERIATIM. 3. WE HAVE HERD SHRI R.S. SRIVASTAVA, LEARNED DR A ND SHRI D.M. SHAH, LEARNED COUNSEL FOR THE ASSESSEE AT LENGTH. WE HAVE CONSIDERED THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW, THE CASE L AWS CITED AND HOLD AS FOLLOWS: 4. ITA NO.7571/MUM/2007. (A.Y. :2002-03). THIS IS AN APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-VI, MUMBAI DA TED 21-08-2007. 5. GROUND NO.1 IS AGAINST INITIATION OF REASSESSME NT PROCEEDINGS U/S 147 OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE HA S NOT PRESSED THIS GROUND. HENCE THE SAME IS DISMISSED AS NOT PRESSED. 6. GROUND NO.2 IS ON THE ISSUE OF DISALLOWANCE U/S 14A. THIS GROUND IS ALSO DISMISSED AS NOT PRESSED. 3 7. GROUND NO.3 IS ON THE ISSUE OF COMPUTATION OF R ELIEF U/S 80HHC ON THE INCOME REALIZED ON SALE OF DEPB LICENSES. THIS ISSUE IS SET ASIDE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN LINE WITH THE JUDG MENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS & CH EMICALS, INCOME TAX APPEAL (LODG) NO. 2887 OF 2009 DATED 28/29 JUNE, 2010. 8. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS A LLOWED IN PART. 9. ITA NO.6585/MUM/2007 (A.Y. 2002-03) THIS IS A REVENUE APPEAL FOR THE ASSESSMENT YEAR 2002-03. GROUND NO.1 READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION OF RS.8,29,125/- BEING 10% OF EXPORT INCENTIVE AS INDIRECT COST FOR THE PURPOSE OF DEDUCTION U/S 8 0HHC OF THE INCOME TAX ACT. IN THIS CONNECTION, IT IS SUBMITTED THE DEFINI TION OF INDIRECT COST AS GIVEN IN THE EXPLANATION BELOW SECTION 80HHC(3) OF THE INCOME TAX ACT DOES NOT PROVIDE FOR ANY SUCH DEDUCTION. ADMITTEDLY THIS ISSUE IS COVERED IN FAVOUR OF THE A SSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SURENDRA E NGINEERING CORPORATION WHICH IS CONFIRMED BY THE HONBLE SUPREME COURT. TH US THIS GROUND OF THE REVENUE IS DISMISSED. 10. GROUND NO. 2 READS AS FOLLOW : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, IT IS SUBMITTED THAT LD. CIT(A) HAS ERRED IN HOLDING THT THE ASSESSEE HA S INCLUDED SALES OF NEW YORK BRANCH OF RS.4,43,30,261/- IN THE TOTAL TURNOV ER. IN THIS CONTEXT, IT IS SUBMITTED THAT AS PER TRADING AND PROFIT & LOSS AC COUNT FILED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME NEW YORK S ALES AMOUNT TO R.4,43,30,261/-, HEAD OFFICE SALES AMOUNT TO RS.36, 50,45,986/-(INCLUDING EXCHANGE DIFFERENCE OF RS.58,59,414/-) AND TOTAL SA LES AMOUNT TO RS.41,74,99,534/- (INCLUDING LICENCE SOLD AMOUNTING TO RS.81,23,287/-) MEANING THEREBY THAT HEAD OFFICE SALES DO NOT INCLU DE NEW YORK SALES AS 4 CLAIMED BY THE ASSESSEE BEFORE THE CIT(A) WHICH HAS WRONGLY BEEN ACCEPTED BY THE CIT(A). AT PAGE 1 OF THE ASSESSEES PAPER BOOK, THE FOLLO WING DETAILS ARE GIVEN : K. UTTAMLAL (EXPORTS) PVT. LTD. ACCT. YEAR : 2001-02. DETAILS OF TOTAL TURNOVER FOR 80HHC PURPOSE : AMOUNT IN RS. F.O.B. SALES TO N.Y. BR. 30570856 (+) F.O.B. SALES OTHER THAN N.Y. BR. 328615716 TOTAL H.O. F.O.B. SALES. 359186572 ADD: EXCHANGE DIFFERENCE 5859414 LESS: SALE BILL NOT REALIZED WITHIN 6 MONTHS 1211661 TOTAL TURNOVER FOR 80HHC PURPOSE. 363834325 WHILE CLAIMING THE DEDUCTION WE HAVE NOT CONSIDERED SALES AFFECTED BY NEW YORK BR. AMOUNTING TO RS.4,43,30,261.00 BECAUSE WE HAVE ALREADY INCLUDED IN H.O. TURN OVER, THE GOODS SENT TO NEW YORK BR; A SALES AMOUNTING TO RS.3,05,70,856.00 . NEW YORK BRANCH HAS NO ANY OTHE R PURCHASE OTHER THAN FROM HEAD OFFICE. 11. WE FIND SOME FORCE IN THE ARGUMENT OF THE ASSE SSEE. THE CIT(APPEALS), IN OUR CONSIDERED OPINION, HAS APPROP RIATELY DEALT WITH THE ISSUE. IN ANY EVENT, KEEPING IN VIEW THE OBJECTIONS OF THE LE ARNED DR, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACC ORDANCE WITH LAW. THE AO SHALL VERIFY WHETHER THERE IS ANY DOUBLE CLAIM MADE BY TH E ASSESSEE. 12. IN THE RESULT, THIS GROUND IS ALLOWED FOR STAT ISTICAL PURPOSES. 13. GROUND NO. 3 READS AS FOLLOWS : 5 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT FOREIGN EXCHANGE AMOUNTING TO RS.12,11,661/- NOT BROUGHT INTO INDIA WITHIN STIPULATED PERIOD IS TO B E EXCLUDED FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC. IN THIS CONNECTION IT IS SUBMITTED THAT AS PER DEFINITION O F EXPORT TURNOVER AND TOTAL TURNOVER GIVEN IN THE CLAUSES (B) AND (BA), EXPLANATION BELOW SECTION 80HHC OF THE INCOME TAX ACT, THE ABOVE MENTIONED AM OUNT OF RS.12,11,661/- IS TO BE EXCLUDED ONLY FROM EXPORT TURNOVER AND NOT FROM TOTAL TURNOVER IN VIEW OF OUR FINDING IN GROUND NO.2, THIS GROUND IS ALSO TO BE SET ASIDE TO THE FILE OF THE AO AS IT IS INTERLINKED WITH GROUND NO.2. 14. GROUND NO. 4 AND 5 ARE GENERAL IN NATURE. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS AL LOWED IN PART. 16. ITA NO.2178/MUM/2007 (A.Y. 2003-04) THIS IS AN ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2003-04. GROUND NO. 1 IS ON THE ISSUE WHETHER NET INTEREST OR GROSS INTEREST IS TO BE CONSIDERED WHILE COMPUTING RELIEF U/S 80HHC. THI S ISSUE NOW STANDS COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE B Y THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ASIAN STAR CO. L TD. 326 ITR 56. 17. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS TH IS GROUND OF THE ASSESSEE. 18. GROUND NO. 2 IS ON THE ISSUE WHETHER INTEREST INCOME EARNED BY THE ASSESSEE ON BANK FIXED DEPOSITS, WHICH ARE MADE, AS MARGIN REQUIREMENTS, FOR OBTAINING BANKING FACILITIES SUCH AS LOANS AND GUAR ANTEES, IS TO BE ASSESSED AS INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES. 19. AS THE FACTS ARE NOT IN DISPUTE, WE ARE OF THE CONSIDERED OPINION THAT THE INTEREST INCOME HAS TO BE ASSESSED UNDER THE HE AD INCOME FROM BUSINESS BY 6 APPLYING THE RATIO OF THE DECISION OF THE HONBLE B OMBAY HIGH COURT IN THE CASE OF CIT VS.INDO SWISS JEWELS LTD. & ANOTHER. 20. IN THE RESULT, GROUND NO. 2 IS ALLOWED. 21. GROUND NO. 3 IS ON THE ISSUE OF COMPUTATION OF RELIEF U/S 80HHC IN RELATION TO DEPB. CONSISTENT WITH THE VIEW TAKEN FO R THE ASSESSMENT YEAR 2002-03, WE SET ASIDE THE MATTER TO THE FILE OF THE AO FOR A DJUDICATING THE SAME AFRESH IN LINE WITH THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS & CHEMICALS, INCOME TAX APPEAL (LODG) NO. 2 887 OF 2009 DATED 28/29 JUNE, 2010. 22. GROUND NO.4 IS ON THE ISSUE OF CONSIDERATION O F FOREIGN EXCHANGE RATE DIFFERENCE OF RS.1,98,346/ IN CALCULATING THE INDI RECT COST. THE LEARNED COUNSEL SUBMITTED THAT, IN VIEW OF THE SMALLNESS OF THE AMO UNT, TO AVOID PROTRACTED LITIGATION, HE IS NOT PRESSING THIS ISSUE. IN VIEW OF THE ABOVE SUBMISSION, GROUND NO. 4 IS DISMISSED AS NOT PRESSED. 23. GROUND NO.5 IS ALSO ON THE COMPUTATION OF RELI EF U/S 80HHC IN RESPECT OF SALE PROCEEDS NOT RECEIVED IN TIME. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS NOT RECEIVED AN AMOUNT OF RS.7,71,372/ -, BEING SALE PROCEEDS IN TIME. THE CASE OF THE ASSESSEE IS THAT THE COST CORRESPON DING TO THESE SALE PROCEEDS, IS TO BE REDUCED WHILE COMPUTING RELIEF U/S 80HHC. HE ALS O PLEADS THAT THE AMOUNT IN QUESTION SHOULD NOT FORM PART OF TOTAL TURNOVER. 24. ON A CAREFUL CONSIDERATION OF THE FACTS, AS TH ERE SHOULD BE PARITY BETWEEN NUMERATOR AND DENOMINATOR AS HELD BY THE HO NBLE SUPREME COURT IN THE CASE OF LAXMI MACHINE TOOLS 290 ITR 667, WE AGREE W ITH THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT OF SALE PROCEEDS WHICH ARE NOT RECEIVED, ARE NOT ONLY TO BE EXCLUDED FROM EXPORT TURNOVER BUT ALSO FROM TOTAL T URNOVER. THE COST PERTAINING TO 7 THIS TURNOVER SHOULD ALSO BE EXCLUDED. WITH THESE D IRECTIONS, WE ALLOW THIS GROUND OF THE ASSESSEE. 25. GROUND NO.6 IS THE SAME AS GROUND NO.3 AND WE SET ASIDE THE SAME TO THE FILE OF THE AO. 26. GROUND NO.7 READS AS FOLLOWS : 7. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN TREATING SHAR E SPECULATION LOSS OF RS.28,15,857/- AS LONG TERM LOSS WHICH IS CONTRARY TO THE FACTS AND EVIDENCE ON RECORD AND AGAINST THE PROVISIONS OF LA W. B) THE LEARNED CIT(A) ERRED IN STATING AND OBSERVIN G THAT NO DETAILS IN RESPECT OF SHARE SPECULATION LOSS WAS FU RNISHED. THE APPELLANT PRAYS ALL THE DETAILS WERE FILED AND PROD UCED BEFORE THE OFFICER AND CIT(A). C) THE APPELLANT PRAYS THAT THIS LOSS BE TREATED AS SHARE SPECULATION LOSS AND BE DIRECTED TO ALLOW AS SUCH. D) THE LEARNED ASSESSING OFFICER ERRED IN TAKING T HE SHARE SPECULATION LOSS AT RS.30,20,811/- AS AGAINST RS.28 ,15,857/-. THE OFFICER BE DIRECTED TO TAKE CORRECT FIGURE. 27. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE CIT(APPEALS) HAS AT PARA 7.2 OBSERVED THAT THE ASSESSEE HAS NOT FILED A NY DETAILS EITHER BEFORE THE AO OR BEFORE THE FIRST APPELLATE AUTHORITY AS TO HOW THE SHARE SPECULATION LOSS IN QUESTION OF RS.30,20,811/- IS COMPUTED. BEFORE US ALSO THE ASSESSEE HAS NOT MOVED ANY APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE. A SIMPLE PLEA HAS BEEN MADE THAT THE ISSUE SHOULD BE SET ASIDE TO THE FILE OF THE AO . WE CANNOT ACCEPT THIS PLEA AT THIS LATE STAGE AND THAT TOO WHEN THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE. THUS WE UPHOLD THE ORDER OF THE CIT(APPEALS) AND DISMISS THIS GROUND OF THE ASSESSEE FOR LACK OF EVIDENCE. 8 28. GROUND NO. 8 IS ON THE ISSUE OF COMPUTATION OF SHORT TERM CAPITAL GAINS. THE AO INVOKED SECTION 50C. 29. ON A CAREFUL CONSIDERATION, WE FIND THAT THE A O COMPLETED THE ASSESSMENT WITHOUT WAITING FOR THE REPORT OF THE VA LUATION OFFICER OF THE INCOME- TAX DEPARTMENT TO WHOM A REFERENCE WAS MADE U/S 55 OF THE I.T. ACT, FOR THE REASON THAT THE ASSESSMENT WAS GETTING TIME BARRED. AS THE VALUATION REPORT IS RECEIVED SUBSEQUENTLY, WE DEEM IT APPROPRIATE TO SE T ASIDE THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 30. IN THE RESULT, GROUND NO.8 IS ALLOWED FOR STAT ISTICAL PURPOSES. 31. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWE D IN PART. 32. ITA NO.2252/MUM/2008 (A.Y. : 2003-04). THIS IS AN ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2003-04 AGAINST THE ORDER PASSED U/S 154 OF THE ACT. ORIGINAL ASSES SMENT WAS COMPLETED U/S 143(3) ON 24-02-2004. THE AO HAD REFERRED THE MATTER OF VA LUATION OF THE PROPERTY TO THE DISTRICT VALUATION OFFICER U/S 55 OF THE I.T. ACT. AS THE ASSESSMENT WAS GETTING TIME BARRED, HE COMPLETED THE ASSESSMENT WITHOUT WA ITING REPORT FOR THE VALUATION OFFICER. SUBSEQUENTLY THE DVOS REPORT WAS RECEIVED AND THE AO PASSED THE ORDER U/S 154 ENHANCING THE SHORT TERM CAPITAL GAINS. THE ISSUE IS WHETHER THE RECTIFICATION IN QUESTION CAN BE CONSIDERED AS A RE CTIFICATION OF A MISTAKE APPARENT FROM RECORD. WE DO NOT THINK SO. IN OUR CONSIDERED OPINION, THE FIRST APPELLATE AUTHORITY WAS WRONG IN UPHOLDING THE ORDER PASSED U /S 154 OF THE I.T. ACT FOR THE REASON THAT THE RECTIFICATION IN QUESTION CANNOT BE TERMED AS A RECTIFICATION OF A MISTAKE APPARENT FROM RECORD. THE VALUE DETERMINED BY THE DVO IS ONLY AN OPINION AND THE ASSESSEE HAS A RIGHT TO DISPUTE THE SAME. THE ADJUSTMENT IN QUESTION IS A DEBATABLE ISSUE. 9 33. IN THE RESULT, WE ALLOW THIS APPEAL OF THE ASS ESSEE. 34. ITA NO.7572/MUM/2007. (A.Y. : 2004-05) THIS IS AN APPEAL BY THE ASSESSEE FOR THE ASSESSM ENT YEAR 2004-05 AND IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-V I, MUMBAI DATED 24-07-2007. 35. GROUND NO. 1 IS IN RESPECT OF DISALLOWANCE MAD E U/S 14A. THIS ISSUE IS SET ASIDE TO THE FILE OF THE AO FOR FRESH ADJUDI CATION IN LINE WITH THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. REPORTED IN (2010) 234 CTR 1 (BOM) 1. 36. IN THE RESULT, THIS GROUND IS ALLOWED FOR STAT ISTICAL PURPOSES. 37. GROUND NOS.2 AND 3 ARE ON THE ISSUE OF COMPUTA TION OF RELIEF U/S 80HHC WITH RESPECT TO PROFIT ON SALE OF DEPB LICENS E. THIS GROUND IS SET ASIDE TO THE FILE OF THE FILE OF THE AO FOR FRESH ADJUDICATI ON IN LINE WITH THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KA LPATARU COLOURS & CHEMICALS, INCOME TAX APPEAL (LODG) NO. 2887 OF 2009 DATED 28/ 29 JUNE, 2010. 38. GROUND NOS. 4 AND 5 ARE DISMISSED AS NOT PRE SSED. 39. GROUND NO. 6 IS GENERAL IN NATURE. 40. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED ON THIS 30 TH DAY OF SEPT., 2010. SD/- SD/- (V. DURGA RAO) (J. SUDHAKAR RED DY) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI, DATED: 30 TH SEPT. 2010. WAKODE 10 COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, H-BENCH //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI BENCHES