Vasant Chemicals Limited, Hyderabad V. Dy.CIT, Circle-3(3), Hyderabad

ITA 780/HYD/2013

• Counselvise Citation: 78022514 RSA 2013
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-04-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 16-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Rectification of order
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND SHRI P.M.JAGTAP, ACCOUNTANT MEMBER ITA NO.780/HYD/2013 : ASSESSMENT YEAR 2001 - 02 M/S. VASANT CHEMICALS LIMI T E D, HYDERABAD (PAN AAACV 7249 K) V/S. DY. COMMISSIONER OF INCOME - TAX CIRCLE 3(3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.V.RAGHURAM RESPONDENT BY : SHRI RAJAT MITRA DR DATE OF HEARING 30.4.2015 DATE OF PRO NOUNCEMENT 01.05.2015 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL FILED BY TH E ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) 9, MUMBAI(CAMP AT HYDERABAD ) DATED 12.3.2013 AND THE GRIE V AN C E OF THE ASSESSEE IS PROJECTED BY WAY OF THE FOLLO W I NG G ROUNDS RAISED T HEREIN. 1 THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) IS CONTRARY TO THE FACTS AND LAW ON THE POINT IN DISPUTE. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CON F I RM ING THE PARTIAL DENIAL O F DEDUCTION U/S. 80HHC OF THE INCOME TAX ACT,1961. 3. THE LEARNED COMMISSIONER (APPEALS ) HAS NO T FULLY S TUDIED THE FA C TS OF TH E CA S E AND THE IN F O R M A TION PROVIDED BY TH E ASSESSEE AND HAS DISMI S SED THE G R OUN D S IN PERFUN C TORY M ANNER. I TA NO. 780/H YD/20 13 M/S. VASANT CHEMICALS LIMITED, HYDERABAD 2 4. THE LEARNED COMMISSIONER (APPEALS) HAS GIVEN A WRONG FIN D ING THAT THE MATTER IS NO T APPEALABLE WITHOUT FU L LY UN D ERSTANDIN G THE FACTS OF THE C A S E. 5. THE LEARNED COMMISSIONER ( APPEALS) OUGHT TO HAVE HELD THAT RECTIFICATION ORDER OF ORIGINAL ORDER ALSO ASSUME S THE C HA R A C TER OF ASSESSMENT ORDER AND IS VERY MUCH APPEALABLE AND THERE IS NO EMBARGO IN FILIN G APPEALS ON THIS ORDER U/S. 246. 2. THE ASSESSEE IN TH E PR E SEN T CA S E IS A COMPA N Y WHICH IS ENGAGED IN THE BU S IN E SS OF MANU FA CTURE AND E X PORTING OF CH E MI C ALS AND DYE INTERMEDIATE. T HE RETURN OF INCOME FOR THE YE A R UN D ER CONSIDERATION WAS FIL E D BY IT ON 29.10.2001 DE C LARING A TOTAL IN C OM E O F RS .63,05,781. IN THE ASSESSMENT CO M PLETED ORIGINALLY UNDER S.143(3) VIDE ORDER DATED 29.3.2004, THE TOTAL INCOM E OF THE ASSESSEE WAS DETERMINED BY TH E ASSESSING OFFICER AT R S .2,53,24,458. IN TH E SAID ASSESSMENT , DEDUCTION UN D ER S.80IA WAS ALLOWED BY THE ASSESSING OFFICER AT RS.50,93,495 BU T THE CLAIM OF THE ASSESSEE FOR DEDUCTION UN D ER S.80HHC W A S DISALLOWED AS TH E PROFITS OF TH E BUSINESS RESULTED IN NEGATIVE FIGURE. 3. TH E ISSUE REGARDING ITS CLAIM FOR DEDUCTION UN D ER S.80HHC WAS AGITATED BY TH E ASSESSEE FIRST IN THE APPEAL FIL E D B E FORE THE LEARNED CIT(A) AND THEN IN TH E APP E AL FIL E D B E FORE THE TRIBUNAL. AS PER THE DIRECTION OF THE APPELL A TE AUTHO R ITI E S, THE DEDUCTION ALLOWABLE TO TH E ASSESSEE UN D ER S.80HHC WAS WORKED OUT BY TH E ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 1.11.2007 PASSED UN D ER S.143(3) READ WITH S.254 OF THE ACT AT R S .38,71,963 A S UNDER - I TA NO. 780/H YD/20 13 M/S. VASANT CHEMICALS LIMITED, HYDERABAD 3 'CALCULATION OF DEDUCTION U/S.8OHHC CONSEQUENTIAL TO ITAT'S ORDER: DEDUCTION U/S. BOHHC A ) AS MANUFACTURER PROFITS OF THE BUSINESS AS PER ANNEXURE ENCLOSED TO ORDER GIVING EFFECT TO CIT(A) ORDER 1,14,79,954 ADD: DEPBI EXPORT INCENTIVE 1,80,73,985 ELIGIBLE PROFITS RS. 2,95,53,939 LESS: PROFITS FROM SALES TO EXPORT HOUSE RS. 54,81,198 TOTAL ELIGIBLE PROFITS 2,40,72,741 B ) EXPORT TURN - OVER 36,25,80,226 C)TOTAL TURN - OVER (THE DEPBI EXPORT IS TAKEN AS PROFITS OF THE BUSINESS, THE SAME IS ADDED TO THE TOTAL TURNOVER) (75,03,441 + 1,80,73,985) 76,84,17,426 D )90 % OF DUTY DRAWBACK O F RS.55,584 AS PER ORDER U/S. 143(3) DTD.29.3.04 50,025 DEDUCTION U/S. 80HHC ALLOWABLE: AXB + DXB C C = 24072741 X 352580226 + 362580226 X 50025 768417426 768817426 = 1,13,58,800 + 23,6 04 = 1,13,82,404 AS SUPPORTING MANUFACTURER 1)SALES THROUGH EXPORT HOUSE RS.15,06,24,532 2)PROFITS OF THE BUSINESS RS. 54,81,108 3)TOTAL TURNOVER RS.76,84,17,426 1X2 = RS.15,06,24,532 X 54,81,198 3 76,84,17,426 I TA NO. 780/H YD/20 13 M/S. VASANT CHEMICALS LIMITED, HYDERABAD 4 = RS.10,74,419 TOTAL DEDUCTION 1. AS MANUFACTURER RS.1,13,18,404 2. AS SUPPORTING MANUF ACTURER RS. 10,74,419 RS. 1,24,56,823 DEDUCTION @ 80% THEREON RS. 99,65,458 LESS. DEDUCTION US/. 80IA(9) RS. 60,93,495 E LIGIBLE DEDUCTION RS. 38,71,963 4. ACCOR D ING TO THE ASSESSEE, THERE WERE CERTAIN MISTAKES IN TH E WORKING MADE BY TH E ASSESSING OFFICER WHIL E COMPUTING THE DEDUCTION ADMISSIBLE UN D ER S.80HHC. AN APPLICATION UN D ER S.154 SEEKIN G RECTIFICATION OF THE SAID MISTAKES THEREFORE , WAS MOVED BY I T BEFORE THE A SSESSING OFFICER. ALTHOUGH THE ASSESSING OFFICER RECTIFIED FOUR OF THE FIVE MISTAKES PO IN TED OUT BY THE ASSESSEE, VIDE HIS ORD E R DATED 30.5.2008, H E DID NO T RE C TIFY ONE M ISTAKE POIN T ED OUT BY TH E ASSESSEE AS MISTAKE NO.3, FOR THE FOLLO W IN G REASONS GIVEN IN HI S ORDER PASSED UN D ER S.154 . ' 3. PROFITS OF THE BUSINESS FOR CALCULATION OF DEDUCTION U/S. 80HHC AS SUPPORTING MANUFACTURER: THE SAME FIGURE OF 'PROFITS OF THE BUSINESS' AS TAKEN FO R DEDUCTION U/S.80HHC AS DIRECT EXPORTER SHOULD ALSO BE TAKEN FOR CALCULATING DEDUCTION U/S. 80HHC AS SUPPORTING MANUFACTURER. THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF PROFITS ATTRIBUTABLE TO THE SUPPORTING MANUFACTURER. HOWEVER, ASSESSEE ARGUED THAT THE SAME PROFIT HAS TO BE ONCE AGAIN CONSIDERED FOR ARRIVING TA T DEDUCTION U/S. 80HHC. HOWEVER, ASSESSEES ARGUMENT IS NOT ACCEPTED AS IT BECOMES THE DOUBLE DEDUCTION. HENCE, PROFITS ATTRIBUTABLE TO THE SUPPORTING MANUFACTURER ARE ESTIMATED BASING ON THE TURNO V ERS. I TA NO. 780/H YD/20 13 M/S. VASANT CHEMICALS LIMITED, HYDERABAD 5 AMOUNT IN RS. TOTAL TURNOVER 741116926 EX PORT TURNOVER THROUGH EXPORT HOU S E (FOB) 150624532 T O TAL PROFITS OF THE BU S IN E SS 11479954 P R O F ITS OF THE BU S IN ES S AS A SUPPORTING MANUFACTURER 150624532/ 741116925 *100 =20.32% 2332727 PROFITS OF THE BU S I NE SS AS A DIRECT EXPORTER 100 - 20.32 79.6 8% 9147227 .. 5. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER UNDER S.154, AN APPEAL AS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS), AND AFTER CONSIDERIN G THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LEARNED CIT(A) HELD THAT THERE WAS NO MISTAKE ON THE PART OF THE ASSESSING OFFICER IN WORKING OUT THE PROFITS ATTRIBUTABLE TO THE SUPPORTING MANUFACTURER ON ESTIMATE BA SIS. HE ALSO HELD THAT THIS ISSUE IN ANY CASE WAS A DEBATABLE ISSUE AND THE SAME, THEREFORE, WAS BEYOND THE SCOPE OF RECTIFICATION PERMISSIBLE UNDER S.154 OF THE ACT. ACCORDINGLY, THE APPEAL OF THE ASSESSEE WAS DISMISSED BY THE CIT(A). 6. WE HAVE HE A RD THE ARGUM E N T S OF BOTH THE SI D ES AND ALSO PERUSED THE R E LEVANT MATE R I A L ON RECORD. ALTHOUGH THE LEARNED COUN S E L THE ASSESSEE HAS SUBMI T TED BEFORE US THAT THE P R O VI SION S OF S.80HHC(3A ) ( B ) RELEVANT IN THIS CONTE X T ARE VERY CLEAR AND FULLY SUPPO R T THE CASE OF THE ASSESSEE ON THE ISSUE UN D ER CO N SID E RATION, I T IS OB S E R VED THAT T H E LEARNED CIT(A) IN HIS I M PUGN E D ORDER HAS I TA NO. 780/H YD/20 13 M/S. VASANT CHEMICALS LIMITED, HYDERABAD 6 DECIDED THE ISSUE ON MERIT ALSO AGAINST THE ASSESSEE VIDE PARAGRAPH 5.2.1 WHICH READS AS UNDER - 5.2.1. I H A VE CAREFULLY AND DISP ASS ION A TELY CONSID E RED THE RIVAL SUBMI SSI ONS, IT IS OB S ER V ED THAT THE TEST FOR THE PU R PO SE OF SUB - S.(3) OF S .80HHC IS WH E RE THE ASSESSEE I S CARRYING ON B USIN E SS OF EXCLU S IVE EXPORT OF EXPORTS AND DOMESTIC BUSINESS ALSO. IF IT IS THE FORMER CL. (A) WOULD APPL Y AND IF IT LA T TER CL.(B) WOULD APPLY. IF CL.(A) APPLIES, THE ENTIRE PROFIT COMPUTED IN TH E MANNER IN WHI C H TH E P R O FI TS UN D ER THE HE A D P ROFITS AND GAIN S OF BU S IN E SS OR PROFESSION ARE TO B E COMPU T ED AND THE WHOLE O F IT IS ENTITLED TO DE DU C T ION. BUT IF CL. (B) OF SUB S.(3) OF S.80HHC APPLIES THE P R O F ITS OF THE EN T IR E BU S IN E SS HAS FIRST TO B E ASCERTAINED AND THEN APPORTIONED IN PROPORTION THE EXPORT TURNO V ER BEARS TO THE TOTAL TURNOVER TO ARRIVE AT THE P R O F ITS DERIVED F R OM E X PORT OF GOODS OR MERCHANDISE. TH E R E FO R E, I T P R O V IDED T H A T THE PROFITS OF TH E BU S IN E SS MEANING THE EN T IRE PROFIT AS COMPU T ED UN D ER THE HEAD PROFITS AND GAIN S O F BU S IN E SS OR PRO F ESSION HAS TO BE ASCERTAINED AND THAT PROFIT SHOULD BE APPORTIONED ON THE BASIS OF THE TOTAL TURNOVER O F THE BU S IN ES S CAR R I E D ON BY THE ASSESSEE. HERE THE REFERENCE TO THE BU S IN E SS I S NOT TO EXPO R T BUSINESS BUT TO TH E BU S IN ES S WHICH CONSISTS BOTH OF THE EXPORT OUT OF INDIA OF THE GOODS OR MER C H A NDISE OR DOM E STIC SALES. IN CA S E S WH E RE THE EXPORT TURNOVER IS SMALL A ND EXPORT PROFIT IS SMALL, BUT THE LOCAL TURNOVER IS MANY TIM E S MORE AND SO THE PROFIT, THE LO C AL PROFIT WILL ALSO GET APPO R TION E D AND WOULD EARN THE E X CEPTION. A P E RU S AL OF TH E AFO R ESAID OB S ER V ATION S RECORDED BY THE LEARNED CIT(A) AND THE CON C LU S ION DRA WN BY HIM AGAINST THE ASSESSEE CLEARLY SHOWS T H A T TH E CLAIM OF TH E ASSESSEE I S BASED ON A DEBATABLE ISSUE, WHICH CANNOT BE ALLOWED IN THE GUISE OF RECTIFICATION UN D ER S.154, AS RIGHTLY HELD BY THE LEARNED CIT(A). WE TH E R E FORE, FIND NO INFIR M I T Y IN THE IMP U G N E D O RD ER O F TH E LEARNED CIT(A) , UPHOLDING THE O RDE R OF THE ASSESSING OFFICER PASSED UN D ER S.154 ON THE ISSUE U NDER CON S ID E RATION AND UPHOL D IN G TH E SAME, WE DISMISS THIS APPEAL FIL E D BY TH E ASSESSEE . 7. IN TH E R E SULT, APPEAL O F TH E ASSESSEE IS DISMIS SED. I TA NO. 780/H YD/20 13 M/S. VASANT CHEMICALS LIMITED, HYDERABAD 7 ORDER PRONOUNCED IN THE COURT ON 1 ST MAY, 2015 SD/ - SD/ - (G.C.GUPTA) ( P.M.JAGTAP ) VICE PRESIDENT ACCOUNTANT MEMBER D T/ - 1 ST MAY , 201 5 COPY FORWARDED TO: 1. M/S. VASA NT CHEMICALS LIMITED, C/O. RAJU & PRASAD, CHARTERED ACCOUNTANTS, 401, DIAMOND HOUSE, ADJ. AMRUTHA HILLS, PANJAGUTTA, HYDERABAD 82. 2 . DY. COMMISSIONER OF INCOME - TAX CIRCLE 3(3), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) I X MUMBAI COMMISSI ONER OF INCOME - TAX(APPEALS) IV HYDERABAD 5 . COMMISSIONER OF INCOME - TAX III, HYDERABAD 6. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S