M/s. Vanavil Dyes & Chemicals Ltd., CHENNAI V. DCIT, CHENNAI

ITA 817/CHNY/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8043 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-10-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 28-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 80HHC; 80IA; 263

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL: C- BENCH:CHENN AI (BEFORE SHRI ABRAHAM P. GEORGE. ACCOUNTA NT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER) ITA NO.817 / MDS/10 ASST. YEAR 1999-2000 M/S VANAVIL DYES & CHEMICALS LTD. (NOW KNOWN AS CLARIANT CHEMICALS INDIA LTD.), II FLOOR KENCES TOWERS, RAMAKRISHNA ST., T.NAGAR, CHENNAI 600017. PAN AAACV2989G VS THE DCIT, CO.CIR.III(4), CHENNAI (APPELLANT) (RESPONDENT) APPELLANT BY: RESPONDENT BY: SRI VIKRAM VIJAYARAGHAVAN. SRI B.SRINIVAS ORDER PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL, GRIEVANCE OF THE ASSESSEE IS THAT THE CIT INVOKED REVISIONARY JURISDICTION UNDER SEC. 263 OF THE INCO ME-TAX ACT, 1961 ITA NO 817/MDS/10 2 (THE ACT FOR SHORT) EVEN WHEN THE AO HAD TAKEN A VIEW WHICH WAS LAWFULLY POSSIBLE. 2. SHORT FACTS APROPOS ARE THAT THE AO, WHILE COMPU TING DEDUCTION UNDER SEC.80HHC OF THE ACT HAD NOT REDUCED FROM THE PROFITS, DEDUCTION ALLOWED TO THE ASSESSEE UNDER SEC. 80IA OF THE ACT. CIT WAS OF THE OPINION THAT THE DEDUCTION ALLOWED UNDER SEC. 80IA SHOULD BE FIRST REDUCED FROM THE BUSINESS PROFITS, BEFORE COMPUTIN G THE DEDUCTION UNDER SEC. 80HHC. HE, THEREFORE, CONSIDERED THE ORDER PAS SED BY THE AO TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. THOUGH THE ASSESSEE HAD SUBMITTED THAT IN VIEW OF THE JURISDIC TIONAL HIGH COURTS DECISION IN SCM CREATIONS V. ACIT (304 ITR 319), TH E DEDUCTION GIVEN BY THE AO WAS CORRECT, THIS WAS NOT APPRECIATED BY THE CIT. ACCORDING TO HIM, COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.22 57/MDS/2006 DATED 22-05-2009 HAD HELD THAT DEDUCTION UNDER SEC.80IA H AD TO BE REDUCED FROM BUSINESS PROFITS WHILE COMPUTING DEDUCTION UND ER SEC. 80HHC OF THE ACT. 3. NOW BEFORE US, THE LD. AR SUBMITS THAT IN THE FI RST PLACE AOS ORDER WHICH WAS SOUGHT TO BE REVISED BY THE CIT, WA S ONE PASSED UNDER ITA NO 817/MDS/10 3 SEC. 143(3) R.W. SECTION 252 OF THE ACT FOR GIVING EFFECT TO AN ORDER OF THE TRIBUNAL DATED 29-01-2007. FURTHER ACCORDING TO HIM, WHEN TWO VIEWS ARE POSSIBLE AND THE AO HAD TAKEN ONE VIEW, T HE ORDER OF THE AO COULD NOT BE TERMED AS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. PER CONTRA, THE LD. DR S UPPORTED THE ORDER OF THE CIT. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . LD. CIT CONSIDERED THE ORDER OF THE AO TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE, FOR A REASON THAT THE AO HAD WORKED OUT DEDUCTION UNDER SEC.80HHC OF THE ACT WITHOUT FIRST REDUCING F ROM THE DEDUCTION ALLOWED TO THE ASSESSEE UNDER SEC.80IA OF THE ACT. THE QUESTION HERE IS WHETHER THE AO HAD TAKEN A VIEW LAWFULLY POSSIBLE W HILE GRANTING DEDUCTION TO THE ASSESSEE UNDER SEC. 80HHC OF THE A CT. NO DOUBT, IT MIGHT BE TRUE THAT A COORDINATE BENCH OF THIS TRIBU NAL HAD TAKEN A VIEW AGAINST THE ASSESSEE ON A SIMILAR ISSUE EVEN AFTER CONSIDERING THE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE OF S.C.M. CREATIONS (SUPRA), RELYING ON THE DECISION OF THE SPECIAL BEN CH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. ROGINI GARMENTS (294 ITR (AT)1 5(SB). NEVERTHELESS, EVEN SUBSEQUENT TO THE ABOVE DECISION S, JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MRF LTD. (TCA NO.1020/ 2009 DATED 27- ITA NO 817/MDS/10 4 10-2009) HELD, AFTER CONSIDERING THE DECISION OF TH E SPECIAL BENCH IN ROGINI GARMENTS (SUPRA) AND THE DECISION OF THE JUR ISDICTIONAL HIGH COURT ITSELF IN S.C.M. CREATIONS (SUPRA), THAT THE LAW LA ID DOWN IN S.C.M. CREATIONS COULD BE TAKEN AS A VIEW ACCEPTED BY THE DEPARTMENT. THEIR LORDSHIPS ALSO TOOK INTO ACCOUNT A PLETHORA OF HIGH COURT AND SUPREME COURT DECISIONS BEFORE COMING TO THIS VIEW. IT ALSO NOTED THAT SLP FILED BY THE DEPARTMENT BEFORE THE HONBLE APEX COURT FROM S IMILAR DECISIONS OF OTHER HIGH COURTS WERE DISMISSED. THE SAME VIEW HA S ALSO BEEN TAKEN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT V S. CHOLA TEXTILES LTD. (304 ITR 256). IN THE CASE OF S.C.M. CREATIONS (SUP RA) IT HAS BEEN SPECIFICALLY NOTED AT PARA-4 OF THE ORDER, BY THEIR LORDSHIPS THAT COUNSEL OF EITHER SIDE SUBMITTED THAT THE ISSUE HAD TO BE D ECIDED IN FAVOUR OF THE ASSESSEE. THUS WE CANNOT SAY THAT THE VIEW TAKEN BY THE AO WAS NOT A LAWFUL ONE. IN THE CASE OF CIT VS. MAX INDIA LTD. ( 295 ITR 282) IT HAS BEEN HELD BY THE HONBLE APEX COURT THAT WHEN TWO V IEWS ARE POSSIBLE AND THE AO HAD TAKEN ONE VIEW, WITH WHICH THE CIT D ID NOT AGREE, IT WAS NOT AN ORDER ERRONEOUS NOR PREJUDICIAL TO THE INTER ESTS OF THE REVENUE. HERE, THE AO HAD ADOPTED ONE OF THE COURSE PERMISSI BLE IN LAW AND JUST BECAUSE THE SAME HAD RESULTED IN A LOSS TO THE REVE NUE, THE ORDER COULD NOT BE CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE ITA NO 817/MDS/10 5 REVENUE. WE ARE, THEREFORE, OF THE OPINION THAT THE CIT HAD ASSUMED THE POWERS UNDER SEC. 263 OF THE ACT WHERE IT WAS NOT W ARRANTED. THE ORDER IS, THEREFORE, QUASHED. 5. APPEAL OF THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19-10- 2010. SD/- SD/- ( GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: 19TH OCTOBER, 2010 NBR CC: ASSESSEE/ ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE.