M/s. Jay Chem, Ahmedabad V. The ACIT., Circle-10, Ahmedabad

ITA 841/AHD/2006

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9248 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-07-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 06-04-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K SHRIDHA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Capital asset; Gift; Depreciation; Capital expenditure; Set aside
• Section: 143(3); 80HHC; 80IB; 80HH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.841/AHD/2006 ASSESSMENT YEAR:2002-03 DATE OF HEARING:9.7.09 DRAFTED:10.7.09 M/S. JAY CHEM, 803, SHILP BUILDING, C.G. ROAD, NAVRANGPURA, AHMEDABAD PAN NO.AACFJ1923F V/S . ACIT, CIRCLE-10, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S.N.SOPARKAR, AR RESPONDENT BY:- SHRI K. SHRIDHA, SR DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XVI, AHMEDABAD IN APPEAL NO. C IT(A)-XVI/AC.CIR.10/8/05-06 DATED 24-11-2006. THE ASSESSMENT WAS FRAMED BY THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-10, AHMEDABAD U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 31-01-2005 FOR THE ASSESSMENT YEAR 2002-03. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN N OT GRANTING DEDUCTION U/S.80IB OF THE ACT. FOR THIS, THE ASSESSEE HAS RAISED THE FOLL OWING GROUND NO.1 :- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE ACTION OF LD. AO IN NOT GRANTING DEDUCTION U/ S 80IB OF THE ACT ON FOLLOWING INCOME:- ITA NO.841/AHD/2006 A.Y. 2002-03 M/S. JAY CHEM V. ACIT, CIR-10, ABD PAGE 2 (A) FOREIGN EXCHANGE RATE INCOME RS.25,07,274/- (B) DEPB SALES PROCEEDS RS.79,12,666/- DUTY DRAW BACK RS.15,92,282/- (D) OTHER INCOME RS. 53,273/- (E) INCOME FROM TRADING ACTIVITIES RS.10,70,654/- 3. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE STATE D THAT THE ISSUE AS REGARDS FOREIGN FLUCTUATION, DEPB, SALE PROCEED, DUTY DRAWB ACK IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN THE CASE OF SHAH ORIGINALS V. ACIT/DCIT, RANGE 24(1), MUMBAI (2008) 19 SOT 568 (MUM). THE BRIEF FACTS AS REGARD S THE EXCHANGE RATES DIFFERENCE, THE ASSESSING OFFICER NO TED THAT EXPORT EXCHANGE RATE DIFFERENCE OF RS.25,07,234/- HAS GENERATED SINCE TH ERE WAS DIFFERENCE ON THE RATES OF RUPEE IN COMPARISON TO THE CURRENCY OF THE COUNTRY IN WHICH SALE WAS MADE. THIS DIFFERENCE RESULTS SOME TIME IN THE FORM OF INCOME AND AT OTHER AS LOSS. BUT THIS INCOME OR LOSS ARISES DUE TO VALUATION OF CURRENCY IN THE INTERNATIONAL SCENARIO. THIS INCOME DOES NOT STRICTLY ARISE DUE TO SALES BUT DUE TO THE CIRCUMSTANCES PREVAILING IN THE INTERNATIONAL MARKET. THEREFORE, THIS IS CONSI DERED AS INCOME NOT DERIVED FROM THE BUSINESS AND ACCORDINGLY HE DISALLOWED THE DEDU CTION U/S.80IB OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT (A) AND CIT(A) ALSO AGREED WITH THE VIEW TAKEN BY THE ASSESSING OFFICER THAT T HE INCOME ON ACCOUNT OF GAIN AS A RESULT OF APPRECIATION OF FOREIGN EXCHANGE SO EARNE D BY THE ASSESSEE SUBSEQUENT TO SALES ACTIVITIES AND IN SUCH INCOME HAS NOT ACCRUED TO THE ASSESSEE AT THE TIME OF SALES. THIS INCOME MAY BE INCIDENTAL TO OR ATTRIBUT ABLE TO THE BUSINESS AND CERTAINLY CANNOT BE TERMED AS DERIVED FROM EXPORT ACTIVITIES OF THE ASSESSEE. AGGRIEVED, NOW ASSESSEE CAME IN SECOND APPEAL BEFORE US. THE BENCH HAS PUT ONLY ONE QUERY TO THE ASSESSEES COUNSEL THAT THIS FOREIGN EXCHANGE I S ARISING OUT OF THE CURRENT YEARS SALES OR OF EARLIER YEAR. THE LD. COUNSEL FOR THE A SSESSEE REPLIED IN AFFIRMATIVE AND STATED THAT THIS SALE OF FOREIGN EXCHANGE FLUCTUATI ONS PERTAINS TO THE SALE OF CURRENT YEAR AND ACCORDINGLY ALLOWABLE. WE FIND THAT ON TH IS ISSUE, THE BENCH IN THE CASE OF SHAH ORIGINALS (SUPRA) HAS CLEARLY STATED IN PARA-35 AS UNDER:- 35. AS REGARDS RECEIPTS FROM FOREIGN EXCHANGE FLUC TUATION IS CONCERNED, IT HAS ALREADY BEEN DISCUSSED ABOVE THAT THE SAME FORMS A INTEGRAL PART OF THE EXPORT PROCEEDS AND WOULD THUS, HAVE TO BE CONSIDER ED AS DERIVED FROM THE INDUSTRIAL UNDERTAKING. WE ORDER ACCORDINGLY AND DI RECT THAT FOREIGN EXCHANGE ITA NO.841/AHD/2006 A.Y. 2002-03 M/S. JAY CHEM V. ACIT, CIR-10, ABD PAGE 3 FLUCTUATION BE TAKEN INTO CONSIDERATION FOR ALLOWIN G DEDUCTION UNDER SECTION 80-IB. AS THE ISSUE IS VERY CLEAR AND THE FOREIGN EXCHANGE FLUCTUATION RECEIPTS CONFIRMED AN INTEGRAL PART OF THE EXPORT PROCEEDS AND IT SHOULD HAVE BEEN CONSIDERED AND DERIVED FROM INDUSTRIAL UNDERTAKINGS. 4. COMING TO DEPB SALE PROCEED, DUTY DRAWBACK, WE F IND THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS EARNED INCOME FROM THESE ITEMS, IT HAS BEEN FOUND T HAT THE ASSESSEE HAS EARNED INCOME FROM DEPB LICENCSE & EXPORT INCENTIVES OF RS .95,04,948/- WHICH INCLUDED RS.79,12,666/- DEPB ENTITLEMENTS AND RS.15,92,282/- WAS FROM THE DUTY DRAWBACK. THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF THI S INCOME. IT WAS CONTENDED THAT THE ASSESSEE HAS RECEIVED DUTY FREE LICENSES SINCE IT IS CARRYING ON THE EXPORT BUSINESS ACTIVITY, AND THIS INCOME HAS GENERATED FR OM THE IMPORT ENTITLEMENT AND SALES OF LICENSES, THEREFORE, THIS INCOME IS PERTAI NING TO MANUFACTURING BUSINESS OF THE ASSESSEE. BUT ACCORDING TO THE AO THIS CONTENTI ON IS MISLEADING, SINCE THE INCOME GENERATED FROM THE ENTITLEMENTS, INCENTIVE I S NOT AN INCOME DIRECTLY DERIVED FROM THE MANUFACTURING ACTIVITY OF THE ASSESSEE. TH E AO CONSIDERED THE CONTENTION RAISED BY THE ASSESSEE AND THE PLEA TO TREAT THE IN CENTIVES AND DEPB INCOME AS INCOME FROM INDUSTRIAL UNDERTAKING IS HOWEVER NOT F OUND ACCEPTABLE. ACCORDING TO THE AO IT IS PRODUCT OF THE INCENTIVE GIVEN BY GOVT . OF INDIA AND ON THIS ISSUE DECISION GIVEN BY THE HONBLE SUPREME COURT IN CASE OF CIT V. STERLING FOODS LTD. (1999) 237 ITR 579 (SC) IS RELEVANT. THOUGH THIS DECISION RELATES TO S ECTION 80HH OF THE ACT BUT THE RATIO IS IDENTICAL THAT THE EXPORT INCE NTIVE CANNOT DERIVE PROFIT AND GAIN FROM THE MANUFACTURING ACTIVITY TO BE ELIGIBLE FOR DEDUCTION, HENCE SAME IS REDUCED FOR THE PURPOSE OF COMPUTING DEDUCTION U/S.80-IB(3) OF THE ACT. THE CIT(A) ALSO CONFIRMED THE ACTION OF THE AO. BEFORE US LD. COUN SEL FOR THE ASSESSEE RELIED ON IN THE CASE OF SHAH ORIGINALS (SUPRA). WE FIND THAT THE MUMBAI BENCH IN THE CASE OF SHAH ORIGINALS (SUPRA) IN PARA-31-34 & 38 HAS HELD AS UNDER :- 31. ANOTHER ISSUE RAISED BY THE ASSESSEE IN ITS AP PEALS FOR THE DIFFERENT YEARS IS WHETHER THE ACTION OF THE LOWER AUTHORITIES IN H OLDING THAT RECEIPTS IN THE NATURE OF DUTY DRAWBACK (EXPORT INCENTIVE), FOREIGN EXCHANGE FLUCTUATION, SALE OF IMPORT LICENCE AND INTEREST ON INCOME-TAX REFUND ARE NOT PART OF INCOME ITA NO.841/AHD/2006 A.Y. 2002-03 M/S. JAY CHEM V. ACIT, CIR-10, ABD PAGE 4 DERIVED FROM INDUSTRIAL UNDERTAKING AND THEREBY NOT ENTITLED TO DEDUCTION UNDER SECTION 80-IB, IS CORRECT OR NOT. 32. WITH REGARD TO THE DUTY DRAWBACK, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT DUTY DRAWBACK IS NOTHING BUT A R EFUND OF EXCISE DUTY OR CUSTOM DUTY PAID ON INPUT OF RAW MATERIAL. HE HAS A RGUED THAT THE FINDING OF THE ASSESSING OFFICER THAT SUCH DUTY DRAWBACK IS NO T DERIVED FROM BUSINESS IS NOT CORRECT INASMUCH AS THERE IS AN INEXTRICABLE LINK BETWEEN THE BUSINESS CARRIED ON BY THE ASSESSEE AND THE RECEIPTS OF THES E AMOUNTS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS REFERRED TO THE JUDGEM ENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. INDIA GELATINE & CHEMIC ALS LTD. [2005] 275 ITR 284 , HELD THAT THE OBJECT OF DUTY DRAWBACK SCHEME IS TO REIMBURSE EXPORTERS FOR TARIFFS PAID ON THE IMPORTED RAW MATERIAL AND I NTERMEDIATES AND CENTRAL EXCISE DUTIES PAID ON DOMESTICALLY PRODUCED INPUTS WHICH ENTER INTO EXPORT PRODUCTION. CUSTOM DUTIES AND EXCISE DUTIES ON INPU TS RAISE THE COST OF PRODUCTION IN INDUSTRIES AND THEREBY AFFECT THE COM PETITIVENESS OF EXPORTS. THEREFORE, EXPORTS NEED TO BE ASSISTED FOR NEUTRALI ZING THE ESCALATION IN THEIR COSTS, ATTRIBUTABLE TO SUCH CUSTOMS AND EXCISE DUTI ES. DUTY DRAWBACK IS, THEREFORE, INTENDED TO REDUCE THE COST OF PRODUCTIO N. HENCE, DUTY DRAWBACK IS AN INTEGRAL PART OF THE PRICING OF THE GOODS AND, T HEREFORE, DUTY DRAWBACK HAS TO BE TREATED AS DERIVED FROM INDUSTRIAL UNDERTAK ING DUTY DRAWBACK IS DERIVED FROM THE INDUSTRIAL UNDERTAKING AND, THEREF ORE, ELIGIBLE FOR RELIEF UNDER SECTION 80J. 33. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER PO INTED OUT THAT FOLLOWING THE AFORESAID DECISION, THE MUMBAI BENCH OF THE TRIBUNA L IN THE CASE OF 1977 KLOTHINGS UNIT NO.1 V. ITO [IT APPEAL NO. 3772 (MU9M) OF 2005] FOR ASSESSMENT YEAR 2001-02 HELD THAT DUTY DRAWBACK REC EIVED BY THE ASSESSEE FORMS PART OF PROFIT DERIVED FROM INDUSTRIAL UNDERT AKING. HE ALSO RELIED UPON THE DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF PARAMOUNT INDUSTRIAL CORPN. 109 TTJ 295, HOLDING THAT INCOME EARNED ON ACCOUNT OF DUTY DRAWBACK IS INCOME EARNED FROM INDUSTRIAL UNDERTAKI NG ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB OF THE ACT. SO FAR AS THE DECIS IONS IN THE CASE OF CIT V. JAMEEL LEATHERS AND UPPERS [2000] 246 ITR 97 AND CIT V. VISHWANATHAN & CO. 261 ITR 737, AS RELIED UPON BY THE REVENUE IS CONCERNED. THE LE ARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DECISIO N OF THE HONBLE GUJARAT HIGH COURT DISCUSSED ABOVE WAS ARRIVED AT AFTER CON SIDERING THE SAID TWO DECISIONS. 34. IN VIEW OF THE ABOVE LEGAL POSITION, WE HOLD TH AT DUTY DRAWBACK IS TO BE CONSIDERED AS DERIVED FROM THE INDUSTRIAL UNDERTAKI NG OF THE ASSESSEE AND WOULD, THUS, HAVE TO BE CONSIDERED FOR THE PURPOSE OF ALLOWANCE OF DEDUCTION UNDER SECTION 80-IB. & 38. FOR THE ASSESSMENT YEAR 2004-05, THERE IS ANOTH ER QUESTION ON WHETHER THE PROFIT ON TRANSFER OF THE DUTY ENTITLEMENT PASS BOOK (DEPB) SCHEME SHOULD BE CONSIDERED AS INCOME DERIVED FROM THE IND USTRIAL UNDERTAKING AND, HENCE, ENTITLED TO BEING RECKONED FOR THE PURPOSE O F COMPUTATION OF DEDUCTION UNDER SECTION 80-IB. WE ARE OF THE VIEW THAT DEPB S CHEME IS MORE AKIN TO THE SCHEME OF ALLOWING DRAWBACK AMOUNT ON DUTY ALRE ADY PAID BY THE ITA NO.841/AHD/2006 A.Y. 2002-03 M/S. JAY CHEM V. ACIT, CIR-10, ABD PAGE 5 ASSESSEE ON IMPORT OF RAW MATERIAL ETC., THAN CONFE RRING IMPORT ENTITLEMENT BENEFIT ON EXPORTS DONE BY THE ASSESSEE. IN THAT WA Y, TREATMENT METED IN THE CASE OF DUTY DRAWBACK SHOULD BE EXERCISED IN THIS CASE. THUS, THE PROFITS ARISING UNDER THE DEPB SCHEME SHOULD BE CONSIDERED TO BE DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THE ASSESSEE SHOULD BE A LLOWED DEDUCTION UNDER SECTION 80-IB ON SUCH PROFITS. WE ORDER ACCORDINGLY . 5. IN VIEW OF THE ABOVE DISCUSSION, THE EXCHANGE DI FFERENCE, DEPB SALES PROCEEDS AND DUTY DRAW BACK ARE ELIGIBLE FOR DEDUCT ION U/S.80-IB OF THE ACT. ACCORDINGLY WE ALLOW THIS ISSUE OF THE ASSESSEES A PPEAL. 6. AS REGARDS TO THE OTHER SUB-GROUND (D) & (E) OF GROUND NO.1 AS REGARDS TO OTHER INCOME AND INCOME FROM TRADING ACTIVITY HAS N OT BEEN PRESSED BY THE ASSESSEES COUNSEL AND ACCORDINGLY THE SAME ARE DIS MISSED AS NOT PRESSED. 7. THE GROUND NO.2, 3 & 4 RAISED BY THE ASSESSEE HA S NOT BEEN PRESSED BY LD. COUNSEL FOR THE ASSESSEE. SO WE DISMISS THE GROUND NO.2, 3 AND 4 IN THIS APPEAL OF THE ASSESSEE AS NOT PRESSED. 8. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ETERMINING THE TOTAL INDIRECT COST ATTRIBUTABLE TO THE TRADING EXPORTS AT RS.3,57,281/ - FOR THE PURPOSE OF DETERMINING DEDUCTION U/S.80HHC OF THE ACT. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCE OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). W E FIND FROM THE ORDERS OF THE LOWER AUTHORITIES THAT ASSESSING OFFICER WHILE COMP UTING DEDUCTION U/S.80HHC OF THE ACT WORKED OUT THE PROPORTIONATE INDIRECT COST FOR EXPORT TURNOVER OF A TRADING GOODS AND WORKED OUT PROFIT AND THEREFORE EXPORT OF TRADI NG GOODS. THE ASSESSEE HAS WORKED OUT THE DEDUCTION ON PROPORTIONATE BASIS OF INDIRECT COST. BUT THE ASSESSEE HAS NOT INCLUDED CERTAIN ITEMS OF INDIRECT EXPENSES IN THE TOTAL INDIRECT COST. THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICE R BY STATING THAT THE AO HAS ITA NO.841/AHD/2006 A.Y. 2002-03 M/S. JAY CHEM V. ACIT, CIR-10, ABD PAGE 6 RIGHTLY WORKED OUT THE INDIRECT COST ON PROPORTIONA TELY BASIS OF EXPORT TURNOVER OF TRADING GOODS. BEFORE US ALSO THE ASSESSEE COULD N OT MAKE OUT ANYTHING AGAINST THE ORDER OF THE LOWER AUTHORITIES. ACCORDINGLY, WE FIN D NO INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES AND WE CONFIRM THE SAME. THIS ISS UE OF THE ASSESSEES APPEAL IS DISMISSED. 10. THE NEXT COMMON ISSUE IN THIS APPEAL OF THE ASS ESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OF FICER IN DISALLOWING 1/7 TH OUT OF THE MOTOR CAR EXPENSES AND TELEPHONE EXPENSES. 11. AFTER HEARING THE RIVAL CONTENTIONS AND GOING T HROUGH THE CASE RECORDS, WE FIND THAT THE CIT(A) HAS RESTRICTED THE DISALLOWANC E ON MOTOR CAR EXPENSES AT 1/6 TH AND NOT AT 1/7 TH AS CLAIMED BY THE ASSESSEE. AS REGARDS THE TELEPHO NE EXPENSES THE ASSESSING OFFICER HAS DISALLOWED 1/6 TH AMOUNTING TO RS.1,69,276/- ON THE GROUND OF PERSONAL USES. THE CIT(A) RESTRICTED AT 1/7 TH BEING REASONABLE BY STATING THAT THE DISALLOWANCE IS SLIGHTLY EXCESSIVE AND WE FIND THAT NORMALLY DISALLOWANCE FOR PERSONAL USER IS MADE AT 1/10 TH AND TRIBUNAL IS CONSISTENTLY MAKING ESTIMATED DISALLOWANCE, ACCORDINGLY, WE RESTRICT THE DISALLOW ANCE ON BOTH THE COUNTS AT 1/10 TH . THIS COMMON ISSUE IN THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 12. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER DISA LLOWING FOREIGN TRAVEL EXPENSES AT RS.12,15,780/-. 13. AFTER HEARING THE RIVAL CONTENTIONS AND GOING T HROUGH THE CASE RECORDS, WE FIND THAT THE CIT(A) HAS PARTLY DISALLOWED AND PART LY ALLOWED THE CLAIM OF THE ASSESSEE BY STATING THE REASON THAT THE ASSESSING O FFICER HAS RIGHTLY DISALLOWED RS.2,01,275/- BECAUSE THESE EXPENSES ARE FOR NON-BU SINESS PURPOSES AS IT APPEARS THAT SHRI CANON PATEL, WHO WAS NEWLY MARRIED AT THA T TIME HAS TAKEN HIS WIFE ABROAD ON A HONEYMOON AND THIS CANNOT BE TERMED AS BUSINE SS TRIP. ALSO IN RESPECT OF FOREIGN TRAVELING EXPENSES DISALLOWED RS.3,830 + RS .45,703/- IN PARA 11.5 AND RS.3,69,750/- IN PARA-11.5 OF THE ASSESSMENT ORDER. THE CIT(A) DIRECTED THE ITA NO.841/AHD/2006 A.Y. 2002-03 M/S. JAY CHEM V. ACIT, CIR-10, ABD PAGE 7 ASSESSING OFFICER TO VERIFY WHETHER THE SAID EXPENS ES PERTAINS TO THE ASSESSMENT YEAR UNDER CONSIDERATION OR IT WAS INCURRED IN THE SUBSEQUENT ASSESSMENT YEAR SUBJECT TO ITS ALLOWABILITY. AS PER THE CIT(A) THE FOREIGN TRAVELING EXPENSES OF RS.3,22,717/- IN RESPECT OF GIFTS GIVEN BY THE ASSE SSEE AS MENTIONED IN PARA-11.6 OF THE ASSESSMENT ORDER HAS BEEN RIGHTLY DISALLOWED BY THE AO. FINALLY, AS PER THE CIT(A), THE FOREIGN TRAVELING EXPENSES OF RS.3,48, 757/- IN PARA-11.8 OF THE ASSESSMENT ORDER MAY BE DISALLOWED AT 1/6 TH INSTEAD OF 1/4 TH OF SUCH EXPENSES AS HAS BEEN DONE BY THE AO TO COVER UP ANY PERSONAL EL EMENT INVOLVED THEREIN. ACCORDING TO THE CIT(A) THE ASSESSEE GETS A RELIEF OF RS.1,16,252/-. WE FIND THAT THIS ISSUE HAS BEEN SET ASIDE BY THE CIT(A) TO THE FILE OF THE ASSESSING OFFICER, AND ACCORDINGLY WE FIND NO INFIRMITY IN THE SAME. THIS ISSUE OF THE ASSESSEES APPEAL IS DISMISSED. 14. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING SOFTWARE EXPENSE AMOUNTING TO RS.2,02,140/- AS CAPITAL EXPENSES. THE ASSESSEE HAS CLAIMED DEDUCTION FOR COMPUTER SOFTWARE PROGRAMME EXPENSES OF RS.4,29,450/- AS REVENUE EXPENSES. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO H OW THE EXPENSES WERE REVENUE IN NATURE AND WHY THE SAME SHOULD NOT BE TR EATED AS CAPITAL EXPENDITURE. THE ASSESSEE HAS FURNISHED WRITTEN SUBMISSION IN TH IS REGARD CONTENDING AS, IT HAS PURCHASED COMPUTER SOFTWARE PROGRAMME WORTH OF RS.4 ,29,450/-. BUT ACCORDING TO THE ASSESSING OFFICER, THE PROGRAMME HAS SET UP TO RUN BUSINESS SMOOTHLY AND MAINTENANCE OF ACCOUNTANCY, IT IS CRYSTAL CLEAR THA T THE SOFTWARE PURCHASED BY THE ASSESSEE WILL HAVE AN EVERLASTING USE AND ENDURING BENEFITS IN FUTURE AS THE SAME WOULD BE USEFUL FOR SEVERAL YEARS. THE INVESTMENT I N SOFTWARE IS DEFINITELY OF AN ENDURING NATURE AND THE SAME IS CAPITAL EXPENDITURE IN NATURE. ACCORDING TO THE ASSESSING OFFICER THE INCOME TAX RULES PROVIDES DEP RECIATION FOR COMPUTER SOFTWARE AT 60% AND THIS ITSELF PROVES THAT THE COMPUTER SOF TWARE IS A CAPITAL EXPENDITURE BUT THE INCOME TAX ACT HAS PROVIDED DEPRECIATION ON SUC H CAPITAL ASSETS AT HIGHER RATES WHICH THE ASSESSEE IS ENTITLED FOR. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) ALSO TREATED THE EXPENDITURE AS C APITAL AND ALLOWED DEPRECIATION. AGGRIEVED, NOW THE ASSESSEE CAME IN SECOND APPEAL B EFORE US. ITA NO.841/AHD/2006 A.Y. 2002-03 M/S. JAY CHEM V. ACIT, CIR-10, ABD PAGE 8 15. AT THE OUTSET BEFORE US, LD. COUNSEL FOR THE AS SESSEE FAIRLY STATED THAT THE ISSUE IS COVERED BY THE DECISION OF THIS TRIBUNAL I N THE CASE OF AMWAY INDIA ENTERPRISES V. DCIT (2008) 111 ITD 112 (DEL) (SB), WHEREIN THE TRIBUNA L HAS LAID DOWN CERTAIN GUIDELINES RELEVANT TO DETERMINE WHETH ER THE ADVANTAGE IS OPERATED IN THE CAPITAL FIELD OR REVENUE FIELD IN PARA- 58 & 59 . FINALLY THE TRIBUNAL HAS DECIDED THE ISSUE IN PARA-60 AS UNDER:- 60. HAVING LAID DOWN THE CRITERIA FOR DETERMINING THE NATURE OF EXPENDITURE INCURRED ON ACQUISITION OF SOFTWARE, WHETHER CAPITA L OF REVENUE, WE ARE OF THE VIEW THAT THESE CRITERIA NEED TO BE APPLIED TO DETE RMINE THE EXACT NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE IN HE PRESENT CASES FOR ACQUIRING DIFFERENT SOFTWARE. SINCE THIS EXERCISE IS REQUIRED TO BE DONE IN RESPECT OF EACH AND EVERY SOFTWARE INDEPENDENTLY HAVING REGARD TO THE CRITERIA LAID DOWN ABOVE, WE ARE OF THE VIEW THAT THE MATTER NEEDS TO BE RESTORED BACK TO THE FILE OF HE ASSESSING OFFICER FOR DOING SUCH EXERCISE. TH E ASSESSING OFFICER SHALL EXAMINE THE QUESTION WHETHER EXPENDITURE ON COMPUTE R SOFTWARE IS CAPITAL OR REVENUE IN THE LIGHT OF THE CRITERIA LAID DOWN ABOV E AFTER GIVING AN OPPORTUNITY OF BEING HARD TO THE ASSESSEE. IF ON SUCH EXAMINATI ON, THE ASSESSING OFFICER COMES TO THE CONCLUSION THAT THE EXPENDITURE IS CAP ITAL EXPENDITURE, THEN THE QUESTION REGARDING ALLOWING DEPRECIATION WILL BE DE CIDED IN ACCORDANCE WITH THE PRINCIPLES LAID DOWN IN THE SUBSEQUENT PARAGRAP HS. RESPECTFULLY FOLLOWING THE DELHI SPECIAL BENCH IN T HE CASE OF AMWAY INDIA ENTERPRISES (SUPRA), WE ALSO SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE IN TERMS OF THE GUIDELINES LAID DOWN IN PARA-58 AND 59 OF THIS SPECIAL BENCH, AS THE FACTS ARE NOT AVAILABLE ON RECORD. THIS ISSU E OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 16. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN N OT GRANTING THE DEDUCTION U/S.80-IB AND 80HHC OF THE ACT ON THE TOTAL INCOME. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND:- 10. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN NOT CONFIRMING THE ACTION OF AO IN NOT GRANTING DEDUCTION U/S.80IB AND 80HHC ON THE SAME AMOUNT OF GROSS TOTAL INCOME. LD. CIT(A) HAS FAILED TO APPRECIATE THAT S. 80IB OF THE ACT IS AN INDEPENDENT SECTION AND ED CLAIMED THEREIN DOES NOT AFFECT THE RIGHT TO CLAIM DEDUCTION UNDER ANY OTHER SECTIO NS INCLUDING DEDUCTION U/S.80HHC OF THE ACT. ITA NO.841/AHD/2006 A.Y. 2002-03 M/S. JAY CHEM V. ACIT, CIR-10, ABD PAGE 9 17. AT THE OUTSET, IT IS SEEN THAT THE ISSUE IS SQU ARELY COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH SPECIAL BENCH OF THIS TRIBUNAL OF MADRAS BENCHES IN THE CAS E OF ACIT V. ROGINI GARMENTS (2007) 294 ITR 15 (AT), (CHENNAI) (SB), WHEREIN IT IS HELD AS UNDER:- FROM THE ABOVE, IT IS CLEAR THAT IF RESTRICTIVE CL AUSE NOT IN THE SAME SECTION BUT IN SOME OTHER PROVISION, IS CLEARLY SHOWING THE MENS LEGIS IT HAS TO BE GIVEN FULL EFFECT. THEREFORE, IF RESTRICTION IS PL ACED ON THE CLAIM OF REPETITIVE DEDUCTION IN SECTION 80IA(9) AND IS MADE APPLICABLE IN RESPECT OF ALL DEDUCTIONS UNDER CHAPTER VI-A, THEN THIS RESTRICTIO N IS TO BE APPLIED. SINCE THE WORDINGS USED ARE ANY OTHER DEDUCTIONS UNDER CHAPT ER VI-A FULL EFFECT IS TO BE GIVEN TO THIS PROVISION AND WHENEVER AN ASSESSEE WANTS TO CLAIM DEDUCTION UNDER SECTION 80-IA(9) RESTRICTION IS TO BE READ IN EVERY OTHER PROVISION PROVIDING FOR DEDUCTION UNDER CHAPTER VI- A. APROPOS THE ARGUMENT THAT THE PROVISION IS COUCHED WITH AMBIGUITIES, AND THEREFORE THE SPIRIT OF THE ACT IS TO BE SEEN AND J USTICE BE DONE WE FIND THAT THE FREEDOM FOR THE SEARCH OF THE SPIRIT OF THE ACT OR THE MISCHIEF AT WHICH IT IS AIMED OPENS THE POSSIBILITY OF LIBERAL INTERPRETATI ON. THIS FINER ASPECT CANNOT BE NARROWLY WATCHED. IT IS THAT DELICATE AND IMPORT ANT BRANCH OF JUDICIAL POWER, THE CONCESSION OF WHICH IS DANGEROUS BUT THE DENIAL IS DISASTROUS. AT ONE STREAM STANDS LORD DENNING WHO SAID : WE DO NOT SIT HERE TO PULL THE LANGUAGE OF PARLIAMENT TO PIECES AND MAKE NON-SENSE OF IT. THAT IS AN EASY THING TO DO. WE SIT HERE TO FIND OUT THE INTENTION OF PARLIAMENT AND CARRY IT OUT. WE DO THIS BETTER BY FILLING IN THE GAPS AND MAKING SENSE OF THE ENACTMENT THAN BY OPENING TO DESTRUCTIVE ANALYSIS. VISCOUNT SIMONDS CALLED IT A NAKED USURPATION OF THE LEGISLATIVE FUNCTION UNDER THE TH ING GUISE OF INTERPRETATION. IN OUR OPINION, THE INTENTION OF LEGISLATURE IS A V ERY SLIPPERY PHASE. WHEN THE LANGUAGE OF THE STATUTE IS TRANSPARENTLY PLAIN, IT IS WRONG TO GIVE IT COLOUR ACCORDING TO THE TEMPER OF TIME. WHEN THE LANGUAGE IMPLIED BY THE ENACTMENT IS CLEAR, THERE IS NO QUESTION OF INTERPRETING THE PROVISIONS IN ANY MANNER EXCEPT BY GIVING THEM THEIR PLAIN AND OBVIOUS MEANI NG. NEBULOUS CONCEPT OF THE LEGISLATIVE INTENT CANNOT BE USED TO CURTAIL TH E EXPLICIT PROVISIONS IN A STATUTE. A STATUTE OR ANY ENACTING PROVISIONS THERE IN MUST BE SO CONSTRUED SO AS TO MAKE IT EFFECTIVE AND OPERATIVE ON THE PRINCI PLE EXPRESSED IN THE MAXIM, UT RES MAGIS VALEAT QUAM PEREAT. THERE IS NO SCOPE FOR IMPORTING INTO THE STATUTE IS THE EDICT OF THE LEGISLATURE AND THE DUT Y OF THE JUDICATURE IS TO ACT UPON THE SENTETIA LEGIS. THERE IS NO ESTOPPEL AGAIN ST THE STATUTE. WE HAVE GONE THROUGH THE CIRCULAR RELIED ON BY LEAR NED COUNSEL FOR THE ASSESSEE. IT NOWHERE SUGGESTS THAT MORE THAN 100 PE R CENT DEDUCTION ON THE SAME PROFIT CAN BE GRANTED TO THE ASSESSEE UNDER VA RIOUS SECTIONS ENUMERATED IN CHAPTER VI-A. SECTION 80HHC IS PART O F CHAPTER VI-A. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SHARON VANEERS P. LTD.[2007] 294 ITR 18 (MAD.) (T.C.(A) NO.62 OF 2004 DATED FEBRUARY 26, 2007) , HAS MADE IT CLEAR THAT IT IS NOT CORRECT TO SAY T HAT SECTION 80HHC OF THE ACT IS A SELF-CONTAINED PROVISION. THE DEDUCTION CA NNOT BE ALLOWED IGNORING ITA NO.841/AHD/2006 A.Y. 2002-03 M/S. JAY CHEM V. ACIT, CIR-10, ABD PAGE 10 THE RESTRICTIVE CLAUSE CONTAINED IN SECTION 80-IA(9 ). THE RESTRICTIVE CLAUSE IN SECTION 80-IA MAKES IT ABUNDANTLY CLEAR THAT WHEREV ER DEDUCTION UNDER ANY OTHER SECTIONS OF CHAPTER VI-A(C) IS CLAIMED, THE C OMPUTATION WILL BE SUBJECT TO THE RESTRICTIONS LAID DOWN IN SECTION 80-IA(9). IT PRECLUDES PRO TANTO, ALL THE DEDUCTIONS OF SUCH PROFITS AND GAINS CLAIMED UNDER CHAPTER VI-A(C). SECTION 80HHC IS A PART OF CHAPTER VI-A(C). IT IS NOT A SE LF-CONTAINED PROVISION. THERE IS ABSOLUTELY NO AMBIGUITY ON THIS ASPECT. WE ARE THEREFORE OF THE OPINION THAT RELIEF UNDER SECTION 80-IA SHOULD BE D EDUCTED FROM THE PROFITS AND GAINS OF THE BUSINESS BEFORE COMPUTING RELIEF UNDER SECTION 80HHC OF THE ACT. ACCORDINGLY, THIS ISSUE OF THE ASSESSEES APPEAL IS DISMISSED BY FOLLOWING THE DECISION OF CHENNAI BENCH (SB) IN THE CASE OF ROGINI GARMENTS (SUPRA). 18. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 28/08/2009 SD/- SD/- (D.C.AGRAWAL) (MAHAVI R SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 28/08/2009 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XVI, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD