Sree Mangayarkarasi Mills Private Ltd., Madurai V. ACIT, Madurai

ITA 847/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64283 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-09-2012
• Assessment Year: 1995-1996
• Appeal Filed On: 18-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Section: 80HHC; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 847/MDS/2012 (ASSESSMENT YEAR : 1995-96) M/S SREE MANGAYARKARASI MILLS PVT. LTD., PULIYANKULAM, NEAR SILAIMAN, MADURAI 625 201. PAN : AABCS5360B (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I, MADURAI. (RESPONDENT) APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE RESPONDENT BY : SHRI SHAJI P. JACOB, ADDL. CIT DATE OF HEARING : 05.09.2012 DATE OF PRONOUNCEMENT : 18.09.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVAN CE IS THAT CIT(APPEALS) DID NOT APPLY THE LAW LAID DOWN BY HON BLE APEX COURT IN THE CASE OF CIT V. LAKSHMI MACHINE WORKS (290 IT R 667) AND FAILED TO EXCLUDE EXCISE DUTY AND SALES TAX FROM IT S TOTAL TURNOVER WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC OF IN COME-TAX ACT, I.T.A. NO. 847/MDS/12 2 1961 (IN SHORT 'THE ACT'). ASSESSEE IS ALSO AGGRIE VED THAT INTEREST UNDER SECTION 234D OF THE ACT WAS CHARGED ON IT DES PITE THE IMPUGNED ASSESSMENT YEAR BEING ONE EARLIER TO ASSES SMENT YEAR 2004-05. 2. FACTS APROPOS ARE THAT ASSESSEE, ENGAGED IN MANU FACTURE OF COTTON YARN, FILED ITS RETURN FOR IMPUGNED ASSESSME NT YEAR ON 20.11.1995 DECLARING AN INCOME OF ` 22,29,270/-. ASSESSEE HAD ALSO CLAIMED A DEDUCTION OF ` 24,03,490/- UNDER CHAPTER VI-A OF THE ACT. AMONG VARIOUS EXPENDITURE CLAIMED BY THE ASSESSEE T HERE WAS A SUM OF ` 61,28,150/-, FOR REPAIRS, WHICH WAS INCURRED FOR I NSTALLATION OF MACHINERY IN THE PLACE OF OLD MACHINERY. ASSESSING OFFICER HELD THAT SUCH EXPENSES INCURRED ON REPLACEMENT OF OLD MACHIN ERY, WERE A CAPITAL OUTGO AND DID NOT ACCEPT THE CLAIM OF THE A SSESSEE THAT IT WAS A REVENUE OUTGO. DEDUCTION UNDER SECTION 80HHC WAS ALSO RE- WORKED FOR A REASON THAT ASSESSEE DID NOT INCLUDE E XCISE DUTY AND SALES TAX AS A PART OF ITS TURNOVER WHILE PERFORMIN G ITS CLAIM FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT. 3. ASSESSEE MOVED IN APPEAL BEFORE CIT(APPEALS) AGA INST THE ABOVE DISALLOWANCES. WITH REGARD TO REPLACEMENT OF MACHINERIES, CIT(APPEALS) HELD THAT THERE WAS NO INCREASE IN CAP ACITY AND SUCH I.T.A. NO. 847/MDS/12 3 EXPENDITURE HAD TO BE ALLOWED AS A REVENUE OUTGO. HOWEVER, INSOFAR AS CLAIM OF DEDUCTION UNDER SECTION 80HHC WAS CONCE RNED, CIT(APPEALS) WAS OF THE OPINION THAT BOTH EXCISE DU TY AND SALES TAX FORMED PART OF TURNOVER OF THE ASSESSEE AND COULD N OT BE EXCLUDED. APPEAL WAS FILED BEFORE THIS TRIBUNAL ALBEIT ONLY O N THE FIRST ISSUE REGARDING MACHINERY REPLACEMENT. IT SEEMS ASSESSEE DID NOT AGITATE ON THE CONFIRMATION OF CIT(APPEALS) THE INCLUSION O F EXCISE DUTY AND SALES TAX AS PART OF ITS TURNOVER FOR THE PURPOSE O F WORKING OUT DEDUCTION UNDER SECTION 80HHC OF THE ACT, ANY FURTH ER. WITH REGARD TO THE ISSUE OF MACHINERY REPLACEMENT, THE MATTER F INALLY REACHED HONBLE APEX COURT, WHICH HELD IN FAVOUR OF THE REV ENUE. THE ASSESSING OFFICER ON 19.9.2009, ISSUED AN ORDER GIV ING EFFECT TO THE ORDER OF HONBLE APEX COURT INSOFAR AS IT RELATED T O THE CLAIM OF REPLACEMENT OF OLD MACHINERY. HOWEVER, FOR THE DED UCTION UNDER SECTION 80HHC, THE A.O. PERSISTED WITH THE ORIGINAL WORKING, AND FOLLOWED IT DITTO. IN OTHER WORDS, EXCISE DUTY AND SALES TAX WERE AGAIN CONSIDERED AS PART OF TOTAL TURNOVER FOR THE PURPOS E OF WORKING OUT DEDUCTION UNDER SECTION 80HHC, IN SUCH GIVING EFFEC T ORDER AS WELL. 4. ASSESSEE ONCE AGAIN MOVED IN APPEAL BEFORE CIT(A PPEALS), BUT THIS TIME ONLY ON TWO ISSUES, NAMELY, ASSAILING THE SCALING DOWN I.T.A. NO. 847/MDS/12 4 OF DEDUCTION UNDER SECTION 80HHC OF THE ACT AND LEV Y OF INTEREST UNDER SECTION 234D OF THE ACT. CIT(APPEALS) IN THE SECOND ROUND OF PROCEEDINGS HELD THAT ASSESSEE HAD NOT CONTESTED TH E ISSUE REGARDING EXCLUSION OF EXCISE DUTY AND SALES TAX FR OM TOTAL TURNOVER, FOR THE PURPOSE OF WORKING OUT DEDUCTION UNDER SECT ION 80HHC, IN A HIGHER APPELLATE FORUM IN THE FIRST ROUND OF PROCEE DINGS. THEREFORE, ACCORDING TO HIM, THE DECISION OF CIT(APPEALS) IN T HE EARLIER ROUND, UPHOLDING THE ACTION OF ASSESSING OFFICER WITH REGA RD TO THIS ISSUE, HAD REACHED FINALITY. AS PER THE CIT(APPEALS), THE ORDER BEFORE HIM WHICH WAS IN APPEAL WAS THE ORDER OF A.O. GIVING EF FECT TO THE ORDER OF HONBLE APEX COURT, WHICH WAS FOR A DIFFERENT ISSUE . WHILE GIVING EFFECT TO THE DIRECTIONS OF HONBLE APEX COURT, ASS ESSING OFFICER COULD CONFINE ONLY TO THE ISSUE ARISING OUT OF THE DECISI ON OF HONBLE APEX COURT AND NOTHING MORE. HE, THEREFORE, HELD THAT A SSESSEES FRESH CLAIM TO RE-WORK DEDUCTION UNDER SECTION 80HHC WAS NOT WELL FOUNDED. THUS, HE CONFIRMED THE ORDER OF ASSESSING OFFICER IN THIS REGARD. 5. WITH REGARD TO CHARGING OF INTEREST UNDER SECTIO N 234D OF THE ACT, CIT(APPEALS) FOLLOWED THE DECISION OF KERALA H IGH COURT IN THE I.T.A. NO. 847/MDS/12 5 CASE OF CIT V. KERALA CHEMICALS & PROTEINS LTD. (32 3 ITR 584) AND HELD THAT THE MATTER REQUIRED A RE-VISIT BY THE ASS ESSING OFFICER. 6. NOW BEFORE US, LEARNED A.R. CONTENDED THAT HONB LE APEX COURT IN THE DECISION OF LAKSHMI MACHINE WORKS (SUP RA) HAD UNEQUIVOCALLY HELD THAT EXCISE DUTY AND SALES TAX D ID NOT FORM PART OF TOTAL TURNOVER FOR THE PURPOSE OF CALCULATING DEDUC TION UNDER SECTION 80HHC OF THE ACT. ACCORDING TO HIM, THIS BEING LAW OF THE LAND DECLARED BY THE HONBLE APEX COURT, ASSESSING OFFIC ER AT ANY STAGE OF PROCEEDINGS WAS DUTY BOUND TO FOLLOW SUCH LAW AN D PASS ORDERS ACCORDINGLY. ASSESSING OFFICER COULD NOT IGNORE SU CH BINDING DECISION OF HONBLE APEX COURT AND DISREGARD SUCH D ECISION AND MAKE A COMPUTATION OF DEDUCTION UNDER SECTION 80HHC , WHICH WENT AGAINST THE DIRECTION OF HONBLE APEX COURT. AS FO R THE ISSUE OF INTEREST UNDER SECTION 234D, LEARNED A.R. SUBMITTED THAT ASSESSEE WAS NEVER GIVEN ANY REFUND OF INCOME-TAX UNDER SECT ION 143(1) OF THE ACT. EVEN IF IT WAS GIVEN A REFUND, IT WAS ONL Y WHILE GIVING EFFECT TO THE ORDER OF CIT(APPEALS), AND AN ORDER PASSED P URSUANT TO ORDER OF CIT(APPEALS) BY THE ASSESSING OFFICER, COULD NOT BE TREATED EQUIVALENT TO AN INTIMATION UNDER SECTION 143(1) OF THE ACT. I.T.A. NO. 847/MDS/12 6 7. PER CONTRA, LEARNED D.R. SUBMITTED THAT THE A.O. WAS ONLY GIVING EFFECT TO THE ORDER OF HONBLE APEX COURT WI TH REGARD TO THE ISSUE REGARDING REPLACEMENT OF MACHINERY. ASSESSEE HAD NEVER FILED APPEAL IN THE FIRST ROUND BEFORE THIS TRIBUNAL WITH REGARD TO WORK-OUT OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. ASSESSIN G OFFICER, WHILE GIVING EFFECT TO ORDER OF HONBLE APEX COURT, COULD NOT BE FASTENED WITH A DUTY TO RE-WORK THE DEDUCTION UNDER SECTION 80HC. ASSESSING OFFICERS POWER WAS CONFINED TO GIVING EFFECT TO TH E DIRECTION OF HONBLE APEX COURT AND NOTHING MORE. THERE MIGHT BE SOME CASES DECLARING A DIFFERENT LAW IN THE INTERREGNUM, BUT I T WOULD NOT BE PROPER FOR THE ASSESSING OFFICER TO TAKE A RE-LOOK ON THE WHOLE OF ASSESSMENT FRESH FOR THAT REASON ALONE. ASSESSEE W AS TRYING TO GET A RELIEF THROUGH AN APPELLATE PROCEEDING, WHEREAS HE OUGHT HAVE MOVED A RECTIFICATORY PETITION UNDER SECTION 154 OF THE ACT, FOR WHICH THE TIME LIMIT WAS ALREADY OVER. THEREFORE, WHAT C OULD NOT BE ACHIEVED DIRECTLY WAS BEING ATTEMPTED TO BE ACHIEVE D INDIRECTLY. 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE QUESTION BEFORE US IS WHETHER IN A PROCEEDING F OR GIVING EFFECT TO THE DIRECTIONS OF SUPREME COURT ON A PARTICULAR ISS UE, AN ASSESSING OFFICER IS DUTY BOUND TO TAKE COGNIZANCE OF ANOTHER DECISION OF I.T.A. NO. 847/MDS/12 7 HONBLE APEX COURT ON A DIFFERENT ISSUE, WHICH WAS NOT AGITATED BY THE ASSESSEE IN THE FIRST ROUND OF PROCEEDINGS. TH ERE IS NO DISPUTE THAT IN THE ORIGINAL ASSESSMENT, ASSESSING OFFICER HAD CURTAILED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80H HC BY INCLUDING EXCISE DUTY AND SALES TAX IN THE TOTAL TU RNOVER. THIS ISSUE WAS TAKEN UP BY THE ASSESSEE IN ITS APPEAL BEFORE C IT(APPEALS), WHO CONFIRMED THE ORDER OF A.O. IN THIS REGARD. NEVERT HELESS, THIS ISSUE WAS NOT TAKEN UP ANY FURTHER. WHAT TRAVELLED UPTO THE HONBLE APEX COURT WAS A DIFFERENT ISSUE, NAMELY, THE QUESTION O F ALLOWABILITY OF MACHINERY REPLACEMENT. BASED ON THE DECISION OF HO NBLE APEX COURT, ASSESSING OFFICER PASSED A GIVING-EFFECT ORD ER. IN SUCH FRESH ORDER, WHICH WAS PASSED ON 19.9.2009, ASSESSING OFF ICER PERSISTED WITH THE SAME TREATMENT GIVEN BY HIM IN THE ORIGINA L ASSESSMENT ORDER INSOFAR AS IT RELATED TO CLAIM OF DEDUCTION U NDER SECTION 80HHC OF THE ACT. A LOOK AT THE ORDER DATED 19.9.2009 CL EARLY SHOWS AT PAGE 3, THE WORK-OUT OF DEDUCTION UNDER SECTION 80HHC. NO DOUBT, THIS WORK-OUT PRIMA FACIE IS SIMILAR TO THE WORK-OUT GIV EN IN THE ORIGINAL ASSESSMENT ORDER DATED 31.12.97. THE AMOUNTS MENTI ONED ARE ALL SAME. THE NARRATION APPEARING UNDER THE HEAD DEDU CTION U/S 80HHC WORKING APPEARING IN ORIGINAL ASSESSMENT ORD ER IS REPRODUCED HEREUNDER:- I.T.A. NO. 847/MDS/12 8 TOTAL TURNOVER : AS REPORTED BY THE ASSESSEE - 1 5,20,11,252 ADD: THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80 HHC OF ` 56,899/-. IT IS SEEN FROM THE DETAILS FILED THAT T HE ASSESSEE HAS NOT INCLUDED CENTRAL EXCISE COLLECTED AND SALES TAX COL LECTED AS PART OF TURNOVER FOR THE PURPOSE OF DEDUCTION U/S 80HHC. TURNOVER C ERTAINLY INCLUDES ALL THE AMOUNTS COLLECTED FROM THE CUSTOMERS TOWARDS THE SA LE OF THE MATERIALS. HERE THE ASSESSEE COLLECTS BOTH CENTRAL EXCISE AND SALES TAX FROM THE CUSTOMERS AND HENCE CENTRAL EXCISE SALES TAX ALSO F ORM PART OF THE RECEIPTS TOWARDS THE SALE OF THE MATERIALS. HENCE, CENTRAL EXCISE AND SALES TAX SHOULD BE INCLUDED IN TURNOVER. THIS WAS SO HELD I N THE CASE OF CHOWRINGEE SALES BUREAU VS. CIT IN 87 ITR 542 (SC). ALSO, THE INCOME-TAX APPELLATE TRIBUNAL, A BENCH, MADRAS, IN THE CASE OF M/S COATS VIYELLA (INDIA) LTD. VS. DCIT, SPECIAL RANGE-II, MDU, IN ITA NO.123/MDS/95/9 1/92 DATED 07.01.97 IN PARA 32 OF THE ORDER HAS HELD THAT CENT RAL EXCISE AND SALES TAX COLLECTED ALSO FORM PART OF TURNOVER. THE HONOURAB LE SUPREME COURT HAS ALSO HELD IN THE CASE OF IMFL MANUFACTURERS, TAMILN ADU VS. GOVERNMENT OF TAMILNADU HAS HELD THAT THE EXCISE DUTY COLLECTED I S ALSO FORMING PART OF TURNOVER FOR THE PURPOSE OF STATES SALESTAX ACT. THIS DECISION IS REPORTED IN THE HINDU DATED 12.09.97. A COPY OF THE PRESS REPORT IS ALS O ENCLOSED. IN VIEW OF THE ABOVE FACTS THE JUDICIAL DECISIONS, CEN TRAL EXCISE AND SALES TAX COLLECTED IS ALSO INCLUDED IN THE TURNOVER. NARRATION APPEARING IN THE REVISION ORDER DATED 19. 9.2009 IS ALSO REPRODUCED HEREUNDER:- ANNEXURE TO REVISION ORDER DT. 19/9/2009---WORKING U/S 80HHC TOTAL INCOME AS REPORTED BY THE ASSESSEE - 15,20 ,11,252 ADD : THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80HHC. I T IS SEEN FROM THE DETAILS FILED THAT THE ASSESSEE HAS NOT IN CLUDED CENTRAL EXCISE I.T.A. NO. 847/MDS/12 9 COLLECTED AND SALES TAX COLLECTED AS PART OF TURNOV ER FOR THE PURPOSE OF DEDUCTION U/S 80HHC. TURNOVER CERTAINLY INCLUDES ALL THE AMOUNTS COLLECT ED FROM THE CUSTOMERS TOWARDS THE SALE OF MATERIALS. HERE THE ASSESSEE C OLLECTS BOTH THE CENTRAL EXCISE AND SALES TAX FROM THE CUSTOMERS AND HENCE C ENTRAL EXCISE AND SALES TAX ALSO FORM PART OF THE RECEIPTS TOWARDS THE SALE OF MATERIALS. HENCE, CENTRAL EXCISE AND SALES TAX SHOULD BE INCLU DED IN TURNOVER. THIS WAS SO HELD IN THE CASE OF CHOWRINGEE SALES BUREAU VS. CIT (87 ITR 542(SC). ALSO THE INCOME-TAX APPELLATE TRIBUNAL, A BENCH, MA DRAS, IN THE CASE OF M/S COATS VIYELLA (INDIA) LTD. VS. DCIT, SPECIAL RA NGE-II, MADURAI IN ITA NO.125/MDS/95/91-92 DT.7/1/2007 IN PARA 32 OF THE O RDER HAS HELD THAT CENTRAL EXCISE AND SALES TAX COLLECTED ALSO FORM PA RT OF THE TURNOVER. THE HONBLE SUPREME COURT HAS ALSO HELD IN THE CASE OF IMFL MANUFACTURERS TAMILNADU VS. GOVERNMENT OF TAMILNADU HAS HELD THAT THE EXCISE DUTY COLLECTED IS ALSO FORMING PART OF THE TURNOVER FOR THE PURPOSE OF STATES SALES TAX ACT. THIS DECISION IS REPORTED IN THE TH E HINDU DATED 12/09/2007. IN VIEW OF THE ABOVE FACTS AND JUDICIAL DECISIONS, CENTRAL EXCISE AND SALES TAX COLLECTED IS ALSO INCLUDED IN THE TURNOVER. 9. THE ABOVE CLEARLY SHOW THAT IN THE REVISION ORDE R ALSO, A.O. HAD FOLLOWED A DECISION OF HONBLE APEX COURT, WHICH WA S REPORTED IN THE HINDU DATED 12.9.97. THE DATE HOWEVER MENTIO NED IN THE REVISIONARY ORDER 12.9.2007 AGAINST 12.9.97. A COP Y OF THE PRESS REPORT MENTIONED IN THE ORIGINAL ORDER IS MISSING I N THE REVISED ORDER. ONCE THE ASSESSING OFFICER HAS DECIDED TO APPLY THE LAW LAID DOWN BY HONBLE APEX COURT IN A PROCEEDING BEFORE HIM, HE I S DUTY BOUND TO FOLLOW THE CORRECT LAW LAID DOWN BY THE APEX COURT. ON THE DATE OF PASSING OF REVISED ORDER, I.E. 19.9.2009, ASSESSING OFFICER WAS HAVING THE BENEFIT OF THE DECISION OF HONBLE APEX COURT IN THE CASE I.T.A. NO. 847/MDS/12 10 OF LAKSHMI MACHINE WORKS (SUPRA). STILL HE CHOSE T O FOLLOW AN EARLIER ORDER, WHICH DID NOT HOLD THE FIELD, INSOFAR AS DED UCTION UNDER SECTION 80HHC WAS CONCERNED. ASSESSING OFFICER HAVING CHOS EN TO MAKE A RE-WORK OF DEDUCTION UNDER SECTION 80HHC IN THE REV ISED ORDER DATED 19.9.2009, HE WAS OBLIGED TO FOLLOW THE LAW OF THE LAND AS DECLARED BY HONBLE APEX COURT. HE COULD NOT SAY THAT I WILL F OLLOW ONLY THE OLD LAW AND WILL NOT FOLLOW THE CORRECT LAW LAID DOWN B Y THE HIGHEST COURT OF THE LAND. THIS VIEW CANNOT BE ACCEPTED. ASSESS EE WAS INDEED ENTITLED TO DEDUCTION UNDER SECTION 80HHC BY EXCLUD ING EXCISE DUTY AND SALES TAX FROM ITS TOTAL TURNOVER AS PER THE DE CISION OF HONBLE APEX COURT IN THE CASE OF LAKSHMI MACHINE WORKS (SU PRA). ORDERED ACCORDINGLY. 10. INSOFAR AS INTEREST UNDER SECTION 234D OF THE A CT, WE ARE OF THE OPINION THAT THE MATTER REQUIRES A RE-VISIT BY THE ASSESSING OFFICER. THIS IS FOR THE REASON THAT WHETHER ANY REFUND WAS ACTUALLY GIVEN TO THE ASSESSEE IS NOT CLEAR FROM THE RECORDS. THEREF ORE, INSOFAR AS THE ISSUE REGARDING LEVY OF INTEREST UNDER SECTION 234D IS CONCERNED, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF A.O. FOR CONSIDERATION AFRESH, IN ACCOR DANCE WITH LAW. ASSESSEE TO BE GIVEN OPPORTUNITY. I.T.A. NO. 847/MDS/12 11 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D PRO TANTO. THE ORDER WAS PRONOUNCED IN THE COURT ON TUESDAY, T HE 18 TH OF SEPTEMBER, 2012, AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 18 TH SEPTEMBER, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-I, MADURAI (4) CIT-I, MADURAI (5) D.R. (6) GUARD FILE