Jay Chemical Industies Ltd., Ahmedabad V. The DY.CIT., Circle-4(1), Ahmedabad

ITA 875/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0518 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-10-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 26-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLY JINDAL
• Assessee Lawyers: NIMISH VAYAWALA
• Keywords: Capital asset; Business income; Cost of acquisition; Difference of opinion; Competent authority; Set aside; Capital Gains
• Section: 43B; 80HHC; 54; 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, C-BENCH, AHMEDABAD. BEFORE: SHRI T.K. SHARMA, JUDICIAL MEMBER AN D SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER. ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASSESSMENT YEAR 2003-2004) JAY CHEMICAL INDUSTRIES LTD. JAY HOUSE, PANCHVATI CIRCLE, AMBAVADI, AHMEDABAD. VERSUS DCIT, CIRCLE 4, AHMEDABAD. DCIT, CIRCLE 4, AHMEDABAD. JAY CHEMICAL INDUSTRIES LTD. JAY HOUSE, PANCHVATI CIRCLE, AMBAVADI, AHMEDABAD. (APPELLANT) (RESPONDENT) PAN: AAACJ 7628 J FOR THE APPELLANT: SHRI NIMISH VAYAWALA, AR FOR THE RESPONDENT SHRI SHELLY JINDAL, CIT DR [ ORDER PER SHRI D.C. AGRAWAL: THESE ARE THE CROSS APPEALS, ONE FILED BY THE REVENUE AND OTHER FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) DATED 29-12-200 6 FOR THE ASSESSMENT YEAR 2003-2004. THE ASSESSEE IS AN EXPO RTER, MANUFACTURING AND EXPORTING DYES AND CHEMICALS. THE ASSESSEE HAS RAISED THE GROUND IN RESPECT OF DEDUCTION UNDER SECTION 80 HHC ON DPB LI CENSES WHICH WAS DENIED BY THE LOWER AUTHORITIES. THE GROUNDS RAISE D BY THE ASSESSEE ARE AS UNDER: 1) THE LEARNED CIT(A) HAS ERRED IN DISTURBING THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE CONSISTENTLY, O NLY WITH A VIEW TO MAKE INCOME TAX AMENDMENT ACT 2005 APPLICABLE. 2 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) 2) THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT ONLY THE PROFIT ARISING ON TRANSFER OF DEPB AND NOT THE TOTAL DEPB RECEIPTS SHALL BE DISREGARDED FOR THE PURPOSE OF CALCULATION OF DE DUCTION U/S. 80HHC. 3) THE LEARNED CIT(A) OUGHT TO HAVE ARRIVED AT THE PROFIT ARISING ON TRANSFER OF DEPB, BY ARRIVING AT THE COST OF DEP B ON SOME PROPER BASIS AND OUGHT NOT HAVE CONSIDERED THE TOTA L SALES CONSIDERATION RECEIVED ON TRANSFER OF DEPB AS PROFI T ARISING ON TRANSFER OF DEPB. 2. WE HAVE HEARD THE LEARNED AR AND LEARNED DR. IS SUE IS NOW FULLY COVERED BY THE DECISION OF ITAT, SPECIAL BENCH IN T OPMAN EXPORTS VS. ITO (2009) 125 TTJ, MUMBAI, SPECIAL BENCH, AHMEDABA D IN ITA NO. 17/A/2007 AND ITA NO. 619/AHMEDABAD/2007 FOR THE AS SESSMENT YEARS 2004-2005 AND 2003-2004 AND MATTER WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR COMPUTING DEDUCTION UNDER SEC TION 80HHC IN ACCORDANCE WITH THE JUDGMENT IN THE TOPMAN EXPORTS CASE. FOR THE SAKE OF CONVENIENCE, WE REPRODUCE OPERATIVE PART OF THE JUDGMENT AS UNDER: 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABL E ON RECORD. IN OUR CONSIDERED VIEW, THE ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT MUMBAI SPECIAL BENCH IN THE CASE OF M/S.TOP MAN EXPORTS(SUPRA). FOR THE SAKE OF CONVENIENCE, WE RE PRODUCE THE OPERATIVE PART OF THE JUDGEMENT AS UNDER:- 43. THE MAJOR CONTROVERSY BEFORE US IS TO INTERPRE T SECTION 28 (IIID) IN WHICH THE EXPRESSION 'ANY PROFIT ON THE TR ANSFER DUTY ENTITLEMENT PASS BOOK SCHEME' HAS BEEN USED. FROM THE FACTS OF THE CASES UNDER CONSIDERATION IT IS NOTED THAT THE A O TREATED THE ENTIRE SALE PROCEEDS AS COVERED UNDER SECTION 28(IIID) , AS AGAINST THE CASE OF THE ASSESSEE THAT ONLY THE PREMIUM OR T HE PROFIT ELEMENT ON THE TRANSFER OF DEPB BE CONSIDERED. TO PUT THE CONTROVERSY IN SIMPLE WORDS, IF, FOR EXAMPLE, THE ASSESSE E RECEIVED DEPB WORTH THE FACE VALUE OF RS.100/- AND THE N SOLD IT FOR RS.110/-, THE ASSESSEE IS CONTENDING THAT ONLY A S UM OF RS.10/- IS TO BE INCLUDED UNDER CLAUSE (IIID), WHEREAS, TH E 3 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) REVENUE'S CONTENTION IS THAT THE ENTIRE AMOUNT OF R S.110/- BE CONSIDERED. 44. THUS WE HAVE TO INTERPRET THE WORD 'PROFIT' AS FIELDED IN SECTION 28(IIID). AS NOTED SUPRA SECTION 28 HAS CLAUSE S (I) TO (VI). ON A CAREFUL CIRCUMSPECTION OF THE LANGUAGE OF CLAUSE (IIIB) AND (IIIE), IT IS NOTED THAT THE REFERENCE IS TO THE GROSS SUM OF CASH ASSISTANCE AND DUTY DRAWBACK ETC. ON THE CONTRARY CL AUSES (IIIA), (IIID) AND (IIIE) USE THE WORD 'PROFIT' ON SALE/TRANSFE R OF LICENCE/DEPB/DFRC. FROM HERE, IT CAN BE EASILY INFERRE D THAT THE EMPLOYMENT OF THE WORDS 'ANY PROFIT OF TRANSFER' IN CLAUSES (IIID) AND (IIIE) OF SECTION 28 IN CONTRADISTINCTION TO THE OMISSION OF SUCH WORD PROFIT IN CLAUSES (IIIB AND IIIE) IS NOT WITHOUT ANY OBJECT. 45. THE PRINCIPLE RULE OF INTERPRETATION IS THAT MEAN ING IS TO BE GIVEN TO EACH AND EVERY WORD IN THE LANGUAGE OF SEC TION. NO WORD CAN BE CLAIMED AS SUPERFLUOUS. EACH COMMA, FULL STOP OR EVERY SIGN OF PUNCTUATION HAS SIGNIFICANCE. IN OUR CONSIDE RED OPINION THE NEED FOR INTERPRETATION WITH THE AID OF SOME EXT ERNAL AIDS OF CONSTRUCTION OF A SECTION ARISES ONLY WHEN THERE IS SOME AMBIGUITY IN THE LANGUAGE OF SECTION AND THE INTENTI ON OF THE LEGISLATURE IS NOT PROPERLY CONVEYED WITH THE WORDS SO USED. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN NUMEROU S JUDGMENTS INCLUDING THE CASE OF FEDERATION OF ANDHRA PRADESH CHAMBERS OF COMMERCE & INDUSTRY & ORS ETC. VS STATE OF ANDHRA PRADESH & ORS. ETC. ETC. (2001) 165 CTR (SC) 672 (2001) 2 47 ITR 36 (SC) THAT THE TAXING STATUTE HAS TO BE STRICTLY CO NSTRUED AND NOTHING CAN BE READ IN IT. IDENTICAL VIEW HAS BEEN TA KEN IN THE CASE OF PADMASUNDARA RAO (DECD.) & ORS. VS. STATE OF T AMIL NADU & ORS (2002) 176 CTR (SC) 104 : (2002) 255 ITR 147 (SC) HOLDING THAT 'WHILE INTERPRETING A STATUTE LEGISLATIVE INTENTION MUST BE FOUND IN THE WORDS USED BY THE LEGISLATURE'. IN THE LIKE MANNER IT HAS BEEN REITERATED IN THE CASE OF COMMR. O F AGRL, IT VS. PLANTATION CORPORATION OF KERALA LTD. (2000) 164 C TR (SC) 502 : (2001) 247 ITR 155 (SC) THAT : 'SO LONG AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO ANY INTERPRETATI VE PROCESS TO UNFOLD THE LEGISLATIVE INTENT BECOMES IMPERMISSIBLE'. 46. COMING BACK TO THE ISSUE UNDER CONSIDERATION WE NOTE THAT THE LANGUAGE OF CLAUSE (IIID) AND (IIIE) OF SECTION 2 8 IS CRYSTAL CLEAR WHICH TALKS OF 'ANY PROFIT ON THE TRANSFER OF DEPB/D FRC. THE REFERENCE IS NOT TO THE SALE PROCEEDS BUT TO THE PRO FIT ON THE TRANSFER OF DEPB/DFRC. A LINE OF DEMARCATION NEEDS T O BE DRAWN BETWEEN THE PROVISIONS IN WHICH GROSS AMOUNT IS CON SIDERED AND THE PROVISIONS IN WHICH ONLY THE PROFIT DEMERIT HAS BEEN THE SUBJECT MATTER OF CONSIDERATION. WE NEED NOT WANDER HERE AND THERE IN SEARCH OF SUCH DISTINCTION, WHICH IS HIGHLI GHTED FROM 4 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) SECTION 28 ITSELF . APART FROM CLAUSES (IIIB) AND (IIIC) TO SECTION 28, CLAUSES (IV) AND (VI) ALSO REFER TO THE INCLUSION OF THE GR OSS AMOUNT, AND NOT THE PROFIT ELEMENT THEREON, FURTHER THE LEGIS LATURE IS NOT OBLIVIOUS TO SUCH DISTINCTION BETWEEN THE GROSS AMO UNT AND THE PROFIT ELEMENT INASMUCH AS IT HAS USED THE APPROPRIATE WORDS WHEREVER IT INTENDED SO. IT IS AMPLY DEMONSTRATED FRO M THE LANGUAGE OF SECTION 54 WHICH GRANTS DEDUCTION FROM THE CAPITAL GAINS BY PROVIDING THAT IT THE AMOUNT OF CAPITAL GAIN' IS GREATER THAN THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED O R CONSTRUCTED, THE DIFFERENTIAL AMOUNT SHALL BE CHARGED UN DER SECTION 45; AS AGAINST SECTION 54E WHICH PROVIDES D EDUCTION IN RESPECT OF LONG TERM CAPITAL ASSETS BY PROVIDING THAT IF THE COST OF THE NEW ASSET, IS NOT LESS THAN THE NET CONSIDERATION ' IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45. IF WE CAREFULLY PERUSE THE L ANGUAGE OF SECTION 54 IN JUXTAPOSITION TO SECTION 54E IT CAN B E SEEN THAT WHEREAS THE FORMER SECTION PROVIDES DEDUCTION WITH R EFERENCE TO THE INVESTMENT OF THE AMOUNT OF CAPITAL GAIN, THE LAT ER SECTION GRANTS DEDUCTION WITH REFERENCE TO THE EXTENT OF INV ESTMENT OF THE NET CONSIDERATION AND NOT THE CAPITAL GAIN. THUS, IT CAN BE VISUALIZED THAT THE LEGISLATURE IS NOT UNMINDFUL OF THE DISTINCTION BETWEEN 'SALE CONSIDERATION AND 'PROFIT' AND HAS USE D THE APPROPRIATE EXPRESSION TO EXHIBIT ITS INTENDMENT. REVERT ING TO THE LANGUAGE OF (IIID) OF SECTION 28 WE OBSERVE THAT IT R EFERS TO ANY PROFIT ON THE TRANSFER OF DEPB. THE WORDS USED IN TH E PROVISION INDICATE THAT ONLY THE PROFIT ELEMENT ON THE TRANSFE R OF DEPB IS TO BE CONSIDERED UNDER THIS CLAUSE AND NOT THE SALE PRO CEEDS ITSELF. THUS IN ORDER TO FEE COVERED WITH THE SCOPE OF THIS CLAUSE, TWO THINGS ARE ESSENTIAL. FIRST, THERE SHOULD BE TRANSFER O F THE DEPB AND SECOND, SUCH TRANSFER SHOULD RESULT INTO ANY PROFI T. UNLESS BOTH THE CONDITIONS ARE CUMULATIVELY SATISFIED, THE T RANSACTION CANNOT FORM PART OF SECTION 28 (IIID). 47. THIS LEAVES US WITH THE DETERMINATION OF THE MEAN ING OF THE WORD 'PROFIT'. IN COMMON DIALECT THE WORD PROFIT' REFE RS TO EXCESS OF SALE PROCEEDS OVER THE COST OF GOODS. THE WORD PROFIT ' HAS ANOTHER SHADE ALSO, WHICH INVOLVES A COMPARISON BETWEEN THE STA TE OF BUSINESS AT TWO SPECIFIC DATES AND THE EXCESS OF TH E VALUE OF ASSET ON ONE DATE OVER THE OTHER, CONSTITUTES PROFIT. THEIR LORDSHIPS OF THE HON'BLE SUPREME COURT IN E.D. SASSOON & COMPANY (SUPRA) HAS LAID DOWN TO THIS EFFECT. 'THE WORD 'PROFITS' HAS IN MY OPINION A WELL DEFINED LEGAL MEANING, AND THIS MEANING CONSIDERS WITH THE FUNDAMEN TAL CONCEPTION OF PROFITS IN GENERAL PARLANCE ALTHOUGH I N MERCANTILE PHRASEOLOGY THE WORD MAY AT LIME BEAR MEANINGS INDICA TED BY THE SPECIAL CONTEXT WHICH DEVIATE IN SOME RESPECTS FRO M THIS 5 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) FUNDAMENTAL SIGNIFICATION. 'PROFITS' IMPLIES A COMPARI SON BETWEEN THE STATE OF A BUSINESS AT TWO SPECIFIC DATES USUALL Y SEPARATED BY AN INTERVAL YEAR. THE FUNDAMENTAL MEANING IS THE AMOUNT OF GAIN MADE BY THE BUSINESS DURING THE YEAR. THIS CAN ONLY B E ASCERTAINED BY A COMPARISON OF THE ASSETS OF THE BU SINESS AT THE TWO DATES'. 48. GOING BY THE CONCEPT OF COMPARISON OF THE ASSET S OF BUSINESS ON TWO DATES, IT CAN BE SEEN THAT AT THE ST AGE OF RECEIPT OF DEPB ON ITS ACCRUAL THE FACE VALUE OF RS.100/- CONST ITUTED AN ASSET IN THE HANDS OF THE EXPORTER WHICH COULD BE UT ILIZED BY HIM IN ANY OF THE WAYS OPEN TO HIM. IF THE EXPORTER CHOOS ES TO SELL THE DEPB FOR RS. 110 AT A SUBSEQUENT DATE, THEN THE PREVA ILING MARKET RATE AT THE TIME OF SALE, THAT IS RS. 110 SHALL REPRESENT THE VALUE OF ASSET ON SUCH DATE OF SALE. ACCORDINGLY, THE D IFFERENCE OF RS 10 BETWEEN THE VALUE OF TWO DATES, VIZ, ON THE DATE OF ITS SALE (RS.110/-) AND THE DATE WHEN IT WAS ACQUIRED ON ACCRUA L (RS.100/-), WILL CONSTITUTE PROFIT. EVEN GOING BY THE MEA NING OF 'PROFIT' AS COMMONLY UNDERSTOOD REPRESENTING EXCESS OF SALE PROCEEDS OVER COST, WE FIND THAT SIMILAR RESULT WILL F OLLOW. NO DOUBT THE EXPORTER DOES NOT DIRECTLY PURCHASE THE D EPB FROM THE MARKET BY INCURRING ANY COST, BUT WHEN WE SEE THE SC HEME OF SECTION 28 IN WHICH THE FACE VALUE OF DEPB, AT THE TIM E OF MAKING APPLICATION, RESULTS INTO THE ACCRUAL OF INCOME AS INC LUDIBLE U/S 28(IIIB) AND THE CORRESPONDING AMOUNT REPRESENTS THE VALUE OF DEPB, SUCH VALUE, WHICH IS IN THE NATURE OF AN ASSET, SHALL CONSTITUTE ITS COST WHEN DEPB IS MADE THE SUBJECT MAT TER OF SALE AT A LATER DATE. THE FOLLOWING ACCOUNTING ENTRY SHALL BE PASSED IN THIS SITUATION. CASH/BANK DR RS. 110 TO DEPB RS. 100 TO PROFIT ON SALE OF DEPB RS. 10 [AT THE TIME OF SALE, THE INCOME OF RS. 10 SHALL ARISE T O THE ASSESSEE U/S 28(IIID) AS INCOME OF RS. 100 HAD ALREADY ACCRUED U/S 28(IIIB) AT TIME OF APPLICATION] 49. THE ABSURDITY IN THE RESULT CAN BE SEEN FROM THE CONSEQUENCES FOLLOWING THE REASONING OF THE DEPARTMENT , THAT THE ENTIRE SALE PROCEEDS SHALL BE TAXABLE U/S 28(IIID) AT T HE TIME OF SALE. IN SUCH A SITUATION THERE WILL BE DOUBLE TAXATION OF THE FACE VALUE OF DEPB, FIRSTLY, WHEN APPLICATION FOR DEPB IS M ADE RESULTING IN TO ACCRUAL OF INCOME U/S 28(IIIB) IF THE EXTENT OF US FACE VALUE AT RS. 100 AND SUBSEQUENTLY WHEN DEPB IS S OLD FOR RS. 110, THE ENTIRE SALE CONSIDERATION OF RS. 110 SHALL S TAND INCLUDED U/S 28(IIID) RESULTING INTO TOTAL INCOME OF RS. 210 ON 6 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) ACCOUNT OF THE TRANSACTION OF DEPB, AS AGAINST, THE R EAL INCOME ONLY TO THE TUNE OF RS.110. .. .. 53. FROM THE ABOVE IT CAN BE NOTED THAT DEPB CREDIT S ALE IS DIFFERENT FROM THE PREMIUM ON THE DEPB AND SUCH PRO FIT OR THE PREMIUM, IS NOT EXPORT PROFIT SINCE IT DOES NOT ARISE OUT OF EXPORT ACTIVITY OR IMPORT ACTIVITY AND ARISES BECAUSE OF TRAD ING IN A 'LICENSE' WHICH HAS A PREMIUM IN THE MARKER SUCH PR EMIUM OR PROFIT CANNOT TO BE COUNTED AS EXEMPTED EXPORT PROF IT AND SHOULD BE ADDED BACK AS TAXABLE PROFIT. THE SPEECH OF THE FI NANCE MINISTER, AS EXTRACTED ABOVE, DIVULGES THE INTENTION O F THE SCOPE OF SECTION 28(IIID) AS COVERING ONLY THE PREMIUM ON SALE O F DEPB AND NOT THE FACE VALUE. . . 72. REVERTING TO THE MAIN QUESTION POSTED BEFORE THI S SPECIAL BENCH FOR CONSIDERATION AS TO WHETHER THE ENTIRE AMO UNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEA BLE U/S 28 (IIID) OR SOME ARTIFICIAL COST IS TO BE INTERPOLATED, W E FIND THAT THE RELEVANCE OF THIS QUESTION IS ONLY IN THE CONTEXT OF THE COMPUTATION OF DEDUCTION U/S 80HHC. WE HAVE HELD ABOVE THAT SUB-SE CTION (3) DEALING WITH THE COMPUTATION OF THE PROFITS DERIVED FROM EXPORT OF GOODS OR MERCHANDIZE IS A COMPLETE CODE IN ITSELF, THUS THE COMPUTATION OF ELIGIBLE PROFITS IS TO BE MADE FIRMLY AS PER THIS SUB- SECTION WITH THE AID OF EXPLANATION AS INTERPRETED BY THE HON'BLE SUPREME COURT IN THE CASE OF HERO EXPORTS (SUPRA) AN D K. RAVINDRANATHAN (SUPRA). THE AO HAS DENIED THE DEDUCTI ON U/S 80HHC BY HOLDING THAT THE ENTIRE SALE PROCEEDS OF DEP B FALL UNDER SECTION 28(IIID) AND SINCE IN THAT VIEW OF THE MATTER, THERE IS NO POSITIVE INCOME, THE DEDUCTION IS IMPERMISSIBLE. ON THE CONTRARY THE VIEW POINT OF THE ASSESSEE IS THAT THE FACE VALUE OF DEPB SHOULD BE REDUCED FROM THE COST OF PURCHASES AS IT IS GIVEN BY THE GOVERNMENT OF INDIA ONLY TO NEUTRALIZE THE IN CIDENCE OF CUSTOM DUTY. ON THE IMPORT CONTENT OF THE EXPORTS. WE HAVE EXAMINED THE FORMAT OF DEPB SCHEME AND COME TO THE CONCLUSION THAT THE FACE VALUE OF DEPB IS NOTHING BUT PARTIAL REIM BURSEMENT OF THE PURCHASE PRICE OF GOODS. OUR THIS VIEW IS BAS ED ON THE UNDERSTANDING OF THE SCHEME OF DEPB IN COMMERCIAL SEN SE AND IN THE TIGHT OF THE FOREIGN TRADE POLICY OF THE GOVERNM ENT OF INDIA. BUT WHEN WE COME TO THE COMPUTATION OF DEDUCTION AN D THE PLACEMENT OF THE FACE VALUE OF DEPB IN THE SCHEME OF SECTION 80HHC, THE GENERAL VIEW BASED ON THE FOREIGN TRADE PO LICY ABOUT THE REDUCTION OF SUCH AMOUNT FROM THE PURCHASE COST , FAILS. WE HAVE SEEN ABOVE THE SUB-SECTION (3) OF SECTION 80HHC IS COMPLETE CODE IN ITSELF IN SO FAR AS THE COMPUTATION OF THE EL IGIBLE PROFITS 7 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) DERIVED FROM EXPORT ARE CONCERNED. THE MANDATE OF SUB-SE CTION (3) HAS TO BE RELIGIOUSLY FOLLOWED FOR DETERMINING THE AM OUNT OF ELIGIBLE PROFITS FOR DEDUCTION AND AS SUCH THE GENER AL VIEW ABOUT THE UNDERSTANDING OF THE NATURE OF DEPB WILL BE SUBDU ED AND THE ONE BASED ON THE PRESCRIPTION OF THIS PROVISION WILL COME TO FORE. IN THAT VIEW OF THE MATTER WE HOLD THAT THE FACE VALUE O F DEPB CANNOT BE REDUCED FROM THE COST OF PURCHASES AND HA S TO BE CONSIDERED AS A SEPARATE SPECIES OF' BUSINESS 'INCO ME'. THUS ALL THE CONTENTIONS PUT FORWARD ON BEHALF OF THE ASSESS ES AND THE INTERVENERS ABOUT THE REDUCTION OF THE FACE VALUE OF DEPB HAVE BECOME ACADEMIC IN THE CONTEXT OF SECTION 80HHC. SIMI LARLY THE COMPARISON OF DEPB WITH MODVAT, WHICH IS AN OFF-SHOOT O F THE BASIC CONTENTION OF REDUCTION OF THE DEPB VALUE FROM THE PURCHASES AND ALSO THE ARGUMENTS BY THE LD. AR TOWARDS THE REDUCTION OF THE FACE VALUE OF DEPB FROM THE PURCHAS E COST ON THE STRENGTH OF CERTAIN DECISIONS RENDERED IN THE FRAME WORK OF SECTION 80IB, LOSE THEIR RELEVANCE IN THE PRESENT CONTEXT OF S ECTION 80HHC AND HENCE NEED NOT BE EXAMINED. 73. IF THE INTENTION OF THE LEGISLATURE HAD BEEN TO ALLOW THE REDUCTION OF THE FACE VALUE OF DEPB FROM THE COST OF PURCHASES, AS HAS BEEN, CONTENDED BEFORE US, THEN THERE WAS NO NEED TO HAVE CLAUSES (IIIA) TO (IIIE) OF SECTION 28 AND ALSO THE FIRST TO FIFTH PROVISOS TO SECTION 80HHC(3) ALONG WITH THE NECESSARY INGREDIENTS OF EXPLANATION BELOW SECTION 80HHC(4C). WE HAVE HELD THAT THE FACE VALUE OF DEPB UNDER THE SCHEME OF THE INCOME- TAX ACT, 1961 FALLS UNDER SECTION 28(IIIB) AND THE PROFI T ELEMENT T ON THE SALE OF DEPB, THAT IS THE EXCESS OF SALE PROCE EDS OVER THE FACE VALUE OF DEPB FALLS U/S 28(IIID). 'PROFITS OF BUSINE SS' AS PER EXPLANATION (BAA) PROVIDES FOR THE EXCLUSION OF NINET Y PER CENT OF ANY SUM REFERRED TO IN SECTION 28(IIIA TO IIIE). THEN FI RST PROVISO TO SUB-SECTION (3) STATES THAT THE PROFITS COMPUTED UNDE R CLAUSES (A) OR (B) OR (C) SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO THE NINETY PER CENT OF ANY SUM REFERRED TO IN SE CTION 28(IIIA, IIIB AND IIIE). IT MEANS THAT THE NINETY CENT OF THE FACE VALUE OF DEP B WHICH WAS REDUCED WHILE COMPUTING THE 'PROFITS OF THE BUSI NESS' SHALL STAND INCLUDED WHEN EFFECT IS GIVEN TO FIRST PROVISO . IF WE GO WITH THIS ARGUMENT THAT THE FACT VALUE OF DEPB IS TO BE R EDUCED FROM THE COST OF PURCHASE THEN IN THE CASE OF MERCHANT E XPORTER WITH TURNOVER OF LESS THAN RS.10 CRORES, AN ANOMALOUS SITUATI ON WILL CROP UP INASMUCH AS THE AMOUNT OF ELIGIBLE PROFIT WIL L FAR EXCEED THE ACTUAL PROFIT AS DEMONSTRATED BELOW. EXPORT TURNOVER RS. 1,000 8 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) COST OF GOODS SOLD - DIRECT COSTS (WITHOUT DEPB) - NO INDIRECT COSTS RS. 800 FACE VALUE OF DEPB RS 100 74. GOING BY SUB-SECTION (3)(B) THE PROFITS DERIVED FR OM SUCH EXPORT SHALL BE EXPORT TURNOVER MINUS THE DIRECT AND INDIRECT COSTS ATTRIBUTABLE TO SUCH EXPORT. GOING BY THE CONTENTION OF THE LD. AR, THE DIRECT COST WILL COME AL RS.700 (800 - 100) AS AGAIN ST THE EXPORT TURNOVER AT RS.1,000 RESULTING INTO PROFITS DER IVED FROM EXPORT AS PER CLAUSE (B) OF SUB-SECTION (3) COMING, TO RS.300 I.E. RS.1,000 MINUS RS.700. WHEN WE FURTHER GIVE EFFECT TO T HE FIRST PROVISO TO SUB-SECTION (3), THE PROFIT OF RS.300 AS COM PUTED ABOVE WOULD REQUIRE TO BE FURTHER INCREASED BY THE NINETY PER CENT OF THE FACE VALUE OF DEPB. THE AMOUNT OF RS.90 (I.E. 90% OF RS.1 00 I.E FACE VALUE OF DEPB COULD, THEREFORE, BE ADDED AND THE P ROFIT AS DETERMINED IN CLAUSE (B) OF 80HHC(3) WILL COME AT RS.390 . AS AGAINST THAT WE FIND THE REAL PROFIT FROM EXPORT AF TER GIVING EFFECT TO THE DEPB BENEFIT IS ONLY RS.300 [1000 700 (800 - 100 )]. THUS IT CAN BE EASILY ASCERTAINED THAT WHEREAS THE TOTAL BUS INESS FROM EXPORT IS RS.300 BUT IF WE ACCEPT THE CONTENTION THA T THE FACE VALUE OF DEPB BE REDUCED FROM THE COST OF PURCHASES THEN THE AMOUNT OF PROFITS DERIVED FROM EXPORT AS PER SECTIO N 80HHC(3)(B) WILL COME AT RS.390. OBVIOUSLY THIS CALCULATION DEFIES A LL LOGICS AND IS INCAPABLE OF ACCEPTANCE DUE TO AWKWARD SITUATI ON CREATED BY DETERMINING THE PROFITS DERIVED FROM EXPORT AT A FIGURE HIGHER THAN THE ACTUAL BUSINESS PROFIT, THE FORMER AMOUNT, IN NO CASE CAN BE HIGHER THAN THE LATER. WE FIND THAT THE LOGIC BEHI ND INTRODUCING CLAUSES (IIIA) TO (IIIE) TO SECTION 28 IS TO DE LINK TH E EXPORT INCENTIVES FROM THE BUSINESS PROFITS WHILE CONTINUING THEM TO BE GOVERNED BY CHAPTER IV-D AT THE SAME TIME. THE NATURAL OUTCOME FOLLOWING THE PRESCRIPTION OF CLAUSES (IIIA) TO (IIIC) OF SECTION 28 ALONG WITH SECTION 80HHC(3) IS THAT ALL THE EXPORT INCEN TIVES INCLUDING THE DEPB AND DFRC ETC. BE CONSIDERED AS SE PARATE BUSINESS INCOME AND NOT TO REDUCE THEM FROM THE COS T OF PURCHASES. 75. WE WILL NOW ENDEAVOR TO EVALUATE THE STAND POINT OF THE AO FROM ANOTHER ANGLE THAT THE ENTIRE AMOUNT OF SALE PRO CEEDS IS COVERED UNDER CLAUSE (IIID) AND; NOT ONLY THE PROFIT E LEMENT. CONTINUING WITH THE ABOVE EXAMPLE, WHERE WE SUPPOSED THAT THE EXPORTER MADE EXPORT TURNOVER OF RS. 1000/- AND HE EA RNED RS.200/- FROM THE EXPORT TRANSACTION IN ADDITION TO RS.1 00/- TOWARDS THE FACE VALUE OF DEPB. THE AMOUNT OF PROFIT S DERIVED FROM EXPORTS SHALL COME AT RS.300 AS PER CLAUSE (BAA) OF EXPLANATION BELOW 80HHC(4C) READ WITH SUB-SECTION (3) IN CLUDING THE FIRST PROVISO. FURTHER SUPPOSE THAT THE SAID DEP B IS HELD AS 9 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) SUCH AT THE CLOSE OF THE YEAR AND IS THEN SOLD IN THE SUCCEEDING YEAR FOR RS. 110. IF WE AGREE WITH THE VIEW POINT OF T HE DEPARTMENT THAT AT THE TIME OF SALE OF DEPB, THE ENTIR E AMOUNT OF RS . 110/- IS INCLUDIBLE IN SECTION 28 (IIID) THEN IT WOULD MEAN THAT IN ORDER TO GIVE EFFECT TO SUB-SECTION (3), FIRSTLY TH E SUM OF RS.100/- WILL REQUIRE INCLUSION IN THE PROFITS AND GAIN S OF BUSINESS OR PROFESSION' IN THE YEAR OF SALE, BECAUSE THE QUESTION OF 90% EXCLUSION SHALL ARISE ONLY IF 100% IS INCLUDED I N THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION'. THAT OBVIOUSLY CANNOT BE TH E DONE BECAUSE THE SUM OF RS.100/- HAD ALREADY BEEN INCLUDED I N THE PROFITS AND GAINS OF BUSINESS OR PROFESSION' FOR TH E LAST YEAR WHEN SUCH INCOME ACCRUED TO THE ASSESSEE U/S 28(IIIB). THE FURTHER INCLUSION OF RS.110/- IN SUCCEEDING YEAR AT THE TIME O F SALE IN THE 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' WOULD LEAD TO OBVIOUS INCONGRUITY AND AN IMPOSSIBLE SITUATION BECAU SE THE INCLUSION OF FACE VALUE OF RS.100/- IN THE PROFITS OF THE SECOND YEAR ALSO WILL AMOUNT TO DOUBLE TAXATION OF RS.100/- FI RSTLY IN THE YEAR ONE WHEN THE INCOME ON ACCOUNT OF THE FACE VALUE OF DEPB ACCRUED U/S 28(IIIB) AND THERE IN THE YEAR TWO AT THE TIME OF SALE U/S 28(IIID). . . 79. THE SECOND PROVISO TO SECTION 80HHC PROVIDES TH AT IN THE CASE OF AN ASSESSEE HAVING EXPORT TURNOVER NOT EXCE EDING RS. 10 CRORES DURING THE PREVIOUS YEAR, THE PROFITS COMPUTE D UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (E) OF THIS SUB-SEC TION OR AFTER GIVING EFFECT TO THE FIRST PROVISO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO NINE TY PER CENT OF ANY SUM REFERRED TO IN CLAUSE (IIID) OR CLAUSE (IIIC) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. IN OTHER WORDS, IN THE CASE OF AN ASSESSEE WITH EXPORT TURNOVE R NOT EXCEEDING RS. 10 CRORES, EVEN THE PROFIT ELEMENT OF RS .10/- IN THE ABOVE EXAMPLE ON THE SALE OF DEPB FOR RS.110/- WILL ALSO BE CONSIDERED AS ELIGIBLE FOR DEDUCTION DESPITE THE FAC T THAT IT IS OUT OF THE TRADING OF DEPB ENTITLEMENT IN INDIA ONLY. BUT F OR THIS PROVISO NO PROFIT ON SALE OF DEPB OR DFRC COULD HAVE BEEN CONSIDERED FOR DEDUCTION UNDER THIS SECTION. IN CONT RAST TO IT THE THIRD AND FOURTH PROVISOS ARE APPLICABLE TO THE CASE OF THE ASSESSEE HAVING EXPORT TURNOVER EXCEEDING RUPEES TE N CRORES IN WHICH CASE THE PROFIT COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SUB SECTION (3) OR AFTER GIVING EFFECT TO THE FIRST PROVISO, SHALL BE FURTHER INCREASED BY THE AMOUNT WHIC H BEARS 90% OF ANY SUM REFERRED TO IN SECTION 28(IIID) OR (IIIE ) IN PROPORTION TO THE EXPORT TURNOVER TO THE TOTAL TURNOVER ONLY IF THE FURTHER TWO 10 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) CONDITIONS STIPULATED THEREIN ARE FULFILLED AND ALSO T HE ASSESSEE HAS SUFFERED EVIDENCE TO PROVE THE FULFILLMENT OF SUC H CONDITIONS. IT IS THIS CATEGORY OF EXPORTERS WHICH HAS BEEN STAT UTORILY DISCRIMINATED VIS A VIS THE SMALL EXPORTERS HAVING TUR NOVER NOT EXCEEDING RS. 10 CRORES. THEY SHALL NOT BE ENTITLED TO IN CREASE IN THE QUANTUM OF DEDUCTION BY PROFIT AT TRANSFER OF D EPB/DFRS WHICH IS OTHERWISE AVAILABLE TO SMALL EXPORTERS, UNLESS THE TWO CONDITIONS AS SET OUT IN THESE PROVISOS ARE FULFILLED . IN THE CASES UNDER CONSIDERATION IT IS AN ADMITTED POSITION THAT THE TWO CONDITIONS AS SO SPECIFIED IN THIRD AND, FOURTH PRO VISOS ARE NOT CAPABLE OF COMPLIANCE AND HENCE THE FURTHER INCREASE AS SUGGESTED IN THESE TWO PROVISOS CANNOT BE MADE TO T HE COMPUTATION OF DEDUCTION U/S.80HHC. THUS, IT IS APPARE NT THAT THE STATUTORY DISCRIMINATION IS BETWEEN THE EXPORTER S HAVING EXPORT TURNOVER NOT EXCEEDING RS. 10 CRORES AND THOS E HAVING EXCEEDING RS. 10 CRORES. WHEREAS THE BENEFIT OF DEDUC TION IN RESPECT OF THE PROFIT OF SALE OF DEPB REALIZED FROM THE INDIAN MARKET IS ALSO AVAILABLE TO SMALL EXPORTERS HAVING EXPO RT TURNOVER, IT IS NOT SO IN THE CASE OF THE LARGE EXPOR TERS HAVING EXPORT TURNOVER EXCEEDING RS. 10 CRORES. THIS APPEARS TO BE THE ONLY REASON FOR INSERTING CLAUSES (IIID) AND (IIIE) TO SECTION 28 BY THE TAXATION, LAWS (AMENDMENT ACT, 2005), SIMULTANEOUS W ITH THE INSERTION OF SECTION 3RD AND 4TH PROVISOS. .. .. 89. THE QUESTION RAISED BEFORE THE SPECIAL BENCH HAS TWO PARTS. IN SO FAR AS THE FIRST PART: 'WHETHER THE ENTIRE AMO UNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE UNDER SECTION 28(IIID) OF THE INCOME TAX ACT, IS CONCERNED , WE ANSWER IT IN NEGATIVE AND THE SECOND PART OF THE QUESTION OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO B E INTERPOLATED IS REPLIED IN AFFIRMATIVE TO THE EXTENT THAT THE FACE VALUE OF DEPB SHALL BE DEDUCTED FROM THE SALE PROCEEDS. AS REGARDS TH E GROUNDS BASED IN THESE APPEALS AGAINST THE DENIAL OF DEDUCTIO N U/S 80HHC, IN FULL OR PART, WE FIND THAT THE COMPUTATION OF PROFITS DERIVED FROM EXPORTS AND THE RESULTANT AMOUNT OF DE DUCTION UNDER THIS SECTION CAN BE MADE ONLY WHEN THE DECISIO N IS TAKEN ON THE AMOUNT AND THE TIMING OF TAXABILITY OF THE FAC E VALUE OF DEPB AND THE PROFIT ON ITS SALE. ON THIS ISSUE WE HOLD THAT THE FACE VALUE OF DEPB IS CHARGEABLE TO TAX U/S 28(IIIB) A T THE TIME OF ACCRUAL OF INCOME, THAT IS, WHEN THE APPLICATION FOR D EPB IS FILED WITH THE COMPETENT AUTHORITY PURSUANT TO EXPORTS AND PROFIT ON SALE OF DEPB REPRESENTING THE EXCESS OF SALE PROCEEDS OF DEPB OVER ITS FACE VALUE IS LIABLE TO BE CONSIDERED U/S 28(III D) AT THE TIME OF ITS SALE. WHATEVER IS SAID ABOUT DEPB SHALL ALSO HOLD GOOD FOR DFRC, ON BOTH ITS COMPONENTS, VIZ THE FACE VALUE O F DFRC AND PROFIT ON ITS TRANSFER, EXCEPT FOR THE FACT THAT TH E PROFIT ON SALE OF 11 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) DFRC SHALL BE CHARGED TO TAX U/S 28(IIIE). THERE IS NO DISPUTE ABOUT THE DUTY DRAWBACK, WHICH SHALL BE CHARGEABLE TO TAX AT TIME OF ACCRUAL OF INCOME U/S 28(IIIC) WHEN APPLICATION IS FILED WITH THE COMPETENT AUTHORITY AFTER MAKING EXPORTS. SI NCE THE NECESSARY FACTS FOR THE DETERMINATION OF THE QUANTU M OF DEDUCTION U/S 80HHC, AS DISCUSSED ABOVE, ARE NOT AVAILABLE ON RE CORD, WE, THEREFORE, SET ASIDE THE IMPUGNED ORDERS AND DIRECT T HE AO TO COMPUTE THE AMOUNT OF RELIEF IN ACCORDANCE WITH THE VIEW EXPRESSED BY US HERE IN ABOVE. 12. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF TH E TRIBUNAL, WE HOLD THAT PROFIT ELEMENT ON DEPB LICENCE WILL B E COVERED BY SECTION 28(IIID) AND, ACCORDINGLY, BY THIRD PROVISO TO SECTION 80HHC(3) OF THE I.T. ACT, 1961 AS THE TURNOVER OF T HE ASSESSEE EXCEEDS RS.10 CRORES THIS AMOUNT SHALL BE EXCLUDE D FOR THE PURPOSE OF COMPUTING DEDUCTION U/S.80HHC OF THE I. T. ACT, 1961, IF CONDITION LAID DOWN IN THAT PROVISO ARE NOT SATI SFIED . THE FACE VALUE OF THE DEPB LICENCE WILL BE COVERED U/S.28(II IB) OF THE I.T. ACT, 1961 AND, THEREFORE, 90% THEREOF WOULD BE ADDE D TO THE EXPORT PROFITS AS PER FIRST PROVISO TO SECTION 80HHC(3) OF THE I.T. ACT, 1961. 13. IN ORDER TO COMPUTE DEDUCTION U/S.80HHC OF THE I.T. ACT, 1961 IN ACCORDANCE WITH THE DECISION OF ITAT SPECI AL BENCH IN THE CASE OF M/S.TOPMAN EXPORTS(SUPRA), WE RESTORE THE M ATTER TO THE FILE OF ASSESSING OFFICER. 3. RESPECTFULLY FOLLOWING ABOVE DECISION, WE RESTOR E THE ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 80HHC IN RESPECT O F DPB ENTITLEMENTS TO THE FILE OF THE ASSESSING OFFICER FOR CALCULATIN G DEDUCTION UNDER THAT SECTION IN ACCORDANCE WITH THE JUDGMENT IN TOPMAN E XPORTS CASE(SUPRA). THIS GROUND IS ACCORDING ALLOWED, BUT FOR STATISTIC AL PURPOSES. 4. IN REVENUES APPEAL, GROUNDS ARE AS UNDER: 1. THE LD.CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE A.O. TO EXCLUDE SALES TAX AND 2. EXCISE DUTY ELEMENTS FROM THE TOTAL TURN OVER IN COMPUTING THE DEDUCTION U/S. 80HHC OF THE I.T. ACT, IGNORING THE DECISION OF THE HON'BLE I.T.A.T., AHMEDABAD IN THE CASE OF ACIT VS. HARSHA ENGINEERS LTD. FOR A.Y. 2002-03 IN ITA NO. 12 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) 2042/AHD/2005 DATED 21.07.2006 AND FURTHER IGNORING THE FACT THAT THE TURN OVER ALWAYS INCLUDED THE ELEMENT S OF TAXES, AS HELD IN THE CASES OF CHOWRANGHEE SALES BUREAU VS . CIT (87 ITR 547 (SC), SINCLAIR MURRAY & COMPANY. P. LTD . VS. CIT (97 ITR 615 (SC) & MC DOWELL & COMPANY. LTD. VS . CIT (154 ITR 148 (SC). 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE F ACTS OF THE CASE IN DIRECTING THE ASSESSING OFFICER NOT TO EXCL UDE 90% OF EXCISE DUTY REFUND AND SALES TAX REFUND FOR COMPUTA TION OF PROFITS OF THE BUSINESS FOR WORKING OUT DEDUCTION U /S. 80HHC OF THE I.T. ACT. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE F ACTS OF THE CASE IN DIRECTING THE ASSESSING OFFICER NOT TO EXCL UDE THE LATE PAYMENT RECEIPTS RECEIVED FROM, CUSTOMERS/TRADE PAR TIES FROM PROFITS OF THE BUSINESS FOR COMPUTATION OF DED UCTION U/S. 80HHC OF THE I.T. ACT. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND OR THE FACTS OF THE CASE IN DIRECTING THE ASSESSING OFFICER NOT TO EXCL UDE THE COMMISSION AND CLEARING CHARGES IN THE COMPUTATION OF BUSINESS FOR COMPUTATION OF DEDUCTION U/S. 80HHC OF THE I.T. ACT. 6. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE F ACTS OF THE CASE IN DIRECTING THE ASSESSING OFFICER TO RECOMPUT E THE PROFIT OF THE BUSINESS AND DECIDE ON THE ALLOWANCE OR REJECTION OF DEDUCTION U/S. 80HHC RELATABLE TO PROF IT ON TRANSFER OF DEPB ENTITLEMENTS/DEPB INCOME AFTER FOL LOWING CERTAIN SPECIFIC DIRECTIONS GIVEN BY HIM IN PARA 2. 2(F) AT PAGE 4 AND 5 OF HIS ORDER, AND IGNORING THE FACT TH AT ASSESSEES CLAIM THAT THE INCOME ON THE DEPB ACCRUE S ONLY WHEN THE SAME IS TRANSFERRED IS NOT BACKED BY ANY R EVISED RETURN NOR SUCH CLAIM WAS MADE DURING THE ASSESSMEN T PROCEEDINGS AND THUS THE LEARNED CIT(A) ERRED IN ENTERTAINING THE ASSESSEES SAID CLAIM APPLYING THE RATIO OF THE HON'BLE SUPREME COURT DECISION IN THE CASE OF G OETZE (INDIA) LTD. CIT(2006) 284 ITR 323 (SC). 7. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE F ACTS OF THE CASE IN DIRECTING THE ASSESSING OFFICER TO DELETE T HE ADDITION OF RS. 8,24,122/- MADE TO CLOSING STOCK OF FINISHED GOODS BY THE ASSESSING OFFICER ON ACCOUNT OF EXCISE DUTY ELE MENT RELATED TO FINISHED GOODS NOT ADDED BY THE ASSESSEE . 13 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) 8. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS. 45,85,729/ - OUT OF HOUSE KEEPING CHARGES MADE BY THE ASSESSING OFFICER U/S. 40A(2)(B) OF THE ACT AFTER HOLDING THAT THE PAYMENT DISALLOWED WAS NEITHER EXCESSIVE NOR COULD BE TREAT ED AS NOT GENUINE. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 5. GROUND NO. 1 AND 2 RELATE TO EXCLUSION OF SALES TAX FROM TOTAL TURNOVER FOR CALCULATING DEDUCTION UNDER SECTION 80 HHC. THIS ISSUE IS NOT COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISI ON OF HON'BLE SUPREME COURT IN CIT VS. CATAPHARMA INDIA PRIVATE LTD. (200 7) 292 ITR 641 (SC), CIT VS. LAXMI MACHINE WORKS (2007) 290 ITR 66 7 (SC) AND OF THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN CIT VS . MAHAVIR SPRING MILLS LIMITED (2009) 308 ITR 445 (P & H). ACCORDIN GLY EXCISE DUTY AND SALES TAX ARE NOT INCLUDED IN TOTAL TURNOVER. ACCO RDINGLY, THIS GROUND OF REVENUE IS REJECTED. 6. GROUND NO. 3 RELATES TO EXCISE DUTY AND SALES TA X REFUND AND DECISION OF LEARNED LD. COMMISSIONER OF INCOME TAX( APPEALS) IN DIRECTING THE ASSESSING OFFICER NOT TO EXCLUDE 90% OF THE REFUND FOR COMPUTATION TO PROFITS OF THE BUSINESS. 7. WE HAVE HEARD THE LEARNED AR AND LEARNED DR. SI MILAR ISSUE HAS ARISEN BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2 001-2002 IN THE CASE OF THE ASSESSEE IN ITA NO. 513/AHMEDABAD/2005 DECIDED ON 09-01-2009. THE OPERATIVE PART OF THAT ORDER IS REPRODUCED AS U NDER: 14 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) 3. IN RESPECT OF GROUND NO. 2, THE CIT(A) DISPOSED OF THE ISSUE BY OBSERVING AS UNDER: 3.5 IT IS SUBMITTED THAT 2 ITEMS OF EXCISE DUTY RE FUND CREDITED IN THE PROFIT AND LOSS ACCOUNT, NAMELY RS. 2,61,86,008/- AND RS. 35,43,570/- IN RESPECT OF THE MANUFACTURING DIVISION AND MERCHANT DIVISION. IT I S SUBMITTED THAT SAID REFUND IS IN RESPECT OF EXCISE DUTY DEBITED IN THE PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDIN G 31 ST MARCH 2001 AND IS CONTRA ENTRY AS FAR AS PROFITS FR OM THE BUSINESS ARE CONCERNED FOR THE PURPOSE OF SECTION 8 0HHC AND EXPLANATION (BAA). BEFORE ME, IT IS PLEADED TH AT EXCISE DUTY WHICH IS RECEIVED BACK IS TAKEN AS PART OF BUS INESS STOCK AND EXPENSES ARE DEBITED IN THE PROFIT AND LOSS ACC OUNT AND THEREAFTER APPLICATION IS MADE TO THE EXCISE DEPART MENT FOR REFUND OF DUE PAID RELEVANT AUDITED BALANCE SHEET A ND PROFIT AND LOSS ACCOUNT AND SUPPORTING SCHEDULES ARE REFER RED TO BEFORE ME IN THIS RESPECT. ON VERIFICATION IT IS F OUND THAT THE CONTENTION IN THIS RESPECT IS CORRECT. SINCE, THE NET PROFIT OF BUSINESS AND PROFESSION WILL NOT GET AFFECTED. IF THE ITEM OF EXCISE DUTY WHICH IS FIRST DEBITED IN THE PROFIT AN D LOSS ACCOUNT AND THEN REFUNDED BACK ARE BOTH EXCLUDED. AS SUCH THE ASSESSING OFFICER IS DIRECTED NOT TO EXCLUDE TH E SAME WHILE WORKING OUT DEDUCTION U/S 80HHC. 3.6 --- 3.7 IT IS SUBMITTED THAT THIS ITEM IS WRONGLY EXCLU DED. HAVING REGARD TO THE DECISION OF ITAT, AHMEDABAD IN THE CASE OF GUJARAT ALKALIES & CHEMICALS LTD. V. DCIT 8 2 ITD 135, THIS ITEM IS NOT REQUIRED TO BE EXCLUDED FOR C OMPUTATION U/S 80HHC AND THE ASSESSING OFFICER IS DIRECTED TO FOLLOW THE SAME ACCORDINGLY. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING THROU GH THE ORDER OF THE TAX AUTHORITIES BELOW, IN OUR OPINION, THE CIT( A) HAS RIGHTLY DIRECTED NOT TO EXCLUDE THE EXCISE DUTY REFUND AND INSURANCE CLAIM WHILE COMPUTING THE DEDUCTION U/S 80HHC. WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A) ON THIS GROUND. 8. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE DI SMISS THIS GROUND OF THE REVENUE. 15 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) 9. GROUND NO. 4 RELATES TO INCLUDING THE LATE PAYME NT RECEIPT FROM CUSTOMERS/TRADE PARTIES IN THE BUSINESS PROFIT OF T HE ASSESSEE FOR THE PURPOSES OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC. 10. WE HAVE HEARD THE LEARNED DR AND LEARNED AR. I NTEREST RECEIVED FROM THE CUSTOMERS/PARTIES, FOR LATE PAYMENT OF DUE S/OUTSTANDING, ARE PART OF BUSINESS RECEIPTS AND THEREFORE WOULD BE INCLUDE D AS BUSINESS PROFIT. HOWEVER, WE DO NOT UPHOLD THE ARGUMENT OF THE LEARN ED AR THAT NETTING SHOULD BE ALLOWED. THERE IS NO EVIDENCE THAT ANY I NTEREST EXPENDITURE WAS INCURRED FOR EARNING SUCH INTEREST INCOME FROM THE CUSTOMERS/CLIENTS. ACCORDINGLY, FOLLOWING THE DECISION OF SPECIAL BENC H OF AHMEDABAD- ITAT, IN ACIT VS. ASHIMA SYNTEX LTD. 100 TTJ 557, W E UPHELD THE INCLUSION OF INTEREST RECEIPTS FROM CUSTOMERS AS BU SINESS RECEIPTS BUT DO NOT ALLOW THE CLAIM OF NETTING. ACCORDINGLY, THIS GROUND OF THE REVENUE IS ALSO REJECTED. 11. THE 5 TH GROUND RELATES TO INCLUDING COMMISSION AND CLEARIN G CHARGES IN THE COMPUTATION OF BUSINESS PROFIT FOR T HE PURPOSES OF DEDUCTION UNDER SECTION 80HHC. WE HAVE HEARD THE L EARNED DR AND LEARNED AR. THESE RECEIPTS ARE PART OF TRADING ACT IVITY AND DIRECTLY RELATES TO THE BUSINESS OF THE ASSESSEE. HON'BLE SUPREME C OURT IN CIT VS. CATA PHARMA INDIA LIMITED (2007) 292 ITR 641 (SC) HAS HE LD THAT INTEREST COMMISSION ETC. DO NOT EMANATE FROM THE TURNOVER LI KE EXCISE DUTY AND SALES TAX, HENCE THEY ARE NOT PART OF THE TURNOVER. BUT THEY ADD TO THE PROFIT SO THEREFORE THERE ARE INCLUDABLE IN PROFIT. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) AND DISMISS THIS GROUND OF THE REVENUE. 16 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) 12. GROUND NO. 6 RELATES TO INCOME ARISING FROM DEP B ENTITLEMENTS. THIS ISSUE HAS BEEN CONSIDERED IN THE APPEAL FILED BY THE ASSESSEE, AND ASSESSING OFFICER HAS BEEN DIRECTED TO RECOMPUTE DE DUCTION UNDER SECTION 80HHC IN RESPECT OF DEPB ENTITLEMENTS IN AC CORDANCE WITH DECISION IN TOPMAN EXPORTS CASE (SUPRA). THIS GROU ND OF THE REVENUE IS THEREFORE ALLOWED, BUT FOR STATISTICAL PURPOSE. 13. GROUND NO. 7 RELATES TO DELETING ADDITION OF RS . 8,24,122/- MADE TO THE CLOSING STOCK OF FINISHED GOODS ON ACCOUNT OF E XCISE DUTY ELEMENT. 14. THE LD. COMMISSIONER OF INCOME TAX(APPEALS) DEC IDED THE ISSUE AS UNDER: 3. GROUND NO. 2 RELATES TO ADDITION OF RS. 8,24,12 2/- TO CLOSING STOCK. THE ASSESSING OFFICER MADE THE ABOVE ADDITI ON TO THE CLOSING STOCK ON FINISHED GOODS HOLDING THAT THE EX CISE DUTY ELEMENT RELATABLE TO FINISHED GOODS WAS NOT ADDED B Y THE APPELLANT. 3.1. BEFORE ME, IT WAS CONTENDED THAT THE STOCK LYI NG IN THE FACTORY WERE NOT CLEARED AND EXCISE DUTY LIABILITY WAS NOT INCURRED AND HENCE THE CLOSING STOCK VALUATION WAS NOT INCLU SIVE OF EXCISE DUTY. ALTERNATIVELY, IT WAS CLAIMED BEFORE THE ASS ESSING OFFICER THAT IF EXCISE ELEMENT WAS TO BE CONSIDERED AS AN O UTSTANDING LIABILITY THEN THE SAID LIABILITY HAVING BEEN DISCH ARGED BEFORE THE DUE DATE FOR FILING OF RETURN COULD BE ALLOWED AND HENCE NO ADDITION WAS CALLED FOR. THE EXPLANATION OF THE AS SESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND THE ADDITION WAS MADE HOLDING THAT THE APPELLANT ACCRUED THE EXCISE LIABI LITY THE MOMENT THE GOODS WERE MANUFACTURED. THE ASSESSING OFFICER ALSO CITED THE PROVISIONS OF SECTION 145A AND THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT V. BRITISH PAINTS INDIA LI MITED 188 ITR 44. THE APPELLANT FURTHER CONTENDED THAT WHEN THERE WAS NO LIABILITY AND WHEN NOTHING WAS PROVIDED IN THE PROFIT AND LOS S ACCOUNT TOWARDS ANY LIABILITY, THE ASSESSING OFFICER WAS NO T CORRECT IN ADDING THE ABOVE SUM TO THE VALUE OF CLOSING STOCK. 17 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) 3.2 I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLAN T AND ALSO PERUSED THE REASONING GIVEN BY THE ASSESSING OFFICE R IN MAKING THE ABOVE ADDITION. I AM CONVINCED THAT ON THE FACTS B ROUGHT ON RECORD BY THE APPELLANT AND AS ALREADY EXPLAINED TO THE AS SESSING OFFICER, THE GOODS LYING AT THE FACTORY WERE JUST FINISHED B UT NO EXCISE DUTY HAVING BEEN INCURRED AND NO PROVISION FOR SUCH LIAB ILITY HAVING BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT, THE RE ASONING GIVEN BY THE ASSESSING OFFICER RELYING ON THE HON'BLE APEX C OURT DECISION IS OUT OF PLACE. FIRST OF ALL, NO COST BY WAY OF EXCI SE DUTY LIABILITY HAS BEEN EITHER INCURRED OR DEBITED TO THE PROFIT AND L OSS ACCOUNT. FURTHER, EXCISE DUTY LIABILITY IS INCIDENT ONLY AT THE TIME OF REMOVAL OF GOODS AND NOT PRIOR TO THAT. SECTION 145A PROVI DES FOR INCLUSION OF ELEMENTS OF COST IN THE VALUATION OF CLOSING STO CK WITH REFERENCE TO LIABILITY ALREADY INCURRED AND NOT WITH REFERENC E TO A FUTURE LIABILITY. ANY ADJUSTMENTS OTHERWISE WOULD BE UNJU STIFIED EITHER ON THE REGULAR METHOD OF ACCOUNTING ON A MATCHING PRIN CIPLE OR WITHIN THE MEANING OF SECTION 145A. IN THIS CASE, THE ASSESSEE HAVING NEITHER INCURRED ANY LIABILITY ON THE FINISH ED GOODS BEFORE CLEARANCE NOR DEBITED ANY ITEM OF EXPENDITURE IN CO NNECTION WITH THE FUTURE LIABILITY, THE ACTION OF THE ASSESSING O FFICER IS NOT TENABLE AND THE ADDITION IN THIS REGARD IS DIRECTED TO BE D ELETED. IN VIEW OF THE ABOVE FINDINGS, NO DEDUCTION U/S. 43B IS AVAILA BLE IN VIEW OF PAYMENTS BEFORE THE DUE DATE FOR FILING OF RETURN R ELATABLE TO THE SAID AMOUNT OF EXCISE DUTY LIABILITY INCURRED AND P AID SUBSEQUENTLY. 15. THE LD. COMMISSIONER OF INCOME TAX(APPEALS) THU S, HELD THAT NO EXCISE DUTY IS PAYABLE ON FINISHED GOODS LYING IN F ACTORY. NO LIABILITY RELATING TO FINISHED GOODS HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. 16. AFTER HEARING THE PARTIES, WE CONFIRM THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) AS NO CONTRARY MATERIAL HAS BEEN SHOWN TO US PROVING THAT ANY EXCISE DUTY HAS BEEN D EBITED IN THE PROFIT AND LOSS ACCOUNT RELATING TO THE FINISHED GOODS. I T IS ALSO NOT SHOWN BY THE REVENUE THAT COST OF FINISHED GOODS AS WORKED O UT BY THE ASSESSEE DID NOT CONTAIN THE ELEMENT OF EXCISE DUTY PAID BY IT O N THE RAW MATERIAL 18 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) CONSUMED IN THE MAKING OF THE FINISHED GOODS. ON T HE OTHER HAND, THE LEARNED AR FOR THE ASSESSEE HAS SUBMITTED THAT EXCI SE DUTY COMPONENT OF RAW MATERIAL HAS BEEN DULY DEBITED IN THE PROFIT AN D LOSS ACCOUNT AND CONSIDERED IN THE COSTING OF CLOSING STOCK. THIS G ROUND OF REVENUE IS THEREFORE ALSO REJECTED. 17. GROUND NO. 8 RELATES TO HOUSE KEEPING CHARGES A DDED UNDER SECTION 40(A)(2)(B). LD. COMMISSIONER OF INCOME TA X(APPEALS) DELETED THE ADDITION BY OBSERVING AS UNDER: 4. GROUND NO. 3 RELATES TO DISALLOWANCE OF RS. 45, 85,729/- U/S 40A(2)(B) OUT OF HOUSE KEEPING CHARGES. THE ASSESS ING OFFICER DISALLOWED THE ABOVE SUM HOLDING IT AS EXCESSIVE PA YMENT REFERABLE TO SERVICES PROVIDED BY JAY INFRA TRADE PVT. LTD. T O THE APPELLANT COMPANY. HE INVOKED THE PROVISIONS OF SECTION 40A( 2)(B). HE TOTALLY RELIED ON HIS DECISION IN THE CASE OF JAY I NFRA TRADE PVT. LTD. FOR A.Y. 2003-04. THE ASSESSING OFFICER ALSO ARRIVED AT A SUM OF RS. 4,10,279/- AS REASONABLE EXPENDITURE PAYABLE TO JAY INFRA TRADE PVT. LTD. BY THE APPELLANT COMPANY FOR THIS Y EAR. 4.1 BEFORE ME, THE LEARNED COUNSEL FOR THE APPELLAN T DREW MY ATTENTION TO THE APPELLATE ORDER FOR A.Y. 2003-04 ( APPEAL NO. CIT(A)-VIII/DC-4/262 05-06 DATED 16.10.2006) IN THE CASE OF JAY INFRA TRADE PVT. LTD. WHEREIN THE ENTIRE RECEIPTS O F RS. 76 LACS FROM GROUP CONCERNS WERE HELD TO BE IN CONNECTION WITH P ROVISIONS OF VARIOUS BUSINESS SERVICES ASSESSABLE AS BUSINESS RE CEIPTS. ACCORDINGLY, IT WAS CONTENDED THAT THE ASSESSING OF FICER WITHOUT PROPER APPRECIATION OF ENTIRETY OF SERVICES, INCLUD ING THE MAIN ASPECT OF OFFICE ACCOMMODATION WORKED OUT A MEAGER SUM AS REASONABLE AND DISALLOWED THE BALANCE OF RS. 45,89, 729/- AS EXCESSIVE. IN VIEW OF THE APPELLANT ORDER CITED AB OVE, IT WAS CONTENDED THAT THE ACTION OF THE ASSESSING OFFICER BE REVERSED. 4.2 I HAVE PERUSED THE RELEVANT PORTION OF THE ASSE SSMENT ORDER WITH THE REASONING THERE OF AND ALSO THE ARGUMENTS OF THE APPELLANT CAREFULLY. IN THE APPELLATE ORDER IN THE CASE OF J AY INFRA TRADE PVT. LTD., THE SERVICE PROVIDER. I HAVE CLEARLY HELD TH AT THE AMOUNT PAID AS SERVICE CHARGES WERE FOR COMPOSITE BUSINESS SUPP ORT SERVICES 19 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) AND ASSESSABLE UNDER BUSINESS RECEIPTS ONLY. THE A CTION OF THE ASSESSING OFFICER IN TREATING EXCESS, ACCORDING TO HIM, AS RECEIPTS UNDER OTHER SOURCES IN THE HANDS OF SERVICE PROVIDE R WAS NOT UPHELD FOR THE REASON THAT THE ASSESSING OFFICER DI D NOT TAKE INTO ACCOUNT THE ACCOMMODATION COST FOR THE FLOOR SPACE OCCUPIED BY THE APPELLANT AND THE ACTION OF THE ASSESSING OFFIC ER IN THE CASE OF JAY INFRA TRADE PVT. LTD. HAVING BEEN REJECTED. TH E DISALLOWANCE IN THE CASE OF THE APPELLANT CANNOT BE SUSTAINED. MERELY, THAT THE PAYMENTS WERE MADE TO AN ASSOCIATE CONCERN DOES NOT MEAN AUTOMATICALLY THAT THE PAYMENT WAS EXCESSIVE. TAKI NG INTO ACCOUNT THE NATURE OF BUSINESS SUPPORT SERVICES AND THE VAL UE OF SERVICES AND THE MARKET VALUE OF OFFICE ACCOMMODATION, AS HE LD BY ME IN THE APPELLATE ORDER FOR THE A.Y. 2003-04 IN THE CASE OF SERVICE PROVIDER. I AM OF THE OPINION THAT THE ASSESSING O FFICER HAS NOT PROVED THE EXCESSIVE PAYMENT WITH FACTS AND FIGURES AND HIS ATTEMPT WAS ONLY PERFUNCTORY. HOWEVER, AS THE ASSE SSING OFFICER HAS NOT MADE HOLISTIC ANALYSIS OF THE ENTIRE SERVIC E PROVIDED, THE DISALLOWANCE MADE IS NOT SUSTAINABLE. MERE ASSESSM ENT OF PART OF INCOME IN THE HANDS OF THE RECIPIENT UNDER DIFFEREN T HEAD DOES NOT PROVE THE UNREASONABLENESS IN THE HANDS OF THE RECI PIENT OF SERVICE. THE GENUINENESS OF THE TRANSACTIONS BEING NOT IN DI SPUTE, IT IS A MERE DIFFERENCE OF OPINION ACCORDING TO THE ASSESSI NG OFFICER THAT CAUSED THE DISALLOWANCE AND FOR THE ABOVE REASONING . I AM TO HOLD THAT THE PAYMENT IN RESPECT OF WHICH DISALLOWANCE I S MADE BY THE ASSESSING OFFICER IS NEITHER EXCESSIVE NOR CAN BE T REATED AS NOT GENUINE. IN THIS VIEW OF THE MATTER, THE DISALLOWA NCE IS NOT SUSTAINABLE AND HENCE DIRECTED TO BE DELETED. 18. WE HAVE HEARD THE LEARNED DR AND LEARNED AR. T HE CONTENTION OF THE ASSESSING OFFICER AND THAT OF LEARNED DR IS THA T ASSESSEE HAS PAID LESS THEN THE NORMAL RATES IN RESPECT OF VARIOUS HOUSE K EEPING SERVICES TO M/S. JAY INFRA TRADE PRIVATE LIMITED. HE ARRIVED AT REA SONABLE EXPENDITURE OF RS. 4,10,279/- AND THUS DISALLOWED AN EXPENDITURE O F RS. 45,85,729/-. 19. WE AGREE WITH LD. COMMISSIONER OF INCOME TAX(AP PEALS) THAT ASSESSING OFFICER HAS NOT PROVED THAT EXCESSIVE PAY MENT HAS BEEN MADE 20 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) TO M/S. JAY INFRA TRADE PRIVATE LTD. BEING AN ASSOC IATE CONCERN OF THE ASSESSEE. THE GENUINENESS OF THE TRANSACTIONS IS N OT IN DISPUTE. THE FURTHER RELIANCE BY THE ASSESSING OFFICER ON THE OR DER OF J. INFRA TRADE PRIVATE LIMITED IS NOT PROPER AS THAT ORDER HAS BEE N REVERSED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS) AND CONFIRMED B Y THE TRIBUNAL. THE ASSESSEE HAD PROVIDED CALCULATION OF FAIR VALUE OF SERVICES BEFORE THE LD. COMMISSIONER OF INCOME TAX(APPEALS) WHICH WAS S ENT TO THE ASSESSING OFFICER DURING REMAND PROCEEDINGS. THERE IS NO MATERIAL TO JUSTIFY THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER. FURTHER, TRIBUNAL IN THE CASE OF JAY INFRA TRADE PRIVATE LIMITED ITA NO. 261/AHMEDABAD/2007 DECIDED ON 30-09-2009 HELD THAT THERE IS NO EXCESSIVE PAYMENT FOR SERVICES PROVIDED BY JAY INFR A TRADE PRIVATE LIMITED. THUS, ONCE FACTUM OF EXCESSIVE PAYMENT FO R SERVICES ARE NOT PROVED, THERE IS NO CASE OF ANY ADDITION EVEN IN TH E CASE OF THE ASSESSEE. THUS, WE REJECT THIS GROUND OF THE REVENUE ALSO. 20. OTHER TWO GROUNDS ARE GENERAL IN NATURE AND THE Y DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 21. AS A RESULT, APPEAL FILED BY THE REVENUE IS DIS MISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 6 TH NOVEMBER, 2009. SD/- SD/- (T.K. SHARMA) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTA NT MEMBER AHMEDABAD; DATED: 06/11/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 21 ITA NO. 875/AHD/2007 ITA NO. 1177/AHD/2007 (ASST. YEAR 2003-2004) 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.