Vardhman Holdings Ltd., Ludhiana V. DCIT, Ludhiana

ITA 92/CHANDI/2007

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81054 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-11-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 23-01-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: SUBHASH AGGARWAL; VINEET J AIN
• Keywords: Rectification of order
• Section: 143(3); 80HHC; 10B; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 92/CHD/2007 ASSESSMENT YEAR: 2000-01 M/S VARDHMAN HOLDINGS LTD., VS. DCIT CHANDIGARH ROAD R- 1 LUDHIANA LUDHIANA PAN NO.AABCV8088P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARWAL & VINEET JAIN RESPONDENT BY : SHRI. MANJIT SINGH DATE OF HEARING : 20/11/2014 DATE OF PRONOUNCEMENT : 27/11/2014 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-II, LUDHIANA, 25-09-2006. 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THAT THE IMPUGNED APPELLATE ORDER PASSED BY COMMISSIONER OF INCOME TAX (APPEALS) IS NOT SUSTAIN ABLE IN LAW AND ON FACTS AS FAR AS THE FOLLOWING GROUNDS AR E CONCERNED. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S WHILE UPHOLDING THE RECTIFICATION ORDER U/S 154 OF THE IN COME TAX ACT. 3. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS WH ILE HOLDING THAT THE DEDUCTION U/S80 HHC AS PER ORDER U /S 143(3) BE MODIFIED U/S OF THE INCOME TAX ACT. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS WHILE SUSTAINING THE ADDITION OF ASSESSED EXPENDITU RE INSTEAD OF EXPENDITURE COMPUTED IN ACCORDANCE WITH PROVISIO NS OF COMPANIES ACT FOR UNITS CLAIMING DEDUCTION U/S 10B WHILE CALCULATING TAX U/S 115JA OF THE INCOME TAX ACT. 5. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS WHILE SUSTAINING THE REDUCTION OF ASSESSED INCOME I NSTEAD OF INCOME COMPUTED IN ACCORDANCE WITH PROVISIONS OF 2 COMPANIES ACT FOR UNITS CLAIMING DEDUCTION U/S 10B WHILE CALCULATING TAX U/S 115JA OF THE INCOME TAX ACT . 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT IN T HIS CASE ORIGINALLY ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 31 /03/2003. SINCE THE INCOME WAS LESS THAN THE BOOK PROFIT THEREFORE BOO K PROFIT WERE ASSESSED AT RS. 7.98 CRORES. LATER ON IT WAS NOTICED THAT TH IS BOOK PROFIT WAS COMPUTED WITHOUT MAKING STATUTORY ADJUSTMENT AS PRO VIDED IN THE EXPLANATION TO SECTION 115 JA THEREFORE, RECTIFICAT ION NOTICE WAS ISSUED UNDER SECTION 154. IN RESPONSE TO THE NOTICE IT WAS SUBMITTED AS UNDER : 1. SOMETHING WHICH CAN BE ESTABLISHED BY LONG DRA WN PROCESS OF REASONING ON POINTS CAN NOT BE DISPOSED OFF U/S 154 AND MODIFICATION OF PROFITS EXEMPTED U/S 10B AN D DEDUCTION U/S 80HHC FOR THE PURPOSE OF CALCULATING TAX U/S 115JA IS NOT A GLARING, OBVIOUS AND PATENT MISTAKE WHICH CAN BE RECTIFIED U/S 154. ASSESSEE ALSO RELIED ON V ARIOUS RULING IN THIS REGARD. 2. 100% EOU AT BADDI IS ELIGIBLE FOR EXEMPTION U/S 10B AND THAT TOTAL INCOME OF THE ASSESSEE WAS LESS THAN 30% OF BOOK PROFIT. THEREFORE, 30% OF BOOK PROFIT IS DEEME D INCOME. 3. ASSESSEE REFERRED TO THE EXPLANATION TO SECTION 115JA FOR CALCULATING BOOK PROFIT AFTER MAKING ADJUSTMENT S AS PROVIDED IN EXPLANATION TO SECTION 115JA IN RESPECT OF INCOME EXEMPTED UNDER CHAPTER III AND DEDUCTION U/S 80HHC. 4. UNDER SECTION 115JA, EXPENDITURE AND INCOME RELATABLE TO EXEMPTED INCOME IS TO BE TAKEN AS PER BOOKS OF ACCOUNT AND THE ASSESSING OFFICER DOES NOT HAVE THE POWER TO SUBSTITUTE ASSESSED INCOME OR EXPENDITURE. AO AFTER EXAMINING THE ABOVE SUBMISSIONS DID NOT FI ND FORCE IN THEM AND OBSERVED THAT NO MODIFICATION IN EXEMPTION UNDER SE CTION 10B WAS PROPOSED AND MODIFICATION IS PROPOSED IN DEDUCTION UNDER SECTION 80HHC. SECTION 115JA WAS CHARGING AS WELL AS COMPUT ING SECTION AND ADJUSTMENT WHICH WERE PROPOSED WERE COVERED BY THE EXPLANATION TO THIS SECTION. THEREAFTER BOOK PROFIT WAS RECOMPUTED BY R EDUCING THE DEDUCTION UNDER SECTION 80HHC AT NIL AS COMPUTED BY THE ASSESSEE. 4. ON APPEAL THE ACTION OF AO WAS CONFIRMED BY THE LD CIT(A) 5. BEFORE US LD. COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE AO AND LD. CIT(A) AND EMPHASIZED THAT T HIS WAS A DEBATABLE ISSUE. IN ANY CASE HONBLE SUPREME COURT HAS HELD IN CASE OF CIT VS. BHARI INFORMATION TECH. SYS. P. LTD. 340 IT R 593 HAS HELD THAT DEDUCTION UNDER SECTION 80HHC WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JA HAS TO BE WORKED OUT ON THE BASIS OF ADJUSTED BOOK PROFIT. 3 6. ON THE OTHER HAND LD. DR STRONGLY SUPPORTED THE ORDER OF LD. CIT(A). 7. AFTER CONSIDERING THE RIVAL SUBMISSION CAREFULLY WE FIND THAT HONBLE SUPREME COURT IN CASE OF CIT VS. BHARI INFORMATION TECH. SYS. P. LTD. 340 ITR 593 (SUPRA) HAS HELD THAT WHILE COMPUTING BOOK PROF IT UNDER SECTION 115JA THE DEDUCTION HAS TO BE REDUCED ON ADJUSTED BOOK PR OFIT BASIS AND NOT ON THE BASIS OF DEDUCTION COMPUTED UNDER REGULAR PR OVISIONS OF LAW. HONBLE COURT FOLLOWING THE VIEW OF THE SPECIAL BEN CH OF THE TRIBUNAL IN CASE OF DEPUTY CIT V. SYNCOME FORMULATIONS (I) LTD. [2007] 106 ITD 193 WHEREIN IT WAS HELD THAT MAT SCHEME WHICH INCLUDES SECTION 115JA DID NOT TAKE AWAY BENEFIT GIVEN UNDER SECTION 80HHC TH EREFORE, IT S CLEAR THAT WHILE COMPUTING THE BOOK PROFIT DEDUCTION UNDER SEC TION 80HHC AS COMPUTED UNDER REGULAR PROVISION IS NOT APPLICABLE BUT SUCH DEDUCTION HAS TO BE ALLOWED WHILE COMPUTING SUCH BOOK PROFIT ON THE BASIS OF ADJUSTED BOOK PROFIT. THEREFORE WE SET ASIDE THE OR DER OF LD. CIT(A) AND HOLD THAT BOOK PROFIT HAS COMPUTED ORIGINALLY UNDER SECTION 143(3) WAS CORRECT. 8. IN ADDITION TO THE ABOVE THE ASSESSEE HAS RAISED FOLLOWING ADDITIONAL GROUNDS. ADDITIONAL GROUND RAISED VIDE A PPLICATION DT. 08/09/2007. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE F ACTS WHILE UPHOLDING THE ACTION OF THE ASSESSING OFFICER FOR N OT WORKING OUT THE DEDUCTION U/S 80HHC IN CASE OF A MAT ASSESS MENT ON THE BASIS OF THE ADJUSTED BOOK PROFITS INSTEAD O F PROFITS COMPUTED UNDER THE REGULAR PROVISIONS OF LAW APPLIC ABLE TO THE COMPUTATION OF PROFITS & GAINS OF BUSINESS OR P ROFESSION. THE ABOVE GROUND OF APPEAL IS PURELY LEGAL IN NATUR E AND THE APPELLANT ALSO RELIES ON THE JUDGMENT OF SPECIA L BENCH IN THE CASE OF DY. CIT VS. SYNCOME FORMULATIONS (I) LI MITED REPORTED IN 108 TTJ 105 (SPECIAL BENCH), MUMBAI. THE ISSUE RAISED IN ABOVE GROUND IS COVERED BY THE MAIN GROUND OF APPEAL AND THEREFORE IN OUR OPINION THERE IS NO NEE D TO ADJUDICATE THIS ADDITIONAL GROUND SEPARATELY. 9. ONE MORE ADDITIONAL GROUND HAVE BEEN RAISED VIDE APPLICATION DT. 09/02/2008 WHICH READS AS UNDER THAT THE LD. ASSESSING OFFICER HAS ERRED IN COMPUT ING INDIRECT COST RELATING TO TRADING GOODS IN AS MUCH AS 10% OF THE ITEMS COVERED BY EXPLANATION (BAA) TO SECTION 8 0HHC HAD NOT BEEN DEDUCTED FROM THE INDIRECT COST AFTER HEARING BOTH THE PARTIES REGARDING ADMISSION OF THE ABOVE ADDITIONAL GROUND WE FIND THAT THIS ISSUE DOES NOT EMANATE OR THE ORDER 4 PASSED UNDER SECTION 154 BECAUSE ASSESSEE HAS NOT M ADE ANY APPLICATION UNDER SECTION 154 AND THEREFORE THIS GR OUND CANNOT BE ENTERTAINED AT THIS STAGE AND ACCORDINGLY WE DISMIS SED THIS GROUND. 10 . IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/11/2014 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27/11/2014 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR