Intas Pharmaceuticals Ltd., Ahmedabad V. The Dy.CIT, Circle-4, Ahmedabad

MA 10/AHD/2014

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1755 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-05-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 22-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA
• Assessee Lawyers: SN SOPARKARAR
• Keywords: Retrospective amendment
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMADABAD , , , , BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND , SHRI T.R. MEENA, ACCOUNTANT MEMBER .. , ! ! ! ! M.A. NO. 9/AHD/2014 (IN ITA NO. 1591/AHD/2007) ASSESSMENT YEAR :2003-04 INTAS PHARMACEUTICALS LTD. 203, CHINUBHAI CENTRE, ASHRAM ROAD, AHMEDABAD V/S . DCIT, CIRCLE-4, 1 ST FLOOR, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMADABAD. PAN NO. A A ACI5120L (APPELLANT) .. (RESPONDENT) M.A. NO. 10/AHD/2014 (IN ITA NO. 1601/AHD/2007) ASSESSMENT YEAR :2003-04 INTAS PHARMACEUTICALS LTD. 203, CHINUBHAI CENTRE, ASHRAM ROAD, AHMEDABAD V/S . DCIT, CIRCLE-4, 1 ST FLOOR, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMADABAD. (APPELLANT) (RESPONDENT) ' # $ / BY REVENUE SHRI O. P. BHATEJA, SR.D.R. # $ /BY ASSESSEE SHRI S. N. SOPARKAR, A.R. %& # /DATE OF HEARING 02.05.2014 '() # /DATE OF PRONOUNCEMENT 16.05.2014 O R D E R PER : SHRI T. R. MEENA, ACCOUNTANT MEMBER THESE TWO MISC. APPLICATIONS ARE FILED BY THE ASSES SEE AGAINST THE TRIBUNALS ORDER DATED 06.08.2010 IN REVENUES APPE AL IN ITA NO. 1601/AHD/07 & ASSESSEES APPEAL IN ITA NO. 1591/AH D/07 FOR A.Y. 2003-04. MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 2 2. IN THESE CASES, THIS ITAT IN ITA NOS. 1591 & 160 1/AHD/2007 FOR A.Y. 2003-04 HAS DECIDED THE APPEAL ON 06.08.2010, WHERE IN ASSESSEES APPEAL WAS DISMISSED AND REVENUES APPEAL WAS PARTLY ALLOW ED. 3. NOW ASSESSEE FILED M.A. ON 22.01.2014 WHICH ARE REPRODUCED AS UNDER: M. A. NO. 10/AHD/2014 (ASSESSEES M.A. AGAINST REVE NUES APPEAL) 1. THE PRESENT MISCELLANEOUS APPLICATION ARISES FRO M THE AFORESAID ORDER OF THE HON'BLE TRIBUNAL UNDER WHICH THE AFORESAID A PPEAL FILED BY THE ASSESSEE COMPANY WAS DECIDED ALONG WITH THE DEPARTM ENTAL APPEAL IN ITA NO. 1601/AHD/2007 FOR A.Y. 2003-04. THIS MISCEL LANEOUS APPLICATION SEEKS RECTIFICATION OF CERTAIN MISTAKES APPARENT FROM RECORD IN THE ORDER OF THE HON'BLE TRIBUNAL ON ACCOUNT OF THE FACT THAT THE LEGAL POSITION ON THE RELEVANT ISSUES WAS REVERSED ON ACC OUNT OF SUBSEQUENT SUPREME COURT DECISIONS ON THE SAME ISSUES. 2. THE RELEVANT ISSUE WHICH REQUIRES RECTIFICATION PERTAINS TO FINDING OF THE HON'BLE TRIBUNAL WITH REGARD TO GROUND NO. 4 OF TH E DEPARTMENTAL APPEAL WHICH READS AS UNDER: '4. THE LEARNED CIT(A) ERRED IN LAW AND ON THE FACT S OF THE CASE IN DIRECTING THE AO NOT TO EXCLUDE 90% OF OTHER INCOMES COMPRISING OF (I) INSURANCE CLAIM RECEIVED OF RS.39,78,429/- AND (II) C & F STOCKIST INTEREST AT RS.5,77,309/- FROM THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N U/S. 80HHC OF THE I. T. ACT.' 3. THIS GROUND HAS BEEN DEALT WITH AND ADJUDICATED BY THE HON'BLE TRIBUNAL AT PARA 8 OF THE ORDER. IT HAS BEEN HELD B Y THE HON'BLE TRIBUNAL THAT IN RESPECT OF THE OTHER INCOMES REFERRED TO IN THE AFORESAID GROUND NO. 4, 90% OF THE GROSS INCOME IS REQUIRED TO BE EX CLUDED UNDER CLAUSE (BAA) OF THE EXPLANATION U/S. 80HHC OF THE I NCOME-TAX ACT. THE HON'BLE TRIBUNAL HAS REFERRED TO ITS DECISION WITH REGARD TO A SIMILAR GROUND OF APPEAL RAISED IN ASSESSEE'S APPEAL WHERE THE HON'BLE TRIBUNAL RELIED ON THE HON'BLE BOMBAY HIGH COURT DE CISION IN THE CASE OF CIT V. ASIAN STAR CO. LTD. (326 ITR 56). AT PARA 6.9 THE HON'BLE MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 3 TRIBUNAL HAS OBSERVED THAT IN CONSONANCE WITH THE A FORESAID BOMBAY HIGH COURT JUDGMENT 90% OF THE RECEIPTS REFERRED TO IN GROUND NO. 2 OF THE ASSESSEE HAVE TO BE EXCLUDED UNDER CLAUSE (BAA) OF THE EXPLANATION. IT IS FURTHER OBSERVED THAT TO TAKE CA RE OF ANY EXPENDITURE WHICH MAY HAVE BEEN INCURRED IN EARNING THIS INCOME , AN AD HOC DEDUCTION OF 10% HAS BEEN ALLOWED BY THE LEGISLATUR E AND AS PER THE BOMBAY HIGH COURT JUDGMENT NO FURTHER DEDUCTION IS PERMISSIBLE. 4. IT IS RESPECTFULLY SUBMITTED THAT THE HON'BLE BO MBAY HIGH COURT DECISION IN THE CASE OF ASIAN STAR CO. (SUPRA) HAS BEEN OVERRULED BY THE HON'BLE SUPREME COURT IN THE CASE OF ACG ASSOCI ATED CAPSULES PVT. LTD. (343 ITR 89). THE HEAD NOTE OF THIS JUDGM ENT IS REPRODUCED BELOW FOR READY REFERENCE: 'UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 8 0HHC OF THE ACT, NINETY PER CENT, OF ANY RECEIPTS BY WAY OF BRO KERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RE CEIPT OF A SIMILAR NATURE INCLUDED IN ANY SUCH PROFITS ARE TO BE DEDUCTED FROM THE PROFITS OF*THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. THE EXPRESSION 'INCLUDED ANY SUCH PROFITS' WOULD MEAN ONLY SUCH RE CEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARG ES OR ANY OTHER RECEIPT WHICH ARE INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION'. THEREFORE, IF ANY QUANTUM OF THE RECEI PTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR A NY OTHER RECEIPT OF A SIMILAR NATURE IS ALLOWED AS EXPENSES UNDER SECTIONS 30 TO 44D OF THE ACT AND IS NOT INCLUDED IN THE PRO FITS OF BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BU SINESS OR PROFESSION', NINETY PER CENT, OF SUCH QUANTUM OF RE CEIPTS CANNOT BE REDUCED UNDER CLAUSE (1) OF EXPLANATION (BAA) FR OM THE PROFITS OF THE BUSINESS. IN OTHER WORDS, ONLY NINET Y PER CENT, OF THE NET AMOUNT OF ANY RECEIPT OF THE NATURE MENTION ED IN CLAUSE (1) WHICH IS ACTUALLY INCLUDED IN THE PROFITS OF TH E ASSESSEE IS TO BE DEDUCTED FROM THE PRO-FITS OF THE ASSESSEE FOR D ETERMINING MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 4 'PROFITS OF THE BUSINESS' OF THE ASSESSEE UNDER EXP LANATION (BAA) TO SECTION 80HHC. EXPLANATION (BAA) HAS TO BE CONSTRUED ON ITS OWN LA NGUAGE AND AS PER THE PLAIN NATURAL MEANING OF THE WORDS USED IN IT, THE WORDS 'RECEIPTS BY WAY OF BROKERAGE, COMMISSION, IN TEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE IN CLUDED IN SUCH PROFITS' WILL NOT ONLY REFER TO THE NATURE OF RECEI PTS BUT ALSO THE QUANTUM OF RECEIPTS INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION' REFERRED TO IN THE FIRST PART OF EXPLAN ATION (BAA). ACCORDINGLY, IF ANY QUANTUM OF ANY RECEIPT OF THE N ATURE MENTIONED IN CLAUSE (1) OF EXPLANATION (BAA) HAS NO T BEEN INCLUDED IN THE PROFITS OF BUSINESS OF AN ASSESSEE AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION', NINETY PER CENT, OF SUCH QUANTUM OF THE RECEIPT CAN NOT BE DEDUCTED UNDER EXPLANATION (BAA) TO SECTION 80HHC. HELD, ACCORDINGLY, THAT NINETY PER CENT, OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY THE NET INTEREST OR NET REN T, WHICH HAD BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASS ESSEE AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION', WAS TO BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80HHC FOR DETERMINING THE PROFITS OF THE BUSINESS. DECISION OF THE BOMBAY HIGH COURT REVERSED. DECISION OF THE DELHI HIGH COURT AFFIRMED. DISTRIBUTORS (BARODA) P. LTD. V. UNION OF INDIA [19 85] 155 ITR 120 (SC) RELIED ON. CIT V. SHRI RAM HONDA POWER EQUIP [2007] 289 ITR 47 5 (DELHI) APPROVED. CIT V. ASIAN STAR CO. LTD. [2010] 326 ITR 56 (BOM) IMPLIEDLY OVERRULED.' MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 5 5. FROM THE ABOVE IT MAY KINDLY BE APPRECIATED THAT 90% OF ONLY NET INCOME CAN BE EXCLUDED UNDER CLAUSE (BAA) OF THE EX PLANATION TO SECTION 80HHC WHILE DETERMINING THE PROFITS OF THE BUSINESS ELIGIBLE FOR DEDUCTION. THIS JUDGMENT HAS BEEN RENDERED BY LARGE R BENCH OF THE HON'BLE SUPREME COURT COMPRISING OF THREE JUDGES AN D THEY HAVE ALSO FOLLOWED THE EARLIER SUPREME COURT DECISION IN THE CASE OF TOPMAN EXPORTS V. CIT (342 ITR 49). 6. IT IS RESPECTFULLY SUBMITTED THAT A SUBSEQUENT D ECISION OF THE JURISDICTIONAL HIGH COURT OR THE SUPREME COURT GIVE S RISE TO A MISTAKE APPARENT FROM RECORD WHICH HAS TO BE RECTIFIED U/S. 254(2) OF THE INCOME-TAX AC. IN THIS CONNECTION, KIND REFERENCE I S INVITED TO THE HON'BLE GUJARAT HIGH COURT DECISION IN THE CASE OF CIT V. SAURASHTRA KUTCH STOCK EXCHANGE (262 ITR 146) WHEREIN THE SCOP E AND AMBIT AND THE POWERS OF THE TRIBUNAL U/S. 254(2) HAVE BEEN EL ABORATELY CONSIDERED AND ANALYZED BY THE HON'BLE HIGH COURT A ND THE POSITION HAS BEEN SUMMED UP ON PAGE 162 OF THE REPORT IN THE FOLLOWING MANNER: '(A) THE TRIBUNAL HAS POWER TO RECTIFY A MISTAKE AP PARENT FROM THE RECORD ON ITS OWN MOTION OR ON AN APPLICAT ION BY A PARTY UNDER SECTION 254(2) OF THE ACT; (B) AN ORDER ON APPEAL WOULD CONSIST OF AN ORDER MA DE UNDER SECTION 254(1) OF THE ACT OR IT COULD BE AN ORDER MADE UNDER SUB-SECTION (1) AS AMENDED BY AN ORDER UNDER SUB- SECTION (2) OF SECTION 254 OF THE ACT; (C) THE POWER OF RECTIFICATION IS TO BE EXERCISED T O REMOVE AN ERROR OR CORRECT A MISTAKE AND NOT FOR DISTURBING F INALITY, THE FUNDAMENTAL PRINCIPLE BEING, THAT POWER OF RECTIFIC ATION IS FOR JUSTICE AND FAIR PLAY ; (D) THAT POWER OF RECTIFICATION CAN BE EXERCISED EV EN IF A MISTAKE IS COM- MITTED BY THE TRIBUNAL OR EVEN IF A MISTAKE HAS OCCURRED AT THE INSTANCE OF PARTY TO THE APPEAL ; (E) A MISTAKE APPARENT FROM RECORD SHOULD BE SELF-E VIDENT, SHOULD NOT BE A DEBATABLE ISSUE, BUT THIS TEST MIGH T BREAK DOWN, BECAUSE JUDICIAL OPINIONS DIFFER, AND WHAT IS A MISTAKE APPARENT FROM THE RECORD CANNOT BE DEFINED PRECISEL Y AND MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 6 MUST BE LEFT TO BE DETERMINED JUDICIALLY ON THE FAC TS OF EACH CASE ; (F) NON-CONSIDERATION OF A JUDGMENT OF THE JURISDIC TIONAL HIGH COURT WOULD ALWAYS CONSTITUTE A MISTAKE APPARE NT FROM THE RECORD, REGARDLESS OF THE JUDGMENT BEING RENDERED PRIOR TO OR SUBSEQUENT TO THE ORDER PROPOS ED TO BE RECTIFIED; (G) AFTER THE MISTAKE IS CORRECTED, CONSEQUENTIAL O RDER MUST FOLLOW, AND THE TRIBUNAL HAS POWER TO PASS ALL NECE SSARY CONSEQUENTIAL ORDERS.' (EMPHASIS SUPPLIED) THE AFORESAID GUJARAT HIGH COURT JUDGMENT WAS SUBSE QUENTLY APPLIED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CI T V. SUBODHCHANDRA S. PATEL (265 ITR 445). 7. IT IS NOTABLE THAT THE HON'BLE GUJARAT HIGH COUR T DECISION IN THE CASE OF SAURASHTRA KUTCH STOCK EXCHANGE LTD. (SUPRA) HAS BE EN AFFIRMED BY THE HON'BLE SUPREME COURT IN 305 ITR 277). 8. IT IS RESPECTFULLY SUBMITTED THAT VARIOUS BENCHE S OF THE HON'BLE AHMEDABAD ITAT HAVE ALSO ADOPTED THE SAME VIEW. A R EFERENCE MAY KINDLY BE MADE TO THE FOLLOWING ORDERS: (1) ORDER DATED 31 ST AUGUST, 2012 IN THE CASE OF JAY CHEMICAL INDUSTRIE S LTD. V. DCIT IN MA NO. 50/AHD/2012 ARISING FROM ITA NO. 4237/AHD/2007 FOR A.Y.2004-05 (2) ORDER DATED 14.12.2012 IN THE CASE OF SAGAR DR UGS AND PHARMACEUTICALS LTD. V. ITO IN MA NO. 149/AHD/2012 ARISING FROM ITA NO. 4042/AHD/2008 FOR A.Y. 2002-03 (3) ORDER DATED 3.5.2013 IN MA NOS. 189, 190, 200/A HD/2012 RESPECTIVELY ARISING FROM ITA NOS. 1819, 1820 AND 1818/AHD/2008 FOR A.YS. 2003- 04, 2004-05 AND 2000-01 9. IT IS SUBMITTED THAT THE LEGAL POSITION HAS BEEN REDEFINED BY THE HON'BLE SUPREME COURT AND THEREFORE, THIS ISSUE HAS TO BE R E-DECIDED IN THE LIGHT OF THE NOW SETTLED LEGAL POSITION AND WHILE A PPLYING CLAUSE (BAA) OF THE EXPLANATION, ONLY THE NET INCOME HAS TO BE TAKE N. MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 7 10. IN THE BACKDROP OF THE LEGAL AND THE FACTUAL PO SITION EXPLAINED ABOVE, IT IS HUMBLY SUBMITTED THAT THERE IS A MISTAKE APPAREN T FROM RECORD IN THE ORDER OF THE HON'BLE TRIBUNAL WITHIN THE MEANING OF SECTION 254(2) OF THE INCOME-TAX ACT AND, THEREFORE, IT IS PRAYED THA T THE IMPUGNED ORDER OF THE HON'BLE TRIBUNAL MAY KINDLY BE APPROPRIATELY RECTIFIED U/S. 254(2) OF THE INCOME-TAX ACT. M. A. NO. 09/AHD/2014 (ASSESSEES M.A. AGAINST ASSE SSEES APPEAL) 1. THE PRESENT MISCELLANEOUS APPLICATION ARISES FRO M THE AFORESAID ORDER OF THE HON'BLE TRIBUNAL UNDER WHICH THE AFORESAID A PPEAL FILED BY THE ASSESSEE COMPANY WAS DECIDED ALONG WITH THE DEPARTM ENTAL APPEAL IN ITA NO. 1601/AHD/2007 FOR A.Y. 2003-04. THIS MISCEL LANEOUS APPLICATION SEEKS RECTIFICATION OF CERTAIN MISTAKES APPARENT FROM RECORD IN THE ORDER OF THE HON'BLE TRIBUNAL ON ACCOUNT OF THE FACT THAT THE LEGAL POSITION ON THE RELEVANT ISSUES WAS REVERSED ON ACC OUNT OF SUBSEQUENT SUPREME COURT DECISIONS ON THE SAME ISSUES. 2. THESE ISSUES PERTAIN TO THE FINDING OF THE HON'B LE TRIBUNAL WITH REGARD TO GROUNDS NO. 1 AND 2 OF THE ASSESSEE'S APPEAL WHI CH READ AS UNDER: '1. THE LEARNED CIT(A) HAS ERRED IN DISALLOWING DED UCTION U/S, 80HHC ON DEPB RECEIVABLES AND ACCRUALS OF RS.251.43 LACS AND TREATING RECOGNITION OF DEPB INCOME IN THE YEAR OF REALIZATION OF SALE PROCEEDS AND NOT ON ACCRUAL BAS IS. S' 2. THE LEARNED CIT(A) HAS ERRED IN DISALLOWING DEDU CTION U/S. 80HHC ON 90% OF OTHER INCOME BEING (I) INTEREST .IN COME (FOR) RS.21,88,854/- (II) INTEREST INCOME OF RS.1,63,618/- (III) RENT INCOME RS.12,70,000/- (IV) OTHER MISC. I NCOME RS.14,18,854/-.' 3. THESE GROUNDS HAVE BEEN DEALT WITH AND ADJUDICAT ED BY THE HON'BLE TRIBUNAL AT PARAS 1 TO 7 OF THE ORDER. WITH REGARD TO GROUND NO. 1, THE HON'BLE TRIBUNAL OBSERVED THAT THIRD PROVISO TO SEC TION 80HHC(3) OF THE INCOME-TAX ACT WAS INTRODUCED BY THE TAXATION L AWS (SECOND AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT FROM 1.4.1998. AT PARA 5.2 THE HON'BLE TRIBUNAL OBSERVED THAT THE LEARNED CIT(A) RECORDED A MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 8 FINDING THAT THE ASSESSEE COMPANY DID NOT FULFILL T HE TWO CONDITIONS LAID DOWN IN THE AFORESAID THIRD PROVISO. THE HON'BLE TR IBUNAL HAS THEREAFTER OBSERVED THAT NO EVIDENCE WAS PRODUCED BY THE ASSES SEE COMPANY BEFORE THE TRIBUNAL TO SHOW THAT THE CONDITIONS OF THE THIRD PROVISO HAVE BEEN FULFILLED. THE HON'BLE TRIBUNAL HAS ALSO REFER RED TO THE FINDING OF THE LEARNED CIT(A) THAT DEPB INCOME ACCRUING IN THE YEAR OF SALE OF DEPB ENTITLEMENT WOULD BE CONSIDERED AND THE PROVIS ION FOR DEPB RECEIVABLES AND ACCRUALS ON NOTIONAL BASIS WOULD NO T BE CONSIDERED AS INCOME FOR THIS PURPOSE. IT IS FURTHER OBSERVED THA T THE LEARNED AR OF THE ASSESSEE COMPANY DID NOT REFER TO ANY MATERIAL TO CONTROVERT THE FINDINGS OF THE LEARNED CIT(A). IN THESE FACTS THE GROUND NO. 1 OF THE ASSESSEE'S APPEAL WAS DISMISSED. 4. ON THIS ISSUE IT IS RESPECTFULLY SUBMITTED THAT THE RETROSPECTIVITY OF THE AMENDMENT OF SECTION 80HHC(3) HAS BEEN STRUCK DOWN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS V. CIT (348 ITR 391). THIS GUJARAT HIGH COURT JUDGMENT HAS BEEN FOLLOWED BY THE HON'BLE BOMBAY HIGH COURT IN THE VASE OF VIJAYA SILK HOUSE (BANGALORE) LTD. V. UNION OF INDIA (349 ITR 566). IN ITS JUDGMENT THE H ON'BLE BOMBAY HIGH COURT HAS REPRODUCED THE FOLLOWING FINDINGS RECORDE D BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS (SU PRA) ON PAGE 568 OF THE REPORT: 'ON CONSIDERATION OF THE ENTIRE MATERIALS ON RECORD , WE, THEREFORE, FIND SUBSTANCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE PETITIONERS THAT THE IMPUGNED AMEND MENT IS VIOLATIVE FOR ITS RETROSPECTIVE OPERATION IN ORDER TO OVERCOME THE DECISION OF THE TRIBUNAL, AND AT THE SAME TIME, FOR DEPRIVING THE BENEFIT EARLIER GRANTED TO A CLASS OF THE ASSESSEES WHOSE ASSESSMENTS WERE STILL PENDING ALTH OUGH SUCH BENEFIT WILL BE AVAILABLE TO THE ASSESSEES WHO SE ASSESSMENTS HAVE ALREADY BEEN CONCLUDED. IN OTHER W ORDS, IN THIS TYPE OF SUBSTANTIVE AMENDMENT, RETROSPECTIV E OPERATION CAN BE GIVEN ONLY IF IT IS FOR THE BENEFI T OF THE ASSESSEES BUT NOT IN A CASE WHERE IT AFFECTS EVEN A FEWER SECTION OF THE ASSESSEES. MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 9 WE, ACCORDINGLY, QUASH THE IMPUGNED AMENDMENT ONLY TO THIS EXTENT THAT THE OPERATION OF THE SAID SECTION COULD BE GIVEN EFFECT FROM THE DATE OF THE AMENDMENT AND NOT IN RESPECT OF EARLIER ASSESSMENT YEARS OF THE ASSESSEE S WHOSE EXPORT TURNOVER IS ABOVE RS. 10 CRORES. IN OTHER WO RDS, THE RETROSPECTIVE AMENDMENT SHOULD NOT BE DETRIMENTAL T O ANY OF THE ASSESSEES.' 5. IT IS RESPECTFULLY SUBMITTED THAT THE FORESAID F INDING RECORDED BY THE HON'BLE JURISDICTIONAL HIGH COURT HAS RESULTED INTO REVERSAL OF THE LEGAL POSITION AND, THEREFORE, NOW THE TWIN CONDITIONS OF THE THIRD PROVISO TO SECTION 80HHC(3) HAVE NO APPLICABILITY TO A.Y. 2003 -04 WHICH IS THE SUBJECT MATTER OF THIS MISCELLANEOUS APPLICATION. I T IS HUMBLY SUBMITTED THAT THIS GIVES RISE TO A MISTAKE APPARENT FROM REC ORD WHICH REQUIRES RECTIFICATION. FURTHER THE QUESTION OF DEPB INCOME VIS-A-VIS SECTION 80HHC OF THE INCOME-TAX ACT READ WITH CLAUSE (BAA) OF THE EXPLANATION BE RECONSIDERED AND DECIDED IN CONSONANCE WITH THE LEGAL POSITION IN THIS REGARD LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF TOP MAN EXPORTS V. CIT (342 ITR 49). 6. IT IS RESPECTFULLY SUBMITTED THAT A SUBSEQUENT D ECISION OF THE JURISDICTIONAL HIGH COURT OR THE SUPREME COURT GIVE S RISE TO A MISTAKE APPARENT FROM-RECORD WHICH HAS TO BE RECTIFIED U/S. 254(2) OF THE INCOME-TAX AC. IN THIS CONNECTION, KIND REFERENCE I S INVITED TO THE HON'BLE GUJARAT HIGH COURT DECISION IN THE CASE OF CIT V. SAURASHTRA KUTCH STOCK EXCHANGE (262 ITR 146) WHEREIN THE SCOP E AND AMBIT AND THE POWERS OF THE TRIBUNAL U/S. 254(2) HAVE BEEN EL ABORATELY CONSIDERED AND ANALYZED BY THE HON'BLE HIGH COURT A ND THE POSITION HAS BEEN SUMMED UP ON PAGE 162 OF THE REPORT IN THE FOLLOWING MANNER: '(A) THE TRIBUNAL HAS POWER TO RECTIFY A MISTAKE AP PARENT FROM THE RECORD ON ITS OWN MOTION OR ON AN APPLICAT ION BY A PARTY UNDER SECTION 254(2) OF THE ACT; (B) AN ORDER ON APPEAL WOULD CONSIST OF AN ORDER MA DE UNDER SECTION 254(1) OF THE ACT OR IT COULD BE AN O RDER MADE MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 10 UNDER SUB-SECTION (1) AS AMENDED BY AN ORDER UNDER SUB- SECTION (2) OF SECTION 254 OF THE ACT; (C) THE POWER OF RECTIFICATION IS TO BE EXERCISED T O REMOVE AN ERROR OR CORRECT A MISTAKE AND NOT FOR DISTURBING F INALITY, THE FUNDAMENTAL PRINCIPLE BEING, THAT POWER OF RECTIFIC ATION IS FOR JUSTICE AND FAIR PLAY ; (D) THAT POWER OF RECTIFICATION CAN BE EXERCISED EV EN IF A MISTAKE IS COM- MITTED BY THE TRIBUNAL OR EVEN IF A MISTAKE HAS OCCURRED AT THE INSTANCE OF PARTY TO THE APPEAL ; (E) A MISTAKE APPARENT FROM RECORD SHOULD BE SELF-E VIDENT, SHOULD NOT BE A DEBATABLE ISSUE, BUT THIS TEST MIGH T BREAK DOWN, BECAUSE JUDICIAL OPINIONS DIFFER, AND WHAT IS A MISTAKE APPARENT FROM THE RECORD CANNOT BE DEFINED PRECISEL Y AND MUST BE LEFT TO BE DETERMINED JUDICIALLY ON THE FAC TS OF EACH CASE ; (F) NON-CONSIDERATION OF A JUDGMENT OF THE JURISDICTION AL HIGH COURT WOULD ALWAYS CONSTITUTE A MISTAKE APPARE NT FROM THE RECORD, REGARDLESS OF THE JUDGMENT BEING RENDERED PRIOR TO OR SUBSEQUENT TO THE ORDER PROPOS ED TO BE RECTIFIED ; (G) AFTER THE MISTAKE IS CORRECTED, CONSEQUENTIAL O RDER MUST FOLLOW, AND THE TRIBUNAL HAS POWER TO PASS ALL NECE SSARY CONSEQUENTIAL ORDERS.' (EMPHASIS SUPPLIED) THE AFORESAID GUJARAT HIGH COURT JUDGMENT WAS SUBSE QUENTLY APPLIED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CI T V. SUBODHCHANDRA S. PATEL (265 ITR 445). 7. IT IS NOTABLE THAT THE HON'BLE GUJARAT HIGH COUR T DECISION IN THE CASE OF SAURASHTRA KUTCH STOCK EXCHANGE LTD. (SUPRA) HAS BE EN AFFIRMED BY THE HON'BLE SUPREME COURT IN 305 ITR 277). 8. IT IS RESPECTFULLY SUBMITTED THAT VARIOUS BENCHE S OF THE HON'BLE AHMEDABAD ITAT HAVE ALSO ADOPTED THE SAME VIEW. A R EFERENCE MAY KINDLY BE MADE TO THE FOLLOWING ORDERS: MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 11 (1) ORDER DATED 31 ST AUGUST, 2012 IN THE CASE OF JAY CHEMICAL INDUSTRIES LTD. V. DCIT IN MA NO. 50/AHD/2012 ARISI NG FROM ITA NO. 4237/AHD/2007 FOR A.Y. 2004-05 (2) ORDER DATED 14.12.2012 IN THE CASE OF SAGAR DRU GS AND PHARMACEUTICAL LTD. V. ITO IN MA NO. 149/AHD/2012 A RISING FROM ITA NO. 4042/AHD/2008 FOR A.Y. 2002-03 (3) ORDER DATED 3.5.2013 IN MA NOS. 189, 190, 200/A HD/2012 RESPECTIVELY ARISING FROM ITA NOS. 1819, 1820 AND 1818/AHD/2008 FOR A.YS. 2003-04, 2004-05 AND 2000-0 1 9. WITH REGARD TO GROUND NO. 2 OF THE ASSESSEE'S AP PEAL PERTAINING TO 90% EXCLUSION UNDER CLAUSE (BAA) OF THE EXPLANATION IN RESPECT OF (1) FOR INTEREST INCOME OF RS.21,88,854, (2) OTHER INTE REST INCOME OF RS.1,63,618, (3) RENTAL INCOME OF RS.12,70,0000 AND (4) OTHER MISC. INCOME OF RS.14,18,854, THE HON'BLE TRIBUNAL HAS RE CORDED ITS FINDINGS AT PARAS 6.9 AND 7 OF THE ORDER. THE HON'BLE TRIBUN AL HAS RELIED ON THE HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF C IT V. ASIAN STAR CO. LTD. (326 ITR 56). AT PARA 6.9 THE HON'BLE TRIB UNAL HAS OBSERVED THAT IN CONSONANCE WITH THE AFORESAID BOMBAY HIGH C OURT JUDGMENT 90% OF THE RECEIPTS REFERRED TO IN GROUND NO. 2 OF THE ASSESSEE HAVE TO BE EXCLUDED UNDER CLAUSE (BAA) OF THE EXPLANATIO N. IT IS FURTHER OBSERVED THAT TO TAKE CARE OF ANY EXPENDITURE WHICH MAY HAVE BEEN INCURRED IN EARNING THIS INCOME, AN AD HOC DEDUCTIO N OF 10% HAS BEEN ALLOWED BY THE LEGISLATURE AND AS PER THE BOMBAY HI GH COURT JUDGMENT NO FURTHER DEDUCTION IS PERMISSIBLE. WITH THIS OBSERVATION GROUND NO. 2 RAISED BY THE ASSESSEE COMPANY WAS DIS MISSED. 10. IT IS RESPECTFULLY SUBMITTED THAT THE HON'BLE B OMBAY HIGH COURT DECISION IN THE CASE OF ASIAN STAR CO. (SUPRA) HAS BEEN OVERRULED BY THE HON'BLE SUPREME COURT IN THE CASE OF ACG ASSOCI ATED CAPSULES PVT. LTD. (343 ITR 89). THE HEAD NOTE OF THIS JUDGM ENT IS REPRODUCED BELOW FOR READY REFERENCE: FOR THE PURPOSE OF SECTION 80HHC OF THE INCOME-TAX ACT, 1961, IT IS NOT THE ENTIRE AMOUNT RECEIVED BY THE ASSESSES ON SALE OF DEPB CREDIT, BUT MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 12 THE SALE VALUE LESS THE FACE VALUE OF THE DEPB THAT WILL REPRESENT PROFIT ON TRANSFER OF DEPB CREDIT BY THE ASSESSEE. TOPMAN EXPORTS V. CIT [2012] 342 ITR 49 (SC) FOLLOWED. UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80 HHC OF THE ACT, NINETY PER CENT, OF ANY RECEIPTS BY WAY OF BROKERAG E, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A S IMILAR NATURE INCLUDED IN ANY SUCH PROFITS ARE TO BE DEDUCTED FROM THE PRO FITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BU SINESS OR PROFESSION'. THE EXPRESSION 'INCLUDED ANY SUCH PROF ITS' WOULD MEAN ONLY SUCH RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT WHICH ARE INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GA INS OF BUSINESS OR PROFESSION'. THEREFORE, IF ANY QUANTUM OF THE RECEI PTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR A NY OTHER RECEIPT OF A SIMILAR NATURE IS ALLOWED AS EXPENSES UNDER SECTION S 30 TO 44D OF THE ACT AND IS NOT INCLUDED IN THE PROFITS OF BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON', NINETY PER CENT, OF SUCH QUANTUM OF RECEIPTS CANNOT BE REDUCED UNDER CLAUSE (1) OF EXPLANATION (BAA) FROM THE PROFITS OF THE BUSINESS. IN OTHER WORDS, ONLY NINETY PER CENT, OF THE NET AMOUNT OF ANY RECEIPT O F THE NATURE MENTIONED IN CLAUSE (1) WHICH IS ACTUALLY INCLUDED IN THE PROFITS OF THE ASSESSEE IS TO BE DEDUCTED FROM THE PRO-FITS OF THE ASSESSEE FOR DETERMINING 'PROFITS OF THE BUSINESS' OF THE ASSESS EE UNDER EXPLANATION (BAA) TO SECTION 80HHC. EXPLANATION (BAA) HAS TO BE CONSTRUED ON ITS OWN LA NGUAGE AND AS PER THE PLAIN NATURAL MEANING OF THE WORDS USED IN IT, THE WORDS 'RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARG ES OR ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFIT S' WILL NOT ONLY REFER TO THE NATURE OF RECEIPTS BUT ALSO THE QUANTUM OF RECE IPTS INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' REFERRED TO IN THE FIRST PART OF EXPLANATION (BAA). ACCORDINGLY, IF ANY QUANTUM OF ANY RECEIPT O F THE NATURE MENTIONED IN CLAUSE (1) OF EXPLANATION (BAA) HAS NO T BEEN INCLUDED IN MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 13 THE PROFITS OF BUSINESS OF AN ASSESSEE AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', NINE TY PER CENT, OF SUCH QUANTUM OF THE RECEIPT CANNOT BE DEDUCTED UNDER EXP LANATION (BAA) TO SECTION 80HHC. HELD, ACCORDINGLY, THAT NINETY PER CENT, OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY THE NET INTEREST OR NET RENT, WHI CH HAD BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', WAS TO BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80HHC FO R DETERMINING THE PROFITS OF THE BUSINESS. DECISION OF THE BOMBAY HIGH COURT REVERSED. DECISION OF THE DELHI HIGH COURT AFFIRMED. DISTRIBUTORS (BARODA) P. LTD. V. UNION OF INDIA [19 85] 155 ITR 120 (SC) RELIED ON. CIT V. SHRI RAM HONDA POWER EQUIP [2007] 289 ITR 47 5 (DELHI) APPROVED. CIT V. ASIAN STAR CO. LTD. [2010] 326 ITR 56 (BOM) IMPLIEDLY OVERRULED.' 11. FROM THE ABOVE IT MAY KINDLY BE APPRECIATED THA T 90% OF ONLY NET INCOME CAN BE EXCLUDED UNDER CLAUSE (BAA) OF THE EX PLANATION TO SECTION 80HHC WHILE DETERMINING THE PROFITS OF THE BUSINESS ELIGIBLE FOR DEDUCTION. THIS JUDGMENT HAS BEEN RENDERED BY LARGE R BENCH OF THE HON'BLE SUPREME COURT COMPRISING OF THREE JUDGES AN D THEY HAVE ALSO FOLLOWED THE EARLIER SUPREME COURT DECISION IN THE CASE OF TOPMAN EXPORTS (SUPRA), 12. IT IS SUBMITTED THAT THE LEGAL POSITION HAS BEE N REDEFINED BY THE HONBLE SUPREME COURT AND THEREFORE, THIS ISSUE HAS TO BE R E-DECIDED IN THE LIGHT OF THE NOW SETTLED LEGAL POSITION AND WHILE A PPLYING CLAUSE (BAA) OF THE EXPLANATION, ONLY THE NET INCOME HAS TO BE TAKE N. 13. IN THE BACKDROP OF THE LEGAL AND THE FACTUAL PO SITION EXPLAINED ABOVE, IT IS HUMBLY SUBMITTED THAT THERE IS A MISTAKE APPAREN T FROM RECORD IN THE ORDER OF THE HONBLE TRIBUNAL WITHIN THE MEANING OF SECTION 254(2) OF MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 14 THE INCOME-TAX ACT AND, THEREFORE, IT IS PRAYED THA T THE IMPUGNED ORDER OF THE HONBLE TRIBUNAL MAY KINDLY BE APPROPRIATELY RECTIFIED U/S. 254(2) OF THE INCOME-TAX ACT. 4. LD. COUNSEL ARGUED THAT NOW CLAUSE (III) OF SECT ION 28, WHICH WAS INSERTED BY THE FINANCE ACT, 2005 WITH RETROSPECTIV E EFFECT 01.04.1998 HAS BEEN STRUCK DOWN BY THE HONBLE GUJARAT HIGH COURT IN CASE OF AVANI EXPORTS V. CIT (348 ITR 391). HE ALSO ARGUED THAT AS PER HONBLE SUPREME COURT IN CASE OF TOPMAN EXPORTS V. CIT [2012] 342 ITR 49 (SC), PROFIT SHOULD BE ASSESSED ON THE TRANSFER OF DUTY ENTITLEMENT PASS B OOK SCHEME. HE FURTHER SUBMITTED THAT 90% RECEIPTS HAVE TO BE EXCLUDED UND ER CLAUSE BAA OF OTHER INCOME REFERRED OF EXPLANATION IS TO BE CONSIDERED NET NOT GROSS AS THIS BENCH HAS RELIED UPON THE BOMBAY HIGH COURT DECISION IN C ASE OF CIT V. ASIAN STAR CO. LTD. (326 ITR 56), WHICH HAS BEEN OVER RULED BY THE HONBLE SUPREME COURT IN CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. (343 ITR 89), HELD THAT FOR THE PURPOSES OF SECTION 80HHC, THE DEP CREDIT I S NOT TO BE INCLUDED AS AN ENTIRE AMOUNT RECEIVED FOR CALCULATION OF DEDUCTION AND ALSO 90% ON PROFIT ALONE TO BE DEDUCTED, 90% OF NET INTEREST OR IS TO BE INCLUDED IN THE PROFIT. HE ALSO ARGUED THAT WHEN LAW CHANGED BY THE REASONS TH AT HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, THEN I T IS A MATTER OF A RECTIFICATION AS HELD BY THE SUPREME COURT IN CASE OF SAURASHTRA KUTCH STOCK EXCHANGE LTD. (305 ITR 277). THUS, HE REQUESTED EITHER TO RECTIFY DUE TO CHANGE OF THE LAW OR RECALL THE ORDER DATED 06.08.2010 DECIDED BY THE ITAT. AT THE OUTSET, LD. SR. D.R. FAIRLY ACCEPTED THE PROPOSAL. MA NOS. 9 & 10/AHD/14 (IN ITA NOS. 1591 & 1601/AHD/ 07) FOR A.Y. 03-04 IN INTAS PHARMACEUTICALS LTD. VS. DC IT PAGE 15 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE LEGAL POSITION ON BOTH THE ISSUES HAV E BEEN CHANGED AS CASE LAWS REFERRED BY THE A.R. OF THE ASSESSEE ON DUTY D RAW PASS BOOK AS WELL AS INCLUSION OF 90% OF INTEREST, RENT ETC. AFTER CONS IDERING THE ABOVE FACTS AND LEGAL POSITION AND ISSUE APPEALED BY THE APPELLANT BEFORE THIS BENCH, WE RECALL OUR ORDER DATED 06.08.2010. THE REGISTRY IS DIRECT ED TO FIX THE CASE BEFORE REGULAR BENCH. 6. IN THE RESULT, ASSESSEES BOTH M. A. ARE ALLOWED . THESE ORDERS ARE PRONOUNCED IN OPEN COURT ON 16.05.2014 SD/- SD/- ( MUKUL KR. SHRAWAT ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA * * * * # ## # +, +, +, +, -,) -,) -,) -,) / COPY OF ORDER FORWARDED TO:- 1. ' / REVENUE 2. / ASSESSEE 3. 11 2 / CONCERNED CIT 4. 2- / CIT (A) 5. ,67 +% , , / DR, ITAT, AHMEDABAD 6. 79: ;< / GUARD FILE. BY ORDER/ * , =/ 1' , !