Appeal Details
Counselvise Citation
[2015] 124 COUNSELVISE.COM (IT) 3126 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 5 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Miscellaneous Application
Pronouncement Date
20-07-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
17-07-2015
Assessment Year
2004-2005
Appeal Filed On
22-01-2014
Judgement Text
, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER MA NO.11/AHD/2014 IN ./ ITA NO.8/AHD/2008 / ASSTT.YEAR: 2004-05] INTAS PHARMACEUTICALS LTD. 203, CHINUBHAI CENTRE ASHRAM ROAD AHMEDABAD. VS DCIT, CIR.4 AHMEDABAD. ( APPLICANT ) (RESPONDENT) REVENUE BY : SHRI D.C. MISHRA, SR.DR ASSESSEE BY : SMT.URVASHI SODHAN / DATE OF HEARING : 17/07/2015 / DATE OF PRONOUNCEMENT: 20/07/2015 *+/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THIS MISC. APPLICATION IS DIRECTED AT THE INSTANCE OF THE ASSESSEE, POINTING OUT APPARENT ERROR IN THE ORDER OF THE TRI BUNAL DATED 22.10.2010 PASSED IN ITA NO.8/AHD/2008 FOR THE ASST T.YEAR 2004-05. 2. IT IS PLEADED IN THE APPLICATION THAT THE REVENU E IN ITS GROUND NO.4 HAS CHALLENGED THE EXCLUSION OF 90% OF OTHER RECEIP TS COMPRISING OF INSURANCE CLAIM, C&F STOCKIST INTEREST AND CASH DIS COUNT FROM THE PROFIT OF THE BUSINESS, WHILE COMPUTING THE DEDUCTION ADMI SSION UNDER SECTION 80HHC. THE TRIBUNAL HAS ALLOWED THIS GROUND OF THE APPEAL BY FOLLOWING THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. K. MA NO.11/AHD/2014 2 RAVINDRANATHAN NAIR, 295 ITR 228 (SC). THE FINDINGS RECORDED BY THE TRIBUNAL ON THIS ISSUE READ AS UNDER: 5. GROUND NO.4: THE LD.CIT(A) HAS ERRED I LAW AND ON THE FACTS O F THE CASE IN DIRECTING THE AO NOT TO EXCLUDE 90% OF OTHER INC OME COMPRISING OF (I) INSURANCE CLAIM RECEIVED OF RS.71 ,53,020/- (II) C&F STOCKIEST INTEREST OF RS.7,62,111/-, AND (III) CASH DISCOUNT OF RS.10,95,018/- FROM THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.80HHC OF THE I.T.ACT. 5.1 AFTER CAREFULLY PERUSING THIS GROUND WE HAVE NO TICED THAT IN RESPECT OF INSURANCE CLAIM AND C&F STOCKISTS A VIEW HAS ALREADY BEEN TAKEN IN ITA NO.1601/AHD/2007 ORDER DATED 06-0 8-2010 ALREADY CITED SUPRA AGAINST THE ASSESSEE AND IN FAV OUR OF THE REVENUE BY THE TRIBUNAL THAT THE INSURANCE AND C&F SOTKCISTS WERE NOT IN ANY MANNER RELATED TO THE EXPORT ACTIVI TY OR TURNOVER OF THE ASSESSEE. IT WAS HELD THAT THE ASSESSING OF FICER WAS JUSTIFIED IN EXCLUDING 90% OF THOSE RECEIPTS WHILE COMPUTING THE PROFITS OF THE BUSINESS IN TERMS OF EXPLANATION(BAA ) TO SECTION 80HHC OF THE ACT. THE DECISION FOLLOWED ARE CIT VS . IK. RAVINDRANATHAN NAIR 295 ITR 228 (SC), AND ALEMBIC C HEMICAL WORKS 266 ITR 47 (GUJ), LIBERTY FOOT WEAR CO. 283 I TR 398 (PUH) ACCORDING WE HEREBY REVERSE THE FINDINGS OF THE LD.CIT(A) AND THIS PART OF THE GROUND GOES IN FAVOUR OF THE R EVENUE. 3. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED T HAT THIS ASPECT HAS BEEN CONSIDERED BY THE HONBLE SUPREME COURTS LARGER BENCH IN THE CASE OF ACG ASSOCIATES CAPSULES PVT. LTD., 343 ITR 89. THE HONBLE SUPREME COURT HAS HELD THAT ONLY 90% OF NET RECEIPT IS TO BE EXCLUDED AND NOT THE GROSS RECEIPT. THIS DECISION OF THE H ONBLE SUPREME COURT BROUGHT THE ORDER OF THE ITAT IN THE AMBIT OF SUFFE RING WITH THE PATENT ERROR. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHE R CONTENDED THAT IN THE CASE OF CIT VS.SAURASHTRA KUTCH STOCK EXCHANGE, 262 ITR 146, THE HONBLE JURISDICTIONAL HIGH COURT HAS, WHILE EXPOUN DING THE SCOPE OF SECTION 254(2) OF THE INCOME TAX ACT, HAS OBSERVED THAT A SUBSEQUENT DECISION OF THE JURISDICTIONAL HIGH COURT OR THE HO NBLE SUPREME COURT WOULD GIVE RISE TO A MISTAKE APPARENT FROM RECORD, WHICH IS TO BE MA NO.11/AHD/2014 3 RECTIFIED UNDER SECTION 254 (2) OF THE I.T.ACT. SH E FURTHER SUBMITTED THAT SIMILAR ISSUE HAD COME BEFORE THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSMENT FOR THE ASSTT.YEAR 2003-04. THE TRIBUNAL FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. (SUPRA) HAS HELD THAT THE ONLY 90% OF THE NET OF SUCH RECEIPTS WOULD BE EXCLUDED. SHE PLACED ON RECORD COPY OF THE TRIBUNALS ORDER DATED 10.4.2015 PASSED IN ITA NO.1591 AND 1601/AHD/2007 FOR THE ASSTT.YEAR 2003-04. 4. THE LEARNED DR, ON THE OTHER HAND, WAS UNABLE TO CONTROVERT THE CONTENTIONS OF THE LEARNED COUNSEL OF THE ASSESSEE. 5. THE POWERS UNDER SECTION 254(2) OF THE I.T.ACT C AN BE EXERCISED WHEN THE MISTAKE WHICH IS SOUGHT TO BE RECTIFIED IS AN OBVIOUS AND PATENT MISTAKE, WHICH IS APPARENT FROM THE RECORD, AND NOT A MISTAKE WHICH REQUIRES TO BE ESTABLISHED BY ARGUMENTS AND L ONG DRAWN PROCESS OF REASONING, ON POINT ON WHICH, THERE MAY CONCEIVA BLY BE TWO OPINIONS. THE HONBLE SUPREME COURT IN THE CASE OF SAURASHTRA KUTCH STOCK EXCHANGE LTD. (SUPRA) HAS HELD THAT NON-CONSIDERATI ON OF A JUDGMENT OF THE JURISDICTIONAL HIGH COURT WOULD ALWAYS CONSTITU TE A MISTAKE APPARENT FROM RECORD, REGARDLESS OF THE JUDGMENT BEING RENDE RED PRIOR TO OR SUBSEQUENT TO THE ORDER PROPOSED TO BE RECTIFIED. THUS, AFTER THE ORDER OF THE TRIBUNAL, THE HONBLE SUPREME COURT HAS SILE NCED THE CONTROVERSY AND HELD THAT 90% OF THE NET RECEIPT REPRESENTING I NSURANCE CLAIM, C&F STOCKS INTEREST AND CASH DISCOUNT WOULD BE EXCLUDED . THE FINDINGS OF THE TRIBUNAL ON SIMILAR ISSUE, ON THE STRENGTH OF T HE HONBLE SUPREME COURT, IN THE ASSTT.YEAR 2003-04 READ AS UNDER: 7. NOW, WE TAKE UP THE GROUND NO.2 OF THE ASSESSEE S APPEAL THAT READS AS UNDER:- THE LEARNED CIT(A) HAS ERRED IN DISALLOWING DEDUCTI ON U/S.80HHC ON 90% OF OTHER INCOME BEING (I) INTEREST INCOME (FDR) RS.21,88,854 MA NO.11/AHD/2014 4 (II) INTEREST INCOME OF RS.1,63,618 (III) RENT INCO ME RS.12,70,000 (IV) OTHER MISC.INCOME RS.14,18,854/-. 7.1. AT THE OUTSET, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF HONB LE APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT.LTD. VS. CI T REPORTED AT 343 ITR 89(SC). LD.COUNSEL REITERATED THE SUBMISSIONS AS WERE MADE IN THE MISC.APPLICATION NO.10/AHD/2014. FOR THE SAKE OF CLARITY, THE RELEVANT CONTENTS ARE REPRODUCED HEREINBELOW:- 3. . . THIS GROUND HAS BEEN DEALT WITH AND ADJ UDICATED BY THE HON'BLE TRIBUNAL AT PARA 8 OF THE ORDER. IT HAS BEE N HELD BY THE HON'BLE TRIBUNAL THAT IN RESPECT OF THE OTHER INCOM ES REFERRED TO IN THE AFORESAID GROUND NO. 4, 90% OF THE GROSS INCOME IS REQUIRED TO BE EXCLUDED UNDER CLAUSE (BAA) OF THE EXPLANATION U/S. 80HHC OF THE INCOME-TAX ACT. THE HON'BLE TRIBUNAL HAS REFERRED T O ITS DECISION WITH REGARD TO A SIMILAR GROUND OF APPEAL RAISED IN ASSE SSEE'S APPEAL WHERE THE HON'BLE TRIBUNAL RELIED ON THE HON'BLE BO MBAY HIGH COURT DECISION IN THE CASE OF CIT V. ASIAN STAR CO. LTD. (326 ITR 56). AT PARA 6.9 THE HON'BLE TRIBUNAL HAS OBSERVED THAT IN CONSONANCE WITH THE AFORESAID 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 OBSE RVED THAT TO TAKE CARE OF ANY EXPENDITURE WHICH MAY HAVE BEEN INCURRE D IN EARNING THIS INCOME, AN AD HOC DEDUCTION OF 10% HAS BEEN ALLOWED BY THE LEGISLATURE AND AS PER THE BOMBAY HIGH COURT JUDGME NT NO FURTHER DEDUCTION IS PERMISSIBLE. 4. IT IS RESPECTFULLY SUBMITTED THAT THE HON' BLE BOMBAY 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 BROKERAG E, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A S IMILAR NATURE INCLUDED IN ANY SUCH PROFITS ARE TO BE DEDUCTED FRO M THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GA INS OF BUSINESS OR PROFESSION'. THE EXPRESSION 'INCLUDED ANY SUCH P ROFITS' WOULD MEAN ONLY SUCH RECEIPTS BY WAY OF BROKERAGE, COMMIS SION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT WHICH ARE INCLUD ED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AN D GAINS OF BUSINESS OR PROFESSION'. THEREFORE, IF ANY QUANTUM OF THE RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARG ES OR ANY OTHER MA NO.11/AHD/2014 5 RECEIPT OF A SIMILAR NATURE IS ALLOWED AS EXPENSES UNDER SECTIONS 30 TO 44D OF THE ACT AND IS NOT INCLUDED IN THE PROFITS O F BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION', NINETY PER CENT, OF SUCH QUANTUM OF RE CEIPTS 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 OF THE NATURE MENTIONED IN CLAUSE (1) W HICH IS ACTUALLY INCLUDED IN THE PROFITS OF THE ASSESSEE IS TO BE DE DUCTED FROM THE PRO- FITS OF THE ASSESSEE FOR DETERMINING 'PROFITS OF TH E BUSINESS' OF THE ASSESSEE 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, CH ARGES 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 R ECEIPTS INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE H EAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' REFERRED TO IN THE FIRST PART OF EXPLANATION (BAA). ACCORDINGLY, IF ANY QUANTUM OF A NY RECEIPT OF THE NATURE MENTIONED IN CLAUSE (1) OF EXPLANATION (BAA) HAS NOT BEEN INCLUDED IN THE PROFITS OF BUSINESS OF AN ASSESSEE AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON', NINETY PER CENT, OF SUCH QUANTUM OF THE RECEIPT CANNOT BE DEDU CTED 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 RENT, WHI CH HAD BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE AS COMPU TED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', WAS TO BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80 HHC 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.' 5. FROM THE ABOVE IT MAY KINDLY BE APPRECIATE D THAT 90% OF ONLY NET INCOME CAN BE EXCLUDED UNDER CLAUSE (BAA) OF TH E EXPLANATION TO SECTION 80HHC WHILE DETERMINING THE PROFITS OF THE BUSINESS ELIGIBLE FOR DEDUCTION. THIS JUDGMENT HAS BEEN RENDERED BY L ARGER BENCH OF THE HON'BLE SUPREME COURT COMPRISING OF THREE JUDGE S AND THEY HAVE MA NO.11/AHD/2014 6 ALSO FOLLOWED THE EARLIER SUPREME COURT DECISION IN THE CASE OF TOPMAN EXPORTS V. CIT (342 ITR 49). 7.2. LD.SR.DR FAIRLY CONCEDED THE LEGAL POSITION AS ENUNCIATED IN THE ABOVE REFERRED JUDGEMENT OF THE HONBLE SUPREME COU RT RENDERED IN THE CASE OF ACG ASSOCIATED CAPSULES (P) LTD. VS. CI T (SUPRA). 7.3. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS CONTENDED BY THE LD.SR.COUNSEL FOR TH E ASSESSEE THAT THE ISSUE IS COVERED BY THE JUDGEMENT OF HONBLE APEX C OURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT.LTD.(SUPRA), WHEREIN TH E HONBLE SUPREME COURT HELD THAT NINETY PERCENT OF NOT THE G ROSS RENT OR GROSS INTEREST BUT ONLY THE NET INTEREST OR NET RENT, WHI CH HAD BEEN INCLUDED IN THE PROFITS OF THE BUSINESS OF THE ASSESSEE AS COMP UTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IS TO BE DEDUCTED UNDER CLAUSE(1) OF EXPLANATION (BAA) TO SECTION 80HHC FOR DETERMINING THE PROFITS OF BUSINESS. THEREFORE, RESPECTFULLY FOLLO WING THE RATION LAID DOWN BY THE HONBLE APEX COURT, WE HEREBY RESTORE T HE ISSUE TO THE FILE OF THE AO FOR RE-COMPUTATION OF DEDUCTION U/S.80-HH C IN THE LIGHT OF THE JUDGEMENT OF HONBLE SUPREME COURT RENDERED IN THE CASE OF ACG ASSOCIATED CAPSULES PVT.LTD.(SUPRA). ACCORDINGLY, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOS ES. 6. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE V IEW THAT THE ORDER OF THE TRIBUNAL DATED 22.10.2010 WAS SUFFERING WITH APPARENT ERROR. WE ALLOW THE MISC. APPLICATION OF THE ASSESSEE, AND HO LD THAT THE AO SHALL RE-COMPUTE THE DEDUCTION ADMISSIBLE UNDER SECTION 8 0HHC TO THE ASSESSEE BY EXCLUDING 90% OF THE NET RECEIPTS OF IN SURANCE CLAIM, C&F STOCKS INTEREST AND CASH DISCOUNTS, AS AGITATED BY THE REVENUE IN ITS GROUND NO.4. 7. IN THE RESULT, THE MISC. APPLICATION OF THE ASSE SSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 20 TH JULY, 2015 AT AHMEDABAD. SD/- SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 20 /07/2015
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