DCIT CEN CIR-34, V. INDOCO REMEDIES LTD,

MA 368/MUM/2010

• Counselvise Citation: [2010] 123 COUNSELVISE.COM (IT) 5283 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 04-11-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SHRI
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI R.S. SYAL AND SMT. ASHA VIJAYARAGHAVA N (JM) M.A. NO. 368/MUM/2010 (ARISING OUT OF ITA NOS. 5566 & 5695/MUM/2007 (ASSESSMENT YEAR- 2005-06) THE ACIT, CENTRAL CIRCLE-34, AAYAKAR BHAVAN, MUMBAI-400 020 M/S. INDOCO REMEDIES LTD., INDOCO HOUSE, KALINA 166, C.S.T. ROAD, SANTACRUZ (E), MUMBAI-400 098 PAN NO.:- AAACI 0380 C (APPELLANT) VS. (RESPONDENT) APPLICANT BY: SHRI MANOJ MISHRA RESPONDENT BY: SHRI PANKAJ JAIN O R D E R PER SMT. ASHA VIJAYARAGHAVAN (JM) AGAINST THE ORDER OF THE ITAT IN ITA NO. NOS. 5566, 5695/M/2007 FOR THE ASSESSMENT YEAR 2005-06 IN THE ASSESSEES C ASE, THE TRIBUNAL HAS UPHELD THE ORDER OF THE LD. CIT(A) IN RESPECT OF IN CLUSION OF FOREIGN EXCHANGE GAIN AND REFUND OF SALES TAX IN COMPUTING RELIEF U/S 80IB, WITH A DIRECTION, AT PARA 22 OF THE ORDER AS UNDER : 22. IN RESPECT OF EXCHANGE GAIN, IT IS NOTHING BUT PART OF THE SALE PRICE REALIZED. SIMILARLY SALES TAX REFUND REPRESEN TS REFUND OF SALES TAX WHICH WAS EARLIER CLAIMED AS DEDUCTION IN COMPU TING THE PROFITS DERIVED FROM THE UNDERTAKING. ALL THE RECEIPTS ARE DERIVED FROM THE MANUFACTURING ACTIVITY OF THE UNDERTAKING. WE THERE FORE DIRECT THE AO TO INCLUDE EXCHANGE GAINS AND SALES TAX REFUNDS THE EXTENT THE ASSESSEE CAN ESTABLISH IT TO ARISE FROM THE OPERATI ONS OF THE GOA UNIT WHILE COMPUTING RELIEF U/S 80IB ON THAT UNIT. WITH THESE DIRECTIONS, THE APPEAL OF THE REVENUE ON THIS ISSUE IS TREATED AS DISMISSED. M.A. NO. 368/M/10 2 2. AGAINST THIS FINDINGS, THE REVENUE HAS FILED A M ISCELLANEOUS APPLICATION AS UNDER: IN THIS CASE, THE ASSESSMENT U/S 143(3) OF THE IN COME TAX ACT 1961 WAS COMPLETED ON 15.3.2007. IN THE ASSESSMEN T ORDER THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS IN CLUDED OTHER INCOME ON ACCOUNT OF SUNDRY RECEIPTS OF S. 8,62,703 /- IN THE PROFITS OF THE BUSINESS FOR COMPUTING THE DEDUCTION U/S 80I B. THE SUNDRY RECEIPTS INCLUDE THE FOLLOWING: I I. EXCHANGE GAIN RS. 8,12,950/- II. SALES TAX REFUND RS. 19,115/- III. SUNDRY BALANCES WRITTEN BACK RS. 4, 490/- IV. MISCELLANEOUS INCOME RS. 26,148/- THE ASSESSING OFFICER RELYING ON THE DECISION OF HO NBLE SUPREME COURT IN THE CASE OF STERLING FOODS 237 ITR 579 DIS ALLOWED THE ABOVE RECEIPTS FOR THE PURPOSE OF COMPUTING DEDUCTI ON U/S 80IB OF THE ACT. THE LD. CIT(A) VIDE ORDER NO. CIT(A) CENT.VI/IT 13/ 07-08 DATED 2.7.2007 ALLOWED RELIEF TO THE ASSESSED IN RESPECT OF EXCHANGE GAIN OF RS. 8,12,950/- AND SALES TAX REFUND OF RS 19,115 /- AGGRIEVED WITH THE ORDER OF CIT(A) THE REVENUE FIL ED APPEAL BEFORE THE HONBLE ITAT. THE HONBLE ITAT VIDE ITS PRESEN T ORDER ITA NO. 5695/MUM/2007 DATED 18.1.2010 IN PARA NO.22 IN PAG E 13, IN RESPECT OF EXCHANGE GAIN, OBSERVED THAT IT IS NOTH ING BUT PART OF THE SALE PRICE REALIZED. IT WAS FURTHER HELD THAT SALES TAX REFUND REPRESENTS REFUND OF SALES TAX WHICH WAS EARLIER CL AIMED AS DEDUCTION IN COMPUTING PROFITS DERIVED FROM THE UND ER TAKING. ALL THE RECEIPTS ARE DERIVED FROM MANUFACTURING ACTIVITY OF THE UNDERTAKING. ACCORDINGLY, THE HONBLE ITAT, DIRECTED THE ASSESSI NG OFFICER TO INCLUDE EXCHANGE GAIN AND SALES TAX REFUND TO THE E XTENT THE ASSESSEE CAN ESTABLISH IT TO ARISE OPERATIONS FRO M THE GOA UNIT WHILE COMPUTING THE RELIEF U/S 80IB ON THAT UNIT. WITH THESE DIRECTIONS THE APPEAL OF THE REVENUE ON THIS ISSUE IS TREATED AS DISMISSED BY THE HONBLE ITAT. THE DECISION OF HONBLE ITAT IN RESPECT OF EXCHANGE GAIN AND SALES TAX REFUND, IS NOT IN ACCORDANCE WITH THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2001-02 SINCE THE HON BLE ITAT IN ITA NO.3780/M/05 FOR AY 2001-02 HAS DISMISSED THE ASSES SEES APPEAL BY HOLDING AS UNDER: M.A. NO. 368/M/10 3 C. EXCHANGE GAIN D. SALES TAX REFUND E. EXPORT INCENTIVE AS FAR AS THESE ITEMS ARE CONCERNED THE DISCUSSION WHICH WAS MADE IN REGARD TO INTEREST RECEIVED FROM CUSTOMERS ARE EQUALLY APPLICABLE . THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO ESTABLISH NEXUS BETWEEN THE ABOVE RECEIPTS AND THE GOA UNIT. THE ABOVE RECEIPTS WERE COMMON RECEIPTS BOTH FOR GOA UN IT AND THE BOMBAY UNIT. FOR THE REASONS STATED THEREIN WE UPH OLD THE ORDER OF THE REVENUE AUTHORITIES IN THIS REGARD. THUS GROUN D NO 1(B) OF THE ASSESSEE IS DISMISSED. IN THE YEAR UNDER CONSIDERATION I.E. A.Y. 2005-06 A LSO, THE ASSESSEE HAS FAILED TO ESTABLISH THE NEXUS BETWEEN THE EXCHA NGE GAIN & SALES TAX REFUND AND THE GOA UNIT. THEREFORE, THE ASSESSI NG OFFICER HAS RIGHTLY EXCLUDED THE SAME FROM THE PROFITS OF THE BUSINESS OF ZGOA UNIT FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80I B IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ST ERLING FOODS LTD 237 ITR 579. IN VIEW OF THE ABOVE IT IS REQUESTED THAT THE ORDER OF HONBLE ITAT IN ITA 5895/MUM/2007 IN RESPECT OF ABOVE ISSUES MAY KI NDLY BE RECTIFIED AND THE ORDER OF THE ASSESSING OFFICER MA Y BE RESTORED. 3. THE MAIN CONTENTION IN THE MISCELLANEOUS APPLIC ATION IS THAT THE ORDER OF THE TRIBUNAL FOR THE A.Y 2005-06 IS NOT IN ACCORDANCE WITH THE ORDERS OF THE TRIBUNAL FOR THE A.Y 2001-02 TO 2004- 05. IN RESPECT OF THIS ISSUE, THE ITAT IN THEIR ORDER FOR A.YRS. 2001-02 TO 2004-05 HAS HELD AT PARAS 5 AND 7, AS UNDER: 5. GROUND NO. 1(B) RELATES TO ACTION OF THE REVEN UE AUTHORITIES IN EXCLUDING THE FOLLOWING ITEMS OF INCOME FROM THE PR OFITS OF THE BUSINESS OF THE INDUSTRIAL UNDERTAKING FOR THE PURP OSE OF ALLOWING DEDUCTION U/S 80IB OF THE ACT. THE ISSUE ARISES IN CONTEXT OF ALLOWING DEDUCTION U/S 80IB OF THE ACT, IN RESPECT OF GOA UNIT. A. INTEREST RECEIVED FROM CUSTOMERS RS 9,37,541/- B. RENT RS. 30,000/- C. EXCHANGE GAIN () D. SALES TAX REFUND () RS 18,08,477/- E. EXPORT INCENTIVE () M.A. NO. 368/M/10 4 WE WILL CONSIDER IN EACH OF THE ITEM OF INCOME AS T O WHETHER THEY CAN BE SAID TO BE PROFITS OF THE BUSINESS DERIVED F ROM THE INDUSTRIAL UNDERTAKING. 4. THE TRIBUNAL IN THE IMMEDIATELY PRECEDING FOUR Y EARS HAS DECIDED THIS ISSUE IN FAVOUR OF THE REVENUE. THE LD. CIT(A ) HAS DISCUSSED THIS POINT ON PAGE 13 OF HIS ORDER. HE SIMPLY RELIED ON HIS ORDER FOR EARLIER YEAR. THERE IS NO INDEPENDENT DISCUSSION ON THE SU BJECT. WHEN THE TRIBUNAL HAS DECIDED THIS ISSUE AGAINST THE ASSESSE E, THE TRIBUNAL IN PRESENT APPEAL SHOULD HAVE FOLLOWED THE ORDER OF TH E CO-ORDINATE BENCH IN ASSESSEES OWN CASE. HAVING NOT DONE SO, IT LED TO THE MISTAKE APPARENT FROM RECORD AS PER THE JUDGEMENT OF THE HO NBLE SUPREME COURT IN HONDA SIEL POWER PRODUCTS LTD. VS CIT (2007) 295 ITR 466 (SC). HENCE IN ACCORDANCE WITH ORDERS OF TRIBUNAL FOR A.Y RS 2001-02 TO 2004- 05, PARA 22 SHALL BE REPLACED AS FOLLOWS: WE FIND THAT THE LD. CIT(A) HAS RELIED ON HIS ORDE R FOR EARLIER YEARS. IN THE EARLIER YEAR, THE TRIBUNAL H AS HELD AS FOLLOWS: AS FAR AS THESE ITEMS ARE CONCERNED THE DISCUSSION WHICH WAS MADE IN REGARD TO INTEREST RECEIVED FROM CUSTOMERS ARE EQUALLY APPLICABLE. THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO ESTABLISH NEXUS BETWEEN THE ABOVE RECEIPTS AND THE GOA UNIT. THE ABOVE RECEIPTS WERE COMMON RECEIPTS BOTH FOR GOA UNIT AND THE BOMBAY UNIT. FOR THE REASONS STATED THEREIN, WE UPHOLD THE ORDER OF THE REVENUE AUTHORITIES IN THIS REGARD THEREFORE RESPECTFULLY FOLLOWING THE DECISION IN ASSESSEES OWN CASE FOR EARLIER YEARS, WE UPHOLD TH E ORDER OF THE REVENUE AND HENCE APPEAL OF THE REVENU E ON THIS ISSUE IS ALLOWED. M.A. NO. 368/M/10 5 5. IN THE RESULT, THE M.A. FILED BY THE REVENUE IS ALLOWED. ORDER PRONOUNCED ON THIS 4 TH DAY OF NOVEMBER, 2010 SD/- SD/- (R.S. SYAL) (ASHA VI JAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI, DATED 4 TH NOVEMBER, 2010 RJ COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASST. REGISTRAR, I.T.A.T, MUMBAI M.A. NO. 368/M/10 6 DATE INITIALS 1 DRAFT DICTATED ON: 1.11..09 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 1.11.09 ______ SR. PS/P S 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/ PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______