BALAJI FILAMENTS LTD., V. DCIT - 4(1),

MA 727/MUM/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7060 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 17-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 06-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Keywords: Business income; Principle of natural justice
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI PRAMOD KUMAR (AM) AND SMT. ASHA VIJAYARA GHAVAN (JM) M.A. 727/MUM/2010 (ARISING OUT OF ITA NO. 934/MUM/2007 ASSESSMENT YEAR-2003-04 M/S. BALAJI FILAMENTS LTD., 1 ST FLOOR, BANDRAWALA BLDG., 16, DADI SETH AGYARI LANE, MUMBAI-400 002 PAN-AAACB2550M VS. THE DCIT - 4(1), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PERCY J PARDIWALA RESPONDENT BY: SHRI V.V. SHASTRI DATE OF HEARING: 3.6.2011 DATE OF PRONOUNCEMENT:17.8.2011 O R D E R PER SMT. ASHA VIJAYARAGHAVAN (JM) BY THIS MISCELLANEOUS APPLICATION FILED BY THE ASSE SSEE, IT HAS BEEN POINTED OUT THAT THE HONBLE TRIBUNAL VIDE ORDER DT . 29 TH OCTOBER, 2009 HAS AGREED THAT THE COMPUTATION OF CLAIM U/S. 80HHC OF THE ACT HAS GIVEN BY THE AO. 2. THE HONBLE BENCH WHILE GIVING TO THE ABOVE CONC LUSION HAS RELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF MY SODET PVT. LTD. VS CIT 305 ITR 276. THE TRIBUNAL HAD EXTRACT THE DECISIO N OF THE APEX COURT VIDE PARA 5 AT PAGE 3 & 4 OF ITS ORDER. THE HONBL E TRIBUNAL HAS RECORDED THE FINDING AT PARA-7 PAGE 4 & 5 OF THE ORDER WHIC H IS EXTRACTED BELOW: FROM THE ABOVE, IT IS CLEAR THAT UNDER SUB-SECTION (3) OF 80HHC THE PROFITS AND TURNOVER BOTH THE EXPORT AND TOTAL FOR THE ENTIRE BUSINESS M.A NO. 727/M/2010 2 HAS TO BE TAKEN INTO ACCOUNT AND CANNOT BE RESTRICT ED TO ANY SINGLE UNIT OF THE ASSESSEE. AS HELD BY THE APEX COURT, TH E RELIEF U/S.80HHC IS GRANTED ON THE PROPORTIONALITY BASIS O F THE ENTIRE BUSINESS. THE WORDING OF THE SECTION 80HHC NOWHERE INDICATES THAT THIS PROPORTIONALITY HAS TO BE RESTRICTED TO ONLY T HE UNIT WHICH HAS MADE EXPORTS IGNORING THE OTHER UNITS WHERE NO EXPO RT IS MADE. EVEN THOUGH THE DECISION OF THE SUPREME COURT RELATES TO THE ASSESSMENT YEAR 1990-91 THERE ARE ONLY TWO MATERIAL CHANGES IN THE SECTION BEFORE THE ASSESSMENT YEAR 2003-04. 3. IT HAS BEEN NOW SUBMITTED AS FOLLOWS: THE ORDER OF THE TRIBUNAL AS SET OUT IN PARA 7 OF THEIR ORDER REQUIRE CORRECTION AS IT DISPLAYS MANIFEST ER RORS OF FACTS AND LAW. FIRSTLY, THE HONBLE TRIBUNAL BEFORE APPL YING THE DECISION OF THE HONBLE APEX COURT OUGHT TO HAVE NO TICED AND RECORDED THE FINDINGS OF FACT REGARDING THE BUSINES S OF THE APPELLANT. THIS IS A CASE WHERE THE APPELLANT CARR IES ON SEVERAL INDEPENDENT BUSINESS DERIVING INCOME THERE- FROM AND ONE PARTICULAR BUSINESS VIZ., THE FABRIC UNIT WAS D ERIVING INCOME ONLY FROM EXPORT. THE CASE OF THE APPELLANT BEFORE BOTH THE LOWER AUTHORITIES WAS ALWAYS THAT THE EXPORT UN IT WAS A SEPARATE BUSINESS UNIT IN SO FAR AS THIS UNIT DERIV ES INCOME ONLY FROM EXPORT AND THERE WAS NO LOCAL BUSINESS. THE ENTIRE BUSINESS RECEIPTS & EXPENDITURE WERE SEPARATELY REC ORDED IN SEPARATE SET OF BOOKS MAINTAINED FOR THAT PARTICULA R BUSINESS. THE APPELLANTS CLAIM WAS SUPPORTED DIRECTLY BY THE DECISIONS OF THE HONBLE MADRAS HIGH COURT IN CIT VS RATHORE BROS. 254 ITR 656 AND CIT VS GANI & CO. 301 ITR 381. THAT TH E HONBLE TRIBUNAL INCORRECTLY APPLIED THE DECISION O F THE HONBLE SUPREME COURT. THE SAID DECISION OF THE AP EX COURT HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE . THE SAID DECISION WAS APPLICABLE TO CASES WHERE WHILE CARRYI NG ON EXPORT BUSINESS, THE ASSESSEE FROM THE SAME BUSINES S WAS ALSO CARRYING ON AND DERIVING INCOME FROM LOCAL BUS INESS. THAT IS, THE SAME BUSINESS DERIVED INCOME FROM EXPO RT BUSINESS AND LOCAL BUSINESS. MOST RESPECTFULLY, TH E TRIBUNAL HAS INADVERTENTLY OMITTED TO APPRECIATE THIS POINT. THE FACT THAT THE APPELLANTS EXPORT UNIT WAS A SEPARATE BUS INESS AND THERE WAS NO LOCAL BUSINESS WENT UNNOTICED. THAT THE DECISION OF THE HONBLE SUPREME COURT NOT HAVING BEEN ADVERTED TO OR CITED AT THE TIME OF HEA RING OF THE APPEAL AND ITS USAGE IN ARRIVING AT THE DECISION IS OPPOSED TO NATURAL JUSTICE FOR NEITHER PARTY WAS GIVEN ANY OPP ORTUNITY FOR MEETING THE JUDGEMENT. M.A NO. 727/M/2010 3 THAT THE DECISION OF THE HONBLE MUMBAI TRIBUNAL IN THE CASE OF MANDHANA INDUSTRIES PVT. LTD VS DCIT IN ITA NO. 5961/M/06, WHICH WAS CITED DURING THE COURSE OF THE HEARING AND A COPY FURNISHED, WHICH ON IDENTICAL FACTS WAS DECIDED BY THE HONBLE BENCH IN FAVOUR OF THE APPELLANT. T HE JURISDICTIONAL DECISION OF THE BENCH ON THIS POINT ALSO WENT UNNOTICED. 4. WE HAVE GONE THROUGH THE M.A FILED BY THE ASSESS EE. THE ASSESSEE HAS RELIED ON THE DECISION OF THE MUMBAI TRIBUNAL I N THE CASE OF MANDHANA INDUSTRIES PVT. LTD VS DCIT IN ITA NO. 596 1/M/06 AND ALSO HAS STATED THAT THE DECISIONS OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS RATHORE BROS. 254 ITR 656 AND CIT VS GANI & CO. 301 ITR 381 SUPPORT HIS STAND. 5. HOWEVER IN THE CASE OF SAYYED HIDAYAT GULAM ABBA S VS ITO IN ITA NO. 4668/M/05 THE ITAT E BENCH HAS HELD AT PARA 1 4 AS FOLLOWS: THUS THE RATIO OF THE DECISION OF THE APEX COURT I N LAKSHMI MACHINE WORKS HAS BEEN REITERATED AND REAFFIRMED IN THE CASE OF CIT VS K. RAVINDRANATHAN NAIR. IN BOTH THE CASES TH E APEX COURT HAS HELD THAT WHAT IS TO BE CONSIDERED IS THE TOTAL INCOME OF THE ASSESSEE. IN BOTH LAKSHMI MACHINE WORKS CASE AS WEL L AS RAVINDRANATHAN NAIRS CASE THE COURT WAS CONCERNED WITH WHAT HAS TO BE INCLUDED AS PART OF TOTAL TURNOVER AND THEY H AVE EXPLAINED HOW THE FOUR LIMBS OF THE FORMULA FOR COMPUTING THE RELIEF U/S 80 HHC WILL HAVE TO BE WORKED OUT. IN BOTH THE CASES T HE APEX COURT HAS MADE IT CLEAR THAT THE PROFITS OF BUSINESS IS T HE PROFITS OF THE BUSINESS OF THE ASSESSEE AND IS NOT RESTRICTED TO T HE PROFITS OF THE EXPORT BUSINESS ALONE. 6. FURTHER THE KANATAKA HIGH COURT IN THE RECENT DE CISION IN THE CASE OF G.J. FERNANDEZ VS ACIT 52 DTR 345 HAS HELD AS F OLLOWS: FOR THE PURPOSE OF 80HHC OF THE ACT, EVEN THOUGH T HE ASSESSEE HAD MAINTAINED SEPARATE BOOKS FOR EACH BUS INESS, DEDUCTION U/S. 80HHC IS TO BE COMPUTED ON THE BASI S OF PROFIT DERIVED FROM ALL THE BUSINESS. M.A NO. 727/M/2010 4 7. WE WISH TO POINT OUT THAT THE EARLIER DECISION C ITED BY THE ASSESSEE IN THE CASE OF RATHORE BROS. 254 ITR 656 HAS NOT CO NSIDERED ALL THESE DECISIONS. 8. HOWEVER THIS ASPECT OF THE ISSUE HAS NOT BEEN PU T TO THE ASSESSEE OR AN OPPORTUNITY HAS BEEN GIVEN TO SUBMIT THEIR AR GUMENTS IN THIS MATTER. 9. THE BOMBAY HIGH COURT DECISION IN THE CASE OF IN VENTURE GROWTH & SECURITIES LTD. VS ITAT 324 ITR 319 HOLDS THAT TR IBUNAL SHOULD NOT DECIDE THE CASES, RELYING ON THE DECISION WHICH HAS NOT BEEN PUT TO THE ASSESSEE OR DEPARTMENT AT THE TIME OF HEARING. THE DECISION OF THE APEX COURT IN THE CASE OF MYSODET VS CIT 305 ITR 276 WAS NOT PUT TO THE ASSESSEE OR DEPARTMENT AT THE TIME OF HEARING. THE REFORE IN THE INTEREST OF JUSTICE, WE DEEM IT FIT TO RECALL THE ORDER FOR THE LIMITED PURPOSE OF GIVING AN OPPORTUNITY OF HEARING THE ASSESSEE ON TH IS JUDICIAL PRECEDENT AND THE REGISTRY IS DIRECTED TO FIX A SUITABLE DATE FOR HEARING THE SAME. 10. IN THE RESULT THE M.A. FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 17 TH DAY OF AUGUST, 2011. SD/- SD/- (PRAMOD KUMAR) ( ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICI AL MEMBER MUMBAI, DATED 17 TH AUGUST, 2011 RJ M.A NO. 727/M/2010 5 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI M.A NO. 727/M/2010 6 DATE INITIALS 1 DRAFT DICTATED ON: 8.8.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 8.8.2011 ______ SR. PS/PS 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: _________ ______