TaxTMI 
TaxTMI 
2009 (11) TMI 606
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....partment has challenged action of learned CIT(A) in directing the AO to allow assessee's claim of relief under s. 80HHC of the IT Act, when no such claim was made in the return of income despite having positive income and failed to fulfill the requirement of s. 80HHC(4) of the Act and also when no claim was preferred in prescribed Form 10CCAC with certificate from the chartered accountant. 3.1 The Department has also filed additional grounds of appeal against action of learned CIT(A) in holding that amount of Rs. 5,79,17,456 claim towards local cess and surcharge is allowable as deduction in asst. yr. 2002-03 (wrongly mentioned as 2001-02) without noting the fact that the Hon'ble Supreme Court vide its order dt. 31st July, 2001 has held that the local cess and surcharges are not collectable after 4th April, 1991 and as a result, liability to pay such amount ceased to exist during the impugned assessment year. Since, it is legal ground, same is admitted. However, it is noticed that claim of the assessee in this regard has been dismissed for the year under consideration. Therefore, Revenue cannot be said to be aggrieved by such order of learned CIT(A). So plea of Revenue in this r....
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....Industries and CIT vs. Gupta Fabs. This ground is disposed of as being allowed." 3.3 Aggrieved by this order of learned CIT(A), the Department has come up in appeal and it was emphatically argued that since assessee has not made any claim in the return of income about deduction under s. 80HHC, despite having positive income. So, in view of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC) such claim has rightly been denied by the AO and the learned CIT(A) is not legally or factually justified in passing the direction to consider the claim under law. It was thus, urged for reversal of the order of the learned CIT(A), whereas, the learned counsel for the assessee relied upon the order of the learned CIT(A) and pleaded for confirmation of the same as there was special circumstances for not preferring claim in the return of income. It was urged for confirmation of the impugned order in this regard. 3.4 We have heard both the sides, considered the materials on record, as well as case relied upon by the learned CIT(A). It is not in dispute that despite having positive income, assessee did not make any claim with r....
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....n the computation of total income attached with the return of income a note was also put to the effect that though the assessee is eligible for deduction under s. 80HHC, the same is not being claimed as the total income has been reduced to nil." 3.6 From all the above four judgments, it would transpire that either clear claim about the deduction have been made in the return or in one of the cases, a note was put up along with the return of income that although the assessee is eligible for deduction under s. 80HHC, the same is not being claimed as the total income has been reduced to nil. But in the case in hand, there is a positive income as specifically noted by the AO and not rebutted by the assessee either before the AO or before the learned CIT(A) or before us. Therefore, in our considered view, the reliance placed by the learned CIT(A) to pass the impugned direction is uncalled for and misplaced. 3.7 As such, considering the entirety of the facts. and circumstances and material on record, we find that the assessee has not made any claim of s. 80HHC deduction in the return of income filed. Therefore, the basis of AO and above decision of the Hon'ble Supreme Court would ap....
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....aking consistent view and following the above order, we set aside the order of the learned CIT(A) and remit the matter to the file of the AO with a direction to decide the issue in the light of the above observations of the Tribunal, after affording opportunity of hearing to the assessee. We hold and direct accordingly. 8. Ground No. 5 is general and calls for no adjudication. 9. As a result, appeal of the assessee gets accepted partly for statistical purpose. ITA No. 2011/Mad/2006 (by the Department): asst. yr. 2002-03 10. Following effective grounds have been raised: "2.1 The learned CIT(A) erred in holding that the amount of Rs. 9,09,27,000 claimed towards local cess and local surcharge is allowable as deduction in the asst. yr. 2002-03. 2.2 The learned CIT(A) failed to note that the Supreme Court by its order dt. 31st July, 2001 in SLP Nos. 13102-13107-1996 in the case of D.M.O.V. Tata Iron & Steel Co. 2001 (7) SCC 358 has held that the local cess and surcharge is not collectible after 4th April, 1991 and as a result the liability to pay the local cess and surcharge ceased to exist during the period relevant to impugned assessment year. The assessee also has c....
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....ssued by the State Government on the basis of which the assessee made the claim for the asst. yr. 2001-02 would not have any relevance. The CIT(A) also came to the conclusion that the entire payment is admissible as business expenditure for the asst. yr. 2002-03. 11.1 The learned CIT(A) while considering the issue, has concluded by deciding the issue in favour of the assessee as per para 3.1 of his order which reads as under: "3.1 I have considered the detailed finding of my learned predecessor who passed the appellate order for the asst. yr. 2001-02 contained in paras 3 to 3.11 of his order dt. 18th Nov., 2005. In the circumstances stated thereon. I am inclined to agree with the view that the entire claim of Rs. 9,09,27,000 is an admissible deduction against business income of the assessee for the current year under consideration. In response to the remand report called for from the AO with regard to the claim for 1he entire amount of Rs. 9,09,27,000 which has not been adjusted in the books fully, the AO in his report dt. 30th Dec., 2005 while admitting that the entire payment is to be allowed for the asst. yr. 2002-03, however expressed his view that only the actual amount ....
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.... of appeal and without considering the fact that such claim was not directly made before the AO. Otherwise also, proper discussion was not there and learned CIT(A) appears to have decided the issue in slipshod method. Keeping in view the entirety of the facts and circumstances and other relevant materials on record, we find it just and appropriate to set aside the order of the learned CIT(A) and restore the matter back on the file of the AO with the direction to decide the same afresh after giving due opportunity to the assessee. We hold and direct. accordingly. 12. As regards ground Nos. 3.1 to 3.3, the Department has challenged that the learned CIT(A) has erred in holding that excise duty and sales-tax should be excluded from the 'total turnover' for the purpose of computing the relief under s. 80HHC and he further failed to recognize the fact when it is settled law that 'excise duty' and 'sales-tax' do form part of that. The learned CIT(A) has failed to note that the term total turnover has been termed in s. 80HHC itself and except to the extent of items excluded from the total turnover therein no other item can be excluded from the same. 12.1 The learned counsel for the a....
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...., was justified. 16. In this case, the assessee is a Government of Tamil Nadu undertaking engaged in the business of manufacture and export of granites. Initial processing of return was under s, 143(1). Thereafter, reassessment proceedings were initiated to disallow the assessee's claim of expenditure of local cess and local cess surcharge. Return for asst. yr. 2001-02 was reopened. Assessee had claimed Rs. 5,79,17,455.91 representing the local cess and local cess surcharge which were charged to revenue expenditure under "prior period expenses" under the head, "Local cess and local cess surcharge". The AO disallowed this amount and made the addition of Rs. 5,79,17,456. Assessee made an alternative claim that it should be allowed benefit of deduction under s. 80HHC. AO did not accept this contention on the following premise: "(a) The assessee company has not claimed the deduction under s. 80HHC(4) of the IT Act, 1961 though it had disclosed a positive income of Rs. 2,97,86,549. (b) The assessee has not complied with the requirements of s. 80HHC(4) of the IT Act, 1961 in the matter of making the claim in the prescribed Form 10CCAC and the report of the accountant along with ....
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....f the appellant has to be considered in the light of judicial precedents in the cases of CIT vs. Hemsons Industries (2001) 171 CTR (AP) 527 : (2001) 251 ITR 693 (AP), Shivanand Electronics and CIT vs. Gupta Fabs. In the relied upon case of CIT vs. A.N. Arunachalam, the facts are slightly different, in as much, that the Tribunal has observed, the preparation of the audit report was beyond the control of the assessee and hence the assessee could considerably delay the filing of the return of income itself so that it is accompanied by the audit report. In such an event, the ITO could not deny the deduction since the purpose of the section would have been fulfilled even though the return itself would have been filed beyond the prescribed time. The AO is directed to ascertain the availability of profits of business eligible for deduction at the first instance and then apply the law as laid down in the relied upon case of CIT vs. Hemsons Industries and CIT vs. Gupta Fabs. This ground is disposed of as being allowed." 19. I have carefully considered the rival submissions and relevant records. An assessee is entitled to claim s. 80HHC deduction not just because it has positive profit....
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.... regarding the non-taxability of the items at all. Sec. 147, being for the benefit of the Revenue and not the assessee, the assessee cannot be permitted to convert the reassessment proceedings into an appeal or revision in disguise, and seek relief in respect of items earlier rejected or claim relief in respect of items not claimed in the original assessment proceedings, unless relatable to 'escaped income'." 22. The Hon'ble apex Court. had clearly expounded that in reassessment, assessee can make claims relatable to items sought to be taxed as "escaped income". It is not the case of the Revenue here that assessee's claim for s. 80HHC deduction in this regard is on matters other than the income resulting from the disallowance of assessee's claim of Rs. 5,79,17,456 in reassessment. 23. The case law of Hon'ble apex Court in the case of Goetze (India) Ltd. vs. CIT is not applicable on the facts of the case. The order of the Hon'ble apex Court reads as under: "The question raised in this appeal relates to whether the appellant assessee could make a claim for deduction other than by filing a revised return. The assessment year in question was 1995-96. The return was filed on 30....
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....e context of the question under consideration and treat it to be the complete law declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the Court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, Courts must carefully try to ascertain the true principle laid down by the decision." 25. It is further noted that Art. 265 of the Constitution of India declares that, no tax can be collected except by authority of law. Again, CBDT Circular No. 14(XL-35) of 1955, dt. 11th April, 1955 states that, officers of the Department must not take advantage of the ignorance of an assessee as to its rights. It is settled law that CBDT circulars are binding on Revenue authorities. Furthermore, the Hon'ble apex Court in the case of CIT vs. V.MR.P. Firm (1965) 56 ITR 67 (SC) has expounded that, if a particular income is not taxable under IT Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. 26. Under the circumstances, in my opinion, there is ....
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.... dt. 19th May, 2003 in view of the judgment of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC) or reversed?" SHAMIM YAHYA, A.M.: 5th Nov., 2008 As I do not agree with the questions framed by my learned Brother, following question is formulated and referred for nominating Third Member: "(1) Whether on the facts and circumstances of the case, assessee's claim of deduction under s. 80HHC, pursuant to disallowance of expenditure in reassessment proceedings, needs to be remitted to the file of the AO or the CIT(A)'s order directing the AO to consider assessee's claim needs to be overturned and assessee's plea dismissed?" PRADEEP PARIKH, VICE PRESIDENT (AS THIRD MEMBER): 13th Oct., 2009 There being a differen....
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....eld that he has no right to enlarge, restrict and modify and/or formulate any question of law on his own on the difference of opinion referred by the Members of the Tribunal. Be that as it may, I proceed to dispose of the reference on the basis of the points of difference formulated by both the Members without modifying the questions. As a matter of fact, all the three questions encompass all the relevant issues revolving around the same controversy and as such reformulation of the questions is not necessary. 3. The brief facts are that the assessee company which is an undertaking of the Government of Tamil Nadu is engaged in manufacture and export of granites. For the year under consideration, it declared a total income of Rs. 2,97,86,549. It is not in dispute that this total income constituted entirely income from other sources. It is also not in dispute that under the head business income there was no positive income. The return was processed under s. 143(1) accepting the returned income. Subsequently, it was noticed by the AO that a sum of Rs. 5,79,15,455 representing statutory liability of local cess and local cess surcharge remained outstanding at the end of the relevant a....
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....able in the assessee's case because in the present case, the assessee had not failed to claim the deduction in the original return. No deduction was claimed because it had income only from other sources and it was only on account of the disallowance made by the AO that it became eligible to claim the deduction. Moreover, in the statement accompanying the return, necessary computation for deduction under s. 80HHC was mentioned. Accordingly, he directed the AO to verify that in the original return no claim of deduction under s. 80HHC was made because it had only income from other sources and that the computation under s. 80HHC was given in the statements accompanying the return. If these facts were found to be true, he directed the AO to grant deduction under s. 80HHC to the assessee. 6. The learned Departmental Representative has put on record his written submissions. The main contention in the written submissions as well as in his oral arguments is that there was no claim for deduction under s. 80HHC in the original return of income and the prescribed audit report not accompanying the return, the claim cannot be entertained in the reassessment proceedings in the light of the dec....
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....ncome. In the light of this principle, let us examine the facts of the present case. It is true that the total income returned by the assessee was a positive income. But the question is, could the assessee claim deduction under s. 80HHC in absence of any business income. It is not in dispute that the total income returned by the assessee was income from other sources only. It is also not in dispute that deduction under s. 80HHC can be claimed only when there are business profits as computed under the Act and as explained in cl. (baa) of s. 80HHC. Had the assessee claimed deduction under s. 80HHC against income from other sources, it would have been disallowed and in addition to that, the assessee would have been visited with a penalty under s. 271(1)(c) for furnishing inaccurate particulars of income. Under these circumstances, the assessee cannot be expected to claim the said deduction. Nonetheless, the assessee was aware of the fact that in case it had business income, it would have claimed the impugned deduction and that explains the submission of the computation of the deduction in the statements accompanying the return. This conduct of the assessee signifies that though it is ....
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.... a loss and assessment was completed under s. 143(3) without disallowance of interest. In the reassessment proceedings under s. 147, the loss was converted into profit on account of disallowance of profit (sic). The assessee immediately filed the prescribed audit report and claimed deduction under s. 80HHC. The AO as well as the CIT(A) did not allow the assessee to file the audit report on the ground that it ought to have been filed along with the return of income or during the original assessment proceedings. The Court held that the spirit behind sub-ss. (5) and (9) of s. 139 r/w s. 80HHC is that the assessee should be given a fair and reasonable opportunity to claim the benefit as available under the statute and any denial on technical ground is not justified. The Court upheld the order of the Tribunal allowing the claim of deduction under s. 80HHC and directing the AO to examine the claim afresh after considering the prescribed audit report. This judgment squarely covers the issue in favour of the assessee. 9. Answering the first question raised by the learned JM, it is held that the order of the CIT(A) directing the AO to consider the deduction under s. 80HHC need not be rev....