TaxTMI 
TaxTMI 
2010 (5) TMI 809
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....hese appeals by the Revenue & the assessee, following grounds have been raised : ITA No.1467/Ahd/2006[Revenue] for AY 2002-03: 1. "The Ld. Commissioner of Income-tax (Appeals)-XI, Ahmedabad has erred in law and on facts while directing assessing officer to allow depreciation of Rs. 3,77,59,296/- on the basis of findings given in earlier years and to consider the depreciation for computing the book profit u/s 115JB of the Act. 2. The Ld. CIT(A)-XI, Ahmeabad has erred in law and on fact while directing assessing officer to recomputed the deduction u/s 80HHC of the Act, after giving effect to the appellate order and reduce the same from the book profit. 3. The Ld. CIT(A)-XI, Ahmedabad has further erred in law and on fact while deleting the addition of Rs. 1,11,75,348/- made by AO while computing the book profit u/s 115JB of the I.T. Act. 4. The Ld. CIT(A)-XI, Ahmedabad has also erred in law and on facts while deleting the disallowance of Rs. 14,075/- made on account of ESI payment. 5. The Ld. CIT(A)-XI, Ahmedabad has further erred in law and on fact while directing AO to verify and determine the claim of long term capital loss and allow the same for carry forward and....
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....ts in deleting the addition made of Rs. 27,075/- on account of disallowance of employees contribution towards ESI which were paid after the due date. 3 .On the facts and in he circumstances of the case, the Ld. CIT(A)-XI, Ahmedabad ought to have upheld the order of the Assessing Officer. for AYs 2002-03, 2003-04 and 2004-05 Rajratna Metal Industries Ltd., Ahmedabad 4. It is, therefore, prayed that the order of the Ld. CIT(A)-XI, Ahmedabad may be set aside and that of the Assessing Officer be restored." ITA No.1089/Ahd/2008[Assessee]-AY 2002-03 1. "That the learned CIT(A) has erred in law and facts by confirming the disallowance of claim of deduction under section 80HHC of the Act, as the amendment in the Act is retrospective, discriminative, against the constitution and the operation of the amendment has been stayed by the various Courts, and therefore the Assessing officer be directed to allow the deduction under section 80HHC as claimed, while computing the total income. 2. Without prejudice to Ground No.1, the deduction under section 80HHC of the Act is to be correctly computed. 3. That the learned CIT (A) has erred in law and facts by not reducing the am....
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....w the deduction under section 80HHC, as claimed while computing the total income. 2. That the learned CIT(A) has erred in law and facts by not reducing the amount of deduction under section 80HHC of the Act, while computing Book Profit under section 115JB of the Act and accordingly the learned AO be directed to reduce the amount of deduction under section 80HHC while computing book profit under section 115JB of the Act. 3. Your appellant craves a leave to add, alter or amend any ground at the time of hearing." 3. Adverting first to ground no.1 in ITA no.1467/A/06, ground nos.2 & 3 in ITA no.546/A/2007 and ground no.1 in ITA no.3242/Ahd./2007 in the three appeals of the Revenue, facts, in brief, as per relevant orders for the AY 2002-03 are that return declaring nil income filed on 31.10.2002 by the assessee, manufacturing SS wires, bright bars and trading in metals and chemicals, after being processed on 11.3.2003 u/s 143(1) of the Income-tax Act,1961 [hereinafter referred to as the 'Act'] was taken up for scrutiny with the issue of notice u/s 143(2) of the Act on 27.10.003. During the course of assessment proceedings, the A....
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....on the WDV which is worked out after giving effect to the above orders. As regards ground no.3 in ITA no.546/A/2007 f or the AY 2003-04 relating to direction to allow additional depreciation of Rs. 16,93,246/- while computing book profit u/s 115JB, the ld. CIT(A) allowed the claim while relying upon the appellate orders of the earlier years. 5 The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR pointed out that issue of depreciation raised in AY 1997-98 has not become final since appeal by the Revenue in AY 1997-98 in second round is pending before the ITAT. On the other hand, the ld. AR on behalf of the assessee contended that the ld. CIT(A) relied upon the order of his predecessor for the AY 2001-02 in these three assessment years. On appeal by the Revenue in that year, the ITAT vide their order dated 20.2.2009 following their decision in ITA No.215/Ahd/2002 for the AY 1998-99 ,upheld the findings of the ld. CIT(A). 6 We have heard both the parties and gone through the facts of the case as also the decisions of the ITAT relied upon. We find that the ITAT in the assess....
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....000-01,& ITA no.2556/Ahd./2004 in the AY 2001-02. While adjudicating the issue in ITA no.2556/Ahd./2004 , the Tribunal incorrectly referred to ground no.5 of ITA No.215/Ahd/2002 instead of ground no.1 & 2 in para 52 of their order. In the light of view taken in these decisions, we have no alternative but to reject ground no.1 in ITA no.1467/A/06, ground nos.2 & 3 in ITA no.546/A/2007 and ground no.1 in ITA no.3242/Ahd./2007.As regards plea of the ld. DR in relation to pendency of appeal for the AY 1997-98, we have gone through that appeal and the impugned order of the ld. CIT(A). In that connection, we may clarify that in the event there is any change in WDV on account adjudication of claim of depreciation in the AY 1997-98 by the ITAT, consequent effect should be percolated in these three assessment years. 7 Ground no.2 in ITA no.1467/A/06 relates to direction of the ld. CIT(A) to re-compute deduction u/s 80HHC after giving effect to appellate order and reduce the same from book profit. The AO noticed that during the year under consideration, the assessee claimed deduction u/s 80HHC of Rs. 3,55,38,688/- as per the report submitted in form no. 10CCAC. For the purpose....
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....ed as under:- "7.1 The submissions of the AR of the appellant have been perused. It is seen that the appellant had made provision for income-tax for the AY 2001-02 at Rs. 1,11,75,348/-. The AO had added back the said provision while computing the book profit for the assessment year 2001-02. 7.2 It is further seen that for the assessment year under consideration the appellant has written back the said provision which was made for the previous year. 7.3 As it could be seen that excess provision made by the appellant towards income-tax was already considered by the AO for previous assessment year, therefore, the same issue cannot be considered for computation of book profit u/s 115JB of Income-tax even it is refunded or provision is written back. The fact is that the said excessive provision has already been considered for the previous assessment year while computing income u/s 115JB of I.T. Act. Therefore, the addition of Rs. 1,11,75,348/- while computing book profit u/s 115JB of IT Act is deleted." 12 The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR supported the order of the AO while the ld. AR on behalf of the as....
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....1 To a query by the AO, the assessee stated that since there there was slight delay in these payments, delay may be condoned in view of the decision quoted in Note-4 to STI. Inter alia, the assessee relied upon the judgments in the case of Fluid Air (India) Ltd. vs.DCIT,63 ITD 182 (Bom) and Madras Radiators and Pressing Ltd. vs. DCIT,59 ITD 515 (Mad) and contended that disallowance u/s 36(1)(va) could not be made for minor delay in payment of the amount to the PF/ESI authorities. However, the AO rejected these contentions of the assessee while referring to provisions of sec. 43B(b), section 2(24)(x) and the explanation below clause (va) of sub-section (1) of Sec.36 of the Act as also decision in the case of CIT vs. South India Corpn. Ltd [(108 Taxman 322 (Ker.)] and disallowed the claim ,resulting in addition of an amount of Rs. 3,774/- being employees' contribution and Rs. 10,301/- as being employer's contribution to the total income. 15. Similarly in the AY 2003-04, the AO disallowed an amount of Rs. 3,01,060/- and in the AY 2004-05, Rs. 27,075/- on account of belated payments of ESI. 16 On appeal, the learned CIT(A) while relying upon his own decision for the precedi....
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....ndment was made by the Finance Act, 2003. Though this amendment was made applicable with effect from April 1, 2004, the amendment was curative in nature and applied retrospectively with effect from April 1, 1988.It was clarified that when a proviso in a section is inserted to remedy unintended consequences and to make the section workable, the proviso which supplies an obvious omission therein is required to be read retrospectively in operation, particularly to give effect to the section as a whole. 18.2 Even more recently, Hon'ble Delhi High Court in their decision dated 23.12.2009 in CIT Vs. AIMIL Ltd.(Delhi)in ITA no. 1063/2008 observed that S. 2(24) (x) provides that amounts received by an assessee from employees towards PF contributions etc shall be "income". S. 36 (1) (va) provides that if such sums are contributed to the employees account in the relevant fund on or before the due date specified in the PF etc legislation, the assessee shall be entitled to a deduction. The second Proviso to s. 43B (b) provided that any sum paid by the assessee as an employer by way of contribution to any provident etc fund shall be allowed as a deduction only if paid on or before the due da....
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....allowing the same. Therefore, ground no.4 in ITA no. 1467/Ahd./2006, ground no. 1 in ITA no. 546/Ahd./2007 and ground no.2 in ITA no.3242/Ahd./2007 are dismissed. 19 Ground no.5 ITA no. 1467/Ahd./2006 relates to direction to determine claim of long term capital loss and allow the same to be carried forward and set off in the succeeding years. There is no discussion on this aspect in the assessment order. On appeal, the learned CIT(A) has dealt with the issue as under:- "11 In the seventh ground, it is submitted by the appellant that the AO has erred in law and facts by not determining the Long Term Capital Loss for carried forward in the next assessment year(s). It is submitted by the AR that by mistake the AO has not allowed the same. 11.1 Having considered the facts and circumstances of the case, in this regard, the AO is directed to verify the appellant's claim, if any, from his record and determine the Long Term Capital loss and allow the same for carried forward and set off in next assessment years in accordance with law." 20. The Revenue is now in appeal against the aforesaid findings of the ld. CIT(A).After hearing both the parties, we find that the learned CIT(A....
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....) held that amendment of section 234B w.e.f. 1.4.2007 being clarificatory, in computing interest u/s 234B of the Act, minimum alternate tax credit has to be taken in to account. 23.1 In the light of view taken in the aforesaid decisions and no contrary decision having been pointed out by the Revenue before us, we are not inclined to interfere with the directions of the ld. CIT(A). Therefore, ground no.6 in ITA no. 1467/Ahd./2006 is dismissed. 24 Ground no.7 in ITA no. 1467/Ahd./2006 relates to direction to exclude sales-tax and excise duty from total turnover for computing deduction u/s 80HHC of the Act. The AO while following his own order in the preceding assessment year, observed that the amount of sales tax and excise duty were required to be added in the total turnover as laid down by Hon'ble Supreme Court in the case of Chowranghee Sales Bureau Pvt. Ltd. v/s. CIT 87 TTR 542 and Sinclare Murray & Co. Pvt. Ltd. v/s. CIT 97 ITR 615. Inter alia, the AO relied upon decision of the Ahmedabad Bench of the ITAT in IT A No.231/Ahd/2000 dated 24.8.2000 in the case of Gujarat Fluro Chemicals Ltd. for A.Y.96-97, following the decision of Britania Industries Ltd. 71 ITD 14....
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....art of the profit and loss account, however, they were not eligible for deduction under section 80HHC. They were not eligible even without the clarification introduced by the Legislature by various amendments because they did not involve any element of turnover. Further, in all other provisions of the Income- tax Act, profits and gains were required to be computed with reference to the books of account of the assessee. However, as can be seen from the Income- tax Rules and from the above Form No. 10CCAC in the case of deduction under section 80HHC a report of the auditor certifying deduction based on export turnover was sufficient. This is because the very basis for computing section 80HHC deduction was "business profits" as computed under section 28, a portion of which had to be apportioned in terms of the above ratio of export turnover to total turnover. Section 80HHC(3) was a beneficial section. It was intended to provide incentives to promote exports. The incentive was to exempt profits relatable to exports. In the case of combined business of an assessee having export business and domestic business the Legislature intended to have a formula to ascertain export profits by appor....
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.... behalf of the Government. Therefore, if they are made relatable to exports, the formula under section 80HHC would become unworkable. The view which we have taken is in the light of the amendments made to section 80HHC from time to time." 27.1 Section 80HHC of the Income-tax Act, 1961 is a beneficial section and was intended to provide incentive to promote exports. The intention was to exempt profits relatable to exports. As observed by the Hon'ble Apex Court, one cannot interpret the words "total turnover" with reference to the definition of the word "turnover" in other laws like the Central sales tax or as defined in accounting principles. The words "total turnover" in section 80HHC have to be read as part of the formula which sought to segregate the "export profits" from the "business profits . Therefore, we are of the opinion that excise duty and sales tax also cannot form part of the "total turnover" under section 80HHC(3) of the Act. 27.2 In the case of Sony India Pvt. Ltd. Vs. DCIT, in ITA no. 1181/Del/2005 dated 23/9/2008 for the AY 2001-02 ,ITAT Delhi Bench ,following the aforesaid decision of the Hon'ble Supreme Court directed to exclude excise duty while working ou....
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.... the learned CIT(A) held in the AY 2002-03 that since the assessee was having turnover exceeding Rs. 10 crores and it did not fulfill the other conditions as per the provisions of the section 80HHC of Act, 1961, the AO has rightly computed the book profit as well as normal income u/s 143(3) of Income-tax Act. Similar findings were recorded in the AY 2003-04 & AY 2004-05 while upholding the order of the AO and consequently, other grounds relating to deduction u/s 80HHC of the Act were not adjudicated by the ld. CIT(A) in the AY 2003-04 & 2004-05. 30. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A) . The learned AR on behalf of the assessee while reiterating their submissions before the ld. CIT(A) contended that that deduction u/s 80HHC needs to be recomputed in the light of decision dated 11.8.2009 in the case of M/s Topman Exports,318 ITR(AT) 87(Mumbai) (SB). On the other hand, the learned DR supported the findings of the ld. CIT(A). 31. We have heard both the parties and gone through the facts of the case as also the decision relied on . The relevant provisions of sec. 28(iiid) applicable w.e.f 1.4.1998 read as under : "(iiid....
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....icial cost to be interpolated? 31.21 The Special Bench adjudicated the aforesaid question in following terms: i) The argument of the Revenue that DEPB is a post export event and has no relation with the purchase of goods cannot be accepted. There is a direct relation between DEPB and the customs duty paid on the purchases. For practical purposes, DEPB is a reimbursement of the cost of purchase to the extent of customs duty; (ii) The DEPB benefit (face value) accrues and becomes assessable to tax when the application for DEPB is filed with the concerned authority. Subsequent events such as sale of DEPB or making imports for self consumption etc are irrelevant for determining the accrual of the income on account of DEPB; (iii) Though s. 28 (iiib) refers to a "cash assistance against exports", it is wide enough to cover the face value of the DEPB benefit; (iv) S. 28 (iiid) which refers to the "profits on transfer of the DEPB" obviously refers only to the "profit" element and not the gross sale proceeds of the DEPB. If the Revenue's argument that the sale proceeds should be considered is accepted there would be absurdity because the face value of the DEPB will then ge....
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.... held in para 21 to 23 as under:- "21 Coming to issue involved in Ground No.2, it is observed that the CIT(A) has decided the same as per his findings contained in paragraph No.7 of the appellate order, which read as under: "7 The third ground of appeal relates to deduction of amount of 80HHC for the purpose of determination of book profit under section 115JA of the Act. This is a consequential ground depending upon the amount of deduction under section 80HHC and therefore the AO is directed to recomputed the amount of 80HHC after giving effect to this order and reduce the same from the book profit under section 115JA of the Act." 22 The ld. DR has supported the order of the AO, whereas the ld. counsel for the assessee has supported the order of the CIT(A), after relying on the decision of ITAT Mumbai Bench "H" (Special Bench) in the case of Dy. CIT vs. Syncome Formulations (I) Ltd. (2007) 106 ITD 193 (Mum) (SB) and in the case of CIT vs. Atul Products (255 ITR 85) (Guj) 23 After careful consideration of the rival submissions, facts and circumstances of the case and the decisions (supra), we are of the opinion that this issue is now covered in favour of the Assessee and....
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....b-s. (1B) derived by the assessee from the export of such goods. The section as amended has brought in the words "deduction to the extent of profits" referred to in sub-s. (1B) by Finance Act, 2000 w.e.f. 1st April, 2001. If the construction sought to be given by counsel for assessee is accepted it would make sub-s. (1B) irrelevant for the purpose of s. 115JB. Sub-s. (1B) provides for deduction in terms set out therein. Sub-s. (3) sets out the method of computation of profits. The computation of profits is, therefore, for the purpose of working out the deduction of profits available under s. 80HHC(1B). Earlier it was in terms of sub-s. (1). Now s. 80HHC(1) in term refers to sub-s. (1B). All the provisions are inter-related and cannot be read de hors one and other. If sub-s. (1B) is not read in sub-s. (1) then the expression "no deduction shall be allowed in respect of the assessment beginning on the 1st day of April, 2005 and any subsequent year", shall be rendered otiose. 25. Insofar as s. 115JB(2), Expln. 1(iv) is concerned, in computing the book profits the export profits under s. 80HHC had to be reduced. The object of s. 115JB was to impose tax on companies which are known a....
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....endment by Finance Act, 1997 to give the benefit was w.e.f. 1st April, 1998. Can it now be argued that MAT companies considering s. 115JB(2) Expln. 1 (iv) are entitled to be placed in a better position than the other companies entitled to the export deduction under s. 80HHC though earlier they constituted one class? No rule of construction nor the language of the s. 80HHC r/w s. 115JB, in our opinion, will permit such construction. If such construction is not possible then both the classes of companies will be entitled to the same deduction. This would contemplate that both would be entitled to deductions of profits in terms of s. 80HHC(1B). So read, it would be a harmonious construction. A class of companies covered by s. 80HHC cannot be sub-classified into two classes, when more so, for intermittent periods Parliament had even denied the benefit of s. 80HHC to MAT companies. If the argument of the assessee is to be accepted, what then is the mischief, that s. 115JB sought to avoid? What s. 115JB did was to continue the deductions also to the MAT companies. The only difference was that instead of calculating tax at 30 per cent of the book profits as in the case of ss. 115J, 115JA,....
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.... profits under s. 80HHC, for the purpose of s. 115JB. 28. We have had the benefit of going through reasoning and the orders of Tribunal in Syncome as also in the case of Dy. CIT vs. Govind Rubber (P) Ltd. It is not possible to agree with the view taken by the Benches. Those decisions in view of this judgment stand overruled. 29. Our attention was also invited to the judgment of the Kerala High Court in the case of CIT vs. GTN Textiles Ltd. In the first instance, the Kerala High Court was considering the provisions of s. 115J. Sec. 115JB was not under consideration. The High Court noted that original s. 115J of the Act did not contain exemption under s. 80HHC. That section as we have noted, did not originally include exemption allowed to exporters under s. 80HHC. By the virtue of the Explanation and cl. (iii) thereto, which came into effect from 1st April, 1989, the reduction under s. 80HHC became available. The issue before the Kerala High Court was, what is profit that should be taken into consideration considering the accounting system that have to be followed while working out the book profits. Therefore, the judgment would be of no assistance in considering the questio....