TaxTMI 
TaxTMI 
2004 (4) TMI 596
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....e passing assessment order and therefore assessment order was not erroneous or prejudicial to revenue and therefore the same cannot be revised. 3. The Learned CIT (Administration) has erred in overlooking learned Assessing Officer had called for detailed computation statement of depreciation statement and after considering that by allowing deduction of depreciation the tax payable would be lower and therefore decided not to allow depreciation and therefore the learned CIT (Administration) cannot pass order under section 263 asking Assessing Officer to allow the depreciation and re-compute assessed income and disallow the deduction under section 263 and further erred in not following judgment of Bombay High Court and Supreme Court and further erred in not considering that the amendment of section 32(1) of allowing depreciation by proposed Finance Bill, 2001 is not retrospective. 4. The Learned CIT (Administration) has erred in not considering that for the assessment year 1997-98 the learned CIT(A) has held with case of appellant that if there is a loss under computation under a section 80HHC(3) the same should be ignored and deduction should be allowed under proviso to section 8....
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....sp; Less : export freight 1,49,59,478 66,06,22,785 Less : unrealized upto to 30-9-1996 47,47,005 6,55,71,35,780 B. Less: unrealized upto 30-9-1996 47,47,005 66,06,22,745 II. Incentive under section 28(iiia), (iiib) and (iiic) (a) duty drawback 718,68,987 (b) cash incentive 7,35,544 (c) Prem. on sale of imp. Licence 3,36,500 (d) Prem. on sale of quota 10,42,777 7,40,23,303 90% of incentive of Rs. 7,40,23,304... 6,66,20,977 III. Exemption under section 80HHC : A. under proviso to section 80HHC(3) B. under section 80HHC(3)(b) (Manufacturing) Profit of the business under section 4A-exp (baa) Profit of the business As per statement 6,88,40,622 Less : 90% of incentive Rs. 6,66,20,977 90% of brokerage commission Int. on FD 4,36,767 Rent 1,59,950 &....
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....750 Rs. 14,80,520 Profit except under section 80HHC Rs. 6,80,22,712" The above computation made by the Assessing Officer was challenged in an appeal filed before CIT(A) on 29-4-1999. The CIT(A) has decided the said appeal vide his order dated 7-7-1999. It was contended in the appeal that Assessing Officer erred in reducing a sum of Rs. 47,87,005 being CIF value of goods as against the FOB value of goods amounting to Rs. 42,85,486 while computing the export sales of the assessee. The CIT(A) found merit in this claim and directed the Assessing Officer to reduce from export turnover a sum of Rs. 42,85,486 in place of a sum of Rs. 47,87,005 as reduced by Assessing Officer. It was also agitated that amount of Rs. 47,87,005 should not have been excluded at all from total turnover computed for the purpose of section 80HHC. This contention was not accepted by the CIT(A). On 20-10-2000, the assessee was issued with a show-cause notice under section 263 by the CIT, Mumbai-City-VIII. The CIT took note of the fact that in the original computation of income the profits of business were computed without claiming there from current depreciation allowable under section ....
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....the calculation mentioned in the order under section 263 is reproduced below: "Net profit as per P and L account Rs. 6,70,68,878 Add : depreciation to be considered separately Rs. 30,10,494 Less : depreciation as per rules) (as per revised statement of the assessee) Rs. 68,78,020 (-) Rs. 38,67,526 Profit from business Rs. 6,32,01,352 Less : Export incentives : Rs. 7,29,41,031 Other income Rs. 26,90,606 Rs. 7,56,31,637 Profits from activities of export business (-) Rs. 1,24,30,285 For the reasoning mentioned in show-cause notice, the CIT held that profit for the purpose of section 80HHC should be computed after excluding export incentive and after allowing current year's depreciation as assessee has incurred loss from its export business, deduction under section 80HHC was erroneously allowed by the Assessing Officer in the assessment order which cause prejudice to the interest of revenue. Thus, CIT has directed the Assessing Officer to re-compute the income of assessee by disallowing deduction under section 80HHC. The assessee is aggrieved hence in appeal before us. 5. Shri Y P Trivedi, the Learned Counsel o....
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....he order of CIT(A) and thus also order under section 263 was not validly passed by the CIT. For this purposes he placed reliance on the following decisions : (i) Sahara India Mutual Benefit Co. Ltd. v. Asstt. CIT (2002) 74 TTJ (All.) 67 (ii) Smt. Sujata Grover v. Dy. CIT (2002) 74 TTJ (Delhi) 347 (iii) Siemens Ltd. v. Dy. CIT [IT Appeal No. 4393 (Bom.) of 1992 (assess-ment year 1987-88) order, dated 21-6-1999] Mumbai Bench 'A' (iv) CIT v. Farida Prime Tannery (2004) 135 Taxman 70(Mad.). He further argued that CIT was wrong in holding that since assessee did not have any profit under section 80HHC(1), the assessee is not entitled to get deduction under section 80HHC. For this proposition, the Learned CIT has placed heavy reliance on the decision of IPCA Laboratories Ltd. v. Dy. CIT (2001) 251 ITR 401(Bom.). He contended that, this conclusion of CIT is not in accordance with law as case of IPCA Laboratories Ltd. (supra) does not have any impact on the present facts of the case. He further argued that incentives are also profit derived from export activities and according to proviso to section 80HHC(3) profits computed as per clauses (a) to (c) of sub-section 3 of sec....
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....ection 80HHC has been held to be a separate code by the jurisdictional High Court. Thus, he pleaded that the case law relied upon by the learned counsel of the assessee has no application to the facts of the present case. 7. He further contended that as per decision of Hon'ble jurisdictional High Court in the case of Indian Rayon Corpn. Ltd. v. CIT (2003) 261 ITR 98 (Bom.), it has been held that depreciation cannot be excluded while computing profits derived from industrial undertaking for computing deduction under Chapter VI-A. Referring to the said decision, he contended that there is a distinct dichotomy between the cases of computation of normal income de hors Chapter VIA and computation of taxable income where the assessee claims the benefit of deduction under Chapter VI-A. He contended that section 80HHC is a section comprised in Chapter VI-A. Therefore, the ratio of said decision is fully applicable to the present case as well. 8. He further referred to the decision of the Tribunal in the case of Mandhana Exports (P.) Ltd. v. Asstt. CIT (2002) 82 ITD 306(Mum.) wherein it has been held that the position has been changed after omission of section 34 by the Taxation Law (....
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....osition of law has been changed. He further contended that on the issue of merger, Explanation (c) to section 263 has been taken care in the decisions relied upon by him. Thus, Learned Counsel pleaded that order passed under section 263 should be quashed. 13. We have carefully considered the rival submissions in the light of material placed before us. The validity of order under section 263 has been challenged by the assessee on following grounds: - (1) The claim of depreciation is at the option of the assessee according to various decisions relied upon in this regard; therefore, non-consideration thereof while computing the profit under section 80HHC was a view in accordance with law and thus, assessment order cannot be considered to be an erroneous. (2) The order of Assessing Officer has merged with the order of CIT(A) as a specific ground in respect of section 80HHC was taken and the same was decided by CIT(A). Once the assessment order has merged with appellate order, powers under section 263 could not be exercised. (3) On merits, a wrong view has been taken by CIT that it was a condition precedent that there should be a positive profit from export activities. According ....
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....1999 before CIT(A). In the grounds of appeal, the assessee agitated the computation of section 80HHC done by Assessing Officer on the ground that Assessing Officer erred in deducting a sum of Rs. 47,87,005 from export turnover not received within six months from the close of the year overlooking the fact that sum of Rs. 47,87,005 is C.I.F. value of goods exported whereas F.O.B. value of such sales amounting to Rs. 42,85,486 which should be deducted from export turnover. The second ground taken was that the said sum being not recovered and excluded from the export turnover should have also been excluded from total turnover. Apart from this, other grounds were taken in regard to chargeability of interest under various provisions of the Act. The said appeal has been decided by the CIT(A) vide his order dated 7-7-1999. The CIT(A) has allowed the first ground of assessee and directed the Assessing Officer to reduce a sum of Rs. 42,85,486 from expert turnover being F.O.B. value. Thus, he allowed first ground and the second ground was not accepted and was dismissed. Thus, it is clear that computation of deduction under section 80HHC was agitated in the appeal filed before the CIT(A) and C....
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....nd represents a subject or situation that you need to think about, discuss or deal with. Thus, it is difficult to accept the submission of the Learned D.R. that the issue of depreciation being optional or the issue that assessee was at all entitled to deduction under section 80HHC or not was not a subject-matter of appeal filed by the assessee before CIT(A). A matter may have many aspects and the above-mentioned two factors may be the aspects of the matter but not entire 'matter' itself. The 'matter' in the present case is 'deduction under section 80HHC'. For arriving at this conclusion, we have derived support from the decision of Hon'ble Calcutta High Court in the case of Oil India Ltd. v. CIT (1982) 138 ITR 836. The following question was referred to their Lordships: - "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the issue of disallowance under section 40(a)(v) was not the subject-matter of an order by the Appellate Assistant Commissioner and hence the Commissioner of Income-tax had the jurisdiction under section 263 on this issue?" In response to the above-mentioned question, th....
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....nths or 12 months. But, now, if further consideration is superimposed by the Commissioner by rectification made by the Income-tax Officer as a result of the order passed by the Commissioner under section 263 then that would be in conflict with the direction given by the AAC, then that order, in our opinion, cannot be the subject-matter before the AAC, then that order, in our opinion, cannot be the subject-matter of an order of revision by the Commissioner. This principle, however, comes where the appeal does not lie from the order of the Income-tax Officer and before the AAC where different kinds of appeal are provided for in the scheme of the IT Act. This principle was enunciated by the Supreme Court in the case of CIT v. Amritlal Bhogilal & Co. (1958) 34 ITR 130. This was also reiterated in the decision in the case of Jeewanlal (1929) Ltd. v. Addl. CIT (1977) 108 ITR 407(Cal.) and the decision in the case of Premchand Sitanath Roy v. Addl. CIT (1977) 109 ITR 751(Cal.) the Allahabad High Court reiterated the same priciple in the case of J.K. Synthetics Ltd. v. Addl. CIT (1976) 105 ITR 344. Therefore, it appears to us that as the quantum of depreciation was the subject-matter of ap....