Satish Kumar Aggarwal, v. DCIT CC-21,

ITA 1429/DEL/2008 | 2002-2003
Pronouncement Date: 28-05-2010 | Result: Allowed

Appeal Details

RSA Number 142920114 RSA 2008
Assessee PAN MARCH2004W
Bench Delhi
Appeal Number ITA 1429/DEL/2008
Duration Of Justice 2 year(s) 1 month(s) 11 day(s)
Appellant Satish Kumar Aggarwal,
Respondent DCIT CC-21,
Appeal Type Income Tax Appeal
Pronouncement Date 28-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 28-05-2010
Date Of Final Hearing 27-11-2014
Next Hearing Date 27-11-2014
Assessment Year 2002-2003
Appeal Filed On 16-04-2008
Judgment Text
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI N.K. SAINI ACCOUNTANT MEMBER AND SHRI A. T. VARKEY JUDICIAL MEMBER ITA NO. 1429 /DEL/ 2008 (ASSESSMENT YEAR: 2002 - 03 ) MR. SATISH KUMAR AGGARWAL 42 BAGH DEWAR FATEH PURI DELHI VS. DCIT CENTRAL CIRCLE - 21 NEW DELHI (APPELLANT) (RESPONDENT) O R D E R PER A. T. VARKEY JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - II NEW DELHI DATED 14.02.2008 FOR ASSESSMENT YEAR 2002 - 03. 2. THE FACTUAL MATRIX IN BRIEF IS THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF EXPORT OF CASEIN. AN ORDER OF ASSESSM ENT DATED 31 ST MARCH 2004 WAS FRAMED DETERMINING THE INCOME OF THE APPELLANT AT RS.1 00 65 059/ - WHEREIN CLAIM OF DEDUCTION OF RS.2 24 38 491/ - WAS ALLOWED U/S 80HHC OF INCOME TAX ACT 1961 (HEREIN AFTER THE ACT) LATER AN ORDER WAS FRAMED U/S 154 OF TH E ACT DATED 01 ST JULY 2005 WHEREBY DEDUCTION U/S 80 HHC WAS RESTRICTED AT RS.1 73 92 169/ - AS AGAINST DEDUCTION ORIGINALLY ALLOWED OF RS.2 24 38 491/ - . ON APPEAL THE LD CIT(A) DIRECTED THE RE - COMPUTATION OF THE DEDUCTION U/S 80 HHC OF THE ACT BY MAKING T HE FOLLOWING MODIFICATIONS APPELLANT BY : SH. VINOD BINDUL & SWEETY KOTHARI CA . RESPONDENT BY : SH. B.R R. KUMARI SR. DR PAGE 2 OF 7 (A) EXCLUSION OF THE DOMESTIC TURN - OVER FROM TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S 80 HHC OF THE ACT. (B) THAT VALUE OF EXPORT INCENTIVES ADOPTED BY THE AO WAS DIRECTED TO BE RE - EXAMINED VIS - A - VIS THE ACTUAL IMPORT INCENTI VES RECEIVED BY THE ASSESSEE. 3. ON APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL BY AN ORDER DATED 28 TH MAY 2010 THE ACTIONS U/S 154 WAS HELD TO BE NOT MAINTAINABLE. HOWEVER ON AN APPEAL BY THE DEPARTMENT THE HONBLE HIGH COU RT BY AN ORDER DATED 08.11.20 11 REVERSED THE RELIEF GRANTED TO THE APPELLANT. SUBSEQUENTLY IN A SEPARATE ORDER DATED 11 TH MAY 2012 THE HONBLE HIGH COURT HELD AS UNDER: - LEARNED COUNSEL FOR THE APPLICANT SUBMITS THAT HE HAD RAISED SOME POINTS ON MERITS WHICH WERE NOT EXAMINED BY THE TRIBUNAL. IF THE APPLICANT - ASSESSEE IS CORRECT THEN IT IS OPEN TO HIM TO FILE AN APPLICATION UNDER SECTION 254(2) BEFORE THE TRIBUNAL. 4. PURSUA NT TO THE ABOVE DIRECTION THE ASSESSEE MOVED A MA NO.217/DEL/2012 BEFORE THIS TRIBUNAL WHICH WAS DISPOSED OFF BY AN ORDER DATED 26.07.2013 AND IT WAS HELD THEREIN AS UNDER: - 3.1 IN VIEW OF THESE FACTS AND KEEPING IN VIEW THE DIRECTION OF HONBLE D ELHI HIGH COURT WE RECALL THE IMPUGNED ORDER OF THE ITAT FOR THE LIMITED PURPOSE TO DECIDE THE MERITS AS RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL. THE REGISTRY IS DIRECTED TO FIX THE APPEAL FOR HEARING IN DUE COURSE. WE ORDER ACCORDINGLY. 5. WITH THIS BACKGROUND WE NOW PROCEED TO TAKE UP THE GROUNDS RAISED ON MERITS BY THE ASSESSEE. 6. GROUND NO.2 RELATES TO NON - INCLUSION OF SUM OF RS.30 01 318/ - BEING FOREIGN EXCHANGE FLUCTUATIONS AS PART OF EXPORT TURNOVER. 7. THE LD CIT(A) IN THIS REGARD HAS OBSERVED AS UNDER: - PAGE 3 OF 7 NEITHER IN THE ORIGINAL RETURN NOR IN THE ASSESSMENT PROCEEDINGS HAS THE APPELLANT EVER RAISED THE ISSUE OF FOREIGN EXCHANGE FLUCTUATION TO BE CONSIDERED AS EXPORT TURNOVER. IT GIVES AN IMPRESSION THAT APPARENTLY THE ASSESSEE ITSELF N OT CONVINCED ABOUT THE LATEST ARGUMENT ADVANCED IN THE PROCEEDINGS U/S 154 OF THE IT ACT. THE EXCHANGE FLUCTUATION HAS TO BE EXAMINED WHETHER IT REALLY RELATES TO EXPORT SALES WHETHER THE AMOUNT HAS REALIZED WITHIN THE TIME ALLOWED UNDER THE ACT ETC. THIS IS A FRESH ISSUE RAISED WHICH CANNOT BE SUBJECT MATTER OF RECTIFICATION BY ANY STRETCH OF ARGUMENT. HENCE UNQUESTIONABLY THIS ITEM CANNOT BE SUBJECT MATTER OF RECTIFICATION. HENCE THE AO HAS RIGHTLY REJECTED THE CONTENTION OF THE APPELLANT ON THIS ISSUE. 8. BEFORE US THE LD COUNSEL SUBMITTED THAT FOREIGN EXCHANGE FLUCTUATIONS SHOULD BE INCLUDED IN THE EXPORT TURNOVER AS THE SAME REPRESENTS THE DIFFERENCE ARISING ON DATE OF RECORDING OF SALE AND RE A L IZ ATION OF SALE AND THEREFORE IS PART OF EXPORT TURNOVER FOLLOWING THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA (P) LTD. (2009) 312 I TR 254 . 9 . HAVING CONSIDERED THE ABOVE CONTENTIONS WE FIND FORCE IN THE SAME IN AS MUCH AS THAT FOREIGN EXCHANGE FLUCTUATIONS ON REALISATION OF EXPORT - BILLS FORMS PART OF EXPORT TURN - OVER IN TERMS OF THE JUDGEMENT OF THE A PEX COURT IN WOOD WARD GOVERNOR INDIA (P) LTD. (SUPRA). WE HAVE GONE THROUGH THE TRADING ACCOUNT (PAGE 31 OF PAPER BOOK) OF THE EXPORT DIVISIONS FURNISHED B Y THE ASSESSEE WHICH CLEARLY SHOWS THAT SUCH FOREIGN EXCHANGE FLUCTUATION PERTAINED TO THE EXPORT - SALES OF RS.26 48 59 379/ - ADOPTED BY THE AO. THUS THE AO IS DIRECTED TO MAKE THE NECESSARY RECTIFICATION BY INCLUDING THE SUM OF RS.30 01 318/ - AS A PART OF EXPORT TURN - OVER. THE SAID GROUND IS THUS ALLOWED. 10. GROUND NO.3 RELATES TO CLAIM OF THE ASSESSEE THAT THE LD CIT(A) HAD ERRED IN NOT ALLOWING TO REDUCE THE IN DIRECT COST BY AN AMOUNT OF RS.37 03 362/ - EQUIVALENT TO 10% OF EXPORT INCENTIVES AND INTERES T. PAGE 4 OF 7 11. IN THIS RESPECT THE LD CIT(A) HAS HELD AS UNDER: - THE NEXT GROUND RAISED IS AGAINST THE AD ION OF THE AO IN DENYING THE BENEFIT OF 10% OF EXPORT INCENTIVE AND INTEREST INCOME FOR THE PURPOSE OF COMPUTING THE INDIRECT COST I FIND THIS ISSUE REQUIRES A DETAILED EXAMINATION REASONING AND APPLICATION OF LAW ETC. AS CONTENDED IT IS NOT THE MISTAKE APPARENT FROM RECORD. WHILE FILING THE RETURN OF INCOME THE ASSESSEE HAS NEVER CLAIMED THIS ITEM AT ALL DESPITE THE FACT THAT THE EXPORT BENEFIT WAS DULY CLAIMED AFTER OBTAINING A CERTIFICATE IN FORM NO.10CCAAA FRO M A QUALIFIED ACCOUNTANT EVEN IN THE ORIGINAL ASSESSMENT PROCEEDINGS THIS WAS NEVER RAISED. FURTHER THE ASSESSEE RELIED ON VARIOUS CASE LAWS IN SUPPORT OF ITS CONTENTION. THE ASSESSEE ITSELF CONTENDED THAT RECTIFICATION PROCEEDINGS CANNOT HE RESORTED TO IN ORDER TO MAKE A REVISION III A MATTER ON WHICH THERE COULD HE TWO PLAUSIBLE INTERPRETATIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM RECORD - AND THE SAME CANNOT THE RECTIFIED U/S 154 OF THE I.T. ACT. THIS REASONING HAS EQUAL FORCE ON THE ISSUE RAISED BY THE APPELLANT IN THIS GROUND. FURTHER AS HELD BY THE APEX COURT IN THE CASE OF GOETZE INDIA LTD. ANY FRESH CLAIM MADE SUBSEQUENT TO THE FILING OF RETURN SHOULD HE IN THE FORM OF RETURN ONLY. IT CANNOT RAISE FRESH CLAIMS IN TH E RECTIFICATION PROCEEDINGS INITIATED BY THE AO. HENCE THE A.O. IS JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE ISSUE OF ALLOWING 10% AS INDIRECT COST. 12. BEFORE US THE COUNSEL SUBMITTED THAT 10% OF THE EXPORT INCENTIVES AND INTEREST AMOUNT ING TO RS.37 03 362/ - SHOULD BE REDUCED FROM THE INDIRECT COST FOLLOWING THE JUDGEMENT OF THE APEX COURT IN THE CASE OF HERO EXPORTS VS . CIT (2007) 295 ITR 454 (SC) AND SURENDRA ENGG. CORPORATION VS. ACIT (2003) 86 ITD 102 (SB) (MUM). 13. HAVING CONSIDER ED THE ABOVE SUBMISSION WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF HERO EXPORTS (SUPRA) HAS HELD THAT 10% OF THE OTHER INCOME WOULD BE A FAIR ESTIMATE TO COMPUTE THE INDIRECT COST. IT WAS HELD UNDER SECTION 80HHC (3 )( B) WHICH IS THE MAIN SECTIO N THE LEGISLATURE HAS PROVIDED THAT IN CASES FALLING UNDER SECTION 80HHC (3)(B) DIRECT AND INDIRECT COSTS ATTRIBUTABLE TO SUCH EXPORTS HAVE TO BE DEDUCTED FROM THE EXPORT TURNOVER TO ARRIVE AT EXPORT PROFITS. A SIMILAR PROVISION IS MADE IN CLAUSE (D) WHICH DEFI N ES PAGE 5 OF 7 THE WORDS DIRECT COSTS TO MAIN COSTS ATTRIBUTABLE TO EXPORTS OF TRADING GOODS. MOREOVER CLAUSE (E) OF THE EXPLANATION DEFINES INDIRECT COSTS AS COST WHICH IS NOT DIRECT COSTS AS DEFINED IN CLAUSE (D). THE WORDS ATTRIBUTABLE IS WIDER THAN THE WORD DERIVED. THE DEPARTMENT IN THIS CASE CAN BE SEEN FROM THE ABOVE EXAMPLE ITSELF SAYS THAT RS.50 000 IN FULL IS THE INDIRECT COST WHICH HAS TO BE DEDUCTED IN FULL AS CLAUSE (E) DOES NOT PROVIDE FOR PROPORTIONATE DEDUCTION. ACCORDING TO THE DEPARTMENT THE DEFINITION OF INDIRECT COSTS WILL NOT COVER EXPENSES INCURRED FOR EARNING OTHER I N COMES. HOWEVER AT THE SAME TIME THE DEPARTMENT CONCEDES THAT THE ASSESSEE HAD EARNED EXPORT TURNOVER OF RS.6 50 000/ - PLUS RS.1 60 000/ - AS OTHER INCOME S. IT ALSO CONCEDES THAT RS.50 000/ - IS THE INDIRECT EXPENSE. IF SO WHAT SHOULD BE THE EXPENSE ALLOCATED TO THE EARNING OF THE TWO INCOMES AND IN WHAT PROPORTION IS THE QUESTION?. ........................................................................ .......................................... 14. AS SATED ABOVE THE ASSESSEE H AS EARNED OTHER INCOME RS.1 60 000/ - APART FROM THE FOB VALUE OF EXPORTS OF RS.6 50 000/ - . THEREFORE SOME EXPENSE HAS TO BE ATTRIBUTED TO EARNING OF RS.1 60 000/ - . IF SO THE NEX T QUESTION WHICH ARISES IS HOW TO ALLOCATE THE COSTS? AS STATED ABOVE THE ASSESSEE HAS TWO INCOMES WITH ONE COMMON POOL OF EXPENSES AND SINCE THE PRINCIPLE OF ATTRIBUTION HAS BEEN RETAINED IN THE SCHEME OF SECTION 80HHC BOTH IN TERMS OF SECTION 80HHC(3) CLAUSE (E) TO THE EXPLANATION TO SECTION 80HHC(3)(A) (B) AND (C) AND IN CLAUSE (BAA) TO THE EXPLANATION TO SECTION 80HHC INSTEAD OF GOING INTO LENGTHY EXERCISE OF DIVIDING SUCH COMMON EXPENSES THE ASSESSEE HAS ESTIMATED THE REDUCTION OF EXPORT TURNOVER BY 10PER CENT OF THE OTHER INCOME OF RS.1 60 000/ - (IN THE ABOVE EXAMPLE). ULTIMATELY CLAUSE (BAA) TO THE EXPLANATION PAGE 6 OF 7 IS ITSELF BASED ON THE ASSUMPTION THAT 10 PER CENT OF THE INCOME WOULD BE AN EXPENSE. WE MAKE IT CLEAR THAT WE ARE NOT READING EXPLANATIO N (BAA) INTO SECTION 80 HHC(3) (B). WHAT WE SAY AS A GUIDANCE VALUE/FACTOR 10 PER CENT OF THE TOTAL OTHER INCOME RS.1 60 000/ - WOULD BE FAIR ESTIMATE. THIS GUIDANCE VALUE IS NOT FLOWING FROM CLAUSE (BAA) BUT FROM THE SCHEME OF SECTION 80HHC READ WITH THE MEMORANDUM TO THE FINANCE ACT OF 1991. TAKE A REVERSE CASE IF ALLOCATION OF EXPENSES IS TO BE DONE ON ACTUAL BASIS IT WOULD NOT ONLY BE VERY DIFFICULT BUT IN SOME CASES ACTUAL APPORTIONMENT MAY NOT BE IN THE INTEREST EVEN OF THE DEPARTMENT. 15. THUS I N TERMS OF THE ABOVE JUDGEMENT THE CLAIM MADE BY THE ASSESSEE IS NO LONGER A DEBATABLE ISSUE. IN VIEW THEREOF THE AO IS DIRECTED TO MAKE THE NECESSARY RECTIFICATION IN COMPUTATION OF THE CLAIM OF DEDUCTION U/S 80(HHC) OF THE ACT BY REDUCING THE INDIRECT COST BY A SUM OF RS.37 03 362/ - BEING 10% OF THE EXPORT INCENTIVES AND INTEREST INCOME. 16. WITH RESPECT TO GROUND NO.4 THE ASSESSEE HAS FAIRLY STATED THAT LOSS IN TRADING SHOULD BE ADJUSTED FOLLOWING THE JUDGMENT OF APEX COURT IN IPCA LABORATORIES REPOR TED IN 266 ITR 521 (SC). HENCE THE SAID GROUND IS REJECTED. 17. GROUND NO.5 RELATES TO CLAIM THAT LD CIT(A) ERRED IN ISSUING DIRECTIONS REGARDING THE VALUE OF EXPORT - INCENTIVES AT RS.3 56 16 653/ - THOUGH THE SAME WAS ACCEPTED BY THE AO AND NO GROUND OF A PPEAL WAS RAISED BEFORE HIM. 18. IN THIS REGARD IT IS SEEN THAT THE LD CIT(A) HAS HELD AS UNDER: - IN THE IMPUGNED ORDER THE A.O. HAS SUBSTITUTED THE AMOUNT OF RS. 3 56 16 653/ - AS EXPORT INCENTIVE AS AGAINST RS2 17 30 601/ - ORIGINALLY CLAIMED AND ALLOWED IN THE RETURN OF INCOME. ON PERUSAL OF THE TRADING ACCOUNT IN RESPECT OF EXPORT DIVISION IT IS NOTICED THAT THE AMOUNT SHOWN UNDER THE HEAD IMPORT LICENCES IS RS. 2 17 30 601/ - . THE TRADING ACCOUNT ALSO REFLECTING A SUM OF RS.2 61 39 938/ - AS REALIZABLE/S ALE VALUE OF IMPORT LICENCES IN HAND. IT IS NOT CLEAR HOW THE FIGURE OF RS.3 56 16 653/ - HAS BEEN ADOPTED FOR COMPUTING THE EXPORT BENEFIT. IN THIS REGARD REFERRING TO PROVISIONS OF SECTION 80 HHC AS WELL AS SECTION 28 (IIIA) (IIIB) (IIIC) (IIID) & PAGE 7 OF 7 (IIIE ) IS VERY MUCH RELEVANT TO EXAMINE WHETHER THE A.O'S ACTION IN ADOPTING A SUM OF RS.3 56 16 653/ - IS CORRECT OR NOT. AS PER CLAUSE (IIID) & (IIIE) THE EXPORT INCENTIVES ARC SUCH RECEIPT WHICH HAS PROFIT ON TRANSFER OF THOSE IMPORT ENTITLEMENTS. THAT MEANS THE A.O. SHOULD ADOPT ONLY THE PROFIT CLEMENT ARISING ON TRANSFER OF SUCH IMPORT LICENCES. THE VALUE OF IMPORT LICENCE AS SUCH IS BUSINESS INCOME FALLS UNDER CLAUSE (IV) OF SECTION 28. HOWEVER IF ASSESSEE DERIVES ANY PROFIT ON TRANSFER OF THOSE ENTITLEMEN TS THE SAME WILL HE ASSESSABLE U/S 28 (IIID) & (IIIE ) OF THE INCOME - TAX ACT AS EXPORT INCENTIVES. HENCE THE ENTIRE VALUE TAKEN BY THE A.O. AS EXPORT INCENTIVE FOR THE COMPUTATION OF DEDUCTION U/S 80HHC IS NOT CORRECT AS PER THE LAW ACCORDINGLY THE A.O. IS DIRECTED TO EXAMINE THE ACTUAL IMPORT INCENTIVE RECEIVED BY THE ASSESSEE AND THE SAME MAY HE CONSIDERED FOR THE PURPOSE OF ARRIVING DEDU CTION U/S 80HHC. 19. BEFORE US THE LD COUNSEL ONLY DISPUTED THE JURISDICTION OF THE LD CIT(A) TO MAKE THE AFORESAID DIRECTION WHICH I N OUR OPINION IS BEREFT OF MERIT. IN KANPUR COAL SYNDICATE 53ITR 225 (SC) THE HONBLE SUPREME COURT HELD THAT LD CIT(A) HAS CO - TERMINUS CO - EXTENSIVE AND PLENARY POWER S AND CAN DO WHAT THE AO CAN DO AS PER LAW. THEREFORE THIS GR OUND OF THE ASSESSEE IS DISMISSED. 20. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 . 01 . 2015 . - SD/ - - SD/ - ( N.K. SAINI ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :16 / 01 / 2015 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT NEW DELHI