The ACIT, Circle-1(1), Baroda v. Camphor & Allied Products Ltd.,, Baroda

ITA 2691/AHD/2006 | 2003-2004
Pronouncement Date: 18-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 269120514 RSA 2006
Assessee PAN AAACC9211E
Bench Ahmedabad
Appeal Number ITA 2691/AHD/2006
Duration Of Justice 3 year(s) 2 month(s) 11 day(s)
Appellant The ACIT, Circle-1(1), Baroda
Respondent Camphor & Allied Products Ltd.,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 18-02-2010
Date Of Final Hearing 02-02-2010
Next Hearing Date 02-02-2010
Assessment Year 2003-2004
Appeal Filed On 07-12-2006
Judgment Text
1 ITA NO. 2691/AHD/2006 IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : A HMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HONBLE SH RI D.C. AGRAWAL A.M.) I.T.A. NO. 2691/AHD./2006 ASSESSMENT YEAR : 2003-2004 ASSISTANT COMMISSIONER OF INCOME TAX -VS.- CAM PHOR & ALLIED PRODUCTS LTD. BARODA CIRCLE-1(1) BARODA (PAN : AAACC 9211 E) (APPELLANT) (R ESPONDENT) APPELLANT BY : SHRI C.K. MISHRA SR . D.R. RESPONDENT BY : SHRI C.N. SHAH O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE DEPARTMENT IS AGAINST THE ORDER DATED 22.09.2006 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-I BARODA FOR T HE ASSESSMENT YEAR 2003-04 ON THE FOLLOWING GROUNDS :- 1(A). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE C.I.T.(A) ERRED IN DIRECTING TO EXCLUDE SALES TAX O F RS.3 11 10 191/- FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DED UCTION U/S.8QHHC BY IGNORING THE RATIO LAID DOWN BY THE SUPREME COURT I N THE CASE OF CHOWRINGHEE SALES BUREAU P LTD VS CIT 87 ITR 542 ( SC) AND SINCLAIR MURRAY & CO P. LTD- VS CIT 97 ITR 615 (SC) HOLDING THAT THE COLLECTION OF SALES TAX FORMS PAN: OF TRADING RECEIPTS AND HENCE TOTAL TURNOVER. 1(B) THE CIT(A) FAILED TO TAKE NOTE OF THE MANDA TE OF SECTION 145A{B) INSERTED W.E.F. 1.4.1999 GOVERNING THE COMPUTATION OF PROFITS HAVING INESCAPABLE BEARING ON THE COMPUTATION OF DEDUCTION U/S.80HHC WHICH IS MADE BY APPORTIONING THE SAME PROFITS IN THE RATIO OF EXPORT TURNOVER TO TOTAL TURNOVER. 1(C) THE CIT(A) ALSO FAILED TO TAKE NOTE OF THE DEFINITION OF TOTAL TURNOVER IN CLAUSE (BA) OF THE EXPLANATION BELOW SECTION 80H HC EXCLUDING ONLY FREIGHT & INSURANCE UP TO THE CUSTOMS STATION LEAV ING THE CONCEPT OF TOTAL TURNOVER TO BE UNDERSTOOD AS IN COMMON COMMERCIAL P ARLANCE 2(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE CIT(A) ERRED IN HOLDING THAT 90% OF THE ROYALTY OF RS. 51 510/- WAS NOT TO BE EXCLUDED FROM THE PROFITS OF THE BUSINESS UNDER CLAUSE (BAA) OF THE EXPLANATION BELOW SECTION 80HHC IN COMPUTING DEDUCT ION UNDER THIS PROVISION. 2 ITA NO. 2691/AHD/2006 2(B) THE CIT(A) ERRED IN NOT APPRECIATING THAT T HE EXPRESSION 'ANY OTHER RECEIPT OF A SIMILAR NATURE' IN THE AFORESAID EXPLA NATION (BAA) READ WITH THE EXPRESSION 'DERIVED FROM USED IN SECTION 80HHC (1) EXCLUDES ALL THOSE RECEIPTS WHICH DO NOT FORM PART OF OR DO NOT FLOW FROM 'TURNOVER' SO AS TO AVOID DISTORTION IN THE APPORTIONMENT OF PROFITS IN THE RATIO OF EXPORT TURNOVER TO TOTAL TURNOVER UNDER SECTION 80HHC(3). 2(C) THE C.I.T.(A) ERRED IN ASSUMING THAT IF AN IN COME IS BUSINESS INCOME IT IS NOT LIABLE TO BE EXCLUDED UNDER EXPLA NATION (BAA) WITHOUT APPRECIATING THAT THE EXPLANATION EXCLUDES ONLY SUC H INCOMES AS ARE ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION' BUT DO NOT FORM PART OF TURNOVER I.E. THE SALE OF GOOD S IN WHICH THE ASSESSEE DEALS AS EXPORTER. 2(D). THE CIT(A) FAILED TO TAKE NOTE OF THE FOLLOWI NG DECISIONS IN FAVOUR OF REVENUE DIRECTLY ON THE ISSUE AT HAND: I) ALEMBIC CHEMICAL WORKS LTD. VS DCIT 26S I TR 47 (GUJ) II) CIT VS K K DOSHI & CO. 245 ITR 849 (BOM) RELYING ON CIT VS STRLING FOODS 237 ITR 579 (SC); IIJ) CIT VS KANTILAL CHHOTALAL 246 ITR 439 ( BOM) 3(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT(A) ERRED IN ALLOWING SET OFF OF MODVAT CREDIT O F RS.8 67492/- AVAILABLE ON PURCHASE OF CAPITAL GOODS I.E. PLANT AND MACHIN ERY AGAINST THE EXCISE DUTY COLLECTED ON THE SALE OF FINISHED GOODS IN STO CK SO AS NOT TO OFFER THE SAME AS REVENUE RECEIPT. 3(B) THE CIT(A) ERRED IN DECIDING THE MATTER AGA INST REVENUE WITHOUT GIVING ANY REASONS OR BASIS BY SOLELY RELYING ON HI S PREDECESSOR'S ORDER FOR EARLIER YEARS AND BY DISREGARDING THE MANDATE OF SE CTION 145A INSERTED W.E F. 1-4-1999 PROVIDING FOR INCLUSION OF ANY TAX DUT Y CESS OR FEE IN THE SALE OF GOODS. 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.150 00/- (9900 + 5100) BEING THE CONTRIBUTION TO CAMPHOR OFFICERS AND WORK ERS CLUB AND THE EMPLOYEES' COOPERATIVE STORE IN CONTRAVENTION OF TH E EXPRESS RESTRICTION IMPOSED BY SECTION 40A(9) OF THE ACT. 2. WE HAVE HEARD BOTH THE SIDES. THE CONTROVERSY IN VOLVED IN GROUND NO. 1(A) TO 1(C) IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SUDARSHAN CHEMICALS LIMITED REPORTED IN 245 ITR 769 . THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS.- LAXMI MACHINE WORKS REPORTED IN 290 IT R 667 (SC) ALSO HELD THAT EXCISE DUTY AND 3 ITA NO. 2691/AHD/2006 SALES TAX CANNOT FORM PART OF THE TOTAL TURNOVER UN DER SECTION 80HHC(3) OF THE INCOME TAX ACT 1961. WE RESPECTFULLY FOLLOWING THE SAME DECLINE TO INTERFERE. GROUND NO. 1(A) TO 1(C) IS REJECTED. 3. THE CONTROVERSY INVOLVED IN GROUND NO.2(A) TO 2( D) OF THIS APPEAL IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HON'BLE ITAT C B ENCH AHMEDABAD IN ASSESSEES OWN CASE IN ITA NOS. 1731-1735/AHD/2001 FOR THE ASSESSMENT YEAR S 1992-93 TO 1997-98 & ITA NOS. 3740- 3741/AHD/2003 FOR THE ASSESSMENT YEAR 2000-01 AND 2 001-02. AT THE TIME OF HEARING OF THIS APPEAL BOTH SIDES CONCEDED THAT THE CONTROVERSY IN VOLVED IN THIS GROUND OF APPEAL IS WELL COVERED IN FAVOUR OF REVENUE BY THE DECISION DATED 16.05.2008 OF THE HON'BLE ITAT C BENCH AHMEDABAD IN ASSESSEES OWN CASE IN ITA NOS. 1731-1 735/AHD/2001 FOR THE ASSESSMENT YEARS 1992-93 TO 1997-98 & ITA NOS. 3740-3741/AHD/2003 FO R THE ASSESSMENT YEAR 2000-01 AND 2001-02. IN THAT DECISION THE HON'BLE TRIBUNAL HAS FOLLOWED THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS.- K. RAVINDRANATHAN NA IR REPORTED IN (2007) 295 ITR 228 (SC) AND HELD THAT 90% OF THE ROYALTY INCOME SHOULD BE EXCLU DED FROM THE TOTAL INCOME UNDER CLAUSE (BAA) TO SECTION 80HHC OF THE INCOME TAX ACT 1961. WE T HEREFORE SET ASIDE THIS ISSUE TO THE FILE OF A.O. AND DIRECT TO RE-COMPUTE THE DEDUCTION IN TERM S OF RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF K. RAVINDRANATHAN NAIR (SUPRA) . THE A.O. WILL INCLUDE THE ROYALTY INCOME AND DIFFERENCE OF EXCHANGE RATE VARIATION AND ALSO INCLUDE 90% UNDER CLAUSE (BAA) TO SECTION 80HHC OF THE INCOME TAX ACT 1961. THE A.O. WILL RE COMPUTE THE DEDUCTION UNDER SECTION 80HHC ACCORDINGLY. RESULTANTLY THIS GROUND OF APP EAL IS ALLOWED FOR STATISTICAL PURPOSES. 4. WITH REGARD TO THE CONTROVERSY INVOLVED IN GROUN D NO.3(A) & 3(D) OF THIS APPEAL THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION DATED 16.05.2008 OF THE HON'BLE ITAT C BENCH AHMEDABAD IN ASSESSEES OWN CASE IN ITA NOS. 1731-1735/AHD/2001 FOR THE ASSESSMENT Y EARS 1992-93 TO 1997-98 & ITA NOS. 3740-3741/AHD/2003 FOR THE ASSESSMENT YEAR 2000-01 AND 2001-02. THE LD. COUNSEL OF THE ASSESSEE ALSO POINTED OUT THAT ON THIS ISSUE REVENU E HAS FILED MISCELLANEOUS APPLICATION THEREFORE SUBJECT TO OUTCOME OF THE APPLICATION T HE VIEW TAKEN BY THE HON'BLE ITAT BE FOLLOWED. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL OF ASSESSEE. 4 ITA NO. 2691/AHD/2006 5. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUT HORITIES BELOW AND THE DECISION DATED 16.05.2008 OF THE HON'BLE ITAT C BENCH AHMEDABA D IN ITA NOS. 1731-1735/AHD/2001 FOR THE ASSESSMENT YEARS 1992-93 TO 1997-98 & ITA NOS. 3740-3741/AHD/2003 FOR THE ASSESSMENT YEAR 2000-01 AND 2001-02. THE HON'BLE TRIBUNAL VIDE ORDER DATED 16.05.2008 (SUPRA) DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE FOR THE DETAIL ED REASONS GIVEN IN PARA 44-45 ON PAGES 16 & 17 OF THE ORDER WHICH READS AS UNDER :- 44. THE NEXT COMMON ISSUE IN ITA NOS. 1734-1735/AH D/2001 AND ITA NO. 3740-3741/AHD/2003 OF THE REVENUE APPEALS AGAIN ST THE ORDERS OF C.I.T.(A) DELETING THE ADDITION OF MODVAT OF CAPITA L GOODS AT RS.1 72 693/- RS.2 43 417/- RS.4 02 233/- AND RS. 22 23 902/- FOR THE ASSESSMENT YEAR 1996-97 1997-98 2000-01 AND 2001- 02. 45. THE ISSUE OF MODVAT ON CAPITAL GOODS IS AS REGA RDS TO REDUCTION OF EXCISE DUTY FROM THE COST OF MACHINERY WHILE CLA IMING DEPRECIATION. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF MODVAT ON CAPITAL GOODS. THE C.I.T.(A) ALLOWED THE SAME HOLDING THAT THE ASSESSE E HAS REDUCED THE AMOUNT OF EXCISE DUTY FROM THE COST OF MACHINERY WH ILE CLAIMING THE DEPRECIATION. THE C.I.T.(A) HAS GIVEN THE FOLLOWING FINDING IN THE ASSESSMENT YEAR 1996-97 AND FACTS BEING IDENTICAL WE APPLY THE SAME FINDING IN ALL THE YEARS. THE FINDINGS READ AS UNDE R :- 25. THE NEXT GROUND OF APPEAL RELATES TO THE DISAL LOWANCE OF RS.1 72 693/- BEING MODVAT ON CAPITAL GOODS. DUR ING THE COURSE OF HEARING THE LD. REPRESENTATIVE OF TH E APPELLANT PLEADED THAT AT THE TIME OF PURCHASE OF MACHINERY F OR THE AMOUNT OF EXCISE DUTY WAS INCLUDED IN THE COST OF M ACHINERY AND THE SAME WAS REDUCED FROM THE COST OF MACHINERY WHILE CLAIMING THE DEPRECIATION ON THAT BECAUSE THE APPEL LANT CANNOT CLAIM BOTH MODVAT AS WELL AS DEPRECIATION ON THAT AMOUNT. HOWEVER THE LD. ASSESSING OFFICER DISALLOW ED THE MODVAT AMOUNT OF RS.1 72 693/- WHICH IS NOT JUSTIFI ED AND THE SAME SHOULD BE DELETED. 25.1. AFTER HEARING THE APPELLANTS REPRESENTATIVE AND AFTER GOING THROUGH THE FACTS OF THE CASE I HOLD THAT TH E ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIED BECAUSE THE ASSESSEE HAS REDUCED THE AMOUNT OF EXCISE DUTY FROM THE COST OF MACHINERY WHILE CLAIMING THE DEPRECIATION. ACCORDINGLY THE A DDITION MADE STANDS DELETED. IN VIEW OF THE ABOVE FACTS AND THE DECISION OF THE C.I.T.(A) WE ARE OF THE VIEW THAT THE ASSESSEE HAS REDUCED THE AMOUN T OF EXCISE DUTY FROM 5 ITA NO. 2691/AHD/2006 THE COST OF MACHINERY WHILE CLAIMING DEPRECIATION ACCORDINGLY WE FIND NO INFIRMITY IN THE ORDERS OF C.I.T.(A) ALLOWING THE C LAIM OF THE ASSESSEE AND ACCORDINGLY THIS ISSUE OF THE REVENUES APPEALS IS DISMISSED. AT THE TIME OF HEARING OF THIS APPEAL BOTH SIDES C ONCEDED THAT THE CONTROVERSY INVOLVED IN THIS GROUND OF APPEAL IS WELL COVERED IN FAVOUR OF ASSES SEE BY THE DECISION OF THE HON'BLE ITAT C BENCH AHMEDABAD IN ASSESSEES OWN CASE IN ITA NOS. 1731-1735/AHD/2001 FOR THE ASSESSMENT YEARS 1992-93 TO 1997-98 & ITA NOS. 3740 -3741/AHD/2003 FOR THE ASSESSMENT YEAR 2000-01 AND 2001-02. WE RESPECTFULLY FOLLOWING THE SAME UPHOLD THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE I N THE IMPUGNED ORDER AND REJECT THE GROUNDS NO. 3(A) & 3(B) FILED BY THE REVENUE. 6. GROUND NO. 4 IS AGAINST IN DELETING THE DISALLOW ANCE OF RS.15 000/- BEING THE CONTRIBUTION TO CAMPHOR OFFICERS AND WORKERS CLUB A ND THE EMPLOYEES COOPERATIVE STORES. 7. DURING THE COURSE OF HEARING BOTH THE SIDES CON CEDED THAT SIMILAR DISALLOWANCE WAS MADE IN THE ASSESSMENT YEARS 1993-94 1994-95 1996-97 1997-98 & 2000-01 AND WAS DELETED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). ON FUR THER APPEAL BY THE REVENUE ITAT C BENCH VIDE ORDER DATED 16.05.2008 IN ASSESSEES OWN CASE IN ITA NO. 1731-1735/AHD/2001 FOR THE ASSESSMENT YEARS 1992-93 TO 1997-98 & ITA NOS. 3740-3741/AHD/2003 FOR THE ASSESSMENT YEAR 2000-01 & 2001-02 UPHELD THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THE RELEVANT DISCUSSION IS CONTAINED IN PARA 8 ON PAGES 3 & 4 OF THE DECISION OF THE TRIBUNAL DATED 16.05.2008 (SUPRA). THE FACTS IN THE PRESENT CASE ARE EXACTLY IDENTICAL THE DISALLOWANCE UNDER DISPUTE ARE STAFF WELFARE AND CL UB PAYMENT WE THEREFORE RESPECTFULLY FOLLOWING THE DECISION DATED 16.05.2008 OF ITAT C BENCH AHMEDABAD IN ASSESSEES OWN CASE (SUPRA) UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THIS GROUND OF APPEAL IS ACCORDINGLY REJECTED. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS PART LY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 18.02.201 0 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18/ 02 / 2010 6 ITA NO. 2691/AHD/2006 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER LAHA/SR.P.S. DEPUTY REGISTRAR ITAT AHMEDA BAD