ACIT CIR. - 6(2), MUMBAI v. M/s. DIAMOND DYE-CHEM LTD., MUMBAI

ITA 3342/MUM/2006 | 2002-2003
Pronouncement Date: 27-01-2010 | Result: Dismissed

Appeal Details

RSA Number 334219914 RSA 2006
Assessee PAN AAACD3478N
Bench Mumbai
Appeal Number ITA 3342/MUM/2006
Duration Of Justice 3 year(s) 8 month(s) 1 day(s)
Appellant ACIT CIR. - 6(2), MUMBAI
Respondent M/s. DIAMOND DYE-CHEM LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted L
Tribunal Order Date 27-01-2010
Assessment Year 2002-2003
Appeal Filed On 26-05-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L MUMBAI. BEFORE SHRI SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMB ER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER. I.T.A. NO. 33 42/MUM/2006 ASSESSMENT YEAR : 2002-03. ASSTT. COMMISSIONER OF M/S DIA MOND DYE-CHEM. LTD. INCOME TAX VS. 20/ 7 TH FLOOR TARDEO AIRCONDITIONED CIRCLE-6(2) MUMBAI. MARKE T TARDEO MUMBAI-34. PAN AAACD3478N. APPELLANT RESPONDENT APPELLAN T BY : S/SHRI S.S. RANA & R.C. PRASAD. RESPONDENT BY : NONE. O R D E R PER J. SUDHAKAR REDDY A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-VI MUMBAI DATED 20-03-20 06 FOR THE ASSESSMENT YEAR 2002-03. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE THE ISSUAL OF NOTICE IN THE ADDRESS MENTIONED AT COL. 11 IN FORM NO. 36. THE ASSESSEE FILED A LETTER DATED 19 TH JANUARY 2010 INDICATING THE FACT THAT HE IS AWAR E OF POSTING OF THE APPEAL. INSTEAD OF MAKING EFFORTS TO OBTAIN THE APPEAL PAPERS THE ASSESSEE SUGGESTS THAT THE PAPERS BE SE NT TO HIM AT A CHANGED ADDRESS. ON A PERUSAL OF THE REQUEST AND ALSO PERUS AL OF THE PAPERS ON RECORD WE ARE OF THE CONSIDERED OPINION THAT THIS IS NOT A FIT CASE FOR GRANT OF ADJOURNMENT. THUS WE REJECT THE SAME AND DISPOSE OF THE APPEAL EXPARTE ON MERITS AFTER HEARING THE LEARNED DR. 2 3. THE ASSESSEE IN THIS CASE IS IN THE BUSINESS OF MANUFACTURING AND OF OPTICAL BRIGHTENERS USED AS BRIGHTENING AGE NTS. THE REVENUES GROUND OF APPEALS READ AS FOLLOWS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A) ERRED IN DIRECTING ASSESSING OFFICER TO EXCL UDE DUTY AND SALES TAX FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMP UTATION OF DEDUCTION U/S 80HHC BY RELYING ON THE DECISION OF T HE BOMBAY HIGH COURT IN THE CASE OF SUDARSHAN CHEMICALS LTD. VS. C IT (245 ITR 769) WITHOUT APPRECIATING THE FACT THAT THE DEPARTM ENT HAD NOT ACCEPTED THE DECISION AND ITS APPEAL ON MERITS WAS PENDING BEFORE THE APEX COURT AND ALSO NOT APPRECIATING THAT AS PE R THE PROVISIONS OF SECTION 145A THE SAME IS TO BE INCLUDED AS AN INTEG RAL PART OF THE TURNOVER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A) ERRED IN DIRECTING ASSESSING OFFICER TO NOT DEDUCT 90% OF THE RECEIPTS BY WAY OF WRITE BACK SUPPLIERS. WRITE BACK CUSTOMERS SALES TAX REFUND PROVISION WRITE BACK EXCISE DUTY AND T ENDER FEES AS PROVIDED FOR BY EXPLANATION (BAA) WHILE COMPUTING T HE DEDUCTION U/S 80HHC WITHOUT APPRECIATING THAT THE SAME HAD NO NEX US WITH THE BUSINESS PROFITS DERIVED FROM THE BUSINESS OF EXPOR TS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO GIVE FURTHER REDUCTION OF 5% OF ARMS LENGTH PRICE IN VIEW OF PR OVISO TO SECTION 92C(2) WITHOUT APPRECIATING THE FACT THAT THE ASSES SEE HAS NEVER CONTENDED THIS ISSUE DURING THE ASSESSMENT PROCEEDI NGS BEFORE THE AO OF TRANSFER PRICING AND IN THE SUBSEQUENT YEAR T HE SAME HAS NOT BEEN ALLOWED BY THE A.O. 4. AFTER HEARING THE LEARNED DR WE FIND THAT GROU ND NO. 1 IS COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE AS SESSEE BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LAXMI MACH INE TOOLS 290 ITR 677 (S.C.) WHEREIN THE DECISION OF HONBLE BOMBAY H IGH COURT IN THE CASE OF SUDARSHAN CHEMICALS VS. CIT HAS BEEN UP HEL D. RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE ORDER OF THE CIT( APPEALS) WHEREIN HE 3 DIRECTED THE AO TO EXCLUDE THE EXCISE DUTY AND SALE S-TAX FROM THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 80HHC. 5. IN THE RESULT GROUND NO.1 OF THE REVENUE IS DI SMISSED. 6. COMING TO GROUND NO.2 WE ARE OF THE CONSIDERED OPINION THAT THE FIRST APPELLATE AUTHORITY WAS RIGHT IN HOL DING THAT A) WRITE BACK SUPPLIERS B) RIGHT BACK FROM CUSTOMERS C) SALES T AX REFUND D) WRITE BACK OF PROVISION OF REFUND OF EXCISE DUTY AND TENDER FE E CANNOT BE EXCLUDED UNDER CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC. 7. A PERUSAL OF ALL THESE ITEMS CLEARLY SHOW THAT WHEN THE EXPENDITURE WAS INCURRED IT HAS GONE TO REDUCE THE PROFITS OF BUSINESS AND WHEN THE ENTRY IS REVERSED PROFITS OF BUSINESS GOE S UP. NONE OF THE RECEIPTS CAN BE CONSIDERED AS A RECEIPT BY WAY OF B ROKERAGE COMMISSION INTEREST RENT CHARGES OR ANY OTHER RECEIPT OF SIM ILAR NATURE. ALL THESE ITEMS ARE CONNECTED WITH THE OPERATIONS OF THE ASSE SSEE. THUS WE AGREE WITH THE FINDINGS OF THE CIT(APPEALS) AND DISMISS G ROUND NO.2 OF THE REVENUE. 8. COMING TO GROUND NO. 3 WHICH IS ON THE ISSUE OF ADJUSTMENT MADE TO ARMS LENGTH PRICE UNDER TRANSFER PRICING R EGULATIONS THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(APPEALS) D IRECTED THE AO TO GRANT A REDUCTION OF 5% FROM THE ARMS LENGTH PRICE IN VIEW OF THE PROVISO TO SECTION 92C(2). THE LEARNED DR THOUGH NOT LEAVI NG HIS GROUND ULTIMATELY SUBMITTED THAT IN VIEW OF THE CBDT CIRC ULAR ON THE ISSUE IF THE VARIATION IS LESS THAN 5% BEING ARMS LENGTH PR ICE DETERMINED BY THE TPO AND THE ARMS LENGTH PRICE DETERMINED BY THE AS SESSEE NO ADJUSTMENT IS CALLED FOR. IN VIEW OF THE ABOVE SUBM ISSION WE DISMISS GROUND NO. 3 OF THE REVENUE. 4 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON THIS 27 TH DAY OF JANUARY 2010. SD/- SD/- (R.S. PADVEKAR) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI DATED : 27 TH JANUARY 2010. WAKODE COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR L-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT MUMBAI BENCHES