The ACIT, Circle-5,, Surat v. M/s. Star Rays,, Surat

ITA 3774/AHD/2007 | 2004-2005
Pronouncement Date: 21-05-2010 | Result: Allowed

Appeal Details

RSA Number 377420514 RSA 2007
Assessee PAN AAMFS1942B
Bench Ahmedabad
Appeal Number ITA 3774/AHD/2007
Duration Of Justice 2 year(s) 7 month(s) 20 day(s)
Appellant The ACIT, Circle-5,, Surat
Respondent M/s. Star Rays,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted D
Tribunal Order Date 21-05-2010
Date Of Final Hearing 17-05-2010
Next Hearing Date 17-05-2010
Assessment Year 2004-2005
Appeal Filed On 01-10-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AT SURAT CAMP AHMEDABAD BEFORE SHRI T.K. SHARMA JUDICIAL MEMBER AND SHRI D. C. AGRAWAL ACCOUNTANT MEMBER ITA NO.3774/AHD/2007 ASSESSMENT YEAR: 2004-05 DATE OF HEARING:17.5.10 DRAFTED:17.5.10 A.C.I.T. CIRCLE-5 SURAT ROOM NO.309 AAYAKAR BHAVAN MAJURA GATE SURAT V/S . M/S. STAR RAYS 304 PRAKUKH CHAMBERS NANPURA TIMALIA WAD SURAT PAN NO.AAMFS1942B (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SMT. JYOTI LAXAMI SR-DR RESPONDENT BY:- SHRI R.N. VEPARI AR O R D E R PER D.C.AGRAWAL ACCOUNTANT MEMBER:- THIS APPEAL FILED BY THE REVENUE ARISING OUT FOLLO WING GROUNDS:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME-TAX(A)-III SURAT HAS ERRED IN DELETING ADDITION OF RS.3 41 973/- OUT OF FOREIGN TRAVEL EXPENSES MAD E BY THE ASSESSING OFFICER 2) THE LEARNED CIT(A) HAS NOT APPRECIATED THE FACT THAT THE DISALLOWANCE OF RS.3 41 973/- WAS MADE ON ACCOUNT OF NON PRODUC TION OF CORROBORATIVE EVIDENCES IN SUPPORT OF THE CLAIM AND SPENT ON PERSONAL ELEMENT AND NOT FOR THE BUSINESS PURPOSES. ITA NO.3774/AHD/2007 A.Y. 2004-05 ACIT CIR-5 SURAT V. M/S. STAR RAYS PAGE 2 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED COMMISSIONER OF INCOME-TAX(A) SURAT HAS ERRED IN D IRECTING THE ASSESSING OFFICER TO RE-COMPUTE THE DEDUCTION U/S. 80HHC INCLUDING THE EXCHANGE RATE DIFFERENCE ON DEBTORS OF THE EARLIER YEAR. 4) THE EXTRA BENEFIT IS RECEIVED BY THE ASSESSEE ON ACCOUNT OF DELAY IN RECEIVING THE PAYMENT OF SALE. THIS AMOUNT IS SNOT RECEIVED FOR VALUE OF GOODS SOLD BY THE ASSESSEE. THE AMOUNT RECEIVED IS ATTRIBUTABLE TO EXPORT SALE BUT NOT DERIVED FROM IT. THE CIT(APPEALS) HAS ERRED IN NOT CONSIDERING THE DIFFERENCE BETWEEN THE WORD ATTRIB UTABLE TO AND DERIVED FROM IN THIS CASE. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS ON IMPORT OF DIAMOND AND EXPORT OF POLISHED DIAMONDS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED FOREIGN TRAVEL EXPENSES AT RS.34 19 736/-. THE ASSESSING OFFICER ASKED TO ASSESSEE TO PRODUCE SUPPORTING EVIDENCE WITH REG ARD TO CLAIM. ASSESSEE FILED SEVERAL DETAILS OF EXPENSES ON TICKETS BOARDING AN D LODGING BUT THE BILLS RELATING TO HOTEL STAY WERE NOT PRODUCED. THE ASSESSING OFFI CER INFERRED THAT ENTIRE EXPENDITURE OF FOREIGN TRAVEL IS NOT VERIFIABLE. H E ACCORDINGLY DISALLOWED 10% OF THE CLAIM. THUS THE PROPOSED AN ADDITION OF RS. 3 41 976/- HOLDING THAT ENTIRE EXPENDITURE IS NOT EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LD. CIT(APPEALS) DELETED THE ADDITION ON THE GR OUND THAT SIMILAR DISALLOWANCE MADE IN THE ASSESSMENT YEAR 2003-04 WA S DELETED BY LD. CIT(APPEALS). 3. WE HAVE HEARD THE PARTIES. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT ASSESSEE HA S NOT VERIFIED THE EXPENSES SO CLAIMED BUT THE LD. AR SUBMITTED THAT SIMILAR AD HOC DISALLOWANCE MADE BY AO IN THE ASSESSMENT YEAR 2003-04 HAS BEEN DELETED TRIBUNAL BY OBSERVING AS UNDER:- 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE RECORD. LOOKING TO THE FATS AND CIRCUMSTANCES O F THE CASE WE FIND THAT THE ASSESSEE HAS CLAIMED TOTAL FOREIGN TRAVEL EXPEN SES OF RS.14 26 398. ITA NO.3774/AHD/2007 A.Y. 2004-05 ACIT CIR-5 SURAT V. M/S. STAR RAYS PAGE 3 THE ASSESSEE HAS PRODUCED THE DETAILS OF EXPENSES R ELATING TO TICKET ACCOUNT AND THE ACCOUNT SPENT ON BOARDING AND LODGI NG. THE ASSESSING OFFICER HAS NOT DOUBTED THE FOREIGN TRAVELING. THE ONLY REASON ASSIGNED BY THE ASSESSING OFFICER IN DISALLOWING SOME AMOUNT OUT OF SUCH EXPENSES ON AD HOC BASIS IS THAT THE ASSESSEE DID NOT PRODU CE THE HOTEL BILLS ETC. EVIDENCING STAYING IN HOTEL ETC. THE ASSESSEE HAS T AKEN THE CONTENTION THAT THE ASSESSEE IS FREQUENTLY TRAVELING TO FOREIGN COU NTRIES AND THEY PREFER TO STAY IN PRIVATE PLACES OF VISIT. THEREFORE HOTEL B ILLS WERE NOT THERE. NON- PRODUCTION OF HOTEL BILLS CANNOT BE A GROUND FOR RE JECTION OF THE CLAIM OF THE ASSESSEE AND THAT TOO ON AD HOC BASIS WITHOUT A NY ADVERSE AERIAL ON RECORD PARTICULARLY WHEN THE FOREIGN TOUR WAS NOT DISPUTED BY THE REVENUE AND IT IS ALSO NOT DISPUTED THAT SUCH FOREI GN TOURS ARE FOR BUSINESS PURPOSE. IN SUCH VIEW OF THE MATTER WE AR E OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER WAS NOT JUSTIFIE D IN MAKING AD HOC DISALLOWANCE OUT F THE FOREIGN TRAVELING EXPENSES A ND THE CIT(A) HAS RIGHTLY DELETED SUCH DISALLOWANCE. THE ORDER OF THE CIT(A) IN THIS REGARD IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS D ISMISSED. 4. SINCE THE AD HOC DISALLOWANCE OUT OF FOREIGN TRA VEL EXPENSE HAS NOT BEEN UPHELD BY THE TRIBUNAL IN THE PRECEDING YEAR THEN R ESPECTFULLY FOLLOWING THE ABOVE ORDER IN ITA NO.428/AHD/2007 PRONOUNCED ON 27-04-2007 WE CONFIRM THE ORDER LD. CIT(APPEALS) IN DELETING THE ADDITION . AS A RESULT THIS GROUND OF REVENUES APPEAL IS REJECTED. 5. THE GROUND NO.3 RELATES TO DIRECTIONS GIVEN BY L D. CIT(APPEALS) FOR RE- COMPUTING THE DEDUCTION U/S.80HHC OF THE ACT BY INC LUDING EXCHANGE RATE DIFFERENCE ON DEBTORS OF THE EARLIER YEAR. 6. THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD C LAIMED DEDUCTION U/S.80HHC OF THE ACT AT RS.1 20 81 380/- OUT OF EXPORT SALES REALIZATION AT RS.4 0271 272/-. THIS REALIZATION WAS MADE DURING THIS YEAR IN INDIA N RUPEES ON THE SALES PERTAINED TO LAST YEAR. THE ASSESSING OFFICER DISA LLOWED THE CLAIM ON THE GROUND THAT FOREIGN EXCHANGE GIVEN DID NOT PERTAIN TO THE CURRENT YEAR. ITA NO.3774/AHD/2007 A.Y. 2004-05 ACIT CIR-5 SURAT V. M/S. STAR RAYS PAGE 4 7. WE HAVE HEARD THE PARTIES. ON THE OTHER HAND LD . DR RELIED ON THE ORDER OF ASSESSING OFFICER. LD. AR SUBMITTED THAT THE TR IBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03 IN ITA NO.2181/AHD/2005 ORDER DATED 07-12- 2005 HAVE ALLOWED THE ISSUE IN FAVOUR OF ASSESSEE I N PARA-4 AS UNDER:- 4. AFTER HAVING CONSIDERED THE RIVAL SUBMISSIONS O F THE LD. DR PROVISIONS OF SECTION 80HHC OF THE ACT AND THE DECI SION OF ITAT AHMEDABAD BENCH B IN THE CASE OF M/S. PRIYANKA GE MS. SURAT & OTHERS VS. ACIT (SUPRA) WE ARE OF THE OPINION THAT THE ISSUE INVOLVED IN THIS REVENUES APPEAL IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF ITAT AHMEDAB AD BENCH B (SUPRA) WHEREIN THE HONBLE BENCH UPHOLD THE ORDER OF THE CIT(APPEALS) ON SIMILAR ISSUE BY OBSERVING AS UNDER:- 17. IN VIEW OF ABOVE DISCUSSION WE ARE INCLINED TO REVERSE THE FINDINGS OF THE LOWER AUTHORITIES TO THE EFFECT THA T EXCHANGE RATE DIFFERENCE PARTAKE THE CHARACTER OF INCOME-TAX ENUM ERATED IN EXPLANATION (BAA) 90% OF WHICH IS REQUIRED TO BE EX CLUDED FORM THE PROFITS OF THE BUSINESS: WHILE COMPUTING DEDU CTION U/S.80HHC AND DIRECT THE AO TO ALLOW DEDUCTION U/S .80HHC WITH REFERENCE TO THE AMOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF EXCHANGE RATE OF FLUCTUATION. THUS THIS GROUND IN A LL THE APPEALS FLED BY THE ASSESSEE AS WELL AS BY THE REVENUE IN I TA NO.2468 IS ALLOWED IN FAVOUR OF ASSESSEE. EVEN AFTER CONSIDERI NG THE POINTS OF DIFFERENCE INDICATED BY THE LD. DR FOR THE REASONS GIVEN HEREINABOVE WE ARE NOT PERUSED TO REACH TO ANY CON CLUSION OTHER THAN THE CONCLUSION THAT SUCH RECEIPTS ON ACCOUNT O F EXCHANGE RATE DIFFERENCE IS DERIVED FORM THE EXPORT SALES AND IS PART AND PARCEL OF EXPORT PROCEEDS ONLY AND BY NO STRETCH OF IMAGINAT ION IT CAN BE GIVEN COLOUR OF INCOME-TAX FROM OTHER SOURCES TO BE EXCLUDED FROM PROFITS OF THE BUSINESS IN TERMS OF EXPLANATION (BA A) BELOW SECTION 80HHC(4A) WE THEREFORE DO NOT SEE ANY REASONS FOR A CCEPTING LD. DRS CONTENTION FOR REFERRING THE MATTER TO THE SPE CIAL BENCH SO AS TO RECONSIDER THE DECISION OF THE TRIBUNAL IN THE C ASE OF AMBA IMPEX (SUPRA). 18. BEFORE PARTING WITH THE MATTER IT IS PERTINENT TO MENTION HERE THAT EVEN IF THE DEPARTMENT TREATS SUCH RECEIPTS/IN COME-TAX AS RELATING TO EXPORT OF EARLIER YEARS DUE BENEFIT OF SECTION 80HHC CAN BE GIVEN AS PER PROVISIONS OF SECTION 155(13) B Y AMENDING THE ASSESSMENT ORDER OF RESPECTIVE ASSESSMENT YEAR. ITA NO.3774/AHD/2007 A.Y. 2004-05 ACIT CIR-5 SURAT V. M/S. STAR RAYS PAGE 5 8. IN OUR CONSIDERED VIEW THE GAIN ON ACCOUNT OF FO REIGN EXCHANGE FLUCTUATION WOULD BE CONSIDERED FOR DEDUCTION IN TH E YEAR TO WHICH SALES IN RESPECT OF WHICH REALIZATION WAS DELAYED AND WHICH RESULTED IN GAIN DUE TO FOREIGN EXCHANGE FLUCTUATION. THE TRIBUNAL HELD THA T DUE BENEFIT OF SEC.80HHC SHOULD BE GIVEN AS PER PROVISION OF SEC.155(13) OF THE ACT WE THEREFORE RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OF FICER TO CONSIDER THE FOREIGN EXCHANGE GAINS IN THE ASSESSMENT YEAR TO WHICH THE SALES RELATING TO WHICH THE FOREIGN EXCHANGE FLUCTUATION GAIN PERTAINED ON ACCO UNT OF DELAYED RECOVERY OF DUES FROM THE DEBTORS. WE ACCORDINGLY RESTORE THE F ILE TO THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH CONSIDERING ABOVE OBSERV ATIONS. AS A RESULT THIS GROUND OF REVENUES APPEAL IS ALLOWED FOR STATISTIC AL PURPOSES. 9. IN THE RESULT APPEAL OF REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 21/05/2010 SD/- SD/- (T.K.SHARMA) (D.C.AGRAWAL) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD DATED : 21/05/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- III SURAT 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD