M/s. CIPLA LTD., MUMBAI v. ACIT CENT. CIR. - 2, MUMBAI

ITA 4006/MUM/2006 | 2000-2001
Pronouncement Date: 17-02-2010 | Result: Allowed

Appeal Details

RSA Number 400619914 RSA 2006
Assessee PAN AAACC1450B
Bench Mumbai
Appeal Number ITA 4006/MUM/2006
Duration Of Justice 3 year(s) 7 month(s) 19 day(s)
Appellant M/s. CIPLA LTD., MUMBAI
Respondent ACIT CENT. CIR. - 2, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 17-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 17-02-2010
Date Of Final Hearing 12-01-2011
Next Hearing Date 12-01-2011
Assessment Year 2000-2001
Appeal Filed On 28-06-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI P.M.JAGTAP AM & SMT. P.MADHAVI DEVI JM. I.T.A.NO.4318 & 4319/MUM/2006 - A.YRS. 1998-99 & 2000-01 ASST. COMMISSIONER OF I.T. CENTRAL CIRCLE 2 MUMBAI VS. M/S CIPLA LIMITED 289 BELLASIS ROAD MUMBAI CENTRAL MUMBAI 400 008 PAN NO.AAACC 1450 B (APPELLANT) (RESPONDENT) AND I.T.A.NOS.6617 & 4006/MUM/2006 A.YRS. 1999-2000 & 2000-01 M/S CIPLA LIMITED MUMBAI ASST. C.I.T. C.C.2 MUMBAI (APPELLANT) (RESPONDENT) REVENUE BY : SHRI PRAGATI KUMAR. ASSESSEE BY : SHRI D. P. BAPAT. O R D E R PER P.MADHAVI DEVI JM: THESE CROSS APPEALS ARE DIRECTED AGAINST CIT[A] S SEPARATE ORDERS FOR THE ASSESSMENT YEAR 1992-93 RESPECTIVELY . THEY ARE CONSOLIDATED AND HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2. I.T.A.NO.4006/MUM/06 A.Y 2000-01[ASSESSEES APPEA L] : IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING G ROUNDS OF APPEAL- 1. THE COMMISSIONER OF INCOME-TAX [APPEALS] CENTRA L-1 MUMBAI [HEREINAFTER REFERRED TO AS THE CIT[A] ] ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME- TAX CENTRAL CIRCLE-2 MUMBAI [HEREINAFTER CALLED T HE AO] IN INITIATING THE PROCEEDINGS U/S.147 OF THE INCOME TA X ACT 2 WITHOUT THE SATISFACTION OF THE CONDITIONS PRECEDEN T FOR DOING SO. WITHOUT PREJUDICE TO THE GENERALITY IT IS SUBMITTED THAT THE RE- ASSESSMENT IS FOUNDED ON MERE CHANGE OF OPINION. YOUR APPELLANT THEREFORE PRAYS THAT THE ASSESSMENT FRAMED BY THE AO U/S.143[3] READ WITH SECTION 147 OF THE INCOME T AX ACT BE ANNULLED. 2. WITHOUT PREJUDICE TO THE FIRST GROUND OF APPEAL YOUR APPELLANT SUBMITS THAT: A] THE LEARNED CIT[A] HAS ERRED IN UPHOLDING THE ACTION OF THE AO IN RECOMPUTING THE AMOUNT OF DEDUCTION AVAILABLE U/ S.80IB OF THE INCOME TAX ACT BY ESTIMATING THE PROFITS ON A G LOBAL BASIS. IT IS SUBMITTED THAT THE LEARNED AO DID NOT HAVE A NY AUTHORITY TO DO SO IN VIEW OF THE FACT THAT THE LEARNED CIT[A] HAD NOT APPROVED AT THE VERY THRESHOLD THE VALIDITY OF TH E GLOBAL METHOD ADOPTED BY THE AO FOR ESTIMATING THE PROFITS DERIVED U/S.80-U/S.80IB[10] IN THE APPELLATE PROCEEDINGS AR ISING FROM THE ORIGINAL ASSESSMENT AND ALL THE ASPECTS CONCERN ING THIS ISSUE HAD MERGED WITH THE ORDER OF THE CIT[A] . FURTHER THE LEARNED AO HAS ERRED IN HOLDING THAT RECEIPTS BY WAY OF INSURANCE CLAIMS PROFIT FROM JOINT VENTURE AND TECHNOLOGY FEES DO NOT QUALIFY TO BE INCLUDED IN TH E PROFITS DERIVED FROM THE UNDERTAKING IN THE CONTEXT OF SECT ION 80IB OF THE ACT. B] THE LEARNED CIT[A] FURTHER ERRED IN CONFIRMING THE ACTION OF THE AO IN HOLDING THAT RECEIPTS BY WAY OF DEPB CRE DITS INSURANCE CLAIMS MISCELLANEOUS RECEIPTS SALE OF S CRAP SALES TAX SETOFF/REFUNDS PROFIT FROM JOINT VENTURE AND T ECHNOLOGY FEES DO NOT CONSTITUTE PROFITS FROM BUSINESS IN THE CONTEXT OF EXPLANATION (BAA) TO SECTION 80-U/S.80HHC OF THE AC T. IT IS FURTHER SUBMITTED THAT THE LEARNED AO DID NOT HAVE ANY AUTHORITY TO DO SO IN VIEW OF THE FACT THAT THIS IS SUE HAD MERGED WITH THE ORDER OF THE CIT[A] . WITHOUT PREJUDICE THE LEARNED CIT[A] HAS ERRED IN NOT DIRECTING THE AO TO INCREASE THE AMOUNT OF DEDUCTIO N U/S.80- U/S.80HHC(3) OF THE ACT WITH REFERENCE TO DEPB CRED ITS IN THE PROPORTION OF EXPORT TURNOVER TO THE TOTAL TURNOVER . 3. AS REGARDS GROUND NO.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME ON 30-11-2000 DECLARING TOTAL INCOME AT RS.105 82 41 790/-. THE A SSESSEE CLAIMED DEDUCTION U/S.80HHC AND ALSO U/S.80IA OF THE INCOME TAX ACT. THE 3 ASSESSMENT WAS COMPLETED U/S.143(3) VIDE ORDER DATE D 12-3-2003 ASSESSING THE NET TAXABLE INCOME AT RS.114 43 77 86 0/-. SUBSEQUENTLY IT CAME TO THE NOTICE OF THE DEPARTMENT THAT THE AS SESSEE HAS BEEN ALLOWED HIGHER DEDUCTIONS U/S.80IA AND U/S.80HHC TH AN THE ACTUAL ALLOWABLE. AO THEREFORE REOPENED THE ASSESSMENT U/S .147 AFTER RECORDING THE FOLLOWING REASONS- I. WHILE WORKING OUT THE DEDUCTION U/S.80-IA BY ADO PTING THE GLOBAL PROFIT METHOD THE DEPARTMENT HAS ADOPTED TH E FIGURE OF BOOK PROFIT OF THE COMPANY INSTEAD OF ASSESSED INCO ME. IN THE BOOKS OF ACCOUNT ASSESSEE HAS DEBITED RS.1 33 99 18 6/- AS DEPRECIATION (AS PER COMPANY LAW) WHEREAS THE DEPR ECIATION CLAIM AS PER I.T.ACT IS RS.22 11 23 222/-. THIS HAS RESULTED INTO EXCESS ALLOWANCE OF DEDUCTION U/S.80IA AMOUNTING TO RS.1 43 45 577/-RS.14 93 07 372/-RS.13 49 61 795). II. SIMILARLY WHILE WORKING THE DEDUCTION U/S.80HH C OF THE I.T.ACT THE AO DIDNT REDUCE THE RECEIPT FROM INSU RANCE CLAIM TECHNOLOGY TRANSFER CHARGES ROYALTY AND OTHER MISC ELLANEOUS INCOME FROM THE PROFITS AND GAINS OF THE BUSINESS. IN RESPONSE TO THE NOTICE U/S.148 OF THE ACT THE AS SESSEE VIDE LETTER DATED 15-4-2005 STATED THAT THE REVISED RETURN FILE D ON 28-3-2002 MAY BE TREATED AS THE RETURN FILED IN RESPONSE TO NOTIC E U/S.148. 4. THE ASSESSEE HOWEVER VIDE LETTER DATED 9-1-06 RAISED OBJECTION TO THE REOPENING OF THE ASSESSMENT ON THE GROUND TH AT THE RE- ASSESSMENT PROCEEDINGS HAVE BEEN INITIATED ONLY DUE TO THE CHANGE OF OPINION AND ALSO THAT THE ISSUE OF COMPUTATION OF T HE AMOUNT ELIGIBLE FOR DEDUCTION U/S.80IA HAS NOT BEEN APPROVED BY THE CIT[A] AND THEREFORE THE ISSUE STANDS MERGED WITH THE ORDER O F THE CIT[A] AND IS BEYOND THE SCOPE OF RE-ASSESSMENT PROCEEDINGS. REGA RDING THE COMPUTATION OF DEDUCTION U/S.80HHC IT WAS SUBMITTE D THAT THERE WERE NO NEW FACTS BROUGHT ON RECORD AND THE RE-ASSESSMEN T PROCEEDINGS ARE 4 ONLY DUE TO CHANGE OF OPINION. THE AO HOWEVER REJ ECTED THE OBJECTIONS OF THE ASSESSEE AND PROCEEDED TO RE-ASSE SS THE INCOME OF THE ASSESSEE BY RECOMPUTING THE DEDUCTIONS U/S.80IA AND 80HHC OF THE ACT. 5. AGGRIEVED ASSESSEE FILED AN APPEAL BEFORE THE C IT[A] WHO CONFIRMED THE ORDER OF THE AO AS FAR AS THE REOPENI NG OF THE ASSESSMENT IS CONCERNED WITH REGARD TO THE COMPUTAT ION OF DEDUCTION U/S.80IA TAKING THE GROSS TOTAL INCOME INTO CONSIDE RATION INSTEAD OF THE BOOK PROFITS TAKEN BY THE AO BY HOLDING THAT THE RE OPENING OF THE ASSESSMENT HAS BEEN DONE WITHIN FOUR YEARS OF THE R ELEVANT ASSESSMENT YEAR AND CONDITIONS AS LAID DOWN IN SEC. 147 ARE FULLY MET. HOWEVER AS REGARDS COMPUTATION OF DEDUCTION U/S.80 IA ON THE GLOBAL PROFIT METHOD THE CIT[A] HELD THAT THE SAME IS NO T PERMISSIBLE AS THE CIT[A] AGAINST PROCEEDINGS U/S.143[3] HAS ALREADY DECIDED THE SAME AND THE ORDER OF THE AO HAS MERGED WITH THAT OF THE CIT[A]. AS REGARDS THE ALLOWABILITY OF OTHER INCOME AS ELIGIBL E PROFITS FOR DEDUCTION U/S.80IA IN RESPECT OF DUTY DRAW BACKS MISCELLANEO US RECEIPTS INSURANCE CLAIMS SALES TAX SET OFF/REFUNDS SALE O F SCRAP ETC. HE HELD THAT THE ISSUE STANDS COVERED BY THE APPELLATE ORDE R PASSED BY THE LD. CIT[A] AND THEREFORE AO HAS NO AUTHORITY TO CONS IDER THE SAID ISSUES AFRESH IN THE RE-ASSESSMENT PROCEEDINGS. HE ACCORD INGLY GRANTED RELIEF TO THE ASSESSEE. AS REGARDS THE OTHER INCOME RELATING TO PROFITS FROM JOINT VENTURES INSURANCE CLAIM TECHNOLOGY FE E HE HELD THAT THE RECEIPTS ARE SIMILAR IN NATURE AND IT CANNOT BE SAI D THAT SUCH INCOME IS 5 DIRECTLY DERIVED FROM THE INDUSTRIAL UNDERTAKING AS HELD BY THE HON'BLE SUPREME COURT IN THE CASES OF STERLING FOODS [237 I TR 579] AND PANDIAN CHEMICALS [262 ITR 278]. HE FURTHER OBSERVE D THAT THE ASSESSEE IN ITS SUBMISSIONS HAS SUBMITTED THAT INCO ME UNDER THE ABOVE HEADS HAVE NOT BEEN CONSIDERED AS ELIGIBLE PROFIT O F ELIGIBLE UNITS AND SINCE AO HAS ALREADY TAKEN INTO ACCOUNT THE ITEMS I N THE ORIGINAL ASSESSMENT ORDER HE HELD THAT NO FRESH ADJUDICATIO N/CONSIDERATION IN RE-ASSESSMENT PROCEEDINGS IS CALLED FOR. ON THE ISS UE RELATING TO DEDUCTION U/S.80HHC IN RESPECT OF OTHER INCOME ON A CCOUNT OF DEPB INSURANCE CLAIM MISCELLANEOUS RECEIPTS SALE OF SC RAP SALES TAX SET OFF/REFUND PROFIT FROM JOINT VENTURES AND TECHNOLO GY FEE HE OBSERVED THAT THIS WAS NOT THE SUBJECT MATTER OF CONSIDERATI ON BEFORE THE CIT[A] IN THE EARLIER APPELLATE ORDER AGAINST ORDER U/S.14 3(3) AND THEREFORE AO IS JUSTIFIED TO TAKE INTO ACCOUNT THE ISSUE IN R E-ASSESSMENT PROCEEDINGS. AS REGARDS THE DEPB CREDIT HE FOLLOWE D HIS OWN ORDER FOR A.Y 04-05 IN ASSESSEES OWN CASE TO HOLD THAT THE A SSESSEE IS NOT ENTITLED TO DEDUCTION U/S.80HHC IN VIEW OF RETROSPE CTIVE AMENDMENT BROUGHT INTO STATUTE AND THE ASSESSEE IS NOT FULFIL LING THE TERMS AND CONDITIONS AS LAID DOWN THEREIN EVEN FOR THE RELEVA NT ASSESSMENT YEAR. AS REGARDS THE INSURANCE CLAIM MISCELLANEOUS RECEI PTS SALE OF SCRAP SALES TAX SET OFF/REFUND PROFIT ON JOINT VENTURES AND TECHNOLOGY FEE ETC. CIT[A] FOLLOWED HIS OWN ORDER FOR A.Y 04-05 AND CONFIRMED THE ORDER OF THE AO. 6 6. AGGRIEVED BY THE RELIEFS GIVEN BY THE CIT[A] T HE REVENUE IS IN APPEAL BEFORE US AND AGGRIEVED BY THE CONFIRMATION OF THE ORDER OF THE AO THE ASSESSEE IS IN APPEAL BEFORE US. 7. AS REGARDS GROUND NO.1 OF THE ASSESSEES APPEAL RELATING TO THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW THAT THE RE-ASSESSMENT IS ON MERE CHANGE OF O PINION AND NO NEW FACTS HAVE BEEN BROUGHT ON RECORD BY THE AO FOR REOPENING OF THE ASSESSMENT. THE SECOND GROUND ON WHICH THE VALIDITY OF THE REOPENING IS CHALLENGED IS ON THE DOCTRINE OF MERGER. HE SUBM ITTED THAT THE ASSESSMENT ORDER U/S.143[3] HAD BEEN CHALLENGED BEF ORE THE CIT[A] WHO HAD CONSIDERED THE SAME AND HAD PASSED THE APPE LLATE ORDER AND THEREFORE THE ASSESSMENT ORDER HAS MERGED WITH THE APPELLATE ORDER AND THE REOPENING OF ASSESSMENT SUBSEQUENT THERETO WOULD AMOUNT TO REOPENING OF THE ORDER OF THE CIT[A] WHICH IS NOT PERMISSIBLE. IN SUPPORT OF THIS CONTENTIONS OF MERGER THE LD. COUN SEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF THE HON'BL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. P. MUNCHERJI AND COMPA NY [167 ITR 671]. ON THE ISSUE OF CHANGE OF OPINION THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE FOLLOWING DECISIONS- A) ASTEROIDS TRADING AND INVESTMENTS PVT. LTD. VS. DY. CIT 308 ITR 190 (BOM) & B) ASIANT PAINTS LTD. VS DY. CIT 308 ITR 195 (BOM) 8. THE LD. DR ON THE OTHER HAND SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHERE THERE IS UNDER-ASSESSMENT 7 OF INCOME IT WOULD AMOUNT TO ESCAPEMENT OF INCOME AND THE AO WAS WITHIN HIS POWERS TO REOPEN THE SAME WITHIN FOUR YE ARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. ACCORDING TO HIM REO PENING OF THE ASSESSMENT IS DONE WITHIN FOUR YEARS AS THE AO INST EAD OF TAKING THE GROSS TOTAL INCOME WHILE COMPUTING DEDUCTION U/S.80 IA HAS ERRONEOUSLY TAKEN THE BOOK PROFIT WHICH HAS RESULTE D IN UNDER- ASSESSMENT OF INCOME AND ALLOWANCE OF EXCESS DEDUCT ION U/S.80IA OF THE ACT. HE SUBMITTED THAT THE DOCTRINE OF MERGER I S ALSO NOT APPLICABLE IN THIS CASE AS THE CIT[A] IN THE APPEAL AGAINST TH E ASSESSMENT ORDER U/S.143[3] HAS ONLY CONSIDERED THE METHOD OF COMPUT ATION OF DEDUCTION U/S.80IA AND NOT AS TO WHETHER THE GROSS TOTAL INCOME OR THE BOOK PROFIT SHOULD BE TAKEN INTO CONSIDERATION FOR THE SAID COMPUTATION. AS REGARDS THE DECISIONS RELIED UPON B Y THE LD. COUNSEL FOR THE ASSESSEE ON THE REOPENING OF THE ASSESSMENT HE SUBMITTED THAT THEY ARE DISTINGUISHABLE ON THE FACTS. 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THEIR RIVAL CONTENTIONS WE FIND THAT REOPENING OF THE ASSESSME NT IS WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND IT IS ON TWO GROUNDS I) THAT THE AO HAS ERRONEOUSLY TAKEN THE BOOK PROFI T INTO CONSIDERATION AS AGAINST THE GROSS TOTAL INCOME FOR COMPUTATION OF DEDUCTION U/S.80IA AND (II) THE WORKING OF THE DEDUCTION U/S.80HHC OF THE ACT. 8 WE HAVE ALSO PERUSED THE ORDER OF THE CIT[A] AGAIN ST THE ASSESSMENT ORDER U/S.143(3) AND WE FIND THAT THE ISSUE OF ADOP TION OF THE FIGURE OF BOOK PROFIT OF THE COMPANY INSTEAD OF THE GROSS TOT AL INCOME FOR COMPUTATION OF DEDUCTION U/S.80IA WAS NOT BEFORE TH E CIT[A]. THEREFORE IT CANNOT BE SAID THAT THE ORDER OF THE AO HAS MERGED WITH THE ORDER OF THE CIT[A] . THEREFORE WE UPHOLD THE ORDER OF THE CIT[A] TO THE EFFECT THAT REOPENING OF THE ASSESSMENT ON T HIS GROUND IS VALID. AS REGARDS THE WORKING OF DEDUCTION U/S.80HHC OF TH E ACT WE FIND THAT THIS ISSUE IS ALSO NOT CONSIDERED BY THE CIT[A] AN D THEREFORE THE REOPENING OF THE ASSESSMENT ON THIS GROUND IS ALSO UPHELD. AS THE REOPENING OF THE ASSESSMENT IS DONE WITHIN FOUR YEA RS FROM THE END OF THE RELEVANT ASSESSMENT YEAR DUE TO THE PRIMA FACIE BELIEF OF THE AO THAT THERE IS ESCAPEMENT OF INCOME BY ALLOWING EXCE SS DEDUCTIONS U/S.80IA & 80HHC WE ARE OF THE OPINION THAT THERE WAS NO CHANGE OF OPINION AND REOPENING OF THE ASSESSMENT DONE IS JUS TIFIED. AS REGARDS THE ASSESSEES ARGUMENTS RELATING TO THE DOCTRINE O F MERGER AND HIS RELIANCE UPON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF P. MUNCHERJI AND COMPANY [CITED SUPRA] IS CONCERNED W E FIND THAT THE SAID CASE IS DISTINGUISHABLE ON FACTS WITH THAT OF THE ASSESSEE. IN THE SAID CASE THE HON'BLE HIGH COURT WAS DEALING WITH THE POWERS OF THE COMMISSIONER U/S.263 AND HAS HELD THAT THE ORDER OF THE INCOME TAX OFFICER UNDER APPEAL COMPLETELY IN THE ORDER OF THE APPELLATE ASSTT. COMMISSIONER AND THEREFORE IT IS NOT AMENABLE JURIS DICTION U/S.263 OF THE ACT. BUT THE HON'BLE BOMBAY HIGH COURT IN THE L ATER CASE OF CIT VS. 9 RATILAL BACHARILAL AND SONS REPORTED IN 282 ITR 457 (BOM) AFTER CONSIDERING THE ABOVE DECISION HAS HELD THAT THE DO CTRINE OF MERGER COULD NOT APPLY TO THAT PART OF THE ORDER WHICH WAS NOT A SUBJECT MATTER OF APPEAL SO AS TO EXCLUDE THE REVISIONAL J URISDICTION OF THE COMMISSIONER U/S.263. THEREFORE WE UPHOLD THE FIND ING OF THE CIT[A] ON THIS ISSUE ALSO. IN VIEW OF THE ABOVE DISCUSSION GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS REJECTED. 10. AS REGARDS GROUND NO.2(A) WE FIND THAT THE CIT [A] AGAINST THE ORIGINAL ASSESSMENT ORDER HAS ALREADY CONSIDERED TH E METHOD OF COMPUTING THE AMOUNT OF DEDUCTION AVAILABLE U/S.80IB OF THE ACT BY ESTIMATING THE PROFITS ON GLOBAL BASIS AND HAS REVE RSED THE ORDER OF THE AO AND THEREFORE THIS ISSUE HAS ALREADY MERGED WI TH THE ORDER OF THE CIT[A] AND AS SUCH CANNOT BE RECONSIDERED BY THE A O IN THE RE- ASSESSMENT PROCEEDINGS. THE FINDING OF THE CIT[A] AGAINST THE ORDER U/S.143[3] R.W.S. 147 IS THAT THE ACTION OF THE AO IN ADOPTING THE GROSS TOTAL INCOME AFTER TAKING INTO CONSIDERATION THE DE PRECIATION AS PER INCOME TAX ACT IN GRANTING DEDUCTION U/S.80IB OF THE ACT IS JUSTIFIED. THEREFORE THIS GROUND OF APPEAL RAISED BY THE ASSE SSEE IS INFRUCTUOUS AS THE ASSESSEE HAS ALREADY BEEN GRANTED RELIEF BY THE CIT[A] IN THE APPEAL FILED AGAINST THE ORDER U/S.143(3). 11. AS REGARDS GROUND NO.2(B) WE FIND THAT THIS IS SUE HAS NOT BEEN DECIDED BY THE CIT[A] IN THE ORIGINAL APPELLATE PR OCEEDINGS AND THEREFORE HAS NOT MERGED WITH THE SAID ORDER AND H ENCE IT CAN BE 10 CONSIDERED IN THE RE-ASSESSMENT PROCEEDINGS. THEREF ORE THIS GROUND OF APPEAL OF THE ASSESSEE IS REJECTED. 12. AS REGARDS WITHOUT PREJUDICE GROUND RELATING TO THE COMPUTATION OF DEDUCTION U/S.80HHC WITH REFERENCE TO DEPB CREDI T WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION OF THE SPECIA L BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS REPORTED IN 318 ITR [AT] 87 AND HAS TO BE RECOMPUTED IN ACCORDANCE WITH THE SAI D DECISION. THEREFORE THIS GROUND OF APPEAL IS ALLOWED WITH A DIRECTION TO THE AO TO RECOMPUTE THE DEDUCTION U/S.80HHC (3) IN ACCORDA NCE WITH THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL CITED SUPRA. THIS GROUND IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT ASSESSEES APPEAL IN I.T.A.NO.400 6/M/06 FOR A.Y 2000-01 IS PARTLY ALLOWED. 14. I.T.A.NO.6617/M/06 A.Y 1999-2000 [ASSESSEES APPEAL] : IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- 1. THE COMMISSIONER OF INCOME-TAX [APPEALS] CENTRA L-1 MUMBAI [HEREINAFTER REFERRED TO AS THE CIT[A] ] ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME- TAX CENTRAL CIRCLE-2 MUMBAI K[HEREINAFTER CALLED THE AO] IN INITIATING THE PROCEEDINGS U/S.147 OF THE INCOME TA X ACT WITHOUT THE SATISFACTION OF THE CONDITIONS PRECEDEN T FOR DOING SO. WITHOUT PREJUDICE TO THE GENERALITY IT IS SUBMITTED THAT THE RE- ASSESSMENT IS FOUNDED ON MERE CHANGE OF OPINION. YOUR APPELLANT THEREFORE PRAYS THAT THE ASSESSMENT FRAMED BY THE AO U/S.143[3] READ WITH SECTION 147 OF THE INCOME T AX ACT BE ANNULLED. 2. WITHOUT PREJUDICE TO THE FIRST GROUND OF APPEAL YOUR APPELLANT SUBMITS THAT: 11 A] THE LEARNED CIT[A] HAS ERRED IN UPHOLDING THE ACTION OF THE AO IN RECOMPUTING THE AMOUNT OF DEDUCTION AVAILABLE U/ S.80IB OF THE INCOME TAX ACT BY ESTIMATING THE PROFITS ON A G LOBAL BASIS. IT IS SUBMITTED THAT THE LEARNED AO DID NOT HAVE A NY AUTHORITY TO DO SO IN VIEW OF THE FACT THAT THE LEARNED CIT[A] HAD NOT APPROVED AT THE VERY THRESHOLD THE VALIDITY OF TH E GLOBAL METHOD ADOPTED BY THE AO FOR ESTIMATING THE PROFITS DERIVED U/S.80-U/S.80IB[10] IN THE APPELLATE PROCEEDINGS AR ISING FROM THE ORIGINAL ASSESSMENT AND ALL THE ASPECTS CONCERN ING THIS ISSUE HAD MERGED WITH THE ORDER OF THE CIT[A] . FURTHER THE LEARNED AO HAS ERRED IN HOLDING THAT RECEIPTS BY WAY OF INSURANCE CLAIMS PROFIT FROM JOINT VENTURE AND TECHNOLOGY FEES DO NOT QUALIFY TO BE INCLUDED IN TH E PROFITS DERIVED FROM THE UNDERTAKING IN THE CONTEXT OF SECT ION 80IB OF THE ACT. B] THE LEARNED CIT[A] FURTHER ERRED IN CONFIRMING THE ACTION OF THE AO IN HOLDING THAT RECEIPTS BY WAY OF DEPB CRE DITS INSURANCE CLAIMS MISCELLANEOUS RECEIPTS SALE OF S CRAP SALES TAX SETOFF/REFUNDS PROFIT FROM JOINT VENTURE AND T ECHNOLOGY FEES DO NOT CONSTITUTE PROFITS FROM BUSINESS IN THE CONTEXT OF EXPLANATION (BAA) TO SECTION 80-U/S.80HHC OF THE AC T. IT IS FURTHER SUBMITTED THAT THE LEARNED AO DID NOT HAVE ANY AUTHORITY TO DO SO IN VIEW OF THE FACT THAT THIS IS SUE HAD MERGED WITH THE ORDER OF THE CIT[A] . WITHOUT PREJUDICE THE LEARNED CIT[A] HAS ERRED IN NOT DIRECTING THE AO TO INCREASE THE AMOUNT OF DEDUCTIO N U/S.80HHC(3) OF THE ACT WITH REFERENCE TO DEPB CRED ITS IN THE PROPORTION OF EXPORT TURNOVER TO THE TOTAL TURNOVER . C) THE LEARNED CIT[A] FURTHER ERRED IN CONFIRMING THE ACTION OF THE AO IN ADDING TO THE INCOME OF YOUR APPELLANT SU M OF RS.7 98 84 453/- ON ACCOUNT OF MODVAT CREDIT ON THE OPENING STOCK. WITHOUT PREJUDICE THE LEARNED AO OUGHT TO HAVE MAD E CORRESPONDING ADJUSTMENT BY ENHANCING THE AMOUNT OF PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING QUALIFIED F OR RELIEF U/S.80-IA OF THE ACT. 15. GROUND OF APPEAL NO.1 IS SIMILAR TO GROUND OF A PPEAL NO.1 RAISED FOR A.Y 2000-01 AND FOR THE DETAILED REASONS GIVEN THEREIN THIS GROUND IS REJECTED. 12 16. GROUND OF APPEAL NO.2(A) IS SIMILAR TO GROUND O F APPEAL NO.2(A) RAISED FOR A.Y 2000-01 AND FOR THE REASONS GIVEN TH EREIN THIS GROUND IS REJECTED. 17. GROUND OF APPEAL NO.2(B) IS SIMILAR TO GROUND O F APPEAL NO.2(B) RAISED FOR A.Y 2000-01 AND FOR THE DETAILED REASONS GIVEN THEREIN THIS GROUND IS REJECTED. AS REGARDS THE WITHOUT PREJUDIC E GROUND THIS IS SIMILAR TO THE WITHOUT PREJUDICE GROUND RAISED IN T HE APPEAL FOR A.Y 2000-01 AND FOR THE REASONS GIVEN THEREIN THIS GROU ND IS ALLOWED FOR STATISTICAL PURPOSES. 18. AS REGARDS GROUND NO.2 IT IS SUBMITTED BEFORE US THAT THIS ISSUE IS COVERED BY THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF MAHAVIR ALUMINIUM REPORTED IN 299 ITR 77. RESPECTFU LLY FOLLOWING THE SAME THIS ISSUE IS REMITTED TO THE FILE OF THE AO FOR RECONSIDERATION IN THE LIGHT OF THE ABOVE DECISION. THIS GROUND IS ACC ORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 19. IN THE RESULT ASSESSEES APPEAL IN I.T.A.NO.661 7/M/06 FOR A.Y 1999-2000 IS ALLOWED. 20. I .T.A.NO.4318/M/06 A.Y 98-99 [REVENUES APPEAL]: THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE CIT[A] HAS ER RED IN CANCELLING THE ASSESSMENT ORDER U/S.143[3] R.W.S. 147 OF THE ACT F OR WANT OF JURISDICTION. 21. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE MANUFACTURE OF DRUGS AND PHARMACEUTI CALS FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.84 58 91 000/- ALONG 13 WITH NECESSARY DOCUMENTS AND FORMS. THEREAFTER A R EVISED COMPUTATION OF INCOME WAS FILED VIDE LETTER DATED 1 0-4-2000 DECLARING TOTAL INCOME OF RS.84 72 87 010/-. THE ASSESSMENT W AS COMPLETED U/S.143[3] ON 25-1-2001 ASSESSING TOTAL INCOME OF T HE ASSESSEE AT RS.90 63 77 459/- WHEREIN DEDUCTIONS U/S.80IA AND 8 0HHC WERE REVISED. THE ASSESSEE FILED AN APPEAL AGAINST THE S AID ORDER BEFORE THE CIT[A] WHO PARTLY ALLOWED THE SAME BY REVISING THE ADDITIONS MADE ON ACCOUNT OF REDUCTION IN DEDUCTION U/S.80IA AND THE TOTAL INCOME WAS ACCORDINGLY COMPUTED AT RS.85 86 39 067/- BY COMPUT ING THE DEDUCTION U/S.80IA AT RS.12 80 24 979/- AND DEDUCTI ON U/S.80HHC AT RS.16 09 01 888/-. AGAINST THE SAME BOTH THE ASSES SEE AS WELL AS THE REVENUE HAVE PREFERRED APPEALS TO THE ITAT. WHILE THE APPEALS ARE STILL PENDING BEFORE THE ITAT IT CAME TO THE NOTIC E OF THE AO THAT THE ASSESSEE HAS BEEN ALLOWED HIGHER DEDUCTION U/S.80IA AND U/S.80HHC THAN THE ACTUALLY ALLOWABLE DEDUCTION. IT WAS OBSERV ED THAT WHILE WORKING OUT DEDUCTION U/S.80IA BY ADOPTING THE GLOB AL PROFIT METHOD THE DEPARTMENT HAS ADOPTED THE FIGURE OF BOOK PROFI T OF THE COMPANY INSTEAD OF THE ASSESSED INCOME AND IN THE BOOKS OF ACCOUNTS ASSESSEE HAS DEBITED RS.13 95 44 083/- AS DEPRECIATION AS PE R THE COMPANYS ACT WHEREAS THE DEPRECIATION CLAIMED AS PER INCOME T AX ACT IS ONLY RS.8 68 98 156/- WHICH HAS RESULTED INTO EXCESS ALL OWANCE OF DEDUCTION 80IA AMOUNTING TO RS.3 30 42 594/-. IT WAS FURTHER OBSERVED THAT WHILE WORKING DEDUCTION U/S.80HHC OF THE ACT AO DID NOT REDUCE THE RECEIPT FROM INSURANCE CLAIM TECHNOLOGY CHARGES ROYALTY A ND OTHER 14 MISCELLANEOUS INCOME FROM THE PROFITS AND GAINS OF THE BUSINESS AND THIS HAS RESULTED INTO EXCESS OF ALLOWANCE OF RS.26 92 678/-. OBSERVING THAT THE INCOME HAD ESCAPED ASSESSMENT NOTICE U/S. 148 WAS ISSUED. IN RESPONSE TO THE SAME ASSESSEE COMPANY VIDE LETTE R DATED 15-4-2005 STATED THAT THE RETURN FILED ON 30-11-98 ALONG WITH THE REVISED COMPUTATION FILED ON 10-4-2000 MAY BE TREAT ED AS RETURN FILED IN RESPONSE TO NOTICE U/S.148 OF THE ACT. THE REASO NS RECORDED FOR REOPENING WERE ALSO REQUESTED TO BE FURNISHED TO TH E ASSESSEE. THE REASONS WERE FURNISHED TO THE ASSESSEE ON 26-5-2005 . THE ASSESSEE QUESTIONED THE VALIDITY OF THE REOPENING OF THE ASS ESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSME NT YEAR AS THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE AO HOWEVER HELD THAT THE CASE OF THE ASSESSEE IS COVERED BY CLAUSE [3] O F EXPLANATION 2 TO SEC.147 AND THEREFORE HE REJECTED THE ASSESSEES OBJECTION AND PROCEEDED TO ASSESS THE INCOME OF THE ASSESSEE. 22. AGGRIEVED BY THE ORDER OF THE AO REJECTING THE ASSESSEES OBJECTION TO THE VALIDITY OF THE REOPENING OF THE A SSESSMENT AS WELL AS MERITS OF THE ADDITIONS ASSESSEE FILED AN APPEAL B EFORE THE CIT[A]. THE CIT[A] AFTER CONSIDERING THE ASSESSEES SUBMISSION S AND AFTER GOING THROUGH THE RECORDS OBSERVED THAT THE AO HAS NOWHE RE IN THE REASONS FOR REOPENING OF THE ASSESSMENT ALLEGED THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT OF ASSESSEES INCOME FOR T HAT ASSESSMENT 15 YEAR. HE ALSO CONSIDERED THE DECISION OF THE JURISD ICTIONAL HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD. [268 ITR 332] AND ALSO THE DECISION IN THE CASE OF DESAI BROTHERS LTD. VS. DCIT [272 ITR 3 35] AND CAME TO THE CONCLUSION THAT REOPENING OF THE ASSESSMENT U/S .147 OF THE ACT WAS NOT IN ACCORDANCE WITH LAW AND THE CONDITIONS A S LAID DOWN THEREIN WERE NOT SATISFIED AND THEREFORE THE REOPENING OF THE ASSESSMENT IS ITSELF NOT VALID AND VITIATES THE ASSESSMENT. HE A CCORDINGLY ANNULLED THE ASSESSMENT AND DID NOT GO INTO THE MERITS OF TH E CASE. AGGRIEVED BY THE ORDER OF THE CIT[A] THE REVENUE IS IN APPE AL BEFORE US. 23. THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE ORDER OF THE CIT[A] . 24. AFTER HEARING BOTH THE PARTIES AND AFTER GOING THROUGH THE MATERIAL ON RECORD WE FIND THAT UNDISPUTEDLY THE R EOPENING OF THE ASSESSMENT IS AFTER THE EXPIRY OF FOUR YEARS FROM T HE END OF THE RELEVANT ASSESSMENT YEAR. AS RIGHTLY POINTED OUT BY THE CIT[A] AO IN HIS REASONS FOR REOPENING HAS NOWHERE STATED THAT T HE ESCAPEMENT OF INCOME IS DUE TO THE FAILURE ON THE PART OF THE ASS ESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT OF ITS INCOME. AS HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CAS E OF HINDUSTAN LEVER LTD. [CITED SUPRA] THE ASSESSMENT CANNOT BE REOPENED UNLESS THE CONDITION SPECIFIED THERE-UNDER ARE SATISFIED I .E. FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR ASSESSMENT OF ITS INCOME. IN VIEW OF THE SAME WE DO NOT SEE ANY 16 REASON TO INTERFERE WITH THE ORDER OF THE CIT[A] A ND THE REVENUES APPEAL IS DISMISSED. 25. IN THE RESULT REVENUES APPEAL IS DISMISSED. 26. I.T.A.NO.4319/M/06 A.Y 2000-01 [REVENUES APPEAL ]: THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER- I. ON THE FACTS AND IN LAW THE LD. CIT[A] ERRED IN H OLDING THAT OTHER INCOME OF THE NATURE OF DUTY DRAWBACK MISCELLANEOUS RECEIPTS INTEREST SALES TAX SET OFF SALE OF SCRAP IS ELIGIBLE PROFIT FOR THE PURPOSES OF DEDUCT ION U/S.80IB OF THE ACT OF THE ELIGIBLE UNITS ON THE GRO UND THAT THE ISSUE STANDS COVERED BY THE APPELLATE ORDE R PASSED IN THE APPEAL AGAINST THE ORIGINAL ASSESSMEN T ORDER VIDE NO.CITA/CEENT.I/AP-5/2003-04 DATED 17-11 - 2003 WITHOUT APPRECIATING THAT THE SAID ORDER HAS N OT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL HAS BEEN FILED BEFORE THE ITAT ON 23-01-2004. 27. AS REGARDS THIS ISSUE WE FIND THAT THE CIT[A] IN THE ORDER AGAINST THE ASSESSMENT ORDER U/S.143(3) HAS ALREADY CONSIDERED THE ISSUE AND THEREFORE THE SAME CANNOT BE RECONSIDERED IN THE RE- ASSESSMENT PROCEEDINGS AS THE ORDER OF THE AO HAS A LREADY MERGED WITH THAT OF THE CIT[A] . WE THEREFORE UPHOLD THE ORDER OF THE CIT[A] AND THE GROUNDS RAISED BY THE REVENUE ARE REJECTED. 28. IN THE RESULT REVENUES APPEAL IN I.T.A.NO.4319/ M/06 FOR A.Y 2000-01 IS DISMISSED. ORDER PRONOUNCED ON THIS 17TH DAY OF FEBRUARY 201 0. SD/- SD/- (P.M.JAGTAP) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 17 TH FEBRUARY 2010. P/-* 17 COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY /ASST.REGISTRAR ITAT MUMBAI.