TMI Blog2010 (5) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the said amount represents the excess realisation of export bills due to higher conversion rates. Thus directions should be issued to treat the foreign exchange fluctuation amount as a part of export turnover for the purpose of calculating deduction under section 80HHC in the exercise under section 154. 3. The learned Commissioner of Income-tax (Appeals) erred in law and on facts in not allowing to reduce the indirect cost by an amount of ₹ 37,03,362 equivalent of 10 per cent. of export incentives and interest while calculating the indirect costs attributable to exports ignoring the decision in the case of Surendra Engg. Corporation v. Asst. CIT [2004] 268 ITR (AT) 118 (Bom) ; [2003] 86 ITD 102 and approved by the apex court in Hero Exports v. CIT [2007] 295 ITR 454. Thus, the reduction of the said amount from the indirect cost should be allowed. 4. The learned Commissioner of Income-tax (Appeals) erred in allowing the adjustment of the loss of ₹ 68,37,193 derived from export of trading goods under section 80HHC(3) against 90 per cent. of the export incentives under the proviso to section 80HHC(3) ignoring that it was a debatable issue and cannot be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces in hand were ignored. The treatment adopted by the assessee is correct as he is following mercantile method of accounting, which is duly mentioned in the tax audit report also. On perusal of your proposal, it is seen that profit and gains from business under section 28 has been computed by considering the value of export incentives at ₹ 3,56,16,653 whereas for the purpose of claiming deduction, their value has been taken at ₹ 2,17,30,601. There cannot be different connotation of clauses (iiia), (iiib) and (iiic) of section 28 for the purpose of section 28 and section 80HHC. Amount referred to in proviso to section 80HHC(3) is 90 per cent. of the amount included under section 28. Thus, if it is decided that the value of import entitlements transferred is to be considered for the purpose, then the difference of ₹ 1,38,86,052 (being closing stock of import entitlements - opening stock of import entitlements, i.e., ₹ 2,61,39,938 - 1,22,53,886) should be excluded from the declared profits from the business as per profit and loss account because the profit for the year stood increased by this figure. As regards the contention that domestic turnover of computer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit on gross export incentives. As per the formula given in section, first 90 per cent. of the export incentives are deducted from the profits of the business and the same is enhanced by the 90 per cent. of the export incentives in the same proportion as the export turnover based on the total turnover of the business carried on by the assessee. Nowhere it refers to the fact as propounded by the assessee that the loss incurred is to be ignored and export benefit is to be allowed on export incentives without adjusting such loss. It is clearly referred to in the Act itself which does not require any reasoning or investigation of facts. The issue has reached finality in view of the apex court decision in the cases of IPCA Laboratory Ltd. [2004] 266 ITR 521 and A.M. Moosa v. CIT [2007] 294 ITR 1 as well as the Special Bench of Mumbai in the case of B. Sorabji v. ITO [2005] 95 ITD 540. Now it has become law of the land even before the Act was amended with effect from April 1, 1998 by virtue of the Taxation Laws (Amendment) Act, 2005. Hence, there is no merit in the argument of the appellant that the loss cannot be adjusted against the export incentives. The issue is neither contentious n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never claimed this item at all despite the fact that the export benefit was duly claimed after obtaining a certificate in form No. 10CCAA from 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 be resorted to in order to make a revision in a matter on which there could be two plausible interpretations. A decision on a debatable point of law is not a mistake apparent from record and the same cannot be rectified under section 154 of the Income-tax 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. v. CIT [2006] 284 ITR 323 any fresh claim made subsequent to the filing of return should be in the form of return only. It cannot raise fresh claims in the rectification proceedings initiated by the Assessing Officer. Hence the Assessing Officer is justified in rejecting the claim of the assessee on the issue of allowing 10 per cent. as indirect cost. In the impugned order, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chartered accountant and the working supplied with the return of income. The Assessing Officer allowed the claim after due deliberation and section 80HHC working of the assessee was accepted, the same depends upon many factors, which require adjustments, additions and analysis of turnover and profits, etc. If there was any possible loss to revenue caused by the working of the assessee the same should not have been accepted by the Assessing Officer in the first place and otherwise revision proceedings under section 263 and reassessment proceedings under section 147 could have been undertaken as provided by the Act. The Assessing Officer chose it as a mistake apparent under section 154 from the record which is not the applicable provision of law to facts looking from any angle, the mistake in order to be rectifiable should be a self-evident and mistake which is tried to be corrected by a complicated process of investigation, arguments, facts and on judicial pronouncement as in these facts cannot be called a mistake apparent from record. Rectification proceedings cannot be invoked to review his order by the Assessing Officer's. Reliance was placed on the following decisions for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 for income escaped assessment and for glaring mistake rectification under section 154. Merely because there is a power to rectify, each and every decided issue resulting in possible loss of revenue of change of opinion of the Assessing Officer cannot be rectified under section 154. The sine qua non of rectification power is existence of a glaring, patent and obvious mistake, which does not cover each and every decided issue which may result in possible loss of revenue. In our view, the rectifications made in the impugned order under section 154 fall in the category of review of the order by the Assessing Officer which is not covered under section 154. Consequently, we hold that the impugned order under section 154 does not conform to the provisions in this behalf, i.e., rectification of mistake. Under these circumstances, we have no alternate but to set aside the impugned order passed by the Assessing Officer under section 154 and allow the assessee's claim in this behalf. Since we have held the proceedings under section 154 to be bad in law we do not go into merits. 11. In the result, the assessee's appeal is allowed on the above terms. 12. The order pronounced i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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