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Income Tax Officer, Ward 4 (4) , Ahmedabad Versus Rameshchandra S. Patel

ITA No. 505/AHD/2008 - Dated:- 27-10-2010 - Bhavnesh Saini (Judicial Member) And N. S. Saini (Accountant Member) For the Appellant : R. K. Dhanesta, D.R. For the Respondent : Urvashi Shodhan ORDER N. S. Saini (Accountant Member) This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-VIII, Ahmedabad, dated 6-11-2007. 2. Ground No.1 reads as under : 1. The Learned Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in .....

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x. We find that section 145A provides as under :- [Method of accounting in certain cases - Notwithstanding anything to the contrary contained in section 145,- (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be (i) in accordance with the method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount of any tax, d .....

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as the case may be, shall be deemed to be the income of the year in which it is received.] 4. Thus, it is observed that section 145A is applicable only for computing the income which is chargeable to tax under the head Profit and Gains from business or profession i.e. for computing income as per provisions of section 28 to 44DB of the Act. Hon'ble Supreme Court in the case of IPCA Laboratory Ltd., (supra) has held as under :- The words total turnover" in s. 80HHC have to be read as par .....

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d a ratio in which "business profits" under s. 28 had to be apportioned. Therefore, one has to give weightage not only to the words "total turnover" but also to the words "export turnover", "total export turnover" and "business profits". In the circumstances, the words "total turnover" in the above formula cannot be interpreted with reference to the definition of the word "turnover" in other laws like Central Sales-tax or as d .....

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any change in the above position of law. We therefore, do not find any merit in this ground of appeal of the Revenue therefore, it is dismissed. 6. Therefore the ground of appeal of the Revenue is dismissed. 7. Ground No.2 reads as under :- 2. The Learned Commissioner of Income Tax (Appeals)erred in law and on the facts of the case in directing the Learned Assessing Officer not to exclude 90% of ₹ 5,94,525/-, being the consultancy fees earned in foreign currency, from the profits of the b .....

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r exceed ₹ 10 crores the assessee is not eligible for deduction in respect of DEPB receipt. 9. Before the Learned Commissioner of Income Tax(Appeals) the assessee pointed out that ₹ 61,52,875/- includes ₹ 5,94,525/- which receipt is on account of consultancy charges earned in foreign currency. The Learned Commissioner of Income Tax(Appeals) accepting the submission of the assessee directed the Learned Assessing Officer not to exclude 90% of ₹ 5,94,525/- while calculating .....

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made before the Learned Commissioner of Income Tax(Appeals). 12. We find that both the lower authorities have not considered the issue under consideration from the angle that whether the consultancy charges earned by the assessee in foreigncurrency was connected with the export business of merchandise of the assessee or not. Both the parties before us have also brought no material to show whether the receipt in question was connected with the export of goods by the assessee or not. In our consid .....

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rved that the Tribunal in the case DCIT V Mazda Ltd in ITA No. 85/Ahd/2008vide its order dated 21st May,2010 held as under :- 15. With regard to the income of ₹ 28,00,156/- from technical drawings, we find that in the instant case, the claim of the revenue is that the Learned Commissioner of Income Tax(Appeals) was not justified in not excluding 90% of the drawing charges of ₹ 28,00,156/- credited by the assessee in the Profit & Loss account. The Learned Commissioner of Income Ta .....

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siness of manufacturing and trading of machinery parts. On the above facts, the explanation of the assessee that the technical drawing was an integral part of the above business of the assessee cannot be held as incorrect. Thus, the drawing charges in question being integral part of the main business of the assessee of manufacturing and selling of machinery and parts, we do not find any error in the order of the Learned Commissioner of Income Tax(Appeals), which is confirmed and this part of the .....

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hearing to the assessee in light of the discussions made hereinabove. Thus, this ground of appeal of the Revenue is allowed for statistical purposes. 14. Ground No.3 reads as under:- 3. The Learned Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in directing the Learned Assessing Officer to allow deduction under section 80HHC on disclaimer certificate issued by M/s. Clariant (India) Ltd. 15. We have heard the rival submissions and perused the materials available on .....

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course of the assessee the Learned Assessing Officer made an inquiry with the Learned Assessing Officer of the Export House and found that M/s. Clariant (India) Ltd., has shown loss on export of trading goods. In view of the above fact, the Learned Assessing Officer held that M/s. Clariant (India) Ltd., cannot pass the benefit of deduction under section 80HHC to the assessee in view of the decision of Hon'ble Supreme Court in the case of IPCA Laboratory Ltd vs. DCIT (2004) 266 ITR 521 (SC). .....

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ouse as supporting manufacturer. The Export House has earned profit in respect of the said transaction and has issued disclaimer certificate on the basis of which the appellant has claimed deduction under section 80HHC for a sum of ₹ 57,14,515/- under section 80HHC. The Learned Assessing Officer has disallowed the said claim on the ground that the Export House is not having any positive claim of deduction under section 80HHC on the exported trading goods. In my view once disclaimer certifi .....

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d manner that ion respect of the amount of export turnover mentioned in the certificate, the Export House has not claimed the deduction under this Section. The appellant has obtained a certificate from the export house M/s. Clariant (India) Ltd., duly certified by the Auditors, M/s. A.F. Ferguson & Company. In view of the above facts, it is held that the appellant has correctly claimed deduction in respect of sales of ₹ 4,56,02,457/-. The Learned Authorised Representative of the assess .....

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other hand, the Learned Authorised Representative of the assessee submitted that the facts of IPCA Laboratory Ltd.,(supra) is distinguishable from, the facts of the instant case, in so far as in the case of IPCA Laboratory Ltd., the assessee was an Export House which suffered loss after adjustment of profit on export of manufactured goods also whereas in the instant case, the Export House had net profit after adjustment of loss on trading goods. Thus, the facts being distinguishable decision of .....

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profit of the supporting manufacturer and not the profit or loss of Export House. He also submitted that the Export House earned profit on export of goods purchased from the assessee. 19. We find that in the instant case, it is not in dispute that the assessee has earned profit from business and also earned profit on sale of goods to the Export House. Further, it is also not in dispute that the assessee has received prescribed certificate in accordance with the provisions of sub-section (4A)(b) .....

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House has issued a certificate under the proviso to sub-section (1), there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee [a deduction to the extent of profits, referred to in sub-section (1B)], derived by the assessee from the sale of goods or merchandise to the Export House or Trading House in respect of which the certificate has been issued by the Export House or Trading House.] Further, sub-section (3A) of se .....

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or merchandise to one or more Export Houses or Trading Houses, the amount which bears to the profits of the business [****] the same proportion as the turnover in respect of sale to the respective Export House or Trading House bears to the total turnover of the Business carried on by the assessee.] 20. Thus, from a reading of the aforesaid provision of law in our considered opinion a supporting manufacturer who receive certificate referred to in sub-section (4A) clause (b) of the Act is entitle .....

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e of IPCA Laboratory Ltd., (supra). We find that in the case of IPCA Laboratory Ltd., (supra) the Hon'ble Supreme Court was confronted with the case of an Export House. The assessee there was an Export House. That assessee suffered a loss on export of trading goods. While computing deduction allowable under section 80HHC of the Act the assessee ignored the loss on export of trading goods on the ground that it has issued a disclaimer certificate under section 80HHC(4A)(b) of the Act in respec .....

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. 21. The decision is an Authority for the proposition that an Export House or Trading House cannot increase the deduction otherwise allowable under section 80HHC by issuing a certificate under sub-section (4A)(b) of the Act in respect of certain turnover. 22. However, on consideration of the facts of the case, we are of the view that the matter requires re-consideration at the level of the Learned Assessing Officer. The Learned Assessing Officer noted in the assessment order that the exporter h .....

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