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Income Tax Appellate Tribunal, HYDERABAD ‘ A ’ BENCH, HYDERABAD.
Before: SHRI S.S. GODARA & SHRI L. P. SAHU
O R D E R Per Shri S.S. Godara, J.M. : These Revenue’s and assessee's cross appeals and 710/Hyd/2015 for Assessment Year 2008-09
2 to 711/Hyd/2015 and ITA Nos.711/Hyd/2016 and 709/Hyd/2015 for Assessment Year 2009-10 arise against the Commissioner of Income Tax (Appeals)-X, Hyderabad’s separate orders; both dt.27.02.2015 passed in case Nos.0367/Addl. CIT, R-1/CIT(A)-X/2014-15 and 0367/Addl. CIT, R-1/CIT(A)-X/2014-15 (assessment year wise) in proceedings u/s.143(3) r.w.s. 144C(4) and 143(3) r.w.s. 92CA(3) of the Income Tax Act, 1961 ('the Act'); respectively. Heard both the parties. Case files perused.
We advert to the assessee's appeals ITA 710 & 711/Hyd/2015. Its first and foremost substantive ground in Assessment Year 2008-09 ITA 710/Hyd/2015 seeks to reverse both the lower authorities action making 115JB MAT adjustment of Rs.62,49,631 involving provision for bad and doubtful debts. Learned counsel vehemently argued that the impugned MAT adjustment is not sustainable in law being an 3 to 711/Hyd/2015 ascertained than a contingent liability. Both the lower authorities have invoked u/s. 115JB Expln. (1)(i) stipulating such MAT adjustment qua “the amount or amounts set aside as provision for diminution in the value of any asset.” The legislature had admittedly made the corresponding amendment in the Finance Act No.2 of 2009 with retrospective effect 1.4.2001 to this effect. Hon’ble Gujarat high court’s Full Bench decision in CIT Vs. Vodafone Essar Gujarat Limited Dt.16.08.2017 has also settled the law that a mere provision for doubtful debts has to be included in section 115JB MAT adjustment. Their lordship’s further conclude that a provision amounts to write off if there is simultaneous reduction form the loans and advances in the asset side of the balance sheet in terms of Vijaya Bank case 323 ITR 166 (SC). We thus find no reason to reverse the learned lower authorities’ action making the impugned 4 to 711/Hyd/2015 section 115JB MAT adjustment qua assessee's provision made for bad and doubtful debts. The assessee's first and foremost substantive ground in Assessment Year 2008-09 is rejected.
The assessee's 2nd substantive ground is Second substantive ground in Assessment Year 2008-09 and sole ground in Assessment Year 2009-10 is that both the lower authorities’ have erred in law and on facts in excluding the corresponding gain qua duty draw back amounts of Rs.1,04,83,421 and Rs.1,84,89,636; respectively not eligible for the purpose of computing profits in its section 10B deduction claims. The Revenue’s case in tune with the lower authorities’ identical reasoning is that such an income could not be held to have been “derived from” from the eligible unit and therefore, the same is not entitled for section 10B deduction. We find that the instant issue is no more res integra as per PCIT Vs. Dishman 5 to 711/Hyd/2015 Pharmaceuticals and Chemicals Ltd. (2019) 417 ITR 373 (Guj) that such an income arising from sale of duty draw back also amounts to profits and gains derived from 100% export oriented unit. We accordingly adopt the very reasoning mutatis mutandis and direct the Assessing Officer to treat the assessee's impugned duty draw back gain (supra) in both these assessment years as eligible for 10B deduction as per law. Necessary computation shall follow. The assessee's second and sole substantive ground in these twin assessment years (supra) to this effect succeeds.
It further transpires during the course of hearing that the assessee also filed identical petitions in both these appeals seeking to raise additional ground(s) of Education Cess deduction(s) of Rs.1,05,97,230 and Rs.1,3,81,150; respectively. The Revenue’s case in the light of its written submissions coming 6 to 711/Hyd/2015 from the CIT’s side is that this additional ground gives altogether a new texture to the already pleaded issues and not allowable therefore as per hon’ble jurisdictional high court in CIT Vs. Begumnoor Banu (1993) 204 ITR 166 (AP). We find no merit in the Revenue’s instant technical argument as per this tribunal Special Bench decision All Cargo Global Logistics Ltd. Vs. DCIT 137 ITD 287 (SB) after considering the decision NTPC Ltd. vs. CIT (229 ITR 383 (SC); holds that we can very well entertain such a pure question of law so as to determine the correct tax liability wherein the relevant facts are already on record. We make it clear that the assessee had duly filed its computation(s) regarding the impugned education cess(es)’ corresponding figures. We thus accept the assessee's identical petition(supra) dt.23.11.2020.
Coming to merits of the assessee's education cess claim, we notice that Sesa Goa 7 to 711/Hyd/2015 Limited Vs. JCIT (2020) 423 ITR 426 (Bom) as well as (2019) 107 Taxman.com 484 (Raj) Chambal Fertilisers Ltd. Vs. JCIT take into consideration the CBDT’s Circular dt.18.05.1967 that the clinching expression “tax” employed in section 40(a)(ii) does not include “cess” and therefore the same is very much allowable as a deduction. We adopt the very reasoning mutatis mutandis and direct the Assessing Officer to accept the assessee's impugned education cess deduction claim in both these assessment years involving sums, as per law. Necessary computation shall follow.
The assessee's identical third and second substantive grievances in both assessment years 2008-09 and 2009-10 succeed in above terms. Its appeal ITA Nos.710/Hyd/2015 is partly accepted & 711/Hyd/2015 is accepted in foregoing terms.
8 to 711/Hyd/2015 7. We next advert to the Revenue’s appeals ITA Nos.708 & 709/Hyd/2015. Its first and foremost substantive ground in both these assessment years seeks to revive the Transfer Pricing Officer’s identical action adopting “CRISIL against LIBOR” rates whilst computing the interest on loans and advances made to oversees Associated Enterprises involving adjustments of Rs.2,08,27,493 and Rs.84,52,506; respectively. We notice at the outset that the TPO’s order(supra)) for Assessment Year 2009-10 and 2010-11 had adopted LIBOR rates only in computing the Arm’s Length Price (ALP) of the impugned loans and advances in corresponding foreign currency. This tribunal's co-ordinate bench decision in the Foursoft India Limited 142 TTJ 358 (Hyd) also holds that it is only “LIBOR” rate what needs to be adopted qua international financial transactions. We thus find no illegality 9 to 711/Hyd/2015 or irregularity in the CIT(A)’s order to this effect. This Revenue’s first and foremost identical substantive ground fails.
The Revenue’s 3rd and 4th substantive grounds in Assessment Year 2008-09 and 5th ground in A.Y. 2009-10 challenge correctness of CIT(A)’s action holding the assessee eligible for section 10AA deduction qua its contract fee receipts of Rs.1,29,53,790 and Rs.1,36,77,199; respectively. Its case is that the assessee had filed additional evidence regarding approval of its corresponding unit(s) wherein neither there was any sanction for export of services nor the same had been put to the Assessing Officer for his necessary factual verification. The CIT(A)’s detailed discussion accepting the assessee's claim to this effect reads as under :
We find no merit in the Revenue’s instant substantive ground not only going by the statutory provisions i.e. section 10AA(1) Expln.(1) defining “export turnover” as also including export of services but also keeping in mind the fact that the Visakhapatnam SEZ (“VSEZ”) had been granted approval vide letter dt.13.08.2007 as against these assessments 11 to 711/Hyd/2015 framed on 31.01.2012 and 20.09.2011; respectively. There is further no indication that the assessee had filed any additional evidences to this effect before the CIT(A). We hold in this factual backdrop that the CIT(A) has rightly treated the assessee's contract research fee receipts as “export turnover” for arriving at section 10AA deduction. The Revenue’s corresponding grounds to this effect in both assessment years stand declined.
The Revenue’s fifth and sixth substantive grounds in Assessment Year 2008-09 and third and fourth substantive grounds in Assessment Year 2009-10 challenge the CIT(A)’s action reversing the assessment findings disallowing Mark to Market (MTM) losses of Rs.18,92,87,645 and Rs.45,21,01,025; respectively. The CIT(A)’s detailed discussion to this effect reads as under :
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The Revenue’s sole substantive argument before us is that the CIT(A) has erred in law and on facts in deleting the impugned MTM losses disallowance despite the fact that the CBDT Circular No.3 of 2010 dt.23.03.2010 has held 18 to 711/Hyd/2015 the same to be a notional and not an actual loss. All these Revenue’s arguments fails to convince us as not only the assessee had filed all the details of corresponding forward / derivative contracts, necessary certificate from the SBI but also the relevant statements thereof since F.Y.2007-08 to 2011-12 along with the catena of case law(s) holding that such losses are in fact in the nature of an ascertained liability than a contingent one. We thus find no reason to interfere with the CIT(A) detailed discussion extracted above to this effect. The Revenue’s corresponding instant substantive grounds stand rejected.
This leaves us with Revenue’s identical 7th and 6th substantive grounds in both these assessment years that the CIT(A) has erred in law and on facts while directing the Assessing Officer to exclude the assessee's freight and insurance charges of Rs.4,21,48,702 and 19 ITA Nos.708 to 711/Hyd/2015 Rs.4,58,34,902; respectively not only from “export” but also from “total turnover”. We find that the instant issue is also no more res integra as per hon'ble apex court’s decision in CIT Vs. HCL Technologies Ltd. (2018) 404 ITR 719 followed by CBDT Circular No.4 of 2018 dt.14.08.2018 that whatever item is to be excluded from “export” must also follow the suit regarding the “total turnover”. The Revenue’s instant substantive last ground is rejected therefore. So is the outcome of its twin appeals ITA 708 & 709/Hyd/2015 (supra). 12. We lastly acknowledge that although the instant appeals are being decided after a period of 90 days from the date of hearing as per Rule 34(5) of the IT(AT) Rules 1963, the same however, does not apply in the covid lockdown situation as per hon'ble apex court's recent directions dated 27-04- 2021 in M.A.No.665/2021 in SM(W)C 20 ITA Nos.708 to 711/Hyd/2015 No.3/2020 'In Re Cognizance for extension of limitation' making it clear that in such cases where the limitation period (including that prescribed for institution as well as termination) shall stand excluded from 14th of March, 2021 till further orders. 13. To sum up, assessee's appeals ITA 710 & 711/Hyd/2015 are partly allowed and allowed & Revenue’s appeals ITA 708 & 709/Hyd/2015 are dismissed in above terms. A copy of this common order be placed in the respective case files.
Order pronounced in the open court on 17th Aug.,2021. Sd/- Sd/- (LAXMI PRASAD SAHU) (S.S. GODARA) Accountant Member Judicial Member Hyderabad, Dt.17.08.2021. * Reddy gp 21 to 711/Hyd/2015 Copy to :
1. 1. M/s. Divi’s Laboratories Limited, 7-1-77/E/1/303, Dharam Karan Road, Ameerpet, Hyderabad- 500016.