ALLANA INVESTMENTS & TRADING CO. P..LTD,MUMBAI vs. ASST CIT 1(1), MUMBAI

(अपीलाथ" /Appellant) (""यथ" / Respondent) Revenue by: Shri Rajesh Kumar Yadav Assessee by: Shri Apurva Shah सुनवाई क" तारीख / Date of Hearing: 18.01.2017 घोषणा क" तारीख / Date of Pronouncement: 15.02.2017 आयकर अिधिनयम अिधिनयम,1961 क" क" धारा धारा 254(1)केकेकेके अ"तग" अ"तग"त आदेश आदेश आयकर आयकर आयकर अिधिनयम अिधिनयम क" क" धारा धारा अ"तग" अ"तग" आदेश आदेश Order u/s.254(1)of the Income-tax Act,1961(Act)

लेखा सद"य सद"य,राजे"" राजे"" केकेकेके अनुसार अनुसार -Per Rajendra,AM: लेखा लेखा लेखा सद"य सद"य राजे"" राजे"" अनुसार अनुसार Challenging the order,dated 31/03/2014,of the CIT (A)-1,Mumbai the assessee and has filed the present appeal.Assessee-company,engaged in the business of manufacturing and export of frozen food products,filed its return of income on 31/10/2005,declaring total taxable income at Rs.NIL under the normal provisions of the act and book profit of Rs. 1.05 crores as per the computation made u/s.115 JB of the Act.The Assessing Officer (AO)completed the assessment, u/s.143(3),on 26/12/2006,determining the income of the assessee at Rs. 50,00,890/-under normal provisions and at Rs.1.41 crores u/s.115 JB of the Act.

2.Effective ground of appeal is about computation of profits as per the provisions of section 115 JB of the Act.Aggrieved by the order,dtd.26.12.2006,of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Vide paragraph No.5.2,the FAA had directed the AO to provide a reasonable opportunity to the assessee and to work out the disallowance u/s.14A of the Act in respect of expenses related to exempt income in accordance with the decision of Bombay High Court in the case of Godrej Boyce Manufacturing Company Ltd.In compliance to the above-mentioned order of the FAA(dated 18/03/2011),the AO computed the total income as under:

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3.Aggrieved by the order of the AO giving effect to the order of the FAA,,the assessee again filed an appeal before the FAA and contended that it had filed a return of income wherein the taxable income was set off by unabsorbed losses,that tax was computed u/s.115 JB after reducing the deduction that would be allowable u/s.80HHC of the Act when computed based on book profit,that during the assessment proceedings the AO had held that assessee was not entitled to deduction u/s.80 HHC, that the then FAA had held that it was entitled to the deduction,that while giving effect to the order the AO did not allow deduction for profits from exports u/s.80 HHC nor did he give any reason for denying the assessee the said deduction while computing book profits,that while calculating tax u/s. 115 JB on book profits amount eligible for deduction u/s. 80 HHC had to be reduced, that the computation should be based on book profits, that the AO should be directed to re-compute book profit after reducing export profits therefrom.

After considering the submission of the assessee and the order giving effect to the order of the then FAA,the FAA held that the AO had followed the order correctly and in an appropriate manner,that in the original assessment the AO had computed the book profit at Rs. 1.14 crores and tax of Rs. 10.89 lakhs for such profit,that it had not contested the book profit u/s. 115 JB, that there was no cause of action for you to review the competition of book profit, that issue of computation of book profit was not originally decided by the then FAA in the initial proceedings, that same could not be raised before him.

4.During the course of hearing before us,the Authorised Representative(AR)stated that the assessee had agitated the issue of deduction u/s.80HHC during the original appellate proceed - ings,that the FAA had allowed the appeal of the assessee,that while giving effect to the said order the AO had not followed the directions of the FAA.He referred to the competition of income filed for the year under consideration with the original return of income(page 2 and three of the paper book) and the order of the FAA dated 18/03/2011.He relied upon the case of AL-Kabeer Exports Ltd.(Special leave petition number 32274 of 2010),delivered by the honorable Supreme Court and Syncome Formulations(I)Ltd. (106 ITD 193).The Departmental Representative(DR) relied upon the order of the FAA.

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5.We have heard the rival submissions and perused the material before us.We find that the entire issue has arisen with regard to the order giving effect to the order of the FAA dated 18/03/ 2011.The assessee had raised two effective grounds against the order of the AO dated 26/12/2006.One of the grounds was about deduction u/s.80HHC of the Act.After analysing the issue at length (pages 1-26 of the order),the then FAA held as under: 4.27. Since the appellant has complied all the relevant provisions of the act, for making claim of deduction u/s. 80 HHC (1A) of the I.T.Act r.w.section (3A) (4A) of section 80 HHC of the Act, it should be allowed deduction u/s. 80 HHC of the Act. The AO is directed to allow the claim of deduction to the appellant as claimed by the appellant. Thus, appellant’s these grounds of appeal or allowed.” The above order of the FAA leaves no doubt that issue of deduction u/s. 80. HHC of the Act was decided in favour of the assessee and while giving effect to the order the AO was bound to give the relief to it.In the computation of income,filed along with the return the assessee had computed the book profit as per section 115 JB as under:

Computation of book profit as per Section 115JB Net profit/(Loss) as per Profit & Loss a/c. Rs. 7,794,215 Add: Provision for taxation Rs. 7,165,946 Rs.14,960,161 Less: Deduction u/s. 80HHC Rs. 3,651,601 Less: Dividend Income U/s.10(34) Rs. 784,524 Book Profit U/s.115JB Rs.10,524,036 In the computation the assessee had deducted two items i.e. deduction u/s.80 HHC of the Act and dividend income u/s.10 (34).It is a fact that while giving effect to the order of the FAA,dated 18/03/2011,the AO had not considered the relevant facts and the material.Considering these facts we are of the opinion that the FAA was not justified in dismissing the appeal of the assessee. So, reversing his order,we direct the AO to compute the book profits after considering the computation of income filed along with the return and the judgments relied upon by the assessee before us.Effective ground of appeal is decided in favour of the assessee. As a result, appeal filed by the assessee stands partly allowed. फलतः िनधा"रती "ारा दािखल क" गई अपील मंजूर क" जाती है. Order pronounced in the open court on 15th February, 2017. आदेश क" घोषणा खुले "यायालय म" दनांक 15फरवरी, 2017 को क" गई । /- (संजय गग" /Sanjay Garg) (राजे"" / RAJENDRA) "याियक सद"य / JUDICIAL MEMBER लेखा लेखा सद"य सद"य / ACCOUNTANT MEMBER लेखा लेखा सद"य सद"य मुंबई Mumbai; दनांक/Dated : 15.02.2017. Jv.Sr.PS.

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