IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "SMC" : MUMBAI
BEFORE SHRI H.L.KARWA, HON'BLE PRESIDENT
ITA. No. 3051/Mum/2001
Assessment year 1998-1999
Shri S.Mansukhlal & Co. vs. ACIT, Cir. 26 (3)
Mumbai 400 002 Mumbai
PAN AAHFS9459A/(169-S)
(Appellant) (Respondent)
For appellant : Ms. Sheetal Shah
For respondent : Shri Om Prakash Meena
Date of Hearing : 01-10-2012
Date of pronouncement : 01-10-2012
ORDER
PER H.L.KARWA, PRESIDENT
This appeal filed by the assessee is directed against the Order of the
CIT(A)-XXI, Mumbai dated 15th March, 2001 relating to the assessment
year 1998-99. The only ground raised by the assessee in this appeal reads
as under :
"The CIT(A)-XXI, Mumbai erred in holding that the Assessing Officer
had rightly computed the deduction u/s. 80HHC at Rs.2,10,61,375/-
as against Rs.2,13,85,204/- computed by the appellant. The said
CIT(A) failed in not appreciating that in the computation of deduction
u/s 80HHC the indirect cost should have been reduced by the indirect
cost allocated to export incentive (10% of gross export incentive income)
and the net amount of indirect cost should have been deducted from
the income to arrive at the profit from exports. The appellant submits
that the earning of export incentive also involves certain expenditure
which have been fixed at the adhoc figure of 10% of such income and
therefore out of the total indirect cost incurred by the appellant, that
portion of the expenses allocated to earning of export incentive, should
be reduced from the indirect expenses incurred in running the export
business."
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2. At the very outset, Ms. Sheetal Shah, Learned Counsel for the
assessee pointed out that the issue is squarely covered in favour of the
assessee and against the Revenue by the decision of I.T.A.T. "J" Bench,
Mumbai dated 14th July, 2002 in assessee's own case in
ITA.4370/Mum/2000 relating to assessment year 1997-1998. The
Tribunal while deciding the identical issue held as under :
"The learned representative of the assessee submitted before us that in
computation of deduction he indirect cost should have been reduced by
the indirect cost allocated to export incentive and net amount of indirect
cost should have been deducted from the income to arrive at the profit
from export. It was further submitted that the earning of export
incentive also involves certain expenditure which have been fixed at the
adhoc figure of 10% of such income and therefore, out of the total
indirect cost the portion of the expenses allocated to earning of support
incentive should be reduced from the indirect expenses relating to the
export business. To support the contention, the learned A.R. carried us
to the computation part in the assessee's paper book page 4 and 4A.
He further argued that the disallowance of entire indirect cost of not
justifiable. He, besides reitering arguments that were advanced before
the authorities relied on the decision of Mumbai Tribunal `E' Bench in
ITA.No. 155/Mum/97 dated 16.03.2001 contained in the assessee's
paper book page no. 16 & 17 and another I.T.A.T. decision of Mumbai
`B' Bench in I.T.A.No. 1916/Mum/99 dated 8.10.2001 and also yet
another Mumbai SMC-4 decision in ITA.No. 5348/Mum/2001 dated
15.1.2002. In sum and substance the Tribunal has agreed that the
indirect cost should be reduced of such expenses of 10% as contended
by the assessee. The facts being similar and we are in the view that
the Tribunal order squarely applicable in the case present before us. On
the other hand the learned D.R. supported the order of the authorities
and he relied upon the case law of Raj Exports which is not directly on
this issue, it relates to the validity of the order under section 154. We,
therefore reject the arguments of learned D.R. and we are in full
agreement with the contention of the assessee. Therefore, we decide
this ground in favour of the assessee thereby set aside the order of the
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CIT(A) and direct the Assessing Officer to allow 10% of the indirect cost
as discussed above."
3. I find that the issue is identical and therefore, respectfully following
the Order of the Tribunal (supra), I allow the appeal of the assessee.
4. I may also add here that the view taken by the Tribunal in
assessee's case is also supported by the decision of the Hon'ble Supreme
Court in the case of Hero Exports vs. CIT (2007) 295 ITR 454 (S.C.).
5. In the result, appeal of the assessee is allowed.
Pronounced in the open Court, on 01st October, 2012.
Sd/-
(H.L.KARWA)
PRESIDENT
Mumbai, Date 01st October, 2012
VBP/-
Copy to
1. Shri S.Mansukhlal & Co., Post Box. No. 2366, Ruia Building, 395, Kalbadevi
Road, Mumbai 400 002 PAN AAHFS9459A/(169-S)
2. ACIT, Cir. 26 (3), Aayakar Bhavan, Mumbai 400 020
3. CIT(A)-XXI, Mumbai
4. CIT, M.C.VIII, Mumbai
5. DR "SMC" Bench
6. Guard File
(True copy) By Order
Asst. Registrar, I.T.A.T. Mumbai
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