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TMI Blog2011 (11) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... l turnover, for the purpose of computing deduction u/s 80 HHF , this point was picked up for revision during the revision proceedings. The show cause notice is issued on the ground that the computation is incorrect. On submission by the assessee there are no findings by the CIT to the effect that any of these contentions are incorrect.The reason which can be inferred from the revision order (that the AO has not verified the issue) is different from the reason set out in the show cause notice (that such expenses cannot be allowed). Unless the CIT points out any defect in the stand of the Assessing Officer, it cannot be open to him to exercise the revision powers. With regard to allowability of bad debts, it is held that :-it is no longer necessary for the assessee to establish that the debt has actually become unrecoverable and as long as the assessee has actually written off the debt in the books of accounts, and upon fulfillment of other necessary preconditions. See TRF Ltd Vs CIT(2010 - TMI - 76626 - Supreme Court ). Decided partly in favor of the Assessee. - ITA No. 7476/Mum/07 and 3201/Mum/10, 3315/Mum/2010, - - - Dated:- 30-11-2011 - Shri Pramod Kumar and Shri Vijay Pal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 HHF before al lowing set off of losses carried forward from earlier years. The view of the Commissioner was that , in view of Hon ble Supreme Court s decision in the case of IPCA Laboratories Ltd Vs. DCIT (266 ITR 521), which was available to the Assessing Officer at the point of time when assessment was finalized, as it was delivered before the date the assessment was finalized. While computing the deduction under section 80 HHF, the Assessing Officer had not taken into account the brought forward business loss. The view of the Commissioner was that this action was incorrect and contrary to the law laid down by Hon ble Supreme Court in IPCA s case (supra), and that the Assessing Officer ought to have reduced the brought forward business losses before computing the deduction under section 80 HHF. In the course of the proceedings before the Commissioner, it was explained by the assessee that IPCA decision is not applicable on the facts of this case inasmuch as the loss is not incurred in the business in the same year in some other activity, and is a brought forward business loss. It was explained that in respect of brought forward business losses, in view of Hon ble Bombay High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om export turnover and total turnover. The assessee has claimed expenses incurred in foreign currency in respect of advertisement/ licence fees, travel etc in foreign currency. In view of the specific definition of total turnover and export turnover given in Explanation below Section 80 HHF(6) Explanations (c) and (j). The amount of expenditure incurred in foreign currency on this account is Rs 18,01,10,000. Since the Assessing Officer has allowed deduction under section 80 HHF in excess by Rs 22,04,96,097 due to ignoring such expenses in foreign currency, the order passed by the AO on this issue is also considered erroneous insofar as it is prejudicial to the interest of the revenue. 5. In response to this show cause notice, it was inter alia submitted by the assessee that no income has been earned by providing technical services such as dubbing, post production, technical consultancy services etc, and that it has not incurred any expenditure in foreign currency for providing technical services outside India. It was also submitted that none of the expenditure incurred in foreign currency are expenditure in providing technical services outside India. It was also pointed out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, but learned counsel for the assessee has not disputed the same so far as challenge to revision proceedings is concerned. We, therefore, need not deal with the same. Aggrieved, inter alia, by the revision proceedings in respect of the above issues, the assessee is in appeal before us. 7. As far as issue in appeal, i .e. ( i) in respect of set off of loss from eligible prof its of business for the purpose of computing deduction under section 80 HHF of the Act , is concerned, the main plank of learned counsel s argument is that what is to be considered, in the context of examining legality of revision proceedings, is the law prevailing as on the time of passing the revision order, and that , the law in view of the legal position as it stood at that point of time, it was a possible view of the matter that the deduction of Section 80 HHF is to be computed before al lowing the set off of brought forward losses. Learned counsel points out that the judgment dated 24t h July 2000 passed by Hon ble jurisdictional High Court in the case of CIT Vs Shrike Construction Equipment Ltd (246 ITR 429) held field till 17th May 2007 when it was reversed by Hon ble Supreme Court by judgment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgments and tried to canvass the view that the issue before Hon ble Bombay High Court in Shirke s case was altogether different and IPCA decision did not touch upon the same. In support of this distinction, he heavily relied upon the observations made by a coordinate bench in Infocon s case (supra), and made elaborate arguments on the actual issues which came up for consideration in these cases and how they were materially different. He, however, fairly accepted that this aspect of the matter is somewhat academic because the judgment of Hon ble Supreme Court is binding anyway. Learned counsel then referred to Hon ble Supreme Court s judgment in the case of CIT Vs Max India Ltd (295 ITR 282) in support of the proposition that when two views on a legal issue are possible, and the Assessing Officer one of these views, Commissioner cannot substitute such views of the AO by his views. Learned counsel then contends that in any case the Assessing Officer was under an obligation to follow the law laid down by Hon ble jurisdictional High Court, and he cannot, therefore, said to be in error when he does so. He, however, did not elaborate this point further because he felt deserves to succ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with the law, and there cannot be any infirmity in directions to follow the law of the land. Learned Departmental Representative then took us through the revision order passed by the Commissioner and vehemently relied upon the same. In his brief rejoinder, learned counsel reiterated his contentions. He also submitted that , unlike in the case of reassessment proceedings under section 147, in which once assessment is held to be validly reopened on any ground, the Assessing Officer can pick up any of the issues even though the reassessment may not have been reopened on that point, the revision proceedings are issue specific. 8. In our considered view, for the purpose of examining validity of revision proceedings, what we really need to examine is the legal position prevailing as on the time when revision powers are exercised by the Commissioner. In the case of Max India Ltd (supra), Hon ble Supreme Court has said that , we have to take into account the position of law as it stood at the point of time when CIT passed the order dated 5th March 1997 in purported exercise of his powers under section 263 of the Act . . In the case of GM Stainless Steel, on which so much of relianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon ble Supreme Court are clear and admit no ambiguity, and the law so laid down by Hon ble Supreme Court binds us under Article 141 of the Constitution of India. What is to be seen is the legal position prevailing as on the point of time when revision order is passed. It is, therefore, wholly immaterial as to what was the legal position as at the point of time when the assessment was framed particularly when there is significant difference in the legal position between the point of time when assessment is framed and when it is revised. A lot of emphasis has then been placed on the suggestion that the view adopted by the Assessing Officer was a possible view of the matter, as the same view was taken by a coordinate bench of this Tribunal in Infocon s case (supra), and, as an analysis of the related decisions, would unambiguously show. We see no merits in this plea either. In the case of Max India (supra), Hon ble Supreme Court has observed as follows: At this stage, we may clarify that in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interest of the Revenue" under s. 263 has to be read in conjunction with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the higher judicial authorities bind the Assessing Officer to the extent that he is required to loyally execute the directions contained in these orders, but then these orders do not prevent him from taking the same stand, as he took in those assessments, in other cases; quite to the contrary, his abandoning that stand in other cases could prejudice his stand in the matters which are in appeal before the higher appellate authorities. The only difference these judicial decisions, which are decided in favour of the assessee and are in challenge before higher authorities, make to the other cases is that, in terms of the guidelines issued by the Central Board of Direct Taxes, the Assessing Officer may not collect demands on those issues till these demands are examined by the appellant authorities, which are, being part of the judicial machinery, anyway bound by those decisions. In terms of the CBDT guidelines, stay is normally granted by the Assessing Officer (a) if the demand in dispute relates to issues that have been decided in assessee s favour by an appellate authority or Court earlier; or (b) if the demand in dispute has arisen because the Assessing Officer had adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of total expenditure in foreign currency of Rs 1,800,110,000 as stated in your notice, majority of the expenditure incurred is in relation to licence fees paid by SIPL (i .e. the assessee) amounting to Rs 1,762,898,000, which is relation to distribution business and not export business , learned Commissioner has not disputed this aspect of the matter either. However, he proceeds to simply brush aside al l these contentions and proceeds to direct the Assessing Officer to examine the applicability of provisions of Explanation c and j below Section 80 HHF(6) of the Income Tax Act . While revision proceedings were initiated on the ground that these expenses were inadmissible, the revision order has been passed with a direction to the Assessing Officer that he should look into the applicability of Explanation c and j below Section 80 HHF, without there being any finding that these provisions can be invoked at all. Learned Commissioner has not rejected the submissions of the assessee on merits and yet allowed the Assessing Officer to reexamine the matter. The show cause notice is issued on the ground that the computation is incorrect but the revision is exercised on the ground that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed deserves to succeed. 14. As regards third issue which is agitated in appeal before us, i .e. in respect of allowability of bad debts as a deduction, learned representatives have fairly agreed that the issue is covered in favour of the assessee by Hon ble Supreme Court s judgment in the case of TRF Ltd (supra). In this view of the matter, we vacate the revision order in respect of this issue as well. 15. In the result , ITA No. 7476/Mum/09, i .e. appeal against the revision order, is partly allowed in the terms indicated above. 16. We now take up ITA No. 3201/Mum/2010, i .e. assessee s appeal against CIT(A) s order dated 12th February 2010, in the matter of assessment under section 143(3) r.w.s. 263, for the assessment year 2003-04. 17. The only grievance raised in this appeal is against CIT(A) s denying the deduction under section 80 HHF on the ground that brought forward loss of earlier years is required to be set off from the eligible prof its of the business. 18. Learned counsel for the assessee fairly admits that the issue is covered against him, on merits, by Hon ble Supreme Court s judgment in the case of Shrike Construction Equipment (supra). His defence, howe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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