Itxa/165/2011 Of The Commissioner Of Income Tax , Iii Pune v. Jayantilal Mangaldas And Sons

sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.165 OF 2011 The Commissioner of Income Tax-III ..Appellant. V/s. M/s. Jayantilal Mangaldas & Sons ..Respondent. Mr. Vimal Gupta for the appellant. None for the respondent. CORAM : J.P. DEVADHAR AND SMT. R.P.SONDURBALDOTA JJ. DATED : 22ND JUNE, 2011 P.C. :- 1.Four questions of law are sought to be raised by the revenue in this appeal, which read thus:- (1)Whether the ITAT is correct in law and on facts in interpreting the decision of the Supreme Court in Hero Exports as reported in 295 ITR 454 to imply that once the principle of attribution is held to be applicable, it is only corollary thereto as only such costs can be taken into account which can indeed be attributed to the exports ?decision of the Supreme Court in Hero Exports as reported in 295 ITR 454 to imply that once the principle of attribution is held to be applicable, it is only corollary thereto as only such costs can be taken into account which can indeed be attributed to the exports ? (2)Whether the ITAT is correct in law and on facts in interpreting the decision of the Supreme Court in Hero Exports as reported in 295 ITR 454 to mean that in other words, as costs are directly attributable to other than the export, this cannot be regarded as decision of the Supreme Court in Hero Exports as reported in 295 ITR 454 to mean that in other words, as costs are directly attributable to other than the export, this cannot be regarded as indirect costs for the purposes of working out export incentive deduction u/s.80HHC of the Income Tax Act, 1961 ? (3)Whether the ITAT is correct in law and on facts in shifting the burden of proof in case of payment to persons u/s.40A(2)(b) of the Income Tax Act, 1961 from the assessee to the department ?burden of proof in case of payment to persons u/s.40A(2)(b) of the Income Tax Act, 1961 from the assessee to the department ? (4)Whether the ITAT is correct in law and on facts in holding that the assessing officer did not bring any material on record in support of his conclusion that the payment was excessive despite the fact that payment to sister concern comprised of penalty and redemption fine and this could not be said to be component of market value because import of garlic was permissible if it was made as per law ?assessing officer did not bring any material on record in support of his conclusion that the payment was excessive despite the fact that payment to sister concern comprised of penalty and redemption fine and this could not be said to be component of market value because import of garlic was permissible if it was made as per law ? 2.As regards the first two questions are concerned, the Tribunal has remanded the matter to the file of the assessing officer to pass fresh order in the light of the judgment of the Apex Court in the case CIT V/s. Hero Exports reported in 295 ITR 454. Since the Tribunal has remanded back the matter to the file of assessing officer to decide the questions in the light of the law laid down by the Apex Court, we are not inclined to entertain the first two questions. 3.As regards the remaining two questions are concerned, the relevant facts are that the assessee had purchased of garlic from its sister concerns. Garlic sold to the assessee by its sister concerns were imported Garlic on which redemption fine and penalty were required to be paid by the said sister concerns. The assessing officer was of the opinion that the price paid by the assessee was in excess of the market price and accordingly made disallowance by invoking Section 40A(2) of the Act. 3.As regards the remaining two questions are concerned, the relevant facts are that the assessee had purchased of garlic from its sister concerns. Garlic sold to the assessee by its sister concerns were imported Garlic on which redemption fine and penalty were required to be paid by the said sister concerns. The assessing officer was of the opinion that the price paid by the assessee was in excess of the market price and accordingly made disallowance by invoking Section 40A(2) of the Act. 4.ITAT deleted the disallowance on the ground that the price by paid by the assessee to its sister concerns was the actual cost incurred by the assessee, because admittedly, the sister concerns were required to pay redemption fine and penalty on the imported garlic. The Tribunal has recorded a finding that the assessing officer has not even made any efforts to ascertain the actual fair market of garlic which was purchased by the assessee from its sister concerns. It is not the case, where the assessee has imported the goods on which the assessee was made to pay redemption fine and penalty. Since the sister concerns were required to pay redemption file and penalty, the cost of garlic was higher. The ITAT has deleted the disallowance by verifying the actual cost incurred by the sister concerns. In these circumstances, the deletion of disallowance made by the ITAT cannot be faulted. Accordingly, question Nos.3 & 4 cannot be entertained. 5.The appeal is accordingly dismissed with no order as to costs. (SMT. R.P.SONDURBALDOTA, J.) (J.P. DEVADHAR, J.)