AMAR IMPEX, MUMBAI V. DCIT 17(1), MUMBAI

CO 151/MUM/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6454 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2004-2005
• Appeal Filed On: 13-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PARAS S SAVLA
• Keywords: Revision of order; Retrospective amendment; Question of law; Validity of assessment; Reassessment proceedings
• Section: 143(3); 80HHC; 27; 148; 263

Judgement Text

1 I.T.A.NOS. 355 & 356/MUM/2010 (A.YS 2001-02 & 2004-05) & CO NOS 14 & 151/MUM/2010 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI A BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI PRAMOD KUMAR , AM & SHRI VIJAY PAL RA O, JM I.T.A.NOS. 355 & 356/MUM/2010 (A.YS 2001-02 & 2004-05) & CROSS OBJECTION NOS 14 & 151/MUM/2010 THE DY COMMR OF INCOME TAX 17(1), MUMBAI VS AMAR IMPEX AMAR HOUSE 14/16 NEAR SHARDA TALKIES (APPELLANT/RESPONDENT ) (RESPONDENT/CROSS OBJECTOR ) PAN NO. AAAFA1841R ASSESSEE BY SHRI PARAS S SAVLA REVENUE BY SHRI C G K NAIR DT.OF HEARING 3 RD AUG 2011 DT OF PRONOUNCEMENT 12 AUG 2011 PER VIJAY PAL RAO, JM THESE APPEALS BY THE REVENUE AND THE CROSS OBJECTIO NS BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE C IT(A) FOR THE Y 2001-02 & 2004-05. 2 THE REVENUE HAS RAISED THE COMMON GROUND IN THESE APPEALS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT() ERRED IN DIRECTING THE AO TO ALLOW DEDUCTION U/S 80HHC ON DEPB WITHOUT TAKING INTO CONSIDERATION AMENDED PROVISION S OF SEC. 28(III)(D) OF THE I T ACT, 1961. 2 I.T.A.NOS. 355 & 356/MUM/2010 (A.YS 2001-02 & 2004-05) & CO NOS 14 & 151/MUM/2010 2.1 THE ASSESSEE IN THE CROSS OBJECTION FOR THE AY 2 001-02 HAS RAISED THE FOLLOWING GROUND: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WHILE PASSING ORDER DT 28 TH OCT 2009 ERRED IN DISMISSING THE APPEAL AS INSTRUCTIONS IN RESPECT OF VALIDITY OF ASSESSMENT U /S 147. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ASSESSEE SHALL BE ALLOWED ALTERNATIVELY TO REDUCE T HE AMOUNT RECEIVED ON SALE OF DEPB/DFRC LICENSES FROM DIRECT COSTS ATTRIB UTABLE TO EXPORT OF GOODS WHILE CALCULATING DEDUCTION U/S 80HHC. GROUND NO.2 IS COMMON AS THE ONLY GROUND RAISED BY THE ASSESSEE IN THE CO FOR ASSESSMENT YEAR 2004-05. 3 SINCE THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE REOPENING OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2001-02; THEREFO RE, WE TAKE UP THE ISSUE OF VALIDITY OF THE REASSESSMENT FOR THE AY 2001-02. 4 THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) ON 28.2.2003. THE ASSESSMENT WAS THEN REVISED U/S 263 VIDE ORDER DATE D 23.2.2004 BY THE COMMISSIONER. THE ASSESSEE CHALLENGED THE REVISION ORDER U/S 263 BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 12.6.200 6 SET ASIDE THE REVISION ORDER PASSED U/S 263. THEREAFTER, NOTICE U/S 148 DATED 27 .3.2008 WAS ISSUED BY THE ASSESSING OFFICER ON THE REASONS THAT THE DEDUCTION CLAIMED AND ALLOWED U/S 80HHC OF THE I T ACT REQUIRED RECONSIDERATION IN TERMS OF TAXATION LAW AMENDED ACT 2005 SINCE THE ASSESSEES TURN OVER WAS ABOVE RS. 10 CRO RES AND THE ASSESSEE HAD AVAILED BOTH BENEFITS OF DUTY DRAW BACK AND SALE ON IMPORT LICENCE (DEPB). THE REASSESSMENT ORDER U/S 143(3) R.W.S 147 WAS PASSED ON 23.12.2008. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFO RE THE CIT(A) BOTH ON MERITS OF DENIAL OF DEDUCTION U/S 80HHC ON SALE VALUE OF DEP B AS WELL AS VALIDITY OF 3 I.T.A.NOS. 355 & 356/MUM/2010 (A.YS 2001-02 & 2004-05) & CO NOS 14 & 151/MUM/2010 REASSESSMENT. THE CIT(A) WAS OF THE VIEW THAT THE REOPENING OF THE ASSESSMENT CANNOT BE UPHELD; HOWEVER, SINCE THE APPEAL OF THE ASSESSEE ON MERITS HAS BEEN ALLOWED THEREFORE, THE GROUND ON VALIDITY OF REO PENING HAS BEEN DISMISSED AS INFRUCTUOUS. 5 WE HAVE HEARD THE LD AR OF THE ASSESSEE AND THE L D DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THIS IS A CASE OF REOP ENING OF THE ASSESSMENT BECAUSE OF RETROSPECTIVE AMENDMENT IN THE PROVISIONS OF I T ACT. IN THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSME NT NOTHING HAS BEEN STATED THAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRU LY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT AND THEREBY THE INCOME CHARGEABLE TO TAX AS ESCAPED ASSESSMENT. SINCE NOTICE U/S 148 HAS BEEN ISSUED AFTER EXPIRY O F FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THE ORIGINAL ASSESSMEN T WAS FRAMED U/S 143(3); THEREFORE, THE CASE FALLS UNDER THE PROVISO TO SEC. 147. HENCE, THE REOPENING OF THE ASSESSMENT IS HIT BY THE FIRST PROVISO TO SEC. 147 OF THE I T ACT AND ACCORDINGLY, THE SAME IS NOT SUSTAINABLE. 5.1 IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V DURATX EXPORT IN ITA NO.3088 & 3089/MUM/2009 ORDER DATED 15.6.2011. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IN PARA 9 & 10 READ AS UNDER: 9. IN VIEW OF THE FACT THAT ADMITTEDLY, THE PROCEED INGS FOR REASSESSMENT WERE INITIATED AFTER FOUR YEARS AND THAT THESE PROCEEDING S WERE INITIATED ON THE BASIS OF RETROSPECTIVE AMENDMENT IN LAW, WE FIND THA T THE ISSUE IS SQUARELY COVERED BY THE DECISION OF A CO-ORDINATE BENCH OF THI S TRIBUNAL IN THE CASE OF DHARMIK EXIM PVT LTD 4 I.T.A.NOS. 355 & 356/MUM/2010 (A.YS 2001-02 & 2004-05) & CO NOS 14 & 151/MUM/2010 V ACIT, IN ITA NO.232/M/2009 AND OTHERS FOR A.Y. 200 0-2001 ORDER DATED 9.9.2010, WHEREIN, ON SIMILARLY MATERIAL FACTS, THE C O-ORDINATE BENCH, INTER ALIA, OBSERVED AS FOLLOWS: 15. WHAT REMAINS FOR CONSIDERATION NOW IS GROUND NO . 5 TO 7 RAISED BY THE ASSESSEE IN ITS APPEAL. THIS RELATES TO THE VAL IDITY OF INITIATION OF REASSESSMENT PROCEEDINGS FOR A.Y. 2000-01. IN THIS REGA RD, WE HAVE M/S. DHARMIK EXIM PVT. LTD. ALREADY NOTICED THAT THE NOTI CE U/S. 148 OF THE ACT FOR THIS ASSESSMENT YEAR WAS ISSUED AND SERVED ON THE ASSESSEE ON 28.3.2007. THE REASSESSMENT PROCEEDINGS HAVE BEEN IN ITIATED BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF ASSESSMENT YE AR. IT IS THEREFORE NECESSARY THAT THE ESCAPEMENT OF INCOME SHOULD BE BE CAUSE OF FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR COMPUTATION OF ITS INCOME. IN TH IS REGARD, WE HAVE ALSO SEEN THAT THE ASSESSMENT FOR A.Y. 2000-01 WAS RE OPENED CONSEQUENT TO AMENDMENT TO THE PROVISIONS OF SECTION 80HHC OF THE ACT BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT. ON THIS ISSUE, WE FIND THAT HON'BLE GUJARAT HIGH COURT IN THE CASE OF DENISH INDUSTRY VS. ITO, 271 ITR 340 HAS DEA LT WITH AN IDENTICAL ISSUE, WHERE ASSESSMENT WAS SOUGHT TO BE REOPENED CO NSEQUENT TO RETROSPECTIVE AMENDMENT TO THE LAW. THE HON'BLE GUJARA T HIGH COURT HAD HELD THAT FOR THE PURPOSE OF DECIDING QUESTION U/S. 147, WHETHER THE ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR THE RELEVANT ASSESSMENT YEAR, LAW APPLICABLE WOULD B E LAW AS IT STOOD ON THE DATE OF FILING OF THE RETURN. IN THE PRESENT C ASE, THE ASSESSEE HAD FILED RETURN OF INCOME FOR A.Y. 2000- 01 ON 30.11.20 00. AS ON THAT DATE QUESTION AS TO WHETHER DEPB BENEFIT WOULD BE ENTITL ED TO DEDUCTION U/S. 80HHC OF THE ACT, WAS A DEBATABLE ISSUE. IN SU CH CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS REGARDING DEDUCTION OF CLAIM U/S. 80H HC ON EXPORT INCENTIVE. IN FACT, EVEN IN THE ORIGINAL PROCEEDINGS CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE REVENUE AUTHORITIES. IN VIEW OF THE AFORESAID DECISION OF HON'BLE GUJARAT HIGH COURT IN T HE CASE OF DENISH INDUSTRY (SUPRA), IT CANNOT BE SAID THAT THERE WAS AN Y FAILURE ON THE PART OF THE SSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERI AL FACTS NECESSARY FOR RELEVANT ASSESSMENT YEAR IN ACCORDANCE WITH THE LAW A PPLICABLE ON THE DATE WHEN IT FILED RETURN OF INCOME. SINCE, ABOV E CONDITION MENTIONED UNDER PROVISO TO SECTION 147 IS NOT SATIS FIED AND SINCE ASSESSMENT IS SOUGHT TO BE REOPENED AFTER A PERIOD O F FOUR YEARS FROM THE END OF ASSESSMENT YEAR, REOPENING OF THE ASSESSM ENT IS INVALID. WE THEREFORE HOLD THAT INITIATION OF REASSESSMENT PROCEE DINGS U/S. 147 M/S. DHARMIK EXIM PVT. LTD. WAS NOT PROPER. THEREFORE ORDER DATED 24.12.2007 TO THE EXTENT THAT IT RELATES TO PROCEEDIN GS U/S. 147 OF THE ACT IS ANNULLED. THE SAID ORDER IN SO FAR AS IT RELA TES TO GIVING EFFECT OF THE ORDER OF THE TRIBUNAL IS HOWEVER UPHELD. 10. WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE COORDINATE BENCH. WE , THEREFORE, UPHOLD THE GRIEVANCE OF THE ASSESSEE AND HELD THAT REASSESSMENT PROCEEDINGS WERE INDEED VIT IATED IN LAW IN THE 5 I.T.A.NOS. 355 & 356/MUM/2010 (A.YS 2001-02 & 2004-05) & CO NOS 14 & 151/MUM/2010 CASE OF REOPENING AFTER FOUR YEARS FROM THE END OF TH E RELEVANT ASSESSMENT YEAR BUT THE MERE FACT THAT THE ASSESSEE HAS NOT OFF ERED THE INCOME IN RESPECT OF DEPB LICENSES TO TAX, COULD NOT BE TREATE D AS LAPSE ON BEHALF OF THE ASSESSEE BECAUSE THE LAW AS STOOD AT THE RELEVA NT POINT OF TIME, WHEN THE RETURN WAS FILED, DID NOT PROVIDE FOR TAXABILITY OF THE SAID INCOME. THE PROCEEDINGS AGAINST THE ORDER UNDER SECTION 263 TO BRIN G THE SAID INCOME TO TAX WERE ALSO DROPPED BY THE CIT. IT IS SETTLED LEGAL POSITION THAT WHEN THE ASSESSMENT IS REOPENED BEYOND FOUR YEARS FROM THE EN D OF THE RELEVANT PREVIOUS YEAR AND UNLESS IT CANNOT BE ESTABLISHED THA T THE ASSESSEE HAS FAILED TO DISCLOSE ALL THE MATERIAL FACTS NECESSARY F OR THE PURPOSE OF ASSESSMENT, SUCH REASSESSMENT PROCEEDINGS CANNOT BE U PHELD UNDER LAW. THAT PRECISELY IS THE CASE BEFORE US. IN VIEW OF THE ABOVE DISCUSSION AND BEARING IN MIND THE ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCE RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION AND, ACCORDINGLY ALLOW THE SAME. ONCE THE REASSESSMENT PROCEEDINGS ITSELF ARE QUASHED, THE ADDITIONS MADE DURING THE ASSESSMENT PROCEEDINGS SO REOPENED SEEMS TO HAVE ANY PRACTICAL IMPLICATION. THE ISSUE REGARDING VALIDITY OF SUCH ADD ITIONS IS RENDERED ACADEMIC AND INFRUCTUOUS. THEREFORE, EVEN THOUGH AS L EARNED COUNSEL FAIRLY AGREES THAT THE CORRECTNESS OF ADDITIONS MADE DURING THE COURSE OF SUCH REASSESSMENT PROCEEDINGS IS NOW COVERED AGAINST THE A SSESSEE BY JURISDICTIONAL HIGH COURTS JUDGMENT IN THE CASE OF KALAPATARU COLOURS CHEMICALS (SUPRA). SINCE THE VERY REASSESSMENT PROCEE DINGS ITSELF ARE QUASHED THAT ASPECT OF THE MATTER CEASES TO HAVE AN Y PRACTICAL IMPLICATION. MOREOVER, THE CIT(A) ON PRINCIPLE HAS ALSO ACCEPTE D THAT THE REOPENING IS NOT SUSTAINABLE AS IT IS EVIDENT FROM PARA 4.2 OF THE I MPUGNED ORDER AND THE REVENUE HAS NOT CHALLENGED THE ISSUE OF REOPENING BEFORE US. 6 IN VIEW OF THE ABOVE DISCUSSION AND THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DURAX (SUPRA), WE HOLD THAT THE REOPENING IS BAD IN LAW AND LIABLE TO BE SET ASIDE. THOUGH THE ISSUE U/S 80HHC ON DEPB IS AGAINST THE ASSESSEE IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS KALPATARA COLOURS & CHEMICALS REPORTED IN 328 ITR 451. HOWEV ER, WHEN THE REASSESSMENT ITSELF HAS BEEN QUASHED, THE REVENUES APPEAL FOR ASSESSME NT YEAR 2001-02 HAS BECOME INFRUCTUOUS 6 I.T.A.NOS. 355 & 356/MUM/2010 (A.YS 2001-02 & 2004-05) & CO NOS 14 & 151/MUM/2010 ITA NO.356/MUM/2010 (ASSESSMENT YEAR 2004-05) 7 THE REVENUE AS WELL AS THE ASSESSEE RAISED THE IS SUE OF DEDUCTION U/S 80HHC ON DEPB. 8 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF T HE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. SINCE THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF KALPATARA COLOURS & CHEMICALS (SUPRA) WHEREIN THE HONBLE COURT HAS H ELD AS UNDER: WE DO NOT FIND ANY LOGICAL JUSTIFICATION IN BIFURCA TING THE VALUE OF THE SALE CONSIDERATION REALIZED BY THE EXPORTER ON THE TRANSFER O F THE DEPB CREDIT. FOR ONE THING CLAUSE (IIID) OF SECTION 28 MUST COVER WI THIN ITS PURVIEW, THE ENTIRETY OF THE SALE CONSIDERATION WHICH IS REALIZED BY THE E XPORTER ON THE TRANSFER OF THE DEPB CREDIT SINCE THAT REPRESENTS THE PROFIT WHIC H THE EXPORTER OBTAINS ON THE TRANSFER OF THE CREDIT. NO PART OF THE CREDIT THA T IS AVAILABLE UNDER THE DEPB SCHEME CAN FALL FOR CLASSIFICATION UNDER CLAUSE (IIIB) OF SECTION 28 WHICH DEALS WITH CASH ASSISTANCE, RECEIVED OR RECEIVABLE AG AINST ANY SCHEME OF THE GOVERNMENT OF INDIA. AS THE LEGISLATIVE HISTORY OF THE PROVISION WOULD SHOW CLAUSE (IIIB) WAS ENACTED BY PARLIAMENT AT A TIME WHEN THE EXPORT INCENTIVES THAT WERE AVAILABLE WERE (I) IMPORT ENTIT LEMENT LICENCES ; (II) CASH COMPENSATORY SUPPORT ; AND (III) DUTY DRAWBACK. THE DEPB SCHEME WAS NOT EVEN IN EXISTENCE WHEN CLAUSE (IIIB) CAME TO BE EN ACTED INTO SECTION 28 BY THE FINANCE ACT OF 1990. THE DEPB SCHEME WAS BROUG HT INTO EXISTENCE WITH EFFECT FROM APRIL 1, 1997. CLAUSE (IIID) OF SECTION 28 WAS INSERTED BY THE AMENDING ACT OF 2005 WITH EFFECT FROM APRIL 1, 1998 . THE VALUE OF THE DEPB CREDIT CAN BY NO MEANS BE REGARDED AS A CASH ASSISTA NCE WHICH IS RECEIVED OR RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER AN Y SCHEME OF THE GOVERNMENT OF INDIA. THE TRIBUNAL HAS RELIED TO A CONSIDERABLE EXTENT ON A SPEECH MADE BY THE THEN FINANCE MINISTER ON THE FLOOR OF PARLIAMENT IN SUPPORT OF ITS CONCLUSION THAT ONLY THE PREMIUM REALIZED BY AN EXPORTER ON THE SALE OF THE DEPB CREDIT WOULD FALL WITHIN THE PURVIEW OF CLAUSE (IIID) OF SE CTION 28 AND NOT THE FACE VALUE OF THE DEPB. THE ENTIRE APPROACH OF THE TRIBUNA L IS WITH RESPECT MISCONCEIVED AND UNSUSTAINABLE. THE FINANCE MINISTE R SOUGHT TO INTRODUCE CLAUSE (IIID) IN SECTION 28 IN VIEW OF THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF P & G ENTERPRISES [2005] 93 I TD 138 (DELHI). THE DISPUTE IN THAT CASE RELATED TO TAXING THE ENTIRE AMOUNT REC EIVED ON THE TRANSFER OF THE DEPB CREDIT AND NOT THE AMOUNT THAT WAS RECEIVED IN EXCESS OF THE FACE VALUE OF THE DEPB CREDIT. AS A MATTER OF FACT IN T HAT CASE THE ASSESSEE HAD CLAIMED THAT THE ENTIRE RECEIPT ON THE TRANSFER OF THE DEPB CREDIT INCLUDING THE FACE VALUE OF THE CREDIT AS PROFITS UNDER SECTIO N 28(IIIA). THE TRIBUNAL IN THAT CASE HELD THAT THE ENTIRETY OF THE AMOUNT WOU LD BE COVERED BY SECTION 7 I.T.A.NOS. 355 & 356/MUM/2010 (A.YS 2001-02 & 2004-05) & CO NOS 14 & 151/MUM/2010 28(IV). HOWEVER, THE VIEW OF THE TRIBUNAL WAS THAT S INCE EXPLANATION (BAA) IN SECTION 80HHC DID NOT ENVISAGE THE EXCLUSION OF PRO FITS COVERED BY SECTION 28(IV), SUCH PROFITS COULD NOT BE EXCLUDED WHILE C OMPUTING THE DEDUCTION UNDER SECTION 80HHC. HENCE, THERE WAS NO DISPUTE IN CONSIDERING THE ENTIRETY OF THE RECEIPTS ON THE TRANSFER OF THE DEPB CREDIT AS PROFITS OF BUSINESS. THE DISPUTE WAS ONLY IN NOT TREATING THE RECEIPTS BY WAY OF TRANSFER OF THE DEPB CREDIT AS EXPORT RECEIPTS WHILE COMPUTING THE DEDUCTI ON UNDER SECTION 80HHC. CONSEQUENTLY, THE ENTIRETY OF THE RECEIPTS ON THE TRANSFER OF THE DEPB CREDIT WHICH WAS SOUGHT TO BE INCLUDED IN SECTION 2 8(IV) WAS BROUGHT IN BY PARLIAMENTARY AMENDMENT IN THE FORM OF AN INSERTION OF CLAUSE (IIID) IN SECTION 28 WITH RETROSPECTIVE EFFECT. THERE WAS NO CONTROVERS Y REGARDING THE TAXABILITY OF THE QUANTUM OF RECEIPTS ON THE TRANSF ER OF THE DEPB CREDIT. HENCE, FOR THESE REASONS WE ARE OF THE VIEW THAT IT CANNOT BE INFERRED FROM THE SPEECH OF THE FINANCE MINISTER THAT THE INSERTION OF CLAUSE (IIID) IN SECTION 28 WAS MADE WITH A VIEW TO TAX ONLY THE AMOUNT WHIC H HAS BEEN RECEIVED IN EXCESS OF THE FACE VALUE OF THE DEPB CREDIT. THE SUB MISSION THAT PRIOR TO THE INSERTION OF CLAUSE (IIID) IN SECTION 28, THE FACE VALUE OF THE DEPB CREDIT REALIZED ON THE TRANSFER OF SUCH CREDIT CONSTITUTED EXPORT PROFITS, BUT NOT THE AMOUNT REALIZED IN EXCESS OF THE FACE VALUE OF THE DEPB IS SIMILARLY WITHOUT ANY BASIS. THIS IS BECAUSE (I) THE OBJECT OF THE D EPB WAS TO FURNISH AN INCENTIVE TO EXPORTERS SO AS TO ADJUST THE CREDIT A GAINST THE CUSTOMS DUTY PAYABLE ON ANY GOODS IMPORTED INTO INDIA. HOWEVER, WHERE AN EXPORTER INSTEAD OF UTILIZING THE CREDIT TRANSFERS THE CRED IT AT A PREMIUM, IT CANNOT BE SAID THAT THE EXPORTER HAS UTILIZED THE CREDIT ; (II) THE LEGISLATURE CONSIDERS THAT THE CUSTOMS DUTY AND EXCISE DUTY PAID ON RAW MATERI ALS USED IN THE EXPORT PRODUCT, WHEN REPAID OR REPAYABLE AS DUTY DRAWBACK, WOULD NOT CONSTITUTE EXPORT PROFIT. SIMILARLY, WHEN THE DEPB CREDIT IS NOT UTILIZED IN THE BUSINESS BUT IS TRANSFERRED FOR VALUE, THE AMOUNT RECEIVED ON THE T RANSFER WOULD BE BUSINESS PROFITS AND NOT EXPORT PROFITS IRRESPECTIVE OF WHETH ER THE AMOUNT WHICH IS REALIZED IS EQUAL TO, LARGER THAN OR LESS THAN THE FAC E VALUE OF THE DEPB CREDIT. PARLIAMENT HAS CONSIDERED THAT THE ENTIRETY OF THE AM OUNT RECEIVED ON THE TRANSFER OF THE DEPB SHALL CONSTITUTE PROFITS OF BU SINESS UNDER SECTION 28(IIID). SINCE SUCH PROFITS ARE NOT EXPORT PROFITS PARLIAMENT DIRECTED THAT NINETY PER CENT. OF THOSE PROFITS WOULD BE EXCLUDED WHILE COMP UTING THE DEDUCTION UNDER SECTION 80HHC ; (III) PARLIAMENT CONSIDERED THA T AN EXPORTER WHO INSTEAD OF UTILIZING THE DEPB CREDIT FOR PAYING CUS TOMS DUTY ON IMPORTED GOODS, MAKES A PROFIT BY TRANSFERRING THE DEPB, WOULD FORM A SEPARATE CLASS AND SEEKS TO TAX THE RECEIPTS ON THE TRANSFER OF TH E DEPB CREDIT AS BUSINESS PROFITS AND NOT EXPORT PROFITS. EXPORTERS WHO TRANS FER THE DEPB CREDIT AND MAKE A PROFIT CANNOT BE PLACED ON PAR WITH THOSE EXP ORTERS WHO UTILIZE THE CREDIT FOR PAYING THE CUSTOMS DUTY ON THE IMPORTED G OODS ; (IV) THE FACT THAT PARLIAMENT DID NOT CONSIDER THE AMOUNT RECEIVED ON THE TRANSFER OF THE DEPB TO BE EXPORT PROFIT CANNOT BE A GROUND TO HOLD THAT THE RECEIPTS ON THE TRANSFER OF DEPB CREDIT ARE NOT BUSINESS PROFITS. CO UNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITS THAT THE ENTIRE AMOUNT RECEIV ED ON THE TRANSFER OF THE DEPB CREDIT IS BUSINESS PROFIT, BUT IT WAS CONTENDED THAT WHAT IS INCLUDED IN SECTION 28(IIID) IS THE AMOUNT RECEIVED ON THE TRANSF ER OF THE DEPB CREDIT IN EXCESS OF THE FACE VALUE OF THE DEPB AND THE AMOUNT RECEIVED TO THE EXTENT OF THE FACE VALUE OF THE DEPB WOULD BE COVERED UNDE R SECTION 28(IIIB). THERE 8 I.T.A.NOS. 355 & 356/MUM/2010 (A.YS 2001-02 & 2004-05) & CO NOS 14 & 151/MUM/2010 IS NO MERIT IN THIS CONTENTION BECAUSE (A) THE DEPB CREDIT WAS NOT IN EXISTENCE WHEN SECTION 28(IIIB) WAS INSERTED BY THE FINANCE ACT OF 1990. DEPB CREDIT WAS INTRODUCED WITH EFFECT FROM APRIL 1, 1997 WHICH WAS AFTER THE INSERTION OF CLAUSE (IIIB) IN SECTION 28 ; (B) SECTION 28(IIIB) REFERS TO CASH ASSISTANCE (BY WHATEVER NAME CALLED) RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT PURSUANT TO A SCHEME OF THE GOVERNMENT. THE AMOUNT RECEIVED ON THE TRANSFER OF THE DEPB CREDIT IS NOT RECEIVED BY THE A SSESSEE FROM THE GOVERNMENT PURSUANT TO A SCHEME OF THE GOVERNMENT WI THIN THE MEANING OF CLAUSE (IIIC) ; AND (C) WHEN SECTION 28(IIID) SPEC IFICALLY DEALS WITH PROFITS REALIZED ON THE TRANSFER OF THE DEPB CREDIT, IT WOUL D BE IMPERMISSIBLE AS A MATTER OF FIRST PRINCIPLE TO BIFURCATE THE FACE VALU E OF THE DEPB AND THE AMOUNT RECEIVED IN EXCESS OF THE FACE VALUE OF THE DEPB. FOR ALL THESE REASONS, WE HAVE COME TO THE CONCLUSION THAT THE VIE W OF THE TRIBUNAL ON THE TWO QUESTIONS OF LAW FORMULATED BY THE REVENUE IS UNSUSTAINABLE. IN THE CIRCUMSTANCES, WE ALLOW THE APPEAL BY ANSWERING THE FIRST QUESTION OF LAW AS FORMULATED IN THE NEGATIVE. IN SO FAR AS THE SECOND QUESTION IS CONCERNED, WE ARE NOT IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL THAT THE FACE VALUE OF THE DUTY ENTITLEMENT PASSBOOK REALIZED ON THE TRANSFER OF THE ENTITLEMENT IS CHARGEAB LE TO TAX UNDER SECTION 28(IIIB). WE HAVE ALREADY CLARIFIED THAT THE ENTIRETY OF THE SALE CONSIDERATION WOULD FALL WITHIN THE PURVIEW OF SECTION 28(IIID). W E ANSWER THE SECOND QUESTION OF LAW ACCORDINGLY IN THE AFORESAID TERMS. IN VIEW OF THE FINDINGS WHICH HAVE BEEN RECORDED IN T HIS JUDGMENT, WE REMAND THE PROCEEDINGS TO THE ASSESSING OFFICER TO PA SS FRESH ORDERS HAVING DUE REGARD TO THE QUESTIONS OF LAW WHICH HAVE BEEN DE TERMINED IN THIS APPEAL. THE ASSESSING OFFICER WILL FURNISH AN OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. ALL SUBMISSIONS ON FACTS MAY BE URGED BEF ORE THE ASSESSING OFFICER AND SHALL BE CONSIDERED IN ACCORDANCE WITH LAW. THE APPEAL IS ACCORDINGLY DISPOSED OF. IN THE CIRCUMSTANCES OF THE CASE, THERE SHALL BE NO ORDER AS TO COSTS. 9 THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KALPATARA COLOURS & CHEMICALS (SUPRA) WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 10 IN THE RESULT, THE APPEAL FILED BY THE REVENUE F OR ASSESSMENT YEAR 2001-02 IS DISMISSED AND THE CO NO.14/M/2011 BY THE ASSESSEE I S ALLOWED WHEREAS THE APPEAL 9 I.T.A.NOS. 355 & 356/MUM/2010 (A.YS 2001-02 & 2004-05) & CO NOS 14 & 151/MUM/2010 OF THE REVENUE FOR ASSESSMENT YEAR 2004-05 IS ALLOW ED AND THE CO NO. 151/M/2011BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 12 TH DAY OF AUG 2011. SD/- SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 12 TH , AUG 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI 12 TH ,