GLOW EXPORT TRADING P. LTD, MUMBAI V. ITO 8(1)(4), MUMBAI

CO 26/MUM/2011

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6259 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 14-07-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 28-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: A L SHARMA
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G : MUMBAI BEFORE SHRI RAJENDRA SINGH,(AM) AND SMT. ASHA VIJA YARAGHAVAN,(JM) ITA NO.2269/MUM/2010 ASSESSMENT YEAR : 2001-02 ITA NO.2498/MUM/2010 ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER WARD 8(1)(4) ROOM NO.206, 2 ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ..( APPELLANT ) VS. GLOW EXPORT TRADING PVT. LTD. 302, KOLDOGARI CHS LTD. SAHAR ROAD ANDHERI(E) MUMBAI-400 099. ..( RESPONDENT ) P.A. NO. (AAACG 3678 F) C.O. NO.26/MUM/2011 (ARISING OUT OF ITA NO.2269/MUM/2010) ASSESSMENT YEAR : 2001-02 C.O. NO.30/MUM/2011 (ARISING OUT OF ITA NO.2498/MUM/2010) ASSESSMENT YEAR : 2004-05 GLOW EXPORT TRADING PVT. LTD. MUMBAI-400 099. ..( CROSS OBJECTOR) VS. INCOME TAX OFFICER WARD 8(1)(4) MUMBAI-20. (APPELLANT IN APPEAL) DEPARTMENT BY : SHR I A.K. NAYAK ASSESSEE BY : S HRI A.L. SHARMA ITA NO.2269,2498,C.O.26 & 30.MUM/10 & 11 A.Y:01-02 & 04-05 2 O R D E R PER BENCH THESE APPEALS BY THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS BOTH DATED 27.1.2010 OF CIT(A) FOR ASSESSMENT YEARS 2001-02 AND 2004-05. SINCE D ISPUTES RAISED IN THE APPEALS AND CROSS OBJECTIONS ARE IDENTICAL TH ESE ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. THE DISPUTE IS IN RELATION TO ALLOWABLITY OF DEDUCTION UNDER SECTION 80HHC IN RESPECT OF DEPB INCOME. 2. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE ASSESSEE WHO IS AN EXPORTER HAD CLAIMED DEDUCTION UNDER SECTION 80HHC OF RS.56,28,613/- FOR ASSESSMENT YEAR 2001-02 AND RS.8,33,726/- FOR ASSESSMENT YEAR 2004-05. THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD INCURRED LO SS IN THE EXPORT BUSINESS AND HAD NO PROFIT. THE PROFIT SHO WN WAS ONLY BECAUSE OF DEPB RECEIPTS. THE ASSESSING OFFICER ALSO NOTED THAT THE TURNOVER IN THE CASE OF THE ASSESSEE EXCEEDED RS.10.00 CRO RES IN BOTH THE YEARS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLA IN AS TO WHY CLAIM OF DEDUCTION UNDER SECTION 80HHC SHOULD NOT BE DISALLOWED. THE ASSESSEE EXPLAINED THAT 90% OF THE PRODUCTS BEING DEA LT BY THE ASSESSEE WERE NOT COVERED UNDER DUTY DRAWBACK AND THEREFO RE, COMPARISON BETWEEN DUTY DRAW BACK AND DEPB RATES WAS NO T POSSIBLE. IT WAS ALSO SUBMITTED THAT ONLY PROFIT ON SALE CAN BE CON SIDERED FOR TAXATION AND NOT ENTIRE SALE PROCEEDS. ASSESSING OFFICER D ID NOT ACCEPT THE CONTENTIONS RAISED. IT WAS HELD BY HIM THAT ENTIRE PROCEEDS ON ACCOUNT OF DEPB WAS TAXABLE AS THE ASSESSEE WAS NOT FULFILL ING THE CONDITIONS MENTIONED IN THE 3 RD PROVISO TO SECTION 80 HHC(3). THE ITA NO.2269,2498,C.O.26 & 30.MUM/10 & 11 A.Y:01-02 & 04-05 3 ASSESSING OFFICER ACCORDINGLY DISALLOWED THE ENTIRE DEDUCTIO N UNDER SECTION 80HHC. IN APPEAL THE ASSESSEE RELIED ON THE DECISIO N OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXP ORTS VS. ITO (318 ITR (AT) 87) IN WHICH IT WAS HELD THAT FACE VALUE OF DEPB HAD TO BE CONSIDERED AS INCOME UNDER SECTION 28(IIIB) AND SALE CO NSIDERATION IN EXCESS OF FACE VALUE HAS TO BE CONSIDERED AS PROFIT UNDE R SECTION 28(IIID). THE CIT(A) THEREFORE, DIRECTED THE ASSESSING OFFICER TO RE- COMPUTE DEDUCTION UNDER SECTION 80HHC IN LIGHT OF THE DE CISION OF THE SPECIAL BENCH IN THE CASE OF TOPMAN EXPORTS (SUPRA). AGG RIEVED BY THE SAID DECISION REVENUE IS IN APPEAL. THE ASSESSEE HAS A LSO FILED CROSS OBJECTIONS IN WHICH IT HAS RAISED THE ISSUE THAT DEPB I NCOME COVERED UNDER SECTION 28(IIID) CANNOT BE LIABLE TO TAX AS IT WAS NOT BE POSSIBLE TO FULFILL THE CONDITIONS MENTIONED IN THE 3 RD PROVISO TO SECTION 80HHC(3). 3. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDI NG ALLOWABILITY OF DEDUCTION UNDER SECTION 80HHC. THE ASSESSEE HAD INCURRED LOSS IN EXPORT BUSINESS AND DEDUCTION HAS ONLY BEEN CLAIMED IN RE SPECT OF DEPB INCOME. THE ASSESSING OFFICER HELD THAT THE ENTIRE DEPB INCOME INCLUDING FACE VALUE HAD TO BE CONSIDERED AS INCOME UNDE R SECTION 28(IIID) AND THE TURNOVER OF THE ASSESSEE EXCEEDING RS.1 0.00 CRORES THE DEDUCTIONS UNDER SECTION 80HHC CANNOT BE ALLOWED AS CO NDITIONS MENTIONED IN 3 RD PROVISO TO SECTION 80HHC(3) WERE NOT FULFILLED. THE CIT(A) HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF TOPMAN EXPORTS (SUPRA) AND HAS DIRECTED THE ASSESSING OFFICER TO RE-COMPUTE THE DEDUCTION IN THE LIGHT OF SAID DECIS ION. CIT(A) HAS NOT EXAMINED AS TO WHETHER CONDITIONS MENTIONED IN THE 3 RD PROVISO TO SECTION 80HHC(3) WERE FULFILLED OR NOT. FURTHER WE ALSO NOTICE THAT THE ITA NO.2269,2498,C.O.26 & 30.MUM/10 & 11 A.Y:01-02 & 04-05 4 HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. KALPATARU C OLOURS & CHEMICALS (328 ITR 451) HAVE NOT UPHELD THE VIEW TAKE N BY THE SPECIAL BENCH IN THE CASE OF TOPMAN EXPORTS(SUPRA). THE HO NBLE HIGH COURT HAS HELD THAT THE ENTIRE DEPB RECEIPTS INCLUDING FACE VALUE HAS TO BE CONSIDERED AS INCOME UNDER SECTION 28(IIID). THE JUDGMENT WAS NOT AVAILABLE AT THE TIME OF PASSING OF ORDER OF CIT( A). AS POINTED OUT EARLIER, CIT(A) HAS ALSO NOT GIVEN ANY FINDING WHETH ER CONDITIONS MENTIONED IN 3 RD PROVISO TO SECTION 80HHC(3) ARE FULFILLED OR NOT. THE ORDER OF THE CIT(A), THEREFORE, CANNOT BE SUSTAINED. BOTH PARTIES HAD NO OBJECTION IF THE MATTER WAS REFERRED BACK TO CIT(A) FOR PASSING A FRESH ORDER. WE, THEREFORE, SET ASIDE THE ORDER OF TH E CIT(A) AND RESTORE THE ISSUE BACK TO HIM FOR PASSING A FRESH ORDER AF TER NECESSARY EXAMINATION IN THE LIGHT OF OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AS WELL AS CROSS OBJECTIONS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14.7.2011 SD/- SD/- (ASHA VIJAYARAGHAVAN) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14.7.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.