M/s. Ambica Knitting Mills, Ahmedabad V. The ACIT.,Circle-5, Surat

CO 65/AHD/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9506 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-05-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 26-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.333/AHD/2013 A.Y.2003-04 ACIT, CIRCLE-5, SURAT. VS M/S. AMBICA KNITTING MILLS, C/O KETAN H. SHAH, ADVOCATE 9 TH FLOOR, SAPPHIRE COMPLEX, C.G. ROAD, NAVRANGPURA, AHMEDABAD. PAN: AAEFA 8407F (APPELLANT) (RESPONDENT) CO NO.65/AHD/2013 A.Y.2003-04 M/S. AMBICA KNITTING MILLS, C/O KETAN H. SHAH, ADVOCATE 9 TH FLOOR, SAPPHIRE COMPLEX, C.G. ROAD, NAVRANGPURA, AHMEDABAD. PAN: AAEFA 8407F VS ACIT, CIRCLE-5, SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI O.P. BATHEJA, SR.D.R. , ASSESSEE(S) BY : NONE / DATE OF HEARING : 29/05/2014 / DATE OF PRONOUNCEMENT: 30/05/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER REVENUE IS IN APPEAL AND THE RESPONDENT-ASSESSEE H AS FILED THE CROSS OBJECTION EMANATING FROM THE ORDER OF LEARNED CIT(A)-I, SURAT, DATED 09.11.2012. GROUNDS RAISED BY THE REVENUE ARE REPRODUCED BELOW: ITA NO.333/AHD/2013 & CO NO.65/AHD/2013 ACIT SURAT VS. M/S. AMBICA KNITTING MILLS. FOR A.Y. 2003-04 - 2 - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.32,56,833/- MA DE ON ACCOUNT OF DISALLOWANCE OF CLAIM U/S.80HHC CLAIMED BY THE ASSE SSEE AND DISALLOWED BY THE ASSESSING OFFICER. 2. THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACTS OF THE CASE THAT THE ASSESSEE HAD NOT EXPORT TURNOVER EXCEEDING RS.10 CR ORES AND DID NOT FULFILL THE CONDITIONS SET OUT IN THE THIRD PROVISO TO SEC. 80H HC(3). 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 254 OF THE IT ACT, DATED 1 5.12.2011 WERE THAT THE AO HAD DISALLOWED THE CLAIM OF DEDUCTION U/S.80HHC OF RS.32,56,833/- ON THE GROUND THAT THE ASSESSEE HAD WRONGLY IGNORED THE NEGATIVE FIGURE OF PROFIT. THE AO HAD RECOMPUTED THE WORKING OF THE DEDUCTION U/S.80HHC AND BECAUSE THAT WAS A NEGATIVE FIGURE, T HEREFORE, THE CLAIM OF DEDUCTION WAS DISALLOWED. AGAINST THAT ORDER AN APPEAL WAS FILED BEFORE LEARNED CIT(A) WHICH WAS DISMISSED. THEREAFT ER, ITAT A BENCH AHMEDABAD VIDE AN ORDER DATED 23 RD OF APRIL, 2010 IN ITA NO.805/AHD/2007 HAD RESTORED THE ISSUE BACK TO THE FILE OF THE AO. AT THAT TIME, THERE WAS A DECISION OF THE SPECIAL BENC H OF THE TRIBUNAL PRONOUNCED IN THE CASE OF TOPMAN EXPORTS, 124 ITD ( SB) (MUM.); HENCE, ON THAT GROUND THE MATTER WAS RESTORED FOR D ENOVO ADJUDICATION. DUE TO THE SAID REASON, THE AO HAS PASSED THE IMPUG NED ORDER NOW UNDER APPEAL AND DISALLOWED THE CLAIM OF DEDUCTION U/S.80 HHC AS IT WAS MADE IN THE FIRST ROUND OF ASSESSMENT PROCEEDINGS. 3. BEFORE LEARNED CIT(A), SAME FACTS WERE REITERATE D AND THE DECISION TAKEN WAS AS UNDER: 9.1 AS REGARDS GROUND NO.2 APPELLANT SUBMISSION I S AMBIGUOUS AND DOES NOT ESTABLISH HOW DEDUCTION IS ALLOWABLY AFTER FOLL OWING THE DECISION IN THE CASE OF KALPATARU COLOURS AND CHEMICALS OF HON'BLE BOMBAY HIGH COURT. APPELLANT HAS ALSO FAILED TO ESTABLISH HOW ASSESSIN G OFFICER ERRED IN APPLYING THE DECISION OF HON'BLE BOMBAY HIGH COURT AND HOW T HE SAID GROUND IS MAINTAINABLE? THEREFORE, GROUND NO, 1 AND 2 ARE NOT ALLOWABLE IS PRINCIPLE. ITA NO.333/AHD/2013 & CO NO.65/AHD/2013 ACIT SURAT VS. M/S. AMBICA KNITTING MILLS. FOR A.Y. 2003-04 - 3 - 9.2 HOWEVER, IN SUBSTANCE THE APPELLANT HAS CLAIME D THAT ITS DEDUCTION U/S 80HHC IN RESPECT OF DEPB CREDITS SHOULD BE ALLO WED. THE ASSESSING OFFICER REJECTED THIS CLAIM BY RELYING UPON DECISIO N OF HONBLE BOMBAY HIGH COURT IN THE CASE OF KALPATARU COLOURS & CHEMICALS (SUPRA). IN THE SAID JUDGEMENT HONBLE BOMBAY HIGH COURT REVERSED THE DE CISION OF ITAT SPECIAL BENCH MUMBAI IN THE CASE OF TOPMAN EXPORTS. THE ITA T HAD HELD THAT 'PROFIT' ON TRANSFER OF DEPB CREDITS U/S 28(III D) IS ONLY THE DIFFERENCE BETWEEN THE SALE VALUE AND THE 'FACE VALUE AND NOT THE ENT IRE AMOUNT OF SALE PROCEEDS. 9.3 THE DECISION IN THE CASE OF TOPMAN EXPORTS OF HON'BLE BOMBAY HIGH COURT HAS BEEN SET ASIDE BY THE HONBLE SUPREME CO URT VIDE DECISION DATED 08.08.2012 REPORTED IN 342 ITR 49 ( SC). THE SAME DECISION HAS BEEN TAKEN BY THE HON'BLE SUPREME COURT IN ANOTHER JUDGMENT OF ACG ASSOCIATES CAPSULES (P) LTD REPORTED IN 343 ITR 89. 9.4. THEREFORE, THE LEGAL BASIS ON WHICH THE ASSESSING OFFICER RELIED I.E. THE DECISION OF HONBLE MUMBAI HIGH COURT IN THE CASE O F KALPATRU COLOUR & CHEMICALS NO LONGER SURVIVES AND THE APPELLANTS CL AIM IS TO BE ALLOWED IN ACCORDANCE WITH THE DECISION OF THE HON'BLE SUPREME COURT (SURPA). 9.5 THE APPELLANT RELIED ON THE ABOVE DECISION OF HON'BLE SUPREME COURT IN ITS WRITTEN SUBMISSION FILED ON 18.10.2012. THE ARGUMENT OF APPELLANT TO THAT EXTENT IS ACCEPTED READ WITH GROUND NO.4 OF AP PEAL. 9.6 CONSIDERING THE SAME, APPEAL IS ALLOWED IN FAVO UR OF THE APPELLANT TO THAT EXTENT. THE ASSESSING OFFICER SHALL ALLOW THE CLAIM OF DEDUCTION U/S 80HHC IN RESPECT OF DEPB CREDITS IN ACCORDANCE WITH THE D ECISION OF HONBLE SUPREME COURT REPORTED IN 342 ITR 49 ( SC) / 343 ITR 89. 4. ON THE DATE OF HEARING AN ADJOURNMENT APPLICATIO N WAS MOVED FROM THE SIDE OF THE RESPONDENT-ASSESSEE WHICH IS A S UNDER: IN REFERENCE TO ABOVE, WE BEG TO INFORM YOUR HONOU R THAT, OUR ADVOCATE SHRI KETAN H. SHAH HAS JUST CAME BACK FROM USA. HOW EVER, NOW HE IS HAVING BACK PAIN AND FEVER AND AS SUCH KINDLY GRANT ANY OT HER CONVENIENT DATE AND OBLIGE. 4.1 FROM THE SAID ADJOURNMENT APPLICATION, IT IS EV IDENT THAT IN THE PAST ON VARIOUS GROUNDS ADJOURNMENTS WERE GRANTED AND AG AIN ON THE DATE OF HEARING, THE LEARNED AR IS SEEKING ADJOURNMENT THAT TOO WITHOUT SUBSTANTIATING THE CAUSE OF ADJOURNMENT. WE HAVE NO TED THAT FROM APRIL, 13 THIS APPEAL GOT ADJOURNED; HENCE IT IS NOT PROPE R FOR US TO KEEP THIS APPEAL ANY MORE PENDING; ESPECIALLY; WHEN A LEGAL I SSUE IS INVOLVED. ITA NO.333/AHD/2013 & CO NO.65/AHD/2013 ACIT SURAT VS. M/S. AMBICA KNITTING MILLS. FOR A.Y. 2003-04 - 4 - 5. FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., M R. O.P. BATHEJA APPEARED AND SUPPORTED THE ACTION OF THE AO. ON ACC OUNT OF THE LATEST DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F TOPMAN EXPORTS, 342 ITR 49 (SC), WHEREIN THE DECISION OF KALPATARU COLOURS AND CHEMICALS, 328 ITR 451 (BOM.) WAS REVERSED IT WAS H ELD THAT THE ENTIRE SALE PROCEEDS OF DEPB COULD NOT BE TREATED AS PROFI T BUT ONLY THE DIFFERENCE BETWEEN THE SALE VALUE AND THE FACE VALU E OF THE CREDIT, THE DEPB PROFIT IS REQUIRED TO BE CONSIDERED FOR THE PU RPOSE OF CLAIM OF DEDUCTION. FURTHER, WHEN THE ASSESSEE IS HAVING TUR N OVER OF MORE THAN RS.10 CRORES, THE NEW PROVISO INSERTED WOULD APPLY. THE ASSESSEE IN ITS WRITTEN SUBMISSION HAS STATED THAT IN THE CASE OF BHAVANI EXPORTS, 74 DTR 97 IT WAS HELD THAT RETROSPECTIVE OPERATION OF THE AM ENDMENT CAN BE GRANTED IF IT IS IN THE BENEFIT OF THE ASSESSEE. AP ART FROM THE ABOVE LEGAL POSITION, WE HAVE ALSO NOTED THAT THE ASSESSEE DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS VIDE A REPLY DATED 10.11.200 4 HAS GIVEN A WORKING, FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES, 266 ITR 521 , AS UNDER: (III) YOU HAVE RELIED UPON THE DECISION OF 'IPCA' OF SUPREME COURT. BUT, WE SAY THAT 'IPCA' NEVER SAY THAT THE ASSESSEE SHOULD NOT GET ANY DEDUCTION U/S. 80HHC BUT IT LAID DOWN THAT THE LOSS CANNOT BE IGNO RED. THUS FOLLOWING THE CASE OF 'IPCA' REVISED WORKING SHOULD BE RS. 155449 8/- AS AGAINST ORIGINALLY MADE AT RS.3256833/-. THE WORKING IS AS UNDER :-- -27737045 [phone] = 3108997 I.E. @ 50% IS 15,54,498/- (IV) WE STILL SAY THAT THE CALCULATION MADE IN FORM NO. 10CCAC AT RS.3256833/- IS RIGHTLY CALIMED IN THE RETURN AND T HE DECISION OF IPCA LABORATORIES CANNOT BE APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF OUR CASE. 6. FROM THE SIDE OF THE RESPONDENT-ASSESSEE A DECIS ION OF BABY MARINE EXPORTS, 290 ITR 323 (SC) HAS ALSO BEEN CITED BUT ACCORDING TO ITA NO.333/AHD/2013 & CO NO.65/AHD/2013 ACIT SURAT VS. M/S. AMBICA KNITTING MILLS. FOR A.Y. 2003-04 - 5 - US THE SAME IS NOT APPLICABLE ON THE FACTS AND CIRC UMSTANCES OF THE CASE BECAUSE THE SAID DECISION IS IN RESPECT OF SUPPORTI NG MANUFACTURER; HENCE, NOT TO BE APPLIED ON THE FACTS OF THE CASE. WE, THE REFORE, HOLD THAT THE DIRECTIONS OF LEARNED CIT(A) REQUIRE A SLIGHT MODIF ICATION. LEARNED CIT(A) HAS HELD THAT THE DEDUCTION U/S. 80HHC IN RE SPECT OF DEPB WAS RECALCULATED AS PER THE ORDER OF SUPREME COURT IN T HE CASE OF TOPMAN EXPORT, 342 ITR 49 (SC) AND THE DECISION OF ACG ASSOCIATES, 343 ITR 89 (SC) BUT WE HEREBY DIRECT THAT THE AO IS ALSO REQUIRED TO COMPUTE THE 80HHC DEDUCTION IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT PRONOUNCED IN THE CASE OF IPCA LABORATORIES (SUPRA) . 6.1 THE GROUND RAISED BY THE REVENUE IS NOT CORRECT LY WORDED BECAUSE THE LEARNED CIT(A) HAS NOT RIGHTLY DIRECTED TO ALLO W THE CLAIM OF THE DEDUCTION U/S.80HHC AS MADE BY THE ASSESSEE BUT DIR ECTED TO RECOMPUTE IN THE LIGHT OF THE DECISIONS OF HONBLE SUPREME CO URT. AS FAR AS THE SECOND GROUND OF THE REVENUE IS CONCERNED, THE COND ITIONS AS PRESCRIBED IF THE AMENDMENT OUGHT TO HAVE BEEN FULFILLED; HENC E, ON THIS ISSUE IN THE ABSENCE OF CLEAR VERDICT OF LEARNED CIT(A), WE HERE BY DIRECT THE AO TO EXAMINE THE LATEST PROVISIONS AND IF THE ASSESSEE F ULFILL THE CONDITIONS AS LAID DOWN IN THE 3 RD PROVISO TO SECTION 80HHC(3) THEN ALLOW AS PER LAW. RESULT OF THE ABOVE DISCUSSION IS THAT BOTH THE GRO UNDS ARE RESTORED BACK FOR RECALCULATION; HENCE, MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSE ONLY. 7. AS FAR AS THE CROSS OBJECTION OF THE ASSESSEE IS CONCERNED, THE ONLY GROUND IS AS FOLLOWS: IN NOT APPRECIATING THE FACT THAT THE SO-CALLED DE PB CREDIT HAS DIRECTLY LINKED WITH VARIOUS EXPORT AGREEMENTS ENTERED INTO BETWEEN THE ASSESSEE AND ITA NO.333/AHD/2013 & CO NO.65/AHD/2013 ACIT SURAT VS. M/S. AMBICA KNITTING MILLS. FOR A.Y. 2003-04 - 6 - THE OVERSEAS PARTY, AND AS SUCH, THE SAID DEPB AMOU NTS TO AND SHOULD BE CONSIDERED AS PART AND PARCEL OF EXPORT SALES CONSI DERATION. THEREFORE, IRRESPECTIVE OF THE PROFIT ELEMENT THE WHOLE DEPB IS TO BE CONSIDERED AS EXPORT SALES TURNOVER AND THE ASSESSEE IS ENTITLED TO GET THE RELIEF ACCORDINGLY. 8. WE FIND NO FORCE IN THE ABOVE GROUND OF THE CROS S OBJECTOR BECAUSE THE DEPB PROFIT IS TO BE TAKEN INTO ACCOUNT IN THE LIGHT OF THE ABOVE DECISION OF HONBLE SUPREME COURT PRONOUNCED IN THE CASE OF TOPMAN EXPORTS (SUPRA) . THIS GROUND OF THE CROSS OBJECTOR IS HEREBY DISMISSED. 9. IN THE RESULT, REVENUES APPEAL MAY BE TREATED A S ALLOWED FOR STATISTICAL PURPOSE ONLY HOWEVER THE CROSS OBJECTIO N IS DISMISSED. SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER 30/5/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD