AIA Engineering Ltd., Ahmedabad V. The ACIT., Circle-1, Ahmedabad

ITA 1005/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8831 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 07-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Section: 80HHC; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING:09/03/2010 DRAFTED ON: 09/03/ 2010 ITA NO.1005/AHD/2007 & 1569/AHD/2007 ASSESSMENT YEAR : 2003-2004, 1999-2000 M/S. AIA ENGINEERING LTD. (PREVIOUSLY KNOWN AS AIA MAGOTTEAUX LTD.) 115, G.V.M.M. ESTATE ODHAV ROAD, ODHAV, AHMEDABAD. VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, AHMEDABAD. PAN/GIR NO. AABCA 2777 J (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI SUNIL TALATI A.R. RESPONDENT BY: SHRI C.K.MISHRA SR. D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -VI, AHMEDABAD, DATED 10/01/2007 AND LEARNED COMMISSIONE R OF INCOME TAX (APPEALS)-V, AHMEDABAD DATED 20.03.2007. 2. IN THE ASSESSMENT YEAR 1999-2000, GROUND NO.1 OF THE APPEAL READS AS FOLLOWS. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE RE-OPENED PROCEEDINGS & ORDE R PASSED U/S. 147 OF THE ACT BY THE LEARNED A.O. AS LEGAL ON THE GROUND THAT BECAUSE OF LEGISLATIVE AMENDMENT AS PER WHICH DEDUCTION U/S. 80-HHC HAD TO BE COMPUTED IN A PARTI CULAR MANNER. IT IS SUBMITTED THAT, THE ACTION OF THE CIT (A) CONFIRMING THE ORDER AS LEGAL IN INCORRECT, ILLEGAL BOTH ON FACTS AND ON LAW, THE SAME MAY BE HELD NOW AS INVALID & B E QUASHED. ITA NO .1005/AHD/2007 AND 1569/AHD/2007 - 2 - 3. AT THE TIME OF THE HEARING, THE AR OF THE ASSESS EE SUBMITTED THAT HE IS NOT PRESSING THIS GROUND OF APPEAL. HENC E THE SAME IS DISMISSED AS NOT PRESSED. 4. IN THE ASSESSMENT YEAR 1999-2000, GROUND NOS. 2 TO 5 AND IN THE ASSESSMENT YEAR 2003-04, GROUND NOS. 1 TO 4 ARE COMMON. THEY READ AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSING OFFICER'S ACTION IN DENYING THE DEDUC TION ON DEPB INCOME U/S. 80 HHC WAS CORRECT. ON THE FACT S AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ALLOWED THE GROUND OF APPEAL REGARDING DEDUCTION U/S.80HHC ON EXPORT INCENTIVE. THE SAME BE SO HELD NOW AND DEDUCTION BE ALLOWED AS CLAIMED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE GROUN D OF THE APPELLANT THAT DEDUCTION U/S. 80HHC WAS ALLOWAB LE AS CLAIMED IN THE RETURN OF INCOME CONSIDERING THE EXPERT INCENTIVE AS INCOME U/S. 28 OF THE INCOME TA X ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS IN HOLDING THAT AS THE EXPORT TURNOVER EXCEEDED RS. 10 CRORES, THE APPELLA NT WAS NOT ENTITLED TO ANY DEDUCTION U/S. 80HHC IN RES PECT OF DEPB INCOME. 4. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ORDERED TO GRANT THE DEDUCTION U/S. 8 0 HHC AS CALCULATED BY THE APPELLANT THE SAME BEING ALLOWABLE. ' THE SAME BE SO HELD NOW AND DEDUCTION BE ORDERED TO BE ALLOWED FULLY AS CLAIMED. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF ALLOY STEEL CASTINGS USED IN CEMENT FACTORIES AND THERMAL POWER STATION. THE ONLY ISSUE AGITATED IN THIS APPEAL IS REGARDING THE TREATMENT TO BE GIVEN TO THE INCOME EARNED ON THE SALE OF DEPB LICE NSES. THE ITA NO .1005/AHD/2007 AND 1569/AHD/2007 - 3 - ASSESSEE HAD REALIZED A SUM OF RS.1,53,13,668/- IN AY 2003-04 AND RS.1,65,34,216/- IN AY 1999-2000. THE AO TAKING INT O CONSIDERATION THE AMENDMENT MADE TO SEC.80HHC BY THE TAXATION LAW (SECOND AMENDMENT) ACT, 2005 HELD THAT THE APPELLANT HAD NO T SATISFIED THE CONDITIONS TO CLAIM THE SALE PROCEEDS OF DEPB AS EL IGIBLE PROFIT FOR COMPUTING THE DEDUCTION U/S.80HHC. AS THE EXPORT T URNOVER OF THE APPELLANT EXCEED RS.10 CRORE, AS PER THE AMENDMENT REFERRED TO ABOVE THE APPELLANT HAS TO SATISFY THE FOLLOWING CO NDITIONS TO GET THE BENEFIT OF DEPB INCOME. (A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAW BACK OR DUTY FREE REPLENISHMENT CERTIFICATE BEING DUTY REMISSION SCHEME AND (B) THE RATE OF DRAW BACK CREDIT ATTRIBUTABLE TO TH E CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE DUTY FREE REPLENISHMENT CERTIFICATE, BEING DUTY REMISSION SCH EME. 6. THE AO MODIFIED THE DEDUCTION CLAIMED U/S.80HHC THE ASSESSEE HAD CLAIMED THE BENEFIT OF DEPB INCOME BY EXCLUDING DEPB INCOME AS THE ASSESSEE HAD NOT FILED EVIDENCE TO SHOW THAT THE TWO CONDITIONS NOTED ABOVE WERE SATISFIED. 7. IN APPEAL BEFORE THE CIT(A), THE AUTHORIZED REPR ESENTATIVE SHRI JAYESH D. BAROT ADMITTED THAT THE APPELLANT COMPANY DID NOT SATISFY BOTH THE CONDITIONS. HE ARGUED THAT THE AMENDED PRO VISIONS AND DISCRIMINATORY, ARBITRARY AND UNCONSTITUTIONAL. HE ALSO STATED THAT THE APPELLANT COMPANY ALONG WITH OTHER EXPORTERS OF THIS REGION HAS CHALLENGED THE VALIDITY OF THE AMENDMENT BEFORE THE SUPREME COURT OF INDIA. 8. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMIS SIONS OF THE AR OF THE ASSESSEE HELD AS UNDER:- I HAVE CONSIDERED THE ARGUMENT OF THE APPELLANT. T HE FACT IS THAT THE APPELLANT HAS NOT SATISFIED BOTH THE CO NDITIONS REQUIRED TO ALLOW DEDUCTION U/S.80HHC IN RESPECT OF THE ITA NO .1005/AHD/2007 AND 1569/AHD/2007 - 4 - DEPB INCOME. AND THE LAW IS CLEAR. AS THE APPELLANT IS FOUND NOT TO HAVE SATISFIED BOTH THE AFORESAID COND ITIONS THE COMPUTATION OF DEDUCTION U/S.80HHC MADE BY THE AO IS SUSTAINED. 9. THE AR OF THE ASSESSEE FILED BEFORE US COPY OF O RDER OF THE TRIBUNAL DATED 5.10.2009 PASSED IN THE CASE OF THE ASSESSEE IN THE AY 2004-05 IN ITA NO.2940/AHD/2006 AND SUBMITTED TH AT IN THAT YEAR THE TRIBUNAL HAD RESTORED THE MATTER BACK TO T HE FILE OF THE AO RELATING TO CLAIM FOR DEDUCTION UNDER SECTION 80HHC IN RESPECT OF THE AMOUNT OF DEBP FOR ADJUDICATION AFRESH IN LIGHT OF THE DECISION OF THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS VS. ITO (2009) 125 TTJ (MUMBAI)(SB) 289. FOLLOWING THE SAID ORDER OF THE TRIBUNAL THE ISSUE IN BOTH THE YEAR UNDER AP PEAL SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUD ICATION. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT OBJECT TO THE ABOVE SUBMISSION OF THE AR OF THE ASSESSEE. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABL E ON RECORD. WE FIND THAT IN THE AY 2004-05, TRIBUNAL IN THE CASE O F THE ASSESSEE HAD RESTORED THE ISSUE BACK TO THE FILE OF THE AO FOR F RESH ADJUDICATION BY OBSERVING AS UNDER:- 5. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT IN THE AFORESAID DECISION DATED 11.8.2009, THE FOLLOWING QUESTION WA S REFERRED TO THE SPECIAL BENCH: WHETHER THE ENTIRE AMOUNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE UNDER SEC TION 28(IIID) OF THE INCOME TAX ACT OR THE PROFIT REFERR ED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTERPOL ATED? 5.1 THE SPECIAL BENCH ADJUDICATED THE AFORESAI D QUESTION IN FOLLOWING TERMS: ITA NO .1005/AHD/2007 AND 1569/AHD/2007 - 5 - I) THE ARGUMENT OF THE REVENUE THAT DEPB IS A POST EXPORT EVENT AND HAS NO RELATION WITH THE PURCHASE OF GOOD S CANNOT BE ACCEPTED. THERE IS A DIRECT RELATION BETWEEN DEPB AND THE CUSTOMS DUTY PAID ON THE PURCHASES . FOR PRACTICAL PURPOSES, DEPB IS A REIMBURSEMENT OF THE COST OF PURCHASE TO THE EXTENT OF CUSTOMS DUTY; (II) THE DEPB BENEFIT (FACE VALUE) ACCRUES AND BECOMES ASSESSABLE TO TAX WHEN THE APPLICATION FOR DEPB IS FILED WITH THE CONCERNED AUTHORITY . SUBSEQUENT EVENTS SUCH AS SALE OF DEPB OR MAKING IMPORTS FOR SELF CONSUMPTION ETC ARE IRRELEVANT FOR DETERMINING THE ACCRUAL OF THE INCOME ON ACCOUNT OF DEPB; (III) THOUGH S. 28 (IIIB) REFERS TO A CASH ASSISTA NCE AGAINST EXPORTS, IT IS WIDE ENOUGH TO COVER THE FACE VALUE OF THE DEPB BENEFIT; (IV) S. 28 (IIID) WHICH REFERS TO THE PROFITS ON TRANSFER OF THE DEPB OBVIOUSLY REFERS ONLY TO THE PROFIT ELEMENT AND NOT THE GROSS SALE PROCEEDS OF THE DEPB. IF THE REVENUES ARGUMENT THAT THE SALE PROCEEDS SHOULD BE CONSIDERED IS ACCEPTED THERE WOULD BE ABSURDITY BEC AUSE THE FACE VALUE OF THE DEPB WILL THEN GET ASSESSED I N THE YEAR OF RECEIPT OF THE DEPB AND ALSO IN THE YEAR OF ITS TRANSFER; (V) CONSEQUENTLY, ONLY THE PROFIT (I.E. THE SALE VALUE LESS THE FACE VALUE) IS REQUIRED TO BE CONSIDERED F OR PURPOSES OF S. 80HHC . 5.2 IN THE LIGHT OF AFORESAID FINDINGS OF THE SPECI AL BENCH AND THE UNDISPUTED SUBMISSIONS OF THE LD. A.R, WE C ONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF T HE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE A O FOR DECIDING THE ISSUE RELATING TO CLAIM FOR DEDUCTION U/S 80HHC OF THE ACT IN RELATION TO THE AMOUNT OF DEPB , AFRESH IN ACCORDANCE WITH LAW, AFTER ALLOWING SUFFI CIENT OPPORTUNITY TO THE ASSESSEE AND KEEPING IN VIEW TH E AFORESAID DECISION OF THE SPECIAL BENCH. WITH THESE DIRECTIONS, GROUND NOS. 1 TO 3 IN THE APPEAL ARE DI SPOSED OF. 12. RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISIO N OF THE TRIBUNAL, WE RESTORE THE ISSUE RELATING TO THE CLAI M FOR DEDUCTION ITA NO .1005/AHD/2007 AND 1569/AHD/2007 - 6 - UNDER SECTION 80HHC IN RESPECT OF AMOUNT DEBP TO TH E FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW IN LI GHT OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS (SUPRA) AFTER ALLOWING REASONABLE OPPORTUNITY OF HE ARING TO THE ASSESSEE. THUS, THE GROUNDS OF APPEAL OF THE ASSESS EE ARE ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE H EARING IN THE PRESENCE OF THE PARTIES ON 09/03/2010. SD/- SD/- (MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCO UNTANT MEMBER AHMEDABAD; DATED 09/03/2009 PARAS# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS) 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD