DCIT, Circle -8, Kolkata, Kolkata V. M/s. R. Piyarelall International(P)Ltd, Kolkata

ITA 1040/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83224 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 21-08-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 12-07-2012
• Court: TRIBUNAL
• Department Lawyers: RAMA PRASAD NAG ACITLD
• Assessee Lawyers: S K SAHA FCALD
• Keywords: Reopening of assessment; Retrospective amendment; Assessment record
• Section: 147; 148; 28; 143(3); 80HHC

Judgement Text

ITA NO. 1040/KOL/12 - B - JM M/S. R.PIYARELALL INTERNL. P.LTD 1 , B IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH: KOLKATA ( ) , , BEFORE HON BLE SRI MAHAVIR SINGH, JM & HON BLE SRI SHAMIM YAHYA, AM I.T.A NO . 1040/ KOL/20 12 / ASSESSMENT YEAR : 200 4 - 05 D .C.I.T, CIRCLE - 8 , KOLKATA V S. R.PIYARELALL INTERNATIONAL PV.LTD PAN:AABCR 3157P ( /APPELLANT ) ( / RE SPONDENT ) / FOR THE DEPARTMENT: / SHRI RAMA PRASAD NAG, ACIT/LD.DR , / FOR THE ASSESSEE : / SHRI S.K.SAHA, FCA/LD.AR /DATE OF HEARING: 20 - 11 - 2014 /DATE OF PRONOUNCEMENT : 16 - 12 - - 2014 / ORDER , SHRI MAHAVIR SINGH, JUDICIAL MEMBER : TH IS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A), KOLKATA IN APPEAL NO. 317/CIT(A) - VIII/KOL/09 - 10 DATED 13 - 04 - 2012 . ASSESSMENT WAS FRAMED BY D CIT , CIR. - 8 , KOLKATA FOR THE ASSESSMENT YEAR 200 4 - 05 U/S 143(3) /147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFER TO AS THE ACT ) . 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF THE AO IN ASSUMING JURISDICTION FOR FRAMING RE - ASSESSMENT U/S. 147 R.W.S 148 OF THE ACT . FOR THIS REVENUE HAS RAISED FOLLOWING GROUNDS: - 1. T HAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) HAS ERRED IN HOLDING THAT THE NOTICE U/S. 148 O F THE INCOME - TAX ACT, 1961 , ISSUED BY THE AO WAS WITHOUT JURISDICTION AS BEING THE CONDITIONS NOT SATISFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEREAS, THE CIT(APPEALS) HAS FAILED TO CORRECTLY APPRECIATE FACTS OF THE CASE AND PROVISIONS OF THE LA WS. ITA NO. 1040/KOL/12 - B - JM M/S. R.PIYARELALL INTERNL. P.LTD 2 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) HAS ERRED IN HOLDING THAT REASSESSMENT U/S. 147 OF THE INCOME - TAX ACT, 1961 , WAS NOT JUSTIFIED IN THE INSTANT CASE, WITHOUT APPRECIATING THAT THE LIMITED ISSUE SET A SIDE BY THE ITAT WAS DIFFERENT FROM THE ISSUE OF ESCAPEMENT CONSIDERED BY THE AO IN REASSESSMENT COMPLETED U/S. 147 OF THE INCOME - TAX ACT, 1961. THE INTER - CONNECTED ISSUE, WHICH IS SECOND ISSUE AND RELATES TO MERITS IS , WHETHER , ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80HHC OF THE ACT ON DEPB CREDITS IN VIEW OF THE AMENDMENT IN SECTION 80HHC BY INSERTING 5 TH PROVISO TO SECTION 80HHC BY TAXATION LAWS (AMENDMENT) ACT 2005. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND: - 3. THAT ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSEE COMPANY WAS ELIGIBLE FOR DEDUCTION U/S. 80HHC OF THE INCOME - TAX ACT, 1961 EVEN WHEN THE COMPUTATION AND CLAIM OF DEDUCTION U/S. 80HHC OF THE INCOME - TAX ACT, 1961 OF T HE ASSESSEE COMPANY WAS INCORRECT AND IN CONTRAVENTION OF THE PROVISIONS OF THE SECTION 80HHC OF THE INCOME - TAX ACT, 1961 . 3 . WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED THE FACTS ARE THA T THE ASSESSEE IS A GOVERNMENT RECOGNIZED TWO STAR EXPORT HOUSE SINCE INCORPORATION. THE ASSESSEE COMPANY MAINLY EXPORTED AGRICULTURAL PRODUCTS SUCH AS RICE, WHEAT, SUGAR, PULSES ETC TO BANGLADESH , CANADA & USA. E XPORT TURNOVER DURING THE YEAR WAS ABOUT 96 % OF THE TOTAL TURNOVER OF ASSESSEE COMPANY. IN THE RETURN OF INCOME FILED BY ASSESSEE , CLAIMED DEDUCTION U/S. 80HHC OF THE ACT AMOUNTING TO RS.19,05,854/ - BEING 30% OF RS.63,52,847/ - , WHICH CONSISTED OF RS.23,64,433/ - BEING PROFIT FROM EXPORT BUSINESS AND RS.39,88,414/ - BEING 90% OF EXPORT INCENTIVES. THE AO RESTRICTED THE ADDITION U/S. 80HHC AT RS.11,30,791/ - FOR THE REASON THAT AS PER CALCULATION OF ASSESSEE THE DEDUCTION U/S. 80HHC SHOULD HAVE BEEN ALLOWED @30% OF RS.63,57,847/ - I.E AT RS.19,05,854/ - . ACCORDING TO THE AO THE RATE OF DEDUCTION DETERMINED BY THE ASSESSEE WAS HIGHER THAN THE SALE OF DEPB/DFRC. BUT AO GOING THROUGH AMENDMENT MADE BY TAXATION LAW ( AMENDMENT ) ACT , 2005 WITH RETROSPECTIVE EFFECT FROM 1 - 4 - 1998 , RECOMPUTED THE CLAIM OF DEDUC TION U/S. 80HHC OF THE ACT ONLY TO THE EXTENT OF PROFIT OF RS.43,49,000 AND THEREBY COMPUTED THE DEDUCTION U/S. 80HHC AT RS.11,37,791/ - AS UNDER: - ITA NO. 1040/KOL/12 - B - JM M/S. R.PIYARELALL INTERNL. P.LTD 3 2, ON A PERUSAL OF THE ASSESSMENT RECORDS IT WAS OBSERVED FROM FORM 3CD THAT THE ASSESSEE COMPANY EXPORTE D GOODS MANUFACTURED/PROCESSED BY OTHERS AND THE COMPUTATION OF EXPORT PROFIT ON WHICH DEDUCTION UNDER SECTION 80HHC OF THE ACT WAS CLAIMED WAS NOT CORRECTLY ARRIVED AT IN FIRM 10CCAC. ACTUALLY THE ASSESSEE COMPANY SUFFERED LOSS OF RS.2,95,02,341/ - ON EXP O RT AND HENCE, THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION OF RS.11,30,791/ - UNDER SECTION 80HHC OF THE ACT. SO THE CLAIM OF DEDUCTION UNDER SECTION 80HHC OF THE ACT IS NOT ALLOWED. 4 . THIS MATTER WAS TAKEN UP BEFORE ITAT OF REGULAR ASSESSMENT I.E. ORIGI NAL ASSESSMENT AND TRIBUNAL HAS GIVEN DIRECTION IN ITA NO.824/KOL/07 DATED 07 - 06 - 2007 D IRECTING THE AO TO DECIDE THE SAME AFRESH AFTER THE DECISION ON VIR ES OF AMENDMENT TO SECTION 80HHC OF THE ACT BY VARIOUS C OURTS. AGGRIEVED ASSESSEE PREFERRED APPEAL BE FORE CIT(A) , WHO AFTER CONSIDERING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT (2012) 342 ITR 49 (SC) ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE ON JURISDICTIONAL ISSUE I.E. THE REOPENING OF ASSESSMENT U/S 147 R.W.S 148 OF THE ACT WAS QUASHED AND EVEN ON MERITS , CIT(A) ALLOWED THE DEDUCTION U/S 80HHC OF THE ACT , IN VIEW OF THE DECISION OF D ECISION OF THE HON BLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA) , WHEREIN IT HAS BEEN HELD AS: - THE AFORESAID DISCUSSI ON WOULD SHOW THAT WHERE AN ASSESSEE HAS AN. EXPORT TURNOVER EXCEEDING RS. 10 CRORES AND HAS MADE PROFITS ON TRANSFER OF DEPB UNDER CLAUSE (D) OF SECTION 28, HE WOULD NOT GET THE BENEFIT OF ADDITION TO EXPORT PROFITS UNDER THIRD OR FOURTH PROVISO TO SUB - S ECTION (3) OF SECTION 80HHC, BUT HE WOULD GET THE BENEFIT OF EXCLUSION OF A SMALLER FIGURE FROM 'PROFITS OF THE BUSINESS' UNDER EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT AND THERE IS NOTHING IN EXPLANATION (BAA) TO SECTION 80HHC TO SHOW THAT THIS BENEF IT OF EXCLUSION OF A SMALLER FIGURE FROM 'PROFITS OF THE BUSINESS' WILL NOT BE AVAILABLE TO AN ASSESSEE HAVING AN EXPORT TURNOVER EXCEEDING RS. 10 CRORES. IN OTHER WORDS, WHERE THE EXPORT TURNOVER OF AN ASSESSEE EXCEEDS RS. 10 CRORES, HE DOES NOT GET THE B ENEFIT OF ADDITION OF NINETY PER CENT, OF EXPORT INCENTIVE UNDER CLAUSE (IIID) OF SECTION 28 TO HIS EXPORT PROFITS, BUT HE GETS A HIGHER FIGURE OF PROFITS OF THE BUSINESS, WHICH ULTIMATELY RESULTS IN COMPUTATION OF A BIGGER EXPORT PROFIT. THE HIGH COURT, T HEREFORE, WAS NOT RIGHT IN COMING TO THE CONCLUSION THAT AS THE ASSESSEE DID NOT HAVE THE EXPORT TURNOVER EXCEEDING RS. 10 CRORES AND AS THE ASSES - SEE DID NOT FULFIL THE CONDITIONS SET OUT IN THE THIRD PROVISO TO SECTION 80HHC(III), THE ASSESSEE WAS NOT E NTITLED TO A DEDUCTION UNDER SECTION 80HHC ON THE AMOUNT RECEIVED ON TRANSFER OF THE DEPB AND WITH A VIEW TO GET OVER THIS DIFFICULTY THE ASSESSEE WAS CONTENDING THAT THE PROFITS ON TRANSFER OF THE DEPB UNDER SECTION 28(IIID) WOULD NOT INCLUDE THE FACE VAL UE OF THE DEPB. IT IS A WELL - SETTLED PRINCIPLE OF STATUTORY INTERPRETATION OF A TAXING STATUTE THAT A SUBJECT WILL BE LIABLE TO TAX AND WILL BE ENTITLED TO EXEMPTION FROM TAX ACCORDING TO THE STRICT LANGUAGE OF THE TAXING STATUTE AND IF AS PER THE WORDS US ED IN EXPLANATION ITA NO. 1040/KOL/12 - B - JM M/S. R.PIYARELALL INTERNL. P.LTD 4 (BAA) TO SECTION 80HHC READ WITH THE WORDS USED IN CLAUSES (IIID) AND (IIIE) OF SECTION 28, THE ASSESSEE WAS ENTITLED TO A DEDUCTION UNDER SECTION 80HHC ON EXPORT PROFITS, THE BENEFIT OF SUCH DEDUCTION CANNOT BE DENIED TO THE ASSESSEE. 5 . FURTHER, VIDE TAXATION LAWS (AMENDMENT) ACT, 2005 AMENDMENTS WERE CARRIED OUT IN SECTIONS 28 AND 80HHC OF THE ACT, WITH RETROSPECTIVE EFFECT FROM 01.07. 1998. THE PROVISION OF SECTION 28 OF THE ACT WAS AMENDED BY INSERT ING NEW CLAUSES (IIID) AND (IIIE) THEREIN, TO COVER PROFIT ON TRANSFER OF DEPB CREDIT AND DUTY FREE REPLENISHMENT CERTIFICATE (DFRC) CREDIT, RESPECTIVELY. SIMULTANEOUS AMENDMENTS WERE ALSO MADE IN SECTION 80 - HHC OF THE ACT BY INSERTING THREE MORE PROVISOS AFTER FIRST PROVISO TO SUB - SECTION (3) OF SECTION 80HHC OF THE ACT. AFTER THE AFORESAID AMENDMENT, THE FULL AMOUNT OF DEPB CREDIT AND DFRC PROFITS QUALIFIED FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT IN RESPECT OF THE EXPORTERS WHOSE EXPORT TURNOVER DID NOT EXCEED RS. 10 CRORES BUT FOR E XPORTERS HAVING EXPORT TURNOVER EXCEEDING RS.10 CRORES, DEPB/ DFRC PROFITS WERE ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT, IF THE FOLLOWING TWO CONDITIONS ARE SATISFIED BY THE EXPORTER: (A)THE EXPORTER HAD AN OPTION TO CHOOSE EITHER THE DUTY D RAW BACK OR CREDIT UNDER DEPB/DFRC SCHEME; AND (B)THE RATE OF CREDIT OF DUTY DRAW BACK WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER DEPB/DFRC SCHEME. BUT, HON'BLE GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS & OTHERS VS. CIT & OTHERS (2012) 348 ITR 391(GUJ) VIDE RECENT JUDGMENT , ALLOW ING WRIT PETITION , HELD RETROSPECTIVE AMENDMENT TO BE ULTRA - VIRES . THE HON'BLE HIGH COURT, IN THE ULTIMATE ANALYSIS, OBSERVED, AS UNDER: ON CONSIDERATION OF THE ENTIRE MATERIALS ON RECORD, WE, THEREFORE, FIND SUBS TANCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE PETITIONERS THAT THE IMPUGNED AMENDMENT IS VIOLATIVE FOR ITS RETROSPECTIVE OPERATION IN ORDER TO OVERCOME THE DECISION OF THE TRIBUNAL, AND AT THE SAME TIME, FOR DEPRIVING THE BENEFIT EARLIER GRANTE D TO A CLASS OF THE ASSESSEES WHOSE ASSESSMENTS WERE STILL PENDING ALTHOUGH SUCH BENEFIT WILL BE AVAILABLE TO THE ASSESSEES WHOSE ASSESSMENTS HAVE ALREADY BEEN CONCLUDED. IN OTHER WORDS, IN THIS TYPE OF SUBSTANTIVE AMENDMENT, RETROSPECTIVE OPERATION CAN BE GIVEN ONLY IF IT IS FOR THE ITA NO. 1040/KOL/12 - B - JM M/S. R.PIYARELALL INTERNL. P.LTD 5 BENEFIT OF THE ASSESSEES BUT NOT IN A CASE WHERE IT AFFECTS EVEN A FEWER SECTION OF THE ASSESSEES. WE, ACCORDINGLY, QUASH THE IMPUGNED AMENDMENT ONLY TO THIS EXTENT THAT THE OPERATION OF THE SAID SECTION COULD BE GIVEN E FFECT FROM THE DATE OF AMENDMENT AND NOT IN RESPECT OF THE EARLIER ASSESSMENT YEARS OF THE ASSESSEES WHOSE EXPORT TURNOVER IS ABOVE RS. 10 CRORES. IN OTHER WORDS, THE RETROSPECTIVE AMENDMENT SHOULD NOT BE DETRIMENTAL TO ANY OF THE ASSESSEES. IN VIEW OF THE ABOVE LEGAL AND FACTUAL POSITION, THE REOPENING IS BAD IN LAW AND HENCE, QUASHED. EVEN ON MERITS, THE ASSESSEE S CASE IS COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA). HENCE, THE APPEAL OF REVENUE IS DISMISSED. 6 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 16 /12 / 2014 SD/ - SD/ - [ , ] [ , ] SHAMIM YAHYA , ACCOUNTANT MEMBER MAHAV IR SINGH, JUDICIAL MEMBER ( ) DATED: 1 6 TH D ECEMBER, 2014 *PP /SR.P.S. - COPY OF THE ORDER FORWARDED TO: 1 . /APPELLANT - D CIT,CIR - 8 , P - 7 CHOWRINGHEE SQ, AAYKAR BHAWAN, 5 TH FL., KOL - 1 2 / RESPONDENT : M/S. R.PIYARELALL INTERNATIONAL PVT. LTD 12 GOVT PL EAST, KOL - 1 3 . / THE CIT, 4 . ( )/ THE CIT(A), KOLKATA 5 . / DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, / BY ORDER, /ASSTT. REGISTRAR