DCIT, Virudhunagar V. M/s. Premier Enterprises, Rajapalayam

ITA 1041/CHNY/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52189 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-12-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 23-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SUBBARAYAN
• Assessee Lawyers: SRI RAM BHARATH
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 1041/MDS/2010 (ASSESSMENT YEAR : 2001-02) THE DY. C.I.T CIRCLE 1 VIRUDHUNAGAR (APPELLANT) VS. M/S PREMIER ENTERPRISE 39/2, SOUTH STREET SANKARAPANDIAPURAM CHATRAPATTI POST RAJAPALYAM 626 102. PAN NO. AABFP 1482 F (RESPONDENT) APPELLANT BY : SHRI V. SUBBARAYAN RESPONDENT BY : SHRI SRI RAM BHARATH, CIT DATE OF HEARING : 14.12.2011 DATE OF PRONOUNCEMENT : 16.12.2011 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY REVENUE FOR THE ASSESSM ENT YEAR 2001-2002 AGAINST THE ORDER DATED 22.02.2011 OF COM MISSIONER OF INCOME TAX [APPEALS] -II, MADURAI. I.T.A. NO.1041/MDS/11 2 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL: 2. THE LD. CIT(A) ERRED IN HOLDING THAT ONLY PROFI T ARISING ON DEPB ALONE SHOULD BE REDUCED FROM THE PROFITS OF THE BUSINESS. 3. THE LD. CIT(A) FAILED TO TAKE NOTE OF THE FACT THAT 90% OF THE ENTIRE SALE PROCEEDS OF DEPB SHOULD BE REDUCED FROM THE PROFITS OF THE BUSINESS SINCE THERE WAS NO COST TO THE ASSESSEE IN RESPECT OF DEPB. 4. THE LD. CIT(A) FAILED TO NOTE THAT THE ASSESSEE IS ENTITLED TO AVAIL TO ADDITIONAL DEDUCTION U/S 80HHC O F THE ACT AS PER THIRD PROVISO TO U/S 80HHC(3) OF THE ACT SINCE THE EXPORT TURNOVER OF THE ASSESSEE EXCEEDS R S. 10 CRORE, AND THE ASSESSEE DID NOT FULFILL THE CONDITIO NS STIPULATED IN THE THIRD PROVISO. 3. IN ALL THE GROUNDS OF APPEAL TAKEN BY THE REVENU E, THE ISSUE INVOLVED IS THAT THE LD. CIT(A) ERRED IN HOLDING TH AT PROFIT ARISING ON DEPB ALONE SHOULD BE REDUCED FROM THE PROFITS OF T HE BUSINESS FOR COMPUTING DEDUCTION ALLOWABLE U/S 80HHC OF THE INCO ME-TAX ACT, I.T.A. NO.1041/MDS/11 3 1961. THE LD. CIT(A) FAILED TO TAKE NOTE OF THE FA CT THAT AS THERE WAS NO COST TO THE ASSESSEE FOR DEPB, THEREFORE, 90 % OF THE ENTIRE SALE PROCEEDS OF DEPB SHOULD BE REDUCED FROM THE PR OFITS OF THE BUSINESS. HE ALSO FAILED TO TAKE NOTE OF THE FACT AS THE ASSESSEE FAILED TO SATISFY THE CONDITIONS IN THE THIRD PROVI SO TO U/S 80HHC(3) OF THE ACT AND THE EXPORT TURNOVER OF THE ASSESSEE EXCEEDS RS. 10 CRORE, THE ASSESSEE WAS NOT ENTITLED TO AVAIL THE A DDITIONAL DEDUCTION U/S 80HHC OF THE ACT. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A O DENIED DEDUCTION UNDER SECTION 80ILLIE OF THE ACT IN VIEW OF THIRD PROVISO TO SECTION 80 HHC OF THE ACT. ACCORDI NG TO HIM~ THE ASSESSEE IS NOT ENTITLED TO FURTHER DEDUCTION SI NCE THE ASSESSEE'S TURN OVER EXCEEDS 10 CRORES AND THE ASSES SEE DID NOT FULFILL THE CONDITIONS STIPULATED IN THE PROVISO: 2.1 AT THE TIME OF HEARING, BEFORE THE UNDERSIGNED, THE AUTHORIZED REPRESENTATIVES REITERATED THE ISSUES RAIS ED IN THE GROUNDS OF APPEAL. THEY ALSO FILED WRITTEN SUBMISSIO NS AND PLEADED FOR ALLOWING THE CLAIM OF DEDUCTION UNDER SECTION80HHC OF THE ACT. IN THE WRITTEN SUBMISSION, IT WAS I.T.A. NO.1041/MDS/11 4 CONTENDED THAT ONLY 90% OUT OF PROFIT EARNED FROM TH E SALE PROCEEDS OF DEPB CAN BE DISALLOWED AND NOT THE ENTI RE SALE PROCEEDS OF DEPB.' IT WAS ALSO CONTENDED THAT THE AO WAS WRONG IN ASSESSING THE ENTIRE SALE OF DEPB AS PROFI T WHICH IS AGAINST THE ACT AS LAID DOWN UNDER SECTION 28(IIID) OF THE ACT. 'THE AUTHORIZED REPRESENTATIVE RELIED ON THE DECISIO N OF SPECIAL BENCH MUMBAI VIDE ITS ORDER IN ITA.NO.5769/ MWNL06 DATED 11.08.2009 IN THE CASE OF TOPMAN EXPORTS VS I TO IN HIS DEFENCE. 2.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT CAREFULLY. THE ASSESSEE FIRM IS AN EXPORTER OF MANUFACTURED AS WELL AS TRADING GOODS. THEREFORE CLAUSE (C) OF SUB, SECTION (3) OF SECTION 8 0ILLFC OF THE ACT IS APPLICABLE TO THE APPELLANT. THE AO ARRI VED AT THE PROFIT FROM EXPORT OF TRADED GOODS AT RS 19,759/- A ND PROFIT DERIVED FROM EXPORT OF MANUFACTURED GOODS AT RS (-) 1,94,53,768/ .... HENCE THE DEDUCTION ON PROFIT DERI VED FROM EXPORT BUSINESS OF TRADED AS WELL AS MANUFACTURED GOO DS. IS RS (-) 1,94,73,527/-. THE PROFIT WORKED OUT ABOVE AS PER CLAUSE (C) WAS INCREASED BY RS 1,10,31,411/- BY APPL YING FIRST PROVISO TO SUB SECTION (3) OF SECTION 80HHC OF THE A CT THIS RESULTED IN A NEGATIVE FIGURE OF RS (-) 83,11,873/-: (19,759 - 1,93,67,042 + 1,10,31ALL). HENCE, THE AO HAS NOT AL LOWED ANY I.T.A. NO.1041/MDS/11 5 DEDUCTION WIDER SECTION 80HHG OF THE ACT. 2.3. PERUSAL OF THE PROFIT AND LOSS ACCOUNT REVEALS T HAT THE APPELLANT CREDITED RS 1,23,11,818/- AS DUTY DRAWBACK RECEIPTS AND RS 4,55,06,610/- AS SALE OF DEPB LICENCE. PERUSAL OF THE WORKING OF DEDUCTION WIDER SECTION 8()HHC BY THE AO REVEALS THAT PROFITS OF THE BUSINESS WAS ARRIVED AT RS (-) 1,94,34,008/- BY REDUCING 90% OF DUTY DRAW BACK AND SALE OF DEPB LICENCE AS PER EXPLANATION (BAA) OF THE ACT WH ILE INCREASING THE PROFIT COMPUTED WID (C) OF SUB SECTIO N (3) OF SECTION 80HHC OF THE ACT, 4. BEFORE US, BOTH THE PARTIES AGREED THAT THE ISSU E INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION OF THE HON'B LE BOMBAY HIGH COURT REPORTED IN 328 ITR 451 IN THE CASE OF CIT VS . KALPATARU COLOURS AND CHEMICALS [BOM] WHICH WAS NOT AVAILABLE BEFORE THE LOWER AUTHORITIES AT THE TIME OF PASSING OF THE ORD ER. THEREFORE, BOTH THE PARTIES SUBMITTED THAT THE MATTER SHOULD B E RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH AFTER TAKING INTO CONSIDERATION THE DECISION OF THE HON'BLE BOMB AY HIGH COURT IN THE AFOREMENTIONED CASE. WE, THEREFORE, ACCORDINGL Y DIRECT THE I.T.A. NO.1041/MDS/11 6 ASSESSING OFFICER TO READJUDICATE THE ISSUE AFRESH AFTER CONSIDERING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TH E ABOVE STATED CASE AND AFTER ALLOWING REASONABLE OPPORTUNITY OF H EARING TO THE ASSESSEE. THUS THE GROUNDS OF APPEAL OF THE REVENU E ARE ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 16 TH DECEMBER, 2011. SD/- SD/- (GEORGE MATHAN) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 16 TH DECEMBER, 2011. VL COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A), CHENNAI (4) CIT, CHENNAI (5) D.R. (6) GUARD FILE