DCIT, Karnal V. M/s. Sheena Exports, Panipat

ITA 1114/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1154 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 21-10-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 25-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Competent authority; Set aside
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI RAJPAL YADAV, JM AND SHRI R.C.SHARMA, A M ITA NO.1103/DEL/2009 ASSESSMENT YEAR : 2000-01 M/S SHEENA EXPORTS, UJHA ROAD, PANIPAT. PAN NO.AAEFS4153N. VS. DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KARNAL. (APPELLANT) (RESPONDENT) ITA NO.1114/DEL/2009 ASSESSMENT YEAR : 2000-01 DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KARNAL. VS. M/S SHEENA EXPORTS, UJHA ROAD, PANIPAT. PAN NO.AAEFS4153N. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI TANEJA AND SHRI TARUN KUMAR, ADVOCATE. REVENUE BY : SHRI N.K.CHAND, SR.DR. ORDER PER R.C.SHARMA, AM : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 20.1.2009 FOR AY 2000-01, IN THE MATTER OF ORDER PASSED U/S 143(3)/148 OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT. A RETURN OF INCOME WAS PROCESSED U/S 143(1), WHEREIN WHILE CALCULATING DED UCTION U/S 80HHC, DUTY DRAWBACK CLAIMED AND DEPB AMOUNTING TO RS.NIL AND R S.2,22,06,840/- RESPECTIVELY WERE ALLOWED AS DEDUCTION ALONGWITH OT HER EXPORT PROFITS OF THE FIRM. THE AO REOPENED THE ASSESSMENT BY OBSERVING THAT DU TY DRAWBACK CLAIMED/DEPB ITA-1103 & 1114/D/2009 2 WERE REQUIRED TO BE CONSIDERED AS PER AMENDED PROVI SIONS OF LAW. ACCORDINGLY, THE AO BROUGHT OUT AMENDED PROVISIONS OF SECTION 80 HHC(3) IN THE ASSESSMENT ORDER. HE ALSO REFERRED TO AMENDED PROVISIONS OF S ECTION 28 OF THE ACT. AS PER THE AMENDED PROVISIONS IN THE CASE OF AN ASSESSEE HAVIN G EXPORT TURNOVER EXCEEDING RS.10 CRORES, DURING THE PREVIOUS YEAR, PROFIT COMP UTED UNDER CLAUSE (A) OR (B) OR (C) OF SECTION 80HHC OR AFTER GIVING EFFECT TO THE FIRST PROVISO AS THE CASE MAY BE IS TO BE FURTHER INCREASED BY THE AMOUNT WHICH BEAR S TO 90% OF ANY SUM REFERRED TO IN CLAUSE (IIID) AND (IIIE) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO. 3. THE ISSUE WITH REGARD TO ELIGIBLE AMOUNT OF DEDU CTION U/S 80HHC ON ACCOUNT OF DEPB RECEIPTS IN CASE OF ASSESSEE HAVING TURNOVER OF MORE THAN RS.10 CRORES HAS BEEN CONSIDERED BY THE ITAT SPECIAL BENC H IN CASE OF TOPMAN EXPORTS IN ITA NO.5769/MUM/2006, ORDER DATED 11.8.2009. FO LLOWING QUESTION WAS BEFORE THE TRIBUNAL :- WHETHER THE ENTIRE AMOUNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE UNDER SECTION 28(IIID) OF THE INCOME TAX ACT OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTERPOLATED? 4. AFTER HAVING DETAILED DISCUSSION, THE SPECIAL BE NCH CONCLUDED AS UNDER:- 89. THE QUESTION RAISED BEFORE THE SPECIAL BENCH H AS TWO PARTS. IN SO FAR AS THE FIRST PART : WHETHER THE ENTIRE A MOUNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEA BLE UNDER SECTION 28(IIID) OF THE INCOME TAX ACT, IS CONCERN ED, WE ANSWER IT IN NEGATIVE AND THE SECOND PART OF THE QUESTION : OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTER POLATED? IS REPLIED IN AFFIRMATIVE TO THE EXTENT THAT THE FACE VALUE OF DEPB SHALL BE DEDUCTED FROM THE SALE PROCEEDS. AS REGARDS THE GR OUNDS RAISED IN THESE APPEALS AGAINST THE DENIAL OF DEDUCTION U/S 8 0HHC, IN FULL OR PART, WE FIND THAT THE COMPUTATION OF PROFITS DERIV ED FROM EXPORTS ITA-1103 & 1114/D/2009 3 AND THE RESULTANT AMOUNT OF DEDUCTION UNDER THIS SE CTION CAN BE MADE ONLY WHEN THE DECISION IS TAKEN ON THE AMOUNT AND THE TIMING OF TAXABILITY OF THE FACE VALUE OF DEPB AND THE PRO FIT ON ITS SALE. ON THIS ISSUE WE HOLD THAT THE FACE VALUE OF DEPB IS C HARGEABLE TO TAX U/S 28(IIIB) AT THE TIME OF ACCRUAL OF INCOME, THAT IS, WHEN THE APPLICATION FOR DEPB IS FILED WITH THE COMPETENT AU THORITY PURSUANT TO EXPORTS AND PROFIT ON SALE OF DEPB REPRESENTING THE EXCESS OF SALE PROCEEDS OF DEPB OVER ITS FACE VALUE IS LIABLE TO B E CONSIDERED U/S 28(IIID) AT THE TIME OF ITS SALE. WHATEVER IS SAID ABOUT DEPB SHALL ALSO HOLD GOOD FOR DFRC, ON BOTH ITS COMPONENTS, VI Z., THE FACE VALUE OF DFRC AND PROFIT ON ITS TRANSFER, EXCEPT FO R THE FACT THAT THE PROFIT ON SALE OF DFRC SHALL BE CHARGED TO TAX U/S 28(IIIE). THERE IS NO DISPUTE ABOUT THE DUTY DRAWBACK, WHICH SHALL BE CHARGEABLE TO TAX AT THE TIME OF ACCRUAL OF INCOME U/S 28(IIIC) W HEN APPLICATION IS FILED WITH THE COMPETENT AUTHORITY AFTER MAKING EXP ORTS. SINCE THE NECESSARY FACTS FOR THE DETERMINATION OF THE QUANTU M OF DEDUCTION U/S 80HHC, AS DISCUSSED ABOVE, ARE NOT AVAILABLE ON RECORD. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDERS AND DIRECT THE AO TO COMPUTE THE AMOUNT OF RELIEF IN ACCORDANCE WITH THE VIEW EXPRESSED BY US HERE IN ABOVE. 5. IN VIEW OF THE DECISION OF THE SPECIAL BENCH, MA TTER WITH REGARD TO COMPUTATION OF DEDUCTION U/S 80HHC WITH REGARD TO D EPB RECEIPTS IS RESTORED BACK TO THE AO FOR COMPUTING THE SAME AS PER THE PR OPOSITION LAID DOWN BY THE SPECIAL BENCH DISCUSSED HEREINABOVE. 6. GROUND NO.1 WITH REGARD TO REOPENING OF ASSESSME NT FOR AY 2000-01 WAS NOT PRESSED BY THE LEARNED AR, THE SAME IS THEREFOR E DISMISSED IN-LIMINE. 7. CHARGING OF INTEREST U/S 234A IS CONSEQUENTIAL I N NATURE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. 9. IN REVENUES APPEAL, THE GROUND TAKEN PERTAINS T O ALLOWING DEDUCTION ON ACCOUNT OF EXCHANGE FLUCTUATION RECEIPT ON EXPORT T URNOVER. ITA-1103 & 1114/D/2009 4 10. WHILE COMPUTING DEDUCTION U/S 80HHC, THE AO HAS CONSIDERED AMOUNT RECEIVED ON ACCOUNT OF CURRENCY FLUCTUATION AS EXPO RT INCENTIVE WHEREAS IT WAS JUST A DIFFERENCE RECEIVED ON ACCOUNT OF EXCHANGE OF RAT E OF FOREIGN EXCHANGE AGAINST INDIAN RUPEE FOR PAYMENT RECEIVED BY THE ASSESSEE A GAINST THE EXPORTS MADE BY IT. THE ISSUE WITH REGARD TO TREATMENT OF FOREIGN EXCHA NGE FLUCTUATION RECEIPT WHETHER ARE IN THE NATURE OF PROFIT DERIVED FROM EXPORT OR ARE IN THE NATURE OF OTHER INCOME, AND ITS ELIGIBILITY OF DEDUCTION U/S 80HHC HAS BEEN CONSIDERED BY THE ITAT DELHI BENCH IN CASE OF SMT. SUJATA GROVER 74 TTJ 347 WH EREIN IT WAS HELD THAT AMOUNT RECEIVED ON ACCOUNT OF FOREIGN EXCHANGE FLUC TUATION ATTRIBUTABLE TO THE EXPORT SALE IS NOT IN THE NATURE OF INCOME AS USED IN EXPLANATION (BAA) TO SECTION 80HHC. RESPECTFULLY FOLLOWING THE SAID PROPOSITION , THE ASSESSEE IS ENTITLED FOR TREATING THE ENTIRE AMOUNT OF FOREIGN EXCHANGE FLUC TUATION RECEIPT IN THE NATURE OF EXPORT SALE ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80H HC. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN ALLOWI NG CLAIM OF DEDUCTION U/S 80HHC ON SUCH RECEIPTS. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN PART WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2009. SD/- SD/- (RAJPAL YADAV) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :30.10.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-1103 & 1114/D/2009 5