Rajoo Engineers Ltd., RAJKOT-GUJARAT V. The Deputy Commissioner of Income Tax, Circle-1, JUNAGADH

ITA 118/RJT/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1302 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-04-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 06-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M N MANVAR
• Keywords: Business income
• Section: 143(3); 80HHC; 28

Judgement Text

ITA NO S . 117 & 118 / RJT/201 1 ASSESSMENT YEA RS : 20 03 - 04 & 2004 - 05 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E - COURT AT AHMEDABAD) BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER I TA NO S . 117 & 118 /RJT/201 1 ASSESSMENT YEAR S : 20 0 3 - 04 & 2004 - 05 RAJOO ENGINEERS LIMITED, VS. DY. COMMISSIONER OF INCOME TAX, C/O. M.N. MANVAR & CO., JUNAGADH CIRCLE - 1, CHARTERED ACCOUN T ANT, JUNAGADH. 504, STAR PLAZA, PHULCHHAB CHOWK, RAJKOT. [PAN: AABCR 3204 M] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.N. MANVAR, C.A. RESPONDENT BY : SHRI PRASOON KABRA, D.R. DATE OF HEARING : 07.04.2016 DATE OF PRONOUNCEMENT : 22 .04.2016 O R D E R PER S.S. GODARA, J.M. TH ESE TWO REVENUE S APPEAL S FOR A SSESSMENT Y EAR S 2003 - 04 & 2004 - 05 , ARISE FROM TWO SEP ARATE ORDER S OF THE CIT(A) - X XI , AHMEDABAD , BOTH DATED 07.03.2011 , PASSED IN CASE NO S .CIT(A) /XXI/ A BD/372/CIR - 1/JND2010 - 11 AND CIT(A) /XXI/ABD/373/CIR - 1/JND2010 - 11 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE S IDENTICAL GROUNDS CHALLENGES THE LOWER APPELLATE ORDER CONFIRMING A SSESSING OFFICER S ACTION IN DEDUCTING SALE PROCEEDS OF DEPB LICENCE INCOME OUT OF THE PROFIT OF THE BUSINESS WHILE WORKING OUT SECTION 80H H C DEDUCTION THEREBY EXCLUDING ITS CLAI MS RAISED OF RS.22,61,991/ - AND RS.12,68,763 / - ; RESPECTIVELY. ITA NO S . 117 & 118 / RJT/201 1 ASSESSMENT YEA RS : 20 03 - 04 & 2004 - 05 PAGE 2 OF 4 3 . RELEVANT FACTS INVOLVED IN THESE TWO CASES ARE IN A NARROW COMPASS. THERE IS NO DISPUTE ABOUT THE ASSESSEE BEING A COMPANY MANUFACTURING PLASTIC MACHINERY. THERE IS FURTHER NO ISSUE THAT IT HAS CARRIED OUT EXPORT BUSINESS AND CLAIMED SECTION 80H H C DEDUCTION. THE SOLE ISSUE BETWEEN THE PARTIES IS THAT THE ASSESSEE EARNED INCOME FROM ITS DEPB LICENCE SALE AMOUNTING TO RS.82,2 5 ,7 5 2/ - AND RS.1,05,42,0 5 8/ - ; RESPECTIVELY. IT CLAIMED DEDUCTION QUA THESE AMOUNTS AS WELL. THE ASSESSING OFFICER IN SEPARATE ASSESSMENT ORDERS WAS OF THE VIEW THAT THESE SUMS REALISED FROM DEPB LICENCE SALE WOULD NOT COME UNDER THE PURVIEW OF SECTION 80HHC DEDUCTION. THIS RESULTED N THE IMPUGNED DISALLOWANCES BEING M ADE IN T HESE TWO ASSESSMENT ORDERS. 4 . THE ASSESSEE FILED TWO SEPARATE APPEALS. IT WOULD PLACE RELIANCE UPON A SPECIAL BENCH DECISION OF THE TRIBUNAL IN TOP MAN E XPORTS (2009) 125 TTJ 289 (MUMBAI) (SB) IN SUPPORT HOLDING THAT ONLY PROFIT ELEMENT INVOLVE D IN DEPB LICE NCE SALE WOULD BE ELIGIBLE FOR THE IMPUGNED SECTION 80HHC DEDUCTION. THE CIT(A) QUOTED H ON BLE BOMBAY H IGH C OURT DECISION IN CIT VS. KALPATHARU COLOURS & CHEMICALS (2010) 328 ITR 451 (BOMBAY) REVERSING THE T RIBUNAL S S PECIAL B ENCH DECISION. HE WOULD ACCORDINGLY CONFIRM ASSESSING OFFICER S ACTION. 5 . A PERUSAL OF THE CASE FILE REVEALS THAT A CO - ORDINATE BENCH IN ITS COMBINED ORDER DATED 09.09.2011 DISMISSED BOTH THESE APPEALS BY HOLDING THAT THE H ON BLE BOMBAY H IGH C OURT HAD ALREADY EXAMI NED THIS ISSUE IN THE LIGHT OF SECTION 28 (IIID) IN HOLDING THAT SIMILAR SALE PROCEEDS DERIVED FROM DEPB LICENCE ARE NOT ELIGIBLE FOR SECTION 80HHC DEDUCTION. THE ASSESSEE THEREAFTER FILED MISCELLANEOUS APPLICATION NO.10 & 13/RJT/2012 SEEKING TO RECTIFY/R ECALL T RIBUNAL S ORDER IN VIEW OF THE FACT THAT H ON BLE A PEX C OURT IN TOPMAN EXPORTS VS. ITO (2012) 342 I TR 49 (SC) HAD REVERSED KALPATHARU (SUPRA) THEREBY RESTORING ITA NO S . 117 & 118 / RJT/201 1 ASSESSMENT YEA RS : 20 03 - 04 & 2004 - 05 PAGE 3 OF 4 TRIBUNAL S S PECIAL B ENCH DECISION. A CO - ORDINATE BENCH ACCEPTED THIS PRAYER AND RESTORED THE INSTANT TWO APPEALS TO THEIR ORIGINAL NUMBER S . IT IS IN THIS BACKDROP OF THE FACTS THAT WE ARE ADJUDICATING THESE TWO APPEALS. 6 . WE HAVE HEARD BOTH THE PARTIES. RELEVANT FACTS NARRATED IN PRECEDING PARAGRAPHS ARE NOT REPEATED FOR THE SAKE OF BREVIT Y. SUFFICE TO SAY, THE ASSESSEE HAS CLAIMED SECTION 80HHC DEDUCTION ON THE IMPUGNED SUMS DERIVED FROM SALE OF ITS DEPB LICENCES BEING AN EXPORTER. THE H ON BLE APEX COURT IN TOPMAN EXPORTS (SUPRA) HOLDS THAT IT IS NOT THE ENTIRE SALE PROCEEDS BUT PROFITS ONLY ARI SING FROM DIFFERENCE BETWEEN SALE VALUE AND FACE VALUE OF DEPB CREDIT LICENCES WHICH ARE TO BE CHARGED AS BUSINESS INCOME UNDER SECTION 28(IIID) OF THE ACT SO AS TO COMPUTE SECTION 80HHC DEDUCTION. THE REVENUE IS UNABLE TO POINT OUT ANY DISTINCTION THERET O. WE FIND FROM THE CASE FILE THAT BOTH THE LOWER AUTHORITIES HAVE NOT CONSIDERED THIS ASPECT OF THE MATTER SO AS TO ARRIVE AT THE PROFIT ELEMENT IN THE SALE VALUE OF DEPB LICENCES. WE ACCORDINGLY REMIT THIS COMMON ISSUE BACK TO THE ASSESSING OFFICER TO PROCEED AFRESH AS PER H ON BLE APEX COURT S DECISION AFTER AFFORDING ADEQUATE OPPORTUNITY OF HEARING. THE ASSESSEE IS DIRECTED TO FILE ALL NECESSARY DETAILS ON RECORD. 7 . THESE TWO ASSESSEE S APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN C OURT TODAY ON TH E 22 ND DAY OF APRIL, 2016. SD/ - SD/ - ANIL CHATURVEDI S.S. GODARA (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, THE 22 ND DAY OF APRIL , 2016 PBN/* ITA NO S . 117 & 118 / RJT/201 1 ASSESSMENT YEA RS : 20 03 - 04 & 2004 - 05 PAGE 4 OF 4 COPIES TO: (1) TH E APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT