Shivom Overseas Exports, V. ITO Range-2 (2),

ITA 1230/DEL/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4163 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 08-04-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 04-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Keywords: Competent authority
• Section: 80HHC; 28; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G NEW DELHI BEFORE SHRI CL SETHI, JM AND SHRI SHAMIM YAHYA, AM ITA NO. 1230/DEL/2008 A.Y. 1999-2000 M/S SHIVOM OVERSEAS EXPORTS VS. THE ITO, RANGE 2(2 ) OLD RAMPUR ROAD, NEAR OVERHEAD BRIDGE MORADABAD MORADABAD (UP) (APPELLANT) (RESPOND ENT) APPELLANT BY : NONE RESPONDENT BY : MS.PRATIMA KAUSHIK, SR.D.R. O R D E R PER SHAMIM YAHYA, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LDCIT(A) DATED 7.1.2008 AND PERTAINS TO A.Y. 1999-2000. 2. THE ISSUE RAISED IS THAT THE LDCIT(A) HAS ERRED IN CONFIRMING THE EXCLUSION OF DEPB FROM BUSINESS PROFIT FOR ALLOWABL E DEDUCTION U/S 80 HHC. 3. IN THIS CASE DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE AO OBSERVED THAT THE ASSESEE IS NOT ELIGIBLE FOR DEDUC TION U/S 80 HHC OF THE ACT ON THE AMOUNT OF DEPB DUE TO TAXATION LAWS (AME NDMENT) ACT, 2005. ACCORDINGLY THE AO HELD THAT THE ASSESEE WIL L NOT GET DEDUCTION 2 U/S 80HHC ON THE AMOUNT OF RS. 13,15,458/- BEING DE PB. UPON ASSESSEES APPEAL THE LDCIT(A) REFERRED TO THE CBDT CIRCULAR NO. 2/2006 DATED 17.1.2006 AND REFERRED TO THE PROVISIONS RELA TING TO AMENDMENT TO S.80 HHC ON THE ISSUE OF DEPB AND DUTY FREE REPLENI SHMENT CERTIFICATE. THE LDCIT(A) CONCLUDED AS UNDER. THUS FROM WHAT HAS BEEN DISCUSSED ABOVE, IT APPEAR S THAT SINCE THE APPELLANTS TURN OVER EXCEEDS THE PRESCRIBED LI MIT, NO CLAIM FOR INCLUSION OF DEPB AMOUNT FOR CALCULATING DEDUCTION U/S 80 HHHC IS ADMISSIBLE BECAUSE NOTHING HAS BEEN PUTFORTH BY THE APPELLANT TO SHOW THAT OTHER TWO CONDITIONS HAVE BEEN SATISFI ED IN ITS CASE. THE AR HAS ALSO SUBMITTED THAT MANY WRITS ARE PEND ING BEFORE HONBLE SUPREME COURT IN THIS MATTER. BE THAT AS I T MAY, ON CAREFUL CONSIDERATION OF THE MATTER, I HAVE NO ALTE RNATIVE BUT TO CONFIRM THE ACTION OF THE A.O. IN NOT ALLOWING THE INCLUSION OF DEPB AMOUNTS IN THE TOTAL PROFIT FOR CALCULATING DE DUCTION U/S 80 HHC OF THE I.T.ACT. 4. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. NONE APPEARED ON BEHALF OF THE ASSESSEE. WRITTEN SUBMIS SIONS HAVE BEEN RECEIVED FROM THE ASSESSEE. IN THE SUBMISSIONS IT HAS BEEN SUBMITTED THAT ENTIRE AMOUNT OF DEPB HAS BEEN EXCLUDED AND N OT THE PROFIT ON SALE OF DEPB FROM EXPORT BUSINESS PROFIT FOR COMPUT ATION OF DEDUCTION U/S 80HHC OF THE I.T.ACT. IT HAS BEEN REQUESTED TH AT ONLY THE PROFIT AND NOT THE ENTIRE AMOUNT ACCRUED OR RECEIVED ON SALE O F TRANSFER LIST OF DEPB SHOULD BE REDUCED FROM EXPORT BUSINESS PROFIT TO CO MPUTE THE DEDUCTION U/S 80 HHC. IN THIS REGARD THE ASSESEE HAS REFERR ED TO THE DECISION OF 3 THE SPECIAL BENCH OF THE TRIBUNAL IN M/S TOPMAN EXP ORTS VS ITO, 318 ITR 87 (AT). IT HAS FURTHER BEEN SUBMITTED BY THE ASSESSEE THAT ITAT DELHI IN THE CASE OF ATOZ INDUSTRIES, MORADABAD VS ACIT, MORADABAD IN ITA NO. 133/DEL/2008 ORDER DT. 16.10.2009 HAD FOLLO WED THE SPECIAL BENCH DECISION AS AFORESAID. THE LD.D.R. ON THE OT HER HAND FAIRLY CONCEDED TO THE PROPOSITION THAT THE RATIO OF M/S T OPMAN EXPORTS (SUPRA) BY THE SPECIAL BENCH WILL BE APPLICABLE IN THIS CASE ALSO AND ACCORDINGLY SHE SUBMITTED THAT THE MATTER MAY BE RE MITTED TO THE FILES OF A.O. 4.1. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. WE FIND THAT THE SPECIAL BENCH IN THE TOPMAN EXPORTS CASE CITED ABOVE HAS HELD AS UNDER. THE QUESTION RAISED BEFORE THE SPECIAL BENCH HAS T WO PARTS. IN SO FAR AS THE FIRST PART: WHETHER THE ENTIRE AMOUN T RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEA BLE UNDER SECTION 28(III D) OF THE INCOME TAX ACT IS CONCERN ED, WE ANSWER IT IN THE NEGATIVE AND THE SECOND PART OF THE QUEST ION: OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTERPOLATED? IS REPLIED IN THE AFFIRMATIVE TO TH E EXTENT THAT THE FACE VALUE OF DEPB SHALL BE DEDUCTED FROM THE SALE PROCEEDS. AS REGARDS THE GROUNDS RAISED IN THE THESE APPEALS AGAINST THE DENIAL OF DEDUCTION UNDER SECTION 80 HHC, IN FULL O R PART, WE FIND THAT THE COMPUTATION OF PROFITS DERIVED FROM EXPORTS AND THE RESULTANT AMOUNT OF DEDUCTION UNDER THIS SECTIO N 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 PROFIT ON 4 ITS SALE. ON THIS ISSUE WE HOLD THAT THE FACE VALU E OF DEPB IS CHARGEABLE TO TAX U/S 28(III B) AT THE TIME OF ACCR UAL OF INCOME, THAT IS, WHEN THE APPLICATION FOR DEPB IS FILED WIT H THE COMPETENT AUTHORITY PURSUANT TO EXPORTS AND PROFIT ON SALE OF DEPB REPRESENTING THE EXCESS OF THE SALE PROCEEDS O F DEPB OVER ITS FACE VALUE IS LIABLE TO BE CONSIDERED U/S 28(II I D) AT THE TIME OF ITS SALE, WHATEVER IS SAID ABOUT DEPB, SHALL ALS O HOLD GOOD FOR DFRC, ON BOTH ITS COMPONENTS, VIZ., THE FACE VA LUE OF DFRC AND PROFIT ON ITS TRANSFER, EXCEPT FOR THE FACT TH AT THE PROFIT ON SALE OF DFRC SHALL BE CHARGED TO TAX U/S 28 (III E) . THERE IS NO DISPUTE ABOUT THE DUTY DRAW BACK, WHICH SHALL BE CH ARGEABLE TO TAX AT THE TIME OF ACCRUAL OF INCOME U/S 28(III C) WHEN APPLICATION IS FILED WITH THE COMPETENT AUTHORITY A FTER MAKING EXPORTS. SINCE THE NECESSARY FACTS FOR THE DETERMI NATION OF THE QUANTUM OF DEDUCTION U/S 80 HHC, AS DISCUSSED ABOVE , ARE NOT AVAILABLE ON RECORD, WE, THEREFORE, SET ASIDE THE I MPUGNED ORDERS AND DIRECT THE A.O. TO COMPUTE THE AMOUNT OF RELIEF IN ACCORDANCE WITH THE VIEW EXPRESSED BY US HEREINABOV E. RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE, WE D IRECT THE A.O. TO CONSIDER THE ISSUE IN ACCORDANCE WITH THE SPECIAL B ENCH DECISION AS ABOVE AND AS PER LAW. 5. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH APRIL, 2 010. (CL SETHI) (SHAM IM YAHYA) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: 8TH APRIL, 2010 5 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2. RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR