Manish Packaging Pvt.Ltd., Surat V. The ACIT., Range-1, Surat

ITA 1473/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8724 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 31-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 12-04-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: HARDIK SHAHAR
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' [BEFORE SHRI MAHAVIR SINGH,JM AND SHRI A N PAHUJA,A M) ITA NO.1473/AHD/2007 (ASSESSMENT YEAR:-2004-05) MANISH PACKAGING PVT. LTD., GHANTIWALA COMPOUND, A K ROAD, NEAR A S MOTORS, SURAT [PAN:AABCM6018Q] V/S THE ADDITIONAL COMMISSIONER OF INCOME- TAX, RANGE-1, SURAT [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI HARDIK SHAH,AR REVENUE BY:- SMT. NEETA SHAH, . DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DAT ED 05-02-2007 OF THE LD.CIT(APPEALS)-I, SURAT, RAISES THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE STAND OF THE AO IN REST RICTING THE DEDUCTION U/S. 80HHC OF THE ACT TO RS.8,59,234/- AS AGAINST THE CL AIM OF THE APPELLANT OF RS.20,60,808/- BY EXCLUDING THE AMOUNT OF DEPB FROM THE 'PROFIT OF THE BUSINESS' WHILE COMPUTING THE SAID DEDUCTION. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE STAND OF THE AO IN NOT APPRECIATING THAT THE TAXATION LAWS (AMENDMENT) ACT, 2005 MAKES UNDUE DIS TINCTION BETWEEN EXPORTERS ON THE BASIS OF TURNOVER AND AMENDS THE L AW, BY LAYING DOWN VARIOUS CONDITIONS, ON A RETROSPECTIVE BASIS, WHICH IS UNCONSTITUTIONAL AND ULTRA-VIRES, REQUIRING OUTRIGHT ANNULMENT. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACT OF AO IN NOT APPREC IATING THE FACT THAT THE AMOUNT OF DEPB LICENSE RECEIVED BY THE APPELLANT IS NOTHING BUT REIMBURSEMENT OF COST OF DUTIES SUFFERED BY THE INP UTS AND THUS, THE ENTIRE PROFIT EARNED BY THE APPELLANT IS DERIVED ONLY FROM EXPORTS AND IS FULLY ELIGIBLE FOR DEDUCTION U/S. 80HHC OF THE ACT. 4. ALL THE AFORESAID GROUNDS REGARDING DISALLOWANCE OF DEDUCTION U/S. 80HHC OF THE ACT ARE INDEPENDENT TO EACH OTHER REQU IRING SEPARATE ADJUDICATION BY YOUR HONOURS. ITA NO.1473/AHD/2007 2 5. THE APPELLANT CRAVES TO ADD, AMEND, ALTER, SUBS TITUTE, MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL, IF NECESSARY, ON T HE BASIS OF SUBMISSIONS TO BE MADE AT THE TIME OF PERSONAL HEARING. 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.1,10,76,140/- FILED ON 31.5.2004 BY TH E ASSESSEE, ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF PVC FILMS,AFTER BEING PROCESSED ON 19.10.2004 U/S 143(1) OF THE INC OME-TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT], WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 29.10.2004. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE A SSESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE CLA IMED DEDUCTION OF RS.20,60,808/- U/S 80HHC OF THE ACT. SINCE THE TURN OVER OF THE ASSESSEE COMPANY EXCEEDED RS.10 CRORES, THE AO ASKE D THE ASSESSEE TO EXPLAIN WHY THE DEDUCTION U/S 80HHC OF THE ACT CLAIMED IN RELATION TO DEPB INCENTIVE SHOULD NOT BE DISALLO WED IN VIEW OF THE AMENDED PROVISIONS OF SECTION 80HHC OF THE ACT AND INSERTION OF CLAUSE (IIID) AND (IIIE) IN SECTION 28 BY THE TAXAT ION LAWS (SECOND AMENDMENT)ACT,2005 . IN RESPONSE, THE ASSESSEE REPL IED THAT THE AMENDED PROVISIONS CREATED DISCRIMINATION BETWEEN D IFFERENT ASSESSEES AND THE CONSTITUTIONAL VALIDITY OF THESE AMENDMENTS HAS BEEN CHALLENGED. SINCE THE AMOUNT OF DEPB LICENSE W AS NOTHING BUT REIMBURSEMENT OF COST OF DUTIES SUFFERED BY THE INP UTS, THE ENTIRE PROFIT EARNED BY THE ASSESSEE WAS DERIVED ONLY FROM EXPORTS AND THUS, FULLY ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT. THE ASSESSEE FURTHER STATED THAT IT WAS NOT PERMISSIBLE TO MAKE A SUB-CLASS WITHIN A CLASS AND DENYING THE DEDUCTION U/S 80HHC, ALTHOU GH THE ASSESSEES WERE PLACED EQUALLY. RELYING UPON THE DEC ISION IN THE CASE OF CIT VS. INDIA GELATINE & CHEMICALS LTD.,275 ITR 284(GUJ), THE ASSESSEE CONTENDED THAT THE DUTY DRAWBACK SCHEM E IS INTENDED TO REDUCE THE COST OF PRODUCTION AND THE SAME BEING AN INTEGRAL PART OF THE PRICING OF GOODS IS PART OF THE COST OF PROD UCTION OF THE INDUSTRIAL UNDERTAKING AND HENCE THE SAME WOULD GO TO REDUCE THE COST OF PRODUCTION. IT WAS ARGUED THAT DUTY DRAWBAC K SCHEME WAS ITA NO.1473/AHD/2007 3 IDENTICAL WITH DEPB AND THEREFORE, THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF INDIA GELATINE & CHEMICALS (SUPRA) WAS APPLICABLE. IT WAS ALSO SUBMITTED THAT THE MATT ER REGARDING THE CONSTITUTIONAL VALIDITY OF THE TAXATION LAWS (SECON D AMENDMENT) ACT, 2005 WAS PENDING BEFORE THE HONBLE SUPREME COURT, THE AMENDMENT HAVING CREATED TWO CATEGORIES OF EXPORTERS HAVING E XPORT OF MORE THAN RS.10 CRORES AND THOSE HAVING BELOW RS.10 CROR ES, WITHOUT ANY RATIONAL BASIS. HOWEVER, THE AO DID NOT ACCEPT TH ESE CONTENTIONS OF THE ASSESSEE, INTER ALIA, ON THE GROUND THAT THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE TO SHOW AS TO HOW IT FULFILLED THE CONDITIONS STIPULATED IN THE THIRD PROVISO TO SUB-SECTION (3) OF SECTION 80HHC OF THE ACT. ACCORDINGLY, THE AO CONCLUDED THAT IF THE ASSESSEE DID NOT FULFILL THE STIPULATED CONDITIONS, NO DEDUCTION U/S 80HHC(3) CAN BE ALLOWED. THEREFORE, THE AO RESTRICTED THE CLAIM FOR DEDUCTION U/S 80HHC OF THE ACT TO RS.8,59,234/- . 3 ON APPEAL, THE ASSESSEE MERELY REITERATED THEIR C ONTENTIONS BEFORE THE AO.ACCORDINGLY, THE LD. CIT(A) UPHELD TH E FINDINGS OF THE AO IN THE FOLLOWING TERMS:- 3. DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS GIVEN THE SAME SUBMISSIONS AS BEFORE THE AO. THE APPELLANT HAS QUE STIONED THE CONSTITUTIONAL VALIDITY OF THE AMENDMENTS TO SECTIO N 80HHC BY TAXATION LAWS AMENDMENT ACT 2005. THE APPELLANT HAS AGAIN FA ILED TO SHOW AS TO HOW IT FULFILLS THE CONDITIONS LAID DOWN IN SECTION 80HHC. 4.1 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A PPELLANT AND OBSERVATIONS OF THE A.O. THE FACTS HAVE NOT BEEN DE NIED BY EITHER THE ASSESSEE OR THE A.O. BOTH ARE IN AGREEMENT WITH THE FACTS. THE TURNOVER OF THE APPELLANT IS RS.13.81 CRORES WHICH IS MORE THAN RS.10 CRORES. THE A.O, HAS STATED THAT THE ASSESSEE HAS NOT GIVEN ANY DETAIL AS TO HOW IT IS FULFILLING THE CONDITIONS LAID DOWN IN CLAUSE (A) A ND (B) OF THIRD PROVISO UNDER SUB-SECTION 3 OF SECTION 80HHC. THE A.O. STATED THA T IN VIEW OF NON- FULFILLMENT OF THE CONDITIONS LAID DOWN, DEDUCTION U/S 80HHC CANNOT BE ALLOWED. THE ASSESSEE HAS REFUSED TO GIVE ANY DETAI LS AS TO HOW IT IS FULFILLING THE CONDITIONS IN CLAUSE (B) BUT HAS ARG UED THAT THE AMENDMENT IS CONSTITUTIONALLY INVALID. ITA NO.1473/AHD/2007 4 4.2 EVEN DURING THE APPELLATE PROCEEDINGS, T HE APPELLANT HAS REFUSED TO GIVE THE DETAILS AS TO HOW IT IS FULFILLING THE CONDITIONS LAID DOWN IN THE AMENDED PROVISIONS BUT HAS AGAIN AND AGAIN SUBMITTE D THAT THE AMENDED PROVISIONS ARE CONSTITUTIONALLY INVALID. IT IS NOT UNDERSTOOD HOW AND WHY THE APPELLANT IS MAKING SUCH STATEMENT WHEN NO OTHER AS SESSEE HAS ARGUED LIKE THIS. IN ANY CASE, SINCE THIS OFFICE IS A CREA TION OF THE INCOME TAX ACT, 1961, IT IS OUT OF THE PURVIEW OF THIS OFFICE AND I HAVE NO POWER TO DECIDE THE VALIDITY OR INVALIDITY OF CLAUSE (B) UNDER 3RD PROVISO TO SUB-SECTION 3 OF SECTION 80HHC. IN THE ABSENCE OF ANY DETAILS IT IS CLEAR THAT THE APPELLANT HAS FAILED TO FULFILL THE CONDITION IN CLAUSE (B) O F THIRD PROVISO BELOW SUB- SECTION 3 OF SECTION 80HHC, AND THEREFORE THIS GROU ND OF APPEAL IS DISMISSED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGA INST THE AFORESAID FINDINGS OF THE LD. CIT(A). THOUGH SHRI HARDIK SHA H,CA APPEARED BEFORE US ON BEHALF OF THE ASSESSEE, THE LD. AR DID NOT MAKE EVEN A WHISPER AS TO HOW THE ASSESSEE FULFILLED CONDITION S STIPULATED IN THE THIRD PROVISO TO SEC. 80HHC(3) OF THE ACT NOR REFER RED US TO ANY MATERIAL IN THIS CONNECTION. EVEN IN THE STATEMENT OF FACTS AND THE WRITTEN SUBMISSIONS FILED ON 30.3.2010 & 13.8.2007, THE ASSESSEE DID NOT EXPLAIN AS TO HOW IT FULFILLED THE CONDITIO NS STIPULATED IN THE THIRD PROVISO TO SEC. 80HHC(3) OF THE ACT AND MEREL Y QUESTIONED THE CONSTITUTIONAL VALIDITY OF THE AMENDMENTS TO SECTIO N 80HHC BY THE TAXATION LAWS (SECOND AMENDMENT) ACT, 2005 APART FROM RELYING ON THE DECISIONS IN THE CASE OF JHAWAR BIOTECH PVT. LTD. VS. ITO, SURAT IN ITA NO. 17/AHD/2007 & ITA NO. 619/AHD/2007 FOR THE A.Y. 2004-05 & A.Y. 2003-04 R ESPECTIVELY AND M/S. TOPMAN EXPORTS VS. ITO, (2009) 125 TTJ (MUMBAI)(SB) 289) . THE LD. AR APPEARING BEFORE US DID NOT EXPLAIN AS TO HOW THES E DECISIONS ARE APPLICABLE IN THE FACTS OF THE CASE UNDER CONSIDERATION WHEN THE RE WAS NOT MATERIAL BEFORE THE LOWER AUTHORITIES AND EVEN BEFORE US TO SHOW AS TO HOW THE ASSESSEE FULFILLED THE CONDITIONS STIPULATED IN THE THIRD PROVISO TO S EC. 80HHC(3) OF THE ACT. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED T HE FINDINGS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE T HROUGH THE FACTS OF THE CASE AS ALSO THE WRITTEN SUBMISSIONS AND THE DE CISIONS RELIED ON THEREIN. THE RELEVANT PROVISIONS OF THIRD PROVISO TO SEC.80HHC(3) OF ITA NO.1473/AHD/2007 5 THE ACT AS INTRODUCED BY THE TAXATION LAWS (SECOND AMENDMENT) ACT, 2005, W.E.F 1.4.1998 READ AS UNDER: PROVIDED ALSO THAT IN THE CASE OF AN ASSESSEE HAVI NG EXPORT TURNOVER EXCEEDING RUPEES TEN CRORES DURING THE PREVIOUS YEAR, THE PRO FITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF THIS SUB-SECTION OR AFTER GIVING EFFECT TO THE FIRST PROVISO, AS THE CASE MAY BE, SHALL BE FURTHER INCRE ASED BY THE AMOUNT WHICH BEARS TO NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSE (IIID) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE, IF THE ASSESSEE HAS NEC ESSARY AND SUFFICIENT EVIDENCE TO PROVE THAT, - (A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAW BACK OR THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING DUTY REMISSION SCHEME; AND (B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE DUTY ENTITLE MENT PASS BOOK SCHEME, BEING DUTY REMISSION SCHEME : 5.1 UNDISPUTEDLY AND AS POINTED OUT BY THE LD. CI T(A), THE ASSESSEE DID NOT FURNISH ANY EVIDENCE EITHER BEFOR E THE AO /THE LD. CIT(A) TO SHOW AS TO HOW THE ASSESSEE FULFILLED TH E AFORESAID TWO CONDITIONS STIPULATED IN CLAUSE (A) & (B) OF THIRD PROVISO TO SUB- SECTION (3) OF SEC. 80HHC OF THE ACT. INSTEAD ,AS P OINTED OUT BY THE LD. CIT(A) ,THE ASSESSEE REFUSED TO GIVE THE NECESS ARY DETAILS IN THAT CONNECTION. EVEN BEFORE US, THE LD. AR DID NO T PLACE ANY SUCH EVIDENCE AS TO HOW THE ASSESSEE FULFILLED THESE CON DITIONS. IN THESE CIRCUMSTANCES AND THERE BEING NO MATERIAL BEFORE US THAT THE ASSESSEE FULFILLED THE AFORESAID STIPULATED CONDITI ONS IN THE THIRD PROVISO TO SUB-SECTION (3) OF SEC. 80HHC OF THE ACT , THE RELIANCE ON BEHALF OF THE ASSESSEE IN THEIR WRITTEN SUBMISSIONS ON THE DECISIONS IN THE CASE OF JHAWAR BIOTECH PVT. LTD. )SUPRA) AND M/S. TOPMAN EXPORTS(SUPRA) IS TOTALLY MISPLACED. THERE BEING NO MATERIAL BEFORE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED T O INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NOS. 1 & 3 IN THE APPEAL ARE DISMISSED ITA NO.1473/AHD/2007 6 6. AS REGARDS GROUND NO.2 CHALLENGING THE CONST ITUTIONAL VALIDITY OF THE AMENDMENTS TO SECTION 80HHC OF THE ACT AS INTRODUCED BY THE TAXATION LAWS (SECOND AMENDMENT) ACT, 2005, W.E.F 1.4.1998, THE LD. CIT(A) OBSERVED THAT HE HAD NO JURISDICTION TO DECIDED THE VALID ITY OF ANY PROVISION. IT IS WELL SETTLED THAT THE TRIBUNAL AND THE TAX AUTHORITIES B EING CREATURES OF THE INCOME-TAX ACT, 1961, CANNOT PRONOUNCE UPON THE CONSTITUTIONAL VALIDITY OR VIRES OF ANY PROVISION OF THE ACT. THEREFORE, SUCH A QUESTION D OES NOT ARISE OUT OF THE ORDER OF THE LD. CIT(A) AND CANNOT BE MADE THE SUBJECT-MATTE R OF AN APPEAL BEFORE US. THIS VIEW OF OURS IS SUPPORTED BY THE DECISIONS IN K.S. VENKATARAMAN & CO. (P) LTD. VS. STATE OF MADRAS (1966) 60 ITR 112 (SC), BEHARILAL SHYAMSUNDER VS. STO (1966) 60 ITR 260 (SC) AND C.T. SENTHILNATHAN CHETTIAR VS. STATE OF MADRAS (1968) 67 ITR 102 (SC). IN VIEW THEREOF, GROUND NO.2 IN THE APPEAL D OES NOT SURVIVE FOR OUR ADJUDICATION. 7. GROUND NO.4 BEING GENERAL IN NATURE DOES NOT REQ UIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROUND HA VING BEEN RAISED IN TERMS OF RESIDUARY GROUND NO.5, THESE GROUNDS AR E ALSO DISMISSED. 8. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 31-03-2 010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 31-03-2010 COPY OF THE ORDER FORWARDED TO : 1. MANISH PACKAGING PVT. LTD., GHANTIWALA COMPOUND, A K ROAD, NR. A S MOTORS, SURAT 2. THE ADDL. CIT, RANGE-1, SURAT 3. CIT CONCERNED 4. CIT(A)-I, SURAT 5. THE DR, ITAT, D BENCH AHMEDABAD 6. GUARD FILE ITA NO.1473/AHD/2007 7 BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD