Spentex Industries LTd, New Delhi V. ACIT Circle-22 (1), New Delhi

ITA 1478/DEL/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61634 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 16-04-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 21-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Competent authority
• Section: 80HHC; 28

Judgement Text

ITA NO. 1478/DEL/2008 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1478/DEL/2008 A.Y. : 2004-05 SPENTEX INDUSTRIES LTD., (FOR AND ON BEHALF OF ERSTWHILE CLC CORPORATION), A-60, OKHLA INDUSTRIAL AREA, NEW DELHI 110 020 [PAN : AAAFL6511G] VS. ACIT, CIRCLE 22(1), NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : ROHIT JAIN, CA & JAN PRIYA ROOP PRAN, CA DEPARTMENT BY : S. MOHANTY, D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXIII, NEW DELHI DATED 13.3.2008 PERTAINING TO ASSESSMENT YEAR 2004-05. 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE EXCLUSI ON OF INTEREST INCOME OF ` 3,08,877/- FROM BUSINESS ITA NO. 1478/DEL/2008 2 INCOME AND THE ASSESSMENT OF THE SAME AS INCOME FROM OTHER SOURCES. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT SINCE THE RE WAS NO NEXUS BETWEEN INTEREST INCOME AND INTEREST EXPENDITURE, GROSS INTEREST INCOME AND NOT NET INTEREST INCOME SHOULD BE EXCLUDED FROM THE BUSINES S PROFITS IN TERMS OF EXPLANATION (BAA) TO SECTION 80 HHC OF THE INCOME TAX ACT, 1961. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE DENIAL O F DEDUCTION UNDER SECTION 80HHC OF THE ACT OF ` 5,16,40,623/- CLAIMED BY THE APPELLANT. 3.1 THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT SINCE THE ENTIRE SALE PROCEEDS RECEIVED BY THE APPELLANT ON TRANSFER OF DUTY ENTITLEMENT PASS BOOK SCHEME CREDIT IS PROFIT ON TRANSFER COVERED WITHIN THE AMBIT OF CLAUSE (IIID) OF SECTION 28 INSERTED BY THE TAXATIO N LAWS (AMENDMENT) ACT, 2005, THE THIRD PROVISO TO ITA NO. 1478/DEL/2008 3 SECTION 80HHC(3) OF THE ACT APPLIES DEBARRING THE APPELLANT FROM CLAIMING ANY DEDUCTION THEREON. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADHOC DISALLOWANCE OF 2,00,000/- OUT OF EXPENSES INCURRED ON ACCOUNT OF FOREIGN TRAVEL ON THE GROUND THAT THE APPELLANT DID NOT PRODUCE SUPPORTING DOCUMENTATION. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF ` 50,000/- OUT OF VEHICLE MAINTENAN CE EXPENSES ON AN ADHOC BASIS. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, AMEND O R VARY FROM THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TI ME OF HEARING. 3. THE MATTER HAD EARLIER BEEN DECIDED BY THE TRIBU NAL VIDE ORDER DATED 18.12.2009. THE MATTER HAS TRAVELLED BEFORE THE HONBLE JURISDICTIONAL HIGH COURT. THE HONBLE JURISDICTIO NAL HIGH COURT HAS CONSIDERED ONE OF THE ISSUES IN A BATCH OF APPEALS VIDE ORDER DATED 18.2.2011. THE QUESTION FRAMED AND ADJUDICATION BY THE HONBLE HIGH COURT IS AS UNDER:- ITA NO. 1478/DEL/2008 4 1. ALL THESE APPEALS INVOLVED COMMON QUESTION OF LAW. FOR THE SAKE OF CONVENIENCE, WE CAN REPRODUCE THE QUESTIONS OF LAW FRAMED IN ONE OF THESE APPEALS: - (A) WHETHER ON A CORRECT INTERPRETATION OF THE RELEVANT STATUTORY PROVISIONS, TRIBUNAL WAS JUSTIFIED IN LAW IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80HHC OF THE ACT IN RESPECT OF PROFIT ON SALE OF DPEB? (B) WHETHER ON THE FACTS OF THE PRESENT CASE, TRIBUNAL WAS JUSTIFIED IN LAW IN IMPLIEDLY HOLDING THAT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION AS PER THE FIRST PROVISO BELOW SUB-SECTION 3 OF SECTION 80HHC IN RESPECT OF DEPB CREDIT UTILIZED BY THE ASSESSEE? 2. THE ORDERS PASSED BY THE TRIBUNAL IN ALL THESE CASES ARE BRIEF BECAUSE OF THE REASON THAT THE TRIB UNAL HAS SIMPLY FOLLOWED (WHICH IT WAS SUPPOSED TO) THE DECISION OF THE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF TOPMAN EXPORT VS. ITO [ITA NO. ITA NO. 1478/DEL/2008 5 5769/MUM/2006] DECIDED ON DATED 11 TH AUGUST, 2009. BY THAT JUDGEMENT, THE SPECIAL BENCH OF THE TRIBUN AL HAS HELD THAT THE FACE VALUE OF DEPB IS CHARGEABLE TO TAX U/S. 28(IIIB) AT THE TIME OF ACCRUAL OF INCOME, T HAT IS, WHEN THE APPLICATION FOR DEPB IS FILED WITH THE COMPETENT AUTHORITY PURSUANT TO EXPORTS AND PROFIT IN SALE OF DEPB REPRESENTING THE EXCESS OF SALE PROCEEDS OF DEPB OVER ITS FACE VALUE IS LIABLE TO BE CONSIDER ED U/S. 28(IIID) AT THE TIME OF ITS SALE. 3. THE REVENUE HAD FILED THE APPEAL IN THE HIGH COURT ADJUDICATE AT BOMBAY AGAINST THE AFORESAID DECISION OF THE SPECIAL BENCH OF THE ITAT. THE BOMBAY HIGH COURT HAS REVERSED THE DECISION OF THE TRIBUNAL AND THE JUDGEMENT OF THE BOMBAY HIGH COURT IS REPORTED AS COMMISSIONER OF INCOME TAX VS. KALPATARU COLOURS AND CHEMICALS 328 ITR 451. 4. SINCE THE TRIBUNAL HAD SIMPLY FOLLOWED SPECIAL BENCH DECISION IN TOPMAN EXPORTS (SUPRA) WHICH STANDS OVER RULED, WE SET ASIDE THE ORDER PASSED BY THE TRIBUNAL IN ALL THESE CASES AND REMIT THE CASES BACK TO THE TRIBUNAL TO DECIDE THESE APPEALS ON ITA NO. 1478/DEL/2008 6 MERITS AFTER TAKING INTO ACCOUNT FACTUAL POSITION IN ALL THESE CASES. 4. FROM THE ABOVE, IT IS CLEAR THAT THE HONBLE HIGH COURT HAD REMITTED THE MATTER TO THE ITAT FOR CONSIDERING THE P RESENT ISSUE WHICH IS CONTAINED IN GROUND NO. 3 AND 3.1 OF THE GROUNDS OF APPEAL BEFORE US. THIS ISSUE WAS EARLIER DECIDED BY THIS TRIBUN AL BY REMITTING THE MATTER TO THE FILES OF THE ASSESSING OFFICER TO BE DECIDED IN ACCORDANCE WITH SPECIAL BENCH DECISION IN THE CASE OF TOPMAN EXPORTS VS. ITO 318 ITR (AT) 87. THE HONBLE JURISDICTIO NAL HIGH COURT HAS OBSERVED THAT THE SPECIAL BENCH DECISION OF TOPMAN E XPORTS STANDS OVERRULED. THE HONBLE HIGH COURT HAS SET ASIDE THI S ORDER AND SENT THE ISSUE BACK TO THE TRIBUNAL TO DECIDE THE APPEAL ACC ORDING TO MERITS. ACCORDINGLY, WE HAVE HEARD THE APPEAL AND RIVAL CON TENTIONS WERE HEARD IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDEN T RELIED UPON. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE MATTER NOW IS TO BE DECIDED IN ACCORDANCE WITH THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF THE TOPMAN EXPORTS VS. C.I.T. 247 CTR 35 3. IN THIS CASE HONBLE APEX COURT HAS CONCLUDED THAT WHEN DEPB IS S OLD BY A PERSON, HIS PROFIT ON TRANSFER OF DEPB WOULD BE SALE VALUE O F DEPB LESS ITS FACE VALUE WHICH REPRESENTS THE COST OF THE DEPB AND NOT T HE ENTIRE SUM RECEIVED BY HIM ON SUCH TRANSFER; DEPB IS CHARGEABLE AS INCOME UNDER CL. (IIIB) OF S. 28 IN THE YEAR IN WHICH SUCH PERSO N APPLIES FOR DEPB CREDIT AGAINST THE EXPORTS WHEREAS THE PROFIT ON TR ANSFER OF DEPB BY THAT PERSON IS CHARGEABLE AS INCOME UNDER CL. (IIID ) OF S. 28 IN HIS HANDS IN THE YEAR IN WHICH HE MAKES THE TRANSFER. ITA NO. 1478/DEL/2008 7 4.1 LD. COUNSEL OF THE ASSESSEE PRAYED THAT THE MATT ER MAY BE REMITTED TO THE FILE OF THE ASSESSING OFFICER TO CO NSIDER THE ISSUE AFRESH, IN LIGHT OF THE HONBLE APEX COURT DECISION CITED ABOVE. 4.2 LD. DEPARTMENTAL REPRESENTATIVE FAIRLY AGREED TO THIS PROPOSITION. 4.3 ACCORDINGLY, IN THE INTEREST OF JUSTICE, THIS ISSUE IS REMITTED TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER THE SAME AFRESH, IN LIGHT OF THE ABOVE HONBLE APEX COURT DECISION. NEEDLESS TO ADD THAT THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HE ARD. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20/4/2012. SD/- SD/- [ [[ [I.P. BANSAL I.P. BANSAL I.P. BANSAL I.P. BANSAL] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 20/4/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES