Alanta Offset & Packagings Ltd, V. DCIT Circle I (I),

ITA 1510/DEL/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1066 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 31-08-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 26-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Keywords: Business income; Depreciation; Competent authority; Unabsorbed depreciation; Set aside
• Section: 80HHC; 133A; 115JB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `A : NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO.1510/DEL./2007 (ASSESSMENT YEAR : 2001-02) AJANTA OFFSET & PACKAGINGS LTD., VS. DCIT, CIRCLE 1(1), B-95, WAZIRPUR INDUSTRIAL AREA, NEW DELHI. DELHI-110 052 (PAN/GIR NO.AAACA0245Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.P. GUPTA & BASANT KUMAR, REVENUE BY : MS. PRATIMA KAUSHIK, SR.DR ORDER PER K.D. RANJAN: AM THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2001 -02 ARISES OUT OF THE ORDER OF CIT(A)-IV, NEW DELHI. 2. THE FIRST ISSUE FOR CONSIDERATION RELATES TO COM PUTATION OF DEDUCTION U/S 80HHC OF THE ACT IN RESPECT OF AMOUNT OF SALE OF DEPB CREDIT S/LICENCES. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE COMPANY IN CO MPUTATION OF DEDUCTION MADE U/S 80HHC HAD CONSIDERED THE RECEIPTS ON ACCOUNT OF DEP B LICENCES AS PART OF EXPORT INCENTIVE AND HAD ACCORDINGLY CLAIMED DEDUCTION WIT H REFERENCE TO 90% OF THE SAME. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER HAD TAKEN T HE VIEW THAT DEDUCTION U/S 80HHC WAS ALLOWABLE IN RESPECT OF ITEM OF EXPORT INCENTIV E REFERRED TO IN CLAUSES(IIIA), (IIIB) & (IIIC) OF SECTION 28 OF THE ACT. IN THE VIEW OF TH E ASSESSING OFFICER, THE RECEIPTS ON ACCOUNT OF DEPB LICENCES WERE NOT COVERED IN ANY OF THE ABOVE MENTIONED CLAUSES OF SECTION 28 OF THE ACT. IN HIS VIEW, THE RECEIPTS O N ACCOUNT OF DEPB LICENCES WERE IN NATURE OF BUSINESS INCOME COVERED BY CLAUSE (IV) OF SECTION 28. THEREFORE, THE SAME WAS TO BE FULLY EXCLUDED FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80 HHC. HE ALSO NOTED THAT THE AMOUNT OF DEPB WAS NOT TO BE INCREAS ED ON PRO-RATA BASIS IN DETERMINATION OF EXPORT PROFITS AS PER THIRD PROVISO TO SUB-SECTI ON (3) OF SECTION 80HHC. I.T.A. NO.1510/DEL./2007 (A.Y. : 2001-02) 2 4. BEFORE CIT(A), IT WAS SUBMITTED THAT PROVISION O F SECTION 80HHC HAVE BEEN AMENDED BY TAXATION LAWS AMENDMENT ACT, 2005, IN OR DER TO MAKE SPECIFIC PROVISION REGARDING ALLOWABILITY OF DEDUCTION IN RESPECT OF D EPB. IT HAS BEEN PROVIDED THAT DEDUCTION IN RESPECT OF DEPB IN THE CASES WHERE EXP ORT TURNOVER EXCEEDED RS.10 CRORE, THE ASSESSEE COMPANY WOULD BE ELIGIBLE ONLY IF THE ASSESSEE HAD NECESSARY AND SUFFICIENT EVIDENCE TO PROVE THAT (A) IT HAD OPTION EITHER TO CLAIM DUTY DRAW BACK OR DEPB; & (B) RATE OF DUTY DRAW BACK CREDIT ATTRIBUTABLE TO C USTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER DEPB CLAIM. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS MADE B Y THE ASSESSEE AFTER DETAILED DISCUSSION HELD THAT DEDUCTION IN RESPECT OF DEPB C OULD NOT BE ALLOWED UNLESS THE ASSESSEE SUBMITED FULL EVIDENCES REGARDING EACH OF THE EXPORT CONSIGNMENT THAT THE RATE OF DUTY DRAW BACK WAS HIGHER THAN DEPB. HE ACCORDI NGLY REJECTED THE CLAIM OF THE ASSESSEE. 5. BEFORE US, LD.AR OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS NOW COVERED BY THE DECISION OF THE ITAT (SB) IN THE CASE OF TOPMAN EXP ORTS VS. ITO, (2009) TIOL 531 ITAT- MUM. 6. ON THE OTHER HAND, LD.SR.DR SUPPORTED THE ORDER OF CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION OF ITAT (SB) IN THE CASE OF TOPMAN EXPORTS(SUPRA), WHEREIN IT HAS BEEN HELD AS UNDER: 89. THE QUESTION RAISED BEFORE THE SPECIAL BENCH H AS TWO PARTS. IN SO FAR AS THE FIRST PART: 'WHETHER THE ENTIRE AMOUNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE UNDER SECTION 28(IIID) OF THE INCOME TAX ACT, IS CONCERNED, WE ANSWER IT IN NEGATIVE AND THE SECOND PART OF THE QUESTION OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTERPOLATED IS REPLIED IN AFFIRMATIVE TO THE EXTENT THAT THE FACE VALUE OF DE PB SHALL BE DEDUCTED FROM THE SALE PROCEEDS. AS REGARDS THE GROUNDS BASED IN TH ESE APPEALS AGAINST THE DENIAL OF DEDUCTION UNDER SECTION 80HHC, IN FULL OR PART, WE FIND THAT THE COMPUTATION OF PROFITS DERIVED FROM EXPORTS AND THE RESULTANT AMOU NT OF DEDUCTION UNDER THIS SECTION CAN BE MADE ONLY WHEN THE DECISION IS TAKEN ON THE AMOUNT AND THE TIMING I.T.A. NO.1510/DEL./2007 (A.Y. : 2001-02) 3 OF TAXABILITY OF THE FACE VALUE OF DEPB AND THE P ROFIT ON ITS SALE. ON THIS ISSUE WE HOLD THAT THE FACE VALUE OF DEPB IS CHARGEABLE TO TAX UNDER SECTION 28(IIIB) AT THE TIME OF ACCRUAL OF INCOME, THAT IS, WHEN THE AP PLICATION FOR DEPB IS FILED WITH THE COMPETENT AUTHORITY PURSUANT TO EXPORTS AND PRO FIT ON SALE OF DEPB REPRESENTING THE EXCESS OF SALE PROCEEDS OF DEPB O VER ITS FACE VALUE IS LIABLE TO BE CONSIDERED UNDER SECTION 28(IIID) AT THE TIME OF ITS SALE. WHATEVER IS SAID ABOUT DEPB SHALL ALSO HOLD GOOD FOR DFRC, ON BOTH ITS COM PONENTS, VIZ THE FACE VALUE OF DFRC AND PROFIT ON ITS TRANSFER, EXCEPT FOR THE FACT THAT THE PROFIT ON SALE OF DFRC SHALL BE CHARGED TO TAX UNDER SECTION 28(IIIE) . THERE IS NO DISPUTE ABOUT THE DUTY DRAWBACK, WHICH SHALL BE CHARGEABLE TO TAX AT THE TIME OF ACCRUAL OF INCOME UNDER SECTION 28(IIIC) WHEN APPLICATION IS FILED WI TH THE COMPETENT AUTHORITY AFTER MAKING EXPORTS. SINCE THE NECESSARY FACTS FOR THE DETERMINATION OF THE QUANTUM OF DEDUCTION UNDER SECTION 80HHC, AS DISCUSSED ABOVE, ARE NOT AVAILABLE ON RECORD, WE, THEREFORE, SET ASIDE THE IMPUGNED ORDERS AND D IRECT THE ASSESSING OFFICER TO COMPUTE THE AMOUNT OF RELIEF IN ACCORDANCE WITH THE VIEW EXPRESSED BY US HERE IN ABOVE. 8. RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET ASI DE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE CLAIM OF THE ASSESSEE IN THE LIGHT OF DECISION OF ITAT (SPECIAL BENCH) IN THE CASE OF TOP MAN EXPORTS(SUPRA). 9. THE NEXT ISSUE FOR CONSIDERATION RELATES TO UPHO LDING THE INTEREST INCOME ON FDRS MADE IN CONNECTION WITH EXPORT BUSINESS. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT T REATED THE INTEREST INCOME FROM OTHER SOURCES. ON APPEAL, THE CIT(A) UPHELD TH E ORDER OF ASSESSING OFFICER. 10. BEFORE US, IT HAS BEEN AGREED BY THE LD.COUNSEL FOR THE ASSESSEE THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF TH E HONBLE DELHI HIGH COURT IN THE CASE OF SRIRAM HONDA POWER EQUIPMENT LTD., 289 ITR 475 W HEREIN IT HAS BEEN HELD THAT INTEREST EARNED ON FDRS WILL BE ASSESSABLE UNDER TH E HEAD OTHER SOURCES. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT, THE ISSUE IS DECIDED AGAINST THE ASSESSEE. 11. THE NEXT ISSUE FOR CONSIDERATION RELATES TO UPH OLDING THE STAND OF ASSESSING OFFICER THAT FOR THE PURPOSE OF ALLOWING DEDUCTION U/S 115JB OF THE ACT IN RESPECT OF EXPORT PROFITS UNABSORBED DEPRECATION FOR EARLIER Y EARS WAS TO BE DEDUCTED WHILE DETERMINING THE EXPORT PROFIT. THE FACTS OF THE C ASE STATED IN BRIEF ARE THAT THE ASSESSEE I.T.A. NO.1510/DEL./2007 (A.Y. : 2001-02) 4 WHILE CALCULATING DEDUCTION U/S 80HHC HAD NOT DEDUC TED BROUGHT FORWARD LOSSES FROM THE PROFIT OF THE BUSINESS. THE ASSESSEE HAD BROUGHT F ORWARD UNABSORBED DEPRECIATION OF RS.2,29,52,167/-. THE ASSESSEE WAS ASKED TO EXPLAI N AS TO WHY THE BROUGHT FORWARD DEPRECATION SHOULD NOT BE ADJUSTED BEFORE CALCULATI NG THE DEDUCTION U/S 80HHC IN VIEW OF THE PROVISIONS OF SECTION 80AB READ WITH SECTION 80B(5) OF THE ACT. THE ASSESSEE DID NOT FILE ANY REPLY. THE ASSESSING OFFICER ACCORDIN GLY REDUCED THE AMOUNT OF UNABSORBED DEPRECIATION BROUGHT FORWAD IN ORDER TO WORK OUT TH E GROSS TOTAL INCOME FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. 12. ON APPEAL, THE CIT(A) FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORY VS. DCIT, 266 ITR 521 CONFI RMED THE STAND TAKEN BY THE ASSESSING OFFICER. 13. BEFORE US, LD.AR O THE ASSESSEE ADMITTED THAT T HE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF IPCA LABORATORY LTD. (SUPRA). 14. ON THE OTHER HAND, LD.SR.DR SUPPORTED THE ORDER OF CIT(A). 15. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATOR Y LTD. (SUPRA) HAS OBSERVED THAT THE INCOME FOR THE PURPOSE OF SECTION 80HHC OF THE ACT HAS TO BE CALCULATED AFTER GIVING EFFECT TO ALL THE PROVISIONS OF INCOME-TAX ACT. AC CORDINGLY, THE DEPRECATION ALLOWABLE U/S 32(2) OF THE ACT IS ALSO REQUIRED TO BE DEDUCTED IN DETERMINATION OF BUSINESS PROFIT FOR THE PURPOSE OF SECTION 80HHC OF THE ACT. SINCE THE ISS UE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF IPCA LA BORATORY LTD.(SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE CIT(A) DEL ETING THE ADDITION. 16. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DED UCTION U/S 35D OF THE ACT. LD.COUNSEL FOR THE ASSESEE DURING THE COURSE OF HEA RING DID NOT PRESS THIS GROUND OF APPEAL AS SUCH THIS GROUND OF APPEAL IS DISMISSED. I.T.A. NO.1510/DEL./2007 (A.Y. : 2001-02) 5 17. THE NEXT ISSUE FOR CONSIDERATION REALTES TO UPH OLDING THE ADDITION TO THE EXTENT OF RS.1 LAKH OUT OF ADDITION OF RS.1,50,000 MADE BY TH E ASSESSING OFFICER ON AD HOC BASIS. IN THIS CASE, SURVEY U/S 133A WAS CONDUCTED AND THE SURVEY PARTY MADE INVENTORIES AT VARIOUS LOCATIONS. THE INVENTORY MADE WAS CHECKED FROM REGULAR BOOKS OF ACCOUNT. THE ASSESSEE COULD NOT TALLY SOME OF THE STOCKS. IT W AS SUBMITTED BY THE ASSESSEE THAT CONSUMABLE STORES WERE DIRECTLY DEBITED TO THE P&L A/C ON THE BASIS OF ACTUAL CONSUMPTION AT THE YEAR END. IN CASE OF SUCH ITEM, IT WAS NOT POSSIBLE TO MATCH EACH AND EVERY ITEM WITH THE BOOKS OF ACCOUNT. THE ASSESSIN G OFFICER WITHOUT APPRECIATING THAT IT WAS NOT POSSIBLE TO SUBMIT RECONCILIATION FOR SUCH ITEMS, MADE AN AD HOC ADDITION OF RS.1,50,000/-. THE CIT(A), HOWEVER, ON CONSIDERATI ON OF FACTS WAS OF THE VIEW THAT ASSESSING OFFICER MADE ADDITION ON THE BASIS OF FIN DINGS BASED ON THE OUTCOME OF THE SURVEY. THE ADDITION WAS BASED ON THE PROPER INVEN TORY AND CALCULATION. WHILE, ON THE OTHER HAND, THE ASSESSEE HAD NOT BEEN ABLE TO DEFEN D HIS CASE AND GIVE PROPER EVIDENCE DURING THE APPELLATE PROCEEDINGS BEFORE HIM. HE AC CORDINGLY CONFIRMED THE ADDITION OF RS.1 LAKH AS AGAINST RS.1,50,000 MADE BY THE ASSESS ING OFFICER. 18. BEFORE US, LD.AR OF THE ASSESSEE SUBMITTED THAT THERE WAS SMALL DIFFERENCE FOUND IN THE ITEMS OF STORES DURING THE COURSE OF SURVEY. DURING THE COURSE OF SURVEY, NO EVIDENCE WAS FOUND THAT THE ASSESSEE WAS PURCHASING THE STOCK ITEMS OUTSIDE THE BOOKS OF ACCOUNT AND HENCE NO ADDITION COULD BE MADE. THE D ETAILS OF THE INVENTORY MADE BY THE SURVEY PARTY IS PLACED AT PAGES 34-58 OF THE PAPER BOOK. IT WAS SUBMITTED THAT SINCE THERE WAS A SLIGHTLY DIFFERENCE AND ASSESSEE COULD NOT TA LLY THE CLOSING STOCK OF INVENTORIES WITH REFERENCE TO THE BOOKS OF ACCOUNT, THE ADDITION OF RS.1,00,000/-, CONFIRMED BY THE CIT(A) WAS NOT JUSTIFIED. ON THE OTHER HAND, LD.SR.DR SUP PORTED THE ORDER OF CIT(A). HE SUBMITTED THAT THERE WAS DISCREPANCY IN THE EXISTEN CE AND SINCE THE ASSESEE HAD NOT FURNISHED ANY EXPLANATION, THE LD.CIT(A) WAS JUSTIF IED IN CONFIRMING THE ADDITION OF RS.1,00,000/-. 19. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE SURVEY PARTY HAD MADE INVENTORY OF ITEMS AND AS PER THE INVENTORY, THERE WAS DIFFERENCE OF RS.1,50,000/-, WHICH HAS BEEN REDUCED BY THE CIT(A) TO RS.1,00,000/- RELYING ON THE SUBMISSIONS MADE BY THE ASSESSEE. I T IS A FACT THAT ASSESSEE HAD NOT BEEN I.T.A. NO.1510/DEL./2007 (A.Y. : 2001-02) 6 ABLE TO TALLY THE STOCKS FOUND. THOUGH, THE DIFFER ENCE IN STORE IS SMALL TO THE EXTENT OF RS.1,00,000/-, WHICH HAS BEEN SUSTAINED BY THE LD.C IT(A), YET THE SAME HAS NOT BEEN RECONCILED. HENCE, KEEPING IN VIEW THE SUBMISSIONS MADE BY THE ASSESSEE, WE ESTIMATE THE DIFFERENCE AT RS.50,000/- AS AGAINST RS.1,00,00 0/- SUSTAINED BY THE CIT(A). 20. THE NEXT ISSUE FOR CONSIDERATION RELATES TO CON FIRMING THE ADDITION OF RS.30,000 OUT OF RS.50,000/- MADE BY THE ASSESSING OFFICER. THE ASSESSING OFFICER NOTED THAT AS PER THE PHYSICAL VERIFICATION OF THE STOCK OF PAPER , THE STOCK WAS SHORT THAN RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE COULD NOT EXPLA IN THE DISCREPANCY. IT WAS SUBMITTED THAT NUMEROUS TYPES OF PAPERS WERE USED BY THE ASSE SSEE. ACCORDING TO THE ASSESSEE, THE DISCREPANCY WAS AT RS.35,000/-. IT WAS SUBMITTED B Y THE ASSESSEE THAT THE DIFFERENCE HAS OCCURRED BECAUSE OF THE FACT THAT AVERAGE COST HAD BEEN TAKEN TO VALUE THE PAPERS FOUND. ON VERIFYING THE RATE OF VARIOUS TYPES OF PAPER, HO WEVER, THE ASSESSING OFFICER FOUND THAT AVERAGE RATE WAS SLIGHTLY ON LOWER SIDE THAN THE AC TUAL RATE. HE ACCORDINGLY ESTIMATED THE VALUE OF PAPER AT RS.50,000/-. 21. ON APPEAL, IT WAS SUBMITTED THAT THE PAPER WAS THE MAIN ITEM IN THE BUSINESS OF THE ASSESSEE AND DURING THE COURSE OF SURVEY, PAPER WAS NOT FOUND PROPERLY ACCOUNTED FOR. THE ASESSEE HAD NOT BEEN ABLE TO GIVE ANY CONVINCIN G JUSTIFICATION FOR THE SHORTAGE OF 22,972 SHEETS. HE CONFIRMED THE ADDITION IN PRINCI PLE. HOWEVER, HE ESTIMATED THE ADDITION AT RS.30,000/- AS AGAINST RS.50,000/- MADE BY THE ASSESSING OFFICER. 22. WE HAVE HEARD BOTH THE PARTIES. THERE IS NO DI SPUTE THAT THERE WAS A SMALL DIFFERENCE OF 22,972 SHEETS FOUND DURING THE COURSE OF SURVEY. IT IS ALSO A FACT THAT THE ASSESSEE COULD NOT GIVE ANY CONVINCING JUSTIFICATIO N FOR SHORTAGE OF 22,972 SHEETS, BUT NO EVIDENCE WAS FOUND DURING THE COURSE OF SURVEY INDI CATING THAT THE ASSESSEE HAD SOLD THE PAPERS OUTSIDE THE BOOKS OF ACCOUNT. THE SHORTAGE O F PAPER MIGHT HAVE OCCURRED BECAUSE OF WASTAGE ETC. SINCE, THERE IS SMALL DIFFERENCE I N THE STOCK, IN OUR CONSIDERED OPINION, ADDITION CANNOT BE MADE UNLESS IT IS PROVED THAT TH E ASSESSEE HAD SOLD THE PAPER OUTSIDE THE BOOKS OF ACCOUNT. I.T.A. NO.1510/DEL./2007 (A.Y. : 2001-02) 7 23. THE LAST ISSUE FOR CONSIDERATION RELATES TO CHA RGING OF INTEREST U/S 234D OF THE ACT. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT (SPECIAL BENCH) IN THE CASE OF EKTA PROMOTERS VS. D CIT, 113 ITD 719, WHEREIN IT HAS BEEN HELD THAT INTEREST U/S 234D WILL BE LEVIABLE F ROM ASSESSMENT YEAR 2004-05 AND ONWARDS. SINCE THE ASSESSMENT YEAR INVOLVED IN THI S CASE IS 2001-02, INTEREST U/S 234D CANNOT BE CHARGED. WE DIRECT THE ASSESSING OFFICER TO ALLOW THE RELIEF ACCORDINGLY. 24. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 25. ORDER PRONOUNCED IN OPEN COURT ON 30/10/2009. (RAJPAL YADAV) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: OCT. 30, 2009. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-IV, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT