P.M.Palani Mudaliar & Co., CHENNAI V. DCIT, CHENNAI

ITA 1555/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4015 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-11-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 30-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: J SREE VIDYA
• Keywords: Retrospective amendment
• Section: 80HHC

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO.1555/MDS/2016. / ASSESSMENT YEAR : 2004-2005 M/S. P M PALANI MUDALIAR & CO., 36, CORAL MERCHANT STREET, MANNADY, CHENNAI 600 001. [PAN AAAFP 0835G ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE -12, CHENNAI ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MS. J. SREE VIDYA, ADVOCATE /RESPONDENT BY : SHRI. A.V.SREEKANTH, IRS, JCIT. /DATE OF HEARING : 17-11-2016 ! /DATE OF PRONOUNCEMENT : 23-11-2016 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVA NCE IS THAT IT WAS DENIED DEDUCTION CLAIMED BY IT U/S.80HHC OF THE INCOME TAX ACT , 1961 (HEREAFTER REFERRED TO THE ACT). ITA NO. 1555/MDS/2016. :- 2 -: 2. FACTS APROPOS ARE THAT ASSESSEE IS A MANUFACTURER, PURCHASER AND SELLER OF COTTON LUNGHIES HAD FILED ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING AN INCOME OF RS.56,96,110 /-. ASSESSEE HAD CLAIMED DEDUCTION FOR A SUM OF RS.24,27,932/- U/S. 80HHC OF THE ACT. ORIGINAL ASSESSMENT WAS COMPLETED ON 20.09.2006 DEN YING SUCH CLAIM. ASSESSEE THEREAFTER MOVED IN APPEAL BEFORE LD. COMM ISSIONER OF INCOME TAX (APPEALS) WHERE IT DID NOT GET A FAVOURA BLE ORDER. WHEN IT CAME IN APPEAL BEFORE TRIBUNAL, THE TRIBUNAL VID E ORDER DATED 24.11.2008, SETASIDE THE MATTER TO THE ASSESSING OF FICER WITH A DIRECTION TO DECIDE THE ISSUE REGARDING DEDUCTION U /S.80HHC OF THE ACT AFRESH AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE. IT SEEMS ASSESSEE HAD MOVED IN FURTHER APPEAL BEFORE THE HONBLE JUR ISDICTIONAL HIGH COURT AND THE CASE IS PENDING. 3. THEREAFTER BASED ON THE DIRECTIONS OF THE TRIBUNAL, LD. ASSESSING OFFICER TOOK UP THE MATTER ONCE AGAIN. LD . ASSESSING OFFICER NOTED THAT ASSESSEE HAD INCURRED A LOSS ON EXPORT B USINESS. AS PER LD. ASSESSING OFFICER, EXPORT BUSINESS OF TRADING GOODS RESULTED IN LOSS OF RS.18,19,240/-, AND SUCH BUSINESS OF MANUFACTURING RESULTED IN A LOSS OF RS.18,00,271/-. HOWEVER, THE ASSESSEE HAD RE CEIVED DUTY DRAW BACK INCENTIVE AND PROFIT ON SALE OF DEPB LICENCES AGGREGATING TO RS.1,31,69,535/-. LD. ASSESSING OFFICER WAS OF THE OPINION THAT ITA NO. 1555/MDS/2016. :- 3 -: ASSESSEE COULD NOT AVAIL DEDUCTION U/S.80HHC OF THE ACT ON DUTY DRAW BACK INCENTIVE AND SALE OF DEPB LICENCES BY VIRTU E OF JUDGMENT OF APEX COURT IN THE CASE OF IPCA LABORATORIES VS. CIT 226 ITR 521 . AS PER LD. ASSESSING OFFICER UNLESS AND UNTIL THERE WA S PROFIT FROM EXPORT BUSINESS, ASSESSEE WOULD NOT BE ELIGIBLE FOR DEDUCT ION U/S.80HHC OF THE ACT. LD. ASSESSING OFFICER MENTIONED THAT AMEN DED PROVISIONS OF SEC.80HHC OF THE ACT WHEREBY PROVISOS WERE ADDED T O THE SAID SECTION, APPLIED TO THE ASSESSEE. 4. AGGRIEVED ASSESSEE ONCE AGAIN MOVED IN APPEAL BEFOR E LD. COMMISSIONER OF INCOME TAX (APPEALS). IT WAS ARGUED THAT AMENDMENT TO SEC. 80HHC(3) OF THE ACT MADE FROM TAX ATION LAWS (SECOND AMENDMENT) ACT, 2005 WHEREBY TWO CATEGORIES OF EXPORTERS WERE CARVED OUT WOULD NOT APPLY RETROSPECTIVELY SI NCE IT DEPRIVED A BENEFIT GRANTED EARLIER TO A CLASS OF THE ASSESSEE WHOSE ASSESSMENTS WERE PENDING ALTHOUGH SUCH BENEFITS WERE AVAILABLE TO THE ASSESSES WHOSE ASSESSMENT WERE COMPLETED. ARGUMENT OF THE AS SESSEE WAS THAT PROVISOS (II)(III) AND (IV) HAD NO APPLICABILI TY TO THE ASSESSEE. RELIANCE WAS PLACED ON THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS & ORS VS. CIT & ORS 348 ITR 391 AND THAT OF HONBLE APEX COURT IN THE CASE OF CIT VS. AVANI EXPORTS (2016) 007 ITR-OL 0046 . LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT IMPRESSED ITA NO. 1555/MDS/2016. :- 4 -: BY THE ABOVE ARGUMENTS. ACCORDING TO HIM, WHAT ASS ESSING OFFICER HAD APPLIED WAS JUDGMENT OF HONBLE APEX COURT IN T HE CASE OF M/S. IPCA LABORATORIES LTD (SUPRA) . AS PER LD. COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE WOULD BE ELIGIBLE FOR CLAIM OF DEDUCTION U/S.80HHC OF THE ACT ONLY IF THERE WERE PROFIT FROM EXPORT BUSINESS. OBSERVATION OF THE LD. COMMISSIONER OF INCOME TAX ( APPEALS) WAS THAT ASSESSEE HAVING INCURRED A LOSS IN ITS EXPORT BUSIN ESS, IT WAS NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S.80HHC OF THE AC T. 5. BEFORE US, LD. AUTHORISED REPRESENTATIVE STRONGLY R ELYING ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF A VANI EXPORTS (SUPRA) SUBMITTED THAT THE CLAIM OF DEDUCTION UNDER SECTION 80HHC OF THE ACT WAS UNJUSTLY DENIED. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE ST RONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IF THE DUTY DRAW I NCENTIVE AND PROFIT ON SALE OF DEPB LICENCES AGGREGATING TO F1,31,69,53 5/- IS EXCLUDED, THE EXPORT BUSINESS OF THE ASSESSE WAS IN A LOSS. THE LOSS WAS F18,19,240/- FOR TRADING EXPORT AND F18,00,271/- FO R MANUFACTURING EXPORT. NO DOUBT BY VIRTUE OF JUDGMENT OF APEX COUR T IN THE CASE OF ITA NO. 1555/MDS/2016. :- 5 -: IPCA LABORATORIES (SUPRA), UNLESS AN ASSESSEE HAS TO HAVE PROFIT FROM EXPORT BUSINESS, A DEDUCTION U/S.80HHC OF THE ACT C ANNOT BE GIVEN. LD. ASSESSING OFFICER HAD RELIED ON THIS JUDGMENT W HILE DISALLOWING THE CLAIM OF THE ASSESSEE. LD. ASSESSING OFFICER DID NO T CONSIDER DUTY DRAW BACK INCENTIVE AND PROFIT ON SALE OF DEPB LICENCES AS PROFIT DERIVED BY THE ASSESSEE FROM EXPORT OF GOODS OR MERCHANDISE. ONE OTHER REASON WHY LD. ASSESSING OFFICER DENIED THE CLAIM WAS THAT ASSESSEE COULD NOT SHOW SATISFACTION OF THE CONDITIONS SPEC IFIED IN SECOND PROVISO TO SEC. 80HHC OF THE ACT. BY VIRTUE OF JUD GMENT OF APEX COURT IN THE CASE OF AVANI EXPORTS & ORS (SUPRA), SECOND PROVISO WOULD NOT HAVE ANY APPLICABILITY IN THE CASE OF THE ASSESSEE, SINCE THE SAID PROVISO WAS HELD TO HAVE NO RETROSPECTIVE EFFECT. HOWEVER, THIS DOES NOT TAKE AWAY THE SHEEN OF THE FIRST REASON CITED B Y THE LD. ASSESSING OFFICER, THAT THE ASSESSEE HAD SUFFERED A LOSS I N ITS EXPORT BUSINESS. THE QUESTION THAT ARISES HERE IS WHETHER PROFIT/LO SS THAT IS TO BE COMPUTED FOR APPLICATION OF SEC. 80HHC(1) OF THE AC T IS ONE AFTER TAKING INTO ACCOUNT THE EXPORT INCENTIVES NAMELY DU TY DRAW BACK INCENTIVE AND PROFIT ON SALE OF DEPB LICENCES OR BE FORE THAT. MEANING OF THE TERM PROFIT AS CONTAINED IN SEC. 80HHC (1) OR (3)(A) OR 3(B) OF THE ACT WAS CONSIDERED BY HONBLE APEX COURT IN THE CAS E OF A.M. MOOSA VS. CIT, 294 ITR 01. HONBLE APEX COURT IN THIS JUDGMENT HAD MADE A SPECIFIC REFERENCE TO EARLIER JUDGMENT IN THE CASE OF IPCA LABORATORIES ITA NO. 1555/MDS/2016. :- 6 -: (SUPRA) . WE ARE OF THE OPINION THAT LOWER AUTHORITIES HAV E NOT ADDRESSED THE ISSUE, WHETHER THE TERM PROFIT AS IT APPEARS IN SEC. 80HHC(1) OF THE ACT IS ONE WHICH IS TO BE COMPUTED AFTER CONSIDERING EXPORT INCENTIVES OR NOT. WE ARE OF THE OPINION THA T THE MATTERS REQUIRES A FRESH LOOK BY THE LOWER AUTHORITIES. WE SETASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE ISSUE REGARD ING APPLICABILITY OF SEC. 80HHC OF THE ACT ON EXPORT INCENTIVES DERIVED BY THE ASSESSEE, WHEN THE EXPORT BUSINESS OPERATIONS WAS RUNNING ON A LOSS, BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR CONSIDER ATION A FRESH IN ACCORDANCE WITH LAW. 8. IN THE RESULT, ASSESSEE APPEAL IS PARTLY ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 23 RD DAY OF NOVEMBER, 2016, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 23RD NOVEMBER, 2016 KV &' ()*) / COPY TO: 1. / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF