Dishman Pharmaceuticals & Chemicals Ltd., Ahmedabad V. The ACIT.,(OSD)Range-1, Ahmedabad

ITA 1565/AHD/2012

• Counselvise Citation: 156520514 RSA 2012
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-08-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 13-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Keywords: Retrospective amendment
• Section: 143(3); 80HHC

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV JUDICDIAL MEMBER AND SHRI MANISH BORAD ACCOUNTANT MEMBER ./ ITA NO.1565/AHD/2012 / ASSESSMENT YEAR: 2003-04 M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LIMITED, 2 BHADRARAJ CHAMBERS, NR.SWASTIK CROSS ROAD, NAVRANGPURA, AHMEDABAD. PAN : AAACD 4164 D VS. THE ASSISTANT COMMISSIONER OF INCOME TAX (OSD), RANGE-1, AHMEDABAD. / (APPELLANT) / (RESPONDENT) BY APPELLANT : SHRI TUSHAR HEMANI. BY RESPONDENT : SHRI D.C. MISHRA, SR. D.R. / DATE OF HEARING : 28/08/2015 / DATE OF PRONOUNCEMENT : 11/09 /2015 / O R D E R PER RAJPAL YADAV JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME TAX (A)-6, AHMEDABAD DATED 0 8-05-2012 FOR ASSESSMENT YEAR 2003-04. THE ASSESSEE HAS TAKEN 9 GROUNDS OF APPEAL WHICH ARE NOT IN CONSONANCE WITH RULE 8 OF THE INCO ME TAX APPELLATE TRIBUNAL RULES, 1963. IN BRIEF ITS GRIEVANCE IS TH AT LD. A.O. HAS ERRED IN EXCLUDING THE PROFIT ON SALE OF DEPB LICENCE FROM T HE PROFIT OF THE BUSINESS FOR COMPUTATION OF DEDUCTION U/S. 80 HHC O F THE INCOME TAX ITA NO.1565/AHD/2012 DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT FOR AY 2003-04 2 ACT. IT HAS ALSO CHALLENGED CHARGING OF INTEREST U /S. 234B/C/D AND INITIATION OF PENALTY U/S. 271(1)(C). 2. AT THE VERY OUTSET THE LD. COUNSEL FOR THE ASSES SEE SUBMITTED THIS IS THE SECOND ROUND OF LITIGATION BEFORE THE T RIBUNAL. THE EXPORT TURNOVER OF THE ASSESSEE ADMITTEDLY WAS MORE THAN R S.10 CRORE. THE BENEFIT OF AMENDMENT CARRIED OUT IN SECTION 80HHC V IDE AMENDMENT ACT, 2005 WAS NOT GRANTED TO THE ASSESSEE BY THE AS SESSING OFFICER WHILE COMPUTING THE ELIGIBLE PROFIT FOR GRANT OF DE DUCTION U/S. 80HHC BECAUSE THE TURNOVER OF THE ASSESSEE WAS MORE THAN RS.10 CRORE. THIS CONTROVERSY HAS BEEN SILENCE BY THE HONBLE HIGH CO URT IN THE CASE OF CIT-V AND OTHERS V/S. M/S. AVANI EXPORTS, WHICH TRA VELLED UPTO THE SUPREME COURT AND THE HONBLE SUPREME COURT HAS ALS O DECIDED THIS ISSUE VIDE JUDGMENT DATED 30-03-2015 PASSED IN CIT- V & OTHERS V/S. M/S. AVANI EXPORTS & OTHERS. HE PLACED ON RECORD CO PY OF THE SPECIAL LEAVE PETITION NO. 9273/2013. HE SUBMITTED THAT TH E ISSUE REQUIRED TO BE REMITTED BACK TO THE FILE OF A.O. FOR RE-ADJUDIC ATION. HE ALSO CONTENDED THAT IDENTICAL ISSUE HAS ARISEN IN A.Y.20 00-01 & 2002-03 IN ITA NO. 84 & 85/AHD/2012 WHERE THE TRIBUNAL HAS REM ITTED THE ISSUE TO THE FILE OF A.O. FOR RE-ADJUDICATION VIDE ITS OR DER DATED 14-05-2015. HE PLACED ON RECORD THE COPY OF THE TRIBUNALS ORDE R. ON THE OTHER HAND, LD. D.R. RELIED UPON THE ORDER OF THE LD. CIT (A). 3. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE CASE RECORDS. THE LD. FIRST APPELLATE AUTHORITY HAS REPRODUCED THE ITA NO.1565/AHD/2012 DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT FOR AY 2003-04 3 FINDING OF LD. ASSESSING OFFICER AND THEREAFTER REJ ECTED THE CONTENTIONS OF THE ASSESSEE BY OBSERVING AS UNDER:- 2.1. THE ASSESSING OFFICER HAS STATED IN THE ASSES SMENT ORDER DATED 20-12-2011 WHICH IS AS UNDER:- THE SUBMISSION OF THE ASSESSEE, IN RELATION TO THE ALLOWABILITY OF PROFIT ON SALE OF DEPB FOR CALCULATION U/S. 80HHC, IS CONSIDERED CAREFULLY. HOWEVER, AS PER AMENDED PROVISIONS OF TA XATION LAW (AMENDMENT) ACT,2005, PROFITS ON SALE OF DUTY ENTITL EMENT PASS BOOK (DEPB) WILL BE TREATED AS PAR WITH DUTY DRAWBACK FOR THE PURPOSES OF PROPORTIONATE INCREASE OF PROFITS DERIVED FROM EXPO RTS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SUB-SECTION (3) OF SECTION 80HHC IN THE CASE OF: (I) AN EXPORTER HAVING EXP[ORT TURNOVER NOT EXCEEDING R S.10 CRORES; (II) IN THE CASE OF AN EXPORTER HAVING EXPORT TURNOVER E XCEEDING RS.10 CRORES IF- (A) HE HAD AN OPTION TO CHOOSE EITHER DUTY DRAWBACK OR DUTY ENTITLEMENT PASS BOOK SCHEME; AND (B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CU STOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER DUTY ENTITLEMENT PASS BOOK SCHEME. OR (C) HE HAD AN OPTION TO CHOOSE EITHER DUTY DRAWBACK OR DUTY FREE REPLENISHMENT CERTIFICATE; AND (D) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUS TOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER DUTY FREE REPLENISHMENT CERTIFICATE. IN THE LIGHT OF THE ABOVE, IT HAS BEEN CONCLUDED TH AT SECTION 80HHC PROVIDES FOR DEDUCTION FROM THE TOTAL INCOME IN RES PECT OF PROFITS DERIVED FROM THE EXPORT OF GOODS OR MERCHANDISE, WHICH ARE REALIZED IN CONVERTIBLE FOREIGN EXCHANGE AND NOT IN RESPECT OF INCIDENTAL INCOME ARISING THROUGH A GOVERNMENT SCHEME. FURTHER THE EL ABORATE SCHEME OF COMPUTATION OF THE DEDUCTION PROVIDED U/S 80HHC OF THE IT ACT DOES NOT COVER PROFIT ON SALE OF DEPB. SUCH PROFITS ARE THEREFORE, NOT ELIGIBLE FOR DEDUCTION U/S 80 HHC, THEREFORE, 100% OF PROFIT ON SALE OF DEPB IS ITA NO.1565/AHD/2012 DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT FOR AY 2003-04 4 TO BE EXCLUDED FROM THE PROFIT OF THE BUSINESS FOR COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. SINCE 100% PROFIT ON SALE OF DEPB HAS ALREADY BEEN EXCLUDED IN THE ASSESSMENT ORDER U /S 143(3) DATED 16.03.2006 AND ALSO CONFIRMED BY THE CIT(A), NO FUR THER EXCLUSION IS NEEDED. 2.2 THE APPELLANT HAS SUBMITTED IN ITS WRITTEN SUBM ISSION, WHICH IS AS UNDER: 1. IT IS MOST RESPECTFULLY SUBMITS THAT THE APPEL LANT HAS COMPLIED WITH THE CONDITIONS LAID DOWN IN THE PROVI SIONS OF S. 80HHC OF THE ACT AND THEREFORE THE CLAIM MADE BY TH E APPELLANT ON DEPB LICENSE MAY BE ALLOWED. 2. IT IS FURTHER SUBMITTED THAT BEFORE HONBLE TH E GUJARAT HIGH COURT, WRIT PETITIONS HAVE BEEN FILED BY MANY ASSES SES CHALLENGING THE RETROSPECTIVE APPLICABILITY OF AMEN DMENTS MADE BY THE TAXATION LAWS (SECOND AMENDMENT) ACT, 2005, W.E.F. 01.04.1998 AS ULTRA VIRES, HEARING OF WHICH IS PART LY COMPLETED AND ITS OUTCOME WOULD HAVE DIRECT BEARING ON THE IS SUE BEFORE YOUR HONOUR. THEREFORE THE APPELLANT MOST RESPECTFU LLY REQUESTS YOUR HONOUR TO FOLLOW THE JUDGMENT OF THE HONBLE GU JARAT HIGH COURT ON THE SIMILAR ISSUE BEFORE YOUR HONOUR. 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSESS MENT ORDER AND APPELLANTS SUBMISSION. IT IS NOT IN DISPUTE THAT APPELLANT CLAIMED DEDUCTION UNDER SECTION 80HHC ON THE PROFIT ON SALE OF DEPB LICENSE WHICH IS COVERED UNDER CLAUSE 28 (IIID). SINCE APPEL LANT DID NOT FULFILL THE REQUIRED CONDITIONS DESPITE HAVING EXPORT TURNO VER ABOVE RS.10 CRORES, PROFIT ON SALE OF DEPB LICENSE IS NOT ELIGI BLE FOR DEDUCTION UNDER SECTION 80HHC. APPELLANTS COUNSEL WAS SPECIFICALL Y ASKED TO EXPLAIN AS TO HOW CONDITIONS REQUIRED UNDER SECTION 80 HHC IN RESPECT OF PROFIT ON SALE OF DEPB LICENSE IS FULFILLED TO WHICH HE CO ULD NOT REPLY. THE APPEAL ON THE ISSUE OF ULTRA VIRES WITH RESPECT TO RETROSPECTIVE AMENDMENT TO SECTION 80HHC IN 2005 IS NOT YET DECID ED HENCE THE SAME CANNOT BE CONSIDERED AT THIS STAGE. CONSIDERI NG THIS, THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80HHC MADE BY THE ASSESSING OFFICER IS CONFIRMED. ITA NO.1565/AHD/2012 DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT FOR AY 2003-04 5 4. WE FIND THAT BOTH THE AUTHORITIES HAVE NOT EXTEN DED THE BENEFIT OF AMENDMENT CARRIED OUT IN SECTION 80-HHC VIDE AME 4NDMENT ACT, 2005 ON THE GROUND THAT THE ASSESSEE DID NOT FULFIL L THE CONDITIONS NARRATED IN 3RD AND 4 TH PROVISO APPENDED TO THE SECTION 80HHC (3). THE CONSTITUTIONAL VALIDITY OF THESE PROVISIONS WER E UNDER CHALLENGE BEFORE THE HONBLE HIGH COURT WHEN CIT (A) HAS ADJU DICATED THIS ISSUE. THE FIRST LD. APPELLATE AUTHORITY ALSO TOOK NOTICE OF THIS FACT IN THE FINDING EXTRACTED (SUPRA). THIS CONTROVERSY HAS BEEN SILENCED BY THE HONBLE SUPREME COURT. THEREFORE, WE DEEM IT FI T THAT THIS ISSUE BE EXAMINED AT THE LEVEL OF A.O. WE SET ASIDE BOTH TH E ORDERS AND RESTORE THIS ISSUE TO THE FILE OF A.O. FOR RE-ADJUDICATION. THE LD. A.O. SHALL GRANT DUE OPPORTUNITY OF HEARING TO THE ASSESSEE AN D ALSO ADJUDICATE THE ISSUE IN THE LIGHT OF HONBLE S.CS DECISION RE NDERED IN THE CASE OF CIT VS. AVANI EXPORTS & OTHERS. THE ASSESSEE WILL PLACE ON RECORD COPY OF THE HONBLE S.C. DECISION BEFORE THE A.O. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE COURT ON 11 TH SEPT. , 2015 AT AHMEDABAD. SD/- SD /- (MANISH BORAD) (RA JPAL YADAV) ACCOUNTANT MWEMBER JUDICIAL MEMBER AHMEDABAD. DATE:- 11 -09-2015 PATKI ITA NO.1565/AHD/2012 DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT FOR AY 2003-04 6 !' #'$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. !' # / CONCERNED CIT 4. # ( ) / THE CIT(A) 5. &'( ' , ' , *+,!, / DR, ITAT, AHMEDABAD 6. (- . / GUARD FILE. % & / BY ORDER, TRUE COPY '/ () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION- 28-8-2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 7-9-2015 OTHER MEMBER 7-9-2015. 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. 7-9-2015 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 11-9-2015. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 11-9 -2015. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER