Sangeeta Jain, V. DCIT circle-24 (1),

ITA 1568/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9900 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 26-08-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 25-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL JAIN
• Keywords: Cost of acquisition; Competent authority; Set aside
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA,VICE PRESIDENT & SHRI RAJPAL YADAV, JUDICIAL MEMBER I.T.A. NO. 1568/DEL/2008 ASSESSMENT YEAR 2004 05 SANGEETA JAIN, 289, CHATTARPUR PAHARI, NEW DELHI. VS. DCIT, CIRCLE 24(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUNIL JAIN, CA RESPONDENT BY : SHRI JASDEEP SINGH, SR. DR ORDER PER RAJPAL YADAV, JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE O RDER OF LD. CIT (A) DATED 18 TH FEBRUARY, 2008 PASSED FOR ASSTT. YEAR 2004-05. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RU LE 8 OF ITAT RULES. THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. THE AS SESSEE HAD RAISED SIX GROUNDS OF APPEAL BUT IN BRIEF THE SOLE CONTROVERSY REVOLVES AROUND ONE ISSUE RELATING TO COMPUTATION OF DEDUCTION ADMISSIBLE U/S 80HHC OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE AN INDIVIDUAL HAS FILED HER RETURN OF INCOME ON 29.10.2004 DECLARING AN INCOME OF RS. 1,21,25,880/- AFTER AVAILING DEDUCTION U/S 80HHC AMOUNTING TO RS. 50,9 6,371/- AND DEDUCTION AT RS. 12,000/- U/S 80-L OF THE ACT. THE AO CONFRONTED THE ASSESSEE WITH THE TAXATION LAWS (AMENDMENT) ACT 2005 WITH RETROSPECTI VE EFFECT. THE COUNSEL FOR 2 THE ASSESSEE CONCEDED THAT DEPB HAS BEEN TREATED AT PAR WITH DUTY DRAWBACK WHILE CALCULATING DEDUCTION U/S 80HHC. SHE FILED A REVISED CALCULATION OF DEDUCTION U/S 80HHC IN CONFORMITY WITH THE AMENDMEN T. ACCORDING TO THE AO TURNOVER OF THE ASSESSEE IS MORE THAN 10 CRORE AND DEPB RECEIPT WOULD EXCLUDED RESULTANTLY BUSINESS PROFIT BECOMES NEGATI VE FIGURE. THE AO ACCORDINGLY EXCLUDED THE DEDUCTION OF RS. 50,96,378 /- CLAIMED BY THE ASSESSEE. THE ASSESSEE WAS NOT SATISFIED WITH THE COMPUTATION MADE BY THE AO AND CHALLENGED HIS ORDER BEFORE THE LD. CIT(A). IT WAS CONTENDED BY THE ASSESSEE THAT FACE VALUE OF DEPB IS THE COST OF ACQUISITION OF DEPB AND ANYTHING OVER AND ABOVE THAT IS RECEIVED BY THE ASSESSEE ON TRANSFER OF DEPB ENTITLEMENT IS TO BE CONSIDERED AS ITS INCOME U/S 28(IIID) OF THE ACT. T HE COMPLETE SALE VALUE OF DEPB CANNOT BE CONSIDERED AS THE PROFIT AND THEREFORE CA NNOT BE EXCLUDED FOR THE CALCULATION OF DEDUCTION U/S 80HHC. LD. CIT(A) DID NOT EXCEPT THIS CONTENTION OF ASSESSEE AND DISMISS THE APPEAL. 3. LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT THE ISSUE WHETHER THE ENTIRE AMOUNT RECEIVED ON SALE OF DEPB ENTITLEMENT REPRESENT PROFIT CHARGEABLE U/S 28 (IIID) OF THE INCOME TAX ACT OR T HE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTERPOLATED ? W AS REFERRED TO THE SPECIAL BENCH OF THE TIAT IN THE CASE OF M/S. TOPMAN EXPORTS ITA NO. 5769/MUM/2006 IN ASSTT. YEAR 2002-03. THE SPECIAL BENCH HAS DECIDED THIS IS SUE VIDE ITS ORDER DATED 11 TH AUGUST 2009. HE PRAYED THAT ISSUE BE RESTORED BACK TO THE FILE OF AO FOR VERIFICATION AND READJUDICATION IN THE LIGHT OF SPE CIAL BENCH DECISION. LD. DR WAS 3 UNABLE TO CONTROVERT THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE. HE RELIED UPON THE ORDER OF LD. CIT(A). 4. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. THE QUESTION REFERRED TO THE SPECIAL BE NCH BY THE HONBLE PRESIDENT READ AS UNDER :- WHETHER THE ENTIRE AMOUNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE UNDER SECTION 28(IIID) OF THE INCOME TAX ACT OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTI FICIAL COST BE INTERPOLATED? 5. THE SPECIAL BENCH HAS DISCUSSED ISSUE AT LENGTH AND THEREAFTER SUMMARIZED ITS CONCLUSION IN PARAGRAPH NO. 89 OF TH E ORDER WHICH READ 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 R ECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE UNDE R SECTION 28(IIID) OF THE INCOME TAX ACT, IS CONCERNED, WE ANSWER IT IN NEGATIVE AND THE SECOND PART OF THE QUESTION :OR T HE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTER POLATED? IS REPLIED IN AFFIRMATIVE TO THE EXTENT THAT THE FACE VALUE OF DEPB SHALL BE DEDUCTED FROM THE SALE PROCEEDS. AS REGARDS THE GRO UNDS RAISED IN THESE APPEALS AGAINST THE DENIAL OF DEDUCTION U/S 8 0HHC, IN FULL OR PART, WE FIND THAT THE COMPUTATION OF PROFITS DERIV ED FROM EXPORTS AND THE RESULTANT AMOUNT OF DEDUCTION UNDER THIS SE CTION CAN BE MADE ONLY WHEN THE DECISION IS TAKEN ON THE AMOUNT AND THE TIMING OF TAXABILITY OF THE FACE VALUE OF DEPB AND THE PRO FIT ON ITS SALE. ON THIS ISSUE WE HOLD THAT THE FACE VALUE OF DEPB IS C HARGEABLE TO TAX U/S 28(IIIB) AT THE TIME OF ACCRUAL OF INCOME, THAT IS, WHEN THE APPLICATION FOR DEPB IS FILED WITH THE COMPETENT AU THORITY PURSUANT TO EXPORTS AND PROFIT ON SALE OF DEPB REPRESENTING THE EXCESS OF SALE PROCEEDS OF DEPB OVER ITS FACE VALUE IS LIABLE TO THE CONSIDERED U/S 28(IIID) AT THE TIME OF ITS SALE. WH ATEVER 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 U/S 28 (IIIE). 4 THERE IS NO DISPUTE ABOUT THE DUTY DRAWBACK, WHICH SHALL BE CHARGEABLE TO TAX AT THE TIME OF ACCRUAL OF INCOME U/S 28(IIIC) WHEN APPLICATION IS FILED WITHS THE COMPETENT AUTHORITY AFTER MAKING EXPORTS. SINCE THE NECESSARY FACTS FOR THE DETERMIN ATION OF THE QUANTUM OF DEDUCTION U/S 80HHC, AS DISCUSSED ABOVE, ARE NOT AVAILABLE ON RECORD. WE, THEREFORE, SET ASIDE THE I MPUGNED ORDERS AND DIRECT THE AO TO COMPUTE THE AMOUNT OF RELIEF I N ACCORDANCE WITH THE VIEW EXPRESSED BY US HEREIN ABOVE. 6. ON DUE CONSIDERATION OF THE RECORD WE ARE OF THE OPINION THAT SIMILAR ISSUE IS AGITATED IN THE PRESENT APPEAL. THE AO IS REQUIR ED TO REEXAMINE THIS ISSUE IN ACCORDANCE WITH THE DECISION OF THE SPECIAL BENCH. THEREFORE, WE SET ASIDE THE ISSUE TO THE FILE OF AO FOR READJUDICATION. IT IS N EEDLESS TO SAY THAT OBSERVATION MADE BY US WHILE SETTING ASIDE THIS ISSUE WILL NOT IMPAIR OR INJURE THE CASE OF AO OR WILL CAUSE PREJUDICE TO THE DEFENCE OR EXPLANATI ON OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28.8.2009. [G.E. VEERABHADRAPPA] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER VEENA DATED : COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, D EPUTY REGISTRAR, ITAT