The DCIT, Circle-4, Ahmedabad V. Milton Laminates Ltd., Ahmedabad

ITA 1594/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0504 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-11-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 20-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMIR TEKRIWA LA
• Assessee Lawyers: T P HEMANI
• Keywords: Retrospective amendment; Corroborative evidences
• Section: 80HHC; 28; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING: 17.11.09 DRAFTED ON: 17.11.09 ITA NO.1696/AHD/2007 ASSESSMENT YEAR : 2003-04 MILTON LAMINATES LTD. , CHITRA AMI APARTMENT, OPP. OLD RBI, ASHRAM ROAD, AHMEDABAD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, AHMEDABAD. PAN/GIR NO. : AABCM 0398 K (APPELLANT) .. (RESPONDENT) ITA NO.1594/AHD/2007 ASSESSMENT YEAR : 2003-04 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, NAVJIVAN TRUST BLDG., OFF. ASHRAM ROAD, AHMEDABAD. VS. MILTON LAMINATES LTD. , CHITRA AMI APARTMENT, OPP. OLD RBI, ASHRAM ROAD, AHMEDABAD. PAN/GIR NO. : AABCM 0398 K (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI SAMIR TEKRIWALA SR. D.R. RESPONDENT BY: SHRI T.P.HEMANI & SHRI TUSHAR VASA A.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THESE ARE THE CROSS APPEALS FILED BY THE REVENUE A ND ASSESSEE AGAINST THE ORDER OF THE LD.CIT(APPEALS)-VIII, AHME DABAD, DATED 29.01.2007 IN APPEAL NO.CIT(A)-VIII/DC-4/122/06-07. 2. GROUNDS OF THE APPEAL OF THE ASSESSEE READS AS U NDER: 1. THAT THE ORDER OF LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) DIRECTING THE ASSESSING OFFICER TO REC OMPUTED DEDUCTION ITA NO.1696 & 1594 /AHD/2007 M/S.MILTON LAMINATES LTD. ASST.YEAR -03-04 - 2 - U/S. 80HHC AS PER HIS DIRECTIONS AND FINDINGS IS AG AINST THE PRINCIPLES OF LAW, FACTS AND EVIDENCE ON RECORD. 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN DIRECTING THE LEARNED ASSESSING OFFICER TO TAKE TH E SALE VALUE OF EXPORT ENTITLEMENTS EITHER BROUGHT FORWARD FROM THE EARLIER YEAR OR RECEIVED DURING THE CURRENT YEAR. AND FURTHER ERRE D IN OBSERVING THAT THE APPELLANT DID NOT SATISFY THE CONDITION SPECIFI ED UNDER 3 RD AND 4 TH PROVISO AND ASSESSEE DID NOT LEAD ANY CORROBORATIVE EVIDENCE IN COMPLIANCE OF THE CONDITIONS. 3. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRE D N CONSIDERING AND COMING TO THE CONCLUSION THAT AS PE R THE AMENDED PROVISION OF SECTION 80HHC AND IN VIEW OF THE DECIS ION OF INCOME-TAX APPELLATE TRIBUNAL, CHANDIGARH A BENCH IN THE CAS E OF ACIT VS. PARKER CYCLES REPORTED AT 104 TTJ 983; INCOME FROM SALE OF DEPB LICENSE IS ASSESSABLE IN THE YEAR OF SALE AND NOT I N THE YEAR OF ACCRUAL. 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN NOT CONSIDERING THE APPELLANTS SUBMISSION THAT ONL Y THE PROFITS ON THE SALE OF DEPB LICENSE WAS TO BE EXCLUDED FROM THE PR OFITS TO WORK OUT DEDUCTION U/S.80HHC AND NOT THE WHOLE OF THE SALE P RICE RECEIVED ON SALE OF DEPB LICENSE, AND ON EXCLUDING ONLY THE PRO FITS INCLUDED IN SALE VALUE OF DEPB LICENSE THE APPELLANT HAD POSITI VE INCOME ENTITLING THE DEDUCTION TO THE APPELLANT. 5. IN VIEW OF THE ABOVE GROUNDS OF APPEAL AND SUBMI SSIONS MADE BEFORE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND ALSO BEFORE DY. COMMISSIONER OF INCOME-TAX THE FOLLOWING DEDUCT ION BE ALLOWED. A. THE BUSINESS PROFITS AND PROFITS FROM EXPORTS BE CONSIDERED AFTER EXCLUDING ONLY THE PROFITS ON SALE OF DEPB LICENSES AND AS PER THE COMPUTATION GIVEN BY APPELLANT DURING THE ASSESSMENT PROCEEDINGS ON CONSIDERING THE RETROSPECTIVE AMENDMENT MADE TO SECTION 80HHC OF THE ACT. B. THAT SUCH FURTHER AND OTHER RELIEFS AND DEDUCTIO NS BE ALLOWED AS THE FACTS AND CIRCUMSTANCES OF THE CASE SO REQUIRES. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, MODIFY AND OR SUBSTITUTE THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF APPEAL. 3. THE FACTS AND ISSUES INVOLVED IN THE ABOVE GROUN DS ARE COMMON AND HENCE THEY ARE BEING CONSIDERED AND DECIDED TOGETHE R AS UNDER. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNED ASSESSING OFFICER ELABORATELY DEALT THE CLAIM OF THE APPELLANT FOR DE DUCTION UNDER SECTION ITA NO.1696 & 1594 /AHD/2007 M/S.MILTON LAMINATES LTD. ASST.YEAR -03-04 - 3 - 80HHC VIDE PARA-3 OF HIS ORDER. DURING THE COURSE O F EXAMINATION OF THE CLAIM THE LEARNED ASSESSING OFFICER FOUND THAT OTHE R THAN EXPORT INCENTIVES, THE BUSINESS PROFIT OF THE APPELLANT WAS A NEGATIVE FIGURES I.E. RS.(-) 2,06,11,673/-. ACCORDINGLY, HE HELD THAT IN THE ABS ENCE OF POSITIVE PROFIT, THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80HHC AND HE RELIED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF I PCA LABORATORIES LTD., 266 ITR 521. ACCORDING TO HIS WORKING, THE DEDUCTIO N UNDER SECTION 80HHC(3) WAS RS.(-)1,31,43,026/- AND AS PER THE PRO VISIONS OF SECTION 80HHC(3), THE DEDUCTION AVAILABLE WAS NIL. THUS, TH E TOTAL ELIGIBLE DEDUCTION UNDER SECTION 80HHC WAS TAKEN AT RS.NIL. THE LEARNE D ASSESSING OFFICER ALSO DISCUSSED THE AMENDMENTS TO SECTION 80HHC(3) B Y THE TAXATION LAWS AMENDMENT ACT, 2005 AND SPECIFICALLY EXAMINED THE D EPB ENTITLEMENTS. VIDE PARA 3-4, HE HELD THAT THE APPELLANT DID NOT S ATISFY THE TWIN CONDITIONS SPECIFIED IN THE 3 RD PROVISO TO SECTION 80HHC(3) AND ACCORDINGLY, THE DEDUCTION IN RESPECT OF PROFIT ON TRANSFER OF DEPB ENTITLEMENTS WAS DISALLOWED. HE ALSO MADE ADJUSTMENTS TO TOTAL TURNO VER BY INCLUDING EXCISE DUTY AND SALE-TAX AND ALSO EXCLUDED 90% OF SALES-TA X REFUND, MISCELLANEOUS INCOME AND INSURANCE CLAIMED AT RS.1,24,892/- IN AR RIVING AT THE PROFIT OF THE BUSINESS AT RS.(-)2,06,11,673/- AS AGAINST THE PROF IT OF THE BUSINESS AS PER FORM NO.10CCAC AT RS.(-)2,04,86,781/-. AS REGARD TH E INCENTIVES, HE WORKED OUT NIL DEDUCTION. APPARENTLY, THIS WAS ON ACCOUNT OF APPLICATION OF DECISION OF THE APEX COURT IN THE CASE OF IPCA LABORATORIES LTD. ON THE GROUND THAT WHEN THERE WAS NO PROFIT FROM THE EXPORT ACTIVITY, THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC. THE APP ELLANT IS AGGRIEVED BY THE TOTAL DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTI ON 80HHC AND HENCE, THIS APPEAL. 5. BEFORE LEARNED COMMISSIONER OF INCOME TAX(APPEAL S), THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE ARGUED FO RCEFULLY THAT PURSUANT TO THE DECISION OF IPCA LABORATORIES LTD. BY THE SUPRE ME COURT, THE TAXATION ITA NO.1696 & 1594 /AHD/2007 M/S.MILTON LAMINATES LTD. ASST.YEAR -03-04 - 4 - LAW AMENDMENT ACT, 2005 WAS PASSED AND THE DEDUCTIO N UNDER SECTION 80HHC SHOULD HAVE BEEN COMPUTED WITH REFERENCE TO THE AMENDED PROVISIONS WHICH THE LEARNED ASSESSING OFFICER DID NOT DO. HE FURTHER STATED THAT THE TOTAL EXPORT INCENTIVES OF RS.304.93 LAC C REDITED TO THE PROFIT & LOSS A/S. AS OTHER INCOME IN SCHEDULE-13 COMPRISED OF TH E VALUE OF DEPB ENTITLEMENTS AND DFRC RECEIVABLE AS ON 31/03/2003 A ND ALSO EXCISE DUTY REFUND RECEIVED AND RECEIVABLES. THE APPELLANT WORK ED OUT THE PROFIT ON TRANSFER OF DEPB ENTITLEMENTS WITH REFERENCE TO DEP B ACCRUALS OFFERED AS INCOME IN THE FIRST INSTANCE AND TAKING THE SAME AS COST. HE ARGUED THAT THE INCENTIVES WERE TO REDUCE THE COST OF EXPORT PRODUC T AND HENCE, SHOULD NOT BE CONSIDERED FOR THE PURPOSE OF EXCLUSION FROM THE BU SINESS PROFITS. HE FURTHER CONTENDED THAT ONLY THE PROFIT ON SALE OF DEPB OR D FRC, THE NET FIGURE AT RS.3,15,950/- SHOULD BE TAKEN FOR EXCLUSION FROM TH E PROFIT OF THE BUSINESS AND NOT THE ENTIRE VALUE OF DEPB/DFRC ENTITLEMENTS RECEIVED BY THE ASSESSEE. THE LEARNED ASSESSING OFFICER HAS EXCLUDE D THE ENTIRE VALUE OF DEPB ENTITLEMENTS FROM THE PROFIT OF THE BUSINESS A ND NOT THE PROFIT. IN SHORT, HE CLAIMED THAT DEDUCTION UNDER SECTION 80HHC SHALL BE REWORKED WITH REFERENCE TO AMENDED PROVISIONS AND NOT SOLELY ON T HE DECISION OF IPCA LABORATORIES LTD. CITED ABOVE. 6. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD AS UNDER: 2.2 I HAVE PERUSED THE RELEVANT PART OF THE ASSESS MENT ORDER AND ALSO CAREFULLY EXAMINED THE VARIOUS SUBMISSIONS AND ARGUMENTS OF THE APPELLANT IN THIS REGARD. AT THE OUTSET, IT IS TO B E STATED THAT DEDUCTION WITH REFERENCE TO THE EXPORT INCENTIVE WAS DISALLOW ED ON THE GROUND OF ABSENCE OF POSITIVE PROFIT AS COMPUTED UNDER SECTIO N 80HHC(3) BEFORE GIVING EFFECT TO THE PROVISOS THEREOF. IN VI EW OF THE AMENDMENT TO SECTION 80HHC(3), THE DEDUCTION HAS TO BE WORKED OUT WITH REFERENCE TO SECTION 80HHC(3)AS WELL AS THE PROVISO AS AMENDED. THE LEARNED ASSESSING OFFICER THOUGH EXAMINED THE ISSUE OF DEPB/DFRC ENTITLEMENTS, DID NOT CONSIDER THE VARIOUS COMPONEN TS OF EXPORT INCENTIVES UNDER THE RESPECTIVE PROVISOS. ALSO THE CLAIM OF THE APPELLANT THAT ONLY THE PROFIT ON TRANSFER OF DEPB ENTITLEMENTS (SALE ITA NO.1696 & 1594 /AHD/2007 M/S.MILTON LAMINATES LTD. ASST.YEAR -03-04 - 5 - VALUE-DEPB RECEIVABLE TAKEN AS COST) SHOULD BE CONS IDERED UNDER THE PROVISO TO SECTION 80HHC(3) IS NOT TENABLE AND IS N OT THE LEGISLATIVE INTENTION. IF THE CONTENTION OF THE APPELLANT IS ACCEPTED, THEN THE ACCRUED VALUE OF THE DEPB/DFRC IS SHOWN AS BUSINESS PROFIT UNDER THE MERCANTILE SYSTEM OF ACCOUNT AND DEDUCTION UNDE R SECTION 80HHC IS CLAIMED WITHOUT SUBJECTING THEMSELVES TO STIPULA TIONS PROVIDED IN THE 3 RD AND 4 TH PROVISO TO SECTION 80HHC(3). SUCH A COURSE WOULD AMOUNT TO RENDERING THE VERY AMENDED PROVISIONS UNW ORKABLE. FOR EXAMPLE, THE APPELLANT MAY SHOW THE DEPB RECEIVABLE AT RS.100/- AND CLAIM DEDUCTION UNDER SECTION 80HHC THE ENTIRE AMOU NT AS BUSINESS PROFIT AND ON THE SALE VALUE OF A RS.105/- WITH REF ERENCE TO THE SAID ENTITLEMENTS, ONLY RS.5/- WOULD BE OFFERED AS PROFI T AS AGAINST RS.105/- TO BE CONSIDERED AS EXPORT INCENTIVES HIT BY THE AM ENDED PROVISIONS. THIS METHOD OF ACCOUNTING IS NOT TENABLE AND HAS TO BE DISTURBED. TO THIS EXTENT, THE ACTION OF THE LEARNED ASSESSING OF FICER IN NOT ACCEPTING THE COMPUTATION OF THE APPELLANT IS JUSTI FIED. HOWEVER, THE VARIOUS COMPONENTS OF THE EXPORT INCENTIVES FORMING PART OF OTHER INCOME HAVE NOT BEEN EXAMINED IN THE PROPER PERSPEC TIVE. IN THE LIGHT OF THE ABOVE, THE FOLLOWING DIRECTIONS ARE GIVEN. THE APPELLANT IS NOT ENTITLED TO DEDUCTION IN RESP ECT OF PROFIT ON TRANSFER OF DEPB/DFRC ENTITLEMENTS AS THE CONDITION S SPECIFIED UNDER THE 3 RD & 4 TH PROVISO RESPECTIVELY OF SECTION 80HHC(3) WERE NOT SATISFIED. MERE CLAIM THAT THE APPELLANT WAS NOT EN TITLED TO ANY DUTY DRAW BACK IN RESPECT OF THE EXPORT PRODUCTS CANNOT JUSTIFY THEIR CLAIM FOR DEDUCTION. IT IS THE COMPLIANCE WITH THE LAW TH AT GOVERNS THE ISSUE AND NOT THE ALLEGED GRIEVANCE TO THE APPELLANT. IT IS ALSO PERTINENT TO STATE HERE THAT HON'BLE ITAT, CHANDIGARH A BENCH IN THE CASE OF ACIT V/S. PARKER CYCLES REPORTED IN 104 TTJ 983 HAS HELD THAT INCOME FROM DEPB LICENSE IS ASSESSABLE IN THE YEAR OF SALE AND NOT IN THE YEAR OF ACCRUAL. INCOME INCLUDED ON ACCRUAL BASIS SHALL BE EXCLUDED FROM THE PROFIT OF THE BUSINESS AND ALSO FROM THE TURNOV ER. IN THIS PERSPECTIVE THE METHOD OF ACCOUNTING EMPLOYED BY TH E APPELLANT WILL HAVE TO BE ADJUSTED TO REWORK THE PROFIT ON TRANSFE R OF DEPB AND ONLY THE ACTUAL PROFIT ARISING AT THE TIME OF ACTUAL SAL E/TRANSFER SHALL BE CONSIDERED FOR ALLOWANCE OR REJECTION OF 80HHC DEDU CTION. IN OTHER WORDS, CLAIM UNDER SECTION 80HHC CANNOT BE ALLOWED ON ACCRUED INCOME ON ACCOUNT OF DEPB/DFRC ENTITLEMENTS. OTHERW ISE, THE APPELLANT WOULD WRONGLY CLAIM DEDUCTION ON DEPB TAK EN ON ACCRUAL BASIS AND SUBJECTING ONLY EITHER MARGINAL PROFIT FO R EXAMINATION WITH REFERENCE 80HHC DEDUCTION OR MAY BE CLAIMED MARGINA L LOSS IF THE SALE VALUE OF THE EXPORT ENTITLEMENTS WERE LESS THA N ACCRUAL FIGURES ACCOUNTED EARLIER. THE LEARNED ASSESSING OFFICER IS HENCE, DIRECTED TO TAKE THE SALE VALUE OF EXPORT ENTITLEMENTS EITHER B ROUGHT FORWARD FROM THE EARLIER YEAR OR RECEIVED DURING THE CURRENT YEA R. HOWEVER, THE INCOME ON SUCH SALE IS NOT ENTITLED TO DEDUCTION UN DER SECTION 80HHC ITA NO.1696 & 1594 /AHD/2007 M/S.MILTON LAMINATES LTD. ASST.YEAR -03-04 - 6 - IN VIEW OF THE FACT THAT THE CONDITIONS SPECIFIED U NDER 3 RD & 4 TH PROVISO WERE NOT SATISFIED WITH ANY CORROBORATIVE EVIDENCES BY THE APPELLANT. AS REGARDS EXCISE DUTY ELEMENT INCLUDED IN THE EXP ORT ENTITLEMENTS SHOWN UNDER OTHER INCOME, IT WAS CLAIM ED BY THE ASSESSEE THAT IT WAS REVENUE NEUTRAL, HENCE, SALES-TAX AND E XCISE DUTY ARE NOT CHARGEABLE OR PAYABLE ON THE EXPORTS. IN THIS REGAR D THE LEARNED ASSESSING OFFICER HAS NOT GIVEN ANY FINDING IN HIS ORDER AS TO EXCLUSION OF THE SAME AND TREATMENT THEREOF, HAS TAKEN THE GR OSS EXPORT INCENTIVE AND DISALLOWED THE DEDUCTION REFERABLE TO THAT IN T OTO. IN THE ABSENCE OF SPECIFIC DISCUSSION IN THE ORDER AND RELIANCE OF THE APPELLANT THAT THE ACCOUNTING OF SALES TAX AND EXCISE DUTY WERE RE VENUE NEUTRAL NOT ADDING TO THE PROFIT OF THE BUSINESS, (ALFA LEVEL L TD. VS. CIT, 266 ITR 418 (MUM.)), THE ASSESSING OFFICER MAY EXAMINE WH ETHER NECESSARY CONTRA ENTRIES ARE PASSED AND IF THEY ARE FOUND TO BE FOR CLEARANCE OF THE EXPORT GOODS AND SUBSEQUENT REIMBURSEMENT WITH NECESSARY DEBIT AND CREDIT ENTRIES NOT ADDING UPTO THE PROFIT, THEN NO EXCLUSION FROM THE PROFIT OF THE BUSINESS IS CALLED FOR. THIS REQU IRES SPECIFIC EXAMINATION WITH REFERENCE TO ENTRIES OF THE CURRE NT YEAR AND IN THE LIGHT OF THE SAME, DEDUCTION UNDER SECTION 80HHC IS TO BE REWORKED. IN SHORT, IT IS HELD THAT THE APPELLANT IS NOT ENTI TLED TO DEDUCTION UNDER SECTION 80HHC IN RESPECT OF DEPB/DFRC ENTITLEMENTS AND AS REGARDS OTHER EXPORT INCENTIVES, THE SAME WILL HAVE TO BE E XAMINED AND REWORKED IN THE LIGHT OF THE ABOVE DIRECTIONS. THUS , GROUND NO.1 TO 16 ARE TREATED AS PARTLY ALLOWED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, THE DEDUCTION UNDER SECTION 80HHC WAS DISALLOWED BY THE LEARNED ASSESSING OFFICER. ON APPEAL, THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) HELD THAT THE ENTIRE SALE PROCEEDS OF DEBP IS TO BE TAKE N INTO CONSIDERATION IN THE YEAR OF ACTUAL SALE OF DEBP AND THEREFORE, DIRECTED THE LEARNED ASSESSING OFFICER TO RE-COMPUTE THE INCOME OF THE ASSESSEE AC CORDINGLY. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FURTHER HELD TH AT IN ABSENCE OF ASSESSEE LEADING THE NECESSARY EVIDENCES TO SHOW TH AT THE CONDITIONS SPECIFIED IN PROVISO 3 AND 4 TO SECTION 80HHC(3) WERE SATISF IED, THE LEARNED ASSESSING OFFICER WAS JUSTIFIED IN CONCLUDING THAT THE ASSESS EE WAS NOT ENTITLED TO DEDUCTION UNDER SECTION 80HHC IN RESPECT OF SALE PR OCEEDS OF DEBP. BEFORE US, BOTH THE PARTIES ACCEPTED THAT THE ISSUE REGARD ING THE MANNER OF ITA NO.1696 & 1594 /AHD/2007 M/S.MILTON LAMINATES LTD. ASST.YEAR -03-04 - 7 - COMPUTATION OF PROFIT ON SALE OF DEBP AND THE VALUE OF DEBP RECEIVED BY THE ASSESSEE AND THE YEAR OF ACCRUAL OF THE PROFIT AND THE VALUE OF DEBP IS COVERED BY THE RECENT DECISION OF THE MUMBAI SPECIA L BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS VS. INCOME-TAX OFFICE R, [2009] 318 ITR (AT) 87 (MUMBAI)[SB] AND AS THE LOWER AUTHORITIES COULD NOT CONSIDER THE FACTS OF THE CASE IN LIGHT OF THE SAID DECISION, THE ISSUE I S REQUIRED TO BE RESTOERED TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR DECID ING THE SAME AFRESH AFTER TAKING INTO CONSIDERATION THE SAID DECISION. WE FIN D THAT THE SPECIAL BENCH OF THE TRIBUNAL HAS HELD THAT PROFIT ON SALE OF DEBP I S INCOME BY THE CLAUSE(IIID) OF SECTION 28 AND THE FACE VALUE OF DEBP RECEIVED B Y THE ASSESSEE IS COVERED BY THE CLAUSE (IIIB) OF SECTION 28 OF THE ACT. FURT HER, THE SPECIAL BENCH ALSO CONCLUDED THAT THE FACE VALUE OF DEBP IS ASSESSABLE IN THE YEAR IN WHICH THE ASSESSEE MAKES APPLICATION IN RESPECT THEREOF AND T HE PROFIT ON SALE OF DEBP IS ASSESSABLE IN THE YEAR OF ACTUAL SALE OF DEBP. F URTHER, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS NOT ALLOWED ANY OPPORTUNITY BY THE LOWER AUTHORITIES TO ADDUCE THE EVIDENCES TO SHOW THAT THE CONDITIONS OF 3 RD PROVISO TO SECTION 80HHC(3) WAS SATISFIED IN THE CASE OF THE ASSESSEE. IN THE ABOVE CIRCUMSTANC ES, IN OUR CONSIDERED VIEW, IT SHALL BE IN THE INTEREST OF THE JUSTICE TO RESTO RE THE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR ADJUDICATION AFRE SH IN LIGHT OF THE OBSERVATIONS MADE HEREINABOVE AFTER ALLOWING REASON ABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE ALSO DIRECTE D TO PRODUCE EVIDENCES TO SHOW THAT PROVISIONS OF 3 RD PROVISO TO SECTION 80HHC HAS BEEN COMPLIED IN ITS CASE WHEN CALLED FOR BY THE LEARNED ASSESSING OFFIC ER. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1594/AHD/2007 8. GROUND NO.1 OF THE REVENUES APPEAL READS AS UND ER:- 1. THE LD.CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE LEARNED ASSESSING OFFICER TO TAKE INT O ACCOUNT THE DEPB INCOME ON ACTUAL SALE BASIS AND NOT ON ACCRUAL BASIS WHILE HOLDING THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80HHC ON DEPB/DFRC ENTITLEMENTS. ITA NO.1696 & 1594 /AHD/2007 M/S.MILTON LAMINATES LTD. ASST.YEAR -03-04 - 8 - 9. IN RESPECT OF GROUND NO.1 OF APPEAL, WE FIND THA T IN VIEW OF OUR DECISION IN RESPECT OF THE APPEAL OF THE ASSESSEE, THIS GROUND OF APPEAL HAS BECOME INFRUCTUOUS. THEREFORE, THE SAME IS DISMISSE D. 10. GROUND NO.2 OF THE REVENUES APPEAL READS AS UN DER:- 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO EXCLUDE ONLY THE NET AMOUNT OF OTHER EXPORT ENTITLEMENTS SUCH AS SALE TAX AND EXCISE DUTY REFUN D FOR COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE I.T.ACT. 11. IN RESPECT OF GROUND OF APPEAL, WE FIND THAT TH E LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS PASSED THE ORDER AS UNDE R:- AS REGARDS EXCISE DUTY ELEMENT INCLUDED IN THE EXP ORT ENTITLEMENTS SHOWN UNDER OTHER INCOME, IT WAS CLAIMED BY THE ASS ESSEE THAT IT WAS REVENUE NEUTRAL, HENCE, SALES-TAX AND EXCISE DUTY A RE NOT CHARGEABLE OR PAYABLE ON THE EXPORTS. IN THIS REGARD THE LEARN ED ASSESSING OFFICER HAS NOT GIVEN ANY FINDING IN HIS ORDER AS TO EXCLUS ION OF THE SAME AND TREATMENT THEREOF, HAS TAKEN THE GROSS EXPORT INCEN TIVE AND DISALLOWED THE DEDUCTION REFERABLE TO THAT IN TOTO. IN THE ABS ENCE OF SPECIFIC DISCUSSION IN THE ORDER AND RELIANCE OF THE APPELLA NT THAT THE ACCOUNTING OF SALES TAX AND EXCISE DUTY WERE REVENU E NEUTRAL NOT ADDING TO THE PROFIT OF THE BUSINESS, (ALFA LEVEL L TD. VS. CIT, 266 ITR 418 (MUM.)), THE ASSESSING OFFICER MAY EXAMINE WH ETHER NECESSARY CONTRA ENTRIES ARE PASSED AND IF THEY ARE FOUND TO BE FOR CLEARANCE OF THE EXPORT GOODS AND SUBSEQUENT REIMBURSEMENT WITH NECESSARY DEBIT AND CREDIT ENTRIES NOT ADDING UPTO THE PROFIT, THEN NO EXCLUSION FROM THE PROFIT OF THE BUSINESS IS CALLED FOR. THIS REQU IRES SPECIFIC EXAMINATION WITH REFERENCE TO ENTRIES OF THE CURRE NT YEAR AND IN THE LIGHT OF THE SAME, DEDUCTION UNDER SECTION 80HHC IS TO BE REWORKED. 12. WE FIND THAT NO ERROR IN THE ABOVE FINDING OF T HE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) COULD BE POINTE D OUT BY LEARNED DEPARTMENTAL REPRESENTATIVE. FURTHER, THE LEARNED C OMMISSIONER OF INCOME TAX(APPEALS) HAS DIRECTED THE LEARNED ASSESSING OFF ICER TO PASS THE ORDER AFTER VERIFICATION, IN OUR CONSIDERED OPINION, SUCH DIRECTION REQUIRES NO INTERFERENCE BY US. THEREFORE, THIS GROUND OF APPEA L OF REVENUE IS REJECTED. ITA NO.1696 & 1594 /AHD/2007 M/S.MILTON LAMINATES LTD. ASST.YEAR -03-04 - 9 - 13. GROUND NO.3 OF THE REVENUES APPEAL READS AS UN DER:- 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON THE FACT OF THE CASE IN DIRECTING THE LEARNED ASSESSING OFFICER TO DELETE T HE DISALLOWANCE OF RS.1,53,431/-. 14. THE BRIEF FACTS OF THE CASE ARE THAT LEARNED AS SESSING OFFICER DISALLOWED 25% OF BUSINESS PROMOTION EXPENSES OF RS .6,13,726/- HOLDING THAT THE ASSESSEE DID NOT FURNISH COMPLETE DETAILS WITH SUPPORTING EVIDENCES. 15. IN APPEAL BEFORE THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) THE ASSESSEE CONTENDED THAT THE ENTIRE EXPENDITURE INCURRED EXCLUSIVELY FOR SALES PROMOTION, WHICH WERE ALL FURNISHED BEFORE TH E LEARNED ASSESSING OFFICER. 16. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVING THAT DISALLOWANCE WAS MADE ON AD-HOC BASIS AND THAT THE EXPENDITURE CLAIMED CANNOT BE CONSIDERED AS UNREASONABLE CONSIDERING TH E TURNOVER AND VOLUME OF THE BUSINESS AND ANY DISALLOWANCE COULD BE MADE WIT H REFERENCE TO THE SPECIFIC OMISSION AND NOT ON AD-HOC ESTIMATE DELETE D THE DISALLOWANCE. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. WE FIND THAT THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY SPECIFIC EXPENDITURE INCURRED UNDER THE HEAD SALES PROMOTION BY THE ASSESSEE WAS NOT FOR THE BUSINESS OF THE ASSESSEE. THUS, THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THEREFORE, WE CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND DISMISS THIS GROUND OF THE APPEAL OF THE REVENUE. ITA NO.1696 & 1594 /AHD/2007 M/S.MILTON LAMINATES LTD. ASST.YEAR -03-04 - 10 - 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED AT THE CONCLUSION OF THE HEARING I N THE PRESENCE OF PARTIES IN THE COURT ON 17/11/2009. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 17/11/2009 PREPARED AND COMPARED BY : PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-VIII, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD