ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, Visakhapatnam V. NEKKANTI SEA FOODS LIMITED, Visakhapatnam

ITA 163/VIZ/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0005 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-10-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 01-09-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAVAN CHAKRAPANI
• Keywords: Revision of order
• Section: 56; 263; 28; 143(3)

Judgement Text

आयकरअपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No.163/Viz/2022 (ननधधारण वर्ा / Assessment Year : 2017-18) Asst.Commissioner of Income Tax Central Circle-1 Visakhapatnam Vs. M/s Nekkanti Sea Foods Limited D.No.3-16/3, Ocean Drive Layout Gudlavanipalem, Sagar Nagar Beside Zoo Park back gate Visakhapatnam [PAN : AAACN4664J] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri Pavan Chakrapani, AR प्रत्यधथी की ओर से / Respondent by : Shri M.N.Murthy Naik, CIT(DR) सुनवधई की तधरीख / Date of Hearing : 17.10.2022 घोर्णध की तधरीख/Date of Pronouncement : 20.10.2022 O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : This appeal is filed by the revenue against the order of the Commissioner of Income Tax [in short, [CIT(A)], Visakhapatnam-3 in DIN & Order No.ITBA/APL/S/250/2022-23/1043819177(1) dated 12.07.2022 for the Assessment Year (A.Y.) 2017-18. 2. Brief facts of the case are that the assessee is a domestic public company engaged in the business of export of frozen shrimp products filed it’s return of income for the A.Y.2017-18 on 28.10.2017, declaring a total 2 ITA No.163/Viz/2022, A.Y.2017-18 Nekkanti Sea Foods Ltd., Visakhapatnam income of Rs.52,30,54,010/-. The case was selected for complete scrutiny under CASS and assessment u/s 143(3) of the Income Tax Act, 1961 (in short ‘Act’) was completed on 28.03.2019, determining total income of Rs. 52,59,11,453/-. Subsequently, vide proceedings u/s 263 of the Act, the Principal Commissioner of Income Tax (in short Pr.CIT), by order dated 29.03.2021, relying on the order of the Hon’ble Supreme Court in Liberty India Vs. CIT(SC) 317 ITR 218, directed the AO to redo the assessment on observing that an amount of Rs.22,82,85,812/- claimed as deduction u/s 80IB(11A) by the assessee was allowed by the AO without properly examining the issue, as to whether the income on which deduction was claimed is derived from the business of industrial undertaking or not. Against the order of the Ld.Pr.CIT dated 29.03.2021, the assessee went on appeal before the Tribunal. On perusing the order of the Ld.Pr.CIT and after considering the submissions of the assessee, the Tribunal passed order in favour of the assessee, vide order in ITA No.156/Viz/2021 dated 06.06.2022, relying on the decision of Hon’ble Supreme Court in the case of CIT vs. Meghalaya Steels Ltd (2016) 383 ITR 217 (SC), holding that the export entitlements and the duty drawback of promotion scheme is an income assessable under the head “profits or gains from business or profession” as per clause (iib) and (iid) to section 28 of the Income Tax Act, 3 ITA No.163/Viz/2022, A.Y.2017-18 Nekkanti Sea Foods Ltd., Visakhapatnam 1961. In the meantime, following the directions of the Ld.Pr.CIT, the AO passed order u/s 143(3) r.w.s. 263 of the Act dated 31.05.2021, disallowing an amount of Rs.17,13,09,032/- with regard to duty draw back and sale of licenses. On being aggrieved, the assessee preferred an appeal before the CIT(A) against the order passed u/s 143(3) r.w.s. 263 dated 31.05.2021. The Ld.CIT(A) has allowed the appeal of the assessee filed against the consequential order passed by the AO u/s 143(3) r.w.s.263 and passed an order dated 12.07.2022 in favour of the assessee, relying on the decision of the ITAT (supra). 3. On being aggrieved, the revenue preferred appeal against the order of the Ld.CIT(A) before the Tribunal and raised the following grounds of appeal : (i) The Ld.CIT(A) erred in law and facts, in view of the subsequent decision of the Hon’ble Supreme Court in the case of M/s Meghalaya Steels Limited, the findings recorded by the authorities below based on the decision of Hon’ble Supreme Court in the case of M/s Liberty India cannot be held as sustainable. (ii) The Ld.CIT(A) erred in by relying on the decision of the Hon’ble ITAT, by its decision in the case of M/s Meghalaya Steels Limited, has overruled its earlier decision in the case of Liberty India, when in fact, no such observation either directly or remotely was made by the Hon’ble Supreme Court in it’s order. (iii) The Ld.CIT(A) erred in law and facts, by holding that the export entitlements (MEIS) and the duty draw back of promotion scheme is an income assessable under the head “profits and gains from business or 4 ITA No.163/Viz/2022, A.Y.2017-18 Nekkanti Sea Foods Ltd., Visakhapatnam profession” as per clause (iiib) and (iid) to section 28 fo the Income Tax Act, 1961, when in fact these clauses do not materially alter the findings on points of law enunciated by the Hon’ble Supreme Court in the case of M/s Liberty India. (iv) Any other ground that may be urged at the time of hearing, with the permission of the Hon’ble ITAT. The Ld.DR relied on the orders passed by the AO as well as Ld.Pr.CIT and argued that the Ld.CIT(A) erred in not upholding the order of the Ld.AO passed u/s 143(3) r.w.s. 263, adhering the directions of the Ld.Pr.CIT and wrongly allowed the appeal of the assessee, relying on the decision of the Tribunal. Therefore, the Ld.DR pleaded for sustaining the findings of the Ld.Pr.CIT, consequential order passed by the AO u/s 143(3) r.w.s. 263 and allow the appeal of the revenue. 4. Per contra, the Ld.AR submitted that the Tribunal has rightly quashed the order of the Ld.Pr.CIT and allowed the appeal in favour of the assessee. The Ld.AR further submitted that in view of the decision of the Tribunal, the consequential order passed by the AO has no locus standi. Considering the same, the Ld.CIT(A) has rightly allowed the appeal of the assessee.. Hence, pleaded for upholding the order of the Ld.CIT(A) and dismiss the appeal of the revenue. 5. We have heard both the parties, perused the material placed on record and also the orders of the revenue authorities. It is known fact that 5 ITA No.163/Viz/2022, A.Y.2017-18 Nekkanti Sea Foods Ltd., Visakhapatnam the assessee preferred appeal against the consequential order passed by the AO u/s 143(3) r.w.s. 263 before Ld.CIT(A) and the Ld.CIT(A) after considering the submissions of the assessee, has rightly allowed the appeal of the assessee on merit and legal grounds, relying on the decision of the Tribunal in assessee’s own case in ITA No.156/Viz/2021 dated 06.06.2022. For the sake of clarity and convenience, we extract relevant part of the order of the Ld.CIT(A), which reads as under : “3.3. During the appeal before the undersigned, it was submitted that aggrieved by the order of assessment passed by the AO u/s 143(3) r.w.s. 263 of the Act dated 31.05.2021, the appellant had preferred an appeal against the impugned order and also preferred appeal against the order of the Pr.CIT(Central), Visakhapatnam u/s 263 of the Act before the Hon’ble ITAT Visakhapatnam on 16.09.2021. It was brought to my notice that Tribunal vide order in ITA No.156/Viz/2021 dated 06.06.2022 allowed the appeal filed by the appellant on merit and legal grounds. I have perused the order of the ITAT in the appellant’s own case against the order u/s 263 of the Act, in which the Tribunal has observed as under : “9. The only issue in the present case is the entitlement for deduction U/s. 80IB(11A) of the Act where the Pr. CIT referred to the decision of the Hon’ble Supreme Court in the case of Liberty India vs. CIT (supra) and directed the AO to exclude the export incentives for the purpose of computation of deduction U/s. 80IB(11A) of the Act. As the export incentives cannot be considered as profits derived from industrial activities for the purpose of claiming deduction U/s. 80IB(11A) of the Act, the reliance placed by the Ld. AR in the decision of the Hon’ble Supreme Court in the case of Meghalaya Steels Ltd (supra) have merits in the case. Relevant paras 28 & 29 of Meghalaya Steels Ltd (supra) judgment delivered by the Hon’ble Supreme Court is extracted below for reference: “28. It only remains to consider one further argument by Shri Radhakrishnan. He has argued that as the subsidies that are received by the respondent, would be income from other sources referable to Section 56 of the Income Tax Act, any deduction that is to be made, can only be made from income from other sources and not from profits and gains of business, which is a separate and distinct head as recognised by Section 14 of the Income Tax Act. Shri Radhakrishnan is not correct in his submission that assistance by way of subsidies 6 ITA No.163/Viz/2022, A.Y.2017-18 Nekkanti Sea Foods Ltd., Visakhapatnam which are reimbursed on the incurring of costs relatable to a business, are under the head “income from other sources”, which is a residuary head of income that can be availed only if income does not fall under any of the other four heads of income. Section 28(iii)(b) specifically states that income from cash assistance, by whatever name called, received or receivable by any person against exports under any scheme of the Government of India, will be income chargeable to income tax under the head “profits and gains of business or profession”. If cash assistance received or receivable against exports schemes are included as being income under the head “profits and gains of business or profession”, it is obvious that subsidies which go to reimbursement of cost in the production of goods of a particular business would also have to be included under the head “profits and gains of business or profession”, and not under the head “income from other sources”. 29. For the reasons given by us, we are of the view that the Gauhati, Calcutta and Delhi High Courts have correctly construed Sections 80- IB and 80-IC. The Himachal Pradesh High Court, having wrongly interpreted the judgments in Sterling Foods and Liberty India to arrive at the opposite conclusion, is held to be wrongly decided for the reasons given by us hereinabove.” 10. Therefore, in view of the subsequent decision of the Hon’ble Supreme Court in the case of Meghalaya Steel Ltd (supra), the findings recorded by the authorities below based on the decision of the Hon’ble Supreme Court in the case of Liberty India (supra) cannot be held as sustainable as the Hon’ble Supreme Court in para 29 of its decision in Meghalaya Steel Ltd (supra) held that the Hon’ble Himachal Pradesh High Court having wrongly interpreted the judgment in the case of CIT vs. Sterling Foods [1999] 104 Taxman 204 and Liberty India (supra) to arrive at the opposite conclusion has held to be wrongly decided. We are therefore of the considered view that since the Hon’ble Supreme Court has overruled its earlier decision in the case of Liberty India (supra) the decision in the case of Meghalaya Steel Ltd (supra) holds good. Respectfully following the decision of the Hon’ble Apex Court in the case of Meghalaya Steel Ltd (supra), we hold that the export entitlements (MEIS) and the duty drawback of promotion scheme is an income asssessable under the head “profits or gains from business or profession” as per clause (iiib) and (iiid) to section 28 of the IT Act, 1961. In view of the above, the Ground No.8 raised by the assessee is allowed. 3.4. Since the assessment u/s 143(3) was made on the basis of the order u/s 263 of the Act which has been reversed by the ITAT Visakhapatnam, the assessment does not survive. Following the decision of the ITAT, Visakhapatnam in the appellant’s own case cited above grounds no.3 & 4 are allowed. “ 7 ITA No.163/Viz/2022, A.Y.2017-18 Nekkanti Sea Foods Ltd., Visakhapatnam After considering the submissions of the assessee and order of the Ld.CIT(A), we find force in the arguments of the assessee and hold that the Ld.CIT(A) has rightly followed the decision of the Tribunal as the consequential order passed by the AO has no locus standi and allowed the appeal of the assessee. Therefore, we are not inclined to interfere with the order passed by the Ld.CIT(A) and dismiss the appeal of the revenue. 6. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 20 th October, 2022. Sd/- Sd/- (एस बालाकृ ष्णन) (द ु व्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयकसदस्य/JUDICIAL MEMBER Dated : 20.10.2022 L.Rama, SPS 8 ITA No.163/Viz/2022, A.Y.2017-18 Nekkanti Sea Foods Ltd., Visakhapatnam आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. रधजस्व/The Revenue – Asst.Commissioner of Income Tax, Central Circle-1 Visakhapatnam 2. ननधधाऩरती/ The Assessee– M/s Nekkanti Sea Foods Limited, D.No.3-16/3, Ocean Drive Layout, Gudlavanipalem, Sagar Nagar, Beside Zoo Park back gate, Visakhapatnam 3. The Principal Commissioner of Income Tax (Central),Visakhapatnam 4. The Commissioner of Income Tax (Appeals)-3, Visakhapatnam 5. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/ DR,ITAT, Visakhapatnam 6.गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam