DCIT, Mattancherry V. M/s.Abad Fisheries, Cochin

ITA 176/COCH/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7477 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-02-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 22-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: P K SASIDHARAN
• Keywords: Recovery proceedings; Retrospective amendment; Question of law
• Section: 143(3); 80HHC

Judgement Text

ITA NO . 176/C/2014 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & G EORGE GEORGE.K , J M ITA NO . 176/COCH/2014 (ASST YEAR 2001 - 02 ) THE DY COMMR OF INCOME TAX CIRCLE 1 MATTANCHERRY COCHIN VS M/S ABAD FISHERIES KOCHANGADI COCHIN 2 ( A PPELLANT) (RESPONDENT) PAN NO. AADFA9900C ASSESSEE BY SHRI PK SASIDHARAN REVENUE BY SHRI K P GOPAKUMAR, SR DR DATE OF HEARING 29 TH FEB 201 6 DATE OF PRONOUNCEMENT 2 ND MARCH 2016 OR D ER PER GEORGE GEORGE. K. J M: THIS APPEAL, AT THE INSTAN CE OF THE REVENUE, IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 4 TH NOV 2013. THE RELEVANT ASSESSMENT YEAR IS 2001 - 02. 2 FOUR GROUNDS ARE RAISED IN THIS APPEAL. THE 1 ST & 4 TH GROUNDS ARE GENERAL IN NATURE AND NO SPECIFIC ADJUDICATION IS CALLED FOR AND HE NCE, THEY ARE DISMISSED. 3 THE SURVIVING GROUNDS, NAMELY GROUNDS 2 & 3 READ AS UNDER: I) THE LD CIT(A) ERRED IN ALLOWING THE CLAIM MADE BY THE ASSESSEE U/S 80HHC(3). AS THE ISSUE HAS NOT ATTAINED FINALITY CONSEQUENT ON FILING SLP BY THE DEPARTMENT AGA INST THE JUDGMENT OF THE HIGH COURT, THE LD CIT(A) ITA NO . 176/C/2014 2 SHOULD HAVE KEPT THE APPEAL PENDING TILL THE DISPOSAL OF APPEAL BY HONBLE APEX COURT. II) THE LD CIT(A) ERRED IN RESTRICTING THE INTEREST U/S 234D W.E.F 1/6/2013. THE LD CIT(A) HAS NOT CONSIDERED THE EX PLANATION 2 TO SEC.234D INSERTED W.R.E.F 1.6.2013 BY THE FINANCE ACT, 2012, AFTER THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT RELIED ON BY HER. 4 THE FIRST GROUND MENTIONED ABOVE, RELATES TO INTERPRETATION OF PROVISIONS OF 80HHC (3) AS AMENDED IN THE YE AR 2005 AND THE TAXABILITY OF PREMIUM ON SALE OF DEPB. 4.1 THE BRIEF FACTS IN RELATION TO THE ABOVE ISSUE ARE AS FOLLOWS: THE ASSESSEE IS A SEAFOOD EXPORTER. FOR THE RELEVANT ASSESSMENT YEAR THE RETURN OF INCOME WAS FILED ON 30.10.2001 DECLARING A TOTA L INCOME AT RS. 26,60,402/ - . THE ASSESSMENT U/S 143(3) WAS PASSED ON 27.2.2004 FIXING A TO TAL INCOME AT RS. 71,52,111/ - . WHILE ARRIVING AT THIS INCOME, DEDUCTION U/S 80HHC TO THE TUNE OF RS. 1,42,30,097/ - WAS ALLOWED. ON APPEAL, THE CIT(A) VIDE HIS ORDER DATED 29 TH NOV 2004 HELD THAT THE ASSESSEE WAS NOT ENTITLED TO ANY DEDUCTION U/S 80HHC IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES REPORTED IN 266 ITR 521, WHEREIN IT WAS HELD THAT THE PROFITS FROM THE EXPORTS CALCULATED U/S 80HHC (3)(C) HAS TO BE THE NET RESULT OF THE PROFITS AND LOSSES FROM THE EXPORTS OF SELF MANUFACTURED GOODS AND OF TRADING GOODS. THE CIT(A) WAS OF THE VIEW THAT THE NET RESULT OF THE PROFITS OF THE BUSINESS IS A NEGATIVE FIGURE AND HENCE T HE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80HHC. THIS ORDER OF THE CIT(A) WAS NOT GIVEN EFFECT TO BY THE AO. IN THE ITA NO . 176/C/2014 3 MEANWHILE, THE TAXATION LAWS (AMENDMENT) ACT, 2005, BROUGHT IN A RETROSPECTIVE AMENDMENT TO SECTION 80HHC ( 3) W.R.E.F 1.4.1992. BASED O N THE TAXATION LAW (AMENDMENT) ACT, 2005, THE ASSESSMENT WAS REOPENED BY ISSUANCE OF NOTICE U/S 1 48. THE ASSESSEE WAS INTIMATED THE REASONS FOR REOPENING OF THE ASSESSMENT WAS ON ACCOUNT OF RETROSPECTIVE AMENDMENT BROUGHT IN TO SECTION 80HHC(3) W .E.F 1.4. 1992 BY TAXATION LAW (AMENDMENT) ACT 2005. THE ASSESSEE FILED A WRIT PETITION BEFORE THE HONBLE HIGH COURT. THE HONBLE HIGH COURT, VIDE ITS JUDGMENT DATED 21.4.2009 DIRECTED THE AO TO COMPLETE THE ASSESSMENT ; HOWEVER, GRANTED STAY OF RECOVERY OF TAX ON COMPLETION OF ASSESSMENT. ACCORDINGLY, THE ASSESSMENT WAS COMPETED VIDE ORDER DATED 28.4.2009 BY DISALLOWING THE CLAIM OF DEDUCTION/S 80HHC , IN VIEW OF THE RETROSPECTIVE AMENDMENT TO PROVISIONS OF SEC.80HHC (3) OF THE ACT BY TAXATION LAW (AMENDMENT), ACT 2005. 4.2 AGGRIEVED BY THE ASSESSMENT O RDER AN APPEAL WAS PREFERRED TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) FOLLOWED THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS & ORS., REPORTED IN 348 ITR 391(IN WHICH CASE THE ASSES SEE WAS ALSO A PARTY). THE CIT(A) DECIDED THE MATTER IN FA V OUR OF THE ASSESSEE. THE RELEVANT FINDINGS OF THE CIT(A) IN THIS REGARD READ AS UNDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER, SUBMISSIONS OF THE ASSESSEE AND THE LEGAL POSITION IN THIS REGA RD. APPELLANT HAS SHOW THAT ASSESSEE IS ALSO A PARTY IN THE WRIT PETITION FILED BEFORE THE GUJARAT HIGH COURT, WHERE OPERATION OF RETROSPECTIVE AMENDMENT HAS BEEN QUASHED. DEPARTMENT HAS GONE IN SLP ITA NO . 176/C/2014 4 AGAINST THIS DECISION. HOWEVER, SINCE ASSESSEE IS PARTY I N THIS CASE, THEREFORE, THIS DECISION IS REQUIRED TO BE FOLLOWED IN THE CASE OF THE ASSESSEE.. ACCORDINGLY, FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT, ADDITIONS MADE ON THE BASIS OF RETROSPECTIVE AMENDMENT IN SECTION 80HHC IS HELD NOT VALID. THI S GROUND OF THE ASSESSEE IS ALLOWED. 4.3 AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING, BOTH THE PARTIES AGREED THAT THE MATTER HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE CIT VS AVANI EXPORTS REPORTED IN 277 CTR 4 60 (SC). IT WAS SUBMITTED THAT THE HONBLE SUPREME COURT HAS CONFIRMED THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT REPORTED IN 348 ITR 391. 4.4 WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS AVANI EXPORTS ( SUPRA ) , HAS CONFIRMED THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT (SUPRA) WHEREIN THE ADDITION MADE ON THE BASIS OF RETROSPECTIVE AMENDMENT TO SEC. 80HHC (3) WAS HELD TO BE NOT VALID. BOTH THE PARTIES HAVE AGREED THAT THE SAID JUDGMENTS ARE APPLICABLE TO THE FACTS OF THE INSTANCE CASE. ACCORDINGLY, WE DECIDE THE ISSUE AGAINST THE REVENUE . HENCE, THE ABOVE GROUND RAISED BY THE REVENUE IS REJECTED. 5 NEXT GROUND IS REGARDING THE ISSUE OF LEVY OF INTEREST U/S 234D OF THE ACT . ITA NO . 176/C/2014 5 5.1 THE CIT(A) DECIDED THE ISSUE BY HOLDING THAT INTEREST WOULD BE CHARGEABLE U/S 234D ONLY W.E.F 1.6.2003. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS: IT IS SEEN THAT THE PROVISIONS OF SECTION 234D ARE APPLICABLE IN ALL THE CASES WHERE REGULAR ASSESSMENT IS MADE ON OR AFTER 1.6.2003. THIS PROVISION ON INTEREST IS NOT INTRODUCED WITH REFERENCE TO ANY ASSESSMENT YEAR, THEREFORE, IT IS APPLICABLE TO ALL ASSESSMENTS YEARS. THERE IS NO RESTRICTION THAT IT WOULD BE APPL ICABLE FROM AY 2004 - 0 5 ONWARDS ONLY. SINCE IN THIS CASE THE REGULAR ASSESSMENT IS MADE AFTER 1.6.2003, ASSESSING OFFICER IS RIGHT IN CHARGING THIS INTEREST. HOWEVER, IN ACCORDANCE WITH THE DECISION OF CIT VS KERALA CHEMICAL & PROTEINS LTD, 323 ITR 584(2010 ), THIS INTEREST WOULD BE CHARGEABLE ONLY W.E.F 1.6.2003. ACCORDINGLY, THIS GROUND OF THE APPELLANT IS ALLOWED TO THE EXTENT OF CHARGING INTEREST W.E.F 1.6.2003. 5.2 AGGRIEVED BY THE ORDER OF THE CIT(A) IN RESTRICTING THE LEVY OF INTEREST W.E.F 1.6.2003, THE REVENUE IS APPEAL BEFORE US. 5.3 AT THE TIME OF HEARING OF THIS APPEAL, BOTH THE PARTIES HAVE AGREED THAT THE ISSUE IS COVERED IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS GUJARAT STATE FINANCIAL SERVICES LTD., REPORTED IN (2014)49 TAXMANN.COM 221(GUJ) . 5.4 WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE FINANCIAL SERVICES LTD (SUPRA) HAS DISAPPROVED THE ORDER OF THE S PECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS EKTA PROMOTERS P LTD., REPORTED IN 113 ITD 7198 (DELHI), WHEREIN IT WAS HELD THAT SECTION 234D IS APPLICABLE ONLY FROM ASSESSMENT YEAR 2004 - 05 ONWARD. THE RELEVANT FINDINGS OF THE HONBLE GUJARAT HIGH COUR T READ AS UNDER: ITA NO . 176/C/2014 6 ANSWERING THE SUBSTANTIAL QUESTION OF LAW IN FAVOUR OF THE REVENUE THAT IN ALL THOSE MATTERS WHERE EXCESS REFUND HAS BEEN GRANTED BY THE REVENUE, THE PROVISION OF SECTION 234D OF THE ACT WILL APPLY AND EVEN IN THE CASE OF EARLIER ASSESSME NT YEARS WHERE THE ASSESSMENTS WERE FRAMED AFTER JUNE 01, 2003, THE INTEREST WILL BE CHARGEABLE IN ACCORDANCE WITH LAW. THERE SHALL BE, HOWEVER, NO ORDER AS TO COSTS. 5.5 IN VIEW OF THE SUBMISSIONS OF BOTH THE PARTIES THAT THE JUDGMENT OF THE HONBLE GU JARAT HIGH COURT (SUPRA) IS IN FAVOUR OF THE REVENUE, WE HOLD THAT INTEREST U/S 234D HAS BEEN CORRECTLY LEVIED BY THE AO . ACCORDINGLY , WE DECIDE THE ISSUE IN FAVOUR OF THE REVENUE. IT IS ORDERED ACCORDINGLY. 6 IN THE RESULT, THE APPEAL FILED BY THE REVEN UE IS PARTLY ALLOWED, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY OF MARCH 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 2 ND MARCH 2016 RAJ* ITA NO . 176/C/2014 7 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN