Shefali Ghosh , Kolkata V. ACIT, Circle - 43, Kolkata , Kolkata

ITA 1810/KOL/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6764 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-02-2019
• Assessment Year: 2004-2005
• Appeal Filed On: 23-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C J SINGH JCIT LD
• Assessee Lawyers: SUBASH AGARWAL LD
• Keywords: Business income; Depreciation; Retrospective amendment
• Section: 143(3); 80HHC; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B - SMC BENCH : KOLKATA [BEFORE HONBLE SHRI S.S. GODARA, JM ] I .T.A NO. 1810/KOL/2018 ASSESSMENT YEAR : 20 04 - 05 S MT. SHEFALI GHOSH VS. A.C.I.T, CIR - 43 , KOLKATA PAN: A DTPG6963A (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SUBASH AGARWAL, ADVOCATE, LD.AR FOR THE RESPONDENT : SHRI C.J. SINGH, JCIT, LD.SR.DR DATE OF HEARING : 28 - 02 - 2019 DATE OF PRONOUNCEMENT : 28 - 02 - 2019 ORDER 1. TH IS ASSESSE S APPEAL IS DIRECTED AGAINST THE CIT(A) , 13, KOLKATA S ORDER , DATED - PASSED IN CASE NO. 281/CIT(A) - 13/CIR - 43/KOL/2014 - 15 INVOLVING PROCEEDINGS U/S 143(3) OF THE I.T ACT , 1961 ( IN SHORT ACT) . HEARD BOTH THE SIDES. CASE FILE PERUSED. 2. THE ASSESSEES FIRST SUBSTANTIVE GROUND CHALLENG ES BOTH THE LOWER AUTHORITIES ACTION S DENYING THE OF SECTION 80HHC DEDUCTION AMOUNTING TO RS. 7 , 21 , 651/ - . THE CIT(A)S DETAILED DISCUSSION TO THIS EFFECT READS AS UNDER: - I HAVE PERUSED THE FACTS OF THE CASE AND ARGUMENT OF THE APPELLANT. IN CASE OF GOODRICKE GROUP LIMITED, KOLKATA V /S DCIT, CIR 4(1), KOLKATA, KOLKATA ON 14 MARCH, 2018 ITA NO.309/KOL/2015HONLE ITAT HAS HELD THAT 'CONSIDERING THE ORDER OF HON'BLE GAUHATI HIGH COURT IN RE SPECT TO INCOME UNDER CLAUSE (III) OF SEC. 28 OF THE ACT, WE ARE OF THE CONSIDERED VIEW THAT PROFITS FROM SALE OF DEPB LICENSE AND GAIN FROM 2 ITA N O. 1810/KOL/2018 - SMC SHEFALI GHOSH 2 FOREIGN EXCHANGE SHOULD BE INCLUDED AS BUSINESS INCOME COMPUTED PRIOR TO THE APPLICATION OF RULE 8 OF THE RULES AND THE DEDUCTION U/S. 33AB OF THE ACT SHOULD BE MADE FROM THE COMPOSITE INCOME I.E. BEFORE APPLYING RULE 8 OF THE RULES THAT PROFIT FROM SALE OF DEPB LICENSE IS AN INCOME INCLUDED IN SUB CLAUSE III(D) OF CLAUSE (III) OF SECTION 28 OF THE ACT AS INCOME CHARGE ABLE TO TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AND, THEREFORE, AS PER THE ORDER OF HON'BLE GUWAHATI HIGH COURT IN MCLEOD RUSSEL INDIA LTD. VS. CIT 260 CTR 337 (GAU), THIS AMOUNT HAS TO BE INCLUDED IN COMPOSITE INCOME BEFORE APPLYI NG RULE 8(1) OF THE RULES. FURTHER A NEW PROVISO TO SECTION 80HHC(3) HAS BEEN INSERTED FOR ALLOWING THE DEDUCTION FOR PROFIT ON ACCOUNT OF SALE OF DEPB LICENCE. FOR THIS PURPOSE THE EXPORTERS HAVE BEEN CLASSIFIED IN 2 CATEGORIES (1) ASSESSEES HAVING EXP ORT TURNOVER UPTO RS. 10 CRORES. (2) ASSESSEES HAVING EXPORT TURNOVER EXCEEDING RS. 10 CRORES. THE ASSESSES HAVING EXPORT TURNOVER UPTO RS. 10 CRORES HAVE NO DIFFICULTY AND WILL GET DEDUCTION OF 90% OF EXPORT INCENTIVE ON ACCOUNT OF PROFITS ON TRANSFER OF DEPB LICENSES BUT ASSESSEES HAVING EXPORT TURNOVER EXCEEDING RS. 10 GORES WILL GET THIS DEDUCTION IF THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVI DENCE TO PROVE THAT (A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAWBACK OR THE DEPB SCHEME OR THE DUTY FREE REPLENISHMENT CERTIFICATE AS THE CASE MAY BE, BEING DUTY REMISSION SCHEME; AND (B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE DEPB SCHEME OR THE DUTY FREE REPLENISHMENT SCHEME AS THE CASE MAY, BE BEING DUTY REMISSION SCHEME. SO, FROM A PERUSAL OF THE ABOVE I NSERTION OF THE TAXATION LAW AMENDMENT ACT,2005 W.R.E.F. AY 1998 99 ANY PROFIT ON TRANSFER OF DEPB LICENSE IS CHARGEABLE UN D ER THE HEAD 'PROFIT & GAINS FOR BUSINESS OR PROFESSION' U / S. 28(IIID) OF THE ACT AND WE NOTE THAT SUB SECTION (3) TO SEC. 80HHC PRO VIDES FORMULA FOR THE COMPUTATION OF EXPORT PROFITS. ACCORDING TO THE SAID FORMULA, THE PROFIT DERIVED FROM THE EXPORT IS THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH GOODS BEARS TO T HE TOTAL TURNOVER OF THE BUSINESS. THE PROFITS OF BUSINESS IS DEFINED IN CLAUSE (BAA) OF EXPLANATION U/S. 80HHC WHICH AS FAR AS IT RELATED TO THIS APPEAL MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR 3 ITA N O. 1810/KOL/2018 - SMC SHEFALI GHOSH 3 PROFES SION' AS REDUCED BY 90% OF EXPORT BENEFIT REFERRED TO IT CLAUSES (IIIA) TO (IIIE) OF SECTION 28. AS PER THE SECOND AND THIRD PROVISO TO SECTION 80HHC(3) THE EXPORT PROFIT SO COMPUTED SHALL BE FURTHER INCREASED IN THIS CASE BY AN AMOUNT WHICH BEARS 90% O F THE PROFIT ON SALE OF DEPB, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS. IN VIEW OF THE INSERTION OF CLAUSE (IIID) TO SECTION 28 AND SIMULTANEOUS INSERTION OF THIRD PROVISO TO SECTION 80HHC WITH RETROSPECTIVE EFFECT FROM 01.04.1998, THERE WAS NO JUSTIFICATION IN REJECTING THE APPELLANT'S SUCH ENHANCED CLAIM. THEREFORE, BENEFIT HAS TO BE GIVEN TO THE ASSESSEE AS PER SECOND/THIRD PROVISO TO SEC. 80HHC(3) OF THE ACT. IN CASE IF THE ASSESSEE FALLS IN 2ND PROVIS O, THERE IS NO DIFFICULTY IN AVAILING THE DEDUCTION, HOWEVER, IN CASE IF THE ASSESSEE FALLS IN THE THIRD PROVISO I.E. IF THE TURNOVER IS EXCEEDING RS. 10 CR. WILL GET THIS DEDUCTION, IF THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVIDENCE TO PROVE CLAUSE ( A) AND (B) GIVEN IN PARA 18 SUPRA. WITH THIS AFORESAID OBSERVATION, WE DIRECT THE AO TO GRANT DEDUCTION IN ACCORDANCE TO LAW. PERUSAL OF AFORESAID DECISION CLEARLY SHOWS THAT THE APPELLANT CASE IS NOT COVERED UNDER THE PROVISO OF THE NEWLY INSERTED, PR OVISION OF SECTION 80HHC(3) THEREFORE THE AO HAS RIGHTLY DISALLOWED THE BENEFIT OF DEPB. HENCE THE ACTION TAKEN BY THE AO IS UPHELD AND THE GROUND OF APPEAL IS DISMISSED. 3. I HAVE GIVEN MY THOUGHTFUL CONSIDERATION TO THE RIVAL CONTENTIONS AGAINST AND IN SUPPORT OF THE IMPUGNED DISALLOWANCE. IT EMERGES DURING THE COURSE OF HEARING AT THE OUTSET THAT THE LOWER AUTHORITIES HAVE APPLIED THE PROVISIONS OF SECTION 80HHC(3) 2 ND TO 4 TH PROVISO TO DENY THE IMPUGNED DEDUCTION. HONBLE GUJARAT HIGH COURT S DECISION AVANI EXPORTS V/S CIT IN (2012) 348 ITR 319 (GUJ.) AS UPHELD IN HONBLE APEX COURT , HAS ALREADY SETTLED THE LAW THAT SECTION 80HHC AMENDED BY WAY OF ABOVE SAID PROVISO BROUGHT IN THE ACT BY THE FINANCE ACT 2005 W.E.F A.Y 1998 - 99 DO NOT CARRY RE TROSPECTIVE EFFECT . I THEREFORE ACCEPT ASSESSEES ARGUMENTS IN PRINCIPLE. 4. NEXT COMES EQUALLY IMPORTANT ASPECT OF COMPUTATION OF ASSESSE E S SECTION 80HHC DEDUCTION CLAIM , HONBLE APEX COURT S DECISION IN TOPMAN EXPORTS VS. CIT (2012) 342 ITR 49 (SC ) HAS SETTLED THE LAW THAT IT IS ONLY THE PROFIT ELEMENT THAN THE 4 ITA N O. 1810/KOL/2018 - SMC SHEFALI GHOSH 4 ENTIRE SALE PRICE THAT REQUIRED TO BE CONSIDERED IN SUCH A SITUATION . I THEREFORE RESTORE THE INSTANT FIRST SUBSTANTIVE GROUND BACK TO THE A SSESSING O FFICER FOR RE - COMPUTATION OF ASSESSEES DEDUCTION CLAIM . THIS SUBSTANTIVE GROUND AS TAKEN IS ACCEPTED FOR STATISTICAL PURPOSE S . 5. THE ASSESSEES SECOND SUBSTANTIVE GROUND CHALLENGES CORRECTNESS OF THE ASSESSING OFFICER AS WELL AS THE CIT(A) S ACTION IN TREATING INTEREST AMOUNT OF R S.3 , 68 , 383 / - AS INCOME FROM OTHER SOURCES. THE A SSESSEES ONLY ARGUMENT DURING THE COURSE OF HEARING IS THAT THE LOWER AUTHORITIES OUGHT TO HAVE ADOPTED NETTING PRINCIP LE REGARDING THE INTEREST AMOUNT IN ISSUE. I FIND HONBLE GUJARAT HIGH COURTS DECISI ON IN CIT VS. 2015 367 ITR 12 AS WELL AS IN APEX COURTS JUDGMENT IN 20 1 343 ITR 89 (SC) IN ACG CAPSULES V/S CIT SETTLE THE LAW THAT NETTING PRINCIP LE HAS TO BE ADOPTED IN SUCH AN ISSUE . I THEREFORE DIRECT THE ASSESSING OFFICER TO FRAME A FRESH COMPUT ATION BY ADOPTING NETTING FORMULA. 6. THE ASSESSEE IS VERY FAIR IN NOT PRESSING THIRD SUBSTANTIVE GROUND SEEKING TO DELETE VEHICLE EXPENSES AND DEPRECIATION DISALLOWANCE AMOUNTING TO RS. 53,800/ - KEEPING IN MIND SMALLNESS OF SUM INVOLVED. 7. THIS A SSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE IN ABOVE TERMS. ORDER PRONOUNCED IN THE COURT ON 28 - 02 - 2019 SD/ - [ S.S.GODARA ] JUDICIAL MEMBER DATED : 28 - 02 - 201 9 5 ITA N O. 1810/KOL/2018 - SMC SHEFALI GHOSH 5 PP , SR. PS COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/ASSESSEE: SMT. S HEFALI GHOSH C/O SUBASH AGARWAL & ASSOCIATES, SIDDHA GIBSON, 1 GIBSON LANE, SUITE - 213, 2 ND FL., KOLKATA - 69. 2. RESPONDENT/ DEPARTMENT : THE ACIT, CIR - 43, KOLKATA. . 3..C.I.T (A) . - 4. C.I.T. - KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR HEAD OF OFFICE/D.D.O., ITAT, KOLKATA