SHRI DEEPAK BHAVNANI, Mumbai V. THE ACIT CIR18(1), Mumbai

ITA 1897/MUM/2005

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7659 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 05-01-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 11-03-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR SRIVASTAVA
• Assessee Lawyers: PRAVIN N SHAH
• Section: 80HHC; 22; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 1897/MUM/2005 (ASSESSMENT YEAR: 2002-03) SHRI DEEPAK BHAVNANI ACIT, CIRCLE 18(1) 215, SUN INDUSTRIAL ESTATE PIRAMAL CHAMBERS, LAL BA UG SUN MILL COMPOUND, LOWER PAREL VS. PAREL, MUMBAI 400012 MUMBAI 400013 PAN - AAAFD 1747 K APPELLANT RESPONDENT APPELLANT BY: SHRI PRAVIN N. SHAH RESPONDENT BY: SHRI AJAY KUMAR SRIVASTAVA O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-XII, MUMBAI DATED 13.03.2007 FOR THE A.Y. 20 04-05. THIS APPEAL WAS EARLIER DISPOSED OFF BY THE I BENCH OF THE TRIBUN AL IN ITS ORDER DATED 29 TH OCTOBER 2008. LATER THE ASSESSEE FILED A MISCELLANE OUS APPLICATION AND THE TRIBUNAL IN MA NO. 08/MUM/2009 ORDER DATED 22 ND APRIL 2009 RECALLED THE ORDER TO THE LIMITED EXTENT OF DECIDING THE ISSUE O F COMPUTATION OF RELIEF UNDER SECTION 80HHC WITH RESPECT TO DUTY DRAWBACK. AS REGARDS THE SECOND ISSUE RAISED IN THE MA, IT WAS WITH REFERENCE TO TR EATMENT OF INTEREST INCOME AND COMPUTATION OF RELIEF UNDER SECTION 80HHC THERE ON, THE TRIBUNAL HAD REJECTED THE PRAYER OF THE ASSESSEE FOR RECALLING T HE ISSUE. THUS IN THIS APPEAL THE SOLE ISSUE THAT IS TO BE DISPOSED OFF IS THE ISSUE PERTAINING TO COMPUTATION OF RELIEF UNDER SECTION 80HHC WITH RESP ECT TO DUTY DRAWBACK. 2. WE HAVE HEARD SHRI PRAVIN N. SHAH, THE LEARNED COUN SEL FOR THE ASSESSEE AND SHRI AJAY KUMAR SRIVASTAVA, THE LEARNE D CIT D.R. 3. THE ASSESSEE IN THIS CASE HAS RECEIVED A SUM OF RS3 ,28,41,134/- AS DUTY DRAWBACK AND NOT AS PROFIT ON TRANSFER OF DEPB CLAIM. AS FAR AS DUTY DRAWBACK IS CONCERNED THE ISSUE IS NOW STAND DECIDE D BY THE HON'BLE ITA NO. 1897/MUM/2005 SHRI DEEPAK BHAVNANI 2 SUPREME COURT IN THE CASE OF B. DESRAJ VS. CIT (200 8) 171 TAXMAN 481 (SC) WHEREIN IT IS HELD AS FOLLOWS: - BY THE FINANCE ACT, 1990, THE PARLIAMENT HAS CLARI FIED THAT CASH COMPENSATORY SUPPORT AND DUTY DRAWBACK SHALL BE TAX ABLE UNDER SECTION 28. BY THE SAID FINANCE ACT, CLAUSE (IIIB) CAME TO BE INSERTED AS ONE OF THE INCOMES CHARGEABLE TO INCOME-TAX UNDER T HE HEAD BUSINESS PROFITS VIDE SECTION 28. CLAUSE (IIIB) COVERS CASH ASSISTANCE (BY WHATEVER NAME CALLED) RECEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVRNMENT OF INDIA. AT THE RELEVANT TIME, AN ISSUE AROSE AS TO WHETHER CASH ASSISTANCE, THOUGH I NCLUDIBLE IN BUSINESS PROFITS UNDER SECTION 28(IIIB), WOULD OR WOULD NOT CONSTITUTE ELIGIBLE INCOME FOR THE PURPOSES OF DEDUCTION UNDER SECTION 80HHC. SINCE THERE WAS SOME DOUBT, THE CBDT HAD ISSUED A CIRCULAR CLAR IFYING THAT EXPORT INCENTIVES, NAMELY, CASH COMPENSATORY SUPPORT AND D UTY DRAWBACK HAVE TO BE INCLUDED IN THE PROFITS OF THE BUSINESS FOR COMPUTING THE DEDUCTION UNDER SECTION 80HHC. WITH THE ISSUANCE OF THIS CIRCULAR, THE POINT IS NO MORE RES INTEGRA. THE FORMULA INDICATED IN SECTION 80HHC(3) ITSELF SH OWS THAT THE BUSINESS PROFITS INCLUDE EXPORT INCENTIVES. THIS FORMULA IS ALSO INDICATED IN THE CIRCULAR ISSUED BY THE CBDT. IT INDICATES THAT THE PARLIAMENT AS WELL AS THE CBDT HAVE TAKEN INTO ACCOUNT THE INSERTION OF C LAUSE (IIIB) IN SECTION 28 BY THE FINANCE ACT. FURTHER, IT IS ALSO RELEVANT TO NOTE THAT BY THE SAME FINANCE ACT, CLAUSE (IIIB) WAS INSERTED INTO S ECTION 28 AND CHANGES WERE ALSO MADE IN SECTION 80HHC(3). THEREFORE, SECT ION 80HHC, AS IT STOOD AT THE RELEVANT TIME, WAS REQUIRED TO BE READ WITH SECTION 28(IIIB), BECAUSE BOTH THE SECTIONS HAVE BEEN AMENDED BY THE SAME FINANCE ACT. THIS VITAL ASPECT HAD NOT AT ALL BEEN CONSIDERED BY THE HIGH COURT. IN THE CIRCUMSTANCES, THE WORDS BUSINESS PROFITS IN THE ABOVE FORMULA UNDER SECTION 80HHC(3) WOULD INCLUDE CASH COMPENSAT ORY ALLOWANCE AND DUTY DRAWBACK AND, ACCORDINGLY, THE ASSESSING O FFICER WAS TO BE DIRECTED TO WORK OUT THE DEDUCTION IN ACCORDANCE WI TH THE LAW AS IT STOOD DURING THE RELEVANT ASSESSMENT YEAR 1991-92. 4. RESPECTFULLY FOLLOWING THE SAME WE ALLOW THIS GROUN D OF THE ASSESSEE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH FEBRUARY 2010. SD/- SD/- (V. DURGA RAO) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH FEBRUARY 2010