Oceanic Products Exporting Co., Kollam V. DCIT, Kollam

ITA 206/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64779 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 1994-1995
• Appeal Filed On: 21-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SAJEEV
• Assessee Lawyers: IYPE MATHEW
• Section: 80HHC; 147

Judgement Text

1 ITA NO.206/COCH/2011 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 206/COCH/2011 (ASSESSMENT YEAR 1994-95) OCEANIC PRODUCTS EXPORTING CO VS DY.CIT, CIR.1 ADMN. OFFICE : SAKTHIKULANGARA QUILON QUILON PAN : NOT AVAILABLE (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI IYPE MATHEW RESPONDENT BY : SHRI P SAJEEV DATE OF HEARING : 05-09-2012 DATE OF PRONOUNCEMENT : 14-09-2012 O R D E R PER N.R.S. GANESAN (JM) BEING AGGRIEVED BY THE ORDER OF COMMISSIONER OF IN COME-TAX(A)-I, TRIVANDRUM DATED 21-12-2010 THE TAXPAYER HAS FILED TH E PRESENT APPEAL BEFORE THIS TRIBUNAL FOR THE ASSESSMENT YEAR 1994-95. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS COMPU TATION OF DEDUCTION U/S 80HHC OF THE ACT. 3. THE LD.REPRESENTATIVE FOR THE TAXPAYER, SHRI IYP E MATHEW SUBMITTED THAT THE TAXPAYER HAS RECEIVED EXPORT INCENTIVE IN THE C OURSE OF ITS BUSINESS ACTIVITY 2 ITA NO.206/COCH/2011 AND THE SAME WAS INCLUDED IN THE TOTAL TURNOVER. O RIGINALLY THE ASSESSING OFFICER ALLOWED THE CLAIM OF THE TAXPAYER AS COMPUTED BY TH E TAXPAYER. HOWEVER, THE ASSESSING OFFICER REOPENED THE ASSESSMENT ON THE GR OUND THAT EXCESS DEDUCTION WAS ALLOWED. ACCORDING TO THE LD.REPRESENTATIVE, T HE ASSESSING OFFICER DEDUCTED 90% OF THE EXPORT INCENTIVE FOR THE PURPOSE OF COMP UTING PROFIT FOR DEDUCTION U/S 80HHC OF THE ACT AND ARRIVED AT A LOSS. ACCORDING TO THE LD.REPRESENTATIVE, EXPORT INCENTIVE HAS TO BE INCLUDED IN THE TOTAL TURNOVER AS HELD BY THE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS BABY MARINE EX PORTS (2007) 290 ITR 323 (SC) AND JANATHA CASHEW EXPORTING CO VS COMMISSIONE R OF INCOME-TAX (2009) 309 ITR 440 (SC). THEREFORE, ACCORDING TO THE LD.REPRE SENTATIVE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN REDUCING 90% OF EXPORT INCENTIV E FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING PROFIT FOR DEDUCTION U/S 80HHC . 4. ON THE CONTRARY, SHRI P SAJEEV, THE LD.DR SUBMIT TED THAT HE IS PLACING RELIANCE ON THE ORDERS OF THE LOWER AUTHORITY. 5. WE HAVE CONSIDERED THE SUBMISSIONS ON EITHER SID E AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ORIGINALLY THE ASSES SMENT WAS COMPLETED AS PER THE COMPUTATION MADE BY THE TAXPAYER. HOWEVER, THE ASS ESSING OFFICER REOPENED THE COMPLETED ASSESSMENT U/S 147 OF THE ACT ON THE GROU ND THAT EXCESS DEDUCTION WAS ALLOWED. THE ASSESSING OFFICER FOUND THAT TO A RRIVE AT THE PROFIT FOR COMPUTATION OF DEDUCTION U/S 80HHC 90% OF THE EXPOR T INCENTIVES ARE TO BE DEDUCTED. AFTER DEDUCTING 90% OF THE EXPORT INCENT IVE, THE RESULTANT FIGURE IS A LOSS OF RS.8,593. THEREFORE, THE ASSESSING OFFICER FOUND THAT THE TAXPAYER IS NOT ENTITLED FOR DEDUCTION U/S 80HHC OF THE ACT. THE C ONTENTION OF THE LD.DR IS THAT IN VIEW OF THE JUDGMENT OF THE APEX COURT IN BABY M ARINE EXPORTS (SUPRA) AND 3 ITA NO.206/COCH/2011 JANATHA CASHEW EXPORTING CO (SUPRA) THE EXPORT INCE NTIVE SHALL NOT BE DEDUCTED WHILE COMPUTING PROFIT FOR DEDUCTION U/S 80HHC OF T HE ACT. 6. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE APEX COURT IN THE CASE OF BABY MARINE EXPORTS (SUPRA). IN THE CA SE BEFORE THE APEX COURT, THE TAXPAYER WAS ENGAGED IN THE BUSINESS OF SELLING MAR INE PRODUCTS BOTH IN THE DOMESTIC MARKET AND ALSO IN THE INTERNATIONAL MARKET. THE TAXPAYER HAD ENTERED INTO CONTRACTS WITH EXPORT HOUSE TO SELL THE GOODS TO THE EXPORT HOUSE AND AS A CONSIDERATION IT RECEIVED THE ENTIRE FOB VALUE OF T HE EXPORT PLUS EXPORT HOUSE PREMIUM OF 2.25% OF THE FOB VALUE. WHILE CONSIDERI NG THESE FACTS, THE APEX COURT FOUND THAT PLAIN READING OF SECTION 80HHC(1A) SHOWED THAT THE TAXPAYER WAS ENTITLED TO CLAIM DEDUCTION ON THE PREMIUM AMOU NT RECEIVED FROM THE EXPORT HOUSE IN COMPUTING THE TOTAL INCOME. THE AP EX COURT FURTHER FOUND THAT THE EXPORT HOUSE PREMIUM CAN BE INCLUDED IN THE BUS INESS PROFIT BECAUSE IT IS AN INTEGRAL PART OF THE BUSINESS OPERATION OF THE TAXP AYER WHICH CONSISTED OF SALE OF GOODS BY THE TAXPAYER TO THE EXPORT HOUSE. IN THIS CASE ALSO, THE TAXPAYER IS EXPORTING MARINE PRODUCTS. THE TAXPAYER APPEARS TO HAVE RECEIVED EXPORT INCENTIVE. IT IS NOT CLEAR FROM THE MATERIAL AVAIL ABLE ON RECORD HOW THE TAXPAYER RECEIVED EXPORT INCENTIVE. WHETHER THE EXPORT INCE NTIVE IS FOR SALE OF GOODS TO THE EXPORT HOUSE AS A SUPPORTING MANUFACTURER OR IT IS AN INCENTIVE GRANTED BY GOVERNMENT OF INDIA FOR EXPORT OF GOODS TO FOREIGN C OUNTRY. UNLESS THE SOURCE OF EXPORT INCENTIVE IS ASCERTAINED IT IS VERY DIFFICUL T TO COMPUTE THE PROFIT FOR DEDUCTION U/S 80HHC. THEREFORE, THIS TRIBUNAL IS O F THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS TO FIND OUT THE SOURCE OF EXPORT INCENTIVE BEFORE COMING TO THE CONCLUSION. IN OTHER WORDS, WHETHER THE EXP ORT CONSIDERATION SAID TO BE RECEIVED BY THE TAXPAYER IS RECEIVED FROM THE EXPOR T HOUSE FOR SALE OF GOODS AS A SUPPORTING MANUFACTURER OR IT IS AN INCENTIVE RECEI VED FROM GOVERNMENT FOR 4 ITA NO.206/COCH/2011 EXPORT OF GOODS. MOREOVER, THE LOWER AUTHORITIES H AD NO OCCASION TO CONSIDER THE JUDGMENT OF THE APEX COURT IN THE CASE OF BABY MARINE EXPORTS (SUPRA) AND JANATHA CASHEW EXPORTING CO (SUPRA). THEREFORE, TH IS TRIBUNAL IS OF THE CONSIDERED OPINION THAT AFTER ASCERTAINING THE FACT S THE ISSUE NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER IN THE LIGHT OF THE JUDGMENTS OF THE APEX COURT IN BABY MARINE EXPORTS (SUPRA) AND JANATHA CA SHEW EXPORTING CO (SUPRA). ACCORDINGLY THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICE R. THE ASSESSING OFFICER SHALL RE- EXAMINE THE ISSUE AFRESH AND FIND OUT THE SOURCE OF INCENTIVE AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW IN THE LIGH T OF THE JUDGMENT OF THE APEX COURT IN BABY MARINE EXPORTS (SUPRA) AND JANATHA CA SHEW EXPORTING CO (SUPRA) AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSES SEE. 7. IN THE RESULT, THE APPEAL OF THE TAXPAYER IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH SEPTEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 14 TH SEPTEMBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH