Al-Nafees Frozen Food Exports Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 2195/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52953 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 10-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MONGA SENIOR
• Keywords: Depreciation
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) SHRI I.P. BANSAL, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.2195/DEL./2010 (ASSESSMENT YEAR : 2003-04) AL-NAFEES FROZEN FOOD EXPORTS PVT. LTD., VS. ITO, WARD 1 (1), 6, CENTRAL LANE, BENGALI MARKET, NEW DELHI. NEW DELHI 110 001. (PAN : AAACA5855E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL KUMAR, CA REVENUE BY : SHRI A.K. MONGA, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF THE ORDER OF CIT (APPEALS)-IV, NEW DELHI DATED 15.03.2007 FOR THE AS SESSMENT YEAR 2003-04. 2. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UND ER CONSIDERATION WAS FILED ON 2.12.2003 DECLARING INCOME OF RS.1,30,10,9 71/-. THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.1,44,00,809/-. THE AS SESSEE WAS DERIVING INCOME FROM MANUFACTURING AND EXPORT OF FROZEN MEAT AND SALE OF RAW HIDES. 3. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE AS UNDER :- 1. THAT THE LEARNED CIT (A) WAS NOT JUSTIFIED IN D ISALLOWING A SUM OF RS.2,07,254/ UNDER THE HEADING REPAIR & MAIN TENANCE OF PLANT & MACHINERY BEING EXPENSES PERTAINING TO PRIO R PERIOD. ITA NO.2195/DEL./2010 2 THE EXPENSES RELATE TO SPARES REPLACED AND USED IN THE YEAR UNDER ASSESSMENT HENCE CHARGED TO P & L A/C OF THE YEAR RELEVANT TO THE A.Y. 2003-04. THE DISALLOWANCE MADE OF RS.2,07,254/- IS TOTALLY UNJUSTIFIED AND UNWARRANTE D, IT IS THEREFORE PRAYED THAT THE SAME MAY PLEASE BE DELETE D. 2. THAT THE LEARNED CIT (A) WAS NOT JUSTIFIED IN DI SALLOWING A SUM OF RS.99,600/- BEING THE AMOUNT OF US$ 2000 PUR CHASED AND SPENT ON FOREIGN VISITS OF EXPORT EXECUTIVES. C OMPLETE DETAIL AND NAMES OF THE EXECUTIVES AND THE COUNTRIE S VISITED HAVE BEEN SUBMITTED DURING THE COURSE OF ASSESSMENT. THE EXPENSES INCURRED OF RS.99,6000 WERE FOR THE BUSINESS OF THE ASSESSEE COMPANY IT IS THEREFORE PRAYED THAT THE ADDITION OF RS.99,600 MAY PLEASE BE DELETED. 3. THAT THE LEARNED CIT (A) WAS NOT JUSTIFIED IN DI SALLOWING 1/10 TH OF CAR RUNNING & MAINTENANCE (RS.1,47,158/-) CAR DEPRECIATION (RS.1,76,707/-) & TELEPHONE EXPENSES (RS.90,970/-) LOOKING TO THE QUANTUM OF EXPENSES CL AIMED UNDER THESE HEADS, THE DISALLOWANCE MADE IS TOO ON THE HIGHER SIDE. IT IS, THEREFORE, PRAYED THAT THE SAME MAY PL EASE BE SUITABLY REDUCED. 4. THAT THE LEARNED CIT (A) WAS NOT JUSTIFIED IN DI SALLOWING A SUM OF RS.4,25,000/ BEING THE AMOUNT OF INTEREST AL LEGEDLY PAID TO THE BANK FOR PURCHASE OF LAND WORTH RS.45.00 LAC S FOR THE NEW PROJECT WHICH IS YET TO TAKE OFF. NO AMOUNT OF BORROWED FUNDS HAS BEEN USED TO PURCHASE/ADVANCE ANY LAND FOR ANY PURPOSE. THE LEAR NED CIT (A) HAS MISCONSTRUED HIMSELF IN MAKING THIS ADDITION 5. THAT THE LEARNED CIT (A) WAS NOT JUSTIFIED IN D ISALLOWING NETTING OF INTEREST EARNED OF RS.12,44,481/- WITH I NTEREST PAID AS THERE WAS DIRECT NEXUS IN EARNING OF INTEREST ON FD RS AND PAYMENT OF INTEREST TO THE BANK ON EXPORT WORKING C APITAL FACILITIES UTILIZED FROM THE BANK. THE FDRS WERE PL EDGED TO THE BANK AS PRECONDITION FOR RELEASE OF EXPOL1 CREDIT F ACILITIES BY THE BANK. ITA NO.2195/DEL./2010 3 IN VIEW OF THIS IT IS PRAYED THAT THE NETTING OF I NTEREST OF RS.12,44,481/- MAY PLEASE BE ALLOWED WITH THE INTER EST PAID TO THE BANK AMOUNTING TO RS.78,36,207/-. 6. THE LEARNED CIT (A) WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.16,57,898/- BEING THE AMOUNT OF DEPB NOT RECE IVED AT THE CLOSE OF THE FINANCIAL YEAR. DEPB IS AVAILABLE SUBJ ECT TO CERTAIN CONDITIONS FROM THE MINISTRY OF COMMERCE. IT WAS EX PLAINED TO THE CIT (A) THAT THE INCOME FROM THE SALE OF DEPB L ICENCE IS DUE ONLY WHEN DEPB IS ACTUALLY SOLD AND NOT UTILIZE D OTHERWISE. DISREGARDING THE SUBMISSIONS MADE THE LEARNED CIT ( A) HAS MADE ADDITION OF RS.16,57,898/- BEING DEPB RECEIVAB LE FOR THE YEAR RELEVANT TO THE AY 2003-04. THE ADDITION MADE OF RS.16,57,898/- IS TOTALLY UNJ USTIFIED AND UNWARRANTED, IT IS THEREFORE PRAYED THAT THE SA ME MAY PLEASE BE DELETED. 7. THE LEARNED CIT (A) HAS WRONGLY TAKEN A SUM OF RS.92,25,020/- BEING THE AMOUNT OF EXPORT SALES PRO CEEDS REALIZED AFTER THE DUE DATE AS RECEIVED OTHER THAN EXPORTS. THE EXTENSIONS TO REALIZE THIS SUM OF RS.92,25,020/- WA S FILED WITH RBI THROUGH OUR BANKER CORPORATION BANK, NOIDA AND THE COPIES OF ETX. FORMS DULY PERMITTING US TO RECEIVE THE SAL E PROCEEDS OF RS.92,25,020/- AFTER THE DUE DATES ARE AVAILABLE AN D WERE FILED DURING THE COURSE OF ASSESSMENT. THE EVIDENCES FILE D IN THE ASSESSMENT HAVE BEEN IGNORED AND THE DISALLOWANCE O F RS.92,25,020/- HAVE BEEN MADE WHILE CALCULATING DED UCTION U/S 80HHC. AS THE DISALLOWANCE MADE IS TOTALLY UNJUSTIFIED & UNWARRANTED, IT IS THEREFORE PRAYED THAT THE SAME M AY PLEASE BE DELETED AND THE DEDUCTION U/S 80HHC MAY PLEASE BE S UITABLY MODIFIED. 8. THAT THE LEARNED CIT (A) WAS NOT JUSTIFIED IN DI SALLOWING A SUM OF RS.3,45,355/ BEING INTEREST PAID ON LATE DEP OSIT OF TDS. AS THE INTEREST PAID IS AN ALLOWABLE EXPENSE, IT IS THEREFORE PRAYED THAT THE SAME MAY PLEASE BE ALLOWED. 9. THE APPELLANT CRAVES TO ADD ANY OTHER GROUNDS O F APPEAL. ITA NO.2195/DEL./2010 4 4. IN THE GROUND NO. 1, THE ISSUE INVOLVED WAS SUST AINING THE ADDITION OF RS.2,07,254/- WHICH WAS DEBITED UNDER THE HEAD PLA NT & MACHINERY. THIS EXPENSES WAS RELATED TO THE PRIOR PERIOD. ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. AT THE TIME OF HEARING, THE LEARNED AR DID NOT PRESS THIS GROUND, HENCE THE SAME IS DISMISSED AS NOT PRE SSED. 5. IN THE GROUND NO.2, THE ISSUE INVOLVED IS SUSTAI NING THE DISALLOWANCE OF RS.99,600/-. THIS WAS THE AMOUNT PERTAINING TO THE PURCHASE OF US $ 2000 AND SPENT ON THE FOREIGN VISITS. THE CIT (A) SUST AINED THE ADDITION BY HOLDING THAT DISALLOWANCE WAS MADE ON ACCOUNT OF NO T FILING THE EXACT DETAILS AND DURING THE REMAND REPORT ALSO. NO DETAILS WERE PRODUCED BEFORE HIM ALSO AND IN ABSENCE OF THE EXACT DETAILS, THE DISALLOWAN CE WAS CONFIRMED. COMPLETE DETAILS WITH THE NAME OF THE EXECUTIVES AN D THE COUNTRY VISITED HAVE BEEN FILED DURING THE COURSE OF ASSESSMENT ITSELF. THE LEARNED AR SUBMITTED THAT THE OBSERVATION OF CIT (A) IS FACTUALLY INCORR ECT. THESE EXPENDITURE HAVE BEEN INCURRED WHOLLY FOR THE BUSINESS PURPOSE OF TH E ASSESSEE AND THE SAME IS ALLOWABLE EXPENSES. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND AF TER HEARING BOTH THE SIDES, WE HOLD THAT THE AMOUNT PERTAINING TO THE F OREIGN EXCHANGE OF PURCHASE OF US $ 2000 WERE RELATED TO THE FOREIGN TRIP OF SH RI NAVIN BHAMBRI, EXPORT MANAGER AND SHRI UDAY THAKUR, MARKET MANAGER WHO HA VE VISITED KUALA ITA NO.2195/DEL./2010 5 LUMPUR AND MOSCOW RESPECTIVELY. THE OBSERVATION OF AUTHORITIES BELOW THAT DETAILS WERE NOT SUBMITTED IS FACTUALLY INCORRECT. THESE DETAILS WERE AVAILABLE IN THE PAPER BOOK WHICH WERE PLACED BEFORE AO AND W ERE ALSO MADE AVAILABLE TO CIT (A). KEEPING THESE FACTS IN VIEW, WE FIND N O MERITS IN THIS ADDITION. THEREFORE, WE SET ASIDE THE ORDERS OF THE AUTHORITI ES BELOW ON THIS ISSUE AS THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY FOR THE BUSI NESS PURPOSES OF ASSESSEE. 7. IN THE GROUND NO.3, THE ISSUE INVOLVED IS SUSTAI NING THE DISALLOWANCE OF 1/10 TH OUT OF THE CAR RUNNING AND MAINTENANCE EXPENSES OF RS.1,47,158/-, CAR DEPRECIATION OF RS.1,76,707/- AND TELEPHONE EXPENSE S OF RS.90,970/-. 8. IT WAS PRAYED BEFORE US BY THE LEARNED AR FOR TH E ASSESSEE THAT 1/10 TH DISALLOWANCES OUT OF THESE DISALLOWANCES ARE ON HIG HER SIDE AND IT WAS PLEADED THAT IT MAY BE REDUCED SUITABLY AT LEAST 1/ 20 TH OF THE EXPENSES. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD BOTH THE SIDES AND AFTER HEARING, WE HOLD THAT THE DISALLOWANCES OF 1/10 TH OF THE EXPENDITURE OF CAR, DEPRECIATION ON CAR AND TELEPHONE EXPENSES ARE EXCESSIVE. HOWEVER, TO MEET THE ENDS OF JUSTICE TO PLUG THE LEAKAGE OF THE REVENUE ON ACCOUNT OF PERSO NAL USE OF CARS AND TELEPHONES, WE HOLD THAT THE DISALLOWANCE UPTO 1/20 TH OF THE TOTAL EXPENSES DEBITED IN THESE HEADS SHALL BE REASONABLE. WE ORD ER SO. THEREFORE, THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. ITA NO.2195/DEL./2010 6 10. IN THE GROUND NO.4, THE ISSUE INVOLVED IS SUSTA INING THE DISALLOWANCE OF RS.4,25,000/- BEING THE AMOUNT OF INTEREST ALLEGEDL Y PAID TO THE BANK FOR PURCHASE OF LAND FOR THE NEW PROJECT WHICH IS YET T O TAKE OFF. AT THE OUTSET OF THE HEARING ON THIS GROUND, LEARNED AR SUBMITTED TH AT HE IS NOT PRESSING THIS GROUND, THEREFORE, THE SAME IS DISMISSED AS NOT PRE SSED. 11. IN THE GROUND NO.5, THE ISSUE INVOLVED IS SUSTA INING THE ADDITION OF RS.12,44,481/- BY NOT ALLOWING THE NETTING OF INTER EST WITH THE INTEREST PAID TO THE BANK. 12. LEARNED AR SUBMITTED THAT THERE WAS A DIRECT NE XUS IN THE EARNING OF THE INTEREST ON THE FDR AND THE INTEREST PAID TO TH E BANK ON THE EXPORT WORKING CAPITAL UTILIZED BY THE ASSESSEE FROM THE B ANK. THE PLEDGING OF THE FDR IS A PRE-CONDITION TO REALIZE THE EXPORT CREDIT FACILITY, THEREFORE, THE NETTING OF THE INTEREST IS DESERVED TO BE ALLOWED. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAS CATEGORICALLY STATED THAT THE INTEREST I NCOME IS FROM OTHER SOURCES AND NOT FROM THE BUSINESS. THE NEXUS BETWEEN THE O BTAINING THE LOAN AND PAYING THE INTEREST FOR THE PURPOSE OF EARNING INTE REST ON THE FDR IS NOT ESTABLISHED WITH ANY COGENT EVIDENCE. HE RELIED O N THE ORDERS OF THE AUTHORITIES BELOW. 13. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE FIND THAT THE AO HAS TAXED THE AMOUNT OF INTEREST EARNED ON THE FDR IS U NDER THE HEAD INCOME ITA NO.2195/DEL./2010 7 FROM OTHER SOURCES. WE ALSO HOLD THAT INTEREST E ARNED ON THE FDR IS THE INCOME FROM OTHER SOURCES. INTEREST ON CAPITAL B ORROWED FOR BUSINESS PURPOSE IS ALLOWABLE U/S 36 OF THE INCOME-TAX ACT. HOWEVER, THE INTEREST PAID ON THE AMOUNT WHICH IS UTILIZED TO MAKE THE FDRS CA N BE CONSIDERED UNDER SECTION 57 OF THE INCOME-TAX ACT. ANY EXPENDITURE LAID OUT AND EXPANDED WHOLLY AND EXCLUSIVELY FOR PURPOSE OF CARRY SUCH IN COME CAN BE ALLOWED. IN OUR CONSIDERED VIEW, NEXUS OF INCOME AND CORRESPOND ING EXPENSES IS MUST, WITHOUT WHICH IT CANNOT BE ALLOWED AND ONUS IS ON A SSESSEE TO PROVE IT. ASSESSEE HAD NOT DONE SO, THEREFORE, WE FIND NO FAU LT IN THE ORDER OF CIT (A) BY HOLDING SO, THEREFORE, THIS GROUND OF ASSESSEES APPEAL IS DISMISSED. 14. IN THE GROUND NO.6, THE ISSUE INVOLVED IS MAKIN G AN ADDITION OF RS.16,57,898/- BEING THE AMOUNT OF DEPB NOT RECEIVE D AT THE CLOSE OF THE FINANCIAL YEAR. THE LEARNED AR SUBMITTED THAT INCO ME FROM THE SALE OF DEPB LICENCE IS DUE ONLY WHEN DEPB IS ACTUALLY SOLD AND NOT UTILIZED OTHERWISE AND THE CIT (A) IS NOT JUSTIFIED IN DISMISSING THE ASSESSEES PLEA IN THIS REGARD AND HE PLEADED TO DELETE THE ADDITION. ON T HE OTHER HAND, THE LEARNED DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AN D PLEADED THAT AS PER THE AMENDED PROVISIONS OF SECTION 28 & 80HHC, THE DEPB AMOUNT CAN BE CONSIDERED ONLY ON SALE. THE WORD USED IN SECTION 28(IIID) IS SALE. ON THE OTHER HAND, THE LEARNED AR SUBMITTED THAT THIS ISSU E IS COVERED BY THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATA RU COLOURS AND ITA NO.2195/DEL./2010 8 CHEMICALS, 328 ITR 451 (BOM.) AND THE SAME MAY BE R ESTORED TO THE FILE OF THE AO TO BE DECIDED IN VIEW OF THAT JUDGMENT. 15. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND A FTER HEARING, WE HOLD THAT THE ISSUE HAS BEEN CONSIDERED BY THE HON'BLE M UMBAI HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS, CI TED SUPRA, WHEREIN THE HON'BLE HIGH COURT HAS DECIDED THE ISSUE AS UNDER : - UNDER SUB-SECTION (1) OF SECTION 80HHC OF THE INC OME- TAX ACT, 1961, A DEDUCTION IS ALLOWED TO THE EXTENT OF PROFITS 'DERIVED BY THE ASSESSEE' FROM THE EXPORT OF GOODS. SINCE THE DEDUCTION IS IN RESPECT OF PROFITS DERIVED FROM EXP ORT, SUB- SECTION (3) LAID DOWN A FORMULA ON THE BASIS OF WHI CH EXPORT PROFITS HAVE TO BE COMPUTED. UNDER CLAUSE (A) OF SU B-SECTION (3), THE EXPRESSION 'PROFITS DERIVED FROM' IS DEFIN ED TO BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUC H GOODS BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. HOWEVER, WHERE AN ASSESSEE CARRIES ON THE BUSINESS OF EXPORT OF TRADING GOODS, CLAUSE (B) DEFINES 'EXP ORT PROFITS' TO BE THE EXPORT TURNOVER IN RESPECT OF SUCH TRADIN G GOODS WHICH IS TO BE REDUCED BY THE DIRECT AND INDIRECT C OSTS ATTRIBUTABLE TO THE EXPORT. IN THE APPLICATION OF T HE FORMULA TO A MANUFACTURER EXPORTER, CLAUSE (A) REFERS TO THE PRO FITS OF THE BUSINESS. THE EXPRESSION 'PROFITS OF THE BUSINESS' IN EXPLAN ATION (BAA) TO SECTION 80HHC MEANS PROFITS AS COMPUTED UN DER THE HEAD OF 'PROFITS AND GAINS OF BUSINESS OR PROFESSIO N' UNDER SECTIONS 28 TO 44D AND THEY ARE THEREUPON TO BE RED UCED TO THE EXTENT PROVIDED BY CLAUSES (1) AND (2). SECTION 28 ELUCIDATES INCOMES WHICH SHALL BE CHARGEABLE TO INCOME-TAX UND ER THE HEAD OF 'PROFITS AND GAINS OF BUSINESS OR PROFESSIO N'. CLAUSES (IIIA), (IIIB) AND (IIIC) WERE INSERTED INTO THE SE CTION BY THE FINANCE ACT OF 1990. BY THE FINANCE ACT OF 2005, PA RLIAMENT INSERTED A SPECIFIC CLAUSE, NAMELY, CLAUSE (IIID) I N SECTION 28 TO THE EFFECT THAT PROFITS ON TRANSFER OF DEPB, I.E., THE AMOUNT ITA NO.2195/DEL./2010 9 RECEIVED ON TRANSFER OF DEPB IS INCOME CHARGEABLE T O TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION'. AS REGARDS THE DEDUCTION UNDER SECTION 80HHC, THE LEGISLATURE SUBSTITUTED EXPLANATION (BAA) IN SECTIO N 80HHC SO AS TO EXCLUDE 90 PER CENT, OF THE PROFITS RECEIVED ON TRANSFER OF DEPB FROM THE PROFITS OF BUSINESS FOR THE PURPOSES OF SECTION 80HHC AND INSERTED THE SECOND AND THIRD PROVISOS TO SECTION 80HHC(3). THE SECOND PROVISO PROVIDED THAT IN THE C ASE OF AN ASSESSEE HAVING AN EXPORT TURNOVER NOT EXCEEDING RS . 10 CRORES, THE PROFITS COMPUTED UNDER SECTION 80HHC(3) SHALL BE INCREASED BY 90 PER CENT. OF THE SUM REFERRED TO IN SECTION 28(IIID). THE THIRD PROVISO PROVIDED THAT IN THE CA SE OF AN ASSESSEE HAVING AN EXPORT TURNOVER EXCEEDING RS. 10 CRORES, THE PROFITS COMPUTED UNDER SECTION 80HHC(3) SHALL BE IN CREASED BY 90 PER CENT. OF THE SUM REFERRED TO IN SECTION 2 8(IIID) SUBJECT TO THE TWO CONDITIONS SET OUT THEREIN. WHAT CONSTIT UTES PROFITS UNDER SECTION 28(IIID) IS THE AMOUNT RECEIVED ON TR ANSFER OF THE DEPB CREDIT AND NOT THE AMOUNT OF CREDIT WHICH THE ASSESSEE WAS ENTITLED TO UNDER THE DEPB SCHEME. IN OTHER WOR DS, THE AMOUNT EQUIVALENT TO THE FACE VALUE OF DEPB AS WELL AS THE AMOUNT RECEIVED IN EXCESS OF THE DEPB WOULD CONSTIT UTE PROFITS OF BUSINESS UNDER SECTION 28(IIID) AND MERE LY BECAUSE A PART OF SUCH PROFITS OF BUSINESS (FACE VALUE) WAS O FFERED TO TAX IN THE YEAR IN WHICH THE CREDIT ACCRUED TO THE ASSE SSEE WOULD NOT BE A GROUND TO HOLD THAT SUCH PROFIT WAS NOT CO VERED UNDER SECTION 28(IIID). WHERE THE FACE VALUE OF THE DEPB CREDIT IS OFFERED TO TAX AS BUSINESS PROFITS UNDER SECTION 28 (IIID) IN THE YEAR IN WHICH THE CREDIT ACCRUED TO THE ASSESSEE, T HEN ANY FURTHER PROFIT ARISING ON TRANSFER OF THE DEPB CRED IT WOULD BE TAXED AS PROFITS OF BUSINESS UNDER SECTION 28(IIID) IN THE YEAR IN WHICH THE TRANSFER OF THE DEPB CREDIT TOOK PLACE. THERE IS ANOTHER PERSPECTIVE FROM WHICH THE ISSUE CAN BE LOOKED AT. THE DEPB CREDIT TO WHICH AN EXPORTER IS ENTITLED IS A FORM OF AN EXPORT INCENTIVE. NO PART OF THE CRE DIT THAT IS AVAILABLE UNDER THE DEPB SCHEME CAN FALL FOR CLASSI FICATION UNDER CLAUSE (IIIB) OF SECTION 28 WHICH DEALS WITH CASH ASSISTANCE, RECEIVED OR RECEIVABLE AGAINST ANY SCHE ME OF THE GOVERNMENT OF INDIA. CLAUSE (IIIB) WAS ENACTED AT A TIME WHEN THE EXPORT INCENTIVES THAT WERE AVAILABLE WERE (I) IMPORT ENTITLEMENT LICENCES; (II) CASH COMPENSATORY SUPPOR T; AND (III) ITA NO.2195/DEL./2010 10 DUTY DRAWBACK. THE DEPB SCHEME WAS NOT IN EXISTENCE WHEN CLAUSE (IIIB) CAME TO BE ENACTED INTO SECTION 28 BY THE FINANCE ACT OF 1990. THE DEPB SCHEME WAS BROUGHT INTO EXIST ENCE WITH EFFECT FROM APRIL 1, 1997. CLAUSE (IIID) OF S ECTION 28 WAS INSERTED BY THE AMENDING ACT OF 2005 WITH EFFECT FR OM APRIL 1, 1998. THE VALUE OF THE DEPB CREDIT CANNOT BE REG ARDED AS A CASH ASSISTANCE WHICH IS RECEIVED OR RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVERNMENT OF INDIA. IT CANNOT BE INFERRED FROM THE SPEECH OF THE FINAN CE MINISTER THAT THE INSERTION OF CLAUSE (IIID) IN SEC TION 28 WAS MADE WITH A VIEW TO TAX ONLY THE AMOUNT WHICH HAS B EEN RECEIVED IN EXCESS OF THE FACE VALUE OF THE DEPB CR EDIT. DEPB CREDIT WAS INTRODUCED WITH EFFECT FORM APRIL 1 , 1997, WHICH WAS AFTER THE INSERTION OF CLAUSE (IIIB) IN S ECTION 28 ; SECTION 28(IIIB) REFERS TO CASH ASSISTANCE RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT PURSUANT TO A SCHEME O F THE GOVERNMENT. THE AMOUNT RECEIVED ON THE TRANSFER OF THE DEPB CREDIT IS NOT RECEIVED BY THE ASSESSEE FROM THE GOV ERNMENT PURSUANT TO A SCHEME OF THE GOVERNMENT WITHIN THE M EANING OF CLAUSE (IIIC) ; AND WHEN SECTION 28(IIID) SPECIFICA LLY DEALS WITH PROFITS REALISED ON THE TRANSFER OF THE DEPB CREDIT , IT WOULD BE IMPERMISSIBLE AS A MATTER OF FIRST PRINCIPLE TO BIF URCATE THE FACE VALUE OF THE DEPB AND THE AMOUNT RECEIVED IN EXCESS OF THE FACE VALUE OF THE DEPB. THE ENTIRETY OF THE SALE CO NSIDERATION WOULD FALL WITHIN THE PURVIEW OF SECTION 28(IIID). CONSIDERING THE FACTS OF THE CASE AND DECISION OF H ON'BLE HIGH COURT BEING DIRECT ON THE ISSUE, WE RESTORE THE ISSUE TO THE FI LE OF AO TO DECIDE DE NOVO. 16. IN THE GROUND NO.7, THE ISSUE INVOLVED IS NOT A LLOWING THE AMOUNT OF EXPORT SALES PROCEEDS REALIZED AFTER THE DUE DATE A S RECEIPT. THE ASSESSEE RECEIVED RS.92,25,020/- FROM EXPORT SALE PROCEEDS R EALIZATION AFTER DUE DATE. THE LEARNED AR SUBMITTED THAT APPLICATION FOR EXTEN SION WAS SUBMITTED WITH RBI THROUGH THE BANKER CORPORATION BANK, NOIDA AND NECESSARY EVIDENCES IN THIS REGARD WERE SUBMITTED SHOWING THAT THESE SALE PROCEEDS WERE DULY ITA NO.2195/DEL./2010 11 RECEIVED BY THE ASSESSEE. THE AUTHORITIES BELOW HA VE IGNORED EVIDENCES SUBMITTED AND DID NOT CONSIDER THE AMOUNT FOR CALCU LATING THE DEDUCTION U/S 80HHC. LEARNED AR PRAYED TO ALLOW THE DEDUCTION U/ S 80HHC ON THIS AMOUNT ALSO. 17. LEARNED DR RELIED ON THE ORDERS OF THE AUTHORIT IES BELOW AND PLEADED THAT THE AO HAS DEALT WITH THE ISSUE IN CLEAR AND U NAMBIGUOUS WORDS AND CIT (A) HAS RIGHTLY CONFIRMED THE FINDINGS OF THE AO. THE AMOUNT HAS TO BE REDUCED FROM THE EXPORT TURNOVER OF THE ASSESSEE. 18. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE FIND THAT THE ASSESSEE HAS FILED DETAILS. THE AUTHORITIES BELOW HAD NOT C ONSIDERED THE SAME. THE APPLICATION FOR EXTENSION WAS SUBMITTED TO RBI THRO UGH ITS BANKER. THE ASSESSEE HAS ALSO REALIZED THESE EXPORT PROCEEDINGS . KEEPING THESE FATS IN VIEW, WE RESTORE THIS ISSUE TO THE FILE OF THE AO T O VERIFY THE CLAIM OF THE ASSESSEE AND DECIDE AS PER LAW. 19. GROUND NO.8 IS NOT PRESSED AND THE SAME IS DISM ISSED. 20. GROUND NO.9 IS GENERAL IN NATURE AND DOES NOT R EQUIRE ANY ADJUDICATION. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2011. SD/- SD/- (I.P. BANSAL) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 30 TH DAY OF SEPTEMBER, 2011 TS ITA NO.2195/DEL./2010 12 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-IV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.