TEXTRADE, MUMBAI V. DCIT CIR 21(3), MUMBAI

ITA 2266/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9534 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 26-11-2012
• Assessment Year: 1999-2000
• Appeal Filed On: 22-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Reasonable cause; Condonation of delay
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 2266/MUM/2010 ASSESSMENT YEAR : 1999-2000 ITA NO. 2267/MUM/2010 ASSESSMENT YEAR : 2001-02 M/S. TEXTRADE 10/11, SHIVAI INDL. ESTATE, 89 ANDHERI KURLA ROAD MUMBAI-400 071. PAN NO.AAAFT 1047 N VS. DY. COMMISSIONER OF INCOME TAX , CIRCLE- 21(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DILIP J. THAKKAR SHRI RAJESH P. SHAH RESPONDENT BY : SHRI MANOJ KUMAR DATE OF HEARING : 27.11.2012 DATE OF PRONOUNCEMENT : 30.11.2012 O R D E R PER RAJENDRA SINGH, AM: THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMM ON ORDER DATED 13.6.2007 OF CIT(A) FOR THE ASSESSMENT YEAR 1999-00 AND 2001-02. THE IDENTICAL DISPUTE RAISED IN THESE APPEALS IS REGARDING ALLOWABILITY OF DEDUCTION IN RESPECT OF DEPB INCOME. ITA NO. 2266 & 2267/M/10 A.Y. 99-00 &01-02 2 2. BEFORE WE PROCEED TO DEAL WITH THE ISSUE RAISED, WE HAVE TO CONSIDER THE CONDONATION OF DELAY IN FILING OF THE APP EAL. THERE IS LONG DELAY OF 937 DAYS IN FILING OF THE APPEAL FOR WHICH CO NDONATION APPLICATION HAS BEEN FILED VIDE LETTER DATED 4.3.2010 . THE ASSESSEE HAS SUBMITTED THAT ORDER OF CIT(A) HAD BEEN RECEIVED ON 2 9.6.2007. THE ASSESSEE AS PER ADVICE OF CHARTERED ACCOUNTANTS WHO WERE ATT ENDING THE MATTER HAD NOT FILED ANY APPEAL AGAINST THE ORDE R OF CIT(A). HOWEVER, LATER THE ASSESSEE APPROACHED THE COUNSEL, AND WAS ADVISED TO FILE THE APPEAL . A AFFIDAVIT TO SUBSTANTIATE THE CLAIM HAS BEEN FILED. 2.1 THE LD. AR ARGUED THAT AT THE RELEVANT POINT OF TIME WHEN THE APPEALS WERE TO BE FILED THERE WERE DECISIONS OF THE TR IBUNAL AGAINST THE ASSESSEE FOLLOWING WHICH THE ADVICE FOR NOT FILING T HE APPEAL HAD BEEN RECEIVED BY THE ASSESSEE. SUBSEQUENTLY IN THE YEAR 2009, THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN CASE OF TOPM AN EXPORTS (318 ITR 87(AT) HAD BEEN DELIVERED IN FAVOUR OF THE ASSESSEE, AND WHEN THE ASSESSEE CAME TO KNOW OF THESE DEVELOPMENTS IT HA D APPROACHED THE COUNSEL WHO THEN ADVISED TO FILE THE APP EAL AND ACCORDINGLY THE APPEAL WAS FILED ON 22.3.2010. IT WAS A LSO SUBMITTED THAT THOUGH THE DECISION OF THE SPECIAL BENCH WAS SUBSEQU ENTLY REVERSED BY THE HON'BLE HIGH COURT OF BOMBAY BUT RECEN TLY THE HON'BLE SUPREME COURT HAVE UPHELD THE VIEW TAKEN BY THE SPE CIAL BENCH. IT WAS ACCORDINGLY REQUESTED THAT IN THE INTEREST OF JUSTICE THE DELAY MAY ITA NO. 2266 & 2267/M/10 A.Y. 99-00 &01-02 3 BE CONDONED AND APPEALS MAY BE ADMITTED FOR ADJUDICATI ON ON MERIT. THE LD. DR RAISED NO SERIOUS OBJECTION IN THE MATTER. 2.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTE R CAREFULLY. THE GUIDELINES FOR DEALING WITH THE CONDONA TION APPLICATION ARE GIVEN IN THE JUDGMENT OF HON'BLE SUPREME COURT I N CASE OF COLLECTOR, LAND ACQUISITION VS MST. KATIJI (167 ITR 4 71) . IN THAT CASE THE HONBLE COURT HAVE HELD THAT THE CONDONATION APPL ICATION SHOULD BE CONSIDERED LIBERALLY TO ADVANCE THE CAUSE OF SUBSTANTI AL JUSTICE. THE HON'BLE SUPREME COURT ALSO HELD THAT WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIONS ARE PITTED AGAINST EACH OTHER, THE CAUSE OF SUBSTANTIAL JUSTICE SHOULD PREVAIL. THE CONDONATION APPLI CATION SHOULD BE CONSIDERED IN A RATIONALE COMMON-SENSE AND PRAGMATIC MANNER. IT WAS ALSO HELD BY THE HON'BLE SUPREME COURT THAT THERE COULD NOT BE ANY PRESUMPTION OF DELIBERATE DELAY OR NEGLIGENCE BY THE ASSESSEE IN FILING OF THE APPEAL BECAUSE THE LITIGANT DOES NOT STA ND TO BENEFIT BY RISKING THE DELAY AND IN FACT HE RUNS A SERIOUS RISK. FU RTHER IT IS ALSO A SETTLED LEGAL POSITION THAT ONCE THE DELAY IS FOUND TO BE BASED ON REASONABLE CAUSE, THE LENGTH OF DELAY IS IMMATERIAL IN CONSIDERING THE CONDONATION. WE HAVE TO CONSIDER THE APPLICATION OF THE ASSESSEE IN THE BACK-DROP OF ABOVE LEGAL POSITION. THE EXPLANATI ON OF THE ASSESSEE IS THAT IT HAD BEEN ADVISED BY THE CHARTERED ACCOUNTANTS AGAINST FILLING THE APPEAL. AS AT THE RELEVANT POINT OF TIME, THERE WERE DECISIONS OF ITA NO. 2266 & 2267/M/10 A.Y. 99-00 &01-02 4 THE TRIBUNAL AGAINST THE ASSESSEE, SUCH ADVICE GIVEN BY CHAR TERED ACCOUNTANTS COULD NOT BE CONSIDERED TOTALLY WITHOUT ANY B ASIS. THE DECISION OF THE SPECIAL BENCH IN THE CASE OF TOPMAN EXPO RTS (SUPRA), WHICH IS IN FAVOUR OF THE ASSESSEE IS DATED 11.8.2009. THE CASE OF THE ASSESSEE IS THAT WHEN IT CAME TO KNOW ABOUT SUCH A DECISION I T HAD APPROACHED THE COUNSEL WHO ADVISED TO FILE THE APPEAL A ND THEREAFTER THE APPEAL WAS FILED. IT MAY ALSO BE NOTED THAT THE DECISION OF THE SPECIAL BENCH WAS OVER-RULED SUBSEQUENTLY BY THE HON'BLE HIGH COURT OF BOMBAY BUT LATER THE HON'BLE SUPREME COURT DID NO T APPROVE THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY AND UPHELD T HE VIEW TAKEN BY THE SPECIAL BENCH. THIS SHOWS THAT THE ISSUE IS HIGHLY D EBATABLE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE, WE CONDONE THE DELAY IN FILING THE APPEAL AND ADMIT THE APPEAL FOR ADJUDICATION ON MERIT. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WHO IS AN EXPO RTER HAD CLAIMED DEDUCTION UNDER SECTION 80 HHC OF RS.3,51,97,298/ - FOR ASSESSMENT YEAR 1999-2000 AND RS.94,17,597/- FOR ASSESSMENT YEAR 2001-02. THE DEDUCTION CLAIMED ALSO INCLUDED DEDUCTION I N RESPECT OF DEPB INCOME. IN THE ORIGINAL ASSESSMENT, THE CLAIM OF TH E ASSESSEE HAD BEEN ALLOWED. HOWEVER SUBSEQUENTLY THE AO RE-OPENE D THE ASSESSMENT ON THE GROUND THAT IN VIEW OF THE AMENDED PR OVISIONS OF SECTION 80HHC BY TAXATION LAW AMENDMENT (2005) DEDUCTIO N CLAIMED ITA NO. 2266 & 2267/M/10 A.Y. 99-00 &01-02 5 BY THE ASSESSEE WAS EXCESSIVE. IN THE RE-ASSESSMENT, THE AO HEL D THAT THE ENTIRE RECEIPT ON SALE OF DEPB LICENSE WAS BUSINESS PRO FIT WHICH WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC. ACCORDI NGLY THE AO RE-COMPUTED THE DEDUCTION UNDER SECTION 80HHC IN REASSESSM ENT ORDER UNDER SECTION 143(3)/147. IN APPEAL CIT(A) OBSE RVED THAT TURNOVER OF THE ASSESSEE IN BOTH THE YEARS WAS MORE THAN RS.10.00 CRORE AND TWO CONDITIONS PRESCRIBED IN THE 3 RD PROVISO TO SECTION 80HHC(3) WERE NOT SATISFIED AND, THEREFORE, THE ASSESSEE WA S NOT ELIGIBLE FOR DEDUCTION IN RESPECT OF DEPB PROFIT. HE AL SO UPHELD THE VIEW OF THE AO THAT ENTIRE RECEIPT ON SALE OF DEPB LICENSE H AS TO BE CONSIDERED AS PROFIT. AGGRIEVED BY THE DECISION OF CIT(A ) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL IN BOTH THE YEARS. 4. WE HAVE HEARD BOTH PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ALLOWAB ILITY OF DEDUCTION UNDER SECTION 80HHC IN RESPECT OF DEPB INCOME. UNDER AMEND ED PROVISIONS OF SECTION 80HHC BY TAXATION LAWS (AMENDMENT) 2 005 APPLICABLE FROM 1998-99, 90% OF PROFIT ON SALE OF DEP B IS TO BE EXCLUDED FROM PROFIT OF BUSINESS AS PER EXPLANATION (BA A) AND 90% OF SUCH PROFIT IN THE RATIO OF EXPORT TURNOVER TO TOTAL TURNOVER IS REQUIRED TO BE ADDED IN TERMS OF SECOND PROVISO TO SECTION 80HHC(3). IN CASES WHERE TURNOVER EXCEEDS RS.10.00 CRORES, THE THIRD PROVIS O TO SECTION 80HHC(3) IS APPLICABLE AS PER WHICH 90% OF DEPB PROFIT I N RATIO OF ITA NO. 2266 & 2267/M/10 A.Y. 99-00 &01-02 6 EXPORT TURNOVER TO TOTAL TURNOVER CAN BE ADDED ONLY WHEN ASSESSEE HAS SATISFIED THE TWO CONDITIONS MENTIONED THEREIN I.E. , THE ASSESSEE HAD OPTION TO CHOOSE EITHER DUTY DRAWBACK OR DEPB AND RATE OF DUTY DRAWBACK CREDIT ATTRIBUTABLE TO CUSTOM DUTY IS HIGHER TH AN THE RATE OF CREDIT ALLOWABLE UNDER DEPB SCHEME. 4.1 IN CASE OF THE ASSESSEE, THE TURNOVER EXCEEDS RS.10.00 C RORES AND THE TWO CONDITIONS MENTIONED ABOVE ARE NOT SATISFIE D. AUTHORITIES BELOW HAVE NOT ALLOWED DEDUCTION UNDER SECTION 80 HHC AS THEY HAVE TREATED THE ENTIRE RECEIPT AS DEPB PROFIT. THE ISSUE H AS BEEN A HIGHLY DEBATABLE ISSUE. THE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF TOPMAN EXPORTS [318 ITR 87(AT)(BOM.)] HAD HELD THAT FACE VALUE OF DEPB HAD TO BE CONSIDERED AS BUSINESS INCOME UNDER SECTION 2 8(IIIB) AND ONLY EXCESS OF SALE PRICE OVER THE FACE VALE HAS TO BE CONSIDERED AS BUSINESS PROFIT UNDER SECTION 28(IIID) AND PROVISIONS OF SECTION 80HHC HAVE TO BE APPLIED ACCORDINGLY. THE DECISION OF THE SPECIAL BENCH WAS REVERSED BY THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF KALPATARU COLOURS & CHEMICALS (328 ITR 451) BUT RECE NTLY THE DECISION OF THE SPECIAL BENCH IN THE CASE OF TOPMAN EXPO RTS (SUPRA) HAS BEEN UPHELD BY THE HON'BLE SUPREME COURT IN THE S AME CASE IN (342 ITR 49). THEREFORE, THE DEDUCTION UNDER SECTION 8 0HHC IS REQUIRED TO BE COMPUTED IN THE LIGHT OF THE SAID JUD GMENT. WE THEREFORE, SET ASIDE THE ORDERS OF CIT(A) AND RESTORE T HE ISSUE TO THE ITA NO. 2266 & 2267/M/10 A.Y. 99-00 &01-02 7 FILE OF AO FOR RE-COMPUTATION OF DEDUCTION UNDER SECTIO N 80HHC FOLLOWING THE DECISION IN CASE OF TOPMAN EXPORTS (SUPRA) , AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2012. SD/- SD/- (V.P. RAO ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 30.11.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.