M/s. Kitchen Express Overseas, Ahmedabad V. The Dy.CIT.,Circle-7, Ahmedabad

ITA 241/AHD/2012

• Counselvise Citation: 24120514 RSA 2012
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 30-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: VIVEK N CHAVAN
• Keywords: Retrospective amendment
• Section: 143(3); 142(1); 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI D K TYAGI JUDICIAL MEMBER AND SHRI A MOHAN ALANKAMONY - AM ITA NO.241/AHD/2012 (ASSESSMENT YEAR:-2001-02) M/S KITCHEN EXPRESS OVERSEAS, 311, NR. SOLA OVER-BRIDGE, SG HIGHWAY SOLA, AHMEDABAD-380060 V/S THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-7, AHMEDABAD PAN: AACFR 3776 J [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI VIVEK N CHAVAN, AR REVENUE BY:- SHRI DINESH SINGH, SR. DR DATE OF HEARING:- 27-03-2012 DATE OF PRONOUNCEMENT:- 27-03-2012 O R D E R PER D K TYAGI (JM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER DATED 18-11-2011 PASSED BY THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD [HEREINAFTER REFERRED TO AS THE LEARNED CIT(A)] F OR ASSESSMENT YEAR (AY) 2001-02. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL READS AS UNDER:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE DISALLOWANCE OF DEDUCTION U/S 80HHC BY RS.19,98,127 /-. 2 2 2 THE FACTS OF THE CASE AS EMERGED FROM THE ASSESSM ENT ORDER PASSED U/S 254 READ WITH SECTION 143(3) OF THE ACT ON 09-11-2009 ARE AS UNDER:- 'IN THIS CASE ASSESSMENT WAS FINALIZED U/S. 143(3) OF THE ACT ON 30/03/2004 AT AFTER DISALLOWING OF DEDUCTION U/S. 8 0HHC ON INCOME OF RS.21,61,947/-JROM SALE OF DEPB LICENSE. ASSESSMENT WAS COMPLETED AT THE ASSESSED INCOME OF RS.65,63,827/- AGAINST TH E RETURNED INCOME OF RS.45,65,700/-. INCOME FROM SALE OF DEPB LICENSE WAS EXCLUDED FROM COMPUTATION OF DEDUCTION U/S. 80HHC IN AS THE DEPB LICENSE IS ISSUED UNDER FOREIGN TRADE (DEVELOPMENT AND REGULAT ION) ACT, 1992 HENCE, THIS LICENSE IS NOT COVERED U/S. 28(IIIA) OF THE ACT AND ACCORDINGLY NOT ENTITLED FOR DEDUCTION AS PER PROVI SO TO SUB SECTION (3) OF SECTION 80HHC. 2 AGAINST THIS DISALLOWANCE, ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE CIT(A) WHO HAS ALLOWED THE ASSESSEE 'S A PPEAL ON THE ISSUE, OBSERVING THAT THE RATIO DECIDED IN THE CASE OF PRA TIBHA SYNTEX LTD., DEPB LICENSES ARE COVERED UNDER THE PROVISIONS OF S ECTION 28(IIIA) OF THE ACT. 3 DEPARTMENT HAS FILED SECOND APPEAL BEFORE THE ITA T AGAINST THE DECISION OF DISALLOWANCE HON'BLE ITAT VIDE IT A NO. 3928/AHD/2004 DATED 12/08/2008 HAS SET ASIDE THE ISSUE ALONG WITH THE OTHER APPEALS ON THE IDENTICAL ISSUE, WITH REGARD TO ISSUE OF TRE ATMENT TO BE GIVEN TO DEPB LICENSE BENEFIT BY THE ASSESSEE, HOLDING THAT 'AS THE AMENDMENTS WITH RETROSPECTIVE EFFECT AND TH E ISSUES IS TO BE PROCESSED AFRESH IN ACCORDANCE THEREWITH AND COMPUTATION OF DEDUCTION UNDER SECTION 80HHC(3), WITH RESPECT T HERETO. WE, THEREFORE, IN THE INTEREST OF JUSTICE SET ASIDE ASS ESSMENT ON THIS ISSUE IN ALL THESE APPEALS TO EXAMINE THE CLAIM OF THE ASSESSEE WITH REGARD TO CONDITIONS LAID DOWN FOR CLAIMING DE DUCTION UNDER SECTION 28 AND 80HHC (3) BY VARIOUS PROVISION S ADDED TO SECTION 80HHC BY THE SAID FINANCE ACT, 2005. ACCORD INGLY, ALL THESE APPEALS ARE SET ASIDE BACK TO THE FILE OF A. O. WITH THIS DIRECTION. ' 4 ACCORDINGLY, WITH A VIEW TO FINALIZE THE SET ASID E ASSESSMENT, A NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 28/01/2 009. ANOTHER NOTICE 3 3 U/S. 142(1) WAS ALSO ISSUED ON 06/10/2009, CALLING CERTAIN INFORMATION IN SUPPORT OF ASSESSEE'S CLAIM OF DEDUCTION U/S. 80 HHC(3) OF THE ACT. 5 IN RESPONSE TO THE SAID NOTICE, SHRI HIREN S. PAT EL, ARTICLE C. A. FROM B. K. PATEL & CO. DULY AUTHORIZED ATTENDED FRO M TIME TO TIME AND THE CASE WAS HEARD. DURING THE YEAR UNDER CONSIDERA TION, ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT S OF SPICES, GROCERY &FOOD STUFF. TOTAL RECEIPT OF THE BUSINESS FROM THE BUSINESS HAS BEEN SHOWN AT RS.13,38,65,643/-AND G. P. DECLAR ED AT RS.2,99,28,255/- AGAINST TOTAL TURNOVER WHICH COMES TO 22.36%. 6 DETAILS HAVE BEEN CALLED FOR WITH REGARD TO THE A SSESSEE'S CLAIM FOR DEDUCTION U/S. 80HHC(3) IN VIEW OF THE AMENDED SECTION 80HHC(3) OF THE ACT, AND PROVISIONS BELOW THIS SECT ION, HAVE BEEN PRODUCED AND VERIFIED. ASSESSEE WAS ASKED TO FURNIS H DETAILS WITH EVIDENCES AS TO HOW DEDUCTION U/S. 80HHC ALLOWABLE. ASSESSES VIDE ITS LETTER DATED 28/10/2009 HAS FURNI SHED AS UNDER: 'WE ARE IN RECEIPT OF YOUR OFFICE LETTER REFERRED A BOVE ASKING US TO SUBMIT THE DETAILS CALLED FOR THEREIN. IN THIS CONNECTION WE HAVE DO SUBMIT THAT WE HAVE C LAIMED THE ELIGIBLE DEDUCTION U/S 80HHC FULFILLING THE CONDITION LAID D OWN UNDER THE 3 AND 4 PROVISO TO SUB SECTION 3 OF SECTION 80HHC. WE ARE SUBMITTING HEREWITH LEDGER ACCOUNT OF DEPB SALE AND ALSO COPIE S OF 3 TO 4 BILL OF DEPB SALE FOR YOUR KIND REFERENCE. IN THIS CONNECTI ON WE HAVE FURTHER TO SUBMIT THAT WE HAVE EXCLUDED 90% OF PROFIT OF DE PB SALES FROM THE WORKING OF TOTAL PROFIT OF THE BUSINESS ELIGIBLE FO R DEDUCTION U/S 80HHC. COPY OF WORKING OF IT IS ALSO ATTACHED HEREW ITH FOR YOUR KIND REFERENCE.' ASSESSEE'S REPLY HAS BEEN CONSIDERED CAREFULLY WHIC H IS FOUND NOT CONVINCING FACTUALLY AND LEGALLY. 6.1 SECTION 80HHC HAS BEEN AMENDED WITH THE RETROSP ECTIVE EFFECT AND FOR THIS PURPOSE, SUB SECTION (3) OF THIS SECTI ON WILL APPLIED ALONG WITH ITS PROVISIONS SECTION. AS PER THIRD AND FOURT H PROVISIONS 'PROVIDED THAT IN THE CASE OF AN ASSESSEE HAVING EX PORT TURNOVER EXCEEDING RUPEES TEN CRORES DURING THE PREVIOUS YEA R, THE 4 4 PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF THIS SUB SECTION OR AFTER GIVING EFFECT TO THE FIRS T PROVISO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOU NT WHICH BEARS TO NINETY PERCENT OF ANY SUM REFERRED TO IN C LAUSE (IIID) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNO VER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E ASSESSEE, IF THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVIDENCES TO PROVE THAT:- (A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAW BACK OR THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DU TY REMISSION SCHEME; AND (B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUS TOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE U NDER THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DU TY REMISSIONS SCHEME: WHERE AS IN THE FOURTH PROVISO TO SECTION 80HHC (3) , 'PROVIDED FURTHER THAT IN THE CASE OF AN ASSESSEE H AVING EXPORT TURNOVER EXCEEDING RUPEES TEN CRORES DURING THE PRE VIOUS YEAR, THE PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF THIS SUB SECTION OR AFTER GIVING EFFECT TO THE F IRST PROVISO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO NINETY PERCENT OF ANY SUM REFERRED TO IN C LAUSE (IIIE) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNO VER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E ASSESSEE, IF THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVIDENCES TO PROVE THAT:- (A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAW BACK OR THE DUTY FREE REPLENISHMENT CERTIFICATE, BEING THE DUTY REMISSION SCHEME; AND (B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE U NDER THE DUTY FREE REPLENISHMENT CERTIFICATE, BEING THE DUTY REMISSION SCHEME: 5 5 6.2 IT IS THE CLEAR FACT THAT THE ASSESSEE IS HAVIN G EXPORT TURNOVER IN EXCESS OF RUPEES TEN CRORES AND THEREFORE, THE ASSE SSEE HAS TO FULFILLED BOTH THE CONDITIONS PROVIDED UNDER THE THIRD OR FOU RTH PROVISO BELOW THE SUB SECTION (3) OF SECTION 80HHC OF THE ACT, IN VIEW OF THE AMENDED COME IN TO FORCE BY FINANCE ACT 2005, WITH RETROSPECTIVE EFFECT IN THE SECTION. ON PERUSAL OF THE ASSESSEE'S REPLY THERE IS NOTHING EXCEPT SOME DEPB LICENSE BILLS AND COPY OF LEDGER A CCOUNT OF DEPB. ASSESSEE HAS ABSOLUTELY FAILED TO PRODUCE NECESSARY AND SUFFICIENT EVIDENCES IN TERMS OF THE PROVISION OF THIS SECTION , WHETHER THE FIRM- HAD AN OPTION TO CHOOSE EITHER DUTY DRAWBACK OF THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REPLENISHMENT SCHE ME WHITE MAKING EXP6RTS. THEREFORE, ASSESSEE IS SQUARELY NOT ELIGIBLE TO FURTHER INCREASE IN THE AMOUNT OF DEDUCTION COMPUTED IN TER MS OF SUB SECTION (I) OF SECTION 80HHC, WITH AN AMOUNT WHICH BEARS TO 90% OF ANY SUM REFERRED TO IN CLAUSE (HID) OF SECTION 28 I.E. INCO ME ON SALE OF DEPB LICENSE, AS THE ASSESSEE IS FAILED TO PRODUCE EVIDE NCES WITH REGARD TO BOTH THE CONDITIONS PROVIDED UNDER THE SECOND AND T HIRD PROVISO. IN VIEW OF THE ABOVE, ASSESSEE'S CLAIM U/S. 80HHC(3 ) OF THE ACT REVISED COMPUTATION OF ALLOWABLE DEDUCTION U/S. 80H HC(3) IS WORKED AS UNDER: COMPUTATION OF DEDUCTION U/S.80HHC(3) PROFIT OF THE BUSINESS RS. 2282S498/- LESS : DEPB LICENSE INCOME RS. 2161947/- -------------------- RS. 20666551/- EXPORT TURNOVER RS. 130928222/- TOTAL TURNOVER R S. 1330901691- DEDUCTION U/S. 80HHC = 20666551 X 13092822 ------------- =20330839/- 133090169 DEDUCTION ALLOWABLE IS THEREFORE, RESTRICTED TO 80% OF RS.20330839/- = RS.16264671/-.' 3 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FI LED AN APPEAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A ) HAS DECIDED THE ISSUE AS UNDER:- 6 6 3.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E AR OF THE APPELLANT HAS MADE THE WRITTEN SUBMISSION AND IT WI LL BE APPROPRIATE TO REPRODUCE BELOW THE RELEVANT PART OF THE SUBMISSION : 'THE FIRST GROUND OF APPEAL RELATES TO THE DEDUCTIO N U/S.80HHC REDUCED BY AO TO RS.1,62,64,671 AS AGAINST THE CLAI M OF THE APPELLANT AT RS.1,82,62,798. IT IS NOTICED THAT THE AO HAS RE DUCED THIS CLAIM ON ACCOUNT OF THE PROFITS OF THE BUSINESS REDUCED BY D EP B LICENSE INCOME OF RS.21,61,947. THE AO HAS ALSO OBSERVED TH AT THE APPELLANT HAD FAILED TO PRODUCE EVIDENCES WITH REGARD TO BOTH THE CONDITIONS PROVIDED UNDER SECOND AND THIRD PROVISO TO SEC. 80H HC. 3.2 THE APPELLANT BEGS TO SUBMIT THAT THE WORKING O F DEPB MADE BY AO IS NOT CORRECT BOTH ON FACTS AND IN LAW. (A) FIRSTLY, THE PROFITS OF THE BUSINESS ARE NOT TO BE REDUCED BY THE DEPB INCOME BECAUSE IN VIEW OF CLAUSE 28(IIIE) INSE RTED BY TAXATION LAWS (AMENDMENT) ACT, 2005, W.E.F. 1.4.2001 THE PRO FIT ON TRANSFER OF DEPB LICENSE IS PART OF THE PROFIT AND GAINS CHARGE ABLE U/S. 28 OF THE ACT. THE AO HAS ALSO FAILED TO APPRECIATE THAT THE FOURTH PROVISO TO SEC. 80HH(3) INSERTED BY THE SAID ACT, W.E.F. 1.4.1 998 ITSELF PROVIDES THAT THE PROFITS AS COMPUTED UNDER THE EARLIER CLAU SES OF THE SUB- SECTION (3) SHALL BE FURTHER INCREASED BY 90% OF TH E PROFIT ON SALE OF DEPB LICENSE ON PRO-RATA BASIS TO THE TURNOVER. IN VIEW OF THE AFORESAID UNAMBIGUOUS AND CLEAR POSI TION IN LAW, THE 90% OF DEPB PROFIT OF RS.21,61,947 WHICH COMES TO R S.19,45,752 WAS REQUIRED TO BE REDUCED FROM THE PROFITS OF THE BUSINESS. HOWEVER, AO HAS REDUCED THE PROFIT BY THE ENTIRE DE PB LICENSE INCOME OF RS.21,61.,947. .......................... .....AO WAS NOT JUSTIFIED IN REDUCING PROFIT OF THE BUSINESS BY RS.21,61,947 AND ALLOWED THE DEDUCTION U/S.80HHC AT A REDUCED AMOUNT. 3.3 DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE CASE WAS SET ASIDE BY H ON'BLE IT AT TO THE FILE OF THE A. O. TO CONSIDER THE ISSUE OF TREATMEN T TO BE GIVEN DEPB LICENSE BENEFIT EARNED BY THE APPELLANT DURING THE YEAR. THE A. O. AFTER TAKING INTO ACCOUNT THE RETROSPECTIVE AMENDMENT MAD E IN THE PROVISIONS OF SECTION 80HHC(3) HAS HELD THAT THE AP PELLANT WAS NOT 7 7 ELIGIBLE FOR DEDUCTION ON SALE OF DEPB LICENSE AS C LAIMED BY HIM IN THE RETURN. THE APPELLANT HAS RELIED ON THE DECISION OF SPECIAL BENCH OF THE ITAT AT MUMBAI IN THE CASE OF TOPMAN EXPORTS [318ITR (AT ) 87] HOWEVER, THE RECENT DECISIONS OF BOMBAY HIGH COURT IN THE CASE OF KALPATRU COLOURS AND CHEMICALS [192 TAXMAN 435] AND ALSO THE DECISION OF HON'BLE GUAJRAT HIGH COURT IN THE CASE OF RINKESH EXPORTS (TAX APPEAL NO. 507 OF 2010) HAVE CLEARLY LAID DOWN THE LAW IN RESPECT OF DEDUCTION ON SALE OF DEPB LICENSE. THE D ECISION OF THE SPECIAL BENCH OF MUMBAI, ITAT HAS BEEN REVERSED. TH E HON'BLE GUJARAT HIGH COURT HAS CONSIDERED ALMOST ALL THE JU DGMENTS ON THE ISSUE AND HAS HELD THAT NO DEDUCTION U/S. 80HHC WOU LD BE AVAILABLE ON SALE OF DEPB LICENSE. THE HON'BLE COURT HAS ALSO TAKEN INTO ACCOUNT THE DECISION OF HON'BLE SUPREME COURT IN LI BERTY INDIA ON THE ISSUE. THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THAT OF THE CASES DECIDED BY HON'BLE GUJARAT HIGH COURT. THE APPELLAN T HAD TURNOVER OF MORE THAN 10 CRORES AND, THEREFORE, THE DECISION OF THE JURISDICTIONAL HIGH COURT WOULD THEREFORE BE SQUARELY APPLICABLE O N THE PRESENT CASE ALSO. THEREFORE, THE A. O. HAS RIGHTLY DISALLOWED T HE DEDUCTION ON ACCOUNT OF SALE PROCEEDS OF DEPB LICENSE TO THE APP ELLANT. THE DECISION OF THE A. O. IS UPHELD AND THE GROUND OF A PPEAL IS DISMISSED. 4 FURTHER AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. AT THE TIME OF HEA RING BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IS COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT (2012) 18 TAXMAN.COM 120 (SC) AND THEREFORE THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE AO FOR RE-CALCULATION OF CL AIM OF DEDUCTION U/S 80HHC IN ACCORDANCE WITH THE AFORESAI D DECISION. THE LEARNED DR DID NOT OBJECT TO THIS SUBMISSION MA DE BY THE LEARNED COUNSEL OF THE ASSESSEE. THEREFORE, WE REST ORE THE MATTER BACK TO THE FILE OF THE AO WITH THE DIRECTION TO DE CIDE THE SAME AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF AFORE SAID DECISION 8 8 OF THE HON'BLE SUPREME COURT IN THE CASE OF TOPAN E XPORTS (SUPRA). 5 IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTI CAL PURPOSE. ORDER PRONOUNCED IN THE COURT TODAY ON 27-03-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 27-03-2012 COPY OF THE ORDER FORWARDED TO: 1. M/S KITCHEN EXPRESS OVERSEAS, 311, NR. SOLA OVER - BRIDGE, SG HIGHWAY SOLA, AHMEDABAD-380060 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-7, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XIV, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD