EMBLEM FASHION WEAR EXPORTS P. LTD, MUMBAI V. ITO 4(1)(4), MUMBAI

ITA 2428/MUM/2010

• Counselvise Citation: 242819914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 20-07-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 29-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Keywords: Competent authority
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO.2428/MUM./2010 (ASSESSMENT YEAR : 2003-04 ) M/S. EMBLEM FASHION WEAR EXPORTS PVT. LTD. 605, KARIM MANZIL J.S.S. ROAD, CHIRA BAZAR MUMBAI 400 002 PAN AAACE4832H .. APPELLANT V/S INCOME TAX OFFICER WARD-4(1)(4), MUMBAI .... RESPONDENT ASSESSEE BY : MR. NITESH JOSHI A/W MR. DHIREN K. RATHORE REVENUE BY : MR. T.T. JACOB DATE OF HEARING 23.6.2011 DATE OF ORDER O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL PREFERRED BY THE ASSESSEE, IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 20 TH JANUARY 2010, PASSED BY THE COMMISSIONER (APPEALS)-VIII, MUMBAI, FOR ASSESSMENT YEAR 2003-04 . M/S. EMBLEM FASHION WEAR EXPORTS PVT. LTD. 2 1. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE, A C OMPANY, IS ENGAGED IN THE BUSINESS OF EXPORT OF READYMADE GARMENTS. IT CL AIMED DEDUCTION UNDER SECTION 80HHC OF THE INCOME TAX ACT, 1961 (FOR SHOR T THE ACT ) IN RESPECT OF PROFIT FROM EXPORT OF GOODS. THE ASSESSING OFFIC ER RESTRICTED THE CLAIM FOR DEDUCTION UNDER SECTION 80HHC, ON THE GROUND THAT I N CASE OF EXPORTS MADE TO M/S. ANDREW SPORTS CLUBS INC. USA, THE SALE PROC EEDS WERE IN FACT RECEIVED BY M/S. FIRST TRADING HOUSE, CHENNAI, WHIC H IS THE SUPPLIER OF THE GOODS AND THAT THE ASSESSEE HAS ONLY ACTED AS AN IN TERMEDIARY, BY PLACING RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRI BUNAL IN M/S. HARIA EXPORTS, 112 ITD 203, AND ALSO ON THE GROUND THAT E XPORT PROCEEDINGS TO THE TUNE OF ` 41,53,901, WERE NOT REALISED ON/OR BEFORE 31 ST SEPTEMBER 2003 AND THE COMPETENT AUTHORITY HAS NOT EXTENDED THE PE RIOD OF REALISATION OF FOREIGN EXCHANGE. ON APPEAL, THE FIRST APPELLATE AU THORITY CONFIRMED THESE FINDINGS. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFO RE THE TRIBUNAL, ON THE FOLLOWING GROUNDS:- 1. THE ASSESSING OFFICER ERRED IN LAW AND ON FACTS BY REDUCING THE CLAIM OF DEDUCTION UNDER SECTION 80HHC ON THE GROU ND THAT EXPORT PROCEEDS TOTALING TO ` 24,21,160 WERE RECEIVED BY THE APPELLANTS SUPPLIER DIRECTLY ON BEHALF OF THE APPELLANT. 2. THE ASSESSING OFFICER ERRED IN LAW AND ON FACTS BY REDUCING THE CLAIM OF DEDUCTION UNDER SECTION 80HHC OF THE ACT T O THE EXTENT OF EXPORT PROCEEDS TOTALING TO ` 65,32,592 REALIZED BEYOND THE PERIOD OF SIX MONTHS, INSPITE OF THE APPELLANT HAVING MADE TH E APPLICATION REQUESTING EXTENDING OF TIME WITH THE RESPECTIVE AU THORITY. 3. BEFORE US, LEARNED COUNSEL, MR. NITESH JOSHI, APPEA RING ON BEHALF OF THE ASSESSEE, SUBMITS THAT THE ASSESSEE PURCHASED G OODS FROM M/S. FIRST TRADING HOUSE, AND EXPORTED THE SAME TO M/S. ANDREW SPORTS CLUB INC. HE SUBMITS THAT THE INVOICES OF M/S. ANDREW SPORTS CLU B INC., WERE RAISED BY THE ASSESSEE COMPANY AND COPY OF THE SAME WAS ENCLO SED. HE SUBMITS THAT THE ASSESSEE COMPANY, VIDE ITS LETTER DATED 13 TH AUGUST 2002, AUTHORIZED CANARA BANK TO COLLECT THE PAYMENT FROM M/S. ANDREW SPORTS CLUB INC., AND CREDITED THE SAME TO M/S. FIRST TRADING HOUSE. HE S UBMITS THAT THE EXPORT IS OF THE ASSESSEE COMPANY AND WHEN THE BANK REMITS TH E AMOUNT TO M/S. FIRST M/S. EMBLEM FASHION WEAR EXPORTS PVT. LTD. 3 TRADING HOUSE, ON ITS REQUEST, BENEFIT OF EXPORT SH OULD NOT BE DENIED TO THE ASSESSEE. HE SUBMITS THAT THE ASSESSEE HAS PRODUCED INVOICE RAISED, SHIPPING BILLS AND BANK REALIZATION CERTIFICATE FOR EXPORTS M/S. ANDREW SPORTS CLUB INC., AND THESE EVIDENCES GO TO PROVE THAT THE ASSESSEE IS THE EXPORTER. HE SUBMITS THAT THE BILL WAS ISSUED IN THE NAME OF ASSESSEE COMPANY, BEING THE CONSIGNOR AND THE CONVERTIBLE FOREIGN EXCHANGE BEING PROCEEDINGS OF EXPORT WERE RECEIVED BY M/S. FIRST TRADING HOUSE, O NLY AT THE INSTANCE OF THE ASSESSEE. ON THE RELIANCE PLACED ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN M/S. HARIA EXPORTS, (SUPRA). LEARNED CO UNSEL SUBMITS THAT THE TRIBUNAL, IN TURN, RELIED ON THE DECISION OF HON'BL E SUPREME COURT IN SEA PERAL INDUSTRIES V/S CIT, 247 ITR 578 AND POINTED O UT THAT IN THIS DECISION, THE FACTS WERE THAT THE ASSESSEE THEREIN WAS NOT AN ELIGIBLE EXPORT HOUSE UNDER THE IMPORT & EXPORT POLICY. IT WAS ONLY UNDER THE AGREEMENT WITH AN EXPORT HOUSE THAT SEA PERAL INDUSTRIES (SUPRA) PROC ESSED FOOD AND SOLD THE SAME ON ACCOUNT OF EXPORT HOUSE AGAINST PURCHASE OR DERS PLACED ON EXPORT HOUSE BY FOREIGN BUYERS. AS PER THE AGREEMENT, ONLY THE EXPORT HOUSE WAS ONLY ENTITLED TO THE SALE PROCEEDS. IN THESE CIRCUM STANCES, THOUGH M/S. SEA PERAL INDUSTRIES (SUPRA) REALIZED ITS SALE PROCEEDS IN FOREIGN EXCHANGE, THE HONBLE COURT HELD THAT SEA PERAL INDUSTRIES (SUPRA ) IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80HHC. HE, THUS, SUBMITS TH AT THE FACTS ARE DISTINGUISHABLE, AS IN THIS CASE, IT IS THE ASSESSE E COMPANY WHICH HAD MADE THE EXPORTS. IN M/S. HARIA EXPORTS (SUPRA), THE EXP ORT SALES MADE BY THE SISTER CONCERN WAS SOUGHT TO BE TREATED AS THE EXPO RT SALE OF THE ASSESSEE THROUGH ITS AGENT AND BENEFITS CLAIMED AND THE TRIB UNAL REJECTED SUCH A CLAIM. HENCE, HE ARGUED THAT RELIANCE WAS WRONGLY P LACED BY THE REVENUE ON THIS CASE. 4. ON GROUND NO.2, LEARNED COUNSEL SUBMITS THAT THE RE SERVE BANK OF INDIA, VIDE ITS LETTER DATED 20 TH JUNE 2008, WHICH IS PLACED AT PAGE-10 OF ASSESSEES PAPER BOOK GRANTED POST FACTO APPROVAL. HE SUBMITS THAT THIS LETTER WAS WRITTEN IN REPLY TO A LETTER DATED 18 TH JUNE 2008, ADDRESSED BY THE ASSESSEE AND THIS SHOWS THAT THE RESERVE BANK OF IN DIA GRANTED POST FACTO M/S. EMBLEM FASHION WEAR EXPORTS PVT. LTD. 4 APPROVAL. HE RELIED ON A NUMBER OF CASE LAWS FOR TH E PROPOSITION THAT AN APPLICATION FOR EXTENSION OF TIME FOR REALIZATION O F EXPORT PROCEEDS, CAN BE MADE AFTER THE EXPIRY OF SIX MONTHS FROM THE DATE O F EXPORT. HE ALSO SUBMITS THAT NON-REJECTION OF AN APPLICATION FOR POST FACTO APPROVAL IS TO BE CONSIDERED AS AN IMPLIED GRANT OF EXTENSION. THE CA SE LAWS RELIED ON BY THE ASSESSEE ARE AS FOLLOWS:- KAUSALES EXPORTS (INDIA) V/S CIT, (1999) 240 ITR 10 8 (DEL.) KAMLESH R. SHAH V/S CIT, (1999) 286 ITR 684 (BOM.) ACIT V/S BANARAS BEADS LTD., (2010) 123 ITD 110 (DEL.) 5. LEARNED DEPARTMENTAL REPRESENTATIVE, MR. T.T. JACOB , ON THE OTHER HAND, OPPOSED THE CONTENTION OF THE ASSESSEE AND SU BMITS THAT IN CASE OF PURCHASE OF GOODS FROM M/S. FIRST TRADING HOUSE, TH E ASSESSEE ONLY ACTED AS INTERMEDIARY AND THE ENTIRE EXPORT PROCEEDINGS WERE DIRECTLY RECEIVED BY M/S. FIRST TRADING HOUSE. HE POINTS OUT THAT THE AS SESSEE DID NOT MAKE ANY PAYMENT TO M/S. FIRST TRADING HOUSE, BUT MADE MERE JOURNAL ENTRIES. HE TOOK US THROUGH PAGE-4 OF THE COMMISSIONER (APPEALS )S ORDER AND EMPHASISED ON THE POINT THAT THE ENTIRE EXERCISE HA S BEEN UNDERTAKEN BY THE APPELLANT TO OBTAIN VARIOUS INCENTIVES AND BENEFITS FROM GOVT. AGENCIES. HE RELIED ON THE JUDGMENT IN M/S. HARIA EXPORTS (SUPRA ). 6. ON THE ISSUE OF APPROVAL OF COMPETENT AUTHORITY FOR EXTENSION OF TIME FOR REALIZATION OF EXPORT BILLS, HE SUBMITS THAT NO SUCH POST FACTO APPROVAL WAS OBTAINED. REFERRING TO PAGE-10 OF THE PAPER BOO K, HE SUBMITS THAT RESERVE BANK OF INDIA HAS SIMPLY STATED THAT IT HAS NOTED THE FACT OF RECEIPT OF EXPORT PROCEEDINGS BUT HAS NOT GRANTED ANY APPRO VAL. REFERRING TO VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESSEE, IN THOSE CASES, CITED COGENT REASONS FOR DEFAULTS IN REALIZING THE EXPORT PROCEE DS. HE RELIED ON THE ORDERS OF THE ASSESSING OFFICER AS WELL AS THE COMMISSIONE R (APPEALS) AND SUBMITS THAT THE SAME SHOULD BE UPHELD. M/S. EMBLEM FASHION WEAR EXPORTS PVT. LTD. 5 7. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF PAPERS O N RECORD AS WELL AS THE CASE LAWS CITED BEFORE US, WE HOLD AS FOLLOWS:- 8. ON THE FIRST ISSUE, WE FIND THAT THE ASSESSEE HAS P URCHASED GOODS ON CREDIT FROM M/S. FIRST TRADING HOUSE, AND EXPORTED THE SAME TO M/S. ANDREW SPORTS CLUB INC., BY RAISING ITS INVOICES. THE SHIP PING BILLS, ETC., ARE THAT THE ASSESSEE COMPANY. THE BANK REALIZATION CERTIFICATE ALSO CONFIRMS THAT THE EXPORTS WERE MADE BY THE ASSESSEE. THE ASSESSING OF FICER HAS NOT DISPUTED THESE DOCUMENTS. IT WAS THE COMPANY WHICH AUTHORIZE D CANARA BANK, CHENNAI, TO REMIT THE MONEY RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE TO M/S. FIRST TRADING HOUSE. THIS SOLE ACT, IN OUR OPI NION, DOES NOT LEAD TO A CONCLUSION THAT THE EXPORT HAS BEEN MADE BY M/S. FI RST TRADING HOUSE AND NOT BY THE ASSESSEE COMPANY. IT HAS BEEN SUBMITTED THAT M/S. FIRST TRADING HOUSE, HAS NOT CLAIMED ANY BENEFIT UNDER SECTION 80 HHC. IF THE ENTIRE REALIZATION AGGREGATING TO US$ 49,668 FOR EXPORT AM OUNT WAS REMITTED TO M/S. FIRST TRADING HOUSE, THEN POSSIBLY THERE IS NO EXPORT PROFIT THAT ACCRUES TO THE ASSESSEE. THE DECISION WHETHER THE EXPORT IS THAT OF THE ASSESSEE OR THAT OF M/S. FIRST TRADING HOUSE, CANNOT BE GUIDED BY THE FACT THAT THE ASSESSEE ASS INTENDED TO CLAIM CERTAIN EXPORT BENEF IT. THE ASSESSEE IS ENTITLED TO ARRANGE ITS AFFAIRS IN THE MANNER IT DE EMS FIT. BENEFITS CANNOT BE DENIED ON THE GROUND THAT THE ASSESSEE DESIRED TO D ERIVE CERTAIN EXPORT BENEFITS. THE FACT IS THAT THE ASSESSEE EXPORTED TH E GOODS AND IS ENTITLED TO THE BENEFIT. 9. COMING TO THE DECISION IN M/S. HARIA EXPORTS (SUPRA ), THE FACTS ARE ENTIRELY DIFFERENT AS THE ASSESSEE IN THAT CASE TRE ATED LOCAL SALES MADE TO A SISTER CONCERN AS ITS EXPORT SALES THROUGH AN AGENT FOR THE REASON THAT THE SISTER CONCERN SUBSEQUENTLY EXPORTED THE VERY SAME GOODS. IT IS THE CASE WHERE THE EXPORTS WERE DONE BY THE SISTER CONCERN A ND WHEREAS M/S. HARIA EXPORTS CLAIMED BENEFITS. THE FACTS IN THE CASE BEF ORE US ARE DIFFERENT AS IT IS THE ASSESSEE WHICH HAD EXPORTED THE GOODS. M/S. EMBLEM FASHION WEAR EXPORTS PVT. LTD. 6 10. COMING TO THE JUDGMENT ON SEA PERAL INDUSTRIES (SUP RA), THE EXPORTS WERE MADE BY THE ASSESSEE WHICH IS NOT AN ELIGIBLE EXPORT HOUSE. HONBLE COURT OBSERVED THAT THERE IS NO REQUIREMENT THAT TH E EXPORTER SHOULD BE THE OWNER OF GOODS. AS THE ASSESSEE IN THIS CASE WAS NO T A PARTY TO THE CONTRACT OF EXPORT, IT WAS HELD THAT THE ASSESSEE IS NOT ENT ITLED TO BENEFIT. IN THE PRESENT CASE, M/S. FIRST TRADING HOUSE, IS NOT A PA RTY TO CONTRACT OF EXPORT AND CANNOT CLAIM THE BENEFIT. THE SAME CANNOT BE SA ID, IN THE CASE OF ASSESSEE. HENCE, BOTH THE CASE LAWS ARE NOT APPLICA BLE. IN VIEW OF THE ABOVE DISCUSSION, WE AGREE WITH THE SUBMISSIONS OF THE AS SESSEE ON GROUND NO.1. CONSEQUENTLY, WE SET ASIDE THE ORDER OF THE COMMISS IONER (APPEALS) AND ALLOW THE GROUND RAISED BY THE ASSESSEE. 11. COMING TO GROUND NO.2, WE FIND THAT THE RESERVE BAN K OF INDIA, VIDE ITS LETTER DATED 20 TH JUNE 2008, HAS STATED AS FOLLOWS:- DEAR SIR, POST FACTO APPROVAL A/C M/S. EMBLEM FASHIONWEAR E XPORTS P. LTD. PLEASE REFER TO YOUR LETTER DATED JUNE 18, 2008, ON THE CAPTIONED SUBJECT. WE ADVISE THAT WE HAVE NOTED THE FACT THAT THE EXPORT PROCEEDS FOR THE FOLLOWING FIVE SHIPPING BILLS WITH AN INVOICE AMOUNT AS MENTIONED BELOW HAVE BEEN REALIZED AS FOLLOWS:- 12. THIS CAN BE COMPARED WITH THE LETTER DATED 24 TH APRIL 2006, WRITTEN BY RESERVE BANK OF INDIA TO THE CHIEF MANAGER, UNION B ANK OF INDIA, IN THE CASE OF ANOTHER ASSESSEE, WHICH READS AS FOLLOWS:- DEAR SIR, POST FACTO APPROVAL A/C PLEASE REFER TO YOUR LETTER NO.MSM.FOREX.52 DATED A PRIL 5, 2006, ON THE SUBJECT. IN THIS CONNECTION, WE ADVISE THAT WE HAVE GRANTED POST- FACTO APPROVAL FOR EXTENSION OF TIME FOR REALISATIO N OF EXPORT PROCEEDS FOR EXPORT BILL UPTO THE DATE OF REALISATION AS DET AILED BELOW:- 13. FROM THE PLAIN READING OF THE ABOVE, IT IS CLEAR TH AT IN CASE OF THESE EXPORT PROCEEDINGS, NO POST FACTO APPROVAL WAS GRAN TED BY THE RESERVE BANK M/S. EMBLEM FASHION WEAR EXPORTS PVT. LTD. 7 OF INDIA. HENCE, VARIOUS CASE LAWS RELIED UPON BY T HE ASSESSEE ARE OF NO ASSISTANCE. ON THESE FACTS, WE UPHOLD THE FINDINGS OF THE COMMISSIONER (APPEALS) THAT THERE IS NO APPROVAL AT ALL THAT HAS BEEN GRANTED BY THE RESERVE BANK OF INDIA TO THE ASSESSEE FOR REALIZING FOREIGN EXCHANGE BEYOND THE STIPULATED TIME FOR ENABLING IT TO CLAIM DEDUCT ION UNDER SECTION 80HHC. WE, THUS, UPHOLD THE ORDER PASSED BY THE COMMISSION ER (APPEALS) AND DISMISS THE GROUND RAISED BY THE ASSESSEE. 14. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.8.2011 SD/- D.K. AGARWAL JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 12.8.2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, F BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI