The DCIT, Circle-2, RAJKOT-GUJARAT V. Decora Cotton Exports Pvt. Ltd., RAJKOT-GUJARAT

ITA 256/RJT/2008

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0154 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-10-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 05-05-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Keywords: Retrospective amendment
• Section: 143(3); 80HHC

Judgement Text

: : IN THE INCOME TAX APPELLATE TRIBUNAL: RAJKOT BENCH: RAJKOT . .. . . . . . . .. . . . . . # # # # BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTA VA AM ITA NO. 256/RJT/2008 / ASSESSMENT YEAR 2001-02 DCIT, CIR- 2 V. DECORA COTTON EXPORTS PVT. LTD. RAJKOT. GIRISH KUNJ, 7, RANCHHOD NAGAR RAJKOT PAN: AABCD0373K DATE OF HEARING: 05.10.2012 DATE OF PRONOUNCEMENT: 30.10.2012 FOR THE REVENUE: ANKUR GARG DR FOR THE ASSESSEE: VIMAL DESAI FCA / // / ORDER . .. . . . . . /D. K. SRIVASTAVA: THE APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) ON 22-02-2008, ON THE FOLLOWING GROUNDS: (I) THE LD. CIT (A)-III, RAJKOT HAS ERRED IN LAW AN D ON FACTS IN DELETING THE DISALLOWANCE MADE ON ACCOUNT OF CLAIM OF DEDUCTION U/S.80HHC OF THE ACT IN RESPECT OF THE DEPB INCOME. (II) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A)-III, RAJKOT MAY KINDLY BE SET-ASIDE AND THAT OF THE ASSESSING OFFIC ER MAY KINDLY BE RESTORED BACK TO THE ABOVE EXTENT. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT CO MMENCED ITS BUSINESS IN THE IMMEDIATELY PRECEDING FINANCIAL YEAR 1999-2000 RELEVANT TO ASSESSMENT YEAR 2000-01. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF DYED AND PRINTED CLOTH WHICH THE ASSESSEE GETS DYED ON JOB WORK BASI S ON FABRICS PURCHASED, AS PER THE SPECIFICATION OF EXPORT ORDER. IN THE FIRST YEA R OF COMMENCEMENT OF BUSINESS, I.E., ASSESSMENT YEAR 2000-01, THE EXPORT INCENTIVE WAS E STIMATED BY THE ASSESSEE AT RS.51,16,724/- WHICH WAS REFLECTED IN THE PROFIT AN D LOSS ACCOUNT AS THE ASSESSEE HAD CARRIED OUT ALL PROCEDURAL FORMALITIES FOR GETT ING THE DEPB ENTITLEMENTS DURING THAT YEAR. IT IS CLAIMED BY THE ASSESSEE THAT IT WA S NOT CERTAIN AS TO WHETHER THE DEPB ENTITLEMENT FOR WHICH THE PROCEDURAL FORMALITI ES HAD ALREADY BEEN CARRIED OUT WOULD MATERIALIZE OR NOT IN THAT ASSESSMENT YEAR, I .E., AY 2000-01. THEREFORE, THE ASSESSEE, WHILE PREPARING THE INCOME-TAX RETURN FOR AY 2000-01, EXCLUDED THE SAID SUM OF RS.51,16,724/- FROM THE PROFITS SHOWN IN THE PROFIT & LOSS ACCOUNT AND FILED THE RETURN OF INCOME ACCORDINGLY. IN OTHER WORDS, E XPORT INCENTIVE AMOUNTING TO RS.51,16,724/- WAS EXCLUDED FROM THE PROFITS SHOWN IN THE PROFIT AND LOSS ACCOUNT 2 ITA 256/RJT/2008 FOR DETERMINING THE TOTAL INCOME EXIGIBLE TO TAX. T HE SAID RETURN OF INCOME WAS ACCEPTED BY THE DEPARTMENT WITHOUT ADJUSTMENT. 3. TURNING TO THE ASSESSMENT UNDER APPEAL, I.E., A. Y. 2001-02, THE ASSESSEE OFFERED THE SAID AMOUNT OF EXPORT INCENTIVE (RS.51, 16,724/-) FOR TAXATION. ASSESSMENT U/S 143(3) WAS COMPLETED ON 31-03-2004 I N WHICH THE ASSESSING OFFICER HELD THAT PROFIT ON SALE OF DEPB WAS NOT EL IGIBLE FOR DEDUCTION U/S.80HHC. THE AFORESAID ORDER PASSED BY THE CIT (A) WAS CHALL ENGED FIRSTLY BEFORE THE CIT(A) AND THEREAFTER BEFORE THIS TRIBUNAL. THE TRIBUNAL, BY ITS ORDER DATED 01-09-2006 IN ITA NO.565/RJT/2005, TOOK NOTE OF THE AMENDMENTS IN SECTION 80HHC BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 AND ACCORDINGLY RESTORED THE MATTER TO THE FILE OF AO TO REPROCESS THE CLAIM OF THE ASSESSEE F OR DEDUCTION U/S.80HHC IN THE LIGHT OF THE AMENDED PROVISIONS OF SECTION 80HHC. 4. PURSUANT TO THE AFORESAID ORDER PASSED BY THIS T RIBUNAL, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT U/S 143(3) R.W .S. 254 REJECTING THE CLAIM OF THE ASSESSEE, WITH THE FOLLOWING OBSERVATIONS:- I HAVE CAREFULLY CONSIDERED THE CONTENTION PUT FOR TH BY THE ASSESSEE. THE SAME IS NOT ACCEPTABLE BECAUSE, IN RESPECT OF DEPB/ DFRC, THE ITAT HAS CLEARLY DIRECTED TO REPROCESS THE CLAIM OF THE ASSESSEE IN THE LIGHT O F AMENDMENT BY TAXATION LAWS (AMENDMENT) ACT, 2005. ACCORDINGLY, AS PER THE DIRECTION OF HONBLE ITAT, RAJKOT BENCH, RA JKOT, THE ALLOWABLE DEDUCTION ON DEDUCTION U/S. 80 HHC OF THE ACT IS WO RKED OUT AS PER THE AMENDED PROVISIONS OF THE I.T. ACT, 1961. IT IS PER TINENT TO MENTION HERE THAT TO GET THE BENEFIT OF THE DEPB THE ASSESSEE HAS TO FURNISH EVIDENCES IN RESPECT OF THE CONDITIONS LAID DOWN IN THE FOURTH P ROVISO TO THE SECTION 80HHC(3) OF THE ACT. IN THIS REGARD, THE ASSESSEE V IDE THIS OFFICE LETTER DATED 14.12.2006 HAS BEEN REQUESTED TO FURNISH THE EVIDEN CES AS LAID DOWN IN THE FORTH PROVISO OF SECTION 80 HHC(3) OF THE ACT AS TH E EXPORT TURNOVER OF THE BUSINESS IS MORE THAN RS. 10 CRORE. HOWEVER, THE AS SESSEE HAS FAILED TO PRODUCE SUFFICIENT EVIDENCE TO FULFILL THE CONDITIO NS LAID DOWN IN THE FORTH PROVISO TO THE SECTION 80 HHC(3) OF THE ACT AND HEN CE, THE ASSESSEE IS NOT LIABLE FOR DEDUCTION ON THE AMOUNT OF PROFIT EARNED ON SALE OF DEPB LICENCE. IN THIS CASE THE ASSESSEE HAS SHOWN INCOME BY WAY O F SALE OF DEPB OF RS.51,16,784/- IN THE COMPUTATION OF RETURN OF INCO ME OF THE EARLIER YEAR. ON THE BASIS OF RECEIPT BASIS AND CLAIMED THE DEDUCTIO N U/S. 80 HHC OF THE ACT ON THE DEPB ALSO. OTHER EXPORT BENEFIT CLAIMED BY THE ASSESSEE IS DUTY DRAW BACK OF RS.75,12,771/- SHOWN IN THE PROFIT & L OSS ACCOUNT, DURING THE YEAR UNDER CONSIDERATION. AS THE ISSUE OF DEPB IS I NVOLVED IN THIS CASE AND THE EXPORT TURNOVER DURING THE YEAR UNDER CONSIDERA TION IS MORE THAN RS.10 CRORE. HOWEVER, THE ASSESSEE HAS FAILED TO PRODUCE THE SUFFICIENT EVIDENCES AS MENTIONED IN THE FOURTH PROVISO TO SECTION 80 HH C (3) OF THE ACT AND 3 ITA 256/RJT/2008 HENCE THE DEPB IS NOT ALLOWABLE FOR THE CALCULATION OF THE EXPORT INCENTIVE FOR DEDUCTION U/S. 80 HHC OF THE ACT. 5. ON APPEAL, THE LD. CIT (A) HAS ALLOWED THE CLAIM OF THE ASSESSEE, WITH THE FOLLOWING OBSERVATIONS: 3.2 I HAVE CAREFULLY CONSIDERED THE FINDING GI VEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLA NT. IN VIEW OF THE RETROSPECTIVE AMENDMENT IN SECTION 80HHC(3) OF THE I.T. ACT, 1961, THE HONBLE ITAT HAS SET ASIDE THE ASSESSMENT TO THE FI LE OF THE ASSESSING OFFICER TO DECIDE THE MATTER OF ELIGIBILITY OF DEPB FOR 80HHC DEDUCTION AFRESH. IT IS NOTICED THAT THE DEPB INCENTIVE OF R S.5116724/- PERTAINS TO THE F.Y. 1999-2000. AS PER THE DETAILS FILED BY THE AP PELLANT, THE DEPB AMOUNT WAS REALIZED STARTING FROM 11-9-99 TO 28-3-2000 AND ACCORDINGLY SAME PERTAINS TO THE F.Y. 1999-2000 AND A.Y. 2000-01 REC EIVED IN THE A.Y. IN QUESTION. IT IS ALSO NOTICED FROM THE COPIES OF THE ACCOUNTS AND BALANCE FOR THE A.Y. 2000-01 THAT IN PARTICULAR THAT YEAR, THE TURNOVER OF THE APPELLANT WAS LESS THAN RS.10 CRORES. THE APPELLANT HAS MADE THI S SUBMISSION BEFORE THE ASSESSING OFFICER ALSO AND SAME APPEARS ON PAGE-4 O F THE ASSTT. ORDER. THEREFORE, AS PER PROVISIONS OF SEC. 80HHC(3) OF TH E I.T. ACT, 1961, THE CONDITIONS AS MENTIONED BY THE ASSESSING OFFICER FO R DISALLOWING THE DEDUCTION ON DEPB INCOME UNDER 80HHC WILL NOT APPLY . CONSIDERING THE APPELLANTS SUBMISSION AND KEEPING IN VIEW THAT EXP ORT TURNOVER TO WHICH DEPB INCOME PERTAINS WAS NOT EXCEEDING RS.10 CRORES DEDUCTION ON DEPB CLAIM OF THE APPELLANT IS ALLOWABLE. 6. AGGRIEVED BY THE ORDER PASSED BY THE CIT(A), THE DEPARTMENT IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE WAS CLAI MING IMPUGNED DEDUCTION U/S.80HHC IN THE YEAR UNDER APPEAL, I.E., A.Y. 2001 -02 IN WHICH ITS EXPORT TURNOVER WAS MORE THAT RS.10 CRORES. IN THIS CONNECTION, HE REFERRED TO THE PROVISIONS CONTAINED IN THIRD PROVISO TO SUB-SECTION (3) OF SE CTION 80 HHC ACCORDING TO WHICH AN ASSESSEE HAVING EXPORT TURNOVER EXCEEDING RS.10 CRORES DURING THE PREVIOUS YEAR IN WHICH THE DEDUCTION IS CLAIMED WAS REQUIRED TO FULFILL BOTH THE CONDITIONS STIPULATED IN CLAUSES (A) AND (B) OF THIRD PROVISO TO SUB-SECTION (3) OF SECTION 80HHC CUMULATIVELY. HE FURTHER SUBMITTED THAT THE ASSESSE E DID NOT FULFILL THOSE CONDITIONS IN THE ASSESSMENT YEAR UNDER APPEAL AND THEREFORE I T WAS NOT ELIGIBLE TO CLAIM THE IMPUGNED DEDUCTION IN THE YEAR UNDER APPEAL AS ITS TURNOVER EXCEEDED RS.10 CRORES. REFERRING TO THE ORDER PASSED BY THE CIT (A ), THE LD. CIT-DR SUBMITTED THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN ALLOWING THE I MPUGNED DEDUCTION IN THE YEAR UNDER APPEAL, I.E., A.Y. 2001-02, ON THE GROUND THA T THE EXPORT TURNOVER OF THE ASSESSEE DID NOT EXCEED RS.10 CRORES IN THE IMMEDIA TELY PRECEDING YEAR, I.E., A.Y. 2000-01. HE CONTENDED THAT THE ASSESSEE WAS CLAIMIN G THE IMPUGNED DEDUCTION IN 4 ITA 256/RJT/2008 THE ASSESSMENT YEAR UNDER APPEAL AND THEREFORE THE QUANTUM OF EXPORT TURNOVER WAS REQUIRED TO BE SEEN WITH REFERENCE TO THE ASSES SMENT YEAR IN WHICH THE IMPUGNED DEDUCTION WAS BEING CLAIMED AND NOT WITH R EFERENCE TO EARLIER ASSESSMENT YEAR. 7. IN REPLY, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FILED A COPY PF JUDGMENT DATED 02-07-2012 DELIVERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN AVANI EXPORTS V. CIT, [2012] 23 TAXMANN.COM 62 (GUJ .) IN WHICH IT HAS BEEN HELD THAT THE CONDITIONS STIPULATED IN THIRD AND FOURTH PROVISO TO SUB-SECTION (3) OF SECTION 80HHC WOULD OPERATE PROSPECTIVELY AND NOT RETROSPEC TIVELY. ACCORDING TO HIM, BOTH THE CONDITIONS STIPULATED IN CLAUSES(A) AND (B) OF SUB-SECTION (3) OF SECTION 80HHC WOULD APPLY PROSPECTIVELY AND NOT RETROSPECTIVELY A ND THEREFORE THE ASSESSEE WAS NOT REQUIRED TO FULFILL THEM IN THE YEAR UNDER APPE AL. HE CONTENDED THAT THE ASSESSEE WAS ENTITLED TO THE IMPUGNED DEDUCTION BY VIRTUE OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN AVANI EXPORTS (SUPRA). 8. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. THE LD. CIT-DR IS RIGHT IN HIS SUBMISSION THAT THE REQUIREMENT OF QUANTUM OF EXPORT TURNOVER HAS TO BE FULFILLED IN THE YEAR IN WHICH T HE DEDUCTION IS CLAIMED AND NOT IN ANY OTHER YEAR. THIS IS QUITE EVIDENT ON BARE PERUS AL OF THIRD AND FOURTH PROVISO TO SUB-SECTION (3) OF SECTION 80HHC. THE LD. CIT (A) W AS NOT JUSTIFIED IN ALLOWING THE IMPUGNED RELIEF TO THE ASSESSEE ON THE GROUND THAT THE EXPORT TURNOVER OF THE ASSESSEE DID NOT EXCEED RS.10 CRORES IN THE PRECEDI NG ASSESSMENT YEAR. HE OUGHT TO HAVE APPRECIATED THAT THE REQUIREMENT OF QUANTUM OF EXPORT TURNOVER WAS SPECIFIC TO THE YEAR IN WHICH THE DEDUCTION WAS CLAIMED. THE ORDER OF THE CIT(A) CANNOT THEREFORE BE SUSTAINED TO THE AFORESAID EXTENT. WE ORDER ACCORDINGLY. 9. RELIANCE PLACED BY THE ASSESSEE ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN AVANI EXPORTS V. CIT ( SUPRA) CANNOT BE BRUSHED ASIDE. THE AFORESAID JUDGMENT HAS BEEN RENDERED BY THE HON BLE HIGH COURT ON 02-07- 2012. OBVIOUSLY, THE AFORESAID JUDGMENT WAS NOT AVA ILABLE TO THE CIT(A) AT THE TIME WHEN APPEAL WAS DECIDED BY HIM. IN THIS VIEW OF THE MATTER, THE ORDER OF THE CIT (A) IS SET ASIDE AND THE MATTER IS RESTORED TO HIS FILE FOR A FRESH DECISION IN CONFORMITY WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEA RING TO BOTH THE PARTIES. HE WILL KEEP IN VIEW THE JUDGMENT IN AVANI EXPORTS V. CIT, CITED SUPRA. 10. APPEAL FILED BY THE DEPARTMENT IS TREATED AS AL LOWED FOR STATISTICAL PURPOSES. ( * 30.10.2012 ( ORDER PRONOUNCED ON 30.10-2012 SD/- SD/- ( . . / T. K. SHARMA) ( .. / D. K. SRIVASTAVA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER /RAJKOT: 30-10-2012 NVA/- 5 ITA 256/RJT/2008 ( (( ( -. -. -. -. /. /. /. /. / COPY OF ORDER FORWARDED TO:- 1.2 / APPELLANT-THE DY. COMMISSIONER OF INCOME-TAX, CI R-2, RAJKOT 2 -42 / RESPONDENT-DECORA COTTON EXPORTS PVT. LTD., RAJK OT 3. 8 / CONCERNED CIT-II, RAJKOT 4. 8- / CIT (A)-III, RAJKOT 5. . -, , / DR, ITAT, RAJKOT 6. / GUARD FILE / BY ORDER TRUE COPY. SENIOR PRIVATE SECRETARY, ITAT , RAJKOT