Associated Dyestuff Pvt.Ltd., Ahmedabad V. The ACIT.,Circle-1, Ahmedabad

ITA 2622/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9732 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-07-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 21-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings
• Section: 80HHC; 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .. , ( .) , BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.2622/AHD/2011 ( / ASSESSMENT YEAR : 2003-04) ASSOCIATED DYESTUFF PVT.LTD. PLOT NO.A-1/5, GIDC ESTATE PHASE I, NR.SHAH TEXTILE VATVA, AHMEDABAD / VS. THE ACIT CIRCLE-1 AHMEDABAD % & ./ ./ PAN/GIR NO. : AACCA 4885 C ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) %( + / APPELLANT BY : MS.URVASHI SHODHAN, A.R. )*%( , + / RESPONDENT BY : SHRI SANTOSH KARNANI, SR.DR -. , /& / DATE OF HEARING 02/07/2015 0123 , /& / DATE OF PRONOUNCEMENT 17/07/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-6, AHMEDABAD (CIT(A) IN SHORT) DATED 17/08/2011 PERTAINING TO ASSESSMENT Y EAR (AY) 2003-04. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL:- 1. LD.CIT(A) ERRED IN LAW AND IN FACTS IN CONFIRMING THE ERRONEOUS ORDER OF THE LD.AO HOLDING THAT THE DEDUCTION UNDER S.80HHC WAS ITA NO.2622/AHD /2011 ASSOCIATED DYESTUFF PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 2 - TO BE COMPUTED AT NIL AND NOT GRANTING DEDUCTION OF RS.38,08,898/- UNDER S.80HHC AS COMPUTED BY THE APPELLANT. 2. THE LD. CIT(A) ERRED BOTH IN LAW AND ON FACTS IN HO LDING THAT THE APPELLANT DID NOT SATISFY THE CONDITIONS AS REQUIRE D BY THE PROVISIONS OF S.80HHC OF THE ACT. THE LD.CIT(A) FAILED TO APP RECIATE THAT OVERALL COMPUTATION OF DEDUCTION UNDER S. 80HHC WIL L NOT BE DIFFERENT UNDER THE JUDGMENTS RENDERED IN THE CASE OF TOPMAN EXPORTS AND KALPATARU COLOURS AND CHEMICALS CASE AS SPECIFICALLY CONTENDED IN GROUND NO:4 BEFORE LD.CIT(A). IT BE S O HELD NOW AND THE DEDUCTION AS CLAIMED AS PER CA CERTIFICATE IN F ORM NO: 10CCAC BE ALLOWED. 3. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE APPELLANT SATISFIED ALL THE C ONDITIONS OF AMENDED PROVISIONS OF S. 80HHC AND WAS ELIGIBLE FOR DEDUCTION COMPUTED AT RS.38,08,898/-. IT BE SO HELD NOW. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LD.CIT(A) ERRED IN CONFIRMING THE ORDER OF THE LD.AO WHICH WAS AGAINST THE SPECIF IC DIRECTION OF THE HONBLE INCOME TAX APPELLATE TRIBUNAL WHICH REM ANDED THE MATTER WITH A DIRECTION TO ALLOW THE CLAIM AS PER P ARA 9 OF ITS ORDER. NOT FOLLOWING THE SPECIFIC DIRECTION OF THE TRIBUNA L IS AGAINST THE JUDICIAL DISCIPLINE. IT BE SO HELD NOW. 5. THE REVISED COMPUTATION UNDER S.80HHC BEING CORRECT LY MADE, THE SAME OUGHT TO HAVE BEEN ACCEPTED BY BOTH THE AUTHOR ITIES BELOW. THE SAME BE DIRECTED TO BE ACCEPTED NOW. 6. THE ORDER PASSED BY THE LD.CIT(A) IS ILLEGAL, AND B AD IN LAW. 7. LEVY OF INTEREST U/S.234A, 234B, 234C AND 234D OF T HE ACT IS UNJUSTIFIED, SINCE THE DISALLOWANCES ARE BASED ON R ETROSPECTIVE AMENDMENTS. 8. INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ARE UNJUSTIFIED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE T IME OF OR BEFORE THE HEARING OF THE APPEAL. ITA NO.2622/AHD /2011 ASSOCIATED DYESTUFF PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 3 - 2. BRIEFLY STATED FACTS ARE THAT THIS IS SECOND ROU ND OF LITIGATION. IN THE EARLIER ROUND, THE TRIBUNAL (ITAT C BENCH AH MEDABAD) VIDE ITS ORDER DATED 30/10/2009 WAS PLEASED TO DIRECT THE AO TO COMPUTE DEDUCTION U/S.80HHC OF THE INCOME TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) IN ACCORDANCE WITH THE DECISION OF ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF TOPMAN EXPORTS VS. ITO REPOR TED AT (2009) 318 ITR (A.T.) 87 (MUM.)[SPECIAL BENCH]. IN PURSUANCE TO THE ORDER OF THE TRIBUNAL, THE AO COMPUTED THE DEDUCTION ALLOWABLE U /S.80HHC TO NIL. THE ASSESSEE FEELING AGGRIEVED BY THE ORDER OF THE AO, PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS AND FOLLOWING THE JUDGEMENT OF HONBLE HIGH COURT OF BO MBAY IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS REPORTED AT (2010) 328 ITR 451(BOMBAY HIGH COURT), DISMISSED THE APPEAL OF THE ASSESSEE. NOW, THE ASSESSEE IS FURTHER IN APPEAL BEFORE US. 3. GROUND NOS.1 TO 5 ARE INTER-CONNECTED AND, THERE FORE, THE SAME ARE BEING DECIDED TOGETHER. THE LD.COUNSEL FOR THE ASS ESSEE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE LD.CIT(A) AND S UBMITTED THAT THE AO GROSSLY ERRED IN DISALLOWING THE CLAIM OF DEDUC TION U/S.80HHC(3) OF THE ACT AMOUNTING TO RS.38,08,898/-. THE LD.COUNSE L FOR THE ASSESSEE FURTHER SUBMITTED THAT THE AO DECLINED THE CLAIM OF THE ASSESSEE ON THE BASIS THAT THE EXPORT TURNOVER OF ASSESSEE IS MORE THAN RS.10 CRORES. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE E ARLIER ROUND OF ITA NO.2622/AHD /2011 ASSOCIATED DYESTUFF PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 4 - LITIGATION, THIS TRIBUNAL WAS PLEASED TO RESTORE TH E MATTER BACK TO THE FILE OF AO TO COMPUTE THE DEDUCTION U/S.80HHC OF THE ACT , 1961 IN ACCORDANCE WITH THE DECISION OF THE ITAT, SPECIAL B ENCH, MUMBAI RENDERED IN THE CASE OF TOPMAN EXPORTS VS. ITO(SUPR A). THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF AVANI EXPORTS VS. CIT REPORTED AT 348 I TR 391(GUJ.) HAS QUASHED THE AMENDMENT TO THE EXTENT THAT THE OPERAT ION OF THE IMPUGNED PROVISION SHOULD BE GIVEN EFFECT FROM THE DATE OF A MENDMENT AND NOT IN RESPECT OF EARLIER ASSESSMENT YEARS OF THE ASSESSEE WHOSE EXPORT TURNOVER IS ABOVE RS.10 CRORES. SHE SUBMITTED THAT THIS JUD GMENT OF THE HONBLE HIGH COURT OF GUJARAT HAS BEEN FURTHER AFFIRMED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. AVANI EXPORTS REPORTED AT (2015) 58 TAXMANN.COM 100(SC) BY HOLDING THAT THE CASES OF EX PORTERS HAVING A TURNOVER BELOW RS.10 CRORES AND THOSE ABOVE RS.10 C RORES WOULD BE TREATED SIMILARLY DURING PERIOD PRIOR TO AMENDMENT. 3.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS NO INFIRMITY IN T HE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT DIRECTION OF THE HONBLE TRIBUNAL WAS CLEAR TO COMPUTE THE DEDUCTION IN ACCORDANCE WI TH THE DECISION OF THE SPECIAL BENCH OF THE MUMBAI TRIBUNAL RENDERED I N THE CASE OF TOPMAN EXPORTS VS. ITO(SUPRA). ITA NO.2622/AHD /2011 ASSOCIATED DYESTUFF PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 5 - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE TRIBUNAL (ITAT C BENCH AHMEDABAD ) IN ITA NO.776/AHD/2007 FOR Y 2003-04 (ASSESSEES OWN CASE) VIDE ITS ORDER DATED 30/10/2009 WAS PLEASED TO RESTORE THE ISSUE I N RESPECT OF DEDUCTION U/S.80HHC OF THE ACT, BY OBSERVING AS UNDER:- 9. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF TH E TRIBUNAL, WE HOLD THAT PROFIT ELEMENT ON DEPB LICENCE WILL BE COVERED BY SECTION 28(IIID) AND, ACCORDINGLY, BY THIRD PROVISO TO SECTION 80HHC (3) OF THE I.T.ACT, 1961 AS THE TURNOVER OF THE ASSESSEE EXCEEDS RS.10 CRORES. THIS AMOUNT SHALL BE EXCLUDED FOR THE PURPOSE OF COMPUTING DEDU CTION U/S.80HHC OF THE I.T.ACT, 1961, IF CONDITION LAID DOWN IN THAT P ROVISO ARE NOT SATISFIED. THE FACE VALUE OF THE DEPB LICENCE WILL BE COVERED U/S.28(IIIB) OF THE I.T.ACT, 1961 AND, THEREFORE, 90% THEREOF WOULD BE ADDED TO THE EXPORT PROFITS AS PER FIRST PROVISO TO SECTION 80HHC(3) OF THE I.T.ACT.1961. 10. IN ORDER TO COMPUTE DEDUCTION U/S.80HHC OF THE I.T.ACT, 1961 IN ACCORDANCE WITH THE DECISION OF THE SPECIAL BENCH I N THE CASE OF M/S.TOPMAN EXPORTS (SUPRA), WE RESTORE THE MATTER T O THE FILE OF ASSESSING OFFICER. 4.1. THERE IS NO DISPUTE WITH REGARD TO THE FACT TH AT THE DECISION OF THE SPECIAL BENCH RENDERED IN THE CASE OF TOPMAN EXPORT S VS. ITO(SUPRA) HAS BEEN UPHELD BY THE HONBLE SUPREME COURT. TH EREFORE, THE ISSUE REMAINS TO BE EXAMINED WHETHER THE AO HAS COMPUTED THE DEDUCTION AS PER THE DECISION OF THE SPECIAL BENCH RENDERED IN T HE CASE OF TOPMAN EXPORTS(SUPRA). THE CONTENTION OF THE LD.COUNSEL F OR THE ASSESSEE IS THAT THE COMPUTATION OF PROFIT OF THE BUSINESS AS PER EXPLANATION(BAA) OF ITA NO.2622/AHD /2011 ASSOCIATED DYESTUFF PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 6 - SECTION 80HHC, WHETHER MADE ON THE BASIS OF THE JUD GMENT OF TOPMAN EXPORTS OR ON THE BASIS OF KALPATARU COLOURS AND CH EMICALS, WILL NOT MAKE ANY DIFFERENCE BECAUSE WHATEVER AMOUNT IS REDU CED FROM THE PROFIT OF THE BUSINESS AS PER EXPLANATION (BAA), THE SAME WILL BE INCREASED BY THE IDENTICAL AMOUNT AS PER VARIOUS PR OVISOS OF SECTION 80HHC(3) OF THE ACT. IN OTHER WORDS, THE OVERALL C OMPUTATION OF CLAIM OF DEDUCTION U/S.80HHC WILL NOT MATERIALLY BE DIFFE RENT UNDER BOTH THE JUDGMENTS. THUS, THE AMOUNT OF DEDUCTION OF RS.38 ,08,898/- U/S.80HHC AS SHOWN WILL REMAIN UNCHANGED. THE AO DID NOT AC CEPT THE CONTENTION ON THE BASIS THAT THE EXPORT TURNOVER OF THE ASSESS EE IS MORE THAN RS.10 CRORES. FURTHER, IT WAS NOTICED THAT PROFITS DERIVED FROM EXPORT IN RESPECT OF GOODS OR MERCHANDISE MANUFACTURED ARE AT LOSS. PROFITS DERIVED FROM EXPORT IN RESPECT OF TRADING GOODS IS AT RS.12,13,054/-. THUS, THE ASSESSEE-COMPANY HAS A NET LOSS DERIVED F ROM EXPORT OF GOODS OR MERCHANDISE MANUFACTURED AND TRADING GOODS AT RS .15,55,222/-. THE CONTENTION OF THE ASSESSEE IS THAT THE AMENDMENT WA S MADE IN THE PROVISIONS OF SECTION 80HHC OF THE ACT AS BROUGHT W .E.F. 01/04/1997, BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 WOULD NOT B E APPLICABLE SINCE THE ASSESSMENT IS AY 2003-04. IN SUPPORT OF THIS CONTENTION, THE LD.COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE JUD GEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF A VANI EXPORTS VS. CIT REPORTED AT REPORTED AT 348 ITR 391(GUJ.). THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. AVANI EXPORTS REPORTED AT 58 TAXMANN.COM ITA NO.2622/AHD /2011 ASSOCIATED DYESTUFF PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 7 - 100(SC) HAS CATEGORICALLY RULED THAT HAVING SEEN TH E TWIN CONDITIONS AND SINCE 80HHC BENEFIT IS NOT AVAILABLE AFTER 1.4.05, THE CASES OF EXPORTERS HAVING A TURNOVER BELOW AND THOSE ABOVE 10 CRORES S HOULD BE TREATED SIMILARLY. 4.2. IN VIEW OF THE ABOVE JUDGEMENT OF HONBLE SU PREME COURT, WE ARE OF THE CONSIDERED VIEW THAT THE LD.CIT(A) WAS NOT J USTIFIED IN CONFIRMING THE ACTION OF THE AO. THEREFORE, RESPECTFULLY FOLL OWING THE JUDGEMENT OF HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT V S. AVANI EXPORTS, WE HEREBY DIRECT THE AO TO ALLOW THE DEDUCTION U/S. 80HHC OF THE ACT. THUS, GROUND NOS.1 TO 5 OF ASSESSEES APPEAL ARE ALLOWED. 5. GROUND NO.6 IS GENERAL IN NATURE WHICH REQUIRES NO INDEPENDENT ADJUDICATION. 6. GROUND NO.7 IS AGAINST LEVY OF INTEREST U/S.234A , 234B, 234C AND 234D OF THE ACT. THIS GROUND IS CONSEQUENTIAL IN N ATURE. 7. GROUND NO.8 IS AGAINST INITIATION OF PENALTY PRO CEEDINGS U/S.271(1)(C) OF THE ACT. SINCE WE HAVE ALLOWED TH E GROUND NOS.1 TO 5 OF ASSESSEES APPEAL, THIS GROUND HAS BECOME INFRUCTUO US AND DISMISSED AS SUCH. ITA NO.2622/AHD /2011 ASSOCIATED DYESTUFF PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 8 - 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 10 TH DAY OF JULY, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( . ) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 17/ 07 /2015 6/..-, .-../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : ( ) / THE CIT(A)-6, AHMEDABAD 5. ;< )-89 , / 893 , 7 / DR, ITAT, AHMEDABAD 6. <= >. / GUARD FILE. / BY ORDER, *; ) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 6/7.7.15 (DICTATION-PAD 12- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..7.7.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.17.7.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17.7.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER