M/s. T.M. Patel Exports, Surat V. The Income tax Officer, Ward-2(2), Surat

ITA 2745/AHD/2006

• Counselvise Citation: [2010] 137 COUNSELVISE.COM (IT) 0183 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-01-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 08-12-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Section: 80HHC

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD. BEFORE: HON'BLE SHRI T.K. SHARMA, JUDICIA L MEMBER, AND HON'BLE SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NOS. 2745 & 2746/AHD/2006 ASSESSMENT YEAR : 2002-2003 & 2003-2004 M/S. T.M. PATEL EXPORTS, SURAT (PAN : AACFT 0084 D) VERSUS INCOME TAX OFFICER, WARD-2(2), SURAT (APPELLANT) (RESPONDENT) FOR THE APPELLANT : NONE (WRITTEN SUBMISSION FILED) FOR THE RESPONDENT : SMT. NEETA SHAH ORDER PER T K SHARMA, JUDICIAL MEMBER :- THESE TWO APPEALS FILED BY THE ASSESSEE ARE AGAINST TWO SEPARATE ORDERS BOTH DATED 06.10.2006 O F LD. COMMISSIONER OF INCOME TAX(APPEALS)-II, SURAT FOR THE ASSESSMENT YEARS 200 2-03 AND 2003-04. 2. SINCE ONE COMMON ISSUE INVOLVED IN BOTH THE APPE ALS, THEREFORE, WE PROCEED TO DECIDE THESE APPEALS BY THIS COMMON ORDER FOR TH E SAKE OF CONVENIENCE. 3. ON THE DATE FIXED FOR HEARING, I.E. 06.01.2010, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. HOWEVER, WRITTEN SUBMISSION WAS FILED BY SHRI VINOD K. CHAUHAN, C.A. ON BEHALF OF THE ASSESSEE-FIRM DATED 02.01.2010, WH EREIN IT WAS POINTED OUT THAT ONLY ISSUE INVOLVED IN BOTH THE APPEALS IS AS FOLLOWS :- WHETHER THE ENTIRE AMOUNT RECEIVED ON SALE OF DEPB ENTITLEMENT REPRESENTS PROFIT CHARGEABLE U/S. 28(II ID) OF THE INCOME TAX ACT, AND ACCORDINGLY WHILE CALCULATING D EDUCTION U/S. 80HHC OF THE ACT, WHETHER THE ENTIRE AMOUNT OF DEPB IS TO BE EXCLUDED FROM THE PROFIT OF THE BUSINESS OR O NLY THE PROFIT ON SALE THEREOF IS TO BE EXCLUDED. 4. IN THE WRITTEN SUBMISSION, IT WAS ALSO SUBMITTED THAT THE AFORESAID ISSUE INVOLVED IN BOTH THE APPEALS IS DIRECTLY AND SQUARE LY COVERED BY THE DECISION OF THE HON'BLE ITAT, SPECIAL BENCH, MUMBAI IN THE CASES OF (1) M/S. TOPMAN EXPORTS VS.- ITO (OSD)-14(2) AND (2) M/S. KALPTARU COLOURS & CHE MICALS VS.- ADDL. CIT, CIR. 13(2), MUMBAI REPORTED IN (2009) 33 SOT 337 (SB) (M UM.). IN THE WRITTEN SUBMISSION, THE ASSESSEE HAS ALSO FILED THE WORKING OF DEDUCTION UNDER SECTION 80HHC AS PER THE DECISION OF HON'BLE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF 2 ITA NOS.2745 & 2746/AHD/2006 TOPMAN EXPORTS (SUPRA). AS PER ASSESSEES WORKING, IT IS ENTITLED TO DEDUCTION UNDER SECTION 80HHC OF RS.30,07,954/- AND RS.24,52,688/- FOR THE ASSESSMENT YEARS 2002- 03 AND 2003-04 RESPECTIVELY. SMT. NEETA SHAH, LD. D EPARTMENTAL REPRESENTATIVE, AFTER GOING THROUGH THE WORKING FURNISHED BY THE ASSESSEE , CONTENDED THAT THIS WORKING FURNISHED BY THE ASSESSEE NEEDS VERIFICATION AT THE END OF A.O. 5. HAVING HEARD THE LD. DEPARTMENTAL REPRESENTATIVE , WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AS WELL AS THE DECISION OF THE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF TOPMAN EXPORTS (SUPRA) RELIED BY THE ASSESSEE AS WELL AS WORKING FURNISHED BY IT. WE FOUND CONSIDERABLE F ORCE IN THE SUBMISSION MADE BY THE LD. DEPARTMENTAL REPRESENTATIVE. WHEN LEARNED C OMMISSIONER OF INCOME TAX(APPEALS) PASSED THE IMPUGNED ORDER, THE JUDGMEN T OF THE HON'BLE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF TOPMAN EXPORTS (SUPRA) WAS NOT AVAILABLE AS IT IS DELIVERED ON 11.08.2009. IN THE CASE OF TOPMAN EXPO RTS (SUPRA), THE ASSESSEE WAS ENGAGED IN MANUFACTURE AND EXPORT OF FABRICS AND GA RMENTS CLAIMED UNDER SECTION 80HHC FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04 AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ASSESS EE REDUCED RS. 301.93 LAKHS FROM PURCHASES REPRESENTING SALE OF DFPB LICENCES AND DR AWBACK. THE ISSUE IN DISPUTE WAS AS REGARDS TAXABILITY OF THE DEPB LICENCE, VIZ., WH ETHER THE ENTIRE SALE PROCEEDS WAS TO BE TAXED OR ONLY THE EXCESS OF SALE PROCEEDS OVE R ITS ARTIFICIAL INTERPOLATED COST WAS TAXABLE? THE TRIBUNAL HELD THAT THE ENTIRE AMOUNT R ECEIVED ON SALE OF DFPB ENTITLEMENT IS NOT PROFIT CHARGEABLE UNDER SECTION 28(IIID). THE PROFIT IS TO BE COMPUTED BY ASCERTAINING ARTIFICIAL COST AND ONLY T HE SALE PROCEEDS IN EXCESS OF SUCH ARTIFICIAL COST ARE CHARGEABLE TO TAX. THE TRIBUNAL OPINED TWO STAGE TAXATION OF DEPB AND ITS SALE, VIZ., (I) THE FACE VALUE OF THE DEPB IS CHARGEABLE TO TAX ON ACCRUAL BASIS WHEN THE APPLICATION FOR DEPB IS FILED WITH THE COMPETEN T AUTHORITY AS PER SECTION 28(IIIB); AND (II) THE PROFIT ON SALE OF DEPB OVER ITS FACE VALUE IS TAXABLE AT THE TIME OF ITS SALE. IT WAS HELD BY THE TRIBUNAL THAT WHATEVER IS SAID A BOUT DEPB WOULD ALSO APPLY TO DUTY FREE REPLENISHMENT CERTIFICATE (DFRC) AS WELL, WHICH IS CHARGEABLE TO TAX UNDER SECTION 28(IIIE) . 3 ITA NOS.2745 & 2746/AHD/2006 6. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE AND SEND THE MATT ER BACK TO THE FILE OF A.O. WITH THE DIRECTION THAT ASSESSEE SHOULD FURNISH THE CALC ULATION UNDER SECTION 80HHC AS PER DECISION OF THE HON'BLE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF TOPMAN EXPORTS (SUPRA), THE A.O. WILL VERIFY THE SAME AND ALLOW TH E DEDUCTION UNDER SECTION 80HHC IN ACCORDANCE WITH LAW. 7. IN THE RESULT, FOR STATISTICAL PURPOSES, BOTH TH E APPEALS FILED BY THE ASSESSEE ARE TREATED AS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 8 TH JANUARY, 2010. SD/- SD/- SD/- SD SD/ - (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUD ICIAL MEMBER DATED: 08/01/2010 COPY OF THE ORDER IS FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, // TRUE COPY // ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD. LAHA/SR. P.S.