Madhusudan Silk Mills, Surat V. The ACIT., Circle-2, Surat

ITA 29/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1898 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-11-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 02-01-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Keywords: Business income
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI (DR.)O.K. NARAYANAN, VICE-PRESIDENT AND MAHAVIR SINGH, JUDICIAL MEMBER) ITA NO.29/AHD/2007 [ASSTT.YEAR : 2002-2003] MADHUSUDAN SILK MILLS 2 ND FLOOR, KAJIWALA COMPLEX NR.KINNARY CINEMA, RING ROAD SURAT. VS. ACIT, CIR.2 SURAT. ASSESSEE BY : NONE REVENUE BY : SHRI GOVIND SINGHAL DATE OF ORDER RESERVED : 30-11-2009 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT : THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2 002-2003. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (APPEALS)-II AT SURAT DATED 2-11-2006. THE APPEAL ARISES OUT OF TH E ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE ADDITION/DISALLOWANCE MADE BY THE CIT(A) MAY BE DEL ETED AND THE DEPB MAY BE CONSIDERED AS EXPORT INCENTIVES FOR THE PURPOSE OF SECTION 80HHC OF THE INCOME TAX ACT, 1961. 3. A SPECIAL BENCH OF THE ITAT AT MUMBAI IN THE CAS E OF TOPMAN EXPORTS VS. ITO, 318 ITR (AT) 87 (MUM) (SB) HAS CONSIDERED THE TREATMENT OF DEPB IN THE CONTEXT OF GRANTING DEDUCTION UNDER SECTION 80HHC. THE SPECIAL BENCH HAS HELD THAT THE PROFIT ACCRUING TO AN ASSESSEE ON SALE OF DEPB ENTITLEMENTS ARE CHARGEABLE TO TAX UNDER SECTION 28(III)(B) AT T HE TIME OF ACCRUAL, BEING THE TIME OF FILING OF APPLICATIONS FOR SUCH ENTITLEMENT S. THE PROFIT SHALL BE THE AMOUNT OF SALE PROCEEDS REDUCED BY THE FACE VALUE O F THE INSTRUMENTS. THE SPECIAL BENCH HAS ALSO HELD THAT THE ENTITLEMENTS S HALL BE DEEMED AS EXPORT PAGE - 2 ITA NO.29/AHD/2007 -2- PROFITS TO THE EXTENT OF 90% AND THEREFORE ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC. THE SPECIAL BENCH HAS FURTHER HELD THAT THE PROFIT ON THE SALE OF DEPB WILL NOT BE AN EXPORT PROFIT FOR THE PURPOSE O F SECTION 80HHC, BUT WILL BE TAXED AS REGULAR BUSINESS INCOME. 4. IN VIEW OF THE ABOVE EXPOSITION OF THE SUBJECT, WE DIRECT THE AO TO RE- EXAMINE THE ISSUE RAISED BY THE ASSESSEE, OF COURSE IN THE LIGHT OF OTHER BINDING STATUTORY PROVISIONS INCLUDING THE RESTRICTION OF M AXIMUM TURNOVER LIMIT TO GIVE ADDITIONAL BENEFIT OF DEPB. 5. IN THE RESULT, THE CASE IS REMITTED BACK TO THE AO TO COMPLY WITH THE ABOVE DIRECTIONS AND THE APPEAL IS TREATED AS PARTL Y ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY, THIS FOURTH DAY OF DECE MBER, 2009. SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (DR.O.K. NARAYANAN) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 04-12-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD