Asahi Songwon Colour Ltd., Ahmedabad V. The ACIT., (OSD)Range-1, Ahmedabad

ITA 2951/AHD/2010

• Counselvise Citation: 295120514 RSA 2010
• Duration Of Justice: 3 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-12-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 29-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: SUNIL H TALATIAR
• Section: 143(3); 80HHC; 28; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD , , , , BEFORE SHRI KUL BHARAT , JUDICIAL MEMBER AND , SHRI T.R. MEENA, ACCOUNTANT MEMBER .. , !' ! # $ ! # $ ! # $ ! # $ ITA NO. 2951/AHD/2010 ASSESSMENT YEAR : 2003-04 ASAHI SONGWON COLOUR LTD. C/O. SKYJET AVIATION 36, VAKIL CHAMBERS, MIRZAPUR, LAL DARWAJA, AHMEDABAD V/S . ASSTT. COMMISSIONER OF INCOME-TAX (OSD), RANGE-1, AHMEDABAD PAN NO. A A A C A9713D (APPELLANT) .. (RESPONDENT) %& ' ( ! / BY APPELLANT SHRI SUNIL H. TALATI, A.R. )*%& ' ( ! /BY RESPONDENT SHRI J. P. JHANGID, SR. D.R. +, ' ' /DATE OF HEARING 02.12.2013 -./ ' ' /DATE OF PRONOUNCEMENT 24.01.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF ASSESSEE WHICH H AS EMANATED FROM THE ORDER OF CIT(A)-VI, AHMEDABAD, DATED 24.09.2010 FOR ASSESSMENT YEAR 2003-04. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UN DER: 1. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER DENYI NG THE CLAIM OF DEDUCTION U/S.80HHC ON DEPB INCOME. ON THE FACTS A ND CIRCUMSTANCES AS WELL AS IN VIEW OF THE CORRECT LEG AL POSITION, THE ITA NO. 2951/AHD/2010, A.Y. 03-04 PAGE 2 DEDUCTION U/S.80HHC IN RESPECT OF EXPORT INCENTIVE OF RS.1,10,11,241/- OUGHT TO HAVE BEEN ALLOWED AS CLAI MED. 2. THE LEARNED C.I.T. (APPEALS) FAILED TO APPRECIAT E THAT WHAT IS TO BE REDUCED WHILE CALCULATING DEDUCTION U/S.80HHC WAS M ERELY PROFIT ON SALE OF DEPB LICENSE AND NOT THE ENTIRE SALE PRO CEEDS OF DEPB LICENSE. IT BE SO HELD NOW AND THE DEDUCTION U/S. 80HHC BE GRANTED AS CLAIMED. 3. THE LEARNED C.I.T. (APPEALS) FAILED TO FOLLOW TH E VARIOUS CASE LAWS CITED BEFORE HIM, MORE PARTICULARLY THE DECISION OF THE CO-ORDINATE BENCH, WHICH WAS CITED BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE HIM. 4. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW A ND ON FACTS IN HOLDING THAT NO OTHER COST WAS TO BE REDUCED FROM T HE SALE PROCEEDS OF DEPB LICENSE WHILE CALCULATING DEDUCTIO N U/S.80HHC. IT IS SUBMITTED THAT IN VIEW OF THE DETAILED WORKIN G REDUCING THE FACE VALUE OF THE LICENSE, THERE BEING NO ACTUAL PROFIT WITHIN THE MEANING OF SEC.28(IIID) AND THERE BEING LOSS, NO AMOUNT WAS TO BE REDUCED FROM THE EXPORT PROFIT. IT BE SO HELD NOW. ALL THE FOUR GROUNDS ARE AGAINST CONSIDERING SALE P ROFITS OF DEPB LICENSE AS PROFIT BY THE LD. CIT(A). 2. IN THIS CASE ORIGINALLY, ASSESSMENT ORDER PASSED U/S. 143(3) ON 28.02.2006 DETERMINING TOTAL INCOME AT RS.1,94,03,2 90/- DENYING THE DEDUCTION ON DEPB INCOME U/S. 80HHC ON EXPORT INCEN TIVE. THE ASSESSEE FILED THE APPEAL BEFORE THE CIT(A) WHO HAS CONFIRME D THE ORDER OF THE A.O. BUT HONBLE ITAT VIDE ORDER DATED 01.03.2007 IN ITA NO. 2935/AHD/2006 FOR A.Y. 03-04 HAD SENT BACK THE ISSUE OF CLAIM OF DEDUCTION U/S.80HHC TO THE FILE OF A.O. FOR DECIDING THE MATTER AFRESH IN ACCORDANCE W ITH THE AMENDED PROVISIONS OF THE ACT. THE LD. A.O. GAVE REASONABL E OPPORTUNITY OF BEING ITA NO. 2951/AHD/2010, A.Y. 03-04 PAGE 3 HEARD ON THE BASIS OF DIRECTIONS GIVEN BY ITAT. TH E ASSESSEE ALSO AFFORDED THE OPPORTUNITY ON 17.11.2008. THE ASSESSEE SUBMIT TED BEFORE THE A.O. THAT GROSS VALUE RECEIVED ON TRANSFER OF DEPB DOES NOT C ONSTITUTE PROFIT HAS NOW BEEN CONSIDERED BY VARIOUS TRIBUNALS IN FOLLOWING C ASES: I. GLANMARK LABORATORIES LTD. VS. D.C.I.T. (2008 11 6 TTJ (MUMBAI) 131. II. VIJAY SILK HOUSE VS. D.C.I.T. IN ITA NO.6147/MU M/06 & 6148/MUM/06. III. M/S. SILVER SEA FOODS VS. A.C.I.T. IN ITA NO. 09/RJT/2007. IT WAS HELD THAT THE ASSESSEES SOLE CONTENTION WAS THAT PROFIT ON SALE OF DEPB WAS TO BE INCLUDED FOR THE PURPOSE OF CALCULAT ING DEDUCTION U/S. 80HHC. HOWEVER, IT HAD BEEN ALREADY HELD IN ASSESS MENT ORDER AND CIT(A)S ORDER THAT THE ASSESSEE DOES NOT FULFILL THE CONDIT ION LAID DOWN IN AMENDED PROVISION OF SECTION 80HHC(3). THUS, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 80HHC ON DEPB INCOME. THE ASSESSEE HAD NEVER APPEALED AGAINST THE ISSUE OF DEDUCTION OF PROFIT FROM SALE OF DEPB LICENSE IN ITAT. THE ASSESSEES CLAIM IS ALSO NOT ACCEPTABLE ON MERI T THAT DEDUCTION U/S. 80HHC IS AVAILABLE ONLY TO PROFITS DERIVED FROM EXP ORT GOODS OR MERCHANDISE WHICH IS RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE A ND NOT IN RESPECT OF THE INCIDENTAL INCOME ON CREDIT ARISING THROUGH GOVERNM ENT SCHEME. THE DEDUCTION U/S. 80HHC(3) OF THE IT ACT DOES NOT COVE R PROFIT ON CREDIT OF DEPB AND SUCH PROFITS ARE THEREFORE, NOT ELIGIBLE FOR DE DUCTION U/S.80HHC. THE ASSESSEE HAD CREDITED RS.1,10,11,241/- IN P&L ACCOU NT IN RESPECT OF DEPB INCOME. AS PER AMENDED PROVISIONS OF SECTION 80HHC IN ORDER TO ARRIVE AT ADJUSTED PROFITS OF BUSINESS 90% OF DEPB INCOME I.E . RS.91,00,117/- HAS TO ITA NO. 2951/AHD/2010, A.Y. 03-04 PAGE 4 BE REDUCED. THE ASSESSEE HAD NOT DEBITED ANY AMOUN T IN P&L ACCOUNT CORRESPONDING TO DEPB INCOME. THUS, 90% OF THE ENT IRE AMOUNT OF RS.1,10,11,241/- CREDITED IN P&L ACCOUNT HAS TO BE REDUCED TO ARRIVE AT ADJUSTED PROFITS FOR THE PURPOSE OF CALCULATING DED UCTION U/S. 80HHC AND ALSO THE TURNOVER OF THE ASSESSEE COMPANY EXCEEDED RS.10 CRORE AND CONDITION LAID DOWN IN AMENDED PROVISIONS OF SECTION 80HHC AR E NOT SATISFIED. THE PROFITS ELIGIBLE FOR DEDUCTION U/S. 80HHC WILL NOT BE INCREASED BY 90% OF THE AMOUNT COVERED U/S.28(III)(D). THUS, A.O. DID NOT REDUCE ANY AMOUNT ON ACCOUNT OF DEPB FROM THE TOTAL INCOME ON ACCOUNT OF DETERMINING OF THE NET INCOME FROM DEPB. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHO HAD DECIDED THE A PPEAL AGAINST ASSESSEE BY OBSERVING AS UNDER: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESS MENT ORDER AND APPELLANT'S SUBMISSION. IF IS NOT IN DISPUTE THAT A PPELLANT HAD EXPORT TURNOVER EXCEEDING RUPEES 10 CRORES AND THEREFORE A MENDED PROVISIONS ARE APPLICABLE IN WHICH APPELLANT IS SUPPOSED TO SU BMIT EVIDENCES TO PROVE THE FULFILLMENT OF TWO CONDITIONS MENTIONED I N THIRD PROVISO. SINCE APPELLANT DID NOT FULFILL THESE CONDITIONS, THE EXP ORT INCENTIVES WERE REDUCED FROM PROFIT OF BUSINESS. TO THIS EXTENT THE RE IS NO DISPUTE AND AO'S ACTION IS CORRECT. APPELLANT'S ARGUMENT IS THAT THE INCOME REFERRED IN CLAUSE (IIID) TO SECTION 28 IS NOT GROSS RECEIPT BUT PROFIT WHICH ME ANS EXPENSES ARE TO BE REDUCED. APPELLANT SUBMITTED DECISION OF RAJKOT BEN CH OF ITAT IN WHICH IT IS HELD THAT WHATEVER CREDITS THE ASSESSEE GETS AT THE TIME OF EXPORT OF GOODS UNDER THIS SCHEME, IT REPRESENTS THE COST INC URRED BY THE ASSESSEE FOR OBTAINING THE DUTY ENTITLEMENT CREDIT. UNDER TH E POLICY, DEPB IS FREELY ITA NO. 2951/AHD/2010, A.Y. 03-04 PAGE 5 TRANSFERABLE. ON SUCH TRANSFER, THE TRANSFEREE GETS CERTAIN CONSIDERATION. THE WHOLE OF THE CONSIDERATION SO RECEIVED CANNOT B E REGARDED TO BE THE PROFIT ON THE TRANSFER OF SUCH DBPB. HOWEVER WHEN T HE DETAILS SUBMITTED BY THE APPELLANT IS REFERRED, IT IS CLEAR THAT APPE LLANT HAS INCURRED ONLY SALES TAX OF RUPEES 3,81,166 ON THE DEPB. APART FRO M THIS, THERE IS NO OTHER COST OR DEBIT OF ANY OTHER ITEM IN THE P&L AC COUNT WHICH CAN BE REDUCED FROM THE SALE VALUE OF DEPB. THE NOMINAL VA LUE OF DEPB LICENSE WAS NOT ACCOUNTED FOR AS INCOME BY THE APPELLANT AN D THEREFORE QUESTION OF ALLOWING THE SAME AS AN EXPENSE DOES NOT ARISE. ACCORDINGLY I DO NOT FIND ANY MERIT IN THE APPELLANT'S ARGUMENT THAT NOM INAL VALUE OF LICENSE SHOULD BE REDUCED FROM THE SALE CONSIDERATION OF DE PB FOR COMPUTING DEDUCTION UNDER SECTION 80 HHC. SINCE, EXCEPT, SALE S TAX BORNE BY THE APPELLANT, THERE IS NO OTHER COST INCURRED AND THER EFORE ENTIRE SOLE PROCEEDS ARE PROFIT FROM DEPB. ASSESSING OFFICER IS DIRECTED TO VERIFY THE APPELLANT'S CLAIM OF SALES TAX ON SALE OF DEPB WHICH CAN BE REDUCED WHILE COMPUTING PROFIT FROM DEPB TO BE REDU CED WHILE COMPUTING DEDUCTION UNDER SECTION 80 HHC . EXCEPT THIS, THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. 4. NOW, THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE ASSESSEE ARGUED THAT HONBLE SUPREME COURT HAD DECIDED IN CASE OF TOPMAN EXPORTS VS COMMISSIONER OF INCOME-TAX IN CIVIL APPEAL NO1699 O F 2012, JUDGMENT DATED 08-02-2012 AND REQUESTED TO ASSESS THE DEPB LICENSE INCOME OF THE BASIS OF HONBLE SUPREME COURT DECISION. AT THE OUTSET, LD. SR. D.R. SUPPORTED THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE SUPREME COURT HAD DECIDED IN CASE OF TOPMAN EXPORTS (SUPRA) THAT PROFIT ON SALE OF DEPB LICENSE IS TO B E ASSESSED ON NET NOT THE ENTIRE SALE PROCEEDS OF DEPB LICENSE. THEREFORE, A .O. IS DIRECTED TO CALCULATE ITA NO. 2951/AHD/2010, A.Y. 03-04 PAGE 6 THE PROFIT ON SALE OF DEPB AS PER THE DECISION OF H ONBLE SUPREME COURT IN CASE OF TOPMAN EXPORTS (SUPRA). ACCORDINGLY, MATTE R IS AGAIN SET ASIDE TO THE A.O 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. THIS ORDER PRONOUNCED IN OPEN COURT ON 24.01.2014 SD/- SD/- ( KUL BHARAT) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA !0 !0 !0 !0 ' '' ' )1 )1 )1 )1 2!1/ 2!1/ 2!1/ 2!1/ / COPY OF ORDER FORWARDED TO:- 1. %& / APPELLANT 2. )*%& / RESPONDENT 3. 6 / CONCERNED CIT 4. 6- / CIT (A) 5. 1: )+ , , / DR, ITAT, AHMEDABAD 6. :<= >? / GUARD FILE. BY ORDER/ !0 !, @/ B , $