Sans Frontiers, New Delhi V. ITO, New Delhi

ITA 3006/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6535 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 05-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 14-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Keywords: Business income; Rule of consistency
• Section: 143(3); 80HHC; 80IB; 10B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-I, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO.3006/DEL/2015 ASSESSMENT YEAR : 2010-11 SANS FRONTIERS, 171, (NEW NO.36), WESTERN AVENUE, SAINIK FARMS, NEW DELHI 110 062. VS. ITO, WARD 32(3), NEW DELHI. PAN : AACFS 1846 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATISH KHOSLA, ADV. RESPONDENT BY : SHRI F. R. MEENA, SR.DR DATE OF HEARING : 05-12-2016 DATE OF PRONOUNCEMENT : 09-12-2016 O R D E R PER S.V. MEHROTRA, A.M : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 25.03.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-13, NEW DELHI, U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT) RELATING TO ASSESSMENT YEAR 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS OF EXPORT OF HANDICRAFT ITEMS. IT HAD FILED ITS RETURN OF INCOME DECLARING TAXABLE IN COME OF RS.1,78,879/-. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD SHO WN NET PROFIT OF RS.80,36,343/- AND CLAIMED EXEMPTION U/S 10B TO THE EXTENT OF 2 ITA NO.3006/DEL/2015 RS.78,51,415/-. HE NOTED THAT ASSESSEE FIRM HAD RE CEIVED DUTY DRAW BACK AMOUNTING TO RS.19,93,742/-, WHICH WAS CREDITED IN THE PROFIT & LOSS ACCOUNT. RELYING ON THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF LIBERTY INDIA, 183 TAXMAN 349 (SC), WHEREIN, DUTY D RAW BACK WAS NOT CONSIDERED AS ELIGIBLE PROFIT FOR COMPUTING DEDUCTI ON U/S 80I AND 80IB OF THE ACT, DISALLOWED THE ASSESSEES CLAIM. THE ASSE SSEE, IN ITS REPLY, RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF PAL ENTERPRISES VS. CIT (IT APPEAL NO.1191 OF 2011 MARCH 26, 2012), WHE REIN, THE HONBLE DELHI HIGH COURT RELIED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT (2012) 205 TAXMA N 119, WHEREIN, IT HAS BEEN HELD THAT THE DEPB CREDIT FALLS UNDER CLAU SE (IIIB) OF SECTION 28 OF THE ACT, WHEREAS, THE PREMIUM RECEIVED THEREON, ON TRANSFER, WILL REPRESENT PROFITS CHARGEABLE UNDER CLAUSE (IIIB) AND THE DEDU CTION U/S 80HHC HAD TO BE COMPUTED ACCORDINGLY. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CONTENTIONS OBSERVING THAT SINCE THE EXE MPTION U/S 10B WAS ON IDENTICAL LINES AS SECTIONS 80-I/80-IA/80-IB WITH I DENTICALLY SIMILAR SPIRIT AND WORDINGS, THEREFORE, DUTY DRAW BACK WILL NOT EL IGIBLE FOR DEDUCTION 10B OF THE ACT, LD. CIT(A) DISMISSED THE ASSESSEES APP EAL. 3. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 3 ITA NO.3006/DEL/2015 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A)'S HAS ERRED IN UPHOLDING THE ACT OF AO IN DENYING APPELLA NT DEDUCTION OF SECTION 10B ON DUTY DRAWBACK AMOUNT OF RS 19,93,742/ - RECE IVED BY THE APPELLANT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW LD. CIT(A) HAS ACTED AGAINST THE PRINCIPLES OF JUDICIAL PROPRIETY BY IGNORING THE BINDING DECISION OF THE JURISDICTIONAL HIGH COURT ON SIMILAR ISSUE I N THE CASE OF M/S XLNC FASHIONS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ACTED AGAINST THE PRINCIPLES OF JUDICIAL PROPRIETY BY IGNORING THE DECISIONS OF DELHI BENCHES OF ITAT ON THE SIMILAR ISSUES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ACTED AGAINST THE PRINCIPLES OF JUDICIAL PROPRIETY AND RULE OF CONSISTENCY BY TAKING CONTRARY VIEW FROM THE DECISIONS OF LD. CIT( A)'S IN APPELLANT OWN CASE BOTH IN IMMEDIATELY AND SUCCEEDING ASSESSMENT YEARS ON SIMILAR ISSUE. 5. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PR EJUDICE TO EACH OTHER. 6. APPELLANT CRAVES FOR GRANT OF PERMISSION TO ADD, AMEND, MODIFY, DELETE OR WITHDRAW ANY GROUND OF APPEAL AT OR ANY TIME BEFORE THE HEARING OF THE APPEAL. 4. LD. COUNSEL SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF ITO VS. SMT. SHASHI SADH VI DE ITA NO.3746/DEL/2013 ORDER DATED 30.12.2014, WHEREIN, T HE TRIBUNAL, AFTER CONSIDERING THE DECISION OF ITAT SPECIAL BENCH, IND ORE, IN THE CASE OF MARAL OVERSEAS LTD. VS. ACIT, (2012)-TIOL-197-ITAT- INDORE-SPECIAL BENCH DATED 28.03.2012, HAS OBSERVED AS UNDER :- 17. FROM VIGILANT PERUSAL AND CAREFUL CONSIDERATIO N OF THE RATIO OF DECISION OF ITAT SPECIAL BENCH, INDORE WE OBSERVE THAT THE SPEC IAL BENCH AFTER CONSIDERING THE RATIO OR DECISION IN THE CASE OF LI BERTY INDIA (SUPRA), INTERNATIONAL RESEARCH PARK LABORATORIES VS. ACIT 2 12 ITR (AT) I AND RELEVANT CIRCULAR OF THE CBDT HAS HELD THAT WHILE WORKING OU T THE DEDUCTION U/S 10B( I) OF THE ACT THE CALCULATION OF ELIGIBLE PROFITS HAS TO BE MADE BY INCLUDING THE CLAIM OF EXPORT INCENTIVES, THEREFORE, THE CLAIM UL TIMATELY ALLOWED BY THE AO WAS FOUND TO BE JUSTIFIED WHICH WAS ALSO ENDORSED B Y SPECIAL BENCH IN THAT CASE. 18. ON CAREFUL CONSIDERATION OF FACTUAL MATRIX OF T HE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE IN QUESTION R ELATED TO ALLOWABILITY OF THE DUTY DRAWBACK STAND SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE ORDER OF THE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF CIT VS. HRITNIK EXPORT (P) 4 ITA NO.3006/DEL/2015 LTD. (SUPRA), WHEREIN THEIR LORDSHIPS SPEAKING FOR THE JURISDICTIONAL HIGH COURT OF DELHI AFTER CONSIDERING AND APPROVING THE RATIO OF THE DECISION OF SPECIAL BENCH IN THE CASE OF MARAL OVERSEAS LTD., (SUPRA) H AVE HELD THAT AS PER SECTION 28, (CLAUSE (IIIC) OF THE ACT ANY DUTY OF CUSTOM AN D EXCISE REPAYABLE AS DRAWBACK TO A PERSON AGAINST EXPORT UNDER CUSTOM AN D CENTRAL EXCISE DUTY DRAWBACK RULES 1971 IS DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION. THEIR LORDSHIP FURTHER HELD THAT THE SA ID PROVISION HAS TO BE GIVEN FULL EFFECT TO AND THIS MEANS THAT THE DUTY DRAWBAC K OR DUTY BENEFITS WOULD BE DEEMED TO BE A PART OF BUSINESS INCOME AND THIS WIL L BE TREATED AS PROFIT DERIVED FROM BUSINESS OF THE UNDERTAKING AND THE SAME CANNO T BE EXCLUDED. 19. IN THE PRESENT CASE, FROM OPERATIVE PART OF THE IMPUGNED ORDER AS REPRODUCED HEREINABOVE, WE OBSERVE THAT BEFORE GRAN TING RELIEF FOR THE ASSESSEE THE LD. CIT(A) HAS HELD THAT THE DECISION OF HONBL E APEX COURT IN THE CASE OF LIBERTY INDIA RELATES TO THE CLAIM OF DEDUCTION U/S 80I, 80IA & 80IB OF THE ACT WHICH HAVE A COMMON SCHEME AND THE SAID SECTIONS PR OVIDE FOR INCENTIVES IN THE FORM OF DEDUCTIONS WHICH ARE LINKED TO PROFIT D ERIVED FROM INDUSTRIAL UNDERTAKING. WE MAY ALSO NOTE THAT IN THE CASE OF M ARAL OVERSEAS LTD., (SUPRA) THE SPECIAL BENCH OF THE ITAT HAS HELD THAT IN THE CASE OF LIBERTY INDIA THE HON'BLE APEX COURT HAS DEALT WITH THE PROVISIONS OF SECTION 80IA OF THE ACT FOR WHICH NO FORMULA WAS LAID DOWN FOR COMPUTING THE PR OFITS DERIVED BY THE UNDERTAKING WHICH HAS SPECIFICALLY BEEN PROVIDED UN DER SUB SECTION (4) OF SECTION 10B OF THE ACT, FOR COMPUTATION OF THE PROF ITS DERIVED BY THE UNDERTAKING FROM THE EXPORT BUSINESS. UNDER THESE F ACTS AND CIRCUMSTANCES, WE RESPECTFULLY HELD THAT THE LD. CIT(A) WAS RIGHT IN HOLDING THAT THE BENEFIT OF THE RATIO OF DECISION OF HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA) IS NOT ALLOWABLE FOR THE REVENUE IN DETERMINING THE CL AIM OF THE ASSESSEE U/S 10B OF THE ACT. THE LD. CIT(A) WAS RIGHT IN HOLDING THA T SECTION 10B(4) OF THE ACT IS A COMPLETE CODE WHICH PROVIDES A FORMULA/MECHANISM FO R COMPUTING THE PROFITS OF THE BUSINESS ELIGIBLE FOR DEDUCTION U/S 10B OF T HE ACT AND IN VIEW OF THE DECISION OF SPECIAL BENCH IN THE CASE OF MARAL OVER SEAS LTD. (SUPRA) THE PRESENT ASSESSEE WAS RIGHTLY HELD TO BE ELIGIBLE FO R THE CLAIM OF DEDUCTION ON THE EXPORT INCENTIVE RECEIVED BY IT AS PER PROVISION OF SECTION 10B (I) R.W.S. 10B(4) OF THE ACT. 20. ON THE BASIS OF FOREGOING DISCUSSION, WE REACH TO LOGICAL FORTIFIED CONCLUSION THAT THE AO MISINTERPRETED THE RATIO OR DECISION OF HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA) WHILE DE NYING CLAIM OF THE ASSESSEE U/S 10B OF THE ACT. 21. ON THE OTHER HAND WE ARE INCLINED TO HOLD THAT THE LD. CIT(A) WAS RIGHT IN FOLLOWING THE DECISION OF SPECIAL BENCH OF ITAT IND ORE IN THE CASE OF MARAL OVERSEAS LTD. (SUPRA) WHILE GRANTING RELIEF FOR THE ASSESSEE IN THE IMPUGNED ORDER. WE ALSO RESPECTFULLY NOTE THAT THE HON'BLE J URISDICTIONAL HIGH COURT OF DELHI IN THE RECENT DECISION DATED 13.11.2013 IN TH E CASE OF CIT VS. HRITNIK EXPORT (P) LTD., (SUPRA) HAVE UPHELD THE RATIO OF T HE DECISION OF SPECIAL BENCH OF ITAT INDORE IN THE CASE OF MARAL OVERSEAS LTD. ( SUPRA) AND THE LD. CIT. DR HAS MISERABLY FAILED TO POINT OUT ANY SPECIFIC AND DIRECT JUDGMENT ON THE ISSUE 5 ITA NO.3006/DEL/2015 WHICH MAY COMPEL US TO TAKE DEVIATED VIEW OF STAND FROM THE SPECIAL BENCH ORDER (SUPRA). 22. TO SUM UP, WE HOLD THAT THE RATIO OF THE DECISI ON OF THE SPECIAL BENCH OF THE TRIBUNAL IS BINDING ON THE ALL DIVISION BENCHES OF THE TRIBUNAL UNTIL AND UNLESS THERE IS A DIFFERENT VIEW EITHER OF HONBLE SUPREME COURT OR BY HONBLE JURISDICTIONAL HIGH COURT OF ANY OTHER HIGH COURT O N THE ISSUE. WE ALSO HOLD THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE CL AIM OF THE ASSESSEE ON THE BASIS OF DECISION OF HONBLE APEX COURT IN THE CASE OF LI BERTY INDIA (SUPRA). 5. RESPECTFULLY FOLLOWING THE DECISION OF SPECIAL B ENCH OF ITAT, INDORE BENCH IN THE CASE OF SMT. SHASHI SADH (SUPRA), WE A LLOW THE ASSESSEES CLAIM 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF DECEMBER, 2016. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED : 09-12-2016. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI