Global Agro Products Pvt. Ltd., Surat V. The Income tax Officer, Ward-1(2), Surat

ITA 3045/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6446 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 13-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: M K PATEL
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 30/5/2011 DRAFTED ON: 30/ 5/2011 ITA NO.3045/AHD/2009 ASSESSMENT YEAR : 2003-04 GLOBAL AGRO PRODUCTS PVT.LTD. 502, EMPRIE STATE BLDG. RING ROAD, SURAT VS. THE INCOME TAX OFFICER WARD-1(2) SURAT PAN/GIR NO. : AAACG 8901 H ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI M.K.PATEL, A.R. RESPONDENT BY: SHRI B.L. YADAV, D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE W HICH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS) -I, SURAT DATED 15/09/2009 PASSED FOR ASSESSMENT YEAR 2003-04. TH E GRIEVANCE OF THE ASSESSEE AS PER GROUND NOS.2 & 3; REPRODUCED BELOW: (2) ON THE FACTS OF THE CASE, THE LEARNED COMMISSI ONER (APPEAL), I SURAT, OUGHT TO CONSIDER ONLY PROFIT ON TRANSFER OF DEPB AS MENTIONED IN SECTION 28(IIID) AS INCENTIVE IN CALCU LATION OF PROFIT OF BUSINESS AS PER EXPLANATION (BAA) OF SECTION 80 HHC AS AGAINST THE ENTIRE SALE PROCEEDS OF DEPB CONSIDER B Y AO. 2. WE HAVE HEARD BOTH THE SIDES. IN THE PAST AN OR DER BY RESPECTED CO-ORDINATE BENCH ITAT C AHMEDABAD IN ITA NO.3045 /AHD/2009 ITA NO.3045/AHD /2009 GLOBAL AGRO PRODUCTS PVT.LTD. VS. ITO ASST.YEAR - 2003-04 - 2 - (A.Y.2003-04) DATED 12/01/2010 WAS PASSED AND THE A FORESAID GROUND WAS DISMISSED. THAT ORDER OF THE TRIBUNAL WAS RE- CALLED BY AN ORDER BEARING MA NO.22/AHD/2010 (ARISING OUT OF ITA NO.30 45/AHD/2009) [A.Y. 2003-04] DATED 11/06/2010 TO RE-DECIDE THE I MPUGNED ISSUE IN ACCORDANCE WITH LAW. 3. THE ISSUE OF TAXABILITY OF DEPB NOW STOOD SETTL ED IN FAVOUR OF THE REVENUE SPECIALLY UNDER THE CIRCUMSTANCES WHEN THE DECISION OF THE SPECIAL BENCH IN THE CASE OF TOPMAN EXPORTS REPORTE D AT 125 TTJ 289 (SB) (MUM.) HAS BEEN REVERSED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS REPORTED AT 233 CTR 313 :: [2010]328 ITR 451 (BOM.); RELEVANT POR TION REPRODUCED BELOW: WHAT CONSTITUTES PROFITS UNDER SECTION 28(IIID) I S THE AMOUNT RECEIVED ON TRANSFER OF THE DEPB CREDIT AND NOT THE AMOUNT O F CREDIT WHICH THE ASSESSEE WAS ENTITLED TO UNDER THE DEPB SCHEME. IN OTHER WORDS, THE AMOUNT EQUIVALENT TO THE FACE VALUE OF DEPB AS WELL AS THE AMOUNT RECEIVED IN EXCESS OF THE DEPB WOULD CONSTITUTE PRO FITS OF BUSINESS UNDER SECTION 28(IIID) AND MERELY BECAUSE A PART OF SUCH PROFITS OF BUSINESS (FACE VALUE) WAS OFFERED TO TAX IN THE YEA R IN WHICH THE CREDIT ACCRUED TO THE ASSESSEE WOULD NOT BE A GROUND TO HO LD THAT SUCH PROFIT WAS NOT COVERED UNDER SECTION 28(IIID). WHERE THE F ACE VALUE OF THE DEPB CREDIT IS OFFERED TO TAX AS BUSINESS PROFITS U NDER SECTION 28(IIID) IN THE YEAR IN WHICH THE CREDIT ACCRUED TO THE ASSE SSEE, THEN ANY FURTHER PROFIT ARISING ON TRANSFER OF THE DEPB CREDIT WOULD BE TAXED AS PROFITS OF BUSINESS UNDER SECTION 28(IIID) IN THE YEAR IN W HICH THE TRANSFER OF THE DEPB CREDIT TOOK PLACE. THERE IS ANOTHER PERSPECTIVE FROM WHICH THE ISSUE C AN BE LOOKED AT. THE DEPB CREDIT TO WHICH AN EXPORTER IS ENTITLED IS A F ORM OF AN EXPORT INCENTIVE. NO PART OF THE CREDIT THAT IS AVAILABLE UNDER THE DEPB SCHEME CAN FALL FOR CLASSIFICATION UNDER CLAUSE (IIIB) OF SECTION 28 WHICH DEALS ITA NO.3045/AHD /2009 GLOBAL AGRO PRODUCTS PVT.LTD. VS. ITO ASST.YEAR - 2003-04 - 3 - WITH CASH ASSISTANCE, RECEIVED OR RECEIVABLE AGAINS T ANY SCHEME OF THE GOVERNMENT OF INDIA. CLAUSE (IIIB) WAS ENACTED AT A TIME WHEN THE EXPORT INCENTIVES THAT WERE AVAILABLE WERE (I) IMPO RT ENTITLEMENT LICENCES ; (II) CASH COMPENSATORY SUPPORT; AND (HI) DUTY DRAWB ACK. THE DEPB SCHEME WAS NOT IN EXISTENCE WHEN CLAUSE (IIIB) CAME TO BE ENACTED INTO SECTION 28 BY THE FINANCE ACT OF 1990. THE DEPB SCHEME WAS BROUGHT INTO EXISTENCE WITH EFFECT FROM APRIL 1 , 1997. CLAUSE (IIID) OF SECTION 28 WAS INSERTED BY THE AME NDING ACT OF 2005 WITH EFFECT FROM APRIL 1, 1998. THE VALUE OF THE D EPB CREDIT CANNOT BE REGARDED AS A CASH ASSISTANCE WHICH IS RECEIVED OR RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVE RNMENT OF INDIA. IT CANNOT BE INFERRED FROM THE SPEECH OF THE FINANC E MINISTER THAT THE INSERTION OF CLAUSE (HID) IN SECTION 28 WAS MADE WI TH A VIEW TO TAX ONLY THE AMOUNT WHICH HAS BEEN RECEIVED IN EXCESS OF THE FACE VALUE OF THE DEPB CREDIT. DEPB CREDIT WAS INTRODUCED WITH EFFECT FORM APRIL 1,1997, WHICH WAS AFTER THE INSERTION OF CLAUSE (II IB) IN SECTION 28 ; SECTION 28(IIIB) REFERS TO CASH ASSISTANCE RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT PURSUANT TO A SCHEME OF THE GOVERNME NT. THE AMOUNT RECEIVED ON THE TRANSFER OF THE DEPB CREDIT IS NOT RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT PURSUANT TO A SCHEME O F THE GOVERNMENT WITHIN THE MEANING OF CLAUSE (IIIC); AND WHEN SECTI ON 28(IIID) SPECIFICALLY DEALS WITH PROFITS REALISED ON THE TRA NSFER OF THE DEPB CREDIT, IT WOULD BE IMPERMISSIBLE AS A MATTER OF FI RST PRINCIPLE TO BIFUR- CATE THE FACE VALUE OF THE DEPB AND THE AMOUNT RECE IVED IN EXCESS OF THE FACE VALUE OF THE DEPB. THE ENTIRETY OF THE SAL E' CONSIDERATION WOULD FALL WITHIN THE PURVIEW OF SECTION 28(IIID) . 3.1. ON PERUSAL OF THE ABOVE ORDER, WE HAVE FOUND T HAT IT WAS HELD THAT THE AMOUNT EQUIVALENT TO THE FACE VALUE OF DEPB, AS WELL AS THE AMOUNT RECEIVED IN EXCESS OF THE DEPB CREDIT CONSTITUTES T HE PROFIT OF BUSINESS U/S.28(IIID) OF THE I.T.ACT, WHERE THE FACE VALUE O F THE DEPB CREDIT IS OFFERED TO TAX AS BUSINESS PROFIT U/S.28(IIID) IN T HE YEAR IN WHICH THE CREDIT ACCRUED TO THE ASSESSEE, ANY FURTHER PROFIT ASSIGNI NG ON TRANSFER ON TRANSFER OF DEPB CREDIT IS TO BE CREDITED AS PROFIT OF BUSINESS U/S.28(IIID) ITA NO.3045/AHD /2009 GLOBAL AGRO PRODUCTS PVT.LTD. VS. ITO ASST.YEAR - 2003-04 - 4 - OF THE I.T.ACT IN THE YEAR IN WHICH THE TRANSFER OF DEBP TAKE PLACE AND NO PART OF THE CREDIT, I.E. AVAILABLE UNDER DEPB SCHEM E CAN FALL FOR CLASSIFICATION UNDER CLAUSE (IIIB) OF SECTION 28. FURTHER, UNDISPUTEDLY THE ASSESSEE HAD AN EXPORT TURNOVER EXCEEDING RS.10 CRO RES, THEREFORE, DID NOT FULFILL THE CONDITIONS SET OUT IN THE 3 RD PROVISO TO SECTION 80HHC(3) AND, THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO A DEDUCTION U/S.80HHC ON THE AMOUNT RECEIVED ON TRANSFER OF DEPB. CONTENTIO N THAT THE PROFIT ON TRANSFER OF DEPB IN SECTION 28(IIID) WOULD NOT INCL UDE THE FACE VALUE OF DEPB SO THAT THE ASSESSEE COULD GET A DEDUCTION U/S .80HHC ON THE FACE OF DEPB HAD NO MERITS. RESPECTFULLY FOLLOWING THE ABOVE VERDICT THE GROUNDS RAISED BY THE ASSESSEE ARE HEREBY DISMISSED . 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 31/ 5 /2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 31/ 05 /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED. 4. THE LD. C IT(APPEALS)-I, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ITA NO.3045/AHD /2009 GLOBAL AGRO PRODUCTS PVT.LTD. VS. ITO ASST.YEAR - 2003-04 - 5 - 1. DATE OF DICTATION..30/5/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30/05/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S31.5.2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.5.2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER