The ACIT, Guntur V. M/s. polisetty Somasundaram, Guntur

ITA 328/VIZ/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8866 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-02-2017
• Assessment Year: 1999-2000
• Appeal Filed On: 30-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R S NARAYAN
• Section: 80HHC

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 328 /VIZ/ 201 6 ( / ASSESSMENT YEAR: 1999 - 2000 ) ./ I.T.A.NO. 329 /VIZ/201 6 ( / ASSESSMENT YEAR: 20 0 3 - 0 4 ) ./ I.T.A.NO. 341 /VIZ/201 6 ( / ASSESSMENT YEAR: 20 04 - 05 ) THE A SST. COMMISSIONER OF INCOME TAX CIRCLE - 2(1), 2 ND FLOOR RAJKAMAL COMPLEX LAKSHMIPURAM, GUNTUR M/S POLISETTY SOMASUNDARAM 8 - 24 - 31,MANGALAGIRI ROAD GUNTUR [PAN NO.A ACFP7251J ] ( / APPELLANT) ( / RESPONDENT) C O NO. 16 /VIZ/201 7 ARISING OUT OF ITA 328/VIZ/2016 ( / ASSESSMENT YEAR: 1999 - 2000 ) C O NO. 17 /VIZ/201 7 ARISING OUT OF ITA 329/VIZ/2016 ( / ASSESSMENT YEAR: 2003 - 2004 ) C O NO. 18 /VIZ/201 7 ARIS ING OUT OF ITA 341/VIZ/2016 ( / ASSESSMENT YEAR: 2004 - 2005 ) / APPELLANT BY : SHRI S.R.S.NARAYAN, SR.DR / RESPONDENT BY : SHRI G.V.N.HARI, AR / DATE OF HEARING : 21 .06.2017 / DATE OF PRONOUNCEMENT : 28 .06.2017 2 ITA NO S 328 /VI Z /201 6,329/VIZ/2016 AND 341 /VIZ/201 6 CO NOS.16 - 18/VIZ/2017 M/S POLISETTY SOMASUNDARAM / O R D E R PER BENCH : THE S E APPEAL S ARE FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. C OMMISSIONER OF INCOME TAX (A PPEALS ) [CIT(A)] - 1, GUNTUR VIDE ITA NO. 335 /CIT(A) - 1/GNT/2013 - 14, 332&333/CIT(A) - 1/GNT/2013 - DATED 2 9 .0 9 .201 6 FOR THE A.Y S . 1999 - 2000, 2003 - 04 AND 200 4 - 0 5 AND THE CROSS OBJECTIONS WERE FILED BY THE ASSESSEE . SINCE , IN ALL THE APPEALS COMMON GROUNDS ARE INVOLVED, ALL THE APPEALS ARE HEARD TOGETHE R AND DISPOSED OFF IN COMMON ORDER AS UNDER. THE COMMON ISSUE FOR ALL THE THREE IN THE SE APPEALS IS T HE DEDUCTION CLAIMED U/S 80HHC OF THE ACT ON THE AMOUNT RECEIVED ON TRANSFER F ROM DEPB LICENSES AS THE ASSESSEE HAD THE TURNOVER EXCEEDING RS.10 CRO RES. 2. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE A SSESSEE HAS RECEIVED THE SUMS ON TRANSFER OF DEPB LICENCE S AND THE ENTIRE AMOUNT RECEIVED ON TRANSFER OF DEPB LICEN C E W AS TREATED AS INCOME U/S 28(IIID ) OF INCOME TAX ACT AND EXCLUDED THE AMOUNTS RECEIVED ON TRANSFER OF DEPB LICENCE FROM THE PROFITS FOR THE PURPOSE COMPUTING THE DEDUCTION U/S 80HHC. THE LD. AO RELIED ON THE DECISION 3 ITA NO S 328 /VI Z /201 6,329/VIZ/2016 AND 341 /VIZ/201 6 CO NOS.16 - 18/VIZ/2017 M/S POLISETTY SOMASUNDARAM OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS & CHEMICALS , 192 TAXM ANN.COM 435 . THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A PPEALS ). THE CIT(APPEALS) ALLOWED THE ASSESSEE S APPEAL FOLLOWING THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT 342 ITR 49. FOR READY REFERENCE, WE REPRODUCE HERE U NDER THE RELEVANT PARA OF THE ORDER OF THE LD.CIT(APPEALS) AS UNDER : AFTER CAREFUL EXAMINATION OF FACTS OF THE CASE IT IS VERY CLEAR THAT THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT (2012) 342 ITR 0049 (SEC) SQUARELY APP LIES TO THE APPELLANT CASE BECAUSE WHEN DEPB IS SOLD BY A PERSON, HIS PROFIT ON TRANSFER OF DEPB WILL BE SALE VALUE OF DEPB LESS ITS FACE VALUE. RESPECTFULLY, FOLLOWING THE PRECEDENT I SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AN DIRECT THE AO TO ALLOW T HE CLAIM IN ACCORDANCE WITH THE AFORE NOTED JUDGEMENT OF HONBLE SUPREME COURT. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE ISSUE IS SETTLED BY HONBLE SUPREME COURT IN THE CASE LAW RELIED UPON BY THE LD.CIT (APPEALS ). THE LD.CIT(APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE FOLLOWING THE JUDGEMENT IN THE CASE OF HONBLE SUPREME COURT. THEREFORE W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(APPEALS) AND THE SAME IS UPHELD. APPEALS OF THE REVENUE ARE DISMISSED . 4 ITA NO S 328 /VI Z /201 6,329/VIZ/2016 AND 341 /VIZ/201 6 CO NOS.16 - 18/VIZ/2017 M/S POLISETTY SOMASUNDARAM 4. IN ITA NO.329 FOR THE ASSESSMENT YEAR 1999 - 2000 , GROUND NO.3 IS RELATED TO INSURANCE PREMIUM. THE ASSESSEE HAS RECEIVED INSURANCE CLAIM OF RS.40,66,631/ - RELATING TO THE STOCK - IN - TRADE AND CLAIMED 90% OF THE GROSS AMOUNT OF INSURANCE CLAIM FOR COMP UTING THE DEDUCTION U/S 80HHC OF THE IT AC T . THE ASSESSING OFFICER EXCLUDED 90% OF THE INSURANCE CLAIM FROM THE PROFITS OF THE BUSINESS FOR COMPUTING THE DEDUCTION U/S 80HHC AND RECOMPUTED THE ALLOWABLE DEDUCTION U/S 80HHC. THE ASSESSING OFFICER RELIED O N THE DECISION OF HONBLE SUPREME COURT JUDGEMENT IN THE CASE OF PANDIAN CHEMICALS VS. CIT (263 ITR 278), WHEREIN, IT WAS HELD THAT THE AMOUNT OF INSURANCE CLAIM RECEIVED BY THE ASSESSEE CANNOT BE HELD TO BE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE WENT ON APPEAL BEFORE THE LD.CIT(APPEALS). LD.CIT(APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE AND DE LETED THE ADDITION MADE BY THE AO. THE LD.CIT(APPEALS) DELETED THE ADDITION AS UNDER : I H AVE GONE THROUGH THE FACTS OF THE CASE, CONTENTS OF THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS FIL ED BY THE ASSESSEE AND THE CASE LAWS RELIED BY THE ASSESSED AND THE AO. IN THE PRESENT CASE THE INSURANCE CLAIM, RELATES TO THE STOCK - IN - TRADE AND IT IS ONLY A N INSURANCE CLAIM OF THAT NATURE WHICH FORMS THE SUBJECT MATTER OF THE APPEAL. NOW, IT CANNOT BE DISPUTED THAT IF THE STOCK - IN - TRADE OF THE ASSESSEE WERE TO BE SOLD THE - INCOME THAT WERE TO BE RECEIVED FROM THE SALE OF GOODS WOULD CONSTITUTE THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE INCOME EMANATING FROM THE SALE WOULD NOT BE 5 ITA NO S 328 /VI Z /201 6,329/VIZ/2016 AND 341 /VIZ/201 6 CO NOS.16 - 18/VIZ/2017 M/S POLISETTY SOMASUNDARAM SUSTAINABLE TO A REDUCTION OF NINETY PER CENT FOR THE SIMPLE REASON THAT IT WOULD NOT CONSTITUTE A RECEIPT OF A NATURE S IMILAR TO BROKERAGE, COMMISSION, INTEREST, RENT OR CHARGES. A CONTRACT OF INSURANCE IS CONTRACT OF INDEMNITY. THE INSURANCE CLAIM IN ESSENCE INDEMNIFIES THE ASSESSED FOR THE LOSS OF THE STOCK - IN - TRADE. THE INDEMNIFICATION THAT IS MADE TO THE ASSESSED M UST STAND ON THE SAME FOOTING AS THE INCOME THAT WOULD HAVE BEEN REALIZED BY THE ASSESSED ON THE SALE OF THE STOCK - IN - TRADE. UNDER THESE CIRCUMSTANCES, I AM CLEARLY OF THE VIEW THAT THE INSURANCE CLAIM ON ACCOUNT OF THE STOCK - IN - TRADE DOES NOT CONSTITUTE AN INDEPENDENT INCOME OR A RECEIPT OF A NATURE SIMILAR TO BROKERAGE, COMMISSION, INTEREST, RENT OR CHARGES. HENCE, SUCH A RECEIPT WOULD NOT BE SUBJECT TO A DEDUCTION OF NINETY PER CENT UNDER CLAUSE (1) OF EXPIN. (BAA ). IN VIEW OF THE DETAILED DISCUSSION OF FACTS AND CIRCUMSTANCES OF THE CASE AND VARIOUS COURT JUDGEMENTS, 90% OF INSURANCE CLAIM OF RS.40 , 66,631/ - CONSIDERED FOR ARRIVING AT ADJUSTED PROFITS OF THE BUSINESS IS TO BE DELETED SINCE THE CLAIM IS AGAINST THE LOSS OF STOCK. HENCE, THE ADDITION MADE BY THE AO IS DELETED AND ASSESSEES GROUND OF APPEAL IS ALLOWED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. THE DEDUCTION U/S 80HHC IS ALLOWABLE ON EXPORT PROFITS . FOR THE SAKE OF CONVENIENCE, THE RELEVANT PART O F THE SECTION 80HHC IS RE PRODUCED AS UNDER : [ DEDUCTION IN RESPECT OF PROFITS RETAINED FOR EXPORT BUSINESS. 80HHC. [(1) WHERE AN ASSESSEE, BEING AN INDIAN COMPANY OR A PERSON (OTHER THAN A COMPANY) RESIDENT IN INDIA, IS ENGAGED IN THE BUSINESS OF EXPORT OUT OF INDIA OF ANY GOODS OR MERCHANDISE TO WHICH THIS SECTION APPLIES, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, [A DEDUCTION TO THE EXTENT OF PROFITS, REFERR ED TO IN SUB - SECTION (1B),] DERIVED BY THE ASSESSEE FROM THE EXPORT OF SUCH GOODS OR MERCHANDISE : 6 ITA NO S 328 /VI Z /201 6,329/VIZ/2016 AND 341 /VIZ/201 6 CO NOS.16 - 18/VIZ/2017 M/S POLISETTY SOMASUNDARAM 6. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80HHC ONLY ON THE PROFITS DERIVED FROM THE EXPORT OF GOODS. INSURANCE RECEIP T IS THE TRADING RECEIPT AND WHILE COMPUTING THE DEDUCTION UNDER SECTION IT GOES TO INCREASE THE TOTAL TURNOVER BUT NOT INCLUD A BLE IN THE EXPORT TURNOVER. IT ALSO CANNOT BE HELD AS SEP A RATE SOURCE OF INCOME. THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE LD.CIT(A) AND THE SAME IS UPHELD. THE APPEAL OF THE REVENUE IS DISMISSED. CROSS OBJECTIONS : 7. GROUNDS RAISED IN THE CROSS OBJECTIONS ARE SUPPORTING THE ORDERS OF THE LD.CIT(APPEALS) WITH REGARD TO THE SALE OF DEPB LICENSES. SINCE WE HAVE UPHE LD THE ORDERS OF THE LD.CIT(APPEALS), NO SEPARATE ADJUDICATION IS REQUIRED ON THE CROSS OBJECTIONS AND THE CROSS OBJECTIONS STAND S ALLOWED. 8. IN THE RESULT THE APPEALS OF THE REVENUE ARE DISMISSED AND THE CROSS OBJECTIONS ARE ALLOWED. 7 ITA NO S 328 /VI Z /201 6,329/VIZ/2016 AND 341 /VIZ/201 6 CO NOS.16 - 18/VIZ/2017 M/S POLISETTY SOMASUNDARAM T HE ABOVE O RDER WAS PRONOUNCED IN THE OPEN COURT ON 28 TH JUN 20 17 . SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 28 .06.2017 L. RAMA, SPS / COPY OF THE ORDER FORWARDED TO : - 1. / THE APPELLANT , THE ASST. COMMISSIONER OF INCOME TAX , CIRCLE - 2(1), 2 ND FLOOR, RAJKAMAL COMPLEX, LAKSHMIPURAM, GUNTUR 2 . / THE RESPONDENT M/S POLISETTY SOMASUNDARAM , 8 - 24 - 31,MANGALAGIRI ROAD , GUNTUR 3 . / THE PR.CIT, GUNTUR 4 . ( ) / THE CIT (A) , VI SAKHAPATNAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM