Smt. Ambika Sadh, New Delhi V. CIT- VIII, New Delhi

ITA 3606/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74073 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A MISRA
• Assessee Lawyers: R K MALHOTRA
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 80HHC; 10B; 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI J.S. REDDY ITA NO. 3606/DEL/2013 ASSTT. YR: 2008-09 SMT. AMBIKA SADH, VS. COMMISSIONER OF INCOME-TAX -VIII, C-57, M.B. ROAD, LAL KUAN, NEW DELHI. BADAR PUR, NEW DELHI-110044. PAN: AQWPS 4050 C ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI R.K. MALHOTRA CA RESPONDENT BY : SHRI A. MISRA CIT (DR) O R D E R PER R.P. TOLANI, J.M: : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF CI T-VIII, NEW DELHI DATED 29-01-201307 PASSED U/S 263 OF THE INCOME-TAX ACT, 1961 RELATING TO A.Y. 2008-09. 2. BRIEF FACTS ARE: WHILE CALCULATING THE ELIGIBLE PROFIT U/S 10B OF THE INCOME-TAX ACT, 1961, THE ASSESSEE INCLUDES RECEIPT OF RS. 1,42,32,066/-. THE CLAIM OF THE ASSESSEE WAS ACCORDINGLY ALLOWED B Y THE A.O. BY PASSING ASSESSMENT ORDER U/S 143(3) DATED 31-12-2010. WHILE MAKING THE ASSESSMENT THE ASSESSING OFFICER DID NOT RECORD ANY OBSERVATIO NS OR FINDINGS ABOUT THE ALLOWABILITY OF THE CLAIM OF DEDUCTION U/S 10B AS W ORKED OUT BY THE ASSESSEE. 2.1. THE CIT ISSUED NOTICE U/S 263, FINDING THAT TH E ORDER OF ASSESSMENT WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF REVENUE AS THE ALLOWABILITY OF AMOUNT OF CLAIM QUA DEPB PROFITS WA S NOT IN CONSONANCE WITH THE RATIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY ITA NO. 3606/DEL/2013 SMT. AMBIKA SADH VS. CIT 2 INDIA 317 ITR 218 AND AS THE ASSESSING OFFICER HAD NOT EXAMINED THE CASE IN THE LIGHT OF HONBLE SUPREME COURT JUDGMENT. THE OR DER THUS, WAS HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE AND LD. CIT IN EXERCISE OF POWERS U/S 263 SET ASIDE THE ASSESSMENT BACK TO THE FILE OF ASSESSING OFFICER WITH FOLLOWING OBSERVATIONS: 11. TO SUM UP, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT WITHOUT MAKING REQUISITE ENQUIRY, WITHOU T CONSIDERING THE ANALYSIS AND APPLICABILITY OF THE D ECISION OF THE HONBLE APEX COURT AND ALSO WITHOUT DUE APPLICATION OF MIND. THUS T4EH IMPUGNED ASSESSMENT ORDER IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF REVENUE AND IS LI ABLE TO BE SET ASIDE. ACCORDINGLY, IN THE EXERCISE OF REVISIONARY POWERS U/S 263 OF INCOME TAX ACT, 1961, THE ASSESSMENT OF A.Y. 2008-09 COMPLETED U/S 143(3) ON 31-12-2010 IS HEREBY SET AS IDE TO THE ASSESSING OFFICER TO MAKE ASSESSMENT DE NOVO AFTER EXAMINING THE CORRECTNESS OF THE INCOME SHOWN BY THE ASSESSEE KEEPING IN VIEW THE DECISION OF THE HONBLE SUPREME COURT AS T O WHETHER THE DEDUCTION CLAIMED AND ALLOWED U/S 10B IS IN ACC ORDANCE WITH LAW, AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 2.3. AGGRIEVED, ASSESSEE IS BEFORE US. 3. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE I SSUE IN QUESTION STANDS SETTLED IN FAVOUR OF ASSESSEE AS DECIDED ON MERITS BY THE ITAT INDORE SPECIAL BENCH JUDGMENT IN THE CASE OF MARAL OVERSEA S LTD. VS. ADDL. CIT (ITA NOS. 777 & 999(IND) OF 2004 & 295 & 356(IND) O F 2006) DATED 28-3- 2012). THE SPECIAL BENCH OBSERVED THAT IN THE CASE OF LIBERTY INDIA (SUPRA) THE HONBLE SUPREME COURT HAS DEALT WITH THE PROVI SIONS OF SEC. 80IA OF THE I.T. ACT WHERE THE ISSUE UNDER CONSIDERATION WA S SEC. 80IB. THE SPECIAL BENCH AFTER DULY CONSIDERING THE FACTS & ISSUES HE LD AS UNDER: IT IS CLEAR FROM THE PLAIN READING OF SECTION 10B( 1) OF THE ACT THAT THE SAID SECTION ALLOWS DEDUCTION IN R ESPECT ITA NO. 3606/DEL/2013 SMT. AMBIKA SADH VS. CIT 3 OF PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU. FURTHER, SECTION 10B(4) OF THE ACT STIPULATES SPECI FIC FORMULA FOR COMPUTING THE PROFIT DERIVED BY THE UNDERTAKING FROM EXPORT. THUS, THE PROVISIONS OF SU B- SECTION (4) OF SECTION 10B OF THE ACT MANDATE THAT DEDUCTION UNDER THAT SECTION SHALL BE COMPUTED BY APPORTIONING THE PROFITS OF THE BUSINESS OF THE UNDERTAKING IN THE RATIO OF EXPORT TURNOVER BY THE TOTAL TURNOVER. THUS, EVEN THOUGH SUB-SECTION (1) OF SECT ION 10B REFERS TO PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU, THE MANNER OF DETERMINING SUCH ELIGIBLE PROFIT S HAS BEEN STATUTORILY DEFINED IN SUB-SECTION (4) OF THAT SECTION. BOTH SUB-SECTIONS (1) AND (4) ARE TO BE READ TOGETH ER WHILE COMPUTING THE ELIGIBLE DEDUCTION U/S 10B OF T HE ACT. WE CANNOT IGNORE SUB-SECTION (4) OF SECTION 10 B WHICH PROVIDES SPECIFIC FORMULA FOR COMPUTING THE 7 4 PROFITS DERIVED BY THE UNDERTAKING FROM EXPORT. AS PER THE FORMULA SO LAID DOWN, THE ENTIRE PROFITS OF THE BUS INESS ARE TO BE DETERMINED WHICH ARE FURTHER MULTIPLIED B Y THE RATIO OF EXPORT TURNOVER TO THE TOTAL TURNOVER OF T HE BUSINESS. IN CASE OF LIBERTY INDIA, THE HON'BLE SUP REME COURT HAS DEALT WITH THE PROVISIONS OF SECTION 80IA OF THE ACT WHEREIN NO FORMULA WAS LAID DOWN FOR COMPUTING THE PROFITS DERIVED BY THE UNDERTAKING WHICH HAS SPECIF ICALLY BEEN PROVIDED UNDER SUB-SECTION (4) OF SECTION 10B WHILE COMPUTING THE PROFITS DERIVED BY THE UNDERTAKING FR OM THE EXPORT. THUS, THE DECISION OF THE HON'BLE SUPRE ME COURT IS OF NO HELP TO THE REVENUE IN DETERMINING T HE CLAIM OF DEDUCTION U/S 10B IN RESPECT OF EXPORT INCENTIVES. 78. SECTION 10B SUB-SECTION (1) ALLOWS DEDUCTION IN RESPECT OF PROFITS AND GAINS AS ARE DERIVED BY A 10 0% EOU. SECTION 10B(4) LAYS DOWN SPECIAL FORMULA FOR COMPUTING THE PROFITS DERIVED BY THE UNDERTAKING FR OM EXPORT. THE FORMULA IS AS UNDER :- PROFIT OF THE BUSINESS OF THE X TOTAL TURNOVER OF B USINESS UNDERTAKING CARRIED OUT BY THE UNDERTAKING ITA NO. 3606/DEL/2013 SMT. AMBIKA SADH VS. CIT 4 79. THUS, SUB-SECTION (4) OF SECTION 10B STIPULATED THAT DEDUCTION UNDER THAT SECTION SHALL BE COMPUTED BY APPORTIONING THE PROFITS OF THE BUSINESS OF THE UNDERTAKING IN THE RATIO OF TURNOVER TO THE TOTAL T URNOVER. THUS, NOT-WITH-STANDING THE FACT 75 THAT SUB-SECTIO N (1) OF SECTION 10B REFERS THE PROFITS AND GAINS AS ARE DER IVED BY A 100% EOU, YET THE MANNER OF DETERMINING SUCH ELIGIBLE PROFITS HAS BEEN STATUTORILY DEFINED IN SU B-SECTION (4) OF SECTION 10B OF THE ACT. AS PER THE FORMULA S TATED ABOVE, THE ENTIRE PROFITS OF THE BUSINESS ARE TO BE TAKEN WHICH ARE MULTIPLIED BY THE RATIO OF THE EXPORT TUR NOVER TO THE TOTAL TURNOVER OF THE BUSINESS. SUB-SECTION (4) DOES NOT REQUIRE AN ASSESSEE TO ESTABLISH A DIRECT NEXUS WITH THE BUSINESS OF THE UNDERTAKING AND ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE UNDERTAKING, THE SAME WOULD BE INCLUDED IN THE PROFITS OF THE BUSINESS OF THE UNDERTAKING. THUS, ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE ELIGIBLE UNDERTAKING, THERE IS NO F URTHER MANDATE IN THE PROVISIONS OF SECTION 10B TO EXCLUDE THE SAME FROM THE ELIGIBLE PROFITS. THE MODE OF DETERMI NING THE ELIGIBLE DEDUCTION U/S 10B IS SIMILAR TO THE PR OVISIONS OF SECTION 80HHC INASMUCH AS BOTH THE SECTIONS MANDATES DETERMINATION OF ELIGIBLE PROFITS AS PER T HE FORMULA CONTAINED THEREIN. THE ONLY DIFFERENCE IS T HAT SECTION 80HHC CONTAINS A FURTHER MANDATE IN TERMS O F EXPLANATION (BAA) FOR EXCLUSION OF CERTAIN INCOME F ROM THE PROFITS OF THE BUSINESS WHICH IS, HOWEVER, CONSPICUOUS BY ITS ABSENCE IN SECTION 10B. ON THE B ASIS OF THE AFORESAID DISTINCTION, SUB-SECTION (4) OF SE CTION 10A/10B OF THE ACT IS A COMPLETE CODE PROVIDING THE 76 MECHANISM FOR COMPUTING THE PROFITS OF THE BUSINES S ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE INCOME OF THE ELI GIBLE UNDERTAKING OF THE ASSESSEE, THE SAME CANNOT BE EXC LUDED FROM THE ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUT ING DEDUCTION U/S 10B OF THE ACT. AS PER THE COMPUTATIO N MADE BY THE ASSESSING OFFICER HIMSELF, THERE IS NO DISPUTE THAT BOTH THESE INCOMES HAVE BEEN TREATED BY THE ASSESSING OFFICER AS BUSINESS INCOME. THE CBDT CIRCULAR NO. 564 DATED 5TH JULY, 1990 REPORTED IN 1 84 ITA NO. 3606/DEL/2013 SMT. AMBIKA SADH VS. CIT 5 ITR (ST.) 137 EXPLAINED THE SCOPE AND AMBIT OF SECT ION 80HHC AND THE MODE OF DETERMINATION OF PROFITS DERI VED BY AN ASSESSEE FROM THE EXPORT OF GOODS. I.T.A.T., SPECIAL BENCH IN THE CASE OF INTERNATIONAL RESEARCH PARK LABORATORIES VS. ACIT, 212 ITR (AT) 1, AFTER FOLLOW ING THE AFORESAID CIRCULAR, HELD THAT STRAIGHT JACKET F ORMULA GIVEN IN SUB-SECTION (3) HAS TO BE FOLLOWED TO DETE RMINE THE ELIGIBLE DEDUCTION. THE HON'BLE SUPREME COURT I N THE CASE OF P.R. PRABHAKAR; 284 ITR 584 HAD APPROVED TH E PRINCIPLE LAID DOWN IN THE SPECIAL BENCH DECISION I N INTERNATIONAL RESEARCH PARK LABORATORIES VS. ACIT (SUPRA). IN THE ASSESSEES OWN CASE THE I.T.A.T. IN THE PRECEDING YEARS, AFTER CONSIDERING THE DECISION IN THE CASE OF LIBERTY INDIA HELD THAT PROVISIONS OF SECTI ON 10B ARE DIFFERENT FROM THE PROVISIONS OF SECTION 80IA W HEREIN NO FORMULA HAS BEEN LAID DOWN FOR COMPUTING THE ELIGIBLE BUSINESS PROFIT. 80. IN VIEW OF THE ABOVE DISCUSSION, QUESTION NO. 2 IS ANSWERED IN AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. ACCOR DINGLY, THE ASSESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION ON EXPO RT INCENTIVE RECEIVED BY IT IN TERMS OF PROVISIONS OF SECTION 10 B(1) READ WITH SECTION 10B(4) OF THE ACT. 3.1. SINCE THE SPECIAL BENCH AFTER CONSIDERING THE RATIO OF DECISIONS IN THE CASE OF LIBERTY INDIA (SUPRA); INTERNATIONAL RESEAR CH PARK LABORATORIES V. ACIT 212 ITR (AT) 1; AND CBDT CIRCULAR HAS HELD THA T WHILE WORKING OUT THE DEDUCTION U/S 10B(1) THE CALCULATION OF ELIGIBL E PROFITS IS TO BE MADE BY INCLUDING THE CLAIM OF EXPORT INCENTIVES, THUS THE CLAIM ULTIMATELY ALLOWED BY THE ASSESSING OFFICER IS JUSTIFIED, WHICH IS END ORSED BY SPECIAL BENCH. THEREFORE, THE ORDER OF CIT SHOULD BE SET ASIDE AS THE MERITS STAND DECIDED. 4. LD. DR SUPPORTED THE ORDER OF LD. CIT. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIE W, SINCE THE ISSUE IN QUESTION STANDS SQUARELY DECIDED IN FAVOUR OF THE A SSESSEE BY THE ITAT ITA NO. 3606/DEL/2013 SMT. AMBIKA SADH VS. CIT 6 SPECIAL BENCH ORDER IN THE CASE OF MARAL OVERSEAS L TD. (SUPRA), WHICH HAS NOT BEEN DISTURBED BY ANY SUPERIOR AUTHORITY, IS BI NDING ON US. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT ON MERITS THE ASSE SSEES COMPUTATION OF ELIGIBLE PROFIT U/S 10B IS TO BE ALLOWED AFTER INC LUDING THE EXPORT PROFITS AS CLAIMED BY THE ASSESSEE. IN VIEW THEREOF, WITHOUT G OING INTO TECHNICALITIES OF VALIDITY OF SEC. 263 WE UPHOLD THE ACTION U/S 263 AND THE ISSUE ON MERITS IS DECIDED IN FAVOUR OF THE ASSESSEE FOLLOWING THE ITA T SPECIAL BENCH JUDGMENT (SUPRA). THUS THE ORDER LD. CIT SETTING AS IDE THE ASSESSMENT BACK TO THE FILE OF ASSESSING OFFICER STANDS VACATED AND THE CLAIM OF THE ASSESSEE AS ALLOWED BY A.O. STANDS. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 10-2-2014. SD/- SD/- ( J.S. REDDY ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10-02-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR