M/s. Colourtex, Surat V. The Dy.CIT.,Cent.Circle-3, Surat

ITA 3758/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1743 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 18-11-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K SHARMA
• Keywords: Retrospective amendment
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO.3758/AHD/2008 A. Y.: 2004-05 M/S. COLOURTEX, SURVEY NO.80, G. I. D. C., PANDESARA, SURAT VS THE D. C. I. T., CENT. CIRCLE-3, SURAT PA NO. AABFC 7214 M (APPELLANT) (RESPONDENT) APPELLANT BY NONE (WRITTEN SUBMISSION) RESPONDENT BY SHRI C. K. SHARMA, SR. DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A)-II, AH MEDABAD DATED 16 TH SEPTEMBER, 2008 FOR ASSESSMENT YEAR 2004-05, ON THE FOLLOWING GROUNDS: 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACT OF A O OF ALTERING DEDUCTION U/S. 80 HHC OF THE ACT AS CLAIME D BY THE APPELLANT BY DISALLOWING 10% OF EXPORT INCENTIV ES AS REDUCED FROM INDIRECT COSTS. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) HAS ERRED IN SUSTAINING THE STAND OF THE AO IN NOT APPRECIATING THAT THE TAXATION LAWS (AMENDMENT) ACT, 2005 MAKES UNDUE DISTINCTION BETWE EN EXPORTERS ON THE BASIS OF TURNOVER AND AMENDS THE L AW, BY LAYING DOWN VARIOUS CONDITIONS, ON A RETROSPECTI VE BASIS, WHICH IS UNCONSTITUTIONAL AND ULTRA-VIRES, R EQUIRING OUTRIGHT ANNULMENT. ITA NO.3758/AHD/2008 M/S. COLOURTEX VS DCIT, CENTRAL CIRCLE -3, SURAT 2 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACT OF A O IN NOT APPRECIATING THE FACT THAT THE AMOUNT OF DEPB L ICENSE RECEIVED BY THE APPELLANT IS NOTHING BUT REIMBURSEM ENT OF COST OF DUTIES SUFFERED BY THE INPUTS AND THUS, THE ENTIRE PROFIT EARNED BY THE APPELLANT IS DERIVED ONLY FROM EXPORTS AND IS FULLY ELIGIBLE FOR DEDUCTION U/S. 80 HHC OF THE ACT. 4. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) HAS EVEN OTHERWISE ERRED IN CONFIRMI NG THE ACT OF AO IN EXCLUDING THE ENTIRE AMOUNT OF DEPB LI CENSE INSTEAD OF EXCLUDING ONLY TH4 PROFIT ON SALE THEREO F. 5. ALL THE AFORESAID GROUNDS REGARDING DISALLOWANCE OF DEDUCTION U/S. 80 HHC OF THE ACT ARE INDEPENDENT TO EACH OTHER REQUIRING SEPARATE ADJUDICATION BY YOUR HONOU RS. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF NOTICE. THE LEARNED DR RELIED UPON THE ORDERS OF TH E AUTHORITIES BELOW AND ALSO RELIED UPON THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF LIBERTY INDIA ITR 317/218 IN WHICH IT WAS HELD THAT DEPB/DUTY DRAWBACK BENEFITS DO NOT FORM PART OF NET PROFIT OR TO ELIGIBLE FOR DEDUCTION U/S 80 IA AND 80 IB OF THE IT ACT. 3. THE ASSESSEE CHALLENGED THE ORDER OF THE AO BEFO RE THE LEARNED CIT(A) FOR NOT ALLOWING DEDUCTION U/S 80 HH C OF THE ACT ON THE AMOUNT OF DEPB LICENSE ON THE GROUND THAT THE T OTAL TURNOVER OF THE ASSESSEE EXCEEDS RS. 10 CRORES, HENCE, DEDUCTIO N U/S 80 HHC OF THE IT ACT IS NOT ALLOWABLE AS PER THE AMENDED P ROVISIONS OF SECTION 80 HHC OF THE IT ACT. THE ASSESSEE SUBMITTE D THAT AMENDMENT IN SECTION 80 HHC MADE BY TAXATION LAWS ( AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT FROM 1-4-1998 I S UNCONSTITUTIONAL AND ULTRA-VIRES AS IT MAKES UNDUE DISTINCTION BETWE EN EXPORTERS ON ITA NO.3758/AHD/2008 M/S. COLOURTEX VS DCIT, CENTRAL CIRCLE -3, SURAT 3 THE BASIS OF TURNOVER AND AMENDMENT IS MADE ON RETR OSPECTIVE BASIS. FURTHER, THE AMOUNT OF DEPB LICENCE RECEIVED BY THE ASSESSEE IS NOTHING BUT REIMBURSEMENT OF COST OF DUTIES SUFFERE D BY THE INPUTS AND THUS, THE ENTIRE PROFIT EARNED BY THE ASSESSEE IS DERIVED ONLY FROM EXPORTS AND IS FULLY ELIGIBLE FOR DEDUCTION U/ S 80 HHC OF THE IT ACT. IT WAS ALSO SUBMITTED THAT THE AO HAS EVEN OT HERWISE ERRED IN EXCLUDING THE ENTIRE AMOUNT OF DEPB LICENSE INSTEAD OF EXCLUDING ONLY THE PROFIT ON SALE THEREOF. THE ASSESSEE RELIE D UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CI T VS INDIA GELATINE & CHEMICALS LTD. 275 ITR 284 (GUJ.) 4. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND FACTS, NOTED THAT THE QUESTION OF AMEN DMENT BEING UNCONSTITUTIONAL AND ULTRA-VIRES IS BEYOND THE SCOP E OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A). ACCORDINGLY, SUCH SUBMISSION WAS REJECTED. THE LEARNED CIT(A) FURTHER NOTED THAT AS PER AMENDMENT MADE IN SECTION 80 HHC OF THE IT ACT BY T AXATION LAW (AMENDMENT) ACT, 2005, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80 HHC OF THE IT ACT AS ITS TURNOVER EXCEEDS R.10 C RORES AND HENCE, IT HAS NOT FULFILLED THE CONDITIONS OF THE AMENDED PROVISIONS. THE LEARNED CIT(A) ALSO NOTED THAT THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF INDIA GELATINE & CHEMICAL S LTD. (SUPRA) IS NOT APPLICABLE AS THAT WAS ON THE POINT OF DUTY DRA WBACK AND AFTER AMENDMENT IN SECTION 80 HHC, RATIO OF THAT CASE CAN NOT BE APPLIED ON THE POINT OF DEDUCTION U/S 80 HHC OF THE IT ACT ON ACCOUNT OF DEPB LICENSE. THE FINDINGS OF THE AO WERE ACCORDING LY CONFIRMED WHICH ARE ACCORDING TO THE AMENDED PROVISIONS OF SE CTION 80 HHC OF ITA NO.3758/AHD/2008 M/S. COLOURTEX VS DCIT, CENTRAL CIRCLE -3, SURAT 4 THE IT ACT. THE LEARNED CIT(A) HAS ALSO CONFIRMED T HE DISALLOWANCE OF 10% OF EXPORT INCENTIVE BECAUSE THE SAME WERE RIGHT LY DISALLOWED ON ACCOUNT OF ENTIRE AMOUNT OF DEPB LICENSE. 5. THE ASSESSEE DID NOT PUT ANY APPEARANCE AND ONLY WRITTEN SUBMISSION IS FORWARDED IN WHICH THE PRECISE POINT WAS RAISED THAT THE AMENDMENT IN SECTION 8O HHC OF THE IT ACT IS UL TRA-VIRES AND DISCRIMINATORY. HOWEVER, IT WAS NOT IN DISPUTE THAT THE TURNOVER OF THE ASSESSEE WAS MORE THAN RS.10 CRORES AND THE AMENDED PROVISIONS OF SECTION 80 HHC OF THE IT ACT WOULD BE APPLICABLE TO THE ASSESSMENT YEAR UNDER APPEAL. 6. ON CONSIDERATION OF THE ABOVE FACTS WE ARE OF TH E VIEW THAT THE FINDINGS OF THE AUTHORITIES BELOW ARE IN ACCORDANCE WITH THE AMENDED PROVISIONS OF SECTION 80 HHC OF THE IT ACT. SINCE T HE TURNOVER OF THE ASSESSEE EXCEEDS RS.10 CRORES AND THE ASSESSEE HAS NOT COMPLIED WITH THE CONDITIONS OF THE PROVISIONS OF SECTION 80 HHC (3) OF THE IT ACT, THEREFORE, CLAIM OF THE ASSESSEE WAS RIGHTLY D ISALLOWED. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS KAL PATARU COLOURS & CHEMICALS 233 CTR 313 HELD AS UNDER: CONCLUSION: IN THE ASSESSMENT IN QUESTION, THE ASSESSEE HAD AN EXPORT TURNOVER EXCEEDING RS. 10 CRORES AND DID NOT FULFILL THE CONDITIONS SET OUT I N THE THIRD PROVISO TO S. 80HHC(3), AND THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO A DEDUCTION UNDER S. 80HHC ON THE AMOUNT RECEIVED ON TRANSFER OF DEPB; CONTENTION THAT THE PROFITS ON TRANSFER OF DEPB IN S. 28 (IIID) WOULD NOT INCLUDE THE FACE VALUE OF THE D EPB SO THAT THE ASSESSEE GETS A DEDUCTION UNDER S. 80 HHC ON THE FACE VALUE OF THE DEPB HAS NO MERIT. ITA NO.3758/AHD/2008 M/S. COLOURTEX VS DCIT, CENTRAL CIRCLE -3, SURAT 5 THIS JUDGMENT IS DIRECTLY APPLICABLE TO THE CASE OF THE ASSESSEE. SINCE THE ASSESSEE DID NOT COMPLY WITH THE CONDITIO NS OF THE AMENDED PROVISIONS OF LAW, THEREFORE, THE AUTHORITI ES BELOW WERE JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. T HE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF THE ACT CANNOT BE CHA LLENGED BEFORE THE LEARNED CIT(A) OR BEFORE THE TRIBUNAL. WE, THEREFOR E, DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE. THE SAME IS AC CORDINGLY DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18-03-2011 SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 18-03-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD