M/S. KARISHMA EXPORTS, MUMBAI V. THE ITO 14(3)(2), MUMBAI

ITA 3971/MUM/2007

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9367 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-11-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 22-05-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH KANOJIA
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI SANJAY ARORA (ACCOUNTANT MEMBER) ITA NO.3971/MUM/2007 ASSESSMENT YEAR: 2000-2001 KARISHMA EXPORTS, 37, RAMWADI KALBADEVI ROAD, MUMBAI-02 PA NO.AAAFK 7189 C ITO 14(3)(2), MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY: SHRI MANISH KANOJIA DATE OF HEARING: 12.11.2012 DATE OF PRONOUNCEMENT: 21 .11.2012 ORDER PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT Y EAR 2000-2001 AGAINST ORDER DATED 2.3.2007 OF LD CIT(A)XV, MUMBAI ON FOLLOWING GROUNDS: 1.THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) [ HEREINAFTER REFERRED TO AS CIT(A)] ERRED IN CONFIRMING THE ASSESSMENT O RDER DATED 30/11/2006 PASSED BY THE ASSESSING OFFICER DETERMIN ED THE TOTAL INCOME AT RS.25,49,270/- WITHOUT APPRECIATING THE FACTS AN D SUBMISSIONS MADE BY THE APPELLANT. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ASSESSMEN T ORDER DATED 30/11/2006 IN WHICH THE ASSESSING OFFICER HAS MADE ADDITION ON ACCOUNT OF DISALLOWANCE OF THE DEPB CLAIM UNDER SECTION 80H HC WITHOUT CONSIDERING THE FACTS IN THE RIGHT SPIRIT. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ADD ITION ON ACCOUNT OF HOUSE PROPERTY OF RS.5,64,394/- HAS BEEN MADE ONLY ON THE NOTIONAL BASIS. THEREFORE, THE ADDITION MADE BY THE ASSESSIN G OFFICER IS WITHOUT ANY BASIS AND THE SAME MAY BE DELETED. 2. AT THE TIME OF HEARING, LD A.R. SUBMITTED THAT G ROUND NO.1 IS GENERAL IN NATURE AND NO SPECIFIC ADJUDICATION IS CALLED FOR. ITA NO.3971/MUM/2007 ASSESSMENT YEAR: 2000-2001 2 3. IN RESPECT OF GROUND NO.2 OF APPEAL, RELEVANT FA CTS ARE THAT THE AO WHILE COMPUTING DEDUCTION UNDER SECTION 80 HHC OF THE ACT SEGREGATED THE AMOUNT RECEIVED BY THE ASSESSEE ON SALE OF DEPB LICENCES FROM THE A MOUNT RECEIVABLES ON ACCOUNT OF DEPB LICENCE. AO RESTRICTED THE DEDUCTION U/S.80HH C OF THE ACT ON ACCOUNT OF RECEIPT OF DEPB LICENCES SOLD WITHOUT TAKING INTO ACCOUNT OF U NSOLD DEPB AT RS.22,05,422. ACCORDINGLY, AO ALLOWED DEDUCTION U/S. 80HHC OF THE ACT AT RS.50,00,329 AS AGAINST RS.69,85,209 CLAIMED BY ASSESSEE. ASSESSEE FILED A PPEAL BEFORE LD CIT(A). LD CIT(A) CONFIRMED THE ACTION OF AO. HENCE, THIS APPEAL BY THE ASSESSEE. 4. AT THE TIME OF HEARING, LD A.R. SUBMITTED THAT I N VIEW OF DECISION OF HONBLE APEX COURT IN THE CASE OF TOPMAN EXPORTS VS CIT, 342 ITR 49(SC), DEPB IS THE CASH ASSISTANCE RECEIVABLE AGAINST THE EXPORT UNDER THE SCHEME OF GOVERNMENT OF INDIA. THEREFORE, THE FACE VALUE OF DEPB FALLS UNDER CLAUS E (IIIB) OF SECTION 28 OF THE I.T.ACT, 1961 AND THE DIFFERENCE BETWEEN SALE VALUE AND FACE VALUE OF DEPB IS THE PROFIT WHICH FALLS UNDER CLAUSE (IIID) OF SECTION 28 OF THE ACT. THE APEX COURT HAS ALSO HELD THAT DEPB REPRESENTS PART OF THE COST INCURRED BY A PERS ON FOR MANUFACTURE OF THE EXPORT PRODUCT AND HENCE EVEN WHERE THE DEPB CREDIT IS NOT UTILIZED BY THE EXPORTER BUT IS TRANSFERRED TO ANOTHER PERSON, DEPB CONTINUES TO RE MAIN AS COST TO THE EXPORTER. THEREFORE, WHEN DEPB IS TRANSFERRED, THE ENTIRE SUM RECEIVED ON SUCH TRANSFER DOES NOT BECOME THE PROFITS OF THE EXPORTER AND IT IS ONLY T HE AMOUNT THAT RECEIVED IN EXCESS OF THE DEPB, WHICH REPRESENTS THE PROFITS ON TRANSFER OF DEPB. HE SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED TO HOLD THAT D EDUCTION U/S.80HHC IS ALLOWABLE ONLY ON PROFIT ON SALE OF DEPB AND NOT ON THE BASIS OF C REDIT. HE SUBMITTED THAT DEDUCTION U/S,.80HHC SHOULD BE ALLOWED TO THE ASSESSEE AS PER DECISION OF HONBLE APEX COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA). 5. ON THE OTHER HAND, LD D.R. SUBMITTED THAT THE MA TTER SHOULD BE RESTORED TO THE FILE OF AO THAT THE DEDUCTION U/S.80HHC SHOULD BE C OMPUTED IN RESPECT OF DEPB AS PER DECISION OF HONBLE APEX COURT IN THE CASE OF TOPMA N EXPORTS(SUPRA). ITA NO.3971/MUM/2007 ASSESSMENT YEAR: 2000-2001 3 6. WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTAT IVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. WE OBSERVE THAT AO RESTRICTED T HE DEDUCTION U/S.80HHC ON ACCOUNT OF RECEIPT OF DEPB SOLD WITHOUT TAKING INTO ACCOUNT THE UNSOLD DEPB LICENCES. CONSIDERING THE DECISION OF HONBLE APEX COURT IN T HE CASE OF TOPMAN EXPORTS (SUPRA), WE CONSIDER IT PRUDENT THAT MATTER BE RESTORED TO T HE FILE OF AO TO COMPUTE THE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S.80HHC OF TH E ACT AS PER DECISION THE DECISION OF HONBLE APEX COURT IN THE CASE OF TOPMAN EXPORTS (S UPRA). HENCE, GROUND NO.2 OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES BY RESTO RING THE MATTER TO THE FILE OF AO WITH A DIRECTION TO RE-COMPUTE THE DEDUCTION ALLOWABLE TO ASSESSEE IN RESPECT OF CLAIM OF DEPB AS PER DECISION OF HONBLE APEX COURT IN THE CASE O F TOPMAN EXPORTS (SUPRA). 7. IN RESPECT OF GROUND NO.3 OF APPEAL, LD REPRESEN TATIVES OF PARTIES SUBMITTED THAT SIMILAR ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL I N ASSESSEES OWN CASE IN SUCCEEDING ASSESSMENT YEAR I.E. 2001-02 IN I.T.A. NO.9050/M/20 04 VIDE ORDER DATED 15.5.2007. THE FINDINGS OF THE TRIBUNAL AS UNDER: WE HAVE CONSIDERED THE MATTER IN DETAIL. AS RIGHTL Y POINTED BY THE REVENUE, THE SUPREME COURT IN THE ABOVE DECISION HA S DOWN DIFFERENT METHODS TO WORK OUT THE ANNUAL LETTING VALUE OF A P ROPERTY. BUT THERE IS NO RULE LAID DOWN BY THE SUPREME COURT THAT THE ASS ESSING OFFICER CAN CHOOSE ANY ONE OF THEM. IF ACTUAL RENT IS RECEIVED BY THE ASSESSEE THAT ALONE SHOULD BE TAKEN INTO CONSIDERATION. IF THERE IS NO SUCH ACTUAL RENT, THE RENT THAT MIGHT BE AVAILABLE FOR THE PROPERTY S HOULD BE WORKED OUT. IF BOTH THE ABOVE METHODS ARE NOT POSSIBLE, THEN ONLY THE QUESTION OF ESTIMATION ON THE CAPITAL VALUE OF THE PROPERTY IS PERMISSIBLE TO BE FOLLOWED. IN THE PRESENT CASE THE ASSESSING OFFICER HAS STRAIGHTAWAY PROCEEDED TO ESTIMATE THE ANNUAL LETTING VALUE ON T HE BASIS OF THE INVESTMENT IN THE PROPERTY OVER LOOKING THE STATUTO RY PROVISION OF SECTION 23(1)(A}. HE HAS GONE TO THE ESTIMATE METHOD WITHOU T EXHAUSTING OTHER MODES AVAILABLE FOR COMPUTATION. THE PROPERTY IN QU ESTION IS SITUATED IN THE CITY OF BOMBAY. IT IS COVERED BY MAHARASHTRA RE NT CONTROL ACT, 1999. THE SUPREME COURT IN ITS DECISION IN DEEWAN DAULAT RAI KPOOR VS. NEW DELHI MUNICIPAL COMMITTEE 122 ITR 700 AND MRS. SHEE LA KAUSHISH VS. CIT 131 IRR 435 HAS CLEARLY HELD THAT WHEREVER RENT CON TROL ACT IS IN FORCE, THE STANDARD RENT MUST BE CONSIDERED FOR WORKING OU T THE ALV WHICH IS AGAIN WORKED ON THE BASIS OF MUNICIPAL VALUATION. THEREFORE, THE METHOD ADOPTED BY THE AO IS NOT PROPER. HIS COMPUTATION I S ACCORDINGLY SET ASIDE. CONSEQUENTLY, THE ADDITION OF RS.7,52,525 I S ALSO SET ASIDE. 8. LD A.R. SUBMITTED THAT MATTER BE RESTORED TO TH E FILE OF AO TO WORK OUT THE ANNUAL LETTING VALUE AS PER EARLIER ORDER OF THE TR IBUNAL DATED 15.5.2007 (SUPRA). IN ITA NO.3971/MUM/2007 ASSESSMENT YEAR: 2000-2001 4 VIEW OF ABOVE SUBMISSION, WE SET ASIDE THE ORDERS O F AUTHORITIES BELOW AND DIRECT THE AO TO WORK OUT THE ALV AS PER ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2001- 02(SUPRA). GROUND NO.3 IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2012 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 21 ST NOVEMBER, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),XV, MUMBAI 4. COMMISSIONER OF INCOME TAX, CITY-14 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH A MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI