Goyal Knitwears (P) Ltd., Ludhiana V. DCIT, Ludhiana

ITA 400/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60876 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 09-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Business income
• Section: 80HHC; 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 400/CHD/2012 ASSESSMENT YEAR: 2002-03 M/S GOYAL KNITWEARS (P) LTD., VS THE DCIT, LUDHIANA CENTRAL CIRCLE-III. LUDHIANA PAN NO. AABCG0964F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI S.K.MITTAL DATE OF HEARING : 14.06.2012 DATE OF PRONOUNCEMENT : 15.06.2012 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-I, LUDHIANA DATED 01.02.2012 RELATING TO ASS ESSMENT YEAR 2002-03. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS:- 1. THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING T HE ORDER OF THE ASSESSING OFFICER BY DISALLOWING DEDUC TION U/S 80HHC ON EXPORT INCENTIVES BEING DEPB AND DFRC. 2 2. THAT THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS.1,21,99,519/- (7794045 ON ACCOUNT OF 80HHC AND 4405484,ON ACCOUNT OF 80-IB) BY MAKING RE- COMPUTATION OF DEDUCTION U/S 80HHCAND 80-IB, WHICH IS ILLEGAL AND ARBITRARY. 3. THAT THE CASE OF THE ASSESSEE IS DIRECTLY COVERE D BY THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF M /S TOPMAN EXPORTS V/S CIT, WHEREIN IT HAS BEEN HELD THAT ONLY 'PROFIT' ELEMENT EMBEDDED IN THE CONSIDERATION RECEIVED ON T RANSFER OF DEPB WOULD BE TAXABLE UNDER CLAUSE (IIID) OF SECTIO N 28 OF THE ACT AT THE TIME OF CALCULATION OF DEDUCTION U/S 80HHC OF THE ACT. 4. THAT THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE PROPERLY AND DISMISSING THE APPEAL OF THE ASSESSEE. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEAR D OR DISPOSED OFF. 3. AS REGARDS GROUND NOS.1 & 3 OF APPEAL, THE FACTS NARRATED BY THE ASSESSING OFFICER ARE THAT THE ASSESSEE HAS CLAIME D DEDUCTION U/S 80HHC AMOUNTING TO RS. 1,80,29,335/- AS PER AUDITORS REP ORT ON FORM NO. 10CCAC. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS R ECEIVED EXPORT INCENTIVES OF RS. 1,24,68,289/-. THE ASSESSING OFFICER REQUIR ED THE ASSESSEE TO EXPLAIN WHETHER DEDUCTION U/S 80HHC IS ALLOWABLE IN THIS CA SE IN ACCORDANCE WITH THE AMENDED PROVISIONS OF SECTION 80HHC. AFTER OBTAINI NG THE REPLY OF THE ASSESSEE, THE ASSESSING OFFICER HAS HELD AS UNDER:- 7. WITH THE INSERTION OF CLAUSE (IIID) AND (IIIE) IN S ECTION 3 28, IT HAS BEEN MADE CLEAR THAT PROCEEDS FROM TRANS FER OF DEPB AND DFRC SCHEME ARE REVENUE RECEIPT CHARGEABLE UNDER THE HEAD 'INCOME FROM BUSINESS OR PROFESSION' AND W OULD FALL UNDER SEPARATELY SPECIFIED SUB-SECTION AND .NOT UND ER CLAUSE (IV) OF OR CLAUSE (IIID) OR SIMILAR OF THAT CLAUSES .. SIMILARLY, AMENDMENTS HAVE BEEN BROUGHT IN SECTION 80HHC AND T HESE RECEIPTS HAVE BEEN BROUGHT AT PAR WITH RECEIPT EARL IER DEALT IN CLAUSES (IIIA), (IIIB) & (IIIC) OF SECTION 28. 8. FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80HC, THE AMENDMENTS HAVE BEEN MADE IN SECTION 80HHC ITSELF A ND IN SECTION 28 OF THE ACT. THE FIRST PART OF THE AMEN DMENT IS BY WAY OF INSERTION OF CLAUSES (IIID) AND (IIIE) IN SE CTION 28 OF THE ACT. THE CLAUSES ARE INSERTED AND DEEMED TO HAVE BE EN INSERTED W.E.F. 1 ST APRIL, 1998 AND 1 ST APRIL, 2001 RESPECTIVELY. EFFECTED OF THESE INSERTION ARE THAT THE (A) PROFIT ON TRANSFER OF THE DUTY ENTITLEMENT PASS BOOK SCHEME AND, (B) PROF IT ON TRANSFER OF DUTY FREE REPLENISHMENT CERTIFICATE BEI NG DUTY REMISSION SCHEME UNDER THE EXPORT/IMPORT POLICY F ORMULATED AND ANNOUNCED U/S 5 OF THE FOREIGN TRADE. (DEV ELOPMENT AND REGULATION) ACT, 1992 SHALL BE CHARGEABLE TO IN COME TAX UNDER THE HEAD 'PROFIT OF GAINS OF BUSINESS OF PROF ESSION.' 9. THE TWO NEW RECEIPTS NAMELY DEPB ANDS DFRC RECOGNIZED IN CLAUSES (IID)AND (IIIE) ARE HELD TO B E CHARGEABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION' AS IN THE CASE OF SIMILAR RECEIPT REFERRED TO IN (IIIA), (III B) & (IIIC) OF SECTION 28 OF THE ACT. IN EXPLANATION TO SECTION 80HHC(3) DEFINING PROFIT OF THE BUSINESS RECEIPT REFERRED TO IN CLAUSES (IIID) AND (IIIE) ARE REQUIRED TO BE REDUCED AS IN THE CASE WITH RECEIPT REFERRED TO IN CLAUSES (IIIA), (IIIB) AND ( IIIC), TREATING THEM NOT ARISING FROM EXPORT BUSINESS. HOWEVER, W HILE RECEIPT REFERRED TO IN CLAUSES (IIIA), (IIIB) AND ( IIIC), THE REFERRED TO IN CLAUSES (IIID) AND (IIIE) FOR THE PU RPOSES OF ADDING BACK IN EXPORT HAVE BEEN SUBJECTED TO CERTAI N 4 CONDITIONS, FIRST, WITH REGARD TO THE NATURE OF THE ASSESSEE, AND SECOND, WITH REGARD TO THE CONDITION SOUGHT TO BE M ET WITH BY EXPORTER ASSESSEE, ARE REQUIRED 10 I N THE AMENDED PROVISION, THE ASSESSEE EXPORTERS HA VING TURNOVER EXCEEDING RS. 10 CRORES SHALL HAVE THE BEN EFIT OF DEDUCTION OF DEPB AND DFRC RECEIPTS WHEN BOTH THE CONDITIONS LAID DOWN ARE MET. THE CONDITIONS ARE TH AT THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVIDENCE TO P ROVE THAT:- I) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRA WBACK OR DEWPB SCHEME, BEING DUTY REMISSION SCHEME. II) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO T HE CUSTOM DUTY WAS HIGHER THAN THE RATE OF CREDIT ALL OWABLE UNDER THE DEPB SCHEME BEING DUTY REMISSION SCHEME. THE SIMILAR CONDITION PREVAILS IN CASE OF DFRC. TH E EXPLANATION IS INSERTED UNDER THIRD PROVISO TO SEC TION 80HHC(3) PROVIDING THAT OF THE PURPOSES OF THEE CL AUSES, THE RATE OF CREDIT ALLOWABLE MEANS THE RATE OF CREDIT ALLOWABLE UNDER THE DFRC, BEING DUTY REMISSION. 11. THE EXPORT TURNOVER IN THE CASE OF THE ASSESSE E IS RS. 13,28,47,636/- WHICH IS MORE THAN RS. 10 CRORES. TH E ASSESSEE HAS NOT FILED ANY EVIDENCE TO SHOW THAT TH E CONDITIONS LAID DOWN IN PROVISION TO SECTION 80HHC (3) INSERTED BY TAXATION LAWS (AMENDMENT) ACT 2005, W.R .E.F. 01.04.1998 ARE SATISFIED IN HIS CASE. MOREOVER THE ASSESSEE HAS FAILED TO FURNISH THE DETAIL OF EXPORT INCENTIV ES AT RS. 1,24,68,289-- IN THE ABSENCE OF WHICH IT IS NOT POS SIBLE TO QUANTIFY THE RECEIPTS COVERED UNDER CLAUSE (IIID) A ND (IIIE) OF SECTION 28 IN THE LIGHT OF WHICH THE ENTIRE AMOUNT OF EXPORT INCENTIVES RECEIVED AT RS. 1,24,68,289/- IS TREATED TO BE FALLING UNDER THE SAME 5 4. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER COMP UTED THE DEDUCTION U/S 80HHC KEEPING IN VIEW THE AMENDED PROVISIONS ENACTE D VIDE TAXATION LAWS (AMENDMENT) ACT, 2005 AND ALSO IN VIEW OF CIRCULAR NO.2/2006 OF THE CBDT. 5. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF ASSESS ING OFFICER, OBSERVING AS UNDER:- 4. THE GROUNDS OF APPEAL AT SR. NO 5, 6 & 7 PERTAI NS TO THE CLAIM OF THE APPELLANT THAT THE AO HAS ERRED IN MAKING AN ADDITION OF RS. 1,21,99,519/- BY MAKING RECOMPUTATI ON OF DEDUCTION U/S 80HHC AND SECTION 80IB. THE AO IN THI S REGARD OBSERVED THAT WITH THE INSERTION OF CLAUSE ( IIID) AND (IIIE) IN SECTION 28 IT HAS BEEN MADE CLEAR THAT PR OCEEDS FROM TRANSFER OF DEPB AND DFRC SCHEME ARE REVENUE RECEIP TS TO BE ASSESSED UNDER THE HEAD BUSINESS OR PROFESSION I NCOME, THE AO PROCEEDED TO RECALCULATE THE DEDUCTION U/S 8 0HHC AS PROVIDED BY THE AMENDED PROVISIONS ALLOWING DEDUCTI ON TO THE TUNE OF RS. 1,02,35,398/-. THE AO FURTHER REWOR KED THE DEDUCTION U/S 80IB BY EXCLUDING THE EXPORT INCENTIV ES ON THE BASIS OF DECISION OF HON'BLE JURISDICTIONAL HIGH CO URT IN THE CASE OF M/S LIBERTY INDIA LTD. VS. CIT WHICH HA S BEEN LATER UPHELD BY HON'BLE APEX COURT AS WELL. THE DED UCTION U/S 80IB WAS REWORKED AT RS. 32,74,265/- AS AGAINST ORIGINAL CLAIM OF RS. 76,79,750/-. THE AR DURIN G THE COURSE OF APPELLATE PROCEEDINGS AS WELL AS ASSESSME NT PROCEEDINGS MERELY RELIED UPON THE CLAIM THAT SUCH REWORKING OF CLAIM OF DEDUCTION WAS NOT PERMISSIBLE IN AN ASSESSMENT MADE U/S 153A/153C. THE ARGUMENTS OF AR ON THIS ISSUE HAVE BEEN ADJUDICATED AND THE CLAIM HAS BEEN REJECTED. AS SUCH THE REWORKING OF CLAIM OF DEDUCTI ON U/S 80HHC AND SECTION 80IB, BEING STRICTLY IN ACCORDANC E WITH THE PROVISIONS OF LAW, IS UPHELD. 6 6. WE HAVE HEARD SHRI SUDHIR SEHGAL, LD. COUNSEL FO R THE ASSESSEE AND SHRI S.K. MITTAL LD. DR AT LENGTH AND HAVE ALSO PER USED THE MATERIALS AVAILABLE ON RECORD. AT THE VERY OUTSET, SHRI SUDH IR SEHGAL, LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED BY T HE ASSESSEE VIDE GROUND NOS. 1 AND 3 OF THE APPEAL IS SQUARELY COVERED BY T HE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS V CIT, MUMBAI REPORTED IN (2012) 67 DTR (SC) 185. SHRI SUDHIR SEHGAL, LD. CO UNSEL FOR THE ASSESSEE SUBMITTED THAT IN OTHER WORDS, THE ISSUE STANDS FIN ALLY SETTLED BY THE HON'BLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS CIT (SUPRA). IN MY CONSIDERED VIEW, THERE IS A MERIT IN THE ABOVE SUBM ISSIONS OF SHRI SUDHIR SEHGAL, LD. COUNSEL FOR THE ASSESSEE. KEEPING IN V IEW THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS CIT (SUPRA), WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND REMAND THE MATTER TO ASSESSING OFFICER WITH A DIRECTION TO RECOMPUTE THE DEDUCTION U/S 80HHC OF THE INCOME TAX ACT, 1961 IN ACCORDANCE WITH LAW AND IN THE LIG HT OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS V CIT (SUPRA). THE ASSESSING OFFICER IS ALSO DIRECTED TO GIVE AN OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE IN THE MATTER. IT IS ALSO MADE CLEAR THAT THE ASSESSEE IS FREE TO PRODUCE NECESSARY EVIDENCE BEFORE THE ASSESSING OFF ICER IN SUPPORT OF ITS CLAIM. FOR STATISTICAL PURPOSES, GROUND NOS. 1 AND 3 OF THE APPEAL ARE ALLOWED. 7. AT THE TIME OF HEARING OF THE APPEAL, SHRI SUDH IR SEHGAL, LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR GROUND NO.2 OF T HE APPEAL AND, HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 7 8. GROUND NOS. 4 AND 5 OF THE APPEAL ARE GENERAL IN NATURE AND HENCE NO COMMENTS ARE BEING GIVEN. 9. FOR STATISTICAL PURPOSES, THE APPEAL STANDS ALLO WED PARTLY. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JUNE, 2012 SD/- SD/- (T. R. SOOD) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 15 TH JUNE, 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR