DCIT 20(3), MUMBAI V. SUNIL M. SEKHSARIA, MUMBAI

ITA 4199/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2002 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 08-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI R V EASWAR, SENIOR VICE PRESIDENT AND SHRI R K PANDA, ACCOUNTANT MEMBER I T A NO: 4199/MUM/2009 (ASSESSMENT YEAR: 2005-06) DEPUTY COMMISSIONER OF INCOME TAX 20(3) APPELLANT MUMBAI VS SHRI SUNIL M SEKHSARIA, MUMBAI RESPONDENT (PAN: AACPS0967L) APPELLANT BY: SHRI NAVEEN GUPTA RESPONDENT BY: NONE O R D E R R V EASWAR, SENIOR VICE PRESIDENT: THIS IS AN APPEAL BY THE REVENUE AND IT RELATES TO THE ASSESSMENT YEAR 2005-06. THE ASSESSEE IS AN INDIVI DUAL CARRYING ON BUSINESS IN MANUFACTURE AND EXPORT OF READYMADE GAR MENTS IN THE NAME AND STYLE OF M/S AMBERTEX SEKHSARIA EXPORTS. THERE ARE TWO UNITS, ONE AT DAMAN AND THE OTHER AT PARDI. 2. THE CONTROVERSY IN THE PRESENT APPEAL CENTERS AR OUND THE DEDUCTION UNDER SECTION 80-IB OF THE INCOME TAX ACT , 1961 IN RELATION TO THE FOLLOWING ITEMS OF INCOME: - (1) DUTY DRAWBACK, (2) DEPB INCOME, (3) SALE OF QUOTA, AND (4) EXCHANGE FLUCTUATIONS THE ASSESSING OFFICER CONSIDERED THE AFORESAID INCO MES UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT AS BUSINES S INCOME. THE CIT(A), HOWEVER, HELD THAT ALL THE AFORESAID ITEMS OF INCOME SHOULD BE CONSIDERED AS PROFITS AND GAINS DERIVED FROM THE IN DUSTRIAL UNDERTAKING 2 AND DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTI ON IN RESPECT OF ALL OF THEM. HENCE, THE PRESENT APPEAL BY THE REVENUE. 3. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE R IVAL CONTENTIONS. AS REGARDS DEPB AND DUTY DRAWBACK, TH E ISSUE HAS TO BE RESOLVED IN FAVOUR OF THE REVENUE RESPECTFULLY F OLLOWING THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF LIBERT Y INDIA VS. CIT (2009) 317 ITR 218 (SC), WHERE THE IDENTICAL QUESTI ON HAS BEEN DECIDED IN FAVOUR OF THE REVENUE. ACCORDINGLY WE H OLD THAT THESE TWO ITEMS CANNOT BE CONSIDERED AS PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING. 4. AS REGARDS FOREIGN EXCHANGE FLUCTUATION GAINS, I T IS NOT CLEAR AS TO WHETHER IT ARISES OUT OF EXPORT ACTIVITY. IN TH E RECENT JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RACHNA UDH YOG (2010) 230 CTR (BOM) 72, IT HAS BEEN HELD THAT GAINS ARISING O N ACCOUNT OF FLUCTUATION IN THE EXCHANGE RATE CAN BE TREATED AS ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80-IB IF THEY ARISE OUT OF EXPORT SALES. SINCE THIS REQUIRES FACTUAL VERIFICATION, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FACTUAL VERIFICATION AND DECI SION AFRESH IN ACCORDANCE WITH LAW AND KEEPING IN VIEW THE JUDGMEN T OF THE HONBLE JURISDICTIONAL HIGH COURT CITED ABOVE. 5. AS REGARDS THE SALE OF QUOTA, THE EARLIER ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 200 3-04, IN ITA NO: 1977/MUM/2007, DATED 23.01.2009 (COPY FILED BEFORE US) HAS HELD THAT THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION (VIDE PA RA 7 OF THE ORDER). 3 RESPECTFULLY FOLLOWING THE SAME, WE CONFIRM THE DEC ISION OF THE CIT(A) ON THIS ISSUE. 6. WE MAY CLARIFY THAT IN THE ORDER OF THE TRIBUNAL CITED ABOVE IN THE ASSESSEES OWN CASE, THE TRIBUNAL HAS ACCEPTED THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80-IB WITH REGARD TO RECEIPTS ON ACCOUNT OF DUTY DRAWBACK AND DEPB, FOLLOWING THE JU DGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. ELTEK SGS ( P) LTD. (2008) 215 CTR (DEL) 279 AND THE JUDGMENT OF THE RAJASTHAN HIG H COURT IN THE CASE OF SARAF SEASONING UDYOG VS. ITO (2008) 219 CT R (RAJ) 461. THEREAFTER, THE ISSUE HAS NOW BEEN DECIDED BY THE S UPREME COURT IN FAVOUR OF THE REVENUE SO FAR AS THESE TWO ITEMS ARE CONCERNED, IN THE CASE OF LIBERTY INDIA CITED ABOVE. IT IS FOR THIS REASON THAT WE ARE UNABLE TO FOLLOW THE EARLIER ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN REGARD TO THESE TWO ITEMS. 7. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS P ARTLY ALLOWED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MAY 2010. SD/- SD/- (R K PANDA) (R V EASWAR) ACCOUNTANT MEMBER SENIOR VICE PRESI DENT MUMBAI, DATED 21 ST MAY 2010 SALDANHA COPY TO: 1. SHRI SUNIL M SEKHSARIA C-18, MAHARAJ SURATMAHAL BLDG. NEW LINK ROAD, ANDHERI (WEST), MUMBAI 400 058 2. DCIT 20(3) 3.CIT-20 4.CIT(A)-XXXII 5.DR E BENC H TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI