ACIT, New Delhi V. M/s. Cosmos International, New Delhi

ITA 4309/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0362 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 20-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BANITA DEVI NAOREM
• Assessee Lawyers: V MOHAN
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.4309/DEL/2010 ASSESSMENT YEAR : 2004-05 ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 32 (1), NEW DELHI. VS. M/S COSMOS INTERNATIONAL, 1, ARADHNA COLONY, SECTOR 14, R.K. PURAM, NEW DELHI. PAN : AAAFC6359A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V. MOHAN, CA REVENUE BY : MS BANITA DEVI NAOREM, SR. DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECT ED AGAINST THE ORDER OF THE CIT (A) DATED 30 TH JUNE, 2010 FOR ASSESSMENT YEAR 2004- 05. GROUNDS OF APPEAL READ AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS NOT RIGHT IN LAW IN ALLOWING THE CLAIM O F THE ASSESSEE FOR DEDUCTION U/S 80HHC OF THE INCOME TAX ACT, 1961 AMOUNTING TO ` 4698123/- AS PER CLAUSE (B) OF SEC.80HHC(III) BY REDUCING DIRECT COST AND DIREC T COST FROM EXPORT TURNOVER AND FURTHER ALLOWING THE BENEFIT OF DEPB IN SPITE OF THE FACT THAT THE ASSESSEE ITSELF HAD ADMITTED THE APPLICABILITY OF AMENDED PROVISIONS OF SEC.80HHC VIDE TAXATION LAWS (AMENDMENT) ACT, 2005. ITA NO.4309/DEL/2010 2 2. IT IS RECORDED IN THE ASSESSMENT ORDER THAT THE ASSESSEE IS HAVING EXPORT TURNOVER OF MORE THAN ` 10 CRORE. IT HAS DEPB RECEIPTS OF ` 11,22,542/- AS EXPORT INCENTIVE. THE ASSESSING OFF ICER HAS REDUCED 90% OF THE EXPORT INCENTIVE WHILE COMPUTING THE DEDUCTION U/S 80HHC AMOUNTING TO ` 10,10,287/- AND RESTRICTED T HE DEDUCTION U/S 80HHC TO A SUM OF ` 19,56,678/- AGAINST THE CLAIM BY THE ASSESSEE AT ` 25,89,179/-. THOUGH THE ASSESSING OFFICER HAS MENTIONED THAT THE ASSESSEE HAS NOT FULFILLED THE TWIN CONDITIONS LAID DOWN IN THIRD PROVISO TO SUB-SECTION (3) OF SECTION 80HHC, BUT, IT HAS NOT B EEN BROUGHT OUT THAT HOW THOSE CONDITIONS HAVE NOT BEEN FULFILLED BY THE ASSESSEE. LEARNED CIT (A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE F OLLOWING THE SPECIAL BENCH DECISION IN THE CASE OF TOPMAN EXPORTS 3 3 SOT 337. THE REVENUE IS AGGRIEVED, HENCE, IN APPEAL. 3. AFTER NARRATING THE FACTS, LEARNED DR PLEADED THA T THE DECISION OF SPECIAL BENCH IN THE CASE OF TOPMAN EXPORTS (SUPRA) HA S BEEN REVERSED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS 328 ITR 451 (BOM). I T WAS SUBMITTED THAT IT HAS BEEN HELD THAT ENTIRE DEPB RECEIPTS ARE TO BE ASSESSED U/S 28(IIID) AS AGAINST THE AFOREMENTIONED DECISION OF SPE CIAL BENCH WHEREIN IT WAS HELD THAT SUCH RECEIPTS ARE ASSESSABLE U/S 2 8 (IIIB). THUS, SHE SUBMITTED THAT THE MATTER MAY BE RESTORED BAC K TO THE FILE OF ASSESSING OFFICER FOR RE-COMPUTING THE DEDUCTION U/S 80H HC IN THE LIGHT OF THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HIG H COURT. 4. ON THE OTHER HAND, IT WAS SUBMITTED BY LEARNED AR THAT HONBLE DELHI HIGH COURT HAS RECENTLY HEARD THIS ISSUE AND THE DECISION OF THE HONBLE HIGH COURT IS AWAITED. IF THE MATTER IS RESTO RED BACK, THEN, A DIRECTION MAY ALSO BE GIVEN TO CONSIDER THE SAID DECISI ON ALSO WHILE RE- COMPUTING THE DEDUCTION U/S 80HHC. IT WAS SUBMITTED T HAT THE ASSESSING OFFICER MAY ALSO BE DIRECTED TO VERIFY THAT WH ETHER OR NOT THE ITA NO.4309/DEL/2010 3 ASSESSEE FULFILLS THE TWIN CONDITIONS LAID DOWN IN THIRD PROVISO TO SUB- SECTION (3) OF SECTION 80HHC. HE SUBMITTED THAT THOU GH THE ASSESSING OFFICER HAS MENTIONED THAT THE ASSESSEE HAS NOT FULFILLED THESE TWIN CONDITIONS, HE HAS NOT RECORDED A FINDING THAT HOW TH E ASSESSEE DOES NOT FULFILL THE TWIN CONDITIONS. 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTI ONS HAVE CAREFULLY BEEN CONSIDERED. THE EXPORT TURNOVER OF T HE ASSESSEE, AS ALREADY STATED, EXCEEDS ` 10 CRORE. THEREFORE, EFFEC T HAS TO BE GIVEN TO THE THIRD PROVISO TO SUB-SECTION (3) OF SECTION 80H HC WHICH READ AS UNDER:- PROVIDED ALSO PROVIDED ALSO PROVIDED ALSO PROVIDED ALSO IN THE CASE OF AN ASSESSEE HAVING EXP ORT TURNOVER EXCEEDING RUPEES TEN CRORES DURING THE PREVIOUS YEAR, THE PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CL AUSE (C) OF THIS SUB-SECTION OR AFTER GIVING EFFECT TO THE FIRST PROVI SO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO NINETY PER CENT OF ANY SUM REFERRED TO IN CLAU SE (IIID) OF SEC. 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEAR S TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSE E, IF THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVIDENCE TO PRO VE THAT, - (A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAWBACK OR THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME; AND (B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE D UTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME. 6. ACCORDING TO THE AFOREMENTIONED DECISION OF HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS & CHEMICALS (SUPRA), THE ENTIRE SALE PROCEEDS OF DEPB ARE TO BE CO NSIDERED TO BE THE PROFIT U/S 28 (IIID). THEREFORE, THE DECISION OF THE SPECIAL BENCH VIDE WHICH IT WAS HELD THAT SUCH AMOUNT WAS ASSESSABLE U/S 28 (IIIB) HAS BEEN REVERSED. IF IT IS SO, THEN, THE DEDUCTION U/ S 80HHC, IN CASE WHERE EXPORT TURNOVER EXCEED ` 10 CRORE, THEN, THE SALE PROCEEDS OF DEPB INCLUDING FACE VALUE HAS TO BE CONSIDERED AS PROF IT ASSESSABLE U/S 28 (IIID). SIMULTANEOUSLY, THE ASSESSEE HAS ALSO TO SATISFY THE TWIN ITA NO.4309/DEL/2010 4 CONDITIONS LAID DOWN IN CLAUSE (A) AND (B) OF THIRD P ROVISO TO SECTION 80HHC(3). THEREFORE, IT IS CONSIDERED JUST AND PROPER TO RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR RECALCULATING THE DEDUCTION U/S 80HHC IN ACCORDANCE WITH THE DECISION OF HONBLE BOM BAY HIGH COURT IN THE CASE OF KALPATARU COLOURS & CHEMICALS (SUPRA). LEARNED ASSESSING OFFICER HAS ALSO TO VERIFY THAT WHETHER OR NOT THE ASSESSEE HAS FULFILLED THESE TWIN CONDITIONS. WE DIRECT ACCORD INGLY. 7. WE ALSO SEE JUSTIFICATION IN THE ARGUMENT OF THE LE ARNED AR THAT AS THE SIMILAR ISSUE HAS BEEN HEARD BY THE HONBLE DELHI HIGH COURT, THEREFORE, IF BY THAT TIME THE DECISION OF HONBLE D ELHI HIGH COURT OR APEX COURT IS AVAILABLE, THEN, THE SAME SHOULD ALSO BE TAKEN INTO CONSIDERATION WHILE COMPUTING THE DEDUCTION U/S 80HHC . THEREFORE, ASSESSING OFFICER IS DIRECTED TO CONSIDER THE SAME ALSO AFT ER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. 8. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSES ONLY. THE ORDER PRONOUNCED IN THE OPEN COURT ON 11.02.20 11. SD/- SD/- [SHAMIM YAHYA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 11.02.2011. DK ITA NO.4309/DEL/2010 5 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES DATE OF DICTATION 09.02.2011 DATE OF PRESENTATION OF THE DRAFT ORDER TO THE MEMBER 10.02.2011 DATE OF RETURN FROM THE BENCH AFTER PRONOUNCEMENT &SIGNING DATE OF DISPATCH OF THE ORDER TO THE BENCH