ACIT, New Delhi V. M/s. Mohan Exports (India) Pvt.Ltd., New Delhi

ITA 4318/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4738 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 09-05-2017
• Assessment Year: 2001-2002
• Appeal Filed On: 07-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: FARHANT KHAN
• Keywords: Business income; Competent authority
• Section: 143(3); 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SH.L.P.SAHU, ACCOUNTANT MEMBER ITA NO. 4318/ DEL/201 4 ( ASSESSMENT YEAR: 20 01 - 02 ) APPELLANT BY SH.NIREN GUPTA, CA RESPONDENT BY SH. FARHANT KHAN, SR.DR DATE OF HEARING 26 .0 7 .2017 DATE OF PRONOUNCEMENT 31 .08 .2017 ORDER PER L.P.SAHU, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 09.05.2014 OF THE CIT(A) - VIII, NEW DELHI RELATING TO ASSESSMENT YEAR 2001 - 02 ON THE FOLLOWING GROUNDS: - 1 . WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING THE DEDUCTION U/S 80HHC ON RECEIPT OF FOREIGN CURRENCY WHICH WAS RECEIVED AS LIQUIDATED DAMAGES IN A.Y. 2001 - 0 2? 2 . THAT THE ORDER OF THE LD.CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 3 . THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FOREGO ANY GROUND(S) OF THE APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THA T THE ASSESSEE FILED HIS RETURN OF INCOME ON 31.10.2001 U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ) ACIT, CIRCLE - 5(1), NEW DELHI - 110002. VS MOHAN EXPORTS (INDIA) PVT.LTD., MOHAN HOUSE, ZAMRUDPUR COMMUNITY CENTER, KAILASH COLONY EXTENSION, NEW DELHI - 110048 PAN - AAACM4168J (APPELLANT) (RESPONDENT) ITA NO. 4318/DEL/2014 2 | P A G E DECLARING A TOTAL INCOME OF RS.2,50,33,912/ - . LATER ON, THE CASE WAS RECTIFIED U/S 154/143(3) ON 13.03.2003 AND THE CASE WAS RE - OPENED U/S 147/148 OF THE ACT AND THE ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF RS.5,54,84,889/ - BY MAKING AN ADDITION OF RS.2,25,55 ,419/ - BY DISALLOWING THE CLAIM OF THE ASSESSEE COMPANY MADE U/S 80HHC OF THE ACT ON A CCOUNT OF LIQUIDATED DAMAGE CHARGES RECEIVED OF RS.4,50,59,9 17/ - OVER AND ABOVE THE EXPORT RECEIVABLE AMOUNT . THIS IS THE SECOND ROUND OF THE APPEAL BEFORE US. IN THE F IRST ROUND OF THE APPEAL, THE ASSESSEE PREFERRED THE APPEAL BEFORE THE HON BLE DELHI HIGH COURT AND THE HON BLE DELHI HIGH COURT DISMISSED THE ASSESSEE S APPEAL AS WITHDRAWN. ACCORDINGLY THE AO MADE ASSESSMENT ON THE BASIS OF ITA NO.3696/DEL/2010 VIDE ORD ER DATED 22.12.2010. 3. THE ASSESSEE CLAIMED DEDUCTION U/S 80HHC OF THE ACT ON THE ABOVE AMOUNT OF RS.4,50,59,517/ - . THE ASSESSEE IS A MERCHANT EXPORTER AND EXPORTED RICE TO ANGOLA AFRICA IN THE FY 1991 - 92 AND PAYMENT WAS RECEIVED MUCH AFTER THE EXPORT MA DE . THE GOVERNMENT OF ANGOLA O F AFRICAN COMPANY PAID TO THE ASSESSEE OVER AND ABOVE AMOUNT WHATEVER RECEIVED BY THE ASSESSEE AND THE ASSESSEE HAS SHOWN IN SCHEDULE 6 OF HIS FINANCIAL STATEMENT TO IT AS OTHER INCOME. THE ASSESSEE HAS SHOWN IT AS LIQUIDAT ED DAMAGES CHARGES RECEIVED . THE ASSESSEE ALSO SUBMITTED WRITTEN SUBMISSIONS BEFOR E THE AO AND THE AO DID NOT ACCEPT THE SUBMISSION S OF THE ASSESSEE AND ADDED IT AS AN INCOME ON THE BASIS OF THE FOLLOWING FINDINGS: - 10. IN THE PRESENT CASE, THE ASSESSEE CLAIMS THAT THE LIQUIDATED DAMAGES OF RS.4,50,59,917/ - FORMS THE PART OF EXPORT RECEIPTS. HOWEVER, NO ANSWER IS FURNISHED BY THE ASSESSEE COMPANY AS TO WHETHER THE CONDITIONS AS LAID DOWN IN CLAUSE (A) OF SUB - SECTION 2 OF SECTION 80HHC ARE SATISF IED OR NOT. IT IS IMPORTANT TO NOTE HERE THAT IT IS THE SETTLED POS ITI ON OF LAW THAT SECTION ITA NO. 4318/DEL/2014 3 | P A G E 80HHC IS A SELF CONTAINED CODE IN ITSELF WHICH TAKES CARE OF ALL THE REQUISITE CONDITIONS AND ELEMENTS NECESSARY TO DECIDE UPON THE RELIEF TO BE GRANTED TO AN ASSE SSEE. 11 . REFERENCE IS NOW DRAWN TO THE EXPLANATION (BAA) OF THE SECTION 80HHC OF THE ACT WHICH READS AS UNDER: (BAA) 'PROFITS OF THE BUSINESS' MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' A S REDUCED BY - (1) NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSES (IIIA), (IIIB) AND (IIIC) OF SECTION 28 OR OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFITS; AND 12 . A PLAIN READING OF THE ABOVE EXPLANATIONS MAKES IT CLEAR THAT COMMISSION, INTEREST, RENT ETC. DO NOT PARTAKE OF, THE CHARACTER OF TURNOVER AS DEFINED IN THE LEGISLATURE TO GET ELIGIBLE TO CLAIM DEDUCTION U / S 80HHC OF THE ACT. THEREFORE, THE LIQUIDAT ED DAMAGES ARE NOT INCLUDIBLE IN THE TOTAL TURNOVER. THUS, IT IS HELD THAT THE LIQUIDATED DAMAGES OF RS. 4,50,59,917/ - RECEIVED BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION DOES NOT QUALIFY FOR THE DEDUCTION U / S 80HHC OF THE ACT. THEREFORE, A SSESSEE'S CLAIM IN THIS REGARD IS HEREBY REJECTED AND AMOUNT OF RS.2,25,55,419 / - IS HEREBY DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY FO R THE YEAR UNDER CONSIDERATION. (ADDITION OF RS. 2,25,55,419/ - ) 4 . AGGRIEVED BY THIS ADDITION, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY . THE ASSESSE E ALSO MADE WRITTEN SUBMISSIONS , THE RELEVANT PORTION OF WHICH READS AS UNDER : '2. FACTS: A) THE ASSESSEE IS MERCHANT EXPORTER. DURING FY 1991 - 92 THE ASSESSEE EXPORTED RICE TO GOVERNMENT OF ANGOLA ON DEFERRED CREDIT OF SIX MONTHS AND RAISED BILL OF US $2573460 TOWARDS SALE PRICE AND US SI 35160 TOWARDS INTEREST FOR SIX MONTHS AS UNDER: INVOICE NO. DATE AMOUNT OUTSTANDING AFTER ADJUSTMENT OF ADVANCE (USD) INTE REST THEREON FOR CREDIT PERIOD OF SIX MONTHS ME/APD/1194/91 23.12.91 5,43,917.00 28,566.81 ME/APD/119 5/91 23.12.91 11,41,956.00 59,976.16 ME/APD/1196/91 23.12.91 8,87,587.00 46,616.55 ITA NO. 4318/DEL/2014 4 | P A G E 25,73,460.00 1,35,159.52 TOTAL DUES $2708619.52 EQUIVALENT IN RS.27.58/ USD RS. 74720520.00 NO PAYMENTS WERE RECEIVED UPTO FY. 1999 - 2000. B) IN FINANCIAL YEAR 1999 - 2000 (AY 2000 - 01), THE ASSESSEE RECEIVED LUMPSUM $6500000 FROM THE GOVT. OF ANGOLA AGAINST PRINCIPAL DUES AND CLAIMS AND AFTER ADJUSTM ENT OF EXCHANGE GAIN, PENAL INTEREST AND CRYSTALLIZATION CHARGES, THE COMPANY WAS LEFT WITH A SURPLUS OF RS. 10,85,30,921 ASUNDER: AMOUNT RECEIVED IN AY 2000 - 01 EQUIVALENT TO US $6500000 RS. 28,25,31,000 LESS: - PRINCIPAL & INTEREST DUE 74720520 - FOREIGN EXCHANGE GAIN INCOME SHOWN 43031946 - ADJUSTED AGAINST INTEREST PAID TO BANKS NOT CLAIMED AS EXPENDITURE IN EARLIER YEARS BUT SHOWN AS RECOVERABLE FROM GOVT. OF ANGOLA 39615047 - CRYSTALLIZATION LOSS NOT CLAIMED AS EXPENDITURE IN EARLIER YEARS BUT SHOWN AS RECOVERABLE FROM GOVT. OF ANGOLA 16632566 RS. 174000079 SURPLUS RECEIVED IN AY 2000 - 01 RS. 108530921 THIS SURPLUS WAS SHOWN AS 'LIQUIDATED DAMAGES RECEIVED' IN THE PRO/IT & LOSS ACCOUNT IN ABSENCE OF ANY SPECIFIC INFORMATION AS TO COMPUTATION OF US $ 6500000 BY THE REMITTER. A SPECIFIC FOOT NOTE TO THE ACCOUNT WAS GIVEN IN THE BALANCE SHEET ABOUT THIS RECEIPT OF OVERDUE AMOUNT/COMPENSATION FROM THE FOREIGN BUYER. THE SAME IS RE - PRODUCED HEREUNDER: ' IN VIEW OF THE ABNORMAL DELAY IN REALIZATION OF CERTAIN EXPORTS EFFECTED DURING FY1991 - 92, THE COMPANY HAS RECEIVED AN EXCESS AMOUNT OF RS. 10,85,30,921.00 AND THE SAME HAS BEEN SHOWN AS INCOME IN SCHEDULE X. ' C) MEANWHILE THE ASSESSEE CONTINUED TO PRESS T HE GOVT. OF ANGOLA FOR FURTHER COMPENSATION REPEATEDLY AND CONSTANTLY. DURING THE AY 2001 - 02, THE ASSESSEE AGAIN RECEIVED LUMPSUM OF US $ 1000000 (RS.4,50,59,517) AS UNDER: ITA NO. 4318/DEL/2014 5 | P A G E DATE AMOUNT (USD) AMOUNT (INR) 16.01.2001 4,84,607.00 2,25,39,074.00 13.02.2001 4,84,900.00 2,25,20,443.00 TOTAL 9,69,507.00 4,50,59,517.00 THIS AMOUNT WAS ALSO SHOWN AS 'LIQUIDATED DAMAGES RECEIVED' IN THE PROFIT & LOSS ACCOUNT. THE SAID AMOUNT WAS NOT INCLUDED IN EITHER THE EXPORT TURNOVER OR TOTAL TURNOVER, AS THE TURNOVER HAD ALREADY BEEN SHOWN IN AY 92 - 93. SINCE NO BASIS OF THIS REMITTANCE WAS PROVIDED, THE SAME WAS AGAIN SHOWN AS LIQUIDATED DAMAGES RECEIVED FROM THE FOREIGN BUYER. A NOTE IN THIS REGARD WAS REPEATED IN THE ANNUAL ACCOUNTS AS UNDER: - 'IN VIEW OF THE ABNORMAL DELAY IN REALIZATION OF CERTAIN EXPORTS EFFECTED DURING THE FY 1991 - 92, THE COMPANY HAS REALIZED AN EXCESS AMOUNT OF RS.4,50,59,517.00 (PYRS. 10,85,30,92 .00 ) AND THE SAME HAS BEEN SHOWN AS INCOME IN SCHEDULE X.' D). DESPITE RECEIPT OF USD LOO MILLION DURING FY 2000 - 01, THE COMPANY STILL CONTINUED TO FOLLOW UP WITH THE FOREIGN BUYER/ ANGOLAN GOVERNMENT FOR COMPENSATING IT FOR THE LOSSES SUFFERED BY IT AND DURING THE FY 2001 - 02 (RELEVANT AY 2002 - 03), THE COMPANY RECEIVE D A FURTHER LUMP - SUM AMOUNT OF USD 10,00,000.00 (US DOLLARS ONE MILLION ONLY) AMOUNTING TO RS.4,64,20,000.00, WHICH WAS AGAIN, BEING THE LUMP - SUM RECEIPT WITHOUT ANY DETAILS, WAS SHOWN AS LIQUIDATED DAMAGES AS IN THE EARLIER YEARS. THUS THE ASSESSEE RECEI VED THE FOLLOWING AMOUNTS FROM GOVT. OF ANGOLA IN EXCESS OF THE BILLED AMOUNTS (INCLUDING INTEREST PAYMENT FOR DEFERRED PERIOD OF SIX MONTHS), WITHOUT ANY CALCULATION ON LUMP SUM BASIS AY 2000 - 01 RS. 108530921 AY 2001 - 02 RS. 45059517 AY 2002 - 03 RS.46420000 THE LD. FIRST APPELLATE AUTHORITY AFTER CONSIDERING THE SUBMISSIONS, ALLOWED THE APPEAL OF THE ASSESSEE , OBSERVING AS UNDER: - ITA NO. 4318/DEL/2014 6 | P A G E I HAVE PERUSED THE WRITTEN SUBMISSION, ASSESSMENT ORDER, DISCUSSED THE MATTER WITH THE AR VERY CAREFULLY. THE AO HAD NOT ALLOWED 80HHC DEDUCTION TO THE APPELLANT DURING THIS AY 2001 - 02, WHEREAS HE HAD ALLOWED THE SAME DEDUCTION U/S 143(1) FOR AY 2000 - 01 AND 2002 - 03 (PRIOR AND SUBSEQUENT YEAR TO THIS AY) ON IDENTICAL FACTS. THE APPELLANT HAD EXPORTED RICE TO GOVT. OF ANGOLA (AFRICAN COUNTRY) IN THE YEAR 1991 - 92 FOR WHICH HE COULD NOT RECEIVE PAYMENT IN EARLY 90'S. HOWEVER, ON MANY REQUESTS BY THE APPELLAN T'S COMPANY AND ITS DIRECTORS, THE GOVT. OF ANGOLA HAD PAID THE AMOUNT IN FOLLOWING YEARS AFTER 8 YEARS AS UNDER: AY 2000 - 01 $6500000 RS.282531000 AO ACCEPTED 80HHC DEDUCTION ON U / S 143(1) AY 2001 - 02 $1000000 RS. 45059517 AO DID NOT ACCEPT 80HHC DEDUCTION U / S 143(3) AY 2002 - 03 $1000000 RS. 46420000 AO ACCEPTED 80HHC DEDUCTION ON U / S 143(1) THE AO IN HIS ORDER HAS DESCRIBED THIS PAYMENT AS COMMISSION, INTEREST, RENT ETC. OR RECEIPT OF SIMILAR NATURE AND REJECTED THE CLAIM OF THE APPELLANT THAT SUCH RECEIPT BY THE APPELLANT COMPANY AS LIQUIDATED DAMAGES. THE APPELLANT COMPANY HAD EXPORTED RICE TO GOVT. OF ANGOLA AND NOT TO ANY PRIVATE PARTY OF THAT COUNTRY IN AFRICA. THE GOVT. OF ANGOLA DID NOT PAY APPELLA NT'S MONEY IN TIME AND SUBSEQUENTLY COMPENSATED THE APPELLANT WITH MORE MONEY BY WAY OF APPRECIATION IN DOLLAR VALUE AND QUANTUM WISE ALSO. THIS RECEIPT OF FOREIGN CURRENCY FORM THE GOVT. OF ANGOLA IN EXCHANGE OF RICE EXPORT AFTER 8 YEARS IS NOTHING BUT LI QUIDATED DAMAGES TO THE APPELLANT COMPANY. THE APPELLANT HAD NOT OBTAINED 80HHC DEDUCTION IN A Y 1992 - 93 AND THE TAX RECOVERY BY THE CIT WAS MADE UNDER KVSS IN THE YEAR 1998 - 99 ACCORDINGLY. HENCE THE APPELLANT CLAIMS THAT THE RECEIPT IN THE YEAR UNDER APPE AL IS LIQUIDITY DAMAGE, CANNOT BE SUMMARILY REJECTED. THE APPELLANT HAD SHOWN THIS INCOME AS OTHER INCOME UNDER LIQUIDATED DAMAGES. THE AO'S REFERENCE IN ITS PARA NO. 12 OF THE ORDER TO THE EXPLANATION (BAA) OF SECTION 80HHC OF THE ACT IS NOT APPLICABLE AT ALL. THE A O COMPARES THIS RECEIPT AS BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF SIMILAR NATURE INCLUDED IN SUCH PROFITS WHICH IS NOT JUSTIFIED AND LEGALLY TENABLE. THE A O 'S RELIANCE OF THE CASE LAW CIT VS. K. RAVINDRANATHAN NAI R 295 ITR 228 (SC) HOLD GOOD FOR THE APPELLANT CASE. IF THERE IS RECEIPT OF FOREIGN MONEY ON EXPORT OF GOODS FROM INDIA, THEN 80HHC DEDUCTION IS TO BE ALLOWED. THE BROKERAGE INTEREST, RENT ETC. ARE EXPENDITURE INCURRED IN INDIA WHICH HAS NO CONNECTION WITH EXPORT FROM INDIA AND EARNING OF FOREIGN CURRENCY BY THE APPELLANT COMPANY. THEREFORE 90% DEDUCTION OF SUCH FOREIGN CURRENCY RECEIPT IS NOT APPLICABLE AT ALL. THEREFORE THE RECEIPT BY THE APPELLANT IS NOTHING BUT LIQUIDATED DAMAGES AND BUSINESS INCOME ONL Y. THEREFORE, THE APPELLANT IS ALLOWED 80HHC DEDUCTION ON THE RECEIPT OF FOREIGN CURRENCY ON EXPORT OF RICE IN THE FY 1991 - 92. THE AO IS DIRECTED TO RE - COMPUTE THE 80HHC DEDUCTION AND ALLOW THE BENEFIT OF DEDUCTION TO THE APPELLANT ACCORDINGLY. IN THE R ESULT, APPEAL IS ALLOWED. ITA NO. 4318/DEL/2014 7 | P A G E 5 . AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE IS IN APPEAL CAME BEFORE THE ITAT. 6 . LD. DR RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE ASSESSEE HAS RECEIVED THIS AMOUNT BY WAY OF A COMPENSATION FROM GOVERNMEN T OF ANGOLA O F AFRICAN COMPANY WHICH IS BEYOND THE EXPORT TURNOVER MADE. HE ALSO REFERRED THE PROVISIONS OF SECTION 80HHC. THE ASSESSEE HAS ALSO NOT TAKEN THE PERMISSION FROM THE COMPETENT AUTHORITY AS CONTEMPLATED U/S 80HHC OF THE ACT FOR THE EXTENDED P ERIOD. ON THE OTHER HAND, LD.AR RELIED ON THE ORDER OF THE FIRST APPELLATE AUTHORITY AND SUBMITTED THAT THE FIRST APPELLATE AUTHORITY HAS DONE GOOD REASONED ORDER AND IT DOES NOT REQUIRE ANY INFERENCE . THE ASSESSEE HAS RECEIVED LIQUIDATED DAMAGE SHOWN A S DIRECTLY LINKED WITH THE BUSINESS OF THE ASSESSEE COMPANY. HE ALSO REITERATED THE SUBMISSIONS MADE BEFORE THE LD.CIT(A). HE FURTHER SUBMITTED THAT THERE WAS A DIRECT NEXUS WITH THE AMOUNT RECEIVED OF RS.4,50,59,917/ - WITH EXPORT TURNOVER. THEREFORE, T HE ASSESSEE IS ENTITLED TO GET BENEFIT OF SECTION 80HHC OF THE ACT. 7 . AFTER HEARING BOTH PARTIES AND PERUSING THE MATERIAL A VAILABLE ON RECORD, WE FIND THAT THE EXPORT WAS MADE BY THE ASSESSEE COMPANY IN THE FY 1991 - 92 BUT AS CONTENDED BY THE ASSESSEE, THE PAYMENT WAS NOT RECEIVED BY THE ASSESSEE AND THE BENEFIT OF DEDUCTION U/S 80HHC W AS NOT CLAIMED IN AY 1991 - 92 . THE ASSESSEE RECEIVED A PAYMENT AFTER 8 YEARS OF THE EXPORT AND RECEIVED THE AMOUNT OVER AND ABOVE THE EXPORT T URNOVER RECEIVABLE . THE ASSES SEE WAS UNABLE TO SHOW ANY PROOF REGARDING OF PAYMENT RECEIVED OF RS.4,50,59,917/ - THAT IT IS A LIQUIDATED DAMAGE CHARGES PAID BY THE ANGOLA GOVERNMENT. THE ASSESSEE HAS ALSO NOT FULFILLED THE CONDITIONS AS LAID DOWN FOR CLAIMING DEDUCTION U/S 80HHC OF THE ACT REGARDING THE LIQUIDATED DAMAGE CHARGES SHOWN TO HAVE BEEN RECEIVED BY THE ASSESSEE. HE HAS ALSO NOT OBTAINED APPROVAL FROM THE COMPETENT AUTHORITY FOR THE EXTENDED PERIOD AS PROVIDED U /S 80HHC OF THE ACT . THE ASSESSEE HAS ITSELF SHOWN IT AS INCOME FROM OTHER SOURCES AND NOT AS A BUSINESS ITA NO. 4318/DEL/2014 8 | P A G E INCOME IN HIS PROFIT AND LOSS ACCOUNT . THE PAYMENT RECEIVED IS DIFFERENT FROM THE EXPORT OF GOODS, AS THE PAYMENT HAS BEEN MADE BY THE IMPORTER WHO HAS COMPENSATED TO THE ASSESSEE FOR DELAYED PAYMENT OF TH E EXPORT CONSIDERATION. 8. CLAUSE (B) OF EXPLANATION TO SECTION 80HHC DEFINES THE EXPORT TURNOVER AS UNDER : (B) EXPORT TURNOVER MEANS THE SALE PROCEEDS RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE W ITH CLAUSE (A) OF SUB - SECTION (2) OF ANY GOODS OR MERCHANDISE TO WHICH THIS SECTION APPLIES AND WHICH ARE EXPORTED OUT OF INDIA, BUT DOES NOT INCLUDE FREIGHT OR INSURANCE ATTRIBUTABLE TO THE TRANSPORT OF THE GOODS OR MERCHANDISE BEYOND THE CUSTOMS STATION AS DEFINED IN THE CUSTOMS ACT, 1962 (52 OF 1962). 9. FROM THE FACTS NOTED ABOVE BY THE ASSESSING OFFICER , IT IS CLEAR THAT THE ASSESSEEE HAS RECEIVED TOTAL OF $85,00,000 IN THREE DIFFERENT FINANCIAL YEAR S ($ 6500000 IN 1999 - 2000, $ 1000000 IN 2000 - 01 & $ 1000000 IN 2001 - 02) AS AGAINST TOTAL RECEIVABLE OF $ 25,73 , 460 . THE AMOUNT RECEIVED IS 230.29 % MORE THAN THE RECEIVABLE AMOUNT. DURING THE FINANCIAL YEAR 1999 - 2000 ITSELF, THE ASSESSEE HAD SHOWN TO HAVE RECEIVED $ 65,00,000 , WHICH IS 152.58 % MORE TH AN THE TOTAL RECEIVABLE AMOUNT. THE ASSESSEE HAS DISTRIBUTED IT INTO VARIOUS HEADS, SUCH AS PRINCIPAL & INTEREST, FOREIGN EXCHANGE GAIN, ADJUSTMENT OF EXPENDITURE OF EARLIER YEARS ADJUSTED AGAINST INTEREST PAID TO THE BANK AND CRYSTALLIZATION LOSS FOR THE PURPOSE OF CLAIMING DEDUCTION U/S. 80HHC. THE ASSESSEE HAS SUBMITTED THAT AFTER SETTING OFF OF ALL DUES AND LOSSES HE RECEIVED RS. 10,85,30,921 AS SURPLUS MONEY AS MENTIONED HEREINABOVE . IN THE IMPUGNED YEAR $10,00,000 INR 4,50,59,517/ - HAS RECEIVED BY TH E ASSESSEE IN SPITE OF THE ABOVE SURPLUS AMOUNT OF RS. 10,85,30,921/ - ON WHICH THE LD. A.O. HAS RIGHTLY DENIED THE BENEFIT OF DEDUCTION U/S 80HHC BY TREATING IT AS COMMISSION , INTEREST , CHARGES AS CONTEMPLATED IN SECTION 28 OF THE INCOME TAX A CT. THE AS SESSEE WAS UNABLE TO SUBMIT ANY MEMORANDUM OF IMPORTER REGARDING PAYMENTS MADE TO THE ASSESSEE . THIS AMOUNT ITA NO. 4318/DEL/2014 9 | P A G E CANNOT BE TREATED AS LIQUIDATED DAMAGE CHARGES BECAUSE TOTAL PRINCIPAL WITH OTHER CLAIMS AS ENUMERATED ABOVE, REGARDING EXPORT TURNOVER, STOOD RECEI VED BY THE ASSESSEE IN THE FINANCIAL YEAR 1999 - 2000 ITSELF . THE ASSESSEE HAS ALSO NOT PROVIDED TERMS AND CONDITION S REGARDING EXPORT BY ASSESSEE AND PAYMENT S BY IMPORTER, SO AS TO CONSIDER THE IMPUGNED EXTRA PAYMENTS IN THE NATURE OF LIQUIDATED DAMAGE CHARGES . IN FACT, NO PRUDENT MAN WOULD BELIEVE THAT ANY IMPORTER WOULD HAVE MADE SUCH AN ENORMOUS PAYMENTS OVER AND ABOVE THE EXPORT CONSIDERATION IN THE FORM OF ALLEGED LIQUIDATED DAMAGE. 10. ON THE CONSPECTUS OF WHAT HAS BEEN DISCUSSED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE CLAIM OF THE ASSESSEE AND IN DISCARDING THE FINDINGS REACHED BY THE ASSESSING OFFICER ON THIS COUNT. ACCORDINGLY, THE APPEAL OF THE REVENUE IS FOUND TO HAVE MERIT AND IS FIT TO BE ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED . THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 3 1 S T AUGUST, 2017. S D / - S D / - (I.C.SUDHIR) (L.P.SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER * AMIT KUMAR * DATE: - 3 1 .08.2017 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI