ITO, New Delhi V. M/s. Hritnik Exports Pvt. Ltd., New Delhi

ITA 4322/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2726 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 07-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 80HHC; 10B

Judgement Text

1 ITA NO. 4322/DEL/2 014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 4322/DEL/2 014 (A.Y .2010-11) ITO WARD-12(4) NEW DELHI (APPELLANT) VS HRITHIK EXPORTS PVT. LTD. 225, KARISHMA APARTMENTS, 27, I. P. EXTENSION NEW DELHI AAACH9458A (RESPONDENT) APPELLANT BY SH. R. S. SINGHVI, CA RESPONDENT BY SH. ARUN KUMAR, SR. DR ORDER PER SUCHITRA KAMBLE, JM THE APPEAL IS FILED BY THE REVENUE AGAINST THE ORDE R DATED 9/6/2014 PASSED BY CIT(A)-XIII, NEW DELHI FOR ASSESSMENT YEA R 2010-11. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES, OF THE C ASE, THE ORDER OF CIT(A) IS WRONG, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF RECEIP T OF DUTY DRAWBACK OF RS.58,99,364/- U/S 10B OF THE IT ACT, 1961, TO THE ASSESSEE COMPANY. DATE OF HEARING 05.07.2017 DATE OF PRONOUNCEMENT 10.07.2017 2 ITA NO. 4322/DEL/2 014 3. THE RETURN OF INCOME DECLARING TOTAL INCOME AT R S.1,79,850/- WAS FILED BY THE ASSESSEE COMPANY ON 8/10/2010. THE RETURN WAS PROCESSED U/S 143(1). THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. ACC ORDINGLY, FIRST NOTICE U/S 143(2) DATED 24/8/2011 WAS ISSUED AND DULY SERVED U PON THE ASSESSEE ON 26/8/2011. IN RESPONSE TO SUBSEQUENT STATUTORY N OTICES THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ATTENDED FROM TIME T O TIME & FILED NECESSARY DETAILS. THE COMPANY WAS INCORPORATED ON 28/6/2001 WITH REGISTRAR OF COMPANY (NCT) DELHI & HARYANA, WITH THE MAIN OBJECT TO CARRY ON THE BUSINESS OF MANUFACTURE, TRADER OF READYMADE GARMEN TS/FABRICS. THE ASSESSEE COMPANY HAS NOT COMMENCED ANY BUSINESS TILL 31/3/20 03 EXCEPT ACQUIRING AN INDUSTRIAL LAND FROM NOIDA AUTHORITY FOR CONSTRUCTI NG FACTORY BUILDING LOCATED AT D-143, HOSIERY COMPLEX, PHASE-II EXTN., NOIDA. THE ASSESSEE COMPANY COMMENCED ITS BUSINESS DURING FINANCIAL YEAR 2003-0 4 AND INCURRED LOSS OF RS.70430/-. THE ASSESSEE COMPANY WAS ALSO GRANTED A STATUS OF 100% EXPORT ORIENTED UNDERTAKING W.E.F. 3/10/2007. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION U/S 10B OF THE IT ACT AMOUNTING TO RS.83,97,846/-. THE ASSESSING OFFICER NOTICED T HAT THE ASSESSEE ALSO CLAIMED RECEIPT OF DUTY DRAWBACK OF RS.58,99,364/- AS DEDUCTION. ACCORDINGLY, THE ASSESSING OFFICER HELD THAT DUTY DRAWBACK REC EIPTS ARE NOT ELIGIBLE FOR DEDUCTION U/S 10B OF THE IT ACT, 1961 AND THUS, DUT Y DRAWBACK RS.58,99,364/- CLAIMED AS DEDUCTION U/S 10B WAS ADD ED BACK IN THE TOTAL INCOME OF THE ASSESSEE. 5. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL O F THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ITA NO. 2111/DEL/20 13 FOR ASSESSMENT YEAR 2009-10 IN ASSESSEES OWN CASE AND DELETED THE ADDI TION MADE BY THE ASSESSING OFFICER . THE REVENUE IS BEFORE US. 6. THE LD. AR SUBMITTED THAT THE TRIBUNAL IN ASSESS MENT YEAR 2009-10 DISMISSED THE APPEAL FILED BY THE DEPARTMENT WHICH IS CONFIRMED BY THE 3 ITA NO. 4322/DEL/2 014 HONBLE DELHI HIGH COURT IN ITA NO. 219 OF 2014 VID E ORDER DATED 13/11/2014. THUS, THE MATTER IS COVERED AS THE ISSUE THEREIN IS ALSO RELATED TO SECTION 10B SUB SECTION 1 OF THE INCOME TAX ACT. 7. THE LD. DR DID NOT DISTINGUISH THE SAME. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDER IN ASSESSEES OWN CASE PASSED BY THIS TRIBUNAL AS WELL AS ORDER PASSE D BY THE HONBLE DELHI HIGH COURT. THE ISSUE IS VERY MUCH COVERED BY THESE ORD ERS. THE EXTRACT OF THE TRIBUNAL ORDER IS AS FOLLOWS:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ONLY ISSUE IN DISPUTE IS REGARDING ELIGIBILITY OF D UTY DRAW BACK FOR THE COMPUTATION OF DEDUCTION U/S 10B OF THE ACT. TH E ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE VIDE SPECIAL BENCH DECISION IN THE CASE OF MORAL OVERSEAS LTD. (SUPRA). THE ITA T HAS DISCUSSED SIMILAR SITUATION VIDE PARAS 78 TO 80 OF THE SAID O RDER WHICH IS REPRODUCED AS UNDER:- 78. SECTION 10B SUB-SECTION (1) ALLOWS DEDUCTION IN RES PECT OF PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU. SECTION 10B (4) LAYS DOWN SPECIAL FORMULA FOR COMPUTING THE PROFITS DERIVED B Y THE UNDERTAKING FROM EXPORT. THE FORMULA IS AS UNDER PROFIT OF THE BUSINESS OF THE EXPORT TURNOVER UNDERTAKING X TOTAL TURNOVER OF BUSINESS CARRIED OUT BY THE UNDERTAKING 79. THUS, SUB-SECTION (4) OF SECTION 10B STIPULATED THAT DEDUCTION UNDER THAT SECTION SHALL BE COMPUTED BY APPORTIONIN G THE PROFITS OF THE BUSINESS OF THE UNDERTAKING IN THE RATIO OF TURNOVER TO THE TOTAL TURNOVER. THUS, NOT-WITH-STANDING THE FACT TH AT SUB-SECTION (1) OF SECTION 10B REFERS THE PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU, YET THE MANNER OF DETERMINING SUCH ELIGIB LE PROFITS HAS BEEN STATUTORILY DEFINED IN SUB-SECTION (4) OF SECTION 10B OF THE ACT. AS PER THE FORMULA STATED ABOVE, THE ENTIR E PROFITS OF THE BUSINESS ARE TO BE TAKEN WHICH ARE MULTIPLIED BY TH E RATIO OF THE 4 ITA NO. 4322/DEL/2 014 EXPORT TURNOVER TO THE TOTAL TURNOVER OF THE BUSINE SS. SUBSECTION (4). DOES NOT REQUIRE AN ASSESSEE TO ESTABLISH A DI RECT NEXUS WITH THE BUSINESS OF THE UNDERTAKING AND ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE UNDERTAKING, THE SAME WOULD BE INCLUDED IN THE PROFITS OF THE BUSINESS OF THE UNDERTAKING. THU S, ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE ELIGIBLE U NDERTAKING, THERE IS NO FURTHER MANDATE IN THE PROVISIONS OF SE CTION 10B TO EXCLUDE THE SAME FROM THE ELIGIBLE PROFITS. THE MOD E OF DETERMINING THE ELIGIBLE DEDUCTION U/S 10B IS SIMIL AR TO THE PROVISIONS OF SECTION 80HHC INASMUCH AS BOTH THE SE CTIONS MANDATES DETERMINATION OF ELIGIBLE PROFITS AS PER T HE FORMULA CONTAINED THEREIN. THE ONLY DIFFERENCE IS THAT SECT ION 80HHC CONTAINS A FURTHER MANDATE IN TERMS OF EXPLANATION (BAA) FOR EXCLUSION OF CERTAIN INCOME FROM THE 'PROFITS OF TH E BUSINESS' WHICH IS, HOWEVER, CONSPICUOUS BY ITS ABSENCE IN SE CTION 10B. ON THE BASIS OF THE AFORESAID DISTINCTION, SUB-SECTION (4) OF SECTION 10A/10B OF THE ACT IS A COMPLETE CODE PROVIDING THE MECHANISM FOR COMPUTING THE 'PROFITS OF THE BUSINESS' ELIGIBL E FOR DEDUCTION U/S 10B OF THE ACT. ONCE AN INCOME FORMS PART OF TH E BUSINESS OF THE INCOME OF THE ELIGIBLE UNDERTAKING OF THE ASSES SEE, THE SAME CANNOT BE EXCLUDED FROM THE ELIGIBLE PROFITS FOR TH E PURPOSE OF COMPUTING DEDUCTION U/S 10B OF THE ACT. AS PER THE COMPUTATION MADE BY THE ASSESSI NG OFFICER HIMSELF, THERE IS NO DISPUTE THAT BOTH THESE INCOMES HAVE BEEN TREATED BY THE ASSESSI NG OFFICER AS BUSINESS INCOME. THE CBDT CIRCULAR NO. 564 DATED 5T H JULY, 1990 REPORTED IN 184 ITR (ST.) 137 EXPLAINED THE SC OPE AND AMBIT OF SECTION 80HHC AND THE MODE OF DETERMINATION OF P ROFITS DERIVED BY AN ASSESSEE FROM THE EXPORT OF GOODS. I. T.A.T., SPECIAL BENCH IN THE CASE OF INTERNATIONAL RESEARCH PARK LA BORATORIES VS. ACIT, 212 ITR (AT) 1, AFTER FOLLOWING THE AFORESAID CIRCULAR, HELD THAT STRAIGHT JACKET FORMULA GIVEN IN SUB-SECTION ( 3) HAS TO BE FOLLOWED TO DETERMINE THE ELIGIBLE DEDUCTION. THE H ON'BLE SUPREME COURT IN THE CASE OF ; -P.R. PRABHAKAR; 284 ITR 584 HAD APPROVED THE PRINCIPLE LAID DOWN IN THE SPECIAL BENCH DECISI ON IN INTERNATIONAL RESEARCH PARK LABORATORIES VS. ACIT ( SUPRA). IN THE ASSESSEE'S OWN CASE THE I.T.A.T. IN THE PRECEDING Y EARS, AFTER CONSIDERING THE DECISION IN THE CASE OF LIBERTY IND IA HELD THAT PROVISIONS OF SECTION 10B ARE DIFFERENT FROM THE PR OVISIONS OF SECTION 80IA WHEREIN NO 77 FORMULA HAS BEEN LAID DO WN FOR COMPUTING THE ELIGIBLE BUSINESS PROFIT. 5 ITA NO. 4322/DEL/2 014 80. IN VIEW OF THE ABOVE DISCUSSION, QUESTION NO. 2 IS ANSWERED , IN AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. ACCORDIN GLY, THE ASSESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION ON EXPORT INCENTIVE RECEIVED BY IT IN TERMS OF PROVISIONS OF SECTION 10B(1) READ WITH SECTION 1 0B(4) OF THE ACT. THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE BEI NG SIMILAR TO THE FACTS OF THE ABOVE TRIBUNAL ORDER, THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LD CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. THE FACTS OF A.Y. 2009-10 ARE SIMILAR TO THE PRESEN T ASSESSMENT YEAR, THEREFORE, THE REVENUES APPEAL DOES NOT SURVIVE. 9. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10TH JULY, 2 017 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 10/07/2017 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 4322/DEL/2 014 DATE 1. DRAFT DICTATED ON 05/07/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 06/07/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 10.07.2017 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 1 0 .07.2017 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.