Sigma Corporation (India) Ltd, V. Addl. CIT Range 8,

ITA 4350/DEL/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3977 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 27-04-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 28-12-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYANT MISRA
• Assessee Lawyers: BALJIT SINGH
• Keywords: Opportunity of being heard; Competent authority; Set aside
• Section: 80HHC; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `G : NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO.4350/DEL./2006 (ASSESSMENT YEAR : 2003-04) SIGMA CORPORATION (INDIA) LTD., VS. ADDL.CIT, RAN GE 8, R-561, SHANKAR ROD, NEW DELHI. NW RAJINDER NAGAR, NEW DELHI. (PAN/GIR NO.AABCS8026L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BALJIT SINGH, CA REVENUE BY : SHRI JAYANT MISRA, CIT(DR) ORDER PER K.D. RANJAN: AM THIS APPEAL BY THE ASSESSEE FOR AY 2003-0 4 ARISES OUT OF THE ORDER OF THE CIT(A)- XI, NEW DELHI. THE ONLY ISSUE FOR CONSIDERATION RE LATES TO ALLOWING DEDUCTION U/S 80HHC IN RESPECT OF DEPB. THE RELEVANT GROUND OF AP PEAL IS REPRODUCED AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN NOT ALLOWING THE DED UCTION CLAIMED U/S 80HHC. 2. THAT WE BE ALLOWED TO ADD FRESH GROUND OF APPEAL AT THE TIME OF THE HEARING. 3. THE ORDER OF THE LD.CIT(A) IS BAD IN LAW, AND ON THE FACTS OF THE CASE. 2. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT T HE ASSESSEE CLAIMED DEDUCTION U/S 80HHC IN RESPECT OF DEPB RECEIPTS. THE MAIN CONTEN TION OF THE ASSESSEE IN RESPECT OF DEPB WAS THAT ONLY PROFIT ON TRANSFER OF DEPB WAS T O BE EXCLUDED IN CLAUSE (BAA) OF EXPLANATION 2 TO SECTION 80HHC OF THE I.T. ACT. LD . CIT(A) HAS HELD THAT DEPB TO THE EXTENT OF 90% WAS RIGHTLY EXCLUDED BY THE ASSESSEE IN THE RETURN OF INCOME. SINCE AFTER EXCLUDING DEPB, THERE WAS A LOSS WHICH HAS TO BE AD JUSTED WITH THE BENEFIT , IF ANY, AVAILABLE IN FIRST OR SECOND PROVISO TO SECTION 80H HC OF THE ACT. THE BENEFIT TO THE ITA NO.4350/DEL/2006 (AY : 2003-04) 2 ASSESSEE COULD BE GIVEN ONLY IF THE CONDITION IN TH IRD PROVISO WAS SATISFIED. SINCE THE CONDITION OF THIRD PROVISO WAS NOT SATISFIED BY THE ASSESSEE, NO BENEFIT UNDER THIS PROVISO COULD BE GRANTED. THE CIT(A), THEREFORE, HELD THAT THE ASSESSEE WAS NOT ENTITLED ANY DEDUCTION U/S 80HHC AS PER AMENDED PROVISIONS OF TH E ACT. 3. BEFORE US, LD.AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS NOW COVERED BY THE DECISION OF SPECIAL BENCH IN THE CASE OF TOPMAN EXP ORTS, REPORTED IN 318 ITR(AT) 87 (SB). ON THE OTHER HAND, LD.CIT(DR) SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF ITAT IN THE CASE OF EASTMAN INDUSTRIES VS. DCIT, 110 TTJ 798. 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THIS ISSUE IS REQUIRED TO BE RESTORED BACK TO THE FILE OF THE AO FOR A FRESH DECISION IN THE LIGHT OF THE DECISION OF ITAT, SPECIAL BENCH, MUMBA I IN THE CASE OF TOPMAN EXPORTS(SUPRA) WHEREIN IT HAS BEEN OBSERVED AS UNDE R: THE QUESTION RAISED BEFORE THE SPECIAL BENCH HAS T WO PARTS. IN SO FAR AS THE FIRST PART, WHETHER THE ENTIRE AMOUNT RECEIVED ON SALE O F DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE U/S 28(IIID) OF THE I. T. ACT IS CONCERNED, WE ANSWER IT IN THE NEGATIVE AND THE SECOND PART OF THE QUESTION : OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTERPOL ATED IS REPLIED IN THE AFFIRMATIVE TO THE EXTENT THAT THE FACE VALUE OF DEPB SHALL BE DEDUCTED FROM THE SALE PROCEEDS. AS REGARDS THE GROUNDS RAISED IN THESE A PPEALS AGAINST THE DENIAL OF DEDUCTION U/S 80HHC, IN FULL OR PART, WE FIND THAT HE COMPUTATION OF PROFITS DERIVED FROM EXPORTS AND THE RESULTANT AMOUNT OF DE DUCTION UNDER THIS SECTION CAN BE MADE ONLY WHEN THE DECISION IS TAKEN ON THE AMOU NT AND THE TIMING OF TAXABILITY OF THE FACE VALUE OF DEPB AND THE PROFIT S ON ITS SALE. ON THIS ISSUE WE HOLD THAT THE FACE VALUE OF DEPB IS CHARGEABLE TO T AX UNDER SECTION 28(IIIB) AT THE TIME OF ACCRUAL OF INCOME, THAT IS, WHEN THE APPLIC ATION FOR DEPB IS FILED WITH THE COMPETENT AUTHORITY PURSUANT TO EXPORTS AND PROFIT ON SALE OF DEPB REPRESENTING THE EXCESS OF THE SALE PROCEEDS OF DEPB OVER ITS FA CE VALUE IS LIABLE TO BE CONSIDERED U/S 28(IIID) AT THE TIME OF ITS SALE, WH ATEVER IS SAID ABOUT DEPB, SHALL BE ALSO HOLD GOOD FOR DFRC, N BOTH ITS COMPONENTS, VIZ., THE FACE OF DFRC AND PROFIT ON ITS TRANSFER, EXCEPT FOR THE FACT THAT TH E PROFIT ON SALE OF DFRC SHALL BE CHARGED TO TAX U/S 28(IIIE). THERE IS NO DISPUTE A BOUT THE DUTY DRAWBACK, WHICH SHALL BE CHARGEABLE TO TAX AT THE TIME OF ACCRUAL O F INCOME U/S 28(IIIC) WHEN APPLICATION IS FILED WITH THE COMPETENT AUTHORITY A FTER MAKING EXPORTS. SINCE THE NECESSARY FACTS FOR THE DETERMINATION OF THE QUANTU M OF DEDUCTION U/S 80HHC, AS DISCUSSED ABOVE, ARE NOT AVAILABLE ON RECORD, WE, T HEREFORE, SET ASIDE THE IMPUGNED ORDERS AND DIRECT THE AO TO COMPUTE THE AM OUNT OF RELIEF IN ACCORDANCE WITH THE VIEW EXPRESSED BY US HEREINABOVE. 5. THE DECISION RELIED UPON BY THE LD.CIT(DR) WAS R ENDERED ON 27.07.2007 WHEREAS THE DECISION OF SPECIAL BENCH HAS BEEN RENDERED ON 11.11.2009. THEREFORE, THE DECISION ITA NO.4350/DEL/2006 (AY : 2003-04) 3 OF SPECIAL BENCH IS BINDING ON US. SINCE, THE AO H AD NOT EXAMINED THE CLAIM OF THE ASSESSEE WITH REFERENCE TO DECISION OF SPECIAL BENC H IN THE CASE OF TOPMAN EXPORTS (SUPRA), WE SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH THE DIRECTIONS TO EXAMINE AND ALLOW THE CLAIM OF THE ASSESSEE IN LINE WITH THE DE CISION OF SPECIAL BENCH IN THE CASE OF TOPMAN EXPORT (SUPRA). THE AO WILL PROVIDE NECESSA RY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. 4. ORDER PRONOUNCED IN OPEN COURT ON 30.04.2010. SD/- SD/- (R.P. TOLANI) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, APRIL 30, 2010. SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XI, NEW DELHI 5.CIT(ITAT), NEW DELHI. AR/ITAT