THE AL-KABEER EXPORTS P. LTD, MUMBAI V. M/S. DCIT CIR 3(1), MUMBAI

ITA 4353/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1911 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 20-04-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 23-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K PAHOOD
• Assessee Lawyers: AMIT KATHIWALA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI R.S.PADVEKAR, JM & SHRI RAJENDRA SINGH, AM & I.T.A.NO.4353/MUM/2008 - A.Y 2004-05 AL-KABEER EXPORTS PVT. LTD., 91, JOLLY MAKER CHAMBERS NO.2, NARIMAN POINT, MUMBAI 400 021. PAN NO.AABCA 0500 H VS. DY. COMMISSIONER OF I.T., CIRCLE 3(1), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT KATHIWALA. REVENUE BY : SHRI S.K.PAHOOD. O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 14-5-2008 OF THE CIT[A] FOR THE A.Y 2004-05. THE D ISPUTE RAISED IN THIS APPEAL RELATES TO ALLOWABILITY OF DEDUCTION U/ S.80HHC IN RESPECT OF DEPB INCOME AND THE INTEREST INCOME. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IN ITS RETURN OF INCOME HAD CLAIMED DEDUCTION U/S.80HHC AT RS.78,53,165/- WHICH ALSO INCLUDED THE DEDUCTION IN RESPECT OF DEPB INCOME OF RS.2,45,90,199/- AND INTEREST INCOME OF 3,38,331/-. THE AO NOTED THAT THE TURNOVER OF THE ASSESSEE WAS RS.1162.10 CRORES AND, THEREFORE, UNDER THE 3 RD PROVISO TO SEC.80HHC[3] PROFIT ON ACCOUNT OF DEPB INCOME, COULD BE FURTHER INCREASED ONLY WHEN THE TW O CONDITIONS 2 MENTIONED IN THE PROVISO WERE SATISFIED, I.E. THE A SSESSEE HAD THE OPTION TO CHOSE EITHER THE DUTY DRAW BACK OR DEPB AN D THE RATE OF DUTY DRAW BACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY W AS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER DEPB SCHEME. IN THIS CASE, THE ASSESSEE ADMITTED THAT THERE WAS NO DUTY DRAW BACK AVAILABLE TO IT. SINCE THE CONDITIONS WERE NOT SATISFIED, AO DID NOT MAKE ANY INCREASE TO THE PROFIT ON ACCOUNT OF DEPB IN TERMS OF THE PROVISO. H E HAD ONLY REDUCED 90% OF DEPB INCOME AS PER EXPLANATION [BAA]. THE ASSE SSEE HAD ALSO CLAIMED DEDUCTION U/S.80HHC IN RESPECT OF ENTIRE IN TEREST INCOME. THE INTEREST INCOME HAD ARISEN FROM THE DEPOSITS PLEDGE D WITH THE BANK AS MARGIN MONEY FOR THE PURPOSE OF BUSINESS. THE AO AC CEPTED THE CLAIM OF INTEREST INCOME AS BUSINESS INCOME, BUT 90% OF T HE SAME WAS DEDUCTED FROM THE PROFIT OF BUSINESS AS PER EXPLANAT ION [BAA]. IN APPEAL, THE ASSESSEE SUBMITTED THAT ONLY 90% OF FAC E VALUE OF DEPB LICENSE COULD HAVE BEEN REDUCED AS PER EXPLANATION [ BAA] AND NOT THE ENTIRE INCOME. IT WAS ALSO SUBMITTED THAT INTEREST INCOME COULD HAVE BEEN FULLY CONSIDERED FOR DEDUCTION U/S.80HHC. THE CIT[A] WAS NOT SATISFIED BY THE CONTENTIONS RAISED AND CONFIRMED T HE ORDER OF THE AO. AGGRIEVED BY WHICH, THE ASSESSEE IS IN APPEAL BEFOR E THE TRIBUNAL. 3. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECO RDS AND CONSIDERED THE MATTER CAREFULLY. THE ISSUE RAISED I N RELATION TO DEPB IS COVERED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE 3 CASE OF TOPMAN EXPORTS LTD. [318 ITR (AT) 87] IN WHI CH IT HAS BEEN HELD THAT FACE VALUE OF DEPB LICENSE WILL BE BUSINES S INCOME U/S.28[IIIB] AND IN CASE OF SALE, EXCESS OF SALE CO NSIDERATION OVER THE FACE VALUE, WILL BE CONSIDERED AS BUSINESS PROFIT U /S.28[IIID]. THEREFORE, THE ENTIRE DEPB INCOME INCLUDING THE FACE VALUE WILL BE ELIGIBLE FOR DEDUCTION @ 90% AS PER EXPLANATION [BAA]. THE ORDER OF THE CIT[A] ON THIS POINT IS THEREFORE CONFIRMED. AS REGARDS TH E INCREASE OF BUSINESS PROFITS AS PER THIRD PROVISO TO SEC.80HHC[ E], IT IS AN ADMITTED POSITION THAT TURNOVER OF THE ASSESSEE EXCEEDED RS. 10 CRORES AND THE CONDITIONS MENTIONED IN THE SAID PROVISO WERE NOT S ATISFIED. THEREFORE, THE PROFIT IS NOT REQUIRED TO BE FURTHER INCREASED IN SO FAR AS DEPB PROFIT IS CONCERNED I.E. EXCESS OF SALE CONSIDERATI ON OVER THE FACE VALUE. HOWEVER, SO FAR AS FACE THE VALUE IS CONCERNED, THI S WILL BE COVERED BY THE 1 ST PROVISO TO SEC.80HHC[3] AND THE PROFIT WILL BE INC REASED BY THE FACE VALUE OF DEPB LICENSE IN THE RATIO OF EXPORT TU RNOVER TO THE TOTAL TURNOVER AS PROVIDED IN THE 1 ST PROVISO. THE AO IS DIRECTED TO MAKE THE COMPUTATION ACCORDINGLY. 3.1. AS REGARDS THE INTEREST INCOME FROM DEPOSITS K EPT AS MARGIN MONEY, THE AO HAS ALREADY TREATED THE INTEREST INCO ME AS BUSINESS INCOME. HIS DECISION TO REDUCE 90% OF INTEREST INCO ME FROM THE BUSINESS PROFITS AS PER EXPLANATION [BAA] IS ALSO CO RRECT AS INTEREST INCOME IS SPECIFICALLY MENTIONED IN EXPLANATION [BAA ]. WE, THEREFORE, 4 SEE NO INFIRMITY IN THE ORDER OF THE CIT[A] IN CON FIRMING THE ORDER OF THE AO ON THIS POINT. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF THE ORDER ABOVE. ORDER PRONOUNCED ON THIS 30 TH DAY OF APRIL, 2010. SD/- SD/- (R.S.PADVEKAR) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 30 TH APRIL, 2010. P/-*