Ultimate Fashion Maker Ltd., New Delhi V. ITO, New Delhi

ITA 4495/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61711 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 29-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 07-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Assessee Lawyers: R K MEHRA
• Keywords: Opportunity of being heard
• Section: 80HHC; 234B; 28

Judgement Text

ITA 4493, 4494 & 4495/D/2011 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H NEW DELHI BEFORE SHRI A.N. PAHUJA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.4493/DEL/2011 ASSESSMENT YEAR : 1999-00 I.T.A.NO.4494/DEL/2011 ASSESSMENT YEAR : 2003-04 I.T.A.NO.4495/DEL/2011 ASSESSMENT YEAR : 2004-05 ULTIMATE FASHION MAKER LTD., VS INCOME TAX OFFICER, B-286, OKHLA INDUSTRIAL AREA, WARD 18 (1), PHASE-I, NEW DELHI 110020 C.R. BU ILDING, (PAN: AAACU2099N) NEW DELH I. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.K. MEHRA RESPONDENT BY : DR. B.R.R.KUMAR, SR. DR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THESE APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE O N THE SAME GROUNDS AGAINST THE ORDER DATED 9.8.2011 OF THE CIT (A)-XXI, NEW DELHI BY WHICH LD. CIT(A) UPHELD THE ORDER OF THE AO DATED 1 6.12.2010 PASSED U/S 254/143(3) OF THE INCOME TAX ACT (HEREINAFTER REFER RED TO AS THE ACT). AS THE GROUNDS OF ALL THESE APPEALS ARE SAME, THEREFOR E, FOR THE SAKE OF ITA 4493, 4494 & 4495/D/2011 2 CONVENIENT AND PROPER ADJUDICATION, WE ARE DECIDING THESE APPEALS BY THIS COMMON ORDER. 2. THE APPEALS ARE PERTAINING TO A.Y. 1999-2000, 20 03-04 AND 2004-05 ON IDENTICAL GROUNDS WHICH READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE PETITIONER COMPANYS CASE, THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF THE LEARNED ASSESSING OFFICER IGNORING THE FACT THAT TH E SPECIFIC DIRECTIONS WERE GIVEN BY THE HONBLE TRIBUNAL TO DECIDE THE ISSUE OF DEDUCTION UNDER SECTION 80HHV VIS--VIS RECEIPTS ON ACCOUNT OF SALE OF DEPB BY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS VS ITO (2009) 318 ITR 87 (MUM) WHICH THE LEARNED ASSESSEE FAILED TO DO SO. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE PETITIONER COMPANYS CASE, THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT ALLOWING APPROPRIATE AMOUNT OF DEDUCTION UNDER SECTION 80HHC BY HOLDING THAT THE ENTIRE AMOUNT RECEIVED ON THE SALE OF DEPB REPRESENTS PROFITS CHARGEABLE TO TAX UNDER SECTION 28 (IIID) OF THE INCOME TAX ACT, 1961. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE PETITIONER COMPANYS CASE, THE LD. CIT(A) ERRED IN LAW IN UPHOLDING THE CHARGING OF THE INTEREST UNDER SECTION 234B OF THE ACT, BY COMPLETELY IGNORING THE BENEFICIAL CIRCULAR NO. 2/2006 DATED 17.01.2006 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES. 4. THAT THE ORDER MADE IS BAD IN LAW. ITA 4493, 4494 & 4495/D/2011 3 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE FACT THAT THERE WERE SPECIFIC DIRECTIONS BY THE ITAT TO DECIDE THE ISSUE OF DEDUCTION U/S 80HHC OF THE ACT VIS--VIS RECEIPTS ON ACCOUNT OF SALE OF DEPB BUT THE AO DISALLOWED THE SAME WITH A FINDING THAT PROFIT EARN ED FROM THE SALE OF DEPB BENEFITS ARE ALSO TO BE INCLUDED IN THE INCOME OF T HE ASSESSEE BESIDES ITS FACE VALUE. THE ABOVE ASSESSMENT ORDER WAS UPHELD BY THE CIT(A) BY THE IMPUGNED ORDERS BY HOLDING THAT THE ENTIRE AMOUNT R ECEIVED ON THE SALE OF DEPB REPRESENTS PROFIT CHARGEABLE TO TAX U/S 28(III D) OF THE ACT AND HE ALSO UPHELD THE ACTION OF THE AO IN CHARGING OF INTEREST U/S 234B OF THE ACT. HENCE, THESE APPEALS BY THE ASSESSEE BEFORE THIS TR IBUNAL. 4. THE ASSESSEES REPRESENTATIVE SUBMITTED BEFORE U S THAT THE AO PASSED THE ASSESSMENT ORDER ON 16.12.2010 WHICH WAS UPHELD BY THE CIT(A) PASSING THE IMPUGNED ORDER DATED 9.8.2011 AND THESE APPEALS WERE FILED ON 7.10.2011 AND DURING THE PENDENCY OF THESE APPEALS, THE DECISION BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF TOPMA N EXPORTS VS CIT, MUMBAI (2012) 205 TAXMAN 119(SC) WAS PRONOUNCED ON 8.2.2012. THE RELEVANT OPERATING PARAS OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA) ARE BEING REPRODUCED HEREINBELOW:- 11. WE MAY NOW CONSIDER THE RELEVANT PROVIS IONS OF SECTION 28 FOR DETERMINING WHETHER DEPB WILL FALL UNDER CLAUSE (IIIB) OR UNDER CLAUSE (IIID) OF SECTION 28. THE ITA 4493, 4494 & 4495/D/2011 4 RELEVANT PROVISIONS OF SECTION 28 OF THE ACT ARE R EPRODUCED HEREUNDER: SECTION 28. PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INCOME- TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFE SSION,-- . (IIIA) PROFITS ON SALE OF A LICENCE GRANTED UNDER THE IMPORTS (CONTROL) ORDER, 1955, MADE UNDER T HE IMPORTS AND EXPORTS (CONTROL)ACT, 1947 (18 OF 1947); (IIIB) CASH ASSISTANCE (BY WHATEVER NAME CA LLED) RECEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVERNMENT OF INDIA;] (IIIC) (IIID) ANY PROFIT ON THE TRANSFER OF THE DUT Y ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME UN DER THE EXPORT AND IMPORT POLICY FORMULATED AND ANNOUNCED UNDER SECTION 5 OF THE FOREIGN TRADE (DEVELOPMENT AND R EGULATION) ACT, 1992 (22 OF 1992) (IIIE) ANY PROFIT ON THE TRANSFER OF TH E DUTY FREE REPLENISHMENT CERTIFICATE, BEING THE DUTY REMISSION SCHEME UND ER THE EXPORT AND IMPORT POLICY FORMULATED AND ANNOUNCED UNDER SECTION 5 OF THE FOREIGN TRADE (DEVELOPMENT AND RE GULATION) ACT, 1992 (22 OF 1992). 12. IT WILL BE CLEAR FROM THE AFORESAID PROVIS IONS OF SECTION 28 THAT UNDER CLAUSE (IIIB) CASH ASSISTANCE (BY WHATEVER NA ME CALLED) RECEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPOR TS UNDER ANY SCHEME OF THE GOVERNMENT OF INDIA IS BY ITSELF INCOME CHARGEABLE TO INCOME TAX UNDER THE HEAD PROF ITS AND GAINS OF BUSINESS OR PROFESSION. DEPB IS A KIND OF ASSISTANCE GIVEN BY THE GOVERNMENT OF INDIA TO AN E XPORTER TO PAY CUSTOMS DUTY ON ITS IMPORTS AND IT IS RECEIVA BLE ONCE EXPORTS ARE MADE AND AN APPLICATION IS MADE BY THE EXPORTER FOR DEPB. WE HAVE, THEREFORE, NO DOUBT THAT DEPB IS CASH ASSISTANCE RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER THE SCHEME OF THE GOVERNMENT OF INDIA AND FALLS UNDE R CLAUSE (IIIB) OF SECTION 28 AND IS CHARGEABLE TO INCOME TAX UNDER THE ITA 4493, 4494 & 4495/D/2011 5 HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION EVEN BEFORE IT IS TRANSFERRED BY THE ASSESSEE. 13. UNDER CLAUSE (IIID) OF SECTION 28, ANY PROF IT ON TRANSFER OF DEPB IS CHARGEABLE TO INCOME TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS AN ITE M SEPARATE FROM CASH ASSISTANCE UNDER CLAUSE (IIIB). THE WORD PROFIT MEANS THE GROSS PROCEEDS OF A BUSI NESS TRANSACTION LESS THE COSTS OF THE TRANSACTION. TO QUOTE FROM BLACKS LAWDICTIONARY (FIFTH EDITION): PROFIT. MOST COMMONLY, THE GROSS PROCEEDS OF A BU SINESS TRANSACTION LESS THE COSTS OF THE TRANSACTION, I. E. NET PROCEEDS. EXCESS OF REVENUES OVER EXPENSES FOR A TRANSACTION ; SOMETIMES USED SYNONYMOUSLY WITH NET INCOME FOR THE PERIOD . GAIN REALIZED FROM BUSINESS OR INVESTMENT OVER AND A BOVE EXPENDITURES. THIS COURT IN E.D. SASSOON & COMPANY LTD. AND OTH ERS V. COMMISSIONER OF INCOME-TAX, BOMBAY CITY (1954) 26 ITR 27 (SC) HAS QUOTED THE FOLLOWING OBSERVATIONS OF L ORD JUSTICE FLETCHER MOULTON IN THE SPANISH PROSPECTING COM PANY LIMITED [(1911) I CH. 92] ON THE MEANING OF THE WORD PROFI TS: . PROFITS IMPLIES A COMPARISON BETWEEN THE STAT E OF A BUSINESS AT TWO SPECIFIC DATES USUALLY SEPARATED BY AN INTE RVAL OF A YEAR. THE FUNDAMENTAL MEANING IS THE AMOUNT OF GAIN MADE BY THE BUSINESS DURING THE YEAR. THIS CAN ONLY BE ASCERT AINED BY A COMPARISON OF THE ASSETS OF THE BUSINESS AT THE T WO DATES. PROFITS, THEREFORE, IMPLY A COMPARISON OF THE VAL UE OF AN ASSET WHEN THEASSET IS ACQUIRED WITH THE VALUE OF THE AS SET WHEN THE ASSET IS TRANSFERREDAND THE DIFFERENCE BETWEEN THE TWO VALUES IS THE AMOUNT OF PROFIT OR GAIN MADE BY A PERSON. AS DEPB HAS DIRECT NEXUS WITH THE COST OF IMPORTS FOR MANUF ACTURING AN EXPORT PRODUCT, ANY AMOUNT REALIZED BY THE ASSESSE ES OVER AND ABOVE THE DEPB ON TRANSFER OF THE DEPB WOULD REPRE SENT PROFIT ON THE TRANSFER OF DEPB. ITA 4493, 4494 & 4495/D/2011 6 14. WE ARE, THUS, OF THE CONSIDERED OPINION THA T WHILE THE FACE VALUE OF THE DEPB WILL FALL UNDER CLAUSE (IIIB) OF SECTION 28 OF THE ACT, THE DIFFERENCE BETWEEN THE SALE VALUE AN D THE FACE VALUE OF THE DEPB WILL FALL UNDER CLAUSE (IIID) OF SECT ION 28 OF THE ACT AND THE HIGH COURT WAS NOT RIGHT IN TAKING THE VIEW IN THE IMPUGNED JUDGMENT THAT THE ENTIRE SALE PROCEED S OF THE DEPB REALIZED ON TRANSFER OF THE DEPB AND NOT JUST THE DIFFERENCE BETWEEN THE SALE VALUE AND THE FACE VALUE OF THE D EPB REPRESENT PROFIT ON TRANSFER OF THE DEPB. 5. THE AR HAS DRAWN OUR ATTENTION TOWARDS ABOVE JUD GEMENT OF THE HONBLE APEX COURT BY SUBMITTING THAT NOW THE POSIT ION AND INTERPRETATION OF SECTION 28(IIIB) R/W SECTION 28(IIID) OF THE ACT MAKE IT CLEAR THAT THE CASH ASSISTANCE RECEIVABLE BY THE ASSESSEE IS COVERED UN DER CLAUSE (IIIB) OF SECTION 28, WHEREAS PROFIT ON TRANSFER OF DEBP TAKES PLACE ON A SUBSEQUENT DATE WHEN DEBP IS SOLD BY THE ASSESSEE AND IS COVERED UN DER CLAUSE (IIID) OF SECTION 28. THE LD. DR ALSO ADMITTED THAT THE JUDG MENT OF TOPMAN EXPORTS (SUPRA) WAS DELIVERED BY HONBLE SUPREME COURT DURI NG THE PENDENCY OF THESE APPEALS IN HAND AND IN THE LIGHT OF ABOVE JUD GEMENT, IT WOULD BE JUST AND PROPER THAT THE AO MAY BE ALLOWED TO DECIDE THE MATTER AFRESH IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY HONBLE SUP REME COURT IN THIS REGARD. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS OF BOTH T HE PARTIES IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND CAREFULLY PERUSED THE ENTIRE RECORD BEFORE US. WE OBSERVE THAT THE ACTION OF THE AO UP HELD BY THE LD. CIT(A) IS ITA 4493, 4494 & 4495/D/2011 7 NOT IN ACCORDANCE WITH THE PROPER INTERPRETATION OF PROVISIONS IN THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TO PMAN EXPORTS (SUPRA). IN THE LIGHT OF ABOVE JUDGEMENT OF HONBLE SUPREME COURT, WE SET ASIDE THE IMPUGNED ORDERS AND RESTORE ALL THESE ISSUES TO THE FILE OF THE AO WITH THE DIRECTION THAT HE WILL DECIDE THE MATTER AFRESH DE NOVO IN ACCORDANCE WITH DIRECTIONS GIVEN BY THE HONBLE APEX COURT IN THE C ASE OF TOPMAN EXPORTS (SUPRA) AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE WOULD COOPERATE WITH THE AO DURING FRESH A DJUDICATION. 7. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JUNE, 2012. SD/- SD/- (A.N. PAHUJA) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 8TH JUNE, 2012 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR ITA 4493, 4494 & 4495/D/2011 8