Pavel Garg, V. DCIT, Cir, 38(1),

ITA 4671/DEL/2005

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5588 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 10-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 13-12-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: ARUN MEHTA
• Keywords: Opportunity of being heard; Competent authority
• Section: 80HHC

Judgement Text

ITA NO. 4671/DEL/05 A.Y. 2003-04 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH I: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 4671/DEL/2005 A.Y. : 2003-04 SH. PAVEL GARG, VS. ACIT, CIRCLE 38(1), 2027/7, CHUNA MANDI, NEW DELHI PAHARGANJ, NEW DELHI [PAN : AALPG2923R] (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ARUN MEHTA, CA DEPARTMENT BY : MS. MONA MOHANTY, DR O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. CIT(A) DATED 07.10.2005 PERTAINING TO ASSES SMENT YEAR 2003-04. 2. THE ONLY ISSUE PRESSED PERTAINS TO CLAIM OF DEDU CTION UNDER SECTION 80HHC ON DEPB INCOME. 3. IN THIS CASE THE AO DURING THE COURSE OF ASS ESSMENT DENIED ASSESSEES CLAIM OF BENEFIT OF SECTION 80HHC ON THE DEPB. UPON ASSESSEES APPEAL LD. CIT(A) HELD THAT HE DID NOT FIND ANY MERIT IN THE ARGUMENTS OF THE ASSESSEE THAT INCOME FROM DEPB SHOULD ALSO BE CONSIDERED FOR CALCULATING THE DEDUCTION UNDER SECTION 80HHC. ITA NO. 4671/DEL/05 A.Y. 2003-04 2 HE DISMISSED THE GROUND RAISED IN THIS REGARD AND D IRECTED THE AO TO EXCLUDE THE WHOLE AMOUNT OF DEPB INCOME AND NOT ONLY 90% OF WHICH FOR CALCULATING THE PROFIT DERIVED FROM EXPOR T. 4. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 5. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISS UE OF DEDUCTION UNDER SECTION 80HHC ON DEPB HAS NOW BEEN ADJUDICATE D BY THE SPECIAL BENCH OF THE TRIBUNAL IN ITA NO. 5769/MUM/2 006 IN THE CASE OF M/S TOPMAN EXPORTS VS. ITO. THE RELEVANT O BSERVATION OF THE SPECIAL BENCH IN THIS CASE IS AS UNDER:- 89. THE QUESTION RAISED BEFORE THE SPECIAL BENCH HAS TWO PARTS. IN SO FAR AS THE FIRST PART : WHETHER THE ENTIRE AMOUNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE U/S 28(IIID) OF THE IT ACT, IS CONCERNED, WE ANSWER IT IN NEGATIVE AND THE SECOND PART OF THE QUESTION OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST BE INTERPOLATED? IS REPLIED IN AFFIRMATIVE TO THE EXTENT THAT THE FACE VALUE OF DE PB SHALL BE DEDUCTED FROM THE SALE PROCEEDS. AS REGARDS THE GROUNDS RAISED IN THESE APPEALS AGAINST THE DENIAL OF DEDUCTION U/S 80HHC, IN FULL OR PART, WE FIND THAT THE COMPUTATION OF PROFITS DERIVED FRO M EXPORTS AND THE RESULTANT AMOUNT OF DEDUCTION UNDER THIS SECTION CAN BE MADE ONLY WHEN THE ITA NO. 4671/DEL/05 A.Y. 2003-04 3 DECISION IS TAKEN ON THE AMOUNT AND THE TIMING OF TAXABILITY OF THE FACE VALUE OF DEPB AND THE PROFIT ON ITS SALE. ON THIS ISSUE WE HOLD THAT THE FACE VALUE ON DEPB IS CHARGEABLE TO TAX U/S 28(IIID) AT THE TIME OF ACCRUAL OF INCOME, THAT IS, WHEN THE APPLICATION FOR DEPB IS FILED WITH COMPETENT AUTHORITY PURSUANT TO EXPORTS AND PROFIT ON SALE OF DEPB REPRESENTING THE EXCESS OF SALE PROCEEDS OF DEPB OVER ITS FACE VALUE IS LIABLE TO BE CONSIDERED U/S 28(IIID) AT THE TIME OF ITS SALE. WHATEVER IS S AID ABOUT DEPB, SHALL ALSO HOLD GOOD FOR DFRC, ON BOTH ITS COMPONENTS, VIZ., THE FACE VALUE OF DFRC AND PROFIT ON ITS TRANSFER, EXCEPT FOR THE FACT THAT T HE PROFIT ON SALE OF DFRC SHALL BE CHARGED TO TAX U/S 28(IIIC). THERE IS NO DISPUTE ABOUT THE DUTY DRA W BACK WHICH SHALL BE CHARGEABLE TO TAX AT THE TIME O F ACCRUAL OF INCOME U/S 28(IIIC). SINCE THE NECESSAR Y FACTS FOR THE DETERMINATION OF THE QUANTUM OF DEDUCTION U/S 80HHC, AS DISCUSSED ABOVE, ARE NOT AVAILABLE ON RECORD, WE, THEREFORE, SET ASIDE THE IMPUGNED ORDERS AND DIRECT THE AO TO COMPUTE THE AMOUNT OF RELIEF IN ACCORDANCE WITH THE VIEW EXPRESSED BY US HEREINABOVE. 5.1 UPON CAREFUL CONSIDERATION WE ARE INCLINED TO REMIT THIS ISSUE TO THE FILES OF AO TO EXAMINE THE CASE AS PER THE DECISION LAID DOWN BY THE SPECIAL BENCH AS ABOVE. BOTH THE COUNSELS FAIRLY AGREED TO ITA NO. 4671/DEL/05 A.Y. 2003-04 4 THIS PROPOSITION. ACCORDINGLY, THE ISSUE STANDS RE MITTED TO THE FILES OF THE AO. NEEDLESS TO ADD THAT THE ASSESSEE SHOUL D BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10/03/2010 U PON CONCLUSION OF THE HEARING. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 10/03/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES