M/s. Ceean Exports Private Limited, Kolkata V. ITO, Ward - 11(4), Kolkata, Kolkata

ITA 469/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48187 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2003-2004
• Appeal Filed On: 21-03-2011
• Court: TRIBUNAL
• Department Lawyers: V A RAJU LD
• Keywords: Services rendered outside India
• Section: 80HHC

Judgement Text

ITA NO.469/KOL/2011- (SMC-B-MVS) 1 , SMC( B ) IN THE INCOME TAX APPELLATE TRIBUNAL, SMC ( B ) BENCH : KOLKATA BEFORE HONBLE SRI MAHAVIR SINGH, JM () , / I.T.A NO. 469/KOL/2011 !' / ASSESSMENT YEAR : 2003-04 M/S. CEEAN EXPORTS PVT. LTD. VS. INCOME-TAX OFFIC ER, PAN:AABCC0468J WARD 11(4), KOLKATA ($% /APPELLANT ) (&'$%/ RESPONDENT ) $% / FOR THE APPELLANT : NONE &'$% / FOR THE RESPONDENT : ( / SHRI V.A RAJU, LD.DR )* / ORDER , SHRI MAHAVIR SINGH, JUDICIAL MEMBER : THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF (CIT(A)-XXXII, KOLKATA IN APPEAL NO.192/CIT(A)-XXXII/08-09/12(3)/R&T/KOL, DAT ED 21-09-2010. ASSESSMENT WAS FRAMED BY THE ITO, WARD 12(3), KOLKATA FOR THE AY 2003-04 U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 31-10- 2006. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING DISALLOWANCE OF DEDUCTION U/S.80HHC OF THE ACT IN RESPECT OF CARGO HANDLING SERVICE CHARGES RENDERED BY THE ASSESSEE TO THE FOR EIGN BUYERS. FOR THIS ASSESSEE HAS RAISED FOLLOWING THREE EFFECTIVE GROUNDS:- 1. THAT THE LD.CIT(A) GROSSLY ERRED BOTH IN LAW AND IN FACT IN NOT ALLOWING DEDUCTION U/S.80HHC ON PROFIT EARNED F ROM EXPORT BUSINESS THROUGH CARGO HANDLING SERVICES. 2. THAT THE LD.CIT(A) GROSSLY ERRED BOTH IN LAW AND IN FACT IN NOT CONSIDERING CARGO HANDLING SERVICES RENDERED BY TH E ASSESSEE TO THE FOREIGN BUYER UNDER EXPORT IMPORT POLICY OF THE GOVT. OF INDIA, AS EXPORT ELIGIBLE FOR DEDUCTION U/S.80HHC OF THE I.T. ACT 1961. ITA NO.469/KOL/2011- (SMC-B-MVS) 2 3. THAT THE LD. CIT(A) GROSSLY ERRED BOTH IN LAW AN D IN FACT IN NOT CONSIDERING THAT SECTION 80HHC BEING A BENEFICI AL LEGISLATION A LIBERAL INTERPRETATION SHOULD BE GIVEN TO THE SAID PROVISION SO AS TO INCLUDE CARGO HANDLING SERVICES PROVIDED BY THE ASS ESSEE TO EARN FOREIGN EXCHANGE AND DULY AUTHORIZED UNDER THE EXPO RT IMPORT POLICY, WITHIN THE AMBIT OF EXPORT TURNOVER. 3. I HAVE HEARD THE LD. SR.DR AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT THE AO DISALLOWED DEDUCTION BY N OTING THE FACT IN ASSESSMENT ORDER THAT AS PER PROVISION OF SECTION HHC OF THE ACT DEDUCTIO N IS ALLOWED TO A COMPANY OR A PERSON RESIDENT IN INDIA WHICH IS ENGAGED IN THE BU SINESS OF EXPORT OUT OF INDIA OR ANY GOODS OR MERCHANDISE TO WHICH THIS SECTION APPLIES. THIS SECTION CLEARLY SPECIFIES THAT IT IS APPLICABLE IF THE ASSESSEE IS ENGAGED IN THE BUSINE SS OF EXPORT OF GOODS OR MERCHANDISE. ACCORDING TO AO THIS ASSESSEE HAS CLAIMED THE EXPOR T BENEFIT ON CARGO HANDLING CHARGES, WHICH SERVICE IS PROVIDED BY THE ASSESSEE COMPANY A ND THE CARGO HANDLING CHARGES CAN IN NO WAY BE TREATED AS GOODS OR MERCHANDISE RATHER IT IS INTANGIBLE SERVICE PROVIDED BY THE ASSESSEE COMPANY. THE AO FOUND THAT THE ASSESSEE HA S ALSO ACCEPTED THIS FACT AND EVEN THOUGH ASKED SPECIFICALLY IN SHOW CAUSE NOTICE, IT HAS NOT RAISED ANY ABJECTION ABOUT IT. ACCORDING TO AO CARGO HANDLING CHARGES CANNOT BE GO ODS OR MERCHANDISE AT ALL AND DISALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S.80 HHC OF THE ACT ON INCOME FROM CARGO HANDLING SERVICES. AGGRIEVED, ASSESSEE PREFER RED APPEAL BEFORE CIT(A) AND HE ALSO CONFIRMED THE ORDER OF AO. AGGRIEVED, ASSESSEE CAME BEFORE TRIBUNAL IN SECOND APPEAL. 4. I FIND THAT THE ASSESSEE COMPANY WAS EXPORTER AN D DURING THE FINANCIAL YEAR 2002- 03 RELEVANT TO THE ASSESSMENT YEAR 2003-04 THERE WA S TOTAL EXPORT OF RS.6036554 THAT INCLUDES GOODS EXPORT OF RS.2,66,247/- AND CARGO HA NDLING SERVICES OF RS.5776307/-. ASSESSEE CLAIMED PROFIT FROM EXPORT OF GOODS AND ME RCHANDISE, AND ACCORDING TO IT SECTION 80HHC OF THE ACT APPLIES TO THE AMOUNT OF R S. 701588/- AND CLAIMED DEDUCTION U/S.80HHC OF THE ACT AMOUNTING TO RS.350794/-. IT W AS CLAIMED THAT DURING ASSESSMENT ITA NO.469/KOL/2011- (SMC-B-MVS) 3 PROCEEDING ASSESSEE COMPANY PROVIDED COPY OF EXPORT IMPORT POLICY 2002-07 AND HAND BOOK OF PROCEDURES VOL-I PUBLISHED BY MINISTRY OF C OMMERCE AND INDUSTRY, DEPARTMENT OF COMMERCE, GOVT. OF INDIA WHICH STATED THAT CARGO HANDLING SERVICES IS THE PART OF SERVICES AUXILIARY TO ALL MODE OF TRANSPORT AND SER VICES INCLUDES ALL THE 161 TRADABLE SERVICES COVERED UNDER GENERAL AGREEMENT ON TRADE I N SERVICES WHERE PAYMENT FOR SUCH SERVICES IS RECEIVED IN FREE FOREIGN EXCHANGE. ACC ORDING TO EXPORT POLICY SERVICES PROVIDERS AS DEFINED IN PARAGRAPH 9.47 RENDERING SE RVICES LISTED IN APPENDIX 36 SHALL BE ENTITLED FOR ALL THE FACILITIES MENTIONED IN THE PO LICY. ALL PROVISIONS OF THE POLICY SHALL APPLY MUTATUS-MUTANDIS TO SUCH EXPORT OF SERVICES A S THEY APPLY TO GOODS .ON THE BASIS OF EXPORT IMPORT POLICY OF GOVERNMENT OF INDIA. 200 2-07, ASSESSEE COMPANY PROVIDED CARGO HANDLING SERVICES TO M/S. AGROCHEM INTER TRAD E, DUBAI, U.A.E. AGAINST GOODS EXPORTED BY MSTC LTD. FROM KOLKATA TO DUBAI AND REC EIVED FOREIGN EXCHANGE AND PROPERLY SHOWN IN ITS ACCOUNTS AND CLAIMED DEDUCTIO N U/S.8QHHC FOR THE YEAR. I FIND THAT THE ARGUMENT OF THE ASSESSEE BEFORE CIT(A) WAS THAT THE AO HAD NOT CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO NOT FOLLOWED THE EXPORT IMPORT POLICY OF THE GOVT. OF INDIA AND NOT APPLY THE PROVISIONS OF SECTION 80 HHCOF THE ACT, WHICH STATES THAT THIS SECTION APPLIES TO ALL GOODS OR MERCHANDISE OTHER T HAN THOSE SPECIFIED IN CLAUSE (B), IF THE SALE PROCEEDS OF SUCH GOODS OR MERCHANDISE EXPORTED OUT OF INDIA ARE RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE F OREIGN EXCHANGE WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR. THE ASSES SEE COMPANY HAS RECEIVED CONVERTIBLE FOREIGN EXCHANGE DURING THE YEAR END AN D CLAIMED U/S.80HHCOF THE ACT AND THE ASSESSEE COMPANY HAS PROVIDED THE SERVICES TO T HE FOREIGN PARTY ACCORDING TO THE EXPORT IMPORT POLICY OF THE GOVT. OF INDIA. 5. I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AN D THE ORDER OF CIT(A). I HAVE ALSO HEARD LD. SR DR. I FIND THAT THE ASSESSEE HAD BUILD ITS CASE AROUND THE PROVISION OF EXPORT IMPORT POLICY OF THE GOVERNMENT OF INDIA. BUT AS PE R SECTION 80HHC(I) OF THE ACT DEDUCTION UNDER SECTION 80HHC OF THE ACT IS AVAILAB LE TO THOSE ASSESSEES WHO ARE ENGAGED IN THE BUSINESS OF EXPORT OUT OF INDIA OF ANY GOODS OR MERCHANDISE TO WHICH THIS ITA NO.469/KOL/2011- (SMC-B-MVS) 4 SECTION APPLIES. THEREFORE, FOR DEDUCTION UNDER SEC TION 80HHC OF THE ACT IS AVAILABLE TO AN ASSESSEE THERE SHALL BE EXPORT OUT OF INDIA OF A NY GOODS OR MERCHANDISE BY THAT ASSESSEE. THIS IS A PRIMARY CONDITION FOR DEDUCTION UNDER THAT SECTION TO BE AVAILABLE. IN THE INSTANT CASE, THE ASSESSEE HAS NOT EXPORTED ANY GOODS OR MERCHANDISE OUT OF INDIA. IT HAS ONLY PROVIDED CARGO HANDLING SERVICES IN INDIA TO A FOREIGN FIRM. THE PROVISIONS OF EXPORT IMPORT POLICY RELIED UPON BY THE ASSESSEE AR E NOT APPLICABLE TO SECTION 80HHC OF THE ACT. SINCE THE ASSESSEE HAS NOT EXPORTED OUT OF INDIA ANY GOODS OR MERCHANDISE, IT DOES NOT FULFILL THE PRIMARY CONDITION FOR AVAILING DEDUCTION U/S.80HHC OF THE ACT. NOW I HAVE TO THE MAIN PROVISION OF SECTION 80HHC(1) WHIC H READS AS UNDER:- DEDUCTION IN RESPECT OF PROFITS RETAINED FOR EXPO RT BUSINESS. 80HHC (1) WHERE AN ASSESSEE, BEING AN INDIAN COMPA NY OR A PERSON (OTHER THAN A COMPANY) RESIDENT IN INDIA, IS ENGAGE D IN THE BUSINESS OF EXPORT OUT OF INDIA OF ANY GOODS OR MERCHANDISE TO WHICH THIS SECTION APPLIES, THERE SHALL, IN ACCORDANCE WITH AND SUBJEC T TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE [ A DEDUCTION TO THE EXTENT OF PROFITS REFERRED TO IN S UB-SECTION(1B), DERIVED BY THE ASSESSEE FROM THE EXPORT OF SUCH GOODS OR MERCH ANDISE I FIND THAT FOR THE PURPOSES OF COMPUTATION OF DEDU CTION ACCORDING TO SECTION 80HHC(3) OF THE ACT ( OPERATIVE FOR AND FROM ASSESSMENT YEAR 19 92-93), FOR THE PURPOSES OF SECTION 80HHC(1)- (A) WHERE THE EXPORT OUT OF INDIA IS OF GOODS OR MERCHA NDISE MANUFACTURED OR PROCESSED BY THE ASSESSEE,- -THE PROFITS DERIVED FROM SUCH EXPORTS SHALL BE TH E AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS AS DEFINED, THE SAME PROPORTION AS THE EXPORT TURNOVER AS DEFINED IN RESPECT OF SUCH GOODS BEAR S TO THE TOTAL TURNOVER AS DEFINED OF THE BUSINESS CARRIED ON BY THE ASSE SSEE. (B) WHERE THE EXPORT OUT OF INDIA IS OF TRADING GOO DS AS DEFINED- ITA NO.469/KOL/2011- (SMC-B-MVS) 5 -THE PROFITS DERIVED FROM SUCH EXPORTS SHALL BE TH E EXPORT TURNOVER IN RESPECT OF SUCH TRADING GOODS AS REDUCED BY THE DI RECT COSTS AS DEFINED AND INDIRECT COSTS AS DEFINED ATTRIBUTABLE TO SUC H EXPORT: (C) WHERE THE EXPORT OUT OF INDIA IS OF GOODS OR M ERCHANDISE MANUFACTURED OR PROCESSED BY THE ASSESSEE AND OF TRADING GOODS AS DEFINED, THE PROFITS DERIVED BY SUCH EXPORT SHALL- (I) IN RESPECT OF THE GOODS OR MERCHANDISE MANUFACTUR ED OR PROCESSED BY THE ASSESSEE, BE THE AMOUNT WHICH BEARS TO THE ADJUSTED PROFITS OF THE BUSINESS AS DEFINED, THE SAME PROPORTION AS THE A DJUSTED EXPORT TURNOVER AS DEFINED IN RESPECT OF SUCH GOODS BEARS TO THE ADJUSTED TOTAL TURNOVER AS DEFINED OF THE BUSINESS CARRIED ON BY THE ASSE SSEE; AND (II) IN RESPECT OF TRADING GOODS, BE THE EXPORT TURNOV ER IN RESPECT OF SUCH TRADING GOODS AS REDUCED BY THE DIRECT AND INDIRECT COSTS AS DEFINED ATTRIBUTABLE TO EXPORT OF SUCH TRADING GOODS. AS PER THE PROVISIONS OF THE PROVISO TO SECTION 80H HC(3), THE PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE ( C) OF SECTION 80HHC(3) SHALL BE- -FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO 9 0 PER CENT OF ANY SUM REFERRED TO IN SECTION 28(IIIA) ( NOT BEING PROFITS ON SALE OF A LICENCE ACQUIRED FROM ANY OTHER PERSON), AND SECTIONS 28(II IB) AND 28(IIIC), THE SAME PROPORTION AS THE EXPORT TURNOVER AS DEFINED BEARS TO THE TOTAL TURNOVER AS DEFINED OF THE BUSINESS CARRIED ON B Y THE ASSESSEE. I FIND FROM THE ABOVE THAT THE MAIN CONDITION FOR C OMPUTATION OF DEDUCTION U/S.80HHC OF THE ACT IS DETERMINATION OF PROFIT DERIVED FROM THE EXPORT OF ELIGIBLE GOODS OR MERCHANDISE AND IN A CASE WHERE THE BUSINESS CARRIE D ON BY THE ELIGIBLE ASSESSEE CONSISTED OF THE EXPORT OUT OF INDIA OF THE ELIGIBL E GOODS OR MERCHANDISE THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION . IN THE PRESENT CASE BEFORE US THE ASSESSEES MAIN CONDITIO N IS NOT SATISFIED AND HENCE, NO BENEFIT ITA NO.469/KOL/2011- (SMC-B-MVS) 6 IS AVAILABLE TO THE ASSESSEE IN VIEW OF THE CLEAR W ORDINGS IN THIS SECTION. UNDOUBTEDLY SECTION 80HHC OF THE ACT HAS BEEN INCORPORATED WITH A VIEW TO PROVIDING INCENTIVE TO EXPORT, BUT EVEN THOUGH A LIBERAL INTERPRETATION HA S TO BE GIVEN TO BENEFICIAL PROVISIONS, THE INTERPRETATION HAS TO BE AS PER THE WORDING OF SECTION 80HHC OF THE ACT. HONBLE APEX COURT IN THE CASE OF IPCA LABORATORY LTD V. DCIT (2004) 266 ITR 521 (SC) , WHEREIN IT IS HELD THAT IF THE WORDING OF THIS SECT ION ARE CLEAR THEN THE BENEFITS, WHICH ARE NOT AVAILABLE UNDER THIS SECTION, CANNOT BE CONFERR ED BY IGNORING OR MISINTERPRETING WORDS OF THIS SECTION. IN VIEW OF THE ABOVE DISCUS SION, I CONFIRM THE ORDERS OF THE LOWER AUTHORITIES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED )* +,) - , . / 0+ 14-06-2011 ORDER PRONOUNCED IN THE OPEN COURT ON 14-06-2011 SD/- [ , ] MAHAVIR SINGH JUDICIAL MEMBER (0+) DATED :14-06-2011 *PP 12 34 5 /SR.P.S. )* 6 &7 8)7!9- COPY OF THE ORDER FORWARDED TO: 1. $% /APPELLANT- M/S. CEEAN EXPORTS PRIVATE LTD 228A, AJC BOSE ROAD, KOL-20. 2 &'$% / RESPONDENT : I.T.O WARD 11(4), KOL P-7 CHOWRING HEE SQ.,KOL-69. 3. */ THE CIT, 4. * ()/ THE CIT(A), KOLKATA. 5. A. &/ DR, KOLKATA BENCHES, KOLKATA '7 &/ TRUE COPY , )*,/ BY ORDER , 4 /ASSTT. REGISTRAR