ACIT 14(3), MUMBAI V. DECITEX DECOR EXPORT, MUMBAI

ITA 4977/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7615 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 15-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUPINDER BRAR
• Assessee Lawyers: D V LAKHANI
• Section: 80HHC; 147; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI B.R. MITTAL, J.M. AND SHRI RAJENDRA S INGH, A.M. ITA NO. : 4977 TO 4779/MUM/2010 ASSESSMENT YEAR : (2001-02; 2003-04 AND 2004-05) ASSTT. COMMISSIONER OF INCOME TAX -14(3) 6 TH FLOOR, EARNEST HOUSE NARIMAN POINT MUMBAI-400 021. M/S. DICITEX DCOR EXPORT 37/41, SHAHVIRI BLDG. PICKET ROAD, KALBADEVI MUMBAI-400 002. PAN NO: AABFD 9075 D (APPELLANT) VS. (RESPONDENT) C.O. NO. 156/MUM/2011 ARISING OUT OF ITA NO.4977/MUM/2010 ASSESSMENT YEAR : 2001-02 M/S. DICITEX DCOR EXPORT 37/41, SHAHVIRI BLDG. PICKET ROAD, KALBADEVI MUMBAI-400 002. PAN NO: AABFD 9075 D ASSTT. COMMISSIONER OF INCOME TAX -14(3) 6 TH FLOOR, EARNEST HOUSE NARIMAN POINT MUMBAI-400 021. (CROSS OBJECTOR) VS. (RESPONDENT) DEPARTMENT BY : MS. RUPINDER BRAR ASSESSEE BY : SHRI D.V. LAKHANI DATE OF HEARING : 28.3.2012 DATE OF PRONOUNCEMENT : 28.3.2012 ITA NO. 4977 TO 79/M/10 A.Y.01-02,03-04,04-05 2 O R D E R PER BENCH THE APPEALS BY THE REVENUE ARE DIRECTED AGAINST DIFFER ENT ORDERS ALL DATED 26.3.2010 OF CIT(A) FOR ASSESSMENT YEARS 2001- 02 TO 2003- 04 AND 2004-05. THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN RELATION TO ASSESSMENT YEAR 2001-02. THE REVENUE IN TH E APPEALS FILED HAS RAISED DISPUTES IN RELATION TO COMPUTATION OF DEDUCTI ON UNDER SECTION 80HHC ON ACCOUNT OF DEPB INCOME WHEREAS THE ASSESSEE IN ASSESSMENT YEAR 2001-02 HAS CHALLENGED THE LEGAL VALIDITY OF RE- OPENING OF THE ASSESSMENT. 2. WE FIRST TAKE UP THE APPEALS BY THE REVENUE IN ITA NO.4977 TO 4979 . IN ALL THESE APPEALS DISPUTES RAISED ARE IN RELATION TO DEDUCTION UNDER SECTION 80HHC IN RESPECT OF DEPB INCOME. THE FACTS I N BRIEF ARE THAT THE ASSESSEE IN ALL THESE YEARS HAD CLAIMED DEDUCTION UNDER SECTION 80 HHC IN RESPECT OF ENTIRE SALE VALUE OF DEPB L ICENCE. THE AO HELD THAT DEDUCTION UNDER SECTION 80 HHC WAS ALLOWABL E ONLY ON PROFIT ON SALE OF DEPB LICENCE. FURTHER, SINCE TURNOVER OF THE ASSESSEE EXCEEDED RS.10.00 CRORES, THE AO ALSO HELD THAT THE ASSESSE E WAS NOT ENTITLED TO DEDUCTION IN VIEW OF THE THIRD PROVISO TO SECTION 80HHC(III) AS ONE OF THE CONDITIONS MENTIONED IN SAID PROVISO WAS N OT SATISFIED AS RATE OF DRAWBACK CREDIT ATTRIBUTABLE CUSTOM DUTY WAS L OWER THAN THE ITA NO. 4977 TO 79/M/10 A.Y.01-02,03-04,04-05 3 RATE OF CREDIT ALLOWABLE UNDER DEPB SCHEME. THE AO THE REFORE, HELD THAT THE ENTIRE PROFIT ON SALE OF DEPB WAS LIABLE TO BE TAXED. THE AO DID NOT FOLLOW THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS VS. ITO (318 ITR 87) IN WHICH IT WAS HELD THAT FACE VALUE OF DEPB HAS TO BE CONSIDERED AS INCOME UNDER SE CTION 28(IIIB) AND ONLY PROFIT ON SALE I.E. EXCESS OF SALE PR ICE OVER FACE VALUE WILL BE COVERED BY SECTION 28(IIID) TO WHICH THE THIRD PROVISO TO SECTION 80HHC WAS APPLICABLE. THE AO DID NOT FOLLOW THE DECISION OF THE SPECIAL BENCH ON THE GROUND THAT DEPARTMENT HAD FILED APPEAL AGAINST THE SAID DECISION BEFORE THE HONBLE HIGH COURT. 3. IN APPEAL, CIT(A) HAS SET ASIDE THE ORDERS OF AO AND DIRECTED HIM TO ALLOW DEDUCTION UNDER SECTION 80 HHC IN RESPECT OF DEPB INCOME ON THE BASIS OF RATIO OF DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS (SUPRA). AGGRI EVED, BY THE SAID DECISION, REVENUE IS IN APPEAL BEFORE THE TRIBUNA L. 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDI NG COMPUTATION OF DEDUCTION IN RESPECT OF DEPB INCOME. THE ASSESSEE HAD CLAIMED DEDUCTION IN RESPECT OF ENTIRE SALE VALE OF DEPB LICENCE. THE AO HELD THAT DEDUCTION UNDER SECTION 80HHC WAS ALLOWABLE ONLY IN RESPECT OF PROFIT ON SALE OF DEPB LICENCE UNDER SECTION 28(IIID). B UT, SINCE THE ITA NO. 4977 TO 79/M/10 A.Y.01-02,03-04,04-05 4 TURNOVER OF THE ASSESSEE WAS MORE THAN RS.10.00 CRORES AND THE ASSESSEE HAD NOT FULFILLED ONE OF THE CONDITIONS MENTIONE D IN THE THIRD PROVISO TO SECTION 80HHC(3) ASSESSEE WAS NOT ENTITLED TO DEDU CTION IN RESPECT OF DEPB INCOME. HOWEVER, THE SPECIAL BENCH OF TH E TRIBUNAL IN CASE OF TOPMAN EXPORTS (SUPRA), HAS HELD THAT THE FA CE VALUE OF DEPB LICENCE HAS TO BE CONSIDERED AS INCOME UNDER SECTION 28 (IIIB) AND EXCESS OF SALE PRICE OVER FACE VALUE HAS TO BE TREATED AS PROFIT UNDER SECTION 28(IIID). THUS, ONLY THE PROFIT UNDER SE CTION 28(IIID) WILL BE HIT BY THE PROVISIONS OF THIRD PROVISO TO SECTION 80HHC (III) AND DEDUCTION WILL BE ALLOWABLE IN RELATION TO FACE VALUE OF DEPB. CIT(A) HAS DIRECTED THE AO TO COMPUTE THE DEDUCTION IN THE LIG HT OF THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS(SUPRA). THE HON'BLE HIGH COURT OF BOMBAY IN CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS (328 ITR 451) HAD EARL IER REVERSED THE DECISION OF THE SPECIAL BENCH (SUPRA), AND HELD THA T THE ENTIRE SALE VALUE HAS TO BE TREATED AS PROFIT UNDER SECTION 28(III D). HOWEVER, THE SAID JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY WAS NOT UPHELD BY THE HON'BLE SUPREME COURT WHO CONFIRMED THE VIEW TAKEN BY THE SPECIAL BENCH IN CASE OF TOPMAN EXPORTS (SUPRA). IN THIS CASE, CIT( A) HAS DIRECTED THE AO TO COMPUTE DEDUCTION FOLLOWING THE SPE CIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORT (SUPRA), HAS NOW BEEN ITA NO. 4977 TO 79/M/10 A.Y.01-02,03-04,04-05 5 UPHELD BY THE HON'BLE SUPREME COURT. THEREFORE, WE S EE NO INFIRMITY IN THE ORDERS OF CIT(A) AND SAME ARE THEREFORE, UPHEL D. C.O. NO. 156/MUM/2011 (ASSESSMENT YEAR 2001-02) : 5. IN THE ASSESSMENT YEAR 2001-02 AO HAD REDUCED THE CLAI M OF DEDUCTION UNDER SECTION 80HHC ON ACCOUNT OF DEPB INCOME AF TER REOPENING THE ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE INCOME TAX ACT. THE ASSESSEE IN THE CROSS OBJECTION HAS CHALLE NGED THE LEGAL VALIDITY OF RE-OPENING OF THE ASSESSMENT. TH E LD. AR FOR THE ASSESSEE AT THE TIME OF HEARING OF THE APPEAL SUBMITTED THAT SINCE ISSUE ON MERIT WAS COVERED BY THE JUDGMENT OF HON'BLE SU PREME COURT WHO HAVE UPHELD THE DECISION OF THE SPECIAL BENCH IN CASE OF TOPMAN EXPORTS (SUPRA), HE WAS NOT PRESSING THE CROSS OBJECTIONS R AISED. THE CROSS OBJECTION OF THE ASSESSEE IS THEREFORE DISMISSED AS NOT PR ESSED. 6. IN THE RESULT, ALL THE APPEALS OF THE REVENUE AS WE LL AS CROSS OBJECTION OF THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.3.2012. SD/- SD/- (B.R. MITTAL ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 28.3.2012. JV. ITA NO. 4977 TO 79/M/10 A.Y.01-02,03-04,04-05 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.