DCIT Circle 14 (1), V. Purolator India Ltd,

ITA 510/DEL/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1341 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 03-11-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 02-02-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANSHU SHUKLA
• Keywords: Competent authority; Set aside
• Section: 143(3); 80HHC; 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI I.P.BANSAL, JM AND SHRI R.C.SHARMA, AM ITA NO.275/DEL/2007 ASSESSMENT YEAR : 2003-04 M/S PUROLATOR INDIA LIMITED, 1, SRI AUROBINDO MARG, NEW DELHI. PAN NO.AAACP5890Q. VS. DY.COMMISSIONER OF INCOME TAX, CIRCLE-14(1), NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO.510/DEL/2007 ASSESSMENT YEAR : 2003-04 DY.COMMISSIONER OF INCOME TAX, CIRCLE-14(1), NEW DELHI. VS. M/S PUROLATOR INDIA LIMITED, 1, SRI AUROBINDO MARG, NEW DELHI. PAN NO.AAACP5890Q. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NEERAJ JAIN. REVENUE BY : SMT.ANSHU SHUKLA PANDEY, DR. ORDER PER R.C.SHARMA, AM : THESE ARE THE APPEALS FILED BY THE ASSESSEE AND TH E REVENUE AGAINST THE ORDER OF CIT(A) DATED 13.11.2006 FOR THE AY 2003-04 , IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE IT ACT. 2. IN ASSESSEES APPEAL, GROUND NO.1 TO 1.4 PERTAIN TO DISALLOWANCE OF CLAIM OF DEDUCTION ON DEPB WHILE COMPUTING DEDUCTION U/S 80H HC OF THE IT ACT. ITA-275 & 510/D/2007 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. DURING THE YEAR, THE ASSESSEE COMPANY HAD SHOWN DEPB RECEIPT OF RS.1,83, 29,157/- WHICH WAS TREATED AS EXPORT INCENTIVES FOR THE PURPOSE OF CALCULATI ON OF DEDUCTION U/S 8OHHC OF THE ACT. IN THE COURSE OF ASSESSMENT, THE AO OBSER VED THAT UNDER THE AMENDED PROVISIONS, PROFIT ARISING FROM TRANSFER OF DEPB HAS BEEN SPECIFICALLY MADE TAXABLE UNDER SECTION 28 BY INSERTING NEW CLAUSE (I IID) AND SECTION 80HHC WAS ALSO AMENDED TO PROVIDE DEDUCTION ON PROFIT ARISIN G FROM TRANSFER OF DEPB U/S 28(IIID) OF THE ACT. HOWEVER, DEDUCTION U/S 80HHC WAS MADE AVAILABLE ON PROFITS ARISING FROM TRANSFER OF DEPB SUBJECT TO CERTAIN CO NDITIONS IN CASE OF ASSESSEES HAVING AN EXPORT TURNOVER OF MORE THAN RS.10 CRORES . IN THE ASSESSMENT ORDER, THE AO DENIED DEDUCTION U/S 80HHC OF THE ACT ON BENEFIT S UNDER THE DEPB SCHEME ON THE GROUND THAT ASSESSEE HAD NOT BROUGHT IN EVID ENCES TO SATISFY THE CONDITIONS RELATING TO AVAILABILITY OF DEDUCTION ON DEPB BENEF ITS, AS PROVIDED UNDER THE AMENDED PROVISIONS OF SECTION 80HHC OF THE ACT. 4. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO. CONTENTION OF AR WAS THAT WHILE COMPUTING DEDUCTION U/S 80HHC ONLY PROFIT ELEMENT ON SALE OF DEPB IS REQUIRED TO BE EXCLUDED AND NOT THE ENTIRE SALE PROCEEDS OF DEPB. BOTH LEARNED AR AND LEARNED DR A GREED THAT ISSUE IS COVERED BY THE ORDER OF ITAT SPECIAL BENCH IN THE CASE OF T OPMAN EXPORTS IN ITA NO.5769/MUM/2006, ORDER DATED 11.8.2009 WHEREIN FOL LOWING QUESTION WAS BEFORE THE TRIBUNAL :- WHETHER THE ENTIRE AMOUNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE UNDER SECTION 28(IIID) OF THE INCOME TAX ACT OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTERPOLATED? 5. AFTER HAVING DETAILED DISCUSSION, THE SPECIAL BE NCH CONCLUDED AS UNDER:- ITA-275 & 510/D/2007 3 89. THE QUESTION RAISED BEFORE THE SPECIAL BENCH H AS TWO PARTS. IN SO FAR AS THE FIRST PART : WHETHER THE ENTIRE A MOUNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEA BLE UNDER SECTION 28(IIID) OF THE INCOME TAX ACT, IS CONCERN ED, WE ANSWER IT IN NEGATIVE AND THE SECOND PART OF THE QUESTION : OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTER POLATED? IS REPLIED IN AFFIRMATIVE TO THE EXTENT THAT THE FACE VALUE OF DEPB SHALL BE DEDUCTED FROM THE SALE PROCEEDS. AS REGARDS THE GR OUNDS RAISED IN THESE APPEALS AGAINST THE DENIAL OF DEDUCTION U/S 8 0HHC, IN FULL OR PART, WE FIND THAT THE COMPUTATION OF PROFITS DERIV ED FROM EXPORTS AND THE RESULTANT AMOUNT OF DEDUCTION UNDER THIS SE CTION CAN BE MADE ONLY WHEN THE DECISION IS TAKEN ON THE AMOUNT AND THE TIMING OF TAXABILITY OF THE FACE VALUE OF DEPB AND THE PRO FIT ON ITS SALE. ON THIS ISSUE WE HOLD THAT THE FACE VALUE OF DEPB IS C HARGEABLE TO TAX U/S 28(IIIB) AT THE TIME OF ACCRUAL OF INCOME, THAT IS, WHEN THE APPLICATION FOR DEPB IS FILED WITH THE COMPETENT AU THORITY PURSUANT TO EXPORTS AND PROFIT ON SALE OF DEPB REPRESENTING THE EXCESS OF SALE PROCEEDS OF DEPB OVER ITS FACE VALUE IS LIABLE TO B E CONSIDERED U/S 28(IIID) AT THE TIME OF ITS SALE. WHATEVER IS SAID ABOUT DEPB SHALL ALSO HOLD GOOD FOR DFRC, ON BOTH ITS COMPONENTS, VI Z., THE FACE VALUE OF DFRC AND PROFIT ON ITS TRANSFER, EXCEPT FO R THE FACT THAT THE PROFIT ON SALE OF DFRC SHALL BE CHARGED TO TAX U/S 28(IIIE). THERE IS NO DISPUTE ABOUT THE DUTY DRAWBACK, WHICH SHALL BE CHARGEABLE TO TAX AT THE TIME OF ACCRUAL OF INCOME U/S 28(IIIC) W HEN APPLICATION IS FILED WITH THE COMPETENT AUTHORITY AFTER MAKING EXP ORTS. SINCE THE NECESSARY FACTS FOR THE DETERMINATION OF THE QUANTU M 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 HERE IN ABOVE. 6. IN VIEW OF THE DECISION OF THE SPECIAL BENCH, MA TTER WITH REGARD TO COMPUTATION OF DEDUCTION U/S 80HHC ON THE AMOUNT OF DEPB RECEIPTS IS RESTORED BACK TO THE AO FOR RECOMPUTING THE SAME AS PER THE PROPOSITION LAID DOWN BY THE SPECIAL BENCH DISCUSSED HEREINABOVE. 7. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO CHARGI NG OF INTEREST U/S 234D OF THE IT ACT. IN VIEW OF THE DECISION OF ITAT LARGER BENCH IN THE CASE OF EKTA PROMOTERS 113 ITD 719, INTEREST U/S 234D IS CHARG EABLE W.E.F. AY 2004-05. ITA-275 & 510/D/2007 4 SINCE THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERAT ION IS 2003-04, NO INTEREST U/S 234D IS LEVIABLE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. 9. IN REVENUES APPEAL, FIRST GRIEVANCE RELATES TO ALLOWING CLAIM OF DEDUCTION U/S 80HHC AND 80IB ON THE SAME AMOUNT OF ELIGIBLE P ROFITS. LEARNED AR FAIRLY CONCEDED THAT ISSUE IS COVERED BY THE DECISION OF T HE SPECIAL BENCH IN THE CASE OF HINDUSTAN MINT & AGRO PRODUCTS 119 ITD 107 WHEREI N VIDE ORDER DATED 23.6.2009, THE DECISION OF SPECIAL BENCH IN THE CAS E OF ROGINI GARMENTS 108 ITD 495 WAS UPHELD AFTER DISCUSSING THE VARIOUS JUD GMENTS OF HIGH COURTS AND HON'BLE SUPREME COURT AND IT WAS FINALLY HELD THAT IN VIEW OF THE PROVISIONS OF SECTION 80IA(9) AND 80IA(13), THE ASSESSEE IS ELIGI BLE FOR CLAIM OF DEDUCTION U/S 80HHC ON THE ELIGIBLE PROFIT WHICH IS WORKED OUT AF TER REDUCING THE AMOUNT OF DEDUCTION ALLOWED U/S 80IB. MEANING THEREBY ASSESS EE IS NOT ENTITLED TO CLAIM DEDUCTION ON THE VERY SAME AMOUNT OF ELIGIBLE PROFI T U/S 80HHC AND 80IB. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE ORDER OF THE LARGER BENCH, THIS GROUND OF REVENUES APPEAL IS ALLOWED. 10. NEXT GRIEVANCE OF THE REVENUE RELATES TO CIT(A) S DIRECTION FOR RECOMPUTING THE DEDUCTION U/S 80HHC BY EXCLUDING TH E SALES TAX AND EXCISE DUTY FROM TOTAL TURNOVER. 11. THE ISSUE WITH REGARD TO EXCLUSION OF THE EXCIS E DUTY AND SALES TAX WHILE COMPUTING DEDUCTION U/S 80HHC IS NO RES-INTEGRA IN VIEW OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SUDERSHAN CHEMICAL INDUSTRIES 245 ITR 769 AND DECISION OF THE ITAT CALCUTTA BENCH IN THE CASE OF CHLORIDE INDIA - 53 ITD 180. RECENTLY, HON'BLE SUPREME COURT IN THE CASE OF LAKSHMI MACHINE WORKS LTD. 290 ITR 667 ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT SALES TAX AND EXCISE DUTY DO NOT FORM PART OF THE TOTAL TURNOVER. ITA-275 & 510/D/2007 5 RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DIRECTING EXCLUSION OF SALES TAX AND EXCISE DUTY FROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTI NG DEDUCTION U/S 80HHC OF THE ACT. 12. IN THE RESULT, THE APPEALS OF THE ASSESSEE AND REVENUE ARE ALLOWED IN PART, IN TERMS INDICATED HEREINABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 3 RD NOVEMBER, 2009. SD/- SD/- (I.P.BANSAL) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 03.11.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-275 & 510/D/2007 6