DCIT, New Delhi V. Shri Suresh Pahwa, New Delhi

ITA 5421/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0394 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 07-02-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 02-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KISHORE B
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO.5421/DEL/2010 ASSESSMENT YEAR : 2002-03 DCIT, CIRCLE 22 (1), NEW DELHI. VS. SURESH PAHWA, D-14/3, OKHLA INDL. AREA, PHASE II, NEW DELHI. PAN : AADPP8004C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJIV KUMAR, CA REVENUE BY : SHRI KISHORE B, DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECTE D AGAINST THE ORDER PASSED BY THE CIT (A) DATED 13 TH SEPTEMBER, 2010 FOR ASSESSMENT YEAR 2002-03. GROUNDS OF APPEAL READ AS UNDER :- 1. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O. TO BE RE-WORKED THE CALCULATION OF DEDUCTION U/S 80HHC BY TREATING THE DEPB CREDIT AS A RECEIPT IN THE FORM OF CASH ASSISTANCE UNDER SECTION 28 (IIIB). 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 2. LEARNED AR OF THE ASSESSEE HAS FILED AN APPLICATION F OR ADJOURNMENT ON THE GROUND THAT THE ISSUE IS PENDING FO R DISPOSAL BEFORE THE HONBLE HIGH COURT. HOWEVER, SUCH GROUND TAKEN BY THE ITA NO.5421/DEL/2010 2 ASSESSEE IS NOT CONSIDERED PROPER FOR GRANT OF ADJOURNMEN T AND THE ISSUE IS FOUND TO BE COVERED, THEREFORE, WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER REJECTING THE REQUEST OF THE ASSESSE E FOR ADJOURNMENT. 3. THE ASSESSEE IN THE PRESENT CASE HAS EXPORT TURNOVER EX CEEDING ` 10 CRORE I.E., A SUM OF ` 14,18,35,713/-. THE ASSESSE E HAS ALSO RECEIVED DUTY DRAWBACK, PROFIT ON TRANSFER OF DEPB A ND DEPB FACE VALUE OF ` 24,92,920/-, ` 45,133/- AND ` 56,93,351/ - RESPECTIVELY. THE NET PROFIT AS PER RETURN OF INCOME WAS SHOWN BY THE ASSE SSEE AT ` 2,26,05,141/- OUT OF WHICH THE ASSESSING OFFICER HAS RED UCED THE FOLLOWING AMOUNTS FOR ARRIVING AT PROFIT FROM EXPORT :- (I) 90% OF THE DRAWBACK (` 24,92,920/-) - 22,43,6 22/- (II) 90% OF THE PROFIT ON TRANSFER OF DEPB (` 45,133 ) - ` 40,620/- (III) DEPB FACE VALUE FALLING U/S 28 (IV) (` 56,93,3 51/-) - ` 56,93,351/- TOTAL : ` 79,77,599/- 4. THE AFOREMENTIONED AMOUNT WAS REDUCED FROM NET PR OFIT AS PER THE RETURN OF INCOME OF ` 2,26,05,141/- AND THE NET PROFIT FROM EXPORT WAS COMPUTED AT ` 1,46,27,542/- AND, IN THIS MANNER, DEDUCTION CLAIMED BY THE ASSESSEE FOR A SUM OF ` 1,51,78,616/- WAS REDUCED TO ` 33,68,797/-. HENCE, NO BENEFIT FOR DEPB WAS GIVEN T O THE ASSESSEE. 5. BEFORE CIT (A) IT WAS CLAIMED THAT THE ENTIRE VAL UE OF DEPB LICENCE SALES PROCEEDS AMOUNTING TO ` 57,38,484/- SHOUL D NOT HAVE BEEN EXCLUDED BY THE ASSESSING OFFICER SINCE ONLY PROFIT ON SALE OF DEPB LICENCE AMOUNTING TO ` 45,351/- IS TAXABLE U/S 2 8 (IIID) AND FACE VALUE OF ` 56,93,351/- SHOULD HAVE BEEN INCLUDED FOR DEDUCTION U/S 80HHC. LEARNED CIT (A) HAS ACCEPTED SUCH CLAIM OF TH E ASSESSEE ON ITA NO.5421/DEL/2010 3 THE BASIS OF DECISION OF SPECIAL BENCH IN THE CASE OF T OPMAN EXPORTS 33 SOT 337 IN WHICH IT WAS HELD THAT FACE VALUE OF D EPB CHARGEABLE TO TAX U/S 28 (IIIB) AND PROFIT ON SALE OF DEPB IS TAXABL E U/S 28 (IIID) AT THE TIME OF SALE. THIS WAS ALSO SO HELD BY THE ITAT IN THE CASE OF THE ASSESSEE ITSELF IN RESPECT OF ASSESSMENT YEARS 2003-04 AND 200 4-05. THEREFORE, FOLLOWING THE AFOREMENTIONED DECISION OF SPECIAL BENCH AND DECISIONS OF ITAT IN ASSESSEES OWN CASE, LEARNED CIT (A) H AS HELD THAT DEPB CREDIT OF ` 56,93,351/- COULD NOT BE EXCLUDED FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC AS THE SAME IS A RECEIPT U/S 28 (IIIB). THE REVENUE IS AGGRIEVED, HENCE, IN APPEAL. 6. REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS 328 ITR 451 (BOM), IT WAS PLEADED BY LEARNED DR THAT THE DECISION OF SPECIA L BENCH IN THE CASE OF TOPMAN EXPORTS (SUPRA) HAS BEEN REVERSED BY THE HONBLE BOMBAY HIGH COURT AND IT HAS BEEN HELD THAT THE ENTI RETY OF THE SALE CONSIDERATION OF DEPB WOULD FALL WITHIN THE PURVIEW OF SECTION 28 (IIID). HE SUBMITTED THAT IF IT IS SO, THEN, THE CASE OF THE ASSE SSEE WOULD CLEARLY FALL UNDER THIRD PROVISO ACCORDING TO WHICH FROM THE PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SUB-SECTION (3) TO SECTION 80HHC AND AFTER GIVING EFFECT TO THE FIR ST PROVISO, THE PROFITS SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS T O THE 90% OF THE SUM REFERRED TO IN CLAUSE (IIID) OF SECTION 28 AND TH E SAME PROPORTION AS EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE AND THAT SUBJECT TO THE CONDITION THA T ASSESSEE MUST HAVE NECESSARY AND SUFFICIENT EVIDENCE TO PROVE TW O CONDITIONS LAID DOWN IN THIRD PROVISO. THUS, HE SUBMITTED THAT T HE MATTER MAY BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER TO RE-COM PUTE DEDUCTION U/S 80HHC IN ACCORDANCE WITH THE DECISION OF HONBLE BOMBAY HIGH COURT AS IT HAS ALSO NOT BEEN BROUGHT ON RECORD BY THE CIT (A) THAT ITA NO.5421/DEL/2010 4 WHETHER OR NOT THE ASSESSEE HAS FULFILLED THE TWIN CONDI TIONS LAID DOWN IN THIRD PROVISO. 7. ON THE OTHER HAND, RELYING UPON THE AFOREMENTION ED ORDER OF THE TRIBUNAL FOR EARLIER YEARS, WHICH IS IN FAVOUR OF THE ASSESSEE, AND RELYING UPON THE ORDER OF THE CIT (A), IT WAS PLEADE D BY LEARNED AR THAT THE ORDER OF LEARNED CIT (A) SHOULD BE UPHELD. HE SU BMITTED THAT IF THE MATTER IS BEING RESTORED BACK TO THE FILE OF ASSESSING OF FICER, THEN, A DIRECTION MAY ALSO BE GIVEN THAT IF BY THAT TIME DEC ISION OF DELHI HIGH COURT IS AVAILABLE, THEN, THE SAME MAY ALSO BE TAKEN I NTO CONSIDERATION WHILE RE-ADJUDICATING DEDUCTION U/S 80HHC. 8. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTI ONS HAVE CAREFULLY BEEN CONSIDERED. THE EXPORT TURNOVER OF T HE ASSESSEE, AS ALREADY STATED, EXCEEDS ` 10 CRORE. THEREFORE, EFFEC T HAS TO BE GIVEN TO THE THIRD PROVISO TO SUB-SECTION (3) OF SECTION 80H HC WHICH READ AS UNDER:- PROVIDED ALSO PROVIDED ALSO PROVIDED ALSO PROVIDED ALSO IN THE CASE OF AN ASSESSEE HAVING EXP ORT TURNOVER EXCEEDING RUPEES TEN CRORES DURING THE PREVIOUS YEAR, THE PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CL AUSE (C) OF THIS SUB-SECTION OR AFTER GIVING EFFECT TO THE FIRST PROVI SO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO NINETY PER CENT OF ANY SUM REFERRED TO IN CLA USE (IIID) OF SEC. 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEAR S TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSE E, IF THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVIDENCE TO PRO VE THAT, - (A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAWBACK OR THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME; AND (B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE D UTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME. 9. ACCORDING TO THE AFOREMENTIONED DECISION OF HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS & CHEMICALS (SUPRA), THE ENTIRE SALE PROCEEDS OF DEPB ARE TO BE CO NSIDERED TO BE THE PROFIT U/S 28 (IIID). THEREFORE, THE DECISION OF THE SPECIAL BENCH ITA NO.5421/DEL/2010 5 VIDE WHICH IT WAS HELD THAT SUCH AMOUNT WAS ASSESSABLE U/S 28 (IIIB) HAS BEEN REVERSED. IF IT IS SO, THEN, THE DEDUCTION U/ S 80HHC, IN CASE WHERE EXPORT TURNOVER EXCEED ` 10 CRORE, THEN, THE SALE PROCEEDS OF DEPB INCLUDING FACE VALUE HAS TO BE CONSIDERED AS PROF IT ASSESSABLE U/S 28 (IIID). SIMULTANEOUSLY, THE ASSESSEE HAS ALSO TO SATISFY THE TWIN CONDITIONS LAID DOWN IN CLAUSE (A) AND (B) OF THIRD P ROVISO TO SECTION 80HHC(3). REGARDING FULFILLMENT OF THESE TWIN CONDI TIONS, THE ORDER OF THE ASSESSING OFFICER AND CIT (A) IS SILENT. THEREFORE, IT IS CONSIDERED JUST AND PROPER TO RESTORE THIS ISSUE TO THE FILE OF ASSESSI NG OFFICER FOR RECALCULATING THE DEDUCTION U/S 80HHC IN ACCORDANCE WITH THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF KALPATAR U COLOURS & CHEMICALS (SUPRA). LEARNED ASSESSING OFFICER HAS ALSO TO V ERIFY THAT WHETHER OR NOT THE ASSESSEE HAS FULFILLED THESE TWIN COND ITIONS. WE DIRECT ACCORDINGLY. 10. WE ALSO SEE JUSTIFICATION IN THE ARGUMENT OF THE L EARNED AR THAT AS THE SIMILAR ISSUE HAS BEEN HEARD BY THE HONBLE DELHI HIGH COURT, THEREFORE, IF BY THAT TIME THE DECISION OF HONBLE D ELHI HIGH COURT OR APEX COURT IS AVAILABLE, THEN, THE SAME SHOULD ALSO BE TAKEN INTO CONSIDERATION WHILE COMPUTING THE DEDUCTION U/S 80HHC . THEREFORE, ASSESSING OFFICER IS DIRECTED TO CONSIDER THE SAME ALSO AFT ER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. 11. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APPEAL FILED BY THE REVENUE IS TREATED AS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 11.02.20 11. SD/- SD/- [K.D. RANJAN] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 11.02.2011. ITA NO.5421/DEL/2010 6 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES