M/S. ROLSON INTERNATIONAL, MUMBAI V. A.C.I.T. 14(2), MUMBAI

ITA 5890/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8840 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-01-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 25-09-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Keywords: Period of limitation; Retrospective amendment; Condonation of delay
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER & SHRI T.R.SOOD, ACCOUNTANT MEMBER SR.NO. I.T.A.NO. A.Y 1 5890/MUM/2008 1999-2000 2 5891/MUM/2008 2000-2001 3 5892/MUM/2008 2001-2002 4 5893/MUM/2008 2002-2003 5 5894/MUM/2008 2004-2005 M/S ROLSON INTERNATIONAL, 294-A, GOVINDWADI, KALBADEVI ROAD, MUMBAI 400 002. PAN: AAAFR 2343 F VS. ASST. COMMISSIONER OF I.T. 14(2), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TARUN GHIA. RESPONDENT BY : SHRI JITENDRA YADAV. O R D E R PER T.R.SOOD, AM: IN ALL THESE APPEALS GROUND NO.2 WHICH IS COMMON I N ALL APPEALS REGARDING TREATING THE INTEREST ON FDR AS INCOME F ROM OTHER SOURCES WAS NOT PRESSED AND, THEREFORE, SAME IS DISMISSED A S NOT PRESSED. 2. THE OTHER COMMON GROUND RAISED IN ALL THE APPEAL S IS AS UNDER: THE LEARNED COMMISSIONER OF INCOME TAX [APPEALS] H AS ERRED IN NOT ALLOWING THE DEDUCTION U/S.80HHC. 3. THESE APPEALS HAVE BEEN FILED LATE RANGING FROM 115 DAYS TO 495 DAYS. A CONDONATION APPLICATION ALONG WITH AN A FFIDAVIT HAS BEEN FILED. THE LD. COUNSEL OF THE ASSESSEE REFERRED TO THIS APPLICATION AND POINTED OUT THAT BASICALLY THE APPEALS INVOLVED THE ISSUE REGARDING DEDUCTION U/S.80HHC, PARTICULARLY THE AMENDMENTS MA DE BY THE 2 TAXATION LAW (2 ND AMENDMENT) 2005 WITH RETROSPECTIVE EFFECT OF THIRD AND FOURTH PROVISO TO SECTION 80HHC AS WELL AS INTR ODUCTION OF CLAUSE III (D) AND (E) TO SECTION 28. THE ASSESSEE CAME TO KNOW THAT VARIOUS PEOPLE HAVE FILED WRIT PETITIONS CHALLENGING THESE AMENDMENTS IN VARIOUS HIGH COURTS AND ASSESSEE WAS ALSO ADVISED T O FILE A WRIT PETITION. LATER ON IT WAS ADVISED THAT ASSESSEE SHO ULD WAIT FOR THE OUTCOME OF THESE PETITIONS AND, THEREFORE, ASSESSEE DID NOT FILE ANY APPEAL BEFORE THE TRIBUNAL. HOWEVER, WHEN THE PETIT IONS WERE NOT GETTING DECIDED A FURTHER ADVICE WAS SOUGHT AND ASS ESSEE WAS ADVISED TO FILE THE APPEALS. THE ASSESSEE WAS ALSO ADVISED TO FILE THE WRIT PETITION AND, ACCORDINGLY, ASSESSEE FILED SUCH WRIT PETITION ON 4-12- 2008 I.E. AFTER FILING OF THE APPEALS BEFORE THE TR IBUNAL. HE SUBMITTED THAT, THEREFORE, ASSESSEE WAS CLEARLY PURSUING THE WRONG REMEDY AND THE DELAY SHOULD BE CONDONED. ALTERNATIVELY, ASSESS EE WAS GIVEN A WRONG ADVISCE AND, THEREFORE, THE DELAY MAY BE COND ONED AT-LEAST ON THAT ACCOUNT. 4. ON THE OTHER HAND, LD. DR SUBMITTED THAT ASSESSE E HAS NEVER FILED ANY WRIT PETITION OR TAKEN ANY OTHER REMEDY W HICH COULD BE CONSTRUED AS WRONG REMEDY. FURTHER, ASSESSEE HAS AL SO NOT FILED ANY COPY OF ADVICE FROM ANYBODY TO SHOW THAT ASSESSEE W AS ADVISED WRONGLY. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. THOUGH IN MATTER OF CONDONATION OF DELAY, NORMALLY WE ARE TAK ING A QUITE LIBERAL APPROACH FOR CONDONATION OF DELAY BUT AT THE SAME T IME THERE HAS TO 3 BE A SUFFICIENT CAUSE. IN FACT, THE HON'BLE SUPREME COURT IN THE CASE OF LACHMAN DAS ARORA V. GANESHI LAL [1999] 8 SCC 532 HAS OBSERVED AS UNDER: THERE IS NO GAIN SAYING THAT THE LAW OF LIMITATION MAY HARSHLY EFFECT A PARTICULAR PARTY BUT IT HAS TO BE APPLIED WITH ALL ITS VIGOUR WHEN THE STATUTE SO PRESCRIBES. THE COURTS CANNOT EXTEND THE PERIOD OF LIMITATION ON EQUITABLE GROUNDS. THE LD. COUNSEL OF THE ASSESSEE HAS SIMPLY MENTIONE D THAT ASSESSEE WAS PURSUING WRONG REMEDY AND AT THE SAME TIME IT H AS BEEN ADMITTED THAT EVEN WRIT PETITIONS WERE FILED AFTER FILING OF THE APPEALS BEFORE THE TRIBUNAL. OBVIOUSLY, ASSESSEE WAS NOT FO LLOWING ANY OTHER REMEDY AND WAS JUST WAITING FOR THE OUTCOME OF THE WRIT PETITIONS FILED BY OTHER ASSESSEES. SIMILARLY, THERE IS NO FORCE IN THE SUBMISSION THAT ASSESSEE WAS ADVISED TO WAIT FOR THE OUTCOME OF THE PETITIONS OF OTHERS. NO COPY OF THE ADVICE OF ANY CHARTERED ACCO UNTANT OR ADVOCATE HAS BEEN FILED OR THAT NOT EVEN A NAME HAS BEEN MEN TIONED. NORMALLY A LARGE COMPANY HAVING A EXPORT TURN OVER OF CRORES OF RUPEES WOULD NOT WAIT FOR THE OUT COME OF THE WRIT PETITIONS FIL ED BY OTHER ASSESSEES BEFORE TAKING A DECISION WHETHER TO FILE WRIT PETIT ION OR NOT. THEREFORE, IT IS CLEAR THAT IT IS A CASE OF MERE NEGLIGENCE AN D, ACCORDINGLY, WE REFUSE TO CONDONE THE DELAY. 6. AS FAR AS THE MERITS ARE CONCERNED, LD. COUNSEL OF THE ASSESSEE FAIRLY CONCEDED THAT THE ISSUE IS COVERED AGAINST T HE ASSESSEE BY THE RETROSPECTIVE AMENDMENT TO SEC.80HHC AS WELL AS THE DECISION OF THE 4 HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KA LPATARU COLOUR & CHEMICAL 328 ITR 461. 7. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED THE ORDER OF THE CIT[A]. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT DEDUCTION U/S.80HHC WAS MAINLY DENIED BY THE AO FOR THE FOLLO WING REASONS: 3. THE ASSESSEES P & L A/C IS CREDITED ON ACCOUNT OF RECEIPT OF ` `` ` .1,01,12,832/- ON ACCOUNT OF DEPB PREMIUM RECEIVED AND ` `` ` .1,52,237/- ON ACCOUNT OF QUOTA PREMIUM. HOWEVER, A S PER NEWLY AMENDED TAXATION LAWS (AMENDMENT) ACT, 2005, THE AS SESSEES TURNOVER IS EXCEEDING ` `` ` .10 CRORES AND THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S.80HHC ON THIS RECEIPT, UNLESS THE ASS ESSEE FULFILLS TWO CONDITIONS. THE ASSESSEES AR WAS REQUESTED TO JUST IFY THE CLAIM OF DEDUCTION U/S.80HHC WITH DOCUMENTARY EVIDENCES. HOW EVER, NO DETAILS HAVE BEEN FILED. THE AR STATED THAT THE DED UCTION MAY BE CONSIDERED AS PER NEWLY AMENDED TAXATION LAWS (AMEN DMENT) ACT, 2005.THEREFORE, AS THE ASSESSEE FAILS TO SUBSTANTIA TE ITS CLAIM AVAILABLE U/S.80HHC ON DEPB PREMIUM RECEIVED OF ` `` ` .1,01,12,832/- AND QUOTA PREMIUM OF ` `` ` .1,52,237/-, THE ASSESSEES CLAIM U/S.80HHC IS REJE CTED AND 90% OF THE DEPB PREMIUM AND QUOTA PREMIUM CREDI TED TO P&L AMOUNTING TO ` `` ` .92,39,463/- (9102450+137013) IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 9. ON APPEAL, THE ORDER OF THE AO WAS CONFIRMED BY THE LD. CIT[A] VIDE PARA-5 WHICH IS AS UNDER: 5. AT THE TIME OF HEARING THE AR HAS NOT MADE ANY SUBMISSION BEFORE ME. ON CAREFUL CONSIDERATION OF THE FACTS AN D SUBMISSIONS, I FIND THAT AO WAS FULLY JUSTIFIED TO DENY DEDUCTION U/S.80HHC IN VIEW OF THE THIRD PROVISO BELOW SECTION 80HH(3). ADMITTE DLY, THE APPELLANTS EXPORT TURNOVER WAS IN EXCESS OF ` `` ` .10 CRORES AND IT COULD NOT BE PROVED THAT THE RATE OF DUTY DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALL OWABLE UNDER DEPB SCHEME AND THEREFORE THE APPELLANT WAS NOT ENTITLED TO DEDUCTION U/S.80HHC IN RESPECT OF DEPB AND QUOTA PREMIUM AT ` `` ` .1,01,12,832/-. AND ` `` ` .1,52,237/-. THEREFORE, THE AOS ACTION IN DENYING THE DEDUCTION U/S.80HHC IS HEREBY CONFIRMED. ACCORDINGLY, THIS GR OUND OF APPEAL IS REJECTED. 5 10. WE FURTHER FIND THAT THIS ISSUE HAS BEEN CONSID ERED BY THE HON'BLE BOMBAY HIGH COURT CIT VS. KALPATARU COLOUR & CHEMICAL [SUPRA]. IN THIS CASE IT WAS HELD AS UNDER: UNDER SUB SECTION (1) OF SECTION 80HHC, A DEDUCTIO N IS ALLOWED TO THE EXTENT OF PROFITS DERIVED BY THE ASSESSEE FRO M THE EXPORT OF GOODS TO WHICH THE SECTION APPLIES. SINCE THE DEDUCTION I S IN RESPECT OF PROFITS DERIVED FROM EXPORT, SUB SECTION (3) LAID D OWN A FORMULA ON THE BASIS OF WHICH EXPORT PROFITS HAVE TO BE COMPUTED. UNDER CLAUSE (A) OF SUB SECTION (3) THE EXPRESSION PROFITS DERIVED FRO M EXPORT ARE DEFINED TO BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUC H GOODS BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE AS SESSEE. HOWEVER, WHERE AN ASSESSEE CARRIES ON THE BUSINESS OF EXPORT OF TRADING GOODS, CLAUSE (B) DEFINES EXPORT PROFITS TO BE THE EXPORT TURNOVER IN RESPECT OF SUCH TRADING GOODS WHICH IS TO BE REDUCED BY THE DI RECT AND INDIRECT COSTS ATTRIBUTABLE TO THE EXPORT. IN THE APPLICATIO N OF THE FORMULA TO A MANUFACTURER EXPORTER, CLAUSE (A) REFERS TO THE PRO FITS OF THE BUSINESS. THE EXPRESSION PROFITS OF THE BUSINESS. THE EXPRESSION PROFITS OF THE BUSINESS MEANS PROF ITS AS COMPUTED UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SECTIONS 28 TO 44D AND THEY ARE THEREUPON TO BE RED UCED TO THE EXTENT PROVIDED BY CLAUSES (1) AND (2). SECTION 28 ELUCIDA TES INCOMES WHICH SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. CLAUSES (IIIA), (IIIB) AND (IIIC) WERE INSERTED INTO THE SECTION BY THE FINANCE ACT OF 1990. BY THE FINANCE ACT, 2005, PARLIAMENT INSERTED A SPECIFIC CLAUSE, NAMELY, CLAU SE (IIID) IN SECTION 28 TO THE EFFECT THAT PROFITS ON TRANSFER OF DEPB, I.E . THE AMOUNT RECEIVED ON TRANSFER OF DEPB IS INCOME CHARGEABLE TO TAX UND ER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. AS REGARDS THE DEDUCTION UNDER SECTION 80 HHC, THE LEGISLATURE SUBSTITUTED EXPLANATION (BAA) IN SECTION 80HHC SO A S TO EXCLUDE 90% OF THE PROFITS RECEIVED ON TRANSFER OF DEPB FROM TH E PROFITS OF BUSINESS FOR THE PURPOSES OF SECTION 80HHC AND INSERTED THE SECOND AND THIRD PROVISOS TO SECTION 80HHC(3). THE SECOND PROVISO IT WAS PROVIDED THAT IN THE CASE OF AN ASSESSEE HAVING AN EXPORT TU RNOVER NOT EXCEEDING RS.10 CRORES, THE PROFITS COMPUTED UNDER SECTION 80 HHC(3) SHALL BE INCREASED BY 90% OF THE SUM REFERRED TO IN SECTION 28(IIID). THE 3RD PROVISO IT WAS PROVIDED THAT IN THE CASE OF AN ASSE SSEE HAVING AN EXPORT TURNOVER EXCEEDING RS.10 CRORES, THE PROFITS COMPUT ED UNDER SECTION 80HHC(3) SHALL BE INCREASED BY 90% OF THE SUM REFER RED TO IN SECTION 28(IIID) SUBJECT TO THE TWO CONDITIONS SET OUT THER EIN. WHAT CONSTITUTES APPLICATION SEEKING DEPB CREDIT WOULD MAKE NO DIFFE RENCE TO THE TAXABILITY OF THE ENTIRE AMOUNT RECEIVED ON TRANSFE R OF THE DEPB CREDIT UNDER SECTION 28(IIID). PROFITS UNDER SECTION 28(II ID) IS THE AMOUNT 6 RECEIVED ON TRANSFER OF THE DEPB CREDIT AND NOT THE AMOUNT OF CREDIT WHICH THE ASSESSEE WAS ENTITLED TO UNDER THE DEPB S CHEME. IN OTHER WORDS, THE AMOUNT EQUIVALENT TO THE FACE VALUE OF D EPB AS WELL AS THE AMOUNT RECEIVED IN EXCESS OF THE DEPB WOULD CONSTIT UTE PROFITS OF BUSINESS UNDER SECTION 28(IIID) AND MERELY BECAUSE, A PART OF SUCH PROFITS OF BUSINESS (FACE VALUE) WAS OFFERED TO TAX IN THE YEAR IN WHICH THE CREDIT ACCRUED TO THE ASSESSEE WOULD NOT BE A G ROUND TO HOLD THAT SUCH PROFIT WAS NOT COVERED UNDER SECTION 28(IIID). WHERE THE FACE VALUE OF THE DEPB CREDIT IS OFFERED TO TAX AS BUSIN ESS PROFITS UNDER SECTION 28(IIID) IN THE YEAR IN WHICH THE CREDIT AC CRUED TO THE ASSESSEE, THEN ANY FURTHER PROFIT ARISING ON TRANSFER OF DEPB CREDIT WOULD BE TAXED AS PROFITS OF BUSINESS UNDER SECTION 28(IIID) IN THE YEAR IN WHICH THE TRANSFER OF DEPB CREDIT TOOK PLACE THERE IS ANOTHER PERSPECTIVE FROM WHICH THE ISSUE C AN BE LOOKED AT. THE DEPB CREDIT TO WHICH AN EXPORTER IS ENTITLED IS A FORM OF AN EXPORT INCENTIVE. NO PART OF THE CREDIT THAT IS AVAILABLE UNDER THE DEPB SCHEME CAN FALL FOR CLASSIFICATION UNDER CLAUSE (II IB) OF SECTION 28 WHICH DEALS WITH CASH ASSISTANCE, RECEIVED OR RECEI VABLE AGAINST ANY SCHEME OF THE GOVERNMENT OF INDIA. AS THE LEGISLATI VE HISTORY OF THE PROVISION WOULD SHOW CLAUSE (IIIB) WAS ENACTED BY P ARLIAMENT AT A TIME WHEN THE EXPORT INCENTIVES THAT WERE AVAILABLE WERE (I) IMPORT ENTITLEMENT LICENCES; (II) CASH COMPENSATORY SUPPOR T; AND (III) DUTY DRAWBACK. THE DEPB SCHEME WAS NOT EVEN IN EXISTENCE WHEN CLAUSE (IIIB) CAME TO BE ENACTED INTO SECTION 28 BY THE FI NANCE ACT OF 1990. THE DEPB SCHEME WAS BROUGHT INTO EXISTENCE WITH EFF ECT FROM 1 APRIL 1997. CLAUSE (IIID) OF SECTION 28 WAS INSERTED BY T HE AMENDING ACT OF 2005 WITH EFFECT FROM 1 APRIL 1998. THE VALUE OF TH E DEPB CREDIT CAN BY NO MEANS BE REGARDED AS A CASH ASSISTANCE WHICH IS RECEIVED OR RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER ANY SC HEME OF THE GOVERNMENT OF INDIA. IT CANNOT BE INFERRED FROM THE SPEECH OF THE FINANC E MINISTER THAT THE INSERTION OF CLAUSE (IIID) IN SECTION 28 WAS MADE W ITH A VIEW TO TAX ONLY THE AMOUNT WHICH HAS BEEN RECEIVED IN EXCESS O F THE FACE VALUE OF THE DEPB CREDIT. DEPB CREDIT WAS INTRODUCED WITH EF FECT FROM 1 APRIL 1997 WHICH WAS AFTER THE INSERTION OF CLAUSE (IIIB) IN SECTION 28; (B) SECTION 28(IIIB) REFERS TO CASH ASSISTANCE (BY WHAT EVER NAME CALLED) RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT PURSUA NT TO A SCHEME OF THE GOVERNMENT. THE AMOUNT RECEIVED ON THE TRANSFER OF THE DEPB CREDIT IS NOT RECEIVED BY THE ASSESSEE FROM THE GOV ERNMENT PURSUANT TO A SCHEME OF THE GOVERNMENT WITHIN THE MEANING OF CL AUSE (IIIC) AND (C) WHEN SECTION 28(IIID) SPECIFICALLY DEALS WITH PROFI TS REALIZED ON THE TRANSFER OF THE DEPB CREDIT, IT WOULD BE IMPERMISSI BLE AS A MATTER OF FIRST PRINCIPLE TO BIFURCATE THE FACE VALUE OF THE DEPB AND THE AMOUNT RECEIVED IN EXCESS OF THE FACE VALUE OF THE DEPB. T HE ENTIRETY OF THE SALE CONSIDERATION WOULD FALL WITHIN THE PURVIEW OF SECTION 28(IIID). 7 RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE HOLD THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S.80HHC. 11. IN THE RESULT, ASSESSEES APPEALS ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JANUARY, 2011. SD/- SD/- (N.V.VASUDEVAN) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 21 ST JANUARY, 2011. P/-*