DCIT CIR 2(2), MUMBAI V. KAYTEE CORPORATION P. LTD, MUMBAI

ITA 5943/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59821 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 09-02-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 28-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIWAS RAO
• Assessee Lawyers: S C TIWARI
• Keywords: Business income
• Section: 28; 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER, A ND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 5923, 5924/MUM./2010 (ASSESSMENT YEARS : 2002-03, 2003-04 ) KAYTEE CORPORATION PVT. LTD. MALHOTRA HOUSE, OPP. GPO FORT, MUMBAI 400 001 PAN AAACK1732E .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE-2(2), MUMBAI .... RESPONDENT ITA NO. 5942, 5943/MUM./2010 (ASSESSMENT YEARS : 2002-03, 2003-04 ) DY. COMMISSIONER OF INCOME TAX CIRCLE-2(2), MUMBAI .. APPELLANT V/S KAYTEE CORPORATION PVT. LTD. MALHOTRA HOUSE, OPP. GPO FORT, MUMBAI 400 001 PAN AAACK1732E .... RESPONDENT ASSESSEE BY : MR. S.C. TIWARI REVENUE BY : MR. GOLI SRINIWAS RAO DATE OF HEARING 09.02.2012 DATE OF ORDER 15.02.2012 KAYTEE CORPORATION P. LTD. A.YS 2002-03 AND 2003-04 2 O R D E R PER J. SUDHAKAR REDDY, A.M. THESE CROSS APPEALS ARE DIRECTED AGAINST THE IMPUG NED IDENTICAL ORDERS 20 TH MAY 2010 AND 18 TH MAY 2010, PASSED BY THE COMMISSIONER (APPEALS)-V, MUMBAI, FOR ASSESSMENT YEARS 2002-03 AND 2003-04, R ESPECTIVELY. FACTS IN BRIEF :- 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING OF HOSIERY AND GARMENTS, WHICH WERE M AINLY EXPORTED. HENCE THE NET PROFIT EARNED IS CLAIMED AS DERIVED FROM EX PORTS AND ACCORDINGLY, DEDUCTION UNDER SECTION 80HHC OF THE INCOME TAX ACT , 1961 (FOR SHORT THE ACT ) AMOUNTING TO ` 53,18,500, WAS CLAIMED AS PER THE CERTIFICATE ATTA CHED ALONG WITH THE RETURN OF INCOME. 3. THE ASSESSING OFFICER COMPLETED THE ORIGINAL ASSESS MENT UNDER SECTION 143(3) OF THE ACT AND DEDUCTION CLAIMED WAS DISALLO WED ON THE REASONING THAT THE ASSESSEE HAD NO POSITION INCOME FROM EXPOR TS AS PER THE THEN EXISTING PROVISIONS OF SECTION 80HHC AND INTERPRETA TIONS BASED ON JUDICIAL PRONOUNCEMENTS. THE ASSESSING OFFICER WAS EXPLAINED THAT THE NET PROFIT EARNED WERE DERIVED FROM THE EXPORTS UNDERTAKEN BY THE APPELLANT COMPANY AND THE APPELLANT COMPANY HAS THROUGH OUT THE YEAR CLAIMED BENEFIT OF DUTY DRAW BACK AND HAD CLAIMED TWICE DEPB DURING THE DUT Y REMISSION SCHEME, BY EXERCISING THE OPTION OF CLAIMING EITHER OF THE BENEFIT & HAD COMPLIED THE CONDITION (A) OF 3 RD PROVISO OF SECTION 80HHC(3). THE ASSESSEE HAS ALSO OFFERED EXPLANATIONS AND EVIDENCES TO FULFILL THE C ONDITION (B) OF 3 RD PROVISO OF SECTION 80HHC(3) BY SUBMITTING THE REQUISITE MATERI AL SUBSTANTIATING THE FACT THAT THE DUTY DRAWBACK BEING HIGHER THAN DEPB. WHEN THE MATTER REACHED THE TRIBUNAL, IT WAS REMANDED TO THE A.O. TO FOLLOW THE AMENDED LAW. KAYTEE CORPORATION P. LTD. A.YS 2002-03 AND 2003-04 3 4. IN THE SECOND ROUND OF PROCEEDINGS, THE DY. COMMISS IONER HAS DISALLOWED THE DEDUCTION FOR THE REASONS STATED IN THE ORDER UNDER APPEAL WITHOUT GIVING DUE WEIGHTAGE TO THE SUBMISSIONS MAD E IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. HE HAS, INTER-ALIA, HELD TH AT THE APPELLANT HAS NOT FULFILLED ANY OF THE CONDITIONS AS STIPULATED IN AM ENDED PROVISIONS OF SECTION 80HHC(3). HE HAS, THEREFORE, CONCLUDED THAT THE ASS ESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80HHC. THE FIRST APPELLATE AUTHORITY GRANTED RELIEF PARTLY. AGGRIEVED, BOTH THE PARTIES ARE IN APPEAL B EFORE THE TRIBUNAL. 5. THE SOLE COMMON GROUND RAISED BY THE ASSESSEE, IN B OTH THE YEARS UNDER ASSESSMENT, IS AS FOLLOWS:- THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF DEDUCTION UNDER SECTION 80HHC OF THE ACT ON THE GROUND THAT T HE APPELLANT HAS NOT SATISFIED CONDITION LAID DOWN IN CLAUSE (A) AND (B) OF 3 RD PROVISO TO SECTION 80HHC OF THE ACT . 6. THE SOLE COMMON GROUND RAISED BY THE REVENUE, IN BO TH THE YEARS UNDER ASSESSMENT, IS AS FOLLOWS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ENTIRE AMO UNT RECEIVED ON SALE OF DEPB DOES NOT REPRESENT PROFITS CHARGEABLE UNDER SECTION 28(IIID) OF THE ACT AND THAT THE FACE VALUE OF THE DEPB SHALL BE DEDUCTED FROM THE SALE PROCEEDS . 7. INSOFAR AS THE GROUND TAKEN BY THE ASSESSEE IS CONC ERNED, THE COMMISSIONER (APPEALS), VIDE PARA-5 OF HIS ORDER PA SSED FOR ASSESSMENT YEAR 2002-03, HELD AS FOLLOWS:- 5. I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS. AS PER AMENDED PROVISIONS, THE NEW CLAUSES (IIID) / (IIIE) HAVE BE EN INSERTED TO SECTION 28. THE SECOND, THIRD, FOURTH AND FIFTH PROVISO HAV E BEEN INSERTED TO SECTION 80HHC(3) AND FURTHER AMENDMENT HAS BEEN MAD E TO EXPLANATION BA' AND BAA TO SECTION 80HHC. AS PER AMENDMENT TO SECTION 28(IIID), PROFIT ON SALE OF TRANSFER OF DEP B IS CHARGEABLE TO TAX AS BUSINESS INCOME AND FURTHER AMENDMENT TO SECTION 80HHC(3), SUCH PROFIT ON TRANSFER IS ENTITLED TO DEDUCTION IN THE PROPORTION OF EXPORT TURNOVER TO TOTAL TURNOVER. AS PER AMENDED PROVISIO NS, ANY PROFIT ON TRANSFER OF DEPB LICENSE IS ALSO AN EXPORT INCENTIV E AND 90 PER CENT KAYTEE CORPORATION P. LTD. A.YS 2002-03 AND 2003-04 4 THEREOF HAS TO BE DEDUCTED FROM THE PROFIT CALCULAT ED AS PER PROVISION OF SECTION 28 TO ARRIVE AT THE PROFIT OF THE BUSINE SS. THE PROFIT SO COMPUTED SHALL BE FURTHER INCREASED BY THE AMOUNT W HICH BEARS 90 PER CENT OF ANY SUM REFERRED TO IN CLAUSE (IIID) OF SEC TION 28, IF THE ASSESSEE HAS EXPORT TURNOVER EXCEEDING ` 10 CRORES DURING THE PREVIOUS YEAR AND IT FULFILLS THE TWO CONDITIONS AS STATED ABOVE. IN THIS CASE, NEITHER BEFORE THE A.O. NOR IN THE APPEAL PRO CEEDINGS, THE APPELLANT HAS BEEN ABLE TO PROVE THAT IT HAS SATISF IED THE TWO CONDITIONS. THEREFORE, THE A.O. HAS CORRECTLY DENIE D DEDUCTION TO SUCH EXTENT . 8. EVEN BEFORE US, THE ASSESSEE HAS NOT FURNISHED THE REQUIRED INFORMATION. THUS, WE UPHOLD THE ORDER PASSED BY TH E FIRST APPELLATE AUTHORITY AND DISMISS THE GROUND RAISED BY THE ASSE SSEE FOR BOTH THE YEARS UNDER ASSESSMENT. 9. IN THE RESULT, ASSESSEES APPEALS ARE DISMISSED. 10. COMING TO THE REVENUES APPEALS FOR THE YEARS UNDER ASSESSMENT, THE COMMISSIONER (APPEALS), FOLLOWED MUMBAI SPECIAL BEN CH DECISION IN TOPMAN EXPORT V/S ITO, (2009) 29 DTR 153 (MUM.) (SB). THIS DECISION HAS BEEN UPHELD BY THE HON'BLE SUPREME COURT IN TOPMAN EXPOR TS V/S CIT, CIVIL APPEAL NO.1699 OF 2012, JUDGMENT DATED 8 TH FEBRUARY 2012. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDER PASSED BY THE COMMISSIONER (APPEALS) AND DISMISS BOTH GROUND RAISE D BY THE REVENUE IN BOTH THE YEARS UNDER APPEAL. 11. IN THE RESULT, REVENUES APPEALS ARE DISMISSED. 12. TO SUM UP, ASSESSEES APPEAL AS WELL AS REVENUES AP PEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY 2012 SD/- R.S. PADVEKAR JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 15 TH FEBRUARY 2012 KAYTEE CORPORATION P. LTD. A.YS 2002-03 AND 2003-04 5 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, H BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI DATE INITIAL 1. DRAFT DICTATED ON 9.2.2012 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 10.2.2012 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 13.2.2012 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 13.2.2012 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 13.2.2012 SR.PS 6. DATE OF PRONOUNCEMENT 15.2.2012 SR.PS 7. FILE SENT TO THE BENCH CLERK 15.2.2012 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER