M/s. Allahdad Tannery, Kanpur V. ACIT, Kanpur

ITA 679/LKW/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8164 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-06-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 25-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 80HHC; 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI MEHAR SI NGH , ACCOUNTANT MEMBER ITA NO. 679/LKW/2010 ASSESSMENT YEAR: 2003 - 04 M/S ALLAHDAD TANNERY 99/85A, JAJMAU KANPUR V. ACIT - I KANPUR PAN: AAEFA9951C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. RAKESH GARG, ADVOCATE RESPONDENT BY: SHRI. PRAVEEN KUMAR, CIT (DR) DATE OF HEARING: 29.06.2012 DATE OF PRONOUNCEMENT: 22. 08.2012 O R D E R PER S UNIL KUMAR YADAV : THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) ON VARIOUS GROUNDS, WHICH ARE AS UNDER: - 1 . BECAUSE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING A SUM OF RS.19455060/ - UNDER SECTION 80IB IN RESPECT OF ALL EXPORT INCENTIVES WITH REGARD TO THE BANTHAR UNIT FOLLOWING THE DECISION OF THE DELHI HIGH COURT IN CIT VS. RITESH INDUSTRIES LTD. DATED 23.09.2004. WHEN THEY : - 2 - : WERE PART OF THE BUSINESS PROFITS OF T HE SAID UNIT AS THEY HAD A DIRECT LINK AND WERE DERIVED ON ACCOUNT OF THE BUSINESS ACTIVITIES CARRIED OUT IN THE SAID INDUSTRIAL UNDERTAKING. 2 . BECAUSE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN PROPORTIONING THE TOTAL EXPORT INCENTIVES EARNED BY THE BANTHAR UNIT IN THE RATIO OF THE AGREED ADHOC DISALLOWANCE OF RS. 2 CRORES. THE SAID AGREED ADHOC ADDITION / DISALLOWANCE IS UNDISPUTEDLY AND ADMITTEDLY IN RESPECT OF BOTH THE UNITS AT BANTHAR, UNNAO AND AT JAJMAU, KANPUR ON WHICH DEDUCTION UNDER SECTION 80HHC ONLY IS TO BE ALLOWED AND DOES NOT IN ANY MANNER EFFECT THE ALLOWABILITY OF DEDUCTION UNDER SECTION 80HHC AND 80IB IN RESPECT OF THE PROFITS OF THE BANTHAR UNIT. AND THAT EVEN AFTER ASSUMING, WITHOUT ADMITTING, THAT THE DISALLOWANCES UNDER SECTION 80IB ON ACCOUNT OF RITESH INDUSTRIES WITH REGARD TO EXPORT INCENTIVES EARNED BY THE BANTHAR UNIT AND DISALLOWANCES UNDER SECTION 80HHC ON ACCOUNT OF TAXATION LAWS AMENDMENT ACT 20 05 WITH REGARD TO PREMIUM ON TRANSFER OF LICENSES [DFRC/DEPB] ARE TO BE TAKEN INTO ACCOUNT THE DEDUCTION UNDER SECTION 80HHC & 80 IB WILL BE ACCORDING TO THE REVISED CALCULATIONS BEING ANNEXED ALONG WITH THE GROUNDS OF APPEAL. ACCORDINGLY THE TAXABLE INCOME OF THE APPELLANT WILL B E RS.3,76,51,021/ - , AS PER THE REVISED CALCULATIONS ANNEXED HEREWITH. 3 . BECAUSE THE DISALLOWANCE HAS BEEN MADE IN ACCORDANCE WITH THE AMENDMENTS BROUGHT ABOUT BY THE TAXATION LAWS : - 3 - : AMENDMENT ACT 2005, RETROSPECTIVELY WITH EFFECT FROM 1 .4.98 ARE SUBJECT TO THE DECISION OF THE HONOURABLE ALLAHABAD HIGH COURT IN THE WRIT PETITION FILED BY THE APPELLANT AND OTHERS CHALLENGING THE VIRES OF THE SAID AMENDMENTS. THIS GROUND IS BEING AGITATED ONLY TO KEEP THE MATTER ALIVE. 4 . BECAUSE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT MAY BE GRANTED ANY OTHER RELIEF THAT YOUR HONOUR MAY DEEM JUST AND EQUITABLE AND/OR THE APPELLANT MAY BE ENTITLED TO. 2 . THE ASSESSEE HAS ALSO MOVED AN APPLICATION FOR ADMISSION OF FOLLOWING ADDITIONAL GROUNDS: - 01. BECAUSE WITHOUT PREJUDICE TO THE GROUNDS OF APPEAL, THE INCENTIVES RECEIVED ON ACCOUNT OF SALE OF IMPORT LICENCE, DUTY DRAW BACK AND DEPC/DRFC, ITS TAXABILITY AND ACCOUNTABILITY FOR COMPUTATION OF DEDUCTION U/S. 80HHC WOULD DEPEND UPON THE SYSTEM OF ACCOUNTING FOLLOWED BY THE APPELLANT AND AS SUCH THE INCENTIVES RECEIVED CANNOT BE TREATED TO BE THE INCOME FOR THE YEAR UNDER APPEAL. 02. BECAUSE ON A PROPER CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, SINCE THE SYSTEM OF ACCOUNTING FOLLOWE D BY THE APPELLANT IS MERCANTILE, THE INCENTIVES (THE ACCOUNTABILITY OF INCENTIVES CREDITED TO THE INCOME AND EXPENDITURE DEPENDS UPON THE SYSTEM OF ACCOUNTING) ARE TO BE CONSIDERED ON ACCRUAL BASIS AND NOT ON RECEIPT BASIS, HENCE THE : - 4 - : SAME ARE TO BE TOTALL Y EXCLUDED FROM THE COMPUTATION OF INCOME FOR THE YEAR. 3 . DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS OPTED NOT TO PRESS FOR ADMISSION OF THE ADDITIONAL GROUNDS. THEREFORE, THE APPLICATION FOR ADMISSION OF ADDITIONAL GROUND IS DISMISSED BEING NOT PRESSED. 4 . SO FAR AS GROUND NO.1 IS CONCERNED, OUR ATTENTION WAS INVITED BY THE LD. D.R. THAT THE ISSUE INVOLVED IN THIS GROUND IS SQUARELY COVERED BY THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA V. CIT [2009] 317 ITR 218 (SC), IN WHICH IT HAS BEEN HELD THAT DEPB/DUTY DRAWBACK ARE INCENTIVES WHICH FLOW FROM THE INCENTIVE SCHEME ENACTED BY THE CENTRAL GOVERNMENT OR FROM SECTION 75 OF THE CUSTOMS ACT, 1962. HENCE INCENTIVES/PROFITS ARE NOT PROFITS DERIVED FROM T HE ELIGIBLE BUSINESS AND THEREFORE DUTY DRAWBACK RECEIVED/DEPB BENEFITS DO NOT FORM PART OF NET PROFIT OF THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF SECTION 80IA OR 80IB. THE LD. D.R. FURTHER INVITED OUR ATTENTION THAT THE LD. CIT(A) HAS ADJUDICATED TH E ISSUE IN THE LIGHT OF THE AFORESAID JUDGMENT OF THE APEX COURT , T HEREFORE, NO INTERFERENCE IN HIS ORDER IS CALLED FOR. 5 . THE LD. COUNSEL FOR THE ASSESSEE DID NOT OBJECT THE FACTUAL ASPECT OF THE MATTER. 6 . HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUT HORITIES, WE FIND THAT THE LD. CIT(A) HAS ADJUDICATED THE ISSUE IN THE LIGHT OF THE AFORESAID JUDGMENT OF THE HON'BLE APEX COURT. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN HIS ORDER. WE ACCORDINGLY CONFIRM THE SAME. 7 . WITH REGARD TO GROUND NO.2, WHICH REL ATES TO PREMIUM ON TRANSFER OF LICENSES OF DFRC/DEPB, OUR ATTENTION WAS INVITED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THIS ISSUE OF PREMIUM ON TRANSFER OF : - 5 - : LICENSES OF DEPB/DFRC IS TO BE COMPUTED IN ACCORDANCE WITH THE JUDGMENT OF THE APEX COURT IN THE C ASE OF TOPMAN EXPORTS V. CIT [2012] 342 ITR 49 (SC), TO WHICH BOTH THE PARTIES HAVE AGREED. 8 . WE HAVE , HOWEVER, CAREFULLY EXAMINED THE FACTS OF THE CASE IN THE LIGHT OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF TOPMAN EXPORTS V. CIT (SUPRA) AND WE FIND T HAT THEIR LORDSHIPS OF THE APEX COURT HAVE LAID DOWN CERTAIN GUIDELINES FOR COMPUTATION OF PROFIT ON TRANSFER OF DEPB. THEIR LORDSH I PS HAVE HELD THAT WHEN THE DEPB IS SOLD BY A PERSON, HIS PROFIT ON TRANSFER OF THE DEPB WOULD BE THE SALE VALUE OF THE DEPB LESS THE FACE VALUE OF DEPB WHICH REPRESENTS THE COST OF THE DEPB AND NOT THE ENTIRE SUM RECEIVE D BY HIM ON SUCH TRANSFER. DEPB IS CHARGEABLE AS INCOME UNDER CLAUSE (IIIA) OF SECTION 28 OF THE ACT IN THE YEAR IN WHICH THAT PERSON APPLIES FOR DEPB CREDIT AGAINST EXPORT WHEREAS PROFIT ON TRANSFER OF DEPB BY THAT PERSON IS CHARGEABLE AS INCOME UNDER CLAUSE (IIID) OF SECTION 28 IN HIS HANDS IN THE YEAR IN WHICH HE MAKES TRANSFER. SINCE THE PROFIT ON TRANSFER OF DEPB / DFRC IS TO BE COMPUTED AS PER THE GUIDELIN ES LAID DOWN BY THE APEX COURT IN THE CASE OF TOPMAN EXPORTS V. CIT (SUPRA), WE ARE OF THE VIEW THAT THIS MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE - COMPUTATION OF PROFITS ON TRANSFER OF DEPB IN THE LIGHT OF THE JUDGMENT OF THE APEX COURT. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RECOMPUTE THE PROFIT ON TRANSFER OF DEPB/DFRC AFTER AFFORDING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9 . GR OUND NO.3 WAS ONLY RAISED TO KEEP THE MATTER ALIVE AS THE AMENDMENTS BROUGHT BY THE TAXATION LAWS AMENDMENT ACT, 2005 RETROSPECTIVELY W.E.F. 1.4.1998 , WHICH IS UNDER CHALLENGE BEFORE HON'BLE : - 6 - : ALLAHABAD HIGH COURT IN A WRIT PETITION. SINCE THIS GROUND IS DE VOID OF MERIT, WE REJECT THE SAME. 10 . GROUND NO.4 IS GENERAL IN NATURE AND NEEDS NO INDEPENDENT ADJUDICATION. 11 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22.8.2012. S D/ - S D/ - [ MEHAR SINGH ] [ S UN IL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22.8.2012 JJ: 0907 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR