SHREEDUTT EXPORTS, MUMBAI V. ASST CIT CIR 14(1), MUMBAI

ITA 6891/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9029 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2001-2002
• Appeal Filed On: 11-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 142(1); 80HHC; 260A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI N.K. BILLAIYA (A.M.) ITA NO. 6891/MUM /2011 ASSESSMENT YEAR : 2001-02 M/S SHREEDUTT EXPORTS, C/O SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BUILDING, 265, PRINCESS STREET, MUMBAI 400 002. PAN AACFS2783E VS. ASSISTANT COMMISSIONER OF INCOME TAX CIR. 14(1), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.L. JAIN DEPARTMENT BY : SHRI GIRIJA DAYAL DATE OF HEARING 11-9-2012 DATE OF PRONOUNCEMENT 14-9-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DTD. 22-09-2011 PASSED BY THE LD. CIT(A) 25, MUMB AI FOR THE A.Y. 2001- 02. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF TEXTILE GOODS. IN THIS CASE THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80 HHC OF THE INCOME TAX ACT, 1961 (THE ACT) OF RS. 2,44,65,629/-. HOWE VER, IN THE ASSESSMENT THE A.O. HAD RESTRICTED THE DEDUCTION U/ S 80HHC TO RS. ITA NO. 6891/MUM/2011 2 1,22,19,105/- THEREBY MAKING A DISALLOWANCE OF RS. 8,52,622/- BY REDUCING BUSINESS INCOME BY 90% OF EXPORT INCENTIVE S AT RS. 1,70,10,757/- WHICH INCLUDED CENTRAL EXCISE REFUND OF RS. 24,07,102/- AND DEPB ADVANCE LICENCE PREMIUM OF RS. 1,46,03,655 /- AS THE SAME WAS NOT FALLING U/S 28(IIIA), 28(IIIB) AND 28(IIIC) OF THE ACT AND ACCORDINGLY THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 1 ,83,64,460/- VIDE ORDER DTD. 30-01-2004 PASSED U/S 143(3) OF THE ACT. ON APPEAL THE LD. CIT(A) IN HIS ORDER DTD. 27-09-2006 KEEPING IN VIEW THE AMENDMENT TO TAXATION LAWS (AMENDMENT) ACT, 2005 DISMISSED THE A PPEAL OF THE ASSESSEE AS THE ASSESSEES EXPORT TURNOVER EXCEEDED RS. 10 CRORES AND IT WAS NOT PROVED THAT THE RATE OF DRAWBACK CREDIT ATT RIBUTED TO THE CUSTOM DUTY IS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UN DER THE DUTY ENTITLEMENT ON THE DATE OF EXPORT. ACCORDING TO TH E LD. CIT(A) THE WORDS USED IN SECTION 28(IIID) ARE PROFIT ON TRANSFER OF DEPB INSTEAD OF THE WORDS DEPB RECEIVED/RECEIVABLE, HENCE, UNUSED AND UNSOLD DEPB CREDIT IS NOT INCOME OF THE ASSESSEE DURING THE CUR RENT YEAR IN WHICH THE ASSESSEE HAS OBTAINED THE CREDIT FROM THE GOVT. RE GARDING THE CENTRAL EXCISE REFUND, THE LD. CIT(A) DIRECTED THE A.O. TO REDUCE 90% OF CENTRAL EXCISE REFUND OF RS. 24,07,102/- FOR COMPUTING THE PROFITS OF BUSINESS FOR THE PURPOSE OF DEDUCTION U/S 80HHC OF THE ACT. AGA INST THE ORDER PASSED BY THE LD. CIT(A) THE ASSESSEE AS WELL AS TH E DEPARTMENT PREFERRED APPEAL BEFORE THE TRIBUNAL WHO VIDE ITS ORDER IN IT A NO. 6514/MUM/2006 DTD. 19-11-2009 RESTORED THE MATTER B ACK TO THE FILE OF ITA NO. 6891/MUM/2011 3 THE A.O. TO RE-COMPUTE THE DEDUCTION U/S 80HHC OF T HE ACT IN VIEW OF THE DECISION IN M/S TOPMAN EXPORTS VS. ITO (2009) 3 18 ITR (AT) 87 (MUMBAI) [SB]. ON THE ISSUE OF CENTRAL EXCISE REFU ND, DIRECTION OF LD. CIT(A) TO REDUCE 90% OF CENTRAL EXCISE REFUND OF RS . 24,07,102/- FOR COMPUTING THE PROFIT OF BUSINESS FOR THE PURPOSE OF DEDUCTION U/S 80HHC OF THE ACT, THE TRIBUNAL WHILE RELYING ON THE ORDER OF THE TRIBUNAL IN M/S SUPER TRADING CO. IN ITA NO. 4249 & 4250/MUM /2006 ORDER DTD. 17-11-2009 WHEREIN IT HAS BEEN HELD THAT EXCISE DUT Y REFUND WILL NOT BE REDUCED FROM THE COST OF THE GOODS BUT WILL BE CONS IDERED AS INCOME FALLING U/S 28(IIIB) OF THE ACT, SET ASIDE THE ORDE R PASSED BY THE LD. CIT(A) AND RESTORED THE MATTER TO THE FILE OF THE A.O. WIT H THE DIRECTION TO RE- COMPUTE THE DEDUCTION U/S 80HHC OF THE ACT. AGAINS T THE SAID ORDER PASSED BY THE TRIBUNAL, THE REVENUE FILED APPEAL U/ S 260A OF THE ACT BEFORE THE HONBLE BOMBAY HIGH COURT. THE HONBLE JURISDICTIONAL HIGH COURT WHILE RELYING ON THE JUDGMENT DELIVERED IN CI T VS. KALPATARU COLOURS & CHEMICALS (ITA (L) 2887 OF 2009) WHILE UP HOLDING THE ORDER OF THE TRIBUNAL DIRECTED THE A.O. TO DECIDE THE PROCEE DINGS IN ACCORDANCE WITH LAW KEEPING IN MIND THE JUDGMENT IN THE CASE O F KALPATARU COLOURS & CHEMICALS (SUPRA). 3. PURSUANT TO THE ABOVE DECISION, THE A.O. ISSUED NOTICE U/S 142(1) OF THE ACT. IN THE ABSENCE OF ANY COMPLIANCE OR EX PLANATION SUBMITTED BY THE ASSESSEE, THE A.O. DETERMINED THE SAME INCOM E I.E RS. 1,83,64,460/- AS ASSESSED IN THE ORDER U/S 143(3) O F THE ACT DTD. ITA NO. 6891/MUM/2011 4 30-01-2004 BY RESTRICTING THE CLAIM OF THE ASSESSEE U/S 80HHC OF THE ACT AT RS. 1,22,19,105/- VIDE ORDER DTD. 31-12-2010 PASSED U/S 143(3) R.W.S. 260-A OF THE ACT. . ON APPEAL THE LD. CIT(A) WHILE UPHOLDING THE ORDER PASSED BY THE A.O. DISMISSED THE APPEAL. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. 5. GROUND NO. 1 READS AS UNDER:- 1. LD. CIT(A) ERRED IN CONFIRMING DENIAL OF DEDUCTI ON U/S 80HHC ON DEPB FOLLOWING THE JUDGMENT OF HONBLE HIGH COURT O F BOMBAY WITHOUT PROPERLY CONSIDERING FACTS OF THE CASE AND LAW APPL ICABLE THERETO. 6. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGR EED THAT THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. KALPATARU COLOURS & CHEMICALS (2010) 328 ITR 451 (B OM) HAS BEEN SET ASIDE AND REVERSED BY THE HONBLE SUPREME COURT IN THEIR DECISION DTD. 8-2-2012 IN THE CASE OF TOPMAN EXPORTS VS. CIT (20 12) 342 ITR 49 (SC), THEREFORE, THE ISSUE MAY BE SET ASIDE TO THE FILE O F THE A.O. TO RE-COMPUTE THE DEDUCTION U/S 80HHC OF THE ACT. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE HONBLE SUPREME COURT IN TOPMAN EXPORTS (SUPRA) HAS HELD TH AT THE DEPB CREDIT FALLS UNDER CLAUSE (IIIB) OF SECTION 28 OF THE ACT WHEREAS THE PREMIUM RECEIVED THEREON ON TRANSFER WILL REPRESENT PROFIT S CHARGEABLE UNDER CLAUSE (IIID) AND THE DEDUCTION UNDER SECTION 80HHC HAS TO BE ITA NO. 6891/MUM/2011 5 COMPUTED ACCORDINGLY. IT WAS HELD THAT ONLY 90% OF THE PROFITS CAN BE EXCLUDED BY APPLYING EXPLANATION (BAA) BELOW SECTIO N 80HHC. IN VIEW OF THE AFORESAID AUTHORITATIVE LEGAL POSITION, WE SET ASIDE THE MATTER TO THE FILE OF THE A.O. TO RE-COMPUTE THE DEDUCTION U/S 80 HHC FOLLOWING THE DECISION OF TOPMAN EXPORTS (SUPRA) AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GR OUND TAKEN BY THE ASSESSEE IS, THEREFORE, PARTLY ALLOWED FOR STATISTI CAL PURPOSE. 8. GROUND NO. 2 & 3 READ AS UNDER:- 2. LD. CIT(A) ERRED IN DENYING BENEFIT U/S 80HHC O N CENTRAL EXCISE REFUND IN SPITE OF THE FACT THAT APPEAL FILED BY TH E DEPARTMENT WAS REJECTED AND ORDER WAS SET ASIDE TO THE FILE OF ASS ESSING OFFICER WITH A DIRECTION TO GIVE BENEFIT U/S 80HHC BY TREATING THE RECEIPT AS FALLING U/S 28(IIIB) OF I.T. ACT. 3. LD. CIT(A) ERRED IN REVIEWING THE ORDER OF HONB LE ITAT AS TO THE ALLOWABILITY OF DEDUCTION U/S 80HHC ON CENTRAL EXCI SE DUTY REFUNDABLE BY APPLYING LIBERTY INDIA (S.C.) ACTION OF HONBLE CIT(A) IS CONTRARY TO LAW. 9. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MA TERIAL AVAILABLE ON RECORD WE FIND THAT THE A.O. HAS NOT DEALT WITH THE ABOVE ISSUE AS PER THE DIRECTION CONTAINED IN PARA 8 OF THE ORDER DTD. 19-11-2009 PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA). IN TH E ABSENCE OF THEREOF WE ARE OF THE VIEW THAT THERE IS A CLEAR VIOLATION OF JUDICIAL DISCIPLINE AND, THEREFORE, WE, IN THE INTEREST OF JUSTICE, CONSIDER IT FAIR AND REASONABLE THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE A .O. AND ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE REVENUE AUTHORITI ES ON THIS ACCOUNT AND SEND BACK THE MATTER TO THE FILE OF THE A.O. TO DECIDE THE SAME AFRESH ITA NO. 6891/MUM/2011 6 IN THE LIGHT OF THE DIRECTION OF THE TRIBUNAL (SUPR A) AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSEE ARE ALLOWED FOR S TATISTICAL PURPOSE. 10. IN THE RESULT, THE ASSESSEES APPEAL STANDS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 14-9-2012 SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED : 14-9-2012 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 39, MUMBA I 4. COMMISSIONER OF INCOME TAX CENT. II MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH EJ, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI