SETH BROTHERS, MUMBAI V. CIT-XIV,

ITA 6898/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7368 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 12-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 03-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAMJEET SINGH
• Assessee Lawyers: DINESH SHETH
• Keywords: Competent authority
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, I BENCH, MUMBAI. BEFORE S/SHRI S.V.MEHROTRA, AM & V. DURGA RAO,JM I.T.A. NO. 6898/MUM/2008 ASSESSMENT YEAR: 2004-05 SETH BROTHERS, V. THE ACIT 14(1), 6, K SHARMA MARG, (OPP CRAWFORD MARKET) MUMBAI. LALSINGH MANSINGH BLDG., 1 ST FLOOR, MUMBAI-02. PA NO.AAAFS 2937 A (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI DINESH SHETH RESPONDENT BY : SHRI PARAMJEET SINGH O R D E R PER S.V.MEHROTRA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER DATED 10 TH OCTOBER, 2008 OF LD CIT (A)-XIV, MUMBAI FOR THE ASSESSME NT YEAR 2004-05. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE FIRM HAD FI LED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.13,69,150/- AFTER CLAIMING DEDUC TION U/S. 80 HHC OF RS.3,68,104/-. THE AO ALLOWED THE DEDUCTION U/S. 80 HHC AT RS.1,64 ,441/-. THE ASSESSEE PREFERRED APPEAL BEFORE LD CIT (A), WHO DISMISSED THE ASSESSE ES APPEAL. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3. GROUND NO.1 READS AS UNDER:- THE LD CIT (A) HAS ERRED IN CONTENDING THAT EXPORT SALES OF RS.7,96,09(FOB VALUE) DO NOT QUALITY FOR BEING CONSIDERED AS SUCH AND CONSEQUENTLY DENYING THE APPELLANT THE BENEFIT OF DEDUCTION U/S. 80 HHC IN R ELATION TO THE SAID EXPORT SALES. 4. BRIEF FACTS APROPOS THIS ISSUE ARE THAT FROM THE BANK REALIZATION CERTIFICATE SUBMITTED BY THE ASSESSEE, THE AO NOTICED THAT THE SALE PROCEEDS FOR A BILL OF ITA NO.6898/M/2008 SHETH BROTHERS 2 RS.8,10,000/-(FOB RS.7,96,075 + FREIGHT INSURANCE OF RS.13,905) HAD BEEN REALIZED BEYOND THE TIME LIMIT PRESCRIBED U/S.80HHC(2)(A). AS NO CERTIFICATE WAS FURNISHED FROM THE COMPETENT AUTHORITY GRANTING EXTENSION, THE AO EXCLUDED RS.7,96,095/- FROM THE EXPORT TURNOVER. LD CIT (A) CONFIRMED THE AOS ACT ION. 5. AT THE TIME OF HEARING, SHRI DINESH SHETH, PARTN ER OF THE ASSESSEE FIRM SUBMITTED THAT VIDE LETTER DATED 8.2.2010, THEY HAVE SOUGHT C LARIFICATION FROM THEIR BANKERS, I.E. CORPORATION BANK REGARDING REALIZATION OF SALE PROC EEDS WITHIN A PERIOD OF 12 MONTHS DURING F.Y. 2003-04, THE COPY OF THE SAID LETTER HA S BEEN FILED BEFORE US. THE REPRESENTATIVE POINTED OUT THAT THE RESERVE BANK OF INDIA HAD PERMITTED TO RECOVER THE SALE PROCEEDS WITHIN A PERIOD OF 12 MONTHS FROM AFR ICAN COUNTRIES AND, THUS, EXTENSION WAS GRANTED. LD D.R. POINTED OUT THAT THE ASSESSEE HAD NOT PRODUCED ANY FORMAL EXTENSION FROM THE COMPETENT AUTHORITY. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE REC ORD OF THE CASE. WE RESTORE THIS ISSUE TO THE FILE OF THE AO TO EXAMINE THIS ISSUE A FRESH IN THE LIGHT OF NOTIFICATION FROM RBI GRANTING 12 MONTHS PERIOD FOR RECOVERY OF SALE PROCEEDS IN CASE OF EXPORTS TO AFRICAN COUNTRIES DURING THE F.Y. 2003-04 TO BE PRO DUCED BY THE ASSESSEE. IN CASE THE ASSESSEE IS ABLE TO PRODUCE THE NOTIFICATION, THEN , THE RBI BEING COMPETENT AUTHORITY, UNDER THE PROVISIONS OF SECTION 80 HHC (2), EXPORT PROCEEDS CANNOT BE EXCLUDED. NEEDLESS TO SAY THAT ASSESSEE WILL CO-OPERATE IN TH E PROCEEDINGS AND FURNISH THE DETAILS TO THE AO TO SUBSTANTIATE ITS CLAIM. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO.2 RELATES TO DEPB LICENSES AMOUNTING T O RS.7,39,439/- NOT QUALIFY FOR DEDUCTION U/S.80HHC. 8. FACTS IN BRIEF ARE THAT THE AO NOTICED THAT THE ASSESSEE HAD WORKED OUT THE DEDUCTION U/S. 80 HHC BY INCREASING THE PROFITS OF THE BUSINESS UNDER THE PROVISO BELOW SECTION 80 HHC (3) @ 90% OF THE EXPORT INCENTIVES B EING PROFITS ON SALE OF DEPB LICENSES IN HAND AND RECEIVABLE AMOUNTING TO RS.7,3 9,439/-. THE AO EXCLUDED THIS AMOUNT ON THE GROUND THAT THE SAME WAS NOT COVERED U/S.28(IIID). LD CIT (A) CONFIRMED THE AOS ACTION. ITA NO.6898/M/2008 SHETH BROTHERS 3 9. HAVING HEARD BOTH THE SIDES, WE RESTORE THIS ISS UE TO THE FILE OF THE AO TO DECIDE THE SAME IN THE LIGHT OF THE DECISION OF THE ITAT M UMBAI (SB) IN THE CASE OF M/S. TOPMAN EXPORTS , 318 ITR (AT) 87 (MUM)(SB), WHEREIN , IT WAS HELD AS UNDER:- IN SO FAR AS THE FIRST PART, WHETHER THE ENTIRE AM OUNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE UNDE R SECTION 28 (IIID) OF THE I.T.ACT, IS CONCERNED, WE ANSWER IT IN NEGATIVE AND THE SECOND OF THE QUESTION; OR THE PROFIT REFERRED TO THEREIN REQUIRE S ANY ARTIFICIAL COST TO BE INTERPOLATED, IS REPLIED IN AFFIRMATIVE TO THE EXTE NT THAT THE FACE VALUE OF DEPB SHALL BE DEDUCTED FROM THE SALE PROCEEDS. AS REGARDS THE GROUNDS RAISED IN THESE APPEALS AGAINST THE DENIAL OF DEDUC TION U/S. 80 HHC, IN FULL OR PART, WE FIND THAT THE COMPUTATION OF PROFITS DE RIVED FROM EXPORTS AND THE RESULTANT AMOUNT OF DEDUCTION UNDER THIS SECTIO N CAN BE MADE ONLY WHEN THE DECISION IS TAKEN ON THE AMOUNT AND THE TI MING OF TAXABILITY OF THE FACE VALUE OF DEPB AND THE PROFIT ON ITS SALE. ON THIS ISSUE WE HOLD THAT THE FACE VALUE OF DEPB IS CHARGEABLE TO TAX U/ S.28(IIID) AT THE TIME OF ACCRUAL OF INCOME THAT IS, WHEN APPLICATION FOR DEPB IS FILLED WITH THE COMPETENT AUTHORITY PURSUANT TO EXPORTS AND PRO FIT ON SALE OF DEPB REPRESENTING THE EXCESS OF SALE PROCEEDS OF DE PB OVER ITS FACE VALUE IS LIABLE TO BE CONSIDERED U/S.28(IIID) AT TH E TIME OF ITS SALE. THIS GROUND IS, ACCORDINGLY, ALLOWED FOR STATISTICA L PURPOSES. 10. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS AL LOWED FOR STATISTICAL PURPOSES. PRONOUNCED ON 18 TH MARCH, 2010 SD/- (V. DURGA RAO) (JUDICIAL MEMBER) SD/- (S.V. MEHROTRA) (ACCOUNTANTMEMBER) MUMBAI, DATED 18 TH MARCH , 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-, MUMBAI 4. COMMISSIONER OF INCOME TAX, CITY-, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH I, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO.6898/M/2008 SHETH BROTHERS 4 DATE INITIALS 1. DRAFT DICTATED ON 12.3.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 12.3.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER ITA NO.6898/M/2008 SHETH BROTHERS 5