DCIT CC-38, MUMBAI V. EXCEL INDUSTRIES LTD, MUMBAI

ITA 6969/MUM/2008

• Counselvise Citation: 696919914 RSA 2008
• Duration Of Justice: 2 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 09-03-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 08-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: P J PARDIWALA
• Keywords: Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, H, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I T A NO: 6969/MUM/2008 (ASSESSMENT YEAR: 2001-02) DEPUTY COMMISSIONER OF INCOME TAX APPELLANT CENTRAL CIRCLE 38, MUMBAI VS M/S EXCEL INDUSTRIES LTD., MUMBAI RESPONDENT (PAN: AAACE2488F) APPELLANT BY: MR NARENDRA SINGH RESPONDENT BY: MR P J PARDIWALA O R D E R R V EASWAR, PRESIDENT: THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVEN UE IN THIS APPEAL WHICH RELATES TO THE ASSESSMENT YEAR 20 01-02: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTIONS OF ` 12,57,525/- IN RESPECT OF THE ADVANCE LICENCE BENEFITS RECEIVABLE BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTIONS IN RESPECT OF PASS BOOK BENEFIT RECEIVABLE AMOUNTING TO ` 4,46,46,976/- BY THE ASSESSEE . THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE MANUFACTURE OF INDUSTRIAL AND AGROCHEMICALS. 2. THERE IS A LONG DISCUSSION IN THE ASSESSMENT ORD ER IN RESPECT OF THE GROUNDS TAKEN IN THE APPEAL. HOWEVE R, BOTH THE GROUNDS ARE COVERED IN FAVOUR OF THE ASSESSEE BY TH E EARLIER ORDERS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE. SO FAR AS GROUND NO.1 ITA NO: 6969/MUM/2008 2 IS CONCERNED, WHICH RELATES TO THE TAXABILITY OF AD VANCE LICENCE BENEFITS RECEIVABLE, THE TRIBUNAL HAS DECIDED THAT NO INCOME ACCRUES UNTIL THE IMPORTS ARE MADE AND THE RAW MATE RIALS ARE CONSUMED. IN THE YEAR BEFORE US, IT IS NOT IN DISP UTE THAT THE IMPORTS WERE MADE AND THE RAW MATERIALS WERE CONSUMED IN TH E SUBSEQUENT YEAR. IN SUCH CIRCUMSTANCES THE EARLIER ORDERS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE APPLY. THE FIR ST OF SUCH ORDERS WAS PASSED ON 6 TH OCTOBER 2003 IN ITA NO: 4346/MUM/1997 FOR THE ASSESSMENT YEAR 1992-93. IN THIS ORDER THE TRIBUNA L APPLIED AND FOLLOWED THE DECISION OF THE MUMBAI BENCH OF THE TR IBUNAL IN JAMSHRI RAJITSINGHJI SPG. & WVG. MILLS LTD. VS. IAC (1992) 41 ITD (BOM) 142, IN WHICH IT WAS HELD THAT UNTIL THE GOOD S ARE IMPORTED AND THE RAW MATERIALS ARE CONSUMED, NO INCOME BY WA Y OF ADVANCE LICENCE BENEFIT ACCRUES TO THE ASSESSEE. THIS ORDE R WAS FOLLOWED BY THE TRIBUNAL IN ITS ORDER DATED 27 TH JANUARY 2004 FOR THE ASSESSMENT YEAR 1993-94 IN ITA NO.4145/MUM/1998. F OR THE ASSESSMENT YEAR 1995-96 THE ISSUE AGAIN CAME BEFORE THE TRIBUNAL IN ITA NO.2067/MUM/2000. THIS APPEAL WAS DISPOSED OF BY THE TRIBUNAL ON 7 TH MARCH 2005. THIS ORDER TOOK THE SAME VIEW AS IN THE EARLIER YEARS. WHAT IS SIGNIFICANT IN THIS ORD ER IS THAT THE DEPARTMENT RELIED ON THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF UNITED PHOSPHORUS LIMITED V S. JCIT (2002) 81 ITD 553 (AHD), IN WHICH A VIEW WAS TAKEN THAT TH E ADVANCE LICENCE BENEFIT WAS TAXABLE IN THE YEAR IN WHICH IT WAS RECEIVED, WITHOUT WAITING FOR THE ACTUAL IMPORTS AND THE CONS UMPTION OF THE RAW MATERIAL. THIS ORDER OF THE AHMEDABAD BENCH OF THE TRIBUNAL ITA NO: 6969/MUM/2008 3 WAS STRONGLY RELIED UPON BY THE REVENUE IN THE APPE AL FOR THE ASSESSMENT YEAR 1995-96. THE TRIBUNAL IN ITS ORDER FOR THE ASSESSMENT YEAR 1995-96 HAS DEALT WITH THE ARGUMENT S OF THE REVENUE BASED ON THE AHMEDABAD BENCH OF THE TRIBUNA L IN PARAGRAPHS 13 ONWARDS. IT WAS HELD BY THE TRIBUNAL THAT EVERY ASPECT HIGHLIGHTED IN THE ORDER OF THE AHMEDABAD BE NCH HAS BEEN DULY EXPLAINED ON BEHALF OF THE ASSESSEE. IN FACT THE TRIBUNAL TOOK THE VIEW THAT THERE WAS NO DISTINCTION BETWEEN THE FACTS OF THE ASSESSEES CASE AND THE FACTS OF THE CASE BEFORE TH E AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF UNITED PHOSPHO RUS LIMITED (SUPRA) AND THAT IT WAS IN ORDER FOR THE AHMEDABAD BENCH TO HAVE REFERRED THE ISSUE TO A LARGER BENCH FOR THE SAKE O F CONSISTENCY, HAVING REGARD TO THE ORDERS OF THE MUMBAI BENCHES O F THE TRIBUNAL IN JAMSHRI RAJITSINGHJI SPG. & WVG. MILLS LTD. (SUP RA). IN THIS VIEW OF THE MATTER AND FINDING NO DIFFERENCE IN THE FACTS R ELATING TO THE ASSESSMENT YEAR 1995-96 AND THE FACTS FOR THE EARLI ER ASSESSMENT YEARS, THE TRIBUNAL HELD THAT THERE WAS NO REASON T O TAKE A DIFFERENT VIEW OF THE MATTER ON THE BASIS OF THE ORDER IN THE CASE OF UNITED PHOSPHORUS LIMITED, AHMEDABAD BENCH. AFTER THIS OR DER OF THE TRIBUNAL, THE TRIBUNAL DISPOSED OF THE APPEALS RELA TING TO THE ASSESSEE FOR THE ASSESSMENT YEARS 1996-97 AND 1997- 98 BY ORDER DATED 12 TH JANUARY 2009, IN WHICH THE TRIBUNAL FOLLOWED ITS O WN ORDER FOR THE ASSESSMENT YEAR 1995-96 PASSED ON 7 TH MARCH 2005, TO HOLD THAT THE ADVANCE LICENCE BENEFIT WAS NOT TA XABLE UNLESS THE GOODS HAVE BEEN IMPORTED AND THE RAW MATERIALS ARE CONSUMED. A ITA NO: 6969/MUM/2008 4 SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL AGAIN FOR TH E ASSESSMENT YEAR 2004-05 IN ITA NO:2251/MUM/2009, DATED 29 TH JULY 2010. 3. THUS, IN A SERIES OF ORDERS PASSED IN THE ASSESS EES OWN CASE, THE TRIBUNAL HAS TAKEN A CONSISTENT VIEW IN F AVOUR OF THE ASSESSEE EVEN AFTER CONSIDERING THE ORDER OF THE AH MEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF UNITED PHOSPHO RUS LIMITED (SUPRA). WE MAY ADD THAT THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1993-94 AND THE ORDER FOR THE ASSES SMENT YEARS 1996-97 AND 1997-98 WERE APPEALED AGAINST BY THE RE VENUE BEFORE THE HONBLE BOMBAY HIGH COURT BUT SINCE NO STEPS HA D BEEN TAKEN BY THE REVENUE TO CHALLENGE THE FIRST ORDER OF THE TRIBUNAL, THE HONBLE HIGH COURT DID NOT CONSIDER IT FIT TO ADMIT THE APPEALS. COPIES OF ALL THE ORDERS OF THE TRIBUNAL AND THE JU DGMENTS OF THE HIGH COURT HAVE BEEN FILED BEFORE US. 4. A WRITTEN SUBMISSION DATED 27.09.2010 HAD BEEN F ILED BY THE LEARNED CIT DR WHEN THE MATTER WAS POSTED FOR HEARI NG ON AN EARLIER OCCASION. WE HAVE CAREFULLY PERUSED THE SA ME. IT HAS BEEN SUBMITTED THAT THE EARLIER ORDERS OF THE TRIBUNAL I N THE ASSESSEES OWN CASE CAN NO LONGER BE GIVEN EFFECT TO IN THE LI GHT OF THE ORDER OF THE SPECIAL BENCH MUMBAI IN THE CASE OF TOPMAN EXPO RTS VS. ITO (2010) 124 ITD 1 (MUM) (SB). THE SUBMISSION OF THE LEARNED CIT DR IS THAT THE OBSERVATIONS IN PARAGRAPHS 33 AND 34 OF THE ORDER OF THE SPECIAL BENCH ARE IN FAVOUR OF THE REVENUE AND THEY SHOULD BE FOLLOWED AND THE GROUND SHOULD BE DECIDED IN FAVOUR OF THE REVENUE. IN THE AFORESAID PARAGRAPHS THERE ARE OBS ERVATIONS AS TO WHEN THE DEPB INCOME ACCRUES TO THE ASSESSEE. ACCO RDING TO THE ITA NO: 6969/MUM/2008 5 SPECIAL BENCH, AN ASSESSEE BECOMES ENTITLED TO DEPB AT THE TIME HE FILES AN APPLICATION FOR THE INCENTIVE AFTER MAK ING THE EXPORTS. THUS THE TIME OF ACCRUAL OF DEPB IS THE DATE WHEN T HE APPLICATION IS FILED WITH THE CONCERNED AUTHORITY AND THE INCOME W OULD BE CHARGEABLE TO TAX ACCORDINGLY. IT WAS FURTHER OBSE RVED THAT THE SUBSEQUENT EVENTS, NAMELY, THE SALE OF DEPB AS SUCH OR MAKING IMPORTS FOR HIS CONSUMPTION OR DIRECT SALE OF THE I MPORTED GOODS ARE NOT SIGNIFICANT FOR DETERMINING THE ACCRUAL OF INCO ME ON ACCOUNT OF THE FACE VALUE OF DEPB, WHICH RESULTS ON MAKING AN APPLICATION FOR THE SAME AFTER MAKING THE EXPORTS. RELYING ON THES E OBSERVATIONS IT HAS BEEN SUBMITTED IN THE WRITTEN SUBMISSIONS TH AT THE ADVANCE LICENCE BENEFITS WERE ASSESSABLE IN THE YEAR UNDER APPEAL AND IT IS NOT NECESSARY THAT THE GOODS SHOULD HAVE BEEN IMPOR TED AND THE RAW MATERIALS CONSUMED. 5. IN ANSWER TO THE WRITTEN SUBMISSIONS AND THE DEC ISION OF THE SPECIAL BENCH (SUPRA), THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS (2010) 328 ITR 451 (BOM). IN THIS JUDGMENT, THE HONBLE HIGH COURT WAS ASKED TO ANSWER THE FOLLOWING TWO QUESTIONS OF LAW: - (A) WHETHER THE TRIBUNAL IS JUSTIFIED IN HOLDING THAT THE ENTIRE AMOUNT RECEIVED ON THE SALE OF THE DUTY ENTITLEMENT PASSBOOK DOES NOT REPRESENT PROFITS CHARGEABLE UNDER SECTION 28(IIID) OF THE INCOME TAX ACT, 1961, AND THAT THE FACE VALUE OF THE DUTY ENTITLEMENT PASSBOOK SHALL BE DEDUCTED FROM THE SALE PROCEEDS? (B) WHETHER THE TRIBUNAL IS JUSTIFIED IN HOLDING THAT THE FACE VALUE OF THE DUTY ENTITLEMENT PASSBOOK IS CHARGEABLE TO TAX UNDER SECTION 28(IIIB) AT THE TIME OF ACCRUAL OF INCOME, I.E. WHEN THE ITA NO: 6969/MUM/2008 6 APPLICATION FOR DUTY ENTITLEMENT PASSBOOK IS FILED WITH THE COMPETENT AUTHORITY PURSUANT TO THE EXPORTS MADE AND THAT THE PROFITS ON THE SALE OF DUTY ENTITLEMENT PASSBOOK REPRESENTING THE EXCESS OF THE SALE PROCEEDS OVER THE FACE VALUE IS LIABLE TO BE CONSIDERED UNDER SECTION 28(IIID) AT THE TIME OF SALE? ULTIMATELY THE HONBLE HIGH COURT HELD THAT THE VIE W OF THE TRIBUNAL ON THE TWO QUESTIONS OF LAW FORMULATED BY THE REVEN UE IS UNSUSTAINABLE AND THAT THE FIRST QUESTION IS TO BE ANSWERED IN THE NEGATIVE. IN SO FAR AS THE SECOND QUESTION WAS CON CERNED, THE HIGH COURT OPINED THAT THEY WERE NOT IN AGREEMENT WITH T HE VIEW OF THE TRIBUNAL THAT THE FACE VALUE OF THE DEPB IS CHARGEA BLE TO TAX UNDER SECTION 28(IIIB) AT THE TIME OF ACCRUAL OF INCOME, I.E. WHEN THE APPLICATION FOR DEPB IS FILED WITH THE COMPETENT AU THORITY PURSUANT TO THE EXPORTS MADE. THE DECISION OF THE SPECIAL B ENCH WAS THUS REVERSED. IN THE LIGHT OF THE JUDGMENT OF THE HON BLE BOMBAY HIGH COURT, WE ARE UNABLE TO ACCEPT THE WRITTEN SUBMISSI ONS FILED BY THE LEARNED CIT DR BASED ON THE ORDER OF THE SPECIAL BE NCH. 6. FOR THE AFORESAID REASONS WE UPHOLD THE DECISION OF THE CIT(A) IN RESPECT OF THE TAXABILITY OF THE ADVANCE LICENCE BENEFITS RECEIVABLE BY THE ASSESSEE. 7. AS REGARDS THE SECOND GROUND, THE SAME IS DIRECT LY COVERED BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT CI TED ABOVE. EVEN IN THE EARLIER ORDERS OF THE TRIBUNAL IN THE A SSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1996-97, IT HAS BEEN H ELD THAT THE DEPB IS NOT ASSESSABLE IN THE YEAR OF EXPORT OF GOO DS WHEN THE BENEFIT IS CREDITED TO THE PASSBOOK, BUT IT IS ASSE SSABLE IN THE YEAR WHEN THE BENEFIT RECEIVABLE IS ACTUALLY AVAILED OF BY THE ASSESSEE. ITA NO: 6969/MUM/2008 7 THIS IS IN THE ORDER DATED 12 TH JANUARY 2009, WHICH IS A COMBINED ORDER FOR THE ASSESSMENT YEARS 1996-97 AND 1997-98. THUS THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BO TH BY THE HONBLE BOMBAY HIGH COURT (SUPRA) AND BY THE TRIBUN AL IN THE ASSESSEES OWN CASE. WE THEREFORE AFFIRM THE DECIS ION OF THE CIT(A) IN RESPECT OF THIS GROUND ALSO. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS D ISMISSED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL 2011. SD/- SD/- (PRAMOD KUMAR) (R V EASWAR) ACCOUNTANT MEMBER PRESIDE NT MUMBAI, DATED 29 TH APRIL 2011 SALDANHA COPY TO: 1. M/S EXCEL INDUSTRIES LTD. 184-187 EXCEL ESTATE, S V ROAD JOGESHWARI (WEST), MUMBAI 400 108 2. DCIT, CENTRAL CIRCLE 38, MUMBAI 3. CIT-CENTRAL III, MUMBAI 4. CIT(A)-CENTRAL VI, MUMBAI 5. DR H BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI