M/s. Alpanil Industries, Ahmedabad V. The ACIT.,Circle-6, Ahmedabad

ITA 736/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63132 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 07-11-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 30-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: S N SOPARKAR
• Keywords: Opportunity of being heard
• Section: 80HHC; 28

Judgement Text

ITA NO 736/ AHD/2012 A.YR.. 2004 -05 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AH MEDABAD (BEFORE SHRI MUKUL KR.SHRAWAT JM & SHRI ANIL CHATUR VEDI A.M.) I.T.A. NO. 73 6 /AHD/2012. (ASSESSMENT YEAR: 2004-05 ) M/S. ALPANIL INDUSTRIES, PLOT NO.81-82 PHASE-II, G.I.D.C. ESTATE VATVA, AHMEDABAD. (APPELLANT) VS. ASSISTANT COMMISSIONER OF INCOME TAX,CIRCLE-6, KENDRIYA PRATYAKSHA KAR BHAVAN, NR. PANJARA POLE, AMBADADI, AHMEDABAD (RESPONDENT) PAN: AAEFA 4803D APPELLANT BY : MR.S.N. SOPARKAR, SR. ADV. RESPONDENT BY : MR. T.SANKAR, CIT (DR) ( )/ ORDER DATE OF HEARING : 7-11-1012 DATE OF PRONOUNCEMENT : 23-11-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF LD. CIT (A)- XI, AHMEDABAD DATED 10-2-2012 FOR THE ASSESSMENT YE AR 2004-05. 2. THE ONLY EFFECTIVE GROUND READS AS UNDER: 1. LD. CIT (A) GROSSLY ERRED IN LAW AND ON FACTS I N DISMISSING GROUND OF APPEAL SET ASIDE TO HIS FILE BY THE HONB LE ITAT VIDE THEIR ORDER DATED 9-4-2010 IN ITA NO.1563/AHD/2007 TO MAK E APPLICABLE WORKING OF DEDUCTION CLAIMED U/S. 80HHC OF THE ACT ON SALE OF DEPB ITA NO 736/ AHD/2012 A.YR.. 2004 -05 2 LICENSE IN LIGHT OF DECISION OF TOPMAN EXPORTS 318 ITR (AT) 87 (MUM.)(SB) LD. CIT (A) ERRED IN NOT APPRECIATING TH E RATIO OF SPL. BENCH DECISION NOW AFFIRMED BY THE HONBLE APEX COU RT (247 CTR 353) THAT ONLY 90% OF PROFIT ON TRANSFER OF DEPB LI CENSE FALLING WITHIN PROVISIONS OF SEC.28(IIID) HAS TO BE REDUCED WHILE DETERMINING DEDUCTION U/S.80HHC OF THE ACT. LD. CIT (A) OUGHT T O HAVE ACCEPTED WORKING SUBMITTED TO HIM IN FORM 10CCAC FOR GRANTIN G DEDUCTION AS PER THE DIRECTION OF THE HONBLE ITAT. 3. IN THE PRESENT CASE, THE ASSESSEE HAD CLAIMED DE DUCTION OF RS.65,22,057/- U/S. 80HHC WHICH WAS RESTRICTED TO R S.27,18,030/- BY THE A.O. WHILE FRAMING THE ASSESSMENT ORDER U/S.143(3) DATED 29-12-2006. ASSESSEE THEREAFTER PREFERRED APPEAL BEFORE CIT (A) . CIT (A) VIDE ORDER DATED 1-3-2007 DISMISSED THE APPEAL WHEREUPON THE A SSESSEE PREFERRED APPEAL BEFORE HONBLE ITAT. ITAT VIDE ORDER DATED 9-4-2010 (ITA NO.1563/AHD/2007) REMITTED THE ORDER TO THE FILE OF CIT (A) BY HOLDING AS UNDER: 9.3. SINCE THE LD. CIT (A) HAVE NOT RECORDING ANY FINDINGS AS TO HOW DEPB LICENSES UTILIZED FOR IMPORT OF RAW MATERIAL O R THOSE IN STOCK FALL WITHIN CLAUSE (IIID) OF SEC. 28 OF THE ACT AND THE PROVISIONS OF THIRD PROVISO TO SEC. 80HHC(3) HAVE BEEN INVOKED IN RESPE CT OF THE ENTIRE AMOUNT OF RS.1,37,18,524/- NOR THE LD. CIT (A) HAD THE BENEFIT OF THE AFORESAID DECISION IN THE CASE OF TOPMAN EXPORTS (S UPRA), WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE O RDER OF THE CIT (A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISSUE RELATING TO CLAIM FOR DEDUCTION U/S. 80HHC OF THE ACT IN RELATI ON TO THE AMOUNT OF DEPB, AFRESH IN ACCORDANCE WITH LAW, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES AND KEEPING IN VIEW THE AFORESAID DECISION OF THE SPECIAL BENCH. INTER ALIA, THE ASSE SSEE SHALL PLACE ALL THE NECESSARY EVIDENCE BEFORE THE LD. CIT (A) AS TO HOW IT FULFILS THE CONDITIONS STIPULATED IN THE THIRD PROVISO TO SUB-S ECTION (3) OF SEC. 80HHC OF THE ACT. NEEDLESS TO SAY THAT WHILE REDEC IDING THE APPEAL, THE LD. CIT (A) SHALL PASS A SPEAKING ORDERS, KEEPI NG IN MIND, INTER ITA NO 736/ AHD/2012 A.YR.. 2004 -05 3 ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6) OF T HE ACT WITH THESE DIRECTIONS, GROUND NOS.2 TO 7 IN THE APPEAL ARE DIS POSED OF. 4. PURSUANT TO THE DIRECTIONS OF ITAT, CIT (A) VIDE ORDER DATED 10-2- 2012 DENIED THE DEDUCTION BY HOLDING AS UNDER: 4. DURING THE APPELLATE PROCEEDINGS OPPORTUNITIES OF HEARING WERE GIVEN TO THE APPELLANT. IN RESPONSE TO THESE NOTICE S SHRI D.K. PARIKH, C.A. ALONG WITH SHRI MUKESH KHANDWALA,C.A. HAS ATTE NDED THE OFFICE. THE APPELLANT IS NOT ENTITLED FOR DEDUCTION U/S. 80 HHC ON DEPB LICENSES AS PER THE PROVISIONS OF PROVISO TO SEC. 8 0HHC(3) FOR THE FOLLOWING REASONS:- 1) DURING THE APPELLATE PROCEEDINGS THE APPELLANT W AS SPECIFICALLY REQUIRED TO FILE DOCUMENTARY EVIDENCES TO PROVE THA T CONDITIONS AS LAID DOWN IN SUB-CLAUSE A AND B TO PROVISO TO SE CTION 80HHC(3) ARE FULFILLED. IN RESPONSE TRO THIS THE AP PELLANT HAS AGREED VIDE ORDER SHEET ENTRY DATED 9-12-2002 THAT THE CONDITIONS AS ENUMERATED IN SUB-CLAUSE A AND B TO T HE PROVISO OF SEC,.80HHC(3) ARE NOT FULFILLED IN THE CASE OF T HE APPELLANT. IN VIEW OF THIS BENEFIT OF SALE PROCEEDS OF DEPB CANNO T BE GIVEN TO THE APPELLANT AS PER THE PROVISIONS OF PROVISO T O SEC.80HHC (3). 2) DURING THE APPELLATE PROCEEDINGS THE APPELLANT W AS REQUIRED TO FURNISH DETAILS OF PROFIT EARNED ON SALE OF DEPB LI CENSES. IN RESPONSE TO IT, THE APPELLANT VIDE ITS CERTIFICATE INFORMNO.10CCAC DATED 26-11-2011 CERTIFIED PROFITS ON SALE OF DEPB LICENSES AT RS./1,00,37,329/-. IT WAS SPECIFIC ALLY POINTED OUT TO THE APPELLANT THAT THESE ARE GROSS RECEIPTS OF DEPB LICENSES SOLD AND IT DOES NOT REPRESENT THE PROFIT EARNED ON SALE OF DEPB LICENSES. IN RESPONSE TO THIS QUERY THE APP ELLANT HAD SUBMITTED FRESH STATEMENT IN FORM NO.10CCAC DATED 2 6-11- 2011. IN THIS COMPUTATION THE APPELLANT HAS TAKEN P ROFITS ON THE SALE OF DEPB LICENSES AT RS.36,81,195/-. EVEN THIS FIGURE IS APPARENTLY WRONG IN THE LIGHT OF FIGURES SUBMITTED BEFORE THE HONBLE ITAT. THE HONBLE ITAT HAS SPECIFICALLY MEN TIONED IN PARA 7 OF ITA NO.1563/AHD/2007 THAT THE APPELLANT H AD UTILIZED ITA NO 736/ AHD/2012 A.YR.. 2004 -05 4 DEPB LICENSES FOR IMPORT OF RAW MATERIALS WORTH RS. 51,63,232/- BESIDES SELLING LICENSE FOR A CONSIDERATION OF RS.3 6,81,195/- AND REMAINING LICENSES AMOUNTING TO RS.48,74,097/- WERE IN STOCK. THE OBSERVATIONS OF HONBLE ITAT CLEARLY REV EALS THAT AMOUNT OF RS.36,81,195/- REPRESENTS THE GROSS SALE AMOUNT OF DEPB LICENSE AND THIS SALE AMOUNT OF DEPB LICENSE W HICH INCLUDES THE FACE VALUE OF DEPB LICENSE AS WELL AS PROFITS EARNED ON THE SALE OF DEPB LICENSE. THIS WAY THE SE COND COMPUTATION FOR DEDUCTION U/S. 80HHC, WHICH WERE SU BMITTED DURING THE APPELLATE PROCEEDINGS ALSO CONSIST FACE VALUE OF DEPB LICENSE. AS PER THE PROVISO TO SECTION80HHC(3) THE APPELLANT IS ENTITLED FOR DEDUCTION U/S.80HHC IN R ESPECT OF PROFITS ON SALE OF DEPB LICENSE ONLY. THIS WAY THE APPELLANT HAS FAILED TO GIVE TRUE FIGURE OF PROFITS EARNED ON SAL E OF DEPB LICENSES. 5. AGAINST THE AFORESAID ORDER OF CIT (A), THE ASSE SSEE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, THE LD. A.R. SUBMITTED THAT THE ISSUE OF DEDUCTION U/S. 80HHC NEEDS TO BE CONSIDERED IN LIGHT OF THE DECISI ON OF HONBLE APEX COURT IN THE CASE OF TOPMAN EXPORTS 342 ITR 49 (SC) IN VIEW OF THE FACT THAT THE EXPORT PROFITS INCLUDE PROFIT OF SALE OF D EPB LICENSE. HE THEREFORE URGED THAT THE MATTER BE RESTORED TO THE FILE OF A. O. FOR VERIFICATION OF CLAIM OF ASSESSEE IN LINE WITH THE DECISION OF TOPMAN EXP ORTS (SUPRA). 7. THE LD. D.R. ON THE OTHER HAND RELIED ON THE ORD ER OF CIT (A). 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE ONLY DISPUTE IN THE PRESENT APPEAL BEFORE US IS OF CALCULATION OF DEDUCTION U/S. 80HHC AS THE PROFITS ALSO INCLUDES S ALE OF DEPB AND PROFIT ITA NO 736/ AHD/2012 A.YR.. 2004 -05 5 THEREON. THE HONBLE APEX COURT IN THE CASE OF TOPM AN EXPORTS (SUPRA) HAS HELD AS UNDER: AS THE DEPB CREDIT HAS DIRECT NEXUS WITH THE COST OF IMPORTS FOR MANUFACTURING AN EXPORT PRODUCT, ANY AMOUNT REALIZE D BY THE ASSESSEE OVER AND ABOVE THE DEPB CREDIT ON TRANSFER OF THE DEPB CREDIT WOULD REPRESENT PROFIT ON THE TRANSFER OF TH E DEPB CREDIT. THUS, WHILE THE FACE VALUE OF THE DEPB CREDIT WILL FALL U NDER CLAUSE (IIIB) OF SECTION 28 OF THE ACT, THE DIFFERENCE BETWEEN THE S ALE VALUE AND THE FACE VALUE OF THE DEPB CREDIT WILL FALL UNDER CLAUS E (IIID) OF SECTION 28 OF THE ACT. THE COST OF ACQUIRING THE DEPB CREDIT I S NOT NIL BECAUSE THE PERSON ACQUIRES IT BY PAYING CUSTOMS DUTY ON T HE IMPORT CONTENT OF THE EXPORT PRODUCT AND THE DEPB CREDIT WHICH ACC RUES TO A PERSON AGAINST EXPORTS HAS A COST ELEMENT IN IT. THE DEPB CREDIT REPRESENTS PART OF THE COST INCURRED BY A PERSON FOR MANUFACTU RE OF THE EXPORT PRODUCT AND HENCE EVEN WHERE THE DEPB CREDIT IS NOT UTILIZED BY THE EXPORTER BUT IS TRANSFERRED TO ANOTHER PERSON, THE CREDIT CONTINUES TO REMAIN AS A COST TO THE EXPORTER. WHEN, THEREFORE, THE DEPB CREDIT IS TRANSFERRED BY A PERSON, THE ENTIRE SUM RECEIVED BY HIM ON SUCH TRANSFER DOES NOT BECOME HIS PROFITS. IT IS ONLY TH E AMOUNT THAT HE RECEIVES IN EXCESS OF THE DEPB CREDIT WHICH REPRESE NTS HIS PROFITS ON TRANSFER OF THE DEPB CREDIT. 9. WE AGREE WITH THE CONTENTION OF THE ASSESSEE THA T THE ISSUE OF DEDUCTION U/S.80HHC REQUIRES FRESH CONSIDERATION IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXP ORT (SUPRA).WE THEREFORE ARE OF THE VIEW THAT THE MATTER OF DEDUCT ION OF PROFITS U/S. 80HHC REQUIRES RECONSIDERATION IN VIEW OF THE DECISION OF APEX COURT. WE THUS REMIT THE ISSUE TO THE FILE OF A.O. AND DIRECT HIM TO ALLOW THE DEDUCTION AS PER THE PROVISIONS OF ACT AND AFTER CONSIDERING THE RATIO LAID BY THE APEX COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA) AND AFT ER ALLOWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO 736/ AHD/2012 A.YR.. 2004 -05 6 10. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 23 - 11 - 2012 . SD/- SD/- (MUKUL KUMAR SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-XI, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO 736/ AHD/2012 A.YR.. 2004 -05 7 1.DATE OF DICTATION 8 - 11 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 9 /11 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..