LOVSON EXPORTS LTD, MUMBAI V. ACIT CIR 3(2), MUMBAI

ITA 7705/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3855 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 15-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR DR
• Keywords: Opportunity of being heard
• Section: 80HHC; 28

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENC H, MUMBAI . . , . , ! '#$ ' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI D. KARUNAKARA RAO, AM ' ./I.T.A. NO.7705/M/2011 ( %& ' / ASSESSMENT YEAR :2003-04) M/S. LOVSON EXPORTS LTD, 98, BAJAJ BHAVAN, NARIMAN POINT, MUMBAI 400 021. & / VS. ACIT-CIRCLE-3(2), AAYAKAR BHAVAN, MUMBAI 400 020. $( ! ' ./PAN : AAACL 2808 C ( () /APPELLANT) .. ( *+() / RESPONDENT) () , - ' / APPELLANT BY : SHRI BIREN GABHAWALA *+() , - ' / RESPONDENT BY : SHRI MANOJ KUMAR, DR ' & , .! /DATE OF HEARING : 9.5.2013 /0' , .! /DATE OF PRONOUNCEMENT 16.5.2013 #1 #1 #1 #1 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 15.11.2011 IS AGAINST THE ORDER OF CIT (A)-4, MUMBAI DATED 16.9.2011 FOR THE ASSESSMENT YE AR 2003-2004. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT (A) ERRED IN UPHOLDING THE STAND OF THE AO IN REJECTING YOUR APPELLANTS CLAIM FOR DEDUCTION U/S 80 HHC AMOUNTING TO RS. 37,79,080/- HOLDING THAT IF 90% O F DEPB OF RS. 1,36,70,906/- IS IGNORED FOR THE PURPOSE OF COMPUTATION OF DEDUC TION U/S 80 HHC, THE ASSESSEE WILL BE LEFT WITH A NEGATIVE PROF IT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT ERRED IN FAILING TO APPRECIATE THE CORRECT INTERPRE TATION OF THE LEGAL POSITION AFTER THE AMENDMENT BROUGHT N BY THE TAXATION LAWS AMENDMENT, 2005 IN THE PROVISION OF SECTION 80 HHC, 28(IIID) AND 28(IIIE) WHICH HAS BEE N NOW CLARIFIED BY THE SPECIAL BENCH OF THE ITAT, MUMBAI VIDE ORDER DATED 15.8.2009 IN ITA NO.5769/M/2006 AND 5653/M/2006 I THE CASES OF M/S. TOPMAN EXPORTS & M/ S. KALPATARU COLOURS & CHEMICALS RESPECTIVELY. 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD CIT (A) FAILED TO APPRECIATE THAT THE PROFIT ON SALE OF DEP B IS TO BE CONSIDERED FOR DEDUCTION U/S 80 HHC IRRESPECTIVE OF WHETHER THE ANNUAL TURNO VER OF THE EXPORTER EXCEEDS RS. 10 CRS. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF AUTOMOBILES, AUTOMOBILES PARTS, RIC E, COTTON, CLOTH ETC. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCO ME OF RS. 54,66,510/-, AFTER CLAIMING DEDUCTION U/S 80HHC OF THE ACT. DURING TH E ASSESSMENT PROCEEDINGS, AO NOTICED FROM THE COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT THAT THE ASSESSEE EARNED EXPORT INCENTIVES, BEING DEPB RECEIPTS, AMOU NTING TO RS. 1,36,70,906/-. AO DENIED THE CLAIM OF DEDUCTION IN RESPECT OF THE SAI D DEPB RECEIPTS IN VIEW OF THE ASSESSEES FAILURE TO SUBSTANTIATE BY NECESSARY AND SUFFICIENT EVIDENCES TO PROVE (I) ASSESSEE HAD AN OPTION TO CHOSE EXPORT INCENTIVE EI THER IN THE FORM OF DUTY DRAWBACK OR DEPB AND (II) THE RATE OF DUTY DRAWBACK ATTRIBUTABLE TO CUSTOM DUTY IS HIGHER THAN THE RATE OF DEPB. FURTHER, BY VIRTUE O F AMENDMENT BROUGHT IN BY INSERTION OF SECTION 28(IIID) AND (IIIE), THE THIRD PROVISO TO SECTION 80HHC (3) REQUIRES THAT THE PROFIT WHICH HAS BEEN ARISEN ON TRANSFER OF DEPB ONLY IS TO BE CONSIDERED FOR THE PURPOSE OF DEDUCTION U/S 80HHC. EVENTUALLY, THE AO DENIED DEDUCTION U/S 80HHC OF THE ACT. AGGRIEVED, ASSESSEE FILED AN APP EAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLAT E AUTHORITY, THE SAID ISSUE RELATING TO ALLOWABILITY OF DEDUCTION U/S 80HHC IN RESPECT OF DEPB ISSUES WAS RAISED. IN THIS REGARD, ASSESSEE RELIED ON THE THEN SPECIAL BENCH DECISION OF THE ITAT IN THE CASE OF M/S. TOPMAN EXPORTS VS. ITO (124 ITD 1) (MU M) (SB) IN SUPPORT OF THE CLAIM. HOWEVER, CIT (A) DID NOT ALLOW THE CLAIM OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARA 5 OF THE IMPUGNED ORDER AND T HE SAME READS AS FOLLOWS. 5. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBM ISSIONS OF THE ASSESSEE. THE RELIANCE OF THE ASSESSEE ON THE CASE OF TOPMAN EXPORTS IS WRONGLY PLACED BECAUSE THE ISSUE IN TOPMAN WAS WHETHER THE ENTIRE AMOUNT OF DEPB RECEIPTS ON SALE OF DEPB IS TAXABLE WHICH INCLUDED THE FACE VAL UE PLUS EXTRA AMOUNT RECEIVED OR IT IS ONLY THE EXTRA AMOUNT RECEIVED WHICH IS TAXABLE AND NOT WHETHER DEDUCTION U/S 80HHC ON DEPB RECEIPTS IS ALLOWABLE AFTER THE AMEND MENT OF THE ACT OR NOT. WHEREAS, AFTER THE AMENDMENT OF SECTION 28 BY INSER TION OF CLAUSE (IIID) AND (IIIE), THE PROFIT ON SALE OF DEPB HAS BECOME TAXABLE. WHE REAS, BY INSERTION OF PROVISO 3 BELOW SUB-SECTION 3 OF 80HHC THE DEDUCTION U/S 80HH C ON DEPB RECEIPTS IS RESTRICTED TO THOSE ASSESSEES, WHOSE TURNOVER IS LE SS THAN RS. 10 CR AND FOR OTHERS, TWO OTHER CONDITIONS ARE REQUIRED TO BE FULFILLED B EFORE BECOMING ELIGIBLE FOR DEDUCTION U/S 80HHC ON DEPB SALE RECEIPTS, THE COND ITIONS ARE THAT ASSESSEE SHOULD HAVE A CHOICE BETWEEN DUTY DRAWBACK AND DEPB SCHEME S AND THE SECOND CONDITION IS THAT THE DUTY DRAWBACK CREDIT WAS HIGHER THAN TH E ENTITLEMENT UNDER DEPB SCHEME. WHEREAS, IN THE CASE OF ASSESSEE ADMITTEDL Y THE EXPORT TURNOVER IS MORE THAN RS. 10 CR BUT ASSESSEE DOES NOT FULFILL THE OT HER CONDITIONS OF HAVING CHOICE BETWEEN DUTY DRAWBACK AND DEPB SCHEME AND DUTY DRAW BACK CREDIT BEING HIGHER THAN THE DEPB BENEFIT. THEREFORE, THE AO HAS RIGHT LY REJECTED THE CLAIM OF THE ASSESSEE ON DEPB U/S 80HHC. HENCE, THE GROUNDS OF APPEAL ARE REJECTED. 4.1. AGGRIEVED WITH THE SAME, ASSESSEE FILED THE PR ESENT APPEAL BEFORE THE TRIBUNAL. 5. DURING THE PROCEEDINGS BEFORE US, SHRI BIREN GAB HAWALA, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE APEX COURT JU DGMENT IN THE CASE OF M/S. TOPMAN EXPORTS VS. CIT (205 TAXMANN. 119) AND DEMON STRATED BEFORE US THAT THE ISSUE WHICH STANDS COVERED IN HIS FAVOUR BY THE SAI D BINDING JUDGMENT, MAY BE REMANDED TO THE FILES OF THE AO FOR RE-COMPUTE THE ALLOWABLE DEDUCTION IN RESPECT OF DEPB RECEIPTS IN THE LIGHT OF THE RATIO IN THE CASE OF TOPMAN EXPORTS (SUPRA). HE ALSO MENTIONED THAT THE APEX COURT HAS SET ASIDE THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF CIT VS. KALPATARU COLOURS & CHEMICALS (328 ITR 451). 6. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORDE RS OF THE REVENUE AUTHORITIES. WE HAVE ALSO PERUSED THE CITED JUDGME NT IN THE CASE OF TOPMAN EXPORTS (SUPRA) AND FIND THAT THE IMPUGNED ISSUE STANDS CO VERED IN FAVOUR OF THE ASSESSEE. WE HAVE ALSO GONE THROUGH THE DECISION OF THE ITAT, CHANDIGARH BENCH IN THE CASE OF JACOB EXPORT HOUSE VS. ACIT [2012] 137 ITD 117 FOR THE PROPOSITION THAT THE DEDUCTION U/S 80HHC ON DEPB LICENSES IS TO BE COMPUTED AS PER THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F TOPMAN EXPORTS (SUPRA) AND THE MATTER REQUIRES REMANDING FOR RE-COMPUTATION TO THE AO. IT IS ALSO NOTICED THAT PARA 6 OF THE SAID DECISION OF THE TRIBUNAL IS RELE VANT IN THIS REGARD WHICH IS REPRODUCED AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE VERY OUTSET, SHRI SUDH IR SEHGAL, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS NO LONGER RES INTEGRA. THE HONBLE SUPREME COURT IS THE CASE OF TOPMAN EXPORTS VS. CIT [2012] 205 TAXMAN 119/18 TAXMANN.COM 120 SET ASIDE THE JUDGMENT AND OTHERS O F HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMIC ALS [2010] 328 ITR 451 / 192 TAXMAN 435,TOPMAN EXPORTS (SUPRA) AND OTHER CONNECT ED APPEALS. A COPY OF THE JUDGMENT OF THE HONBLE SUPREME COURT WAS FILED BEF ORE US. SHRI SUDHIR SEHGAL, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE M AY BE RESTORED TO THE FILES OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE SA ME AFRESH IN ACCORDANCE WITH LAW FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREM E COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA) AND COMPUTE THE DEDUCTION U/S 80HHC ON DEPB / DFRC LICENSES IN THIS CASE AS PER JUDGMENT OF THE HONBLE SUPREME CO URT REFERRED TO ABOVE. WE FIND SUBSTANCE IN THE ABOVE SUBMISSIONS OF SHRI SUDHIR S EHGAL AND, THEREFORE, WE SET ASIDE THE ORDER OF CIT (A) AND REMAND THE ISSUE TO ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE SAME AFRESH KEEPING IN VIEW THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA). THE ASSESSING OFFICER SHOULD GIVE AN OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. FOR STATISTICAL PURPOSES, THE APPEAL IS ALLOWED. 8. THUS, IN SUBSTANCE, THE PRAYER OF THE LD COUNSEL IS THAT THE ISSUE RAISED IN THE GROUNDS STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE SAID APEX COURT JUDGMENT IN THE CASE OF TOPMAN EXPORTS (SUPRA), IS ACCEPTABL E. FURTHER, WE ALSO FIND THAT IT IS THE PRAYER OF LD COUNSEL THAT THE MATTER MAY BE SET ASIDE FOR THE LIMITED PURPOSE OF RE-COMPUTATION OF ALLOWABLE DEDUCTION ON THE DEPB R ECEIPTS. IN THIS REGARD, REFERRED DECISION OF THE TRIBUNAL IN THE CASE OF JACOB EXPOR T HOUSE (SUPRA), IS RELEVANT AND THE SAME IS EVIDENT FROM THE CONTENTS OF PARA 6 REP RODUCED ABOVE. ACCORDINGLY, WE FIND SUBSTANCE IN THE SUBMISSIONS OF THE LD COUNSEL FOR REMANDING TOO. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT (A) AND REMAND TH E ISSUE TO THE FILES OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH KEEPING IN VIEW THE JUDGMENT OF APEX COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA). AO SH ALL GRANT AN ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORD INGLY, GROUNDS RAISED BY THE ASSESSEE ARE REMANDED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16/5/2013. #1 , /0' ! 2#&3 16/5/2013 0 , 4 SD/- SD/- (H.L. KARWA) (D. KARUNAKARA RAO ) / PRESIDENT ! '#$ / ACCOUNTANT MEMBER MUMBAI; 2#& DATED 16/5/2013. . %& . ' ./ OKK , SR. PS #1 #1 #1 #1 , ,, , *%.56 *%.56 *%.56 *%.56 76'. 76'. 76'. 76'. / COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+() / THE RESPONDENT. 3. 8 ( ) / THE CIT(A)- 4. 8 / CIT 5. 694 *%.%& , , / DR, ITAT, MUMBAI 6. 4 : / GUARD FILE. '+6. *%. //TRUE COPY// #1& ' #1& ' #1& ' #1& ' / BY ORDER, ; ;; ; / '< '< '< '< = = = = (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI