GELSULES EXPORTS, MUMBAI V. ASST CIT CIR 21(3), MUMBAI

ITA 7771/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0577 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 31-05-2017
• Assessment Year: 2001-2002
• Appeal Filed On: 31-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Section: 80HHC

Judgement Text

7771/M/14-)01-02) GELSULES EXPORTS 1 , INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./7771/MUM/2014, /ASSESSMENT YEAR: 2001-02 M/S. GELSULES EXPORTS B-203, GODREJ COLLESEUM OFF. EASTERN EXPRESS HIGHWAY SION(E),MUMBAI-400 022. PAN:AAAFG 1651 P VS. ADDL. CIT, CIRCLE 21- (3) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI R.K.SAHU ASSESSEE BY: SHRI NITESH JOSHI / DATE OF HEARING: 31.05.2017 / DATE OF PRONOUNCEMENT: 02.06.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS,DATED 20/10/2014,OF THE CIT (A)-32,MUMBAI,THE ASSESSEE HAS FILED THE PRESENT APPEALS.ASSESSEE-COMPANY,A 100% TRADING EXPORTER,FILED ITS RETURN OF INCOME ON 29/10/2001,DECLARING TOTAL INCOME AT RS. 72.50 LAKH S. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S.143 (3) R.W.S.147 OF THE ACT, ON 28/11/2006, DETERMINING ITS INCOME AT RS. 2.54 CRORES.THE MATTER TRAVELLED UP TO THE TRIBUNAL AND VIDE ITS ORDER DATED 12/09/2010 (ITA/ 7175/ MUM/2008 AND 581/MUM/2009) IT RESTORED BACK T HE ISSUE TO THE FILE OF THE AO. 2. FIRST GROUND OF APPEAL IS ABOUT NOT REDUCING THE EX CISE DUTY REFUND OF RS.17.22 LAKHS,WHILE COMPUTING THE AMOUNT OF DIRECT COST UNDER SECTION 8 0HHC OF THE ACT. TO GIVE EFFECT TO THE DIRECTIONS OF THE TRIBUNAL,THE AO COMPLETED THE ASS ESSMENT U/S.143(3)R.W.S. 254, ON 27/09/ 2013,DETERMINING ITS INCOME AT RS.63.79 LAKHS.WHILE COMPLETING THE ASSESSMENT, THE AO HELD THAT THE EXCISE DUTY REFUND OF RS.17,22,305/-COULD NOT BE REDUCED FROM THE DIRECT COST WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC, THAT EXCIS E DUTY REFUND WAS AN INDEPENDENT ITEM OF INCOME AS PER THE DECISION OF DRESSER RAND INDIA PRIVATE LTD (323 ITR 429)OF THE HONBLE BOMBAY HIGH COURT. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND ARGUED THAT FACTS OF TH E CASE UNDER CONSIDERATION WERE DISTIN - GUISHABLE FROM THE FACTS OF DRESSER RAND INDIA PRIV ATE LTD (SUPRA).BESIDES IT MADE ELABORATE SUBMISSIONS ARGUING THAT THE EXCISE DUTY REFUND HAD TO BE REDUCED WHILE COMPUTING THE AMOUNT OF DIRECT COST FOR THE PURPOSES OF CALCULATI NG THE DEDUCTION UNDER SECTION 80HHC. 7771/M/14-)01-02) GELSULES EXPORTS 2 AFTER CONSIDERING THE AVAILABLE MATERIAL,HE HELD TH AT THERE WAS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE DECISION OF DRESSER RAND INDI A PRIVATE LTD (SUPRA) WAS NOT APPLICABLE TO THE FACTS OF THE CASE, THAT EXCISE DUTY REFUND WAS AN INDEPENDENT ITEM OF INCOME NOT RELATED TO THE EXPORT ACTIVITIES OF THE ASSESSEE, THAT THE AO WAS JUSTIFIED IN NOT REDUCING THE EXCISE DUTY REFUND FROM THE PURCHASES OF THE ASSESSEE AND TREAT ING IT AS AN INDEPENDENT ITEM OF INCOME NOT LIABLE FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT. 4. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) REFERRED TO THE CASE OF VALIANT GLASSWORKS (P) LTD.(110 DTR 281). T HE DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 5. WE FIND THAT THE ISSUE HAS BEEN DELIBERATED UPON AN D DECIDED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF VALIANT GLASSWORKS (P) LT D.(SUPRA). WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE JUDGMENT AND IT READS AS UN DER: THE CENVAT INCENTIVE BEING THE REFUND OF TAX AND D UTY PAID ON INPUTS CONSUMED FOR GOODS MANUFACTURED AND EXPORTED WOULD AUTOMATICALLY REDUC E THE COST OF MANUFACTURE OF EXPORTED GOODS, THEREBY NECESSARILY INCREASING THE PROFIT. I N VIEW THEREOF, THE DEEMED CREDIT UNDER THE CENVAT INCENTIVE SCHEME AT RS. 89, 34, 87 WOULD BE A PART OF BUSINESS PROFIT ELIGIBLE FOR A DEDUCTION UNDER S.80HHC. IT CAN HARDLY BE ARGUED TH AT DEEMED CREDIT UNDER THE CENVAT INCENTIVE SCHEME WOULD NOT REDUCE THE MATERIAL/MANU FACTURING COST OF THE GOODS EXPORTED BY THE ASSESSEE. THIS WAS NOT THE CASE OF THE REVENUE ALSO. THAT BEING THE CASE, UNDER THE PROVISIONS OF S. 80HHC, THE ASSESSEE WOULD BE ENTIT LED TO DEDUCTION TO THE EXTENT OF PROFITS REFERRED TO IN SUBSECTION (1B) THEY ARE OF DERIVED BY THE ASSESSEE FROM THE EXPORT OF SUCH GOODS OR MERCHANDISE. NO OTHER PROVISION WAS BROUGH T TO NOTICE THAT WOULD JUSTIFY THE DISALLOWANCE OF INCENTIVE WHILST COMPUTING THE ADMI SSIBLE DEDUCTION UNDER S.80HHC. IN THIS VIEW OF THE MATTER, IN THE REGULAR FACTS AND CIRCUM STANCES OF THE PRESENT CASE, THE TRIBUNAL WAS JUSTIFIED IN COMING TO THE CONCLUSION THAT THE AMOUNT OF DEEMED CREDIT UNDER THE CENVAT INCENTIVE SCHEME WAS A PART OF THE BUSINESS PROFIT OF THE ASSESSEE ELIGIBLE FOR DEDUCTION UNDER S.80HHC DESPITE THE FACT THAT IT DI D NOT SPECIFICALLY FIND PLACE IN SECTION 80HHC (3). RESPECTFULLY FOLLOWING THE ABOVE,WE HOLD THAT THE R EVENUE AUTHORITIES WERE NOT JUSTIFIED IN REDUCING THE EXCISE DUTY REFUND WHILE COMPUTING THE AMOUNT OF DIRECT COST UNDER SECTION 80HHC OF THE ACT.SO,REVERSING THE ORDER OF THE FAA, WE DECIDE FIRST GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE.NEXT TWO GROUNDS ARE ACADEMI C IN NATURE AND STAND ALLOWED FOR STATISTICAL PURPOSES. AS A RESULT,APPEAL FILED B Y THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND , JUNE, 2017. 2 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 02.06.2017. JV.SR.PS. 7771/M/14-)01-02) GELSULES EXPORTS 3 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.