Jindal Worldwidde Ltd, Ahmedabad V. The Dy.CIT., Circle-4, Ahmedabad

ITA 799/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8752 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 19-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH SRDR
• Assessee Lawyers: P M MEHTA ARS; S N SOPARKAR
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.799/AHD/2007 ASSESSMENT YEAR:2003-04 DATE OF HEARING:16.3.10 DRAFTED:16.3.10 JINDAL WORLDWIDE LTD., 1 ST , FLOOR SURYARATH BUILDING, PANCHVATI, FIRST LANE, AMBAWADI, AHMEDABAD PAN NO.AAACJ3816Q V/S. DCIT, CIRCLE-4, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S.N.SOPARKAR & SHRI P.M.MEHTA, ARS RESPONDENT BY:- SMT. NEETA SHAH, SR-DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-VII, AHMEDABAD IN APPEAL NO. CI T(A) VII. CIR.4 /101 /2006-07 DATED 26-12-2006. THE ASSESSMENT WAS FRAMED BY THE ACIT, CIRCLE-4, AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 24-03-2005 FOR THE ASSESSMENT YEAR 2003 -04. 2. AT THE OUTSET LD COUNSEL FOR THE ASSESSEE STATED THAT ONLY ISSUE OF THIS APPEAL OF THE ASSESSEE IS REGARDING DEDUCTION U/S.80HHC OF THE ACT ON DEPB. THE LD. COUNSEL FOR THE ASSESSEE, FIRST OF ALL, TAKEN US TO THE ORDER OF CIT(A) PAGE-11 PARA- 5.12, WHEREIN THE CIT(A) HAS NOTED THE BIFURCATION OF DEPB RECEIVED AND PROVISION MADE FOR DEPB AS UNDER:- DEPB LICENCE RECEIVED & SOLD RS.96,65,908 PROVISION MADE FOR DEPB RS.85,06,322 ITA NO.799/AHD/2007 A.Y. 2003-04 JINDAL WORLDWIDE LTD. V. DCIT CIR-4 ABD PAGE 2 PROVISION MADE FOR DEPB RS.29,49,893 DUTY DRAWBACK RS.10,72,010 BALANCE AS PER P & L RS.2,21,94,133 FURTHER THE LD. COUNSEL FOR THE ASSESSEE TAKEN US T O GROUNDS OF APPEAL RAISED BY THE ASSESSEE VIDE GROUND NO.1(B) , WHICH READS AS UNDER:- 1(B) WITHOUT PREJUDICE TO WHAT IS STATED ABOVE, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT AS PER NEW TAXAT ION LAWS AMENDMENT ACT, 2005 ONLY PROFIT ON SALE/TRANSFER OF DEPB LICENSES ARE COVERED U/S.S28(IIID) OF THE ACT AND NOT REIMBURSEMENT OF DUTY COMPONENT IN THE DEPB SCHEME. HE FURTHER REFERRED TO THE ADDITIONAL GROUND, WHICH READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE COMPUTATION MADE BY THE ASSESSING OFF ICER IN TREATING THE GROSS RECEIPTS OF SALE OF LICENCE AS PROFIT ON SALE OF LICENCE. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT OUT OF THE SUM OF RS. 2,21,94,133/- BEING THE BALANCE OF DEPB AS PER P & L A/C. THE SUM OF RS.1,1 4,56,215/- WAS THE PROVISION MADE FOR DEPB AND AS SUCH NO INCOME HAS A CCRUED TO THE ASSESSEE ON THE SAID DEPB PROVISION. THE LD. CIT(A) HAS ALSO FAILED TO APPRECIATE THAT IT IS A SETTLED LEGAL POSITION THAT THE INCOME IS TO BE RECOGNIZED AND BECOMES CHARGEABLE TO TAX WHEN HE RIGHT TO RECE IVE SUCH INCOME IS FINALLY ACQUIRED BY THE ASSESSEE. THEREFORE, NO SUCH INCOME IS ACCRUED TO THE ASSESSEE ON THE PROVISION MADE FOR DEPB OF THE SUM OF RS.1,14,56,215/-. IN VIEW THESE GROUNDS AND FACTS, THE LD. COUNSEL FO R THE ASSESSEE STATED THAT BY VIRTUE OF PROVISION MADE ON ACCOUNT OF DEPB NO INCO ME HAS ACCRUED TO THE ASSESSEE AND ACCORDINGLY THIS SHOULD NOT BE ADDED E ITHER IN THE TOTAL TURNOVER OR IN THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPU TATION OF DEDUCTION U/S.80HHC OF THE ACT. AS REGARDS TO THE SALE OF DEPB LICENCE, T HE LD. COUNSEL STATED THAT ONLY PROFIT IS TO BE CONSIDERED FOR DEDUCTION U/S.80HHC OF THE ACT. 3. ON THE OTHER HAND, LD. SR-DR, SMT. NEETA SHAH ST ATED THAT THE LOWER AUTHORITIES HAS RIGHTLY HOLD THE ISSUE AGAINST THE ASSESSEE, AND FOR THIS, THE REASONING WAS GIVEN THAT THE DEPB LICENCE ARE ISSUE D TO THE EXPORTERS ON FULFILLMENT OF CERTAIN CONDITIONS AND NO COST IS INCURRED BY TH E EXPORTER TO ACQUIRE DEPB LICENCE. ACCORDING TO HER, AFTER GETTING THE DEPB LICENCE, T HE EXPORTER IS FREE EITHER TO USE IT AS SET OFF AGAINST IMPORT DUTY OR SELL IT IN THE OP EN MARKET. AS NO COST HAS BEEN INCURRED IN ACQUIRING THIS LICENCE, THE TOTAL SALES REALIZATION SHOULD BE TREATED AS PROFIT. ITA NO.799/AHD/2007 A.Y. 2003-04 JINDAL WORLDWIDE LTD. V. DCIT CIR-4 ABD PAGE 3 4. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS OF THE CASE, WE FIND THAT THE ISSUE HAS ALREADY BEEN CONSIDERED BY THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF TOPMAN EXPORTS V. ITO (2009) 318 ITR (AT) 87 (MUM) (SB), WHEREIN IT IS HELD THAT ONLY THE NET PROFIT OF DEPB SHOULD BE EXCLUDED FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.80HHC OF THE ACT. ACCO RDINGLY, WE ARE OF THE VIEW THAT THE ISSUE CAN BE REVERTED BACK TO THE FILE OF ASSES SING OFFICER FOR DECIDING THE ISSUE IN TERMS OF TOPMAN EXPORTS (SUPRA). WE FURTHER DIRECT THE ASSESSING OFFICER T O COMPUTE THE ELIGIBILITY OF DEPB AND ALSO THE COST O F ACQUISITION, INCURRED BY THE ASSESSEE FOR ACQUIRING DEPB AND THEN DECIDE THE CLA IM OF DEDUCTION U/S.80HHC OF THE ACT. AS REGARDS TO THE PROVISION OF DEPB, THE A SSESSING OFFICER WILL VERIFY, WHETHER THE ASSESSEE HAS RECEIVED ANY CONSIDERATION OR NOT IN THE YEAR UNDER CONSIDERATION AND ACCORDINGLY DECIDE THE ISSUE. THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 16/03/2010 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 16/03/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VII, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD