OPERA CLOTHING P. LTD, MUMBAI V. ITO 18(1)(3), MUMBAI

ITA 8083/MUM/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3596 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 23-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 80IB

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.8083/MUM/2010 ASSESSMENT YEAR: 2007-08 M/S OPERA CLOTHING PRIVATE LIMITED, 2 & 4, SHAH & NAHAR INDUSTRIAL ESTATE, S.J. MARG, LOWER PAREL, MUMBAI-400013 VS ITO-18(1)(3), MUMBAI ( /ASSESSEE) ( / REVENUE) PAN. NO. AAAFO4522H ' # $ % / DATE OF HEARING : 12/05/2016 $ % / DATE OF ORDER: 12/05/2016 / ASSESSEE BY NONE / REVENUE BY SHRI LOVE KUMAR-DR ITA NO.8083/MUM/2010 M/S OPERA CLOTHING PRIVATE LIMITED. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 06/08/2010 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. 2. WE NOTE THAT THIS APPEAL IS FILED BY THE ASSES SEE ON 31/10/2011. THIS APPEAL WAS FIXED FOR HEARING FOR 28/08/2012 AND WAS ADJOURNED AT THE REQUEST OF THE ASSESSEE, TO 29/08/2012. ON 29/08/2012, THE APPEAL WAS ADJOURNED AT THE REQUEST OF THE ASSESSEE TO 30/08/2 012. THIS DATE WAS DULY NOTED BY THE LD. COUNSEL FOR THE ASSE SSEE (AS IS EVIDENT FROM THE ORDER-SHEET). AGAIN ON AT THE REQU EST OF THE, THE APPEAL WAS ADJOURNED TO 26/11/2012 (THE DATE WA S DULY NOTED BY THE COUNSEL). AGAIN ON 15/05/2013, 13/08/2 013, THE APPEAL WAS ADJOURNED AT THE REQUEST OF THE ASSE SSEE. ON FURTHER DATES LIKE 30/03/2015, 06/05/2015, 26/05/20 15, 24/08/2015, 09/12/2015, 15/03/2016, THE APPEAL WAS ADJOURNED AT THE REQUEST OF THE ASSESSEE. TODAY, ON 12/05/2016, THE ASSESSEE NEITHER PRESENTED NOR MOVE D ANY ADJOURNMENT PETITION. IT SEEMS THAT THE ASSESSEE IS NOT INTERESTED TO PURSUE ITS APPEAL, THEREFORE, WE HAVE NO OPTION ITA NO.8083/MUM/2010 M/S OPERA CLOTHING PRIVATE LIMITED. 3 BUT TO PROCEED EX-PARTE, QUA THE ASSESSEE, AND TEND TO DISPOSE OF THIS APPEAL, ON MERIT, ON THE BASIS OF M ATERIAL AVAILABLE ON RECORD. IT IS PRESUMED THAT THE ASSESS EE HAS NOTHING TO SAY. 2.1. THE LD. DR, SHRI LOVE KUMAR, STRONGLY DEFENDE D THE IMPUGNED ORDER BY CLAIMING THAT BOTH THE ISSUES ARE COVERED AGAINST THE ASSESSEE. RELIANCE WAS PLACED U PON THE DECISION FROM HONBLE APEX COURT IN CIT VS STERLING FOODS (1999) 104 TAXMAN 204 (SC), LIBERTY INDIA VS CIT (2 009) 183 TAXMAN 439 (SC) AND THE DECISION OF THE TRIBUNAL IN M/S EURO FOOTWEAR LTD. VS ACIT (ITA NO.877 AND 878/LKW/ 2008) AND ITA NO.61 & 62/LKW/2009 ORDER DATED 18/12/2009. 2.2. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE F IRST GROUND RAISED BY THE ASSESSEE PERTAINS TO EXCLUSION OF DUTY DRAWBACK OF RS.1,81,49,486/- FOR DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). THE FA CTS, IN BRIEF, ARE THAT THE ASSESSEE DISCLOSED TURNOVER OF RS.55,02,56,982/- AND NET PROFIT OF RS.4,01,83,355/ -. THE ASSESSEE CLAIMED DEDUCTION OF RS.3,20,08,473/- U/S 80IB OF ITA NO.8083/MUM/2010 M/S OPERA CLOTHING PRIVATE LIMITED. 4 THE ACT IN RESPECT OF MANUFACTURING ACTIVITY AT DAM AN UNIT. THE LD. ASSESSING OFFICER FOUND THAT THE ASSESSEE R ECEIVED RS.1,81,49,486/- AS DUTY DRAWBACK AND RS.18,97,097/ - ON ACCOUNT OF DIFFERENCE OF EXCHANGE RATE. THE CLAIM OF THE ASSESSEE WAS THAT THE DUTY DRAWBACK SCHEME IS TO RE IMBURSE EXPORTERS FOR TARIFFS PAID ON THE IMPORTED RAW MATE RIAL AND INTERMEDIATES AS THE DUTY DRAWBACK IS INTENDED TO R EDUCED THE COST OF PRODUCTION, THEREFORE, IT IS AN INTEGRA L PART OF THE PRICING OF THE GOODS. THE CRUX OF THE ARGUMENT BY T HE ASSESSEE, BEFORE THE ASSESSING OFFICER, WAS THAT IT IS TO BE TREATED AS INCOME DERIVED FROM THE BUSINESS OF IN DUSTRIAL UNDERTAKING. HOWEVER, CONSIDERING THE TOTALITY OF FACTS AND THE DECISION FROM HONBLE APEX COURT IN LIBERTY IND IA VS CIT 317 ITR 218 (SC), IT WAS HELD THAT DUTY DRAWBACK AN D OTHER EXPORT INCENTIVES CANNOT BE SAID TO BE INCOME DERI VED FROM INDUSTRIAL UNDERTAKING. 2.3. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INC OME TAX (APPEAL), THE STAND TAKEN IN THE ASSESSMENT ORD ER WAS AFFIRMED. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. ITA NO.8083/MUM/2010 M/S OPERA CLOTHING PRIVATE LIMITED. 5 2.4. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, UNDER THE FACTS NARRATE D HEREINABOVE, WE NOTE THAT HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA VS CIT (SUPRA) DECIDED THE ISSUE AGAI NST THE ASSESSEE BY HOLDING THAT DUTY DRAWBACK RECEIPT/DEPB BENEFIT DO NOT FORM PART OF NET PROFITS OF ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF SECTION 80I/80IA/80 IB OF THE ACT. IDENTICALLY, HONBLE MADRAS HIGH COURT IN CIT VS JAMEEL LEATHERS 246 ITR 97 (MAD.) HELD THAT INCOME FROM DU TY DRAWBACK CANNOT BE ALLOWED FOR THE PURPOSES FOR CLA IMING DEDUCTION U/S 80IB OF THE ACT. 2.5. WE ARE AWARE THAT A PROVISION IN THE TAXING S TATUTE GRANTING INCENTIVES FOR PROMOTING GROWTH AND DEVELO PMENT SHOULD BE CONSTRUED LIBERALLY. AS WAS HELD BY HONB LE APEX COURT IN BAJAJ TEMPO LTD. VS CIT (1992) 62 TAXMAN 4 80 (SC). HOWEVER, FOR CLAIMING DEDUCTION U/S 80IB OF THE ACT , THE ASSESSEE HAS TO ESTABLISH CERTAIN FACTS. THE INCOM E MUST BE ITA NO.8083/MUM/2010 M/S OPERA CLOTHING PRIVATE LIMITED. 6 DIRECTLY GENERATED FROM THE BUSINESS. IN CIT VS KO CHIN REFINERIES LTD. 135 ITR 278 (KERALA) AND CIT VS CEM ENT DISTRIBUTORS LTD. 208 ITR 355 (DEL.), IT WAS HELD T HAT INCOME MUST BE DIRECTLY GENERATED FROM BUSINESS. THE RATIO LAID DOWN IN CIT VS KOTHARI PRODUCTS LTD. 295 ITR 223 (A LL.) SUPPORTS THE CASE OF THE REVENUE. FOR TAKING THE BE NEFIT OF DEDUCTION U/S 80IB, WE ARE OF THE VIEW THAT THE SO URCE OF IMPORT ENTITLEMENTS CANNOT BE SAID TO BE THE INDUST RIAL UNDERTAKING OF THE ASSESSEE AS IT IS OUT OF THE EXP ORT PROMOTION SCHEME OF THE CENTRAL GOVERNMENT AND IS N OT DIRECTLY DERIVED FROM AN INDUSTRIAL UNDERTAKING O F THE ASSESSEE. FOR GETTING THE BENEFIT OF DEDUCTION UNDE R SECTION 80IB THERE HAS TO BE DIRECT NEXUS BETWEEN THE PRO FIT & GAINS AND IN THE INDUSTRIAL UNDERTAKINGS. IN THE IN STANT CASE, THE NEXUS IS NOT DIRECT BUT ONLY INCIDENTAL. THE R ATIO LAID DOWN IN CIT VS STERLING FOODS (1999) 104 TAXMAN 204 (SC) SUPPORTS OUR VIEW. THUS, WE FIND NO INFIRMITY IN TH E CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL). ITA NO.8083/MUM/2010 M/S OPERA CLOTHING PRIVATE LIMITED. 7 2.6. SO FAR AS, EXCLUSION OF EXCHANGE RATE DIFFERE NCE OF RS.18,97,091/- FOR CLAIMING DEDUCTION U/S 80IB IS CONCERNED, WE FIND THAT THE LD. ASSESSING OFFICER H AS GIVEN A FINDING IN THE ASSESSMENT ORDER THE ASSESSEE HAS CR EDITED AN AMOUNT OF RS.18,97,091/- BEING THE EXCHANGE RATE DI FFERENCE EARNED ON THE EXPORT REALIZED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEES SUBMISSION ARE ON REC ORD WHEREIN THEY HAVE CONTENDED THAT THE SAME IS PART O F THE SALE PROCEEDS AND IS ELIGIBLE AS PROFIT OF THE UNDERTAKI NG. WE FIND THAT HONBLE BOMBAY HIGH COURT IN CIT VS M/S RACHNA UDYOG (BOM.) IN ITA NO.2394 OF 2009, ORDER DATED 31/01/2010 HAS AFFIRMED THE JUDGMENT OF THE TRIBUNA L, WHEREBY, THE TRIBUNAL HELD THAT THE DIFFERENCE ON A CCOUNT OF EXCHANGE RATE FLUCTUATION IS LIABLE TO BE ALLOWED U /S 80IB OF THE ACT. THE EXCHANGE RATE FLUCTUATION ARISES OUT O F AND IS DIRECTLY RELATED TO THE SALE TRANSACTION INVOLVING THE EXPORT OF THE GOODS OF THE INDUSTRIAL UNDERTAKING. RESPECTFUL LY FOLLOWING THE AFORESAID ORDER FROM HONBLE JURISDIC TIONAL HIGH COURT, THIS GROUND OF THE ASSESSEE IS ALLOWED. ITA NO.8083/MUM/2010 M/S OPERA CLOTHING PRIVATE LIMITED. 8 3. SO FAR AS, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE THAT THE DUTY DRAWBACK OF RS.1,81,49,486/- , IF TREATED AS NOT EXEMPT U/S 80IB THEN ONLY THE NET DU TY DRAW BACK MAY BE CONSIDERED AS INCOME ASSESSABLE IN THE HANDS OF THE ASSESSEE. WE ARE OF THE VIEW THAT ADDITIONAL GR OUND/LEGAL GROUND CAN BE RAISED BEFORE THE TRIBUNAL. HOWEVER, THIS GROUND WAS NEVER RAISED BEFORE THE ASSESSING OFFICE R/CIT(A) BY THE ASSESSEE, THEREFORE, KEEPING IN VIEW, THE PR INCIPLE OF NATURAL JUSTICE, WE REMAND THIS ADDITIONAL GROUND T O THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF TH E ASSESSEE AND DECIDE IN ACCORDANCE WITH LAW. THE ASSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD, THUS, THE ADDITIONAL GR OUND RAISED BEFORE THIS TRIBUNAL IS ALLOWED FOR STATISTI CAL PURPOSES. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. DR AT THE CONCLUSION OF THE HEARING ON 12/05/2016. SD/- SD/- ( RA MIT KOCHAR ) (JOGINDER SINGH) ! ' / ACCOUNTANT MEMBER # ' /JUDICIAL MEMBER ITA NO.8083/MUM/2010 M/S OPERA CLOTHING PRIVATE LIMITED. 9 ' # MUMBAI; ' DATED : 12/05/2016 F{X~{T? P.S/. .. $#%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. )*+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / ' 0 ( )* ) / THE CIT, MUMBAI. 4. / / ' 0 / CIT(A)- , MUMBAI 5. 2 3 - , / )*% ) 4 , ' # / DR, ITAT, MUMBAI 6. 5 6# / GUARD FILE. / BY ORDER, .2* - //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ' # / ITAT, MUMBAI