Dishman Pharmaceuticals & Chemicals Ltd., Ahmedabad V. The Dy.CIT.,(OSD)Range-1, Ahmedabad

ITA 85/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89434 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-05-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 12-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment
• Section: 80HHC; 28; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI S.S. GODARA JUDICIAL MEMBER ITA NO S . 84 & 85 /AHD/ 201 2 A. Y S . 200 0 - 0 1 & 2002 - 03 M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD., 2, BHADRARAJ CHA MBERS, NR. SWASTIK CROSS ROADS, NAVRANGPURA, AHMEDABAD. PAN: AAACD 4164D VS THE DCIT (OSD), RANGE - 1, AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : S HRI SUBHASH BAINS, CIT - D.R. , ASSESSEE(S) BY : SHRI TUSHAR P. HEMANI, A.R. / DATE OF HEARING : 07/ 0 5 /201 5 / DATE OF PRONOUNCEMENT: 14 / 0 5 /201 5 / O R D E R PER SHRI S.S. GODARA , JUDICIAL MEMBER TH ESE ASSESSEE S APPEAL S FOR A.Y. 200 0 - 01 AND 2002 - 03 , ARIS E FROM DIFFERENT ORDER S OF THE CIT(A) - V I AHMEDABAD; BOTH DATED 3.11.2011 PASSED I N CASE NO S . CIT(A) - VI/DCIT (OSD)/.R.1/64/10 - 11 AND CIT(A) - VI/DCIT.R.1/80/10 - 11; RESPECTIVELY , IN PROCEEDINGS U/S. 143 ( 3 ) R.W.S . 254 OF THE INCOME TAX ACT IN SHORT THE ACT . 2 . THE ASSESSEE S IDENTICAL GROUNDS IN BOTH CASES READ AS UNDER: 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO BY NOT RECTIFYING APPARENT MISTAKE ITA NO S . 84 & 85 /AHD/201 2 M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. FOR A.Y S . 200 0 - 0 1 & 2002 - 03 - 2 - MADE BY NOT FOLLOWING THE DIRECTIONS OF THE HON'BLE IT AT IN TRUE SPIRIT. 2. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO OF DISALLOWING DEDUCTION ON SALE PROCEEDS OF DEPB U/S 80HHC OF THE ACT. 3. ALTERNATIVELY AND WITHOUT PREJUDICE, FACE VAL UE OF THE DEPB OUGHT TO HAVE BEEN TREATED AS COST OF DEPB LICENSE AND TAXED U/S 28(IV) OF THE ACT AND ONLY PROFITS, IF ANY, ON SALE OF DEPB LICENSES OUGHT TO HAVE BEEN TAXED U/S 28(IIID)/(IIIE) OF THE ACT. 4. ALTERNATIVELY AND WITHOUT PREJUDICE, ONL Y 90% OF THE PROFITS AND NOT THE ENTIRE SALE PROCEEDS OF DEPB LICENSE AND DUTY DRAWBACK INCOME CAN BE REDUCED FROM THE PROFITS OF THE BUSINESS. 5. ALTERNATIVELY AND WITHOUT PREJUDICE, EVEN AS PER THE PROVISIONS OF TAXATION LAWS (SECOND AMENDMENT) AC T, 2005, THE SAID DEPB LICENSE INCOME IS ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT. 6. ALTERNATIVELY AND WITHOUT PREJUDICE BOTH LOWER AUTHORITIES FAILED TO APPRECIATE THAT THE SAID SALE PROCEEDS OF THE DEPB LICENSE IS COVERED BY 28(IV) OF THE ACT AND THEREFORE DEDUCTION U/S 80HHC OF THE ACT OUGHT TO HAVE BEEN ALLOWED FULLY ON THE SAME. 7. ALTERNATIVELY AND WITHOUT PREJUDICE, IF PROFIT ON SALE OF DEPB LICENSE IS NOT FALLING WITHIN THE PURVIEW OF S. 28(IIIA/B/C/D/E) OF THE ACT, THE SAME IS NOT L IABLE TO TAX AT ALL AND THEREFORE THE SAME HAS TO BE REDUCED FROM THE TAXABLE INCOME OF THE APPELLANT. 8. BOTH LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACT OF THE CASE BY NOT GRANTING DEDUCTION ON INTEREST RECEIPTS U/S 80HHC OF THE ACT. 9. ALTERNATIVELY AND WITHOUT PREJUDICE, ONLY THE NET INTEREST INCOME, IF ANY, MAY BE REDUCED FROM THE ELIGIBLE PROFITS. 10. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACT AND THAT THEY FURTHER ERRED IN GROSSLY IGNOR ING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATUR AL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. ITA NO S . 84 & 85 /AHD/201 2 M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. FOR A.Y S . 200 0 - 0 1 & 2002 - 03 - 3 - 11. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF ID. AO IN CHARGING INTEREST U/S 234B/C/D OF THE ACT. 12. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF ID. AO IN INITIATING PENALTY PROCEEDINGS U/S 271( 1 )(C) OF THE ACT. WE TREAT ITA 84/AHD/2012 FOR ASSESSMENT YEAR 2000 - 01 AS THE LEAD CASE. 3. THE ASSESSEE - COMPANY MANUFACTURES BULK DRUGS AND CHEMICALS. THE PRESENT IS SECOND ROUND OF LITIGATION BETWEEN THE PARTIES UPTO THE TRIBUNAL. THE INSTANT PROCEEDINGS ARE IN CONSEQUENCE TO EARLIER REMAND ORDER. THE ASSESSEE HAD CLAIMED SECTION 80HHC DEDUCTION RELATING TO SALE OF ITS DEPB LICENSE FOR RS.49,24,297/ - . THERE IS NO DISPUTE THAT ITS EXPORT TURNOVER EXCEE DS RS. 10 CRORE. THE ASSESSING OFFICER SOUGHT FOR THE RELEVANT DETAILS . THE ASSESSEE QUOTED SECTION 28 AND 80HHC AS AMENDED BY THE TAXATION ( AMENDMENT ) ACT, 2005. THE ASSESSING OFFICER IN HIS CONSEQUENTIAL ORDER DATED 18.12.2009 REFERRED TO ITS FAILURE IN SATISFYING THE STATUTORY CONDITIONS U/S.80HHC(3) 3 RD PROVISO CLAUSE S (A) AND (B) MANDATING EVIDENCE REGARDING OPTION OF CHOOSING DUTY DRAWBACK DEPB ALONG WITH RATE OF DRAWBACK CREDIT S ATTRIBUTABLE TO THE CUSTOMS DUTY ETC. THE ASSESSEE S CLAIM OF DEDUCTION STOOD DISALLOWED ACCORDINGLY. THE ASSESSING OFFICER TREATED IT INELIGIBLE FOR SECTION 80HHC DEDUCTION AND ORDERED EXCLUSION OF 100% OF PROFIT ON DEPB SALE FROM THE PROFIT OF THE BUSINESS FOR NECESSARY COMPUTATION. ITA NO S . 84 & 85 /AHD/201 2 M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. FOR A.Y S . 200 0 - 0 1 & 2002 - 03 - 4 - 4. THE ASSESSEE PREFERRED APPEAL. THE CI T(A) HAS AFFIRMED THE ASSESSING OFFICER S FINDINGS QUA THE STATUTORY CONDITIONS NARRATED HEREINABOVE. HE ALSO HOLDS PROFITS ON SALE OF DEPB AS INELIGIBLE FOR SECTION 80HHC DEDUCTION AS PER HON BLE BOMBAY HIGH COURT DECISION REPORTED AS CIT VS. KALPATARU CO LOURS AND CHEMICALS (2010) 328 ITR 451 . A ND ALSO A SIMILAR VIEW ADOPTED BY THE HON BLE JURISDICTION HIGH COURT DECIDED ON 10.08.2011. 5. WE HAVE HEARD BOTH SIDES AND PERUSED THE CASE FILES . FACTS RELEVANT TO THE GROUND NOS.1 TO 7 HAVE ALREADY BEEN NARRA TED IN THE PRECEDING PARAGRAPHS. THE AUTHORITIES BELOW INVOKE SECTION 80HHC(3) 3 RD PROVISO CLAUSES (A) AND (B) AS THE ASSESSEE S EXPORT TURNOVER EXCEEDS RS.10 CRORES. THE LEGISLATURE HAS INSERTED THE AFORESAID PROVISO IN THE ACT BY WAY OF 2005 AMENDMENT. T HE HON BLE JURISDICTIONAL HIGH COURT HAS DEALT WITH CONSTITUTIONAL VALIDITY THEREOF IN A BATCH OF CASES REPORTED AS AVANI EXPORTS AND OTHERS VS. CIT (2012) 348 ITR 391 (GUJ.) . THE SAID PETITIONERS HAD ARGUED THAT THE IMPUGNED 2005 AMENDMENT PRESCRIBING NEC ESSARY EVIDENCE ABOVESAID WAS VIOLATIVE OF ARTICLE 14 AND 19(1)(G) OF THE CONSTITUTION OF INDIA. THEIR LORDSHIPS HAVE QUASHED THE IMPUGNED AMENDMENT ONLY TO TH E EXTENT THAT ITS OPERATION WOULD BE GIVEN FROM THE DATE OF AMENDMENT AND NOT IN RESPECT OF EARL IER ASSESSMENT YEARS QUA ASSESSEES HAVING TURNOVER EXCEEDING RS.10 CRORES. IT ALSO STANDS CLARIFIED THAT THE RETROSPECTIVE AMENDMENT WOULD NOT BE DETRIMENTAL TO ANY OF THE ASSESSEES. THE IMPUGNED ASSESSMENT YEAR IS 2000 - 01. WE QUOTE THIS JUDGMENT AND REVER SE THE FORMER FINDING OF THE LOWER ITA NO S . 84 & 85 /AHD/201 2 M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. FOR A.Y S . 200 0 - 0 1 & 2002 - 03 - 5 - AUTHORITIES SEEKING NECESSARY EVIDENCE DETAILS FROM THE ASSESSEE ACCORDINGLY . NOW WE COME TO THE LATTER FINDING OF THE LOWER AUTHORITIES THAT PROFITS FROM DEPB SALES ARE NOT ENTITLED FOR SECTION 80HHC DEDUCTION. T HE HON BLE APEX COURT IN TOPMAN EXPORTS VS. CIT (2012) 342 ITR 49 (SC) HAS DECIDED THE ISSUE IN ASSESSEE S FAVOUR AND HOLDS THAT ONLY DIFFERENCE BETWEEN SALE VALUE AND FACE VALUE OF DEPB CREDITS IS TO BE CONSIDERED FOR DEDUCTION U/S.80HHC R.W.S. 28(IIIB) AND (II ID). CASE LAW OF KALPATAR U (SUPRA) STANDS OVERRULED. IT TRANSPIRES THAT THE AUTHORITIES BELOW HAVE NOT ADVERTED THE DETAILS OF THE ASSESSEE S DEPB SALE. THEREFORE, WE QUOTE THE HON BLE APEX COURT JUDGMENT ABOVESAID IN PRINCIPLE AND REMIT THE ISSUE BACK TO THE ASSESSING OFFICER FOR PROCEEDING A FRESH AS PER LAW. THE ASSESSEE S GROUND NO.1 TO 7 ARE ALLOWED FOR STATISTICAL PURPOSES. 6. NOW WE COME TO ASSESSEE S GROUNDS 8 AND 9. RELEVANT FACTS ARE IN A NARROW COMPASS. THE ASSESSING OFFICER HELD THE ASSESSEE S INTE REST RECEIPTS TO BE NOT FORM PART OF PROFIT DERIVED FROM EXPORTS BUT FROM OTHER SOURCES. THE CIT(A) HAS ALSO AGREED WITH THE VERY VIEW. 7. THE ASSESSEE SUBMITS DECISION OF THE HON BLE APEX COURT IN ACG ASSOCIATED CAPSULES PVT. LTD. VS. CIT (2012) 343 I TR 89 (SC) THAT ONLY NET INTEREST IS TO BE INCLUDE D QUA PROFITS OF BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND ITA NO S . 84 & 85 /AHD/201 2 M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. FOR A.Y S . 200 0 - 0 1 & 2002 - 03 - 6 - PROFESSION FOR THE PURPOSE OF SECTION 80HHC EXPLANATION (BAA) AND NOT 90% OF THE GROSS INTEREST SUM . THE REVENUE FAIL S TO DRAW ANY EXCEPTION. WE ACCEPT THE ASSESSEE S CONTENTION ACCORDINGLY AND REMIT TH IS ISSUE ALSO BACK TO THE ASSESSING OFFICER FOR PROCEEDING IN NETTING FORMULA. THE ASSESSEE GROUNDS 8 AND 9 ARE ALLOWED FOR STATISTICAL PURPOSES. 8. THE ASSESSEE S OTHE R GROUNDS OF SECTION 234B/C/D ARE TREATED AS CONSEQUENTIAL IN NATURE. ONCE WE HAVE ALLOWED ITS SUBSTANTIVE PLEADING S FOR STATISTICAL PURPOSES, THESE CONSEQUENTIAL PLEAS OF INTEREST ETC HAVE BECOME INFRUCTUOUS. ASSESSEE S APPEAL ITA 84/AHD/2012 IS ALLOWED FOR STATISTICAL PURPOPES. 9. SAME ORDER TO FOLLOW IN ITA 85/AHD/2012. 10. ASSESSEE S BOTH APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON THIS DAY, THE 14 TH MAY , 201 5 AT AHMEDABAD. SD/ - SD/ - ( N.S. SAINI ) ( S.S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 14 / 0 5 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. ITA NO S . 84 & 85 /AHD/201 2 M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. FOR A.Y S . 200 0 - 0 1 & 2002 - 03 - 7 - 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD