Milton Laminates Ltd., Ahmedabad V. The CIT-II, Ahmedabad

ITA 87/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0432 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 07-11-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 11-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Section: 80HHC; 263; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.87/AHD/2010 A. Y.: 2001-02 MILTON LAMINATES LTD., (NOW KNOWN AS MILTON INDUSTRIES), 1 / 2, CHITRA AMI APARTMENT, OPP. LA GAJJAR CHAMBERS, ASHRAM ROAD, AHMEDABAD P. A. NO. AABCM 0398 K VS THE C. I. T.- II, ROOM NO.101, NAVJEEVAN TRUST BUILDIGN, BEHIND GUJARAT VIDYAPITH, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. N. SOPARKAR WITH SHRI T. H. VASA, AR RESPONDENT BY SHRI SHELLEY JINDAL, CIT DR DATE OF HEARING: 20-02-2013 DATE OF PRONOUNCEMENT: 22-03-2013 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED CIT- II, AHMEDABAD DATED 06-11-2009 IN APPEAL NO. CIT-II/TECH/263/01/2 009-10 PASSED U/S SECTION 263 OF THE IT ACT, FOR THE ASSESSMENT Y EAR 2000-01. 2. THE ASSESSEE HAS RAISED FIVE GROUNDS IN ITS APPE AL, WHEREIN GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT SURVI VE FOR ADJUDICATION AND GROUND NO.4 IS NOT PRESSED AND THEREFORE, THE S AME ARE DISMISSED AS SUCH. THE OTHER GROUNDS ARE REPRODUCED HEREIN BELOW FOR REFERENCE: ITA NO.87/AHD/2010 (AY 2000-01) MILTON LAMINATES LTD. VS CIT-II, AHMEDABAD 2 GROUND NO.3: (I) THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING INTEREST INCOME EARNED ON FIXED DEPOSIT AND MARGIN MONEY PLEDGED WITH THE BANK FOR THE PURPOSE OF ISSUING LE TTERS OF CREDIT ARISING FROM EXPORT BUSINESS OF THE APPELLAN T BEING ELIGIBLE FOR CALCULATION OF DEDUCTION U/S 80 HHC OF THE ACT. GROUND NO.2 AND 5 ARE OF THREE-FOLD BRIEFLY STATED AS UNDER: (I) THE LEARNED CIT(A) HAS ERRED IN NOT COMPUTING T HE BUSINESS PROFIT OF THE COMPANY AS PER AMENDED PROVISIONS OF SECTION 80 HHC OF THE ACT. (II) THE LEARNED CIT(A) HAS ERRED IN NOT COMPUTING THE BUSINESS PROFITS OF THE COMPANY BY CONSIDERING THAT THE 90% OF THE SALE VALUE OF DEPB LICENSE VALUE RECEIVE D REQUIRED TO BE EXCLUDED FROM THE BUSINESS PROFITS. (III) THE LEARNED CIT(A) HAS ERRED IN NOT COMPUTING THE BUSINESS PROFITS OF THE COMPANY BY CONSIDERING THAT 90% OF EXCISE REFUND RECEIVED REQUIRED TO BE EXCLUDED F ROM BUSINESS PROFITS. 3. AT THE OUTSET, THE LEARNED AR SUBMITTED THAT ALL THE ABOVE ISSUES ARE COVERED BY THE DECISION OF THE TRIBUNAL AND HIGHER JUDICIARY WHICH HAVE NOT BEEN CONSIDERED BY THE LEA RNED CIT(A) IN HIS ORDER AND CITED THE FOLLOWING REPORTED DECISIONS:- (I) WITH RESPECT TO GROUND NO.3- INTEREST INCOME EA RNED ON FIXED DEPOSIT AND MARGIN MONEY, RELIANCE WAS PLACED IN THE DECISION IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. (FORMERLY ASSOCIATED CAPSULES PVT. LTD.) VS CI T [2012] 343 ITR 89 (SC) AS UNDER: ITA NO.87/AHD/2010 (AY 2000-01) MILTON LAMINATES LTD. VS CIT-II, AHMEDABAD 3 (II) WITH RESPECT TO GROUND NO.2 AND 5 (A) WITH RESPECT TO 90% OF SALE VALUE OF DEPB RELIA NCE WAS PLACED IN THE DECISION OF THE CASE OF TOPMAN EXPORTS VS CIT [2012] 342 ITR 49 (SC). (B) WITH RESPECT TO 90% OF EXCISE REFUND RELIANCE W AS PLACED ON THE ORDERS OF THE ITAT IN ITA NO. 3407/AHD/2004 DATED 12-12-2008 IN THE CASE OF STERLING EXPORT VS ACIT AND 2005 (095) TTJ 0014 AHD AARTI INDUSTRIES VS DCIT IT HAS BEEN HELD AS UNDER- 4. THE LEARNED DR COULD NOT CONTROVERT TO THE SUBMI SSIONS OF THE LEARNED AR. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. ON EXAMINING THE ISSUE AND THE ARGUMENTS ADVANCED BY THE LEARNED AR CITING THE RELEVANT DECISIONS, IT IS APPARENT THAT THE LEARNED CIT HAS NOT CONSIDERED THESE DECISION CITED SUPRA BY THE LEARNED AR WHILE GIVING DIRECTION TO THE LEARNED AO . THE LEARNED AR HAD FURTHER MADE THE FOLLOWING SUBMISSIONS BEFORE U S THAT: (I) WITH RESPECT TO DEDUCTION U/S 80 HHC OF THE ACT WHEN THERE IS A NEGATIVE BUSINESS PROFIT FROM EXPORT OF GOODS BUT POSITIVE INCOME FROM SALE OF EXPORT INCENTIVES, BY VIRTUE OF RETROSPECTIVE LEGISLATIVE AMENDMENT BY IN SERTION OF FIFTH PROVISO TO SECTION 80 HHC (3) OF THE ACT, DEDUCTION IS ALLOWABLE. IN THE LIGHT OF THE ABOVE AMENDMENT OF THE ACT THE DECISION RENDERED IN THE C ASE ITA NO.87/AHD/2010 (AY 2000-01) MILTON LAMINATES LTD. VS CIT-II, AHMEDABAD 4 IPCA LABORATORIES REPORTED IN 266 ITR 531 (SC) IS N O LONGER IS A GOOD LAW. (II) REFUND OBTAINED FOR PAYMENT OF EXCISE DUTY ON GOODS EXPORTED REDUCES THE EXPENDITURE CHARGED TO THE PRO FIT & LOSS ACCOUNT OF THE ASSESSEE, AND, THEREFORE, IT FO RMS A PART OF THE BUSINESS PROFIT ELIGIBLE TO CLAIM DEDUC TION U/S 80 HHC OF THE ACT. RELIANCE WAS PLACED ON THE DECIS ION IN THE CASE OF AARTI INDUSTRIES, CITED SUPRA. (III) THE DECISION RENDERED IN THE CASE TOPMAN EXPO RTS, CITED SUPRA SETTLES THE ISSUE THAT IT IS ONLY 90% OF THE PROFITS REALIZED ON SALE OF DEPB ENTITLEMENT THAT REQUIRES TO BE EXCLUDED WHILE COMPUTING DEDUCTION U/S 80 HHC OF TH E ACT. 6. THE GIST OF THE DECISIONS CITED BY THE LEARNED A R ARE REPRODUCED HEREIN BELOW FOR REFERENCE: (A) WITH RESPECT TO GROUND NO.3- INTEREST INCOME EA RNED ON FIXED DEPOSIT AND MARGIN MONEY, IT WAS HELD IN THE CASE ACG ASSOCIATED CAPSULES PVT. LTD. (FORMERLY ASSOCIA TED CAPSULES PVT. LTD.) VS CIT [2012] 343 ITR 89 (SC) A S UNDER: HELD ACCORDINGLY, THAT NINETY PER CENT. OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY THE NET INTEREST OR NET RENT, WHICH HAD BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AND GA INS OF BUSINESS OR PROFESSION, WAS TO BE DEDUCTED UNDE R CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80 HC FO R DETERMINING THE PROFITS OF THE BUSINESS. (B) WITH RESPECT TO GROUND NO.2 AND 5 WITH RESPEC T TO 90% OF SALE VALUE OF DEPB IT WAS HELD IN THE CASE OF TOPM AN ITA NO.87/AHD/2010 (AY 2000-01) MILTON LAMINATES LTD. VS CIT-II, AHMEDABAD 5 EXPORTS VS CIT [2012] 342 ITR 49 (SC) WHEREIN IT W AS HELD AS UNDER:- UNDER SECTION 28 OF THE ACT CASH ASSISTANCE RECE IVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS SUCH AS TH E DEPB CREDIT AND PROFIT ON TRANSFER OF THE DEPB CRE DIT ARE TREATED AS TO SEPARATE ITEMS OF INCOME UNDER CL AUSE (IIIB) AND (IIID). AS A RESULT, THE DEPB CREDIT WIL L BE CHARGEABLE AS INCOME UNDER CLAUSE (IIIB) OF SECTION 28 IN THE YEAR IN WHICH THE PERSON APPLIES FOR THE DEPB C REDIT AGAINST THE EXPORTS AND THE PROFIT ON TRANSFER OF T HE DEPB CREDIT BY THAT PERSON WILL BE CHARGEABLE AS INCOME UNDER CLAUSE (IIID) OF SECTION 28 IN HIS HANDS IN THE YEA R IN WHICH HE MAKES THE TRANSFER. THERE IS NO DOUBLE TAXATION OF THE SAME INCOME. SUB-SECTION (3) (A) OF SECTION 80 HHC PROVIDES THAT WHERE THE EXPORT OUT OF INDIA IS OF GOODS OR MERCHANDISE MANUFACTURED OR PROCESSED BY THE ASSESSEE, THE PROF ITS DERIVED FROM SUCH EXPORTS SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROP ORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH GOODS BEA RS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E ASSESSEE. EXPLANATION (BAA) UNDER SECTION 80 HHC ST ATES THAT PROFITS OF THE BUSINESS MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GA INS OF BUSINESS OR PROFESSIONS AS REDUCED, INTER ALIA, BY NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSES ( IIIA), (IIIB), (IIIC), (IIID) AND (IIIE) OF SECTION 28. TH US, NINETY PERCENT OF THE DEPB CREDIT WHICH IS CASH ASSISTANC E AGAINST EXPORTS AND IS COVERED UNDER CLAUSE (IIIB) OF SECTION 28 WILL GET EXCLUDED FROM THE PROFITS OF T HE BUSINESS OF THE ASSESSEE IF SUCH THE DEPB CREDIT H AS ACCRUED TO THE ASSESSEE DURING THE PREVIOUS YEAR. SIMILARLY, IF DURING THE SAME PREVIOUS YEAR, THE AS SESSEE HAS TRANSFERRED THE DEPB CREDIT AND THE SALE VALUE OF SUCH THE DEPB CREDIT IS MORE THAN THE FACT VALUE OF THE DEPB CREDIT, THE DIFFERENCE BETWEEN THE SALE VALUE OF THE ITA NO.87/AHD/2010 (AY 2000-01) MILTON LAMINATES LTD. VS CIT-II, AHMEDABAD 6 DEPB CREDIT AND THE FACE VALUE OF THE DEPB CREDIT W ILL REPRESENT THE PROFIT ON TRANSFER OF THE DEPB CREDIT COVERED UNDER CLAUSE (IIID) OF SECTION 28 AND NINET Y PER CENT OF SUCH PROFIT ON TRANSFER OF THE DEPB CREDIT CERTIFICATE WILL GET EXCLUDED FROM PROFITS OF THE BUSINESS. BUT, WHERE THE DEPB CREDIT ACCRUES TO THE ASSESSEE IN THE FIRST PREVIOUS YEAR AND THE ASSESSEE TRANSFERS THE DEPB CREDIT CERTIFICATE IN THE SECOND PREVIOUS YEAR , ONLY NINETY PER CENT OF THE PROFITS ON TRANSFER OF THE D EPB CREDIT COVERED UNDER CLAUSE (IIID) AND NOT NINETY P ER CENT OF THE ENTIRE SALE VALUE INCLUDING THE FACE VALUE O F DEPB CREDIT WILL GET EXCLUDED FROM THE PROFITS OF THE B USINESS. THUS, WHERE THE NINETY PER CENT OF THE FACE VALUE O F THE DEPB CREDIT DOES NOT GET EXCLUDED FROM PROFITS OF THE BUSINESS UNDER EXPLANATION (BAA) AND ONLY NINETY P ER CENT OF THE DIFFERENCE BETWEEN THE FACE VALUE OF TH E DEPB CREDIT AND THE SALE VALUE OF THE DEPB CREDIT GETS EXCLUDED FROM PROFITS OF THE BUSINESS, THE ASSESS EE GETS A BIGGER FIGURE OF PROFITS OF THE BUSINESS AND TH IS IS POSSIBLE WHEN THE DEPB CREDIT ACCRUES TO THE ASSESS EE IN ONE PREVIOUS YEAR AND TRANSFER OF THE DEPB CREDI T TAKES PLACE IN THE SUBSEQUENT PREVIOUS YEAR. THE RE SULT IN SUCH CASE IS THAT A HIGHER FIGURE OF PROFITS OF TH E BUSINESS BECOMES THE MULTIPLIER IN THE FORMULA UND ER SUB-SECTION (3) (A) OF SECTION 80HHC FOR ARRIVING A T THE FIGURE OF PROFITS DERIVED FROM EXPORTS. (C) WITH RESPECT TO 90% OF EXCISE IT WAS HELD IN TH E CASE :- (I) ORDER OF THE ITAT, AHMEDABAD BENCH PASSED IN ITA NO.3407/AHD/2004 DATED 12-12-2008 IN THE CASE OF STERLING EXPORT VS ACIT WHERE IN IT WAS HELD AS UNDER:- WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE ITA NO.87/AHD/2010 (AY 2000-01) MILTON LAMINATES LTD. VS CIT-II, AHMEDABAD 7 ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE DECISION OF THIS TRIBUNAL IN THE CASE OF ITO VS M/S. UMEDIA LABORATORIES LTD. [ ITA NO.2678/AHD/2002 FOR AY 1996-97 DECIDED ON 05- 04-2007]. WE FIND SUBSTANCE IN THE CONTENTION OF TH E ASSESSEE THAT THE EXCISE DUTY REFUND HAS BEEN RECEIVED BY THE ASSESSEE IN VIEW OF THE EXPORT ACTIVITIES AND IS A PART OF THE PROFITS AND GAINS O F BUSINESS OR PROFESSION U/S 28 (IIIE) OF THE ACT. THEREFORE, IT WILL BE PROFIT FROM THE BUSINESS. WE ACCORDINGLY DIRECT THE AO TO RE-COMPUTE THE DEDUCTION U/S 80 HHC AFTER TREATING THE EXPORT DUTY REFUND TO BE PART OF THE BUSINESS PROFIT AND RE- COMPUTE THE DEDUCTION U/S 80 HHC (3) READ WITH EXPLANATION (BAA) IN ACCORDANCE WITH LAW. (II) 2005 (095) TTJ 0014 AHD AARTI INDUSTRIES VS DCIT IT WAS HELD AS UNDER:- WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT PROFIT OF THE ASSESSEES BUSINESS DID NOT INCLUDE THE EXCISE DUTY REFUND. AS THE ASSESSEE WAS NOT LIABLE TO PAY EXCISE DUTY ON THE GOODS WHICH WERE EXPORTED AND HE WAS ONLY REQUIRED TO DEPOSIT THE EXCISE DUTY, AT THE TIME OF PURCHASES PENDING EXPORT OF THE SAME. AS AND WHEN THE EXPORT WAS MATERIALIZED, THE AMOUNT OF CORRESPONDING EXCISE DUTY DEPOSITED EARLIER WAS REFUNDED TO THE ASSESSEE-COMPANY. IN CASE OF AN EXPORTER HAVING FACILITY OF BOUNDED WAREHOUSE, IT I S NOT REQUIRED AT ALL TO DEPOSIT EXCISE DUTY IN THE F IRST INSTANCE AND THEN RECEIVE REFUND OF THE SAME. IF TH E ASSESSEE WAS HAVING BOUNDED WAREHOUSE FACILITY, THESE PAYMENTS AND REFUNDS OF EXCISE DUTY WOULD NOT HAVE TAKEN PLACE. AS AD WHEN SUCH EXCISE DUTY WAS PAID BY THE ASSESSEE AS A TEMPORARY MEASURE, THE AMOUNT WAS DEBITED AND SIMILARLY, ON REFUND OF SUCH EXCISE DUTY, THE SAME WAS CREDITED TO THE ITA NO.87/AHD/2010 (AY 2000-01) MILTON LAMINATES LTD. VS CIT-II, AHMEDABAD 8 BOOKS OF ACCOUNT. THUS, WE FOUND THAT ALLEGED AMOUNT OF EXCISE DUTY EITHER PAID OR REFUNDED DID NOT AFFECT THE BUSINESS PROFITS OF THE ASSESSEE AT ALL AND, THEREFORE, THERE IS NO REASON FOR EXCLUDING 90 PER CENT OF THE EXCISE DUTY REFUND FROM THE PROFITS OF THE BUSINESS OF ASSESSEE AS PER THE EXPLN. (BAA) TO S. 80 HHC. THE FINDINGS RECORDED BY THE CIT(A) TO THE EFFECT THAT PAYMENT OF EXCISE DUTY HAS NOT REDUCED THE BUSINESS PROFIT OF THE ASSESSEE, THEREFORE, REFUND OF EXCISE DUTY PAID SHOULD NOT BE EXCLUDED FROM THE BUSINESS PROFIT, HAD NOT BEEN CONTROVERTED BY THE DEPARTMENT. WE, THEREFORE, INCLINED TO AGREE WITH THE LEARNED AUTHORISED REPRESENTATIVE, THAT THERE IS NO INFIRMITY IN THE O RDER OF THE CIT(A) IN DIRECTING THE AO NOT TO EXCLUDE 90 PER CENT OF SUCH EXCISE DUTY REFUND IN TERMS OF EXPLN. (BAA), FROM THE PROFIT OF BUSINESS FOR COMPUTING DEDUCTION UNDER S. 80HHC. 6.1 CONSIDERING THE ABOVE SUBMISSIONS OF THE LEARNE D AR WHICH WAS NOT CONTROVERTED BY THE LEARNED DR, WE HEREBY D IRECT THE LEARNED AO TO FRAME THE ASSESSMENT PURSUANT TO THE ORDER OF THE LEARNED CIT IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS CITED S UPRA. TO THAT EXTEND THE ORDER OF LEARNED CIT STANDS MODIFIED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 22-03-2013. SD/- SD/- (D. K. TYAGI ) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT LAKSHMIKANT LAKSHMIKANT LAKSHMIKANTA AA A DEKA/ DEKA/ DEKA/ DEKA/- -- - ITA NO.87/AHD/2010 (AY 2000-01) MILTON LAMINATES LTD. VS CIT-II, AHMEDABAD 9 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASSTT. REGISTRAR, ITAT, AHMEDABA D 1. DATE OF DICTATION: DIRECT ON COMPUTER 18-03-13 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 18-03-13 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: N.A. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: