Asahi Songwon Colour Ltd., Ahmedabad V. The DY.CIT., (OSD)Range-1, Ahmedabad

ITA 902/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8840 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 02-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 27-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: D K PARIKH
• Keywords: Business income; Cost of acquisition; Set aside
• Section: 80HHC; 28; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND BHAVNESH SAINI, JUDICIAL MEMBER) ITA.NO.902/AHD/2007 ASSTT.YEAR : 2004-2005 ASAHI SONGWON COLORS LTD. 30, AMBICA SOCIETY OPP: USMANPURA GARDEN USMANPURA, AHMEDABAD. VS. DCIT(OSD) RANGE-1, AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.K.PARIKH REVENUE BY : SHRI C.K. MISHRA O R D E R PER G.D. AGARWAL, VICE-PRESIDENT: THIS IS ASSESSEES APPEAL AGAINST ORDER OF THE CIT(A)-X, AHMEDABAD DATED 7-12 -2006. IN THIS APPEAL FOLLOWING GROUNDS ARE RAISED: 1. THE LD.CIT(A) ERRED BOTH IN LAW AND ON FACTS IN NOT APPRECIATING THE PLEA OF THE APPELLANT ABOUT THE UNJUST EFFECT O F THE PROVISO TO SEC.80HHC(3). THE LD.CIT(A) OUGHT TO HAVE DIRECTED THE AO TO GRANT THE DEDUCTION U/S.80HHC IN RESPECT OF DEPB INCOME. 2. THE LD.CIT(A) FURTHER ERRED BOTH IN LAW AND ON F ACTS IN HOLDING THAT THE AO HAS PROPERLY DEALT WITH THE AMENDED SEC .80HHC IN DETAIL. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE DIRECTED THE AO TO GRANT THE FULL DEDUCTION U/S.80H HC AS CLAIMED. IT IS PRAYED THAT DEDUCTION U/S.80HHC BE GRANTED TO THE A PPELLANT AS CLAIMED IN THE RETURN OF INCOME. 3. THE LD.CIT(A) FURTHER ERRED BOTH IN LAW AND ON F ACTS IN HOLDING THAT WHILE CALCULATING DEDUCTION U/S.80HHC THE SET OFF OF LOSS IN TRADING EXPORT AGAINST PROFIT OF MANUFACTURING EXPORT WAS T O BE MADE PARTICULARLY WITHOUT THERE BEING ANY DISCUSSION OR REASON HAVING BEEN GIVEN BY THE AO. IT IS SUBMITTED THAT THE ERRONEOU S ORDER OF THE AO CONFIRMED BY THE CIT(A) BE CANCELLED AND DEDUCTION BE DIRECTED TO BE GIVEN U/S.80HHC IN FULL. ITA.NO.902/AHD/2007 -2- 4. THE LD.CIT(A) ERRED IN LAW AND ONF ACTS IN CONFI RMING THE ORDER OF THE AO HOLDING THAT THE APPELLANT HAD NOT FULFIL LED THE CONDITION LAID DOWN IN SEC.28(III)(D) AND 28(III)(E) AND THEREBY D ISALLOWING THE DEDUCTION CORRECTLY CLAIMED U/S.80HHC. IT IS SUBMI TTED THAT EXPORT INCENTIVE WAS PROFIT ELIGIBLE FOR DEDUCTION AND THE SAME BE SO HELD NOW AND THE DEDUCTION OF RS.1,04,05,848/- BE GIVEN AS C LAIMED. 5. THE LD.CIT(A) OUGHT TO HAVE ALLOWED THE APPEAL I N TOTO 2. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT THE GROUNDS RAISED IN THE APPEAL ARE RELATED TO COM PUTATION OF DEDUCTION UNDER SECTION 80HHC AND ESPECIALLY AS TO HOW THE TREATMEN T IS TO BE GIVEN TO SALE PROCEEDS OF THE DEPB ENTITLEMENT. HE SUBMITTED THA T THIS ISSUE IS NOW SQUARELY COVERED BY THE DECISION OF THE SPECIAL BEN CH OF THE ITAT, MUMBAI IN THE CASE OF TOPMAN EXPORTS VS. ITO, 125 TTJ, 289. THEREFORE, THE AO SHOULD BE DIRECTED TO RE-COMPUTE DEDUCTION UNDER SECTION 8 0HHC AS PER THE ABOVE DECISION OF THE ITAT. THE LEARNED DR ON THE OTHER HAND HAS NO OBJECTION TO THE ABOVE REQUEST OF THE ASSESSEE. 3. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T THE SPECIAL BENCH OF THE ITAT, MUMBAI IN THE CASE OF TOPMAN EXPORTS (SUPRA) HAS HELD AS UNDER: BUSINESS INCOME BENEFIT OR PERQUISITE UNDER S. 2 8(IIID) DEPB ENTITLEMENT VIS--VIS COST OF ACQUISITION TH4REOF THOUGH DEPB IS POST- EXPORT INCENTIVE, BUT ITS OBJECTIVE IS TO COUNTERBA LANCE THE EFFECT OF CUSTOMS DUTY INCLUDED IN THE COST OF PURCHASES, INC URRED DIRECTLY OR INDIRECTLY BY THE EXPORTER IT CANNOT BE SEEN AS A N INCENTIVE DETACHED FROM COST OF GOODS PURCHASED IT IS ONLY ON THE MA KING OF AN APPLICATION FOR DEPB THAT THE ASSESSEE ACQUIRES THE RIGHT TO RECEIVE THE DEPB AND INCOME ACCRUES AT THAT STAGE FACT THAT T HE ASSESSEE SELLS THE DEPB ENTITLEMENT IN THIS YEAR OR LATER YEAR AND HENCE THE INCOME BE CONSIDERED TO HAVE ACCRUED IN ENTIRETY ON THE DATE OF SUCH SALE IS TOTALLY IRRELEVANT INSOFAR AS THE ORIGINAL AMOUNT, BEING TH E FACE VALUE OF THE DEPB IS CONCERNED LANGUAGE OF CLS. (IIID) AND (II IE) OF S. 28 IS CRYSTAL CLEAR WHICH TALKS OF ANY PROFIT ON THE TRANSFER OF DEPB/DFRC- REFERENCE IS NOT TO THE SALE PROCEEDS BUT TO THE PR OFIT ON THE TRANSFER OF ITA.NO.902/AHD/2007 -3- DEPB/DFRC SALE PROCEEDS CANNOT BE CONFUSED WITH P ROFIT IN AS MUCH AS THE PROFIT CAN ONLY BE AN INCREMENTAL AMOUNT AND NOT THE WHOLE THEREFORE, THE WORD PROFIT IN S.28(IIID) REFERS T O THE EXCESS OF SALE PROCEEDS OVER THE FACE VALUE OF DEPB ENTIRE AMOUN T RECEIVED ON SALE OF DEPB ENTITLEMENT IS NOT PROFIT CHARGEABLE UNDER S. 28(IIID) BUT THE FACE VALUE OF DEPB HAS TO BE DEDUCTED FROM THE SALE PROCEEDS. THE ABOVE DECISION OF THE SPECIAL BENCH WOULD BE S QUARELY APPLICABLE TO THE ISSUE UNDER APPEAL BEFORE US. WE, THEREFORE , SET ASIDE THE ORDER OF THE AUTHORITIES BELOW ON THIS POINT AND RESTORE THE MAT TER BACK TO THE FILE OF AO. WE DIRECT THE AO TO RE-COMPUTE DEDUCTION UNDER SECT ION 80HHC AFTER TAKING INTO ACCOUNT THE ABOVE DECISION OF THE SPECIAL BENC H OF THE ITAT. 4 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TO B E TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 2 ND MARCH, 2010. SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 02-03-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD