OPERA CLOTHING, MUMBAI V. ACIT 18(1), MUMBAI

ITA 917/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0116 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 24-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: BHARAT L GANDHI
• Section: 80HHC; 80IB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI PAWAN SINGH (JM) I.T.A. NO. 52 /MUM/20 16 & I.T.A. NO. 917/MUM/2016 (ASSESSMENT YEAR 2008 - 09) M/S. OPERA CLOTHING 2&4 SHAH & NAHAR INDUSTRIAL ESTATE S.J. MARG, L OWER PAREL MUMBAI - 400 013. PAN : AABFO4522H V S . ACIT 18(1) MUMBAI. ( APPELLANT ) ( RESPONDENT ) A SSESSEE BY SHRI BHARAT L. GANDHI DEPARTMENT BY S HRI V. JUSTIN DATE OF HEARING 6 . 0 3 . 201 8 DATE OF PRONOUNCEMENT 6 . 0 3 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - THE ASSESSEE HAS FILED THESE APPEALS CHALLENGING THE ORDERS PASSED BY LD CIT(A) - 33, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEARS 2008 - 09. ONE APPEAL IS RELATED TO THE ORDER PASSED BY THE LD CIT(A) IN THE RESTORED PROCEEDINGS AND THE O THER APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE REJECTION OF RECTIFICATION PETITION FILED BY THE ASSESSEE U/S 154 OF THE ACT BEFORE LD CIT(A). 2. IN BOTH THE APPEALS, THE ASSESSEE IS SEEKING DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF DUTY DRAWBAC K RECEIPTS BY CONTENDING THAT THE SAME IS ONLY REIMBURSEMENT OF DUTY/DEEMED DUTY PAID BY IT AND HENCE ONLY NET AMOUNT SHOULD BE DISALLOWED. THE ASSESSEE HAS ALSO TAKEN A PLEA THAT THE DUTY DRAWBACK RECEIPTS WOULD GO TO REDUCE THE MATERIAL COST. 3. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE TRIBUNAL HAS REJECTED THE CLAIM FOR DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF DUTY DRAWBACK RECEIPTS BY FOLLOWING THE DECISION RENDERED BY HONBLE SUPREME M/S. OPERA CLOTHING 2 COURT IN THE CASE OF LIBERTY INDIA (317 ITR 218), VIDE ITS ORDER DATED 08 - 05 - 2014 PASSED IN ITA NO.7538/M/2011. HOWEVER, THE ASSESSEE CLAIMED BEFORE THE TRIBUNAL THAT IT HAD TAKEN CERTAIN ALTERNATIVE PLEAS AND THOSE GROUNDS WERE NOT ADJUDICATED BY LD CIT(A). HENCE THE TRIBUNAL RESTORED T HE ISSUES RELATING TO ALTERNATIVE PLEAS, CITED ABOVE, TO THE FILE OF LD CIT(A). ACCORDINGLY THE LD CIT(A) PASSED THE IMPUGNED ORDER REJECTING THE ALTERNATIVE PLEAS. THE RECTIFICATION PETITION FILED BY THE ASSESSEE BEFORE LD CIT(A) WAS ALSO REJECTED. HEN CE THE ASSESSEE HAS FILED THESE APPEALS. 4. THE LD A.R SUBMITTED THAT THE HONBLE SUPREME COURT HAS HELD IN THE CASE OF ACG ASSOCIATED CAPSULES P LTD (343 ITR 89) THAT THE NET INCOME SHOULD BE CONSIDERED FOR COMPUTING PROFITS OF BUSINESS. HE SUBMITT ED THAT THE SAME RATIO SHOULD BE APPLIED TO THE INSTANT CASE ALSO. HE SUBMITTED THAT THE ASSESSEE HAS PAID EXCISE DUTY ON ITS PURCHASES AND IN RESPECT OF PURCHASES MADE FROM NON - EXCISABLE UNITS, THE DUTY SHOULD BE DEEMED TO HAVE BEEN PAID. HE SUBMITTED TH AT THE DUTY DRAWBACK SCHEME IS NOTHING BUT REIMBURSEMENT OF THOSE EXCISE DUTY ONLY AND HENCE THE DISALLOWANCE OF DEDUCTION U/S 80IB SHOULD BE RESTRICTED TO NET AMOUNT OF DUTY DRAWBACK AFTER DEDUCTION OF EXCISE DUTY PAID OR DEEMED TO HAVE BEEN PAID. IN T HE ALTERNATIVE, THE LD A.R SUBMITTED THAT THE DUTY DRAWBACK SHOULD GO TO REDUCE MATERIAL COST AND HENCE SHOULD BE CONSIDERED AS PART OF BUSINESS PROFITS. 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE DUTY DRAWBACK IS AN INCENTIVE SCHEME PROMOTED BY THE GOVERNMENT OF INDIA IN ORDER TO ENCOURAGE EXPORTS. HE SUBMITTED THAT THE QUANTUM OF INCENTIVE IS DETERMINED ON THE BASIS OF VALUE OF EXPORTS MADE BY APPLYING THE RATES PRESCRIBED THEREIN. ACCORDINGLY HE SUBMITTED THAT THE INCENTIVE SO RECEIVED IS RE LATED TO THE EXPORT PROMOTION SCHEME FLOATED BY THE GOVERNMENT AND CANNOT BE CONSIDERED AS ACTUAL REIMBURSEMENT OF EXCISE DUTY AS CANVASSED BY THE ASSESSEE. HE SUBMITTED THAT THE HONBLE SUPREME COURT HAS HELD IN THE CASE OF CIT VS. STERLING FOODS (237 IT R 579) THAT THE SOURCE FOR THE IMPORT ENTITLEMENTS IS THE EXPORT PROMOTION SCHEME OF THE CENTRAL GOVERNMENT AND HENCE THE NEXUS M/S. OPERA CLOTHING 3 BETWEEN THE INCENTIVES AND INDUSTRIAL UNDERTAKING IS NOT DIRECT BUT ONLY INCIDENTAL. 6. HAVING HEARD RIVAL CONTENTIONS, WE D O NOT FIND ANY MERIT IN THE CONTENTIONS OF THE ASSESSEE. ADMITTEDLY, THE DUTY DRAWBACK WAS ALLOWED BY THE CENTRAL GOVERNMENT AS PER THE EXPORT PROMOTION SCHEME FLOATED BY IT AND FURTHER THE SCHEME NOWHERE STATES THAT IT IS ACTUAL REIMBURSEMENT OF DUTY PAI D BY THE ASSESSEE. IN ANY CASE THE SOURCE OF DUTY DRAWBACK IS THE EXPORT PROMOTION SCHEME AS HELD BY HONBLE SUPREME COURT IN THE CASE OF STERLING FOODS (SUPRA) AND NOT THE INDUSTRIAL UNDERTAKING. IN THIS VIEW OF THE MATTER, WE DO NOT FIND MERIT IN ALL T HE CONTENTIONS RAISED BY THE ASSESSEE. THE RELIANCE PLACED BY LD A.R IN THE CASE OF ACG ASSOCIATED CAPSULES (SUPRA) IS ALSO MISPLACED AS THE SAME HAS BEEN RENDERED IN THE CONTEXT OF SEC. 80HHC OF THE ACT, WHEREIN A SPECIAL FORMULA WAS PRESCRIBED TO COMPUT E PROFITS OF BUSINESS AND THE ABOVE SAID DECISION OF HONBLE SUPREME COURT ONLY INTERPRETS THE FORMULA FOR THE PURPOSES OF SEC. 80HHC OF THE ACT. HENCE THE RATIO LAID DOWN IN THE SAID CASE CANNOT BE APPLIED TO SEC. 80IB OF THE ACT. IN ANY CASE, THE CLA IM OF THE ASSESSEE IS SQUARELY COVERED AGAINST IT BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF STERLING FOODS (SUPRA). ACCORDINGLY WE REJECT BOTH THE APPEALS OF THE ASSESSEE. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 6 . 0 3 .201 8 . SD/ - SD/ - (PAWAN SINGH ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 6 / 0 3 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI M/S. OPERA CLOTHING 4 6. GUARD FILE. BY ORDER, //TRUE COPY// SENIOR P RIVATE S ECRETARY PS ITAT, MUMBAI