Shirdi Exim (P) Ltd, v. DCIT Circle -8 (1),

ITA 1161/DEL/2008 | 2004-2005
Pronouncement Date: 08-04-2010 | Result: Allowed

Appeal Details

RSA Number 116120114 RSA 2008
Bench Delhi
Appeal Number ITA 1161/DEL/2008
Duration Of Justice 2 year(s) 6 day(s)
Appellant Shirdi Exim (P) Ltd,
Respondent DCIT Circle -8 (1),
Appeal Type Income Tax Appeal
Pronouncement Date 08-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 08-04-2010
Date Of Final Hearing 08-04-2010
Next Hearing Date 08-04-2010
Assessment Year 2004-2005
Appeal Filed On 02-04-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G NEW DELHI BEFORE SHRI CL SETHI JM AND SHRI SHAMIM YAHYA AM ITA NO. 1161/DEL/2008 A.Y. 2004-05 SHIRDI EXIM P.LTD. VS. DCIT CIRCLE 8(1) 30/27 1 ST FLOOR EAST NEW DELHI PATEL NAGAR NEW DELHI (APPELLANT) (RESPONDE NT) APPELLANT BY : SH. ASHWANI TANEJA ADV. SH. TARUN KUMAR ADV. RESPONDENT BY : MS.PRATIMA KAUSHIK SR.D.R. O R D E R PER SHAMIM YAHYA ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LDCIT(A) DATED 18.1.2008 AND PERTAINS TO A.Y. 2004-05. 2. THE FIRST ISSUE RAISED IS THAT THE LDCIT(A) WAS NOT CORRECT IN CONFIRMING THE DISALLOWANCE OF RS. 10 31 519/- MADE BY THE A.O. U/S 80 HHC. 3. THE AO IN THIS CASE HAS HELD THAT THE ASSESSEE SHALL NOT BE ALLOWED DEDUCTION U/S 80HHC IN RESPECT OF DEPB IN V IEW OF THE AMENDED PROVISIONS OF LAW AND CBDT CIRCULAR NO. 2/2006 DATE D 17.1.2006. 2 HENCE HE PROCEEDED TO DISALLOW A SUM OF RS. 10 31 5 19/- IN THIS REGARD AS HE NOTED THAT THE ASSESSEE COMPANY HAD A NEGATI VE PROFIT OF RS. 3 30 52 497/-. 4. UPON ASSESSEES APPEAL THE LDCIT(A) CONFIRMED TH IS DISALLOWANCE. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS VS. ITO 318 ITR 87 (AT) HAD AN OCCASION TO CONSIDER AN IDEN TICAL ISSUE. THE SPECIAL BENCH HAS HELD AS UNDER. THE QUESTION RAISED BEFORE THE SPECIAL BENCH HAS T WO PARTS. IN SO FAR AS THE FIRST PART: WHETHER THE ENTIRE AMOUN T RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEA BLE UNDER SECTION 28(III D) OF THE INCOME TAX ACT IS CONCERN ED WE ANSWER IT IN THE NEGATIVE AND THE SECOND PART OF THE QUEST ION: OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTERPOLATED? IS REPLIED IN THE AFFIRMATIVE TO TH E EXTENT THAT THE FACE VALUE OF DEPB SHALL BE DEDUCTED FROM THE SALE PROCEEDS. AS REGARDS THE GROUNDS RAISED IN THE THESE APPEALS AGAINST THE DENIAL OF DEDUCTION UNDER SECTION 80 HHC IN FULL O R PART WE FIND THAT THE COMPUTATION OF PROFITS DERIVED FROM EXPORTS AND THE RESULTANT AMOUNT OF DEDUCTION UNDER THIS SECTIO N CAN BE MADE ONLY WHEN THE DECISION IS TAKEN ON THE AMOUNT AND THE TIMING OF TAXABILITY OF THE FACE VALUE OF DEPB AND THE PROFIT ON ITS SALE. ON THIS ISSUE WE HOLD THAT THE FACE VALU E OF DEPB IS CHARGEABLE TO TAX U/S 28(III B) AT THE TIME OF ACCR UAL OF INCOME THAT IS WHEN THE APPLICATION FOR DEPB IS FILED WIT H THE 3 COMPETENT AUTHORITY PURSUANT TO EXPORTS AND PROFIT ON SALE OF DEPB REPRESENTING THE EXCESS OF THE SALE PROCEEDS O F DEPB OVER ITS FACE VALUE IS LIABLE TO BE CONSIDERED U/S 28(II I D) AT THE TIME OF ITS SALE WHATEVER IS SAID ABOUT DEPB SHALL ALS O HOLD GOOD FOR DFRC ON BOTH ITS COMPONENTS VIZ. THE FACE VA LUE OF DFRC AND PROFIT ON ITS TRANSFER EXCEPT FOR THE FACT TH AT THE PROFIT ON SALE OF DFRC SHALL BE CHARGED TO TAX U/S 28 (III E) . THERE IS NO DISPUTE ABOUT THE DUTY DRAW BACK WHICH SHALL BE CH ARGEABLE TO TAX AT THE TIME OF ACCRUAL OF INCOME U/S 28(III C) WHEN APPLICATION IS FILED WITH THE COMPETENT AUTHORITY A FTER MAKING EXPORTS. SINCE THE NECESSARY FACTS FOR THE DETERMI NATION OF THE QUANTUM OF DEDUCTION U/S 80 HHC AS DISCUSSED ABOVE ARE NOT AVAILABLE ON RECORD WE THEREFORE SET ASIDE THE I MPUGNED ORDERS AND DIRECT THE A.O. TO COMPUTE THE AMOUNT OF RELIEF IN ACCORDANCE WITH THE VIEW EXPRESSED BY US HEREINABOV E. THE LD.D.R. ON THE OTHER HAND FAIRLY CONCEDED TO THE PROPOSITION THAT THE RATIO OF M/S TOPMAN EXPORTS (SUPRA) BY THE SPEC IAL BENCH WILL BE APPLICABLE IN THIS CASE ALSO AND ACCORDINGLY SHE SU BMITTED THAT THE MATTER MAY BE REMITTED TO THE FILES OF A.O. RESPEC TFULLY FOLLOWING THE DECISION ABOVE WE REMAND THE ISSUE BACK TO THE FIL E OF THE AO TO CONSIDER THE ISSUE AFRESH AS PER THE SPECIAL BENCH DECISION CITED ABOVE AS PER LAW. NEEDLESS TO ADD THAT THE ASSESEE MAY BE GIVEN AN ADEQUATE OPPORTUNITY OF BEING HEARD. 6. NEXT ISSUE RAISED IS THAT THE LDCIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 60 310/- MADE BY THE A.O. 4 7. ON THIS ISSUE THE AO NOTED THAT THE ASSESEE HA D DEBITED AN AMOUNT OF RS. 1 99 435/- UNDER THE HEAD VEHICLE RU NNING AND MAINTENANCE RS. 2 73 703/- UNDER THE HEAD TELEPHON E & COMMUNICATION AND RS. 1 29 959/- UNDER THE HEAD DEP RECIATION ON VEHICLES. THE AO ASKED THE ASSESSEE TO EXPLAIN WHE THER ANY LOG BOOK OR REGISTER HAS BEEN MAINTAINED IN RESPECT OF RUNNING/ MAINTENANCE OF VEHICLES. SINCE THE ASSESSEE HAS NOT MAINTAINED A NY SUCH RECORD THE AO HELD THAT PERSONAL USE OF VEHICLES CANNOT BE DENIED AND 10% OUT OF THESE EXPENSES WILL BE DISALLOWED FOR PERSONAL USE OF DIR ECTORS I.E. RS. 60 310/- ON ASSESSEES APPEAL THE LDCIT(A) CONFIRMED THE ADD ITION. 8. AGAINST THIS ORDER THE ASSESEE IS IN APPEAL BEFO RE US. IT HAS BEEN CONTENDED THAT THIS ADDITION IS TOTALLY BASED UPON SURMISES AND CONJECTURES. FURTHER IT HAS BEEN CLAIMED THAT DEL HI ITAT IN THE CASE OF SWASTIC INDUSTRIES AND POWER LTD. HAD DELETED SIMIL AR DISALLOWANCE ON THE BASIS OF GUJARAT HIGH COURT JUDGEMENT IN THE C ASE OF SAYAJI ENGINEERING CO. VS CIT REPORTED IN 253 ITR 249. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. W E FIND THAT IT IS NOT THE CASE OF THE AO THAT THE VOUCHERS IN THIS R EGARD ARE NOT AVAILABLE OR THAT HE HAD COME ACROSS ANY PERSONAL USE OF VE HICLES BY THE DIRECTORS. THE DISALLOWANCE MADE BY THE AO IS TOTA LLY ON ADHOC BASIS BASED ON SURMISES AND CONJECTURES. IT IS A SETTLED LAW THAT NO ADDITION 5 CAN BE MADE ON SURMISES AND CONJECTURES. HENCE WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW ON THIS ISSUE AND DELET E THE ADDITION. 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH APRIL 2 010. (CL SETHI) (SHAM IM YAHYA) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: 8TH APRIL 2010 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2. RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR