Rugs India, v. ITO Ward-2,

ITA 1676/DEL/2008 | 2001-2002
Pronouncement Date: 30-03-2010 | Result: Allowed

Appeal Details

RSA Number 167620114 RSA 2008
Bench Delhi
Appeal Number ITA 1676/DEL/2008
Duration Of Justice 1 year(s) 10 month(s) 28 day(s)
Appellant Rugs India,
Respondent ITO Ward-2,
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 30-03-2010
Date Of Final Hearing 30-03-2010
Next Hearing Date 30-03-2010
Assessment Year 2001-2002
Appeal Filed On 02-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NOS. 1654 1655 & 1676/DEL/2008 ASSESSMENT YEARS : 1999-2000 2004-05 & 2001-02 M/S RUGS INDIA OPP. SHIV PURI KRISHANPURA PANIPAT. VS. INCOME-TAX OFFICER WARD-2 PANIPAT. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI TANEJA ADVOCATE RESPONDENT BY : SMT. BANITA DEVI NAREON SR. D.R. ORDER PER BENCH: ALL THESE APPEALS ARE FILED BY THE ASSESSEE. THEY ARE DIRECTED AGAINST THREE SEPARATE ORDERS OF THE CIT(A) DATED 22.2.2008 FOR ASSESSMENT YEARS 1999- 2000 2004-05 AND 2001-02. 2. IN ALL THE APPEALS ONE ISSUE IS COMMON WHICH IS REGARDING GRANT OF DEDUCTION U/S 80HHC ON THE TOTAL SALE PROCEEDS OF D EPB AMOUNT INSTEAD OF PROFITS AS MENTIONED IN SECTION 28(III)(D). THE GR IEVANCE OF THE ASSESSEE IN ALL THE THREE APPEALS ON THAT ISSUE IS EXPRESSED IN THE FOL LOWING GROUND OF APPEAL:- THAT LEARNED CIT(A) HAS REDUCED DEDUCTION U/S 80HH C ON THE TOTAL SALE PROCEEDS OF DEPB AMOUNT INSTEAD OF PROFITS AS MENTIONED IN SECTION 28(III)(D) OF THE INCOME-TAX ACT. IN THE C ASE OF M/S GLENMARK LABORATORIES LTD. ITAT HAVE HELD THAT ON LY PROFIT ON SALE OF DEPB LICENSE WILL BE CONSIDERED U/S 28(IIID) WH ILE FACE VALUE OF DEPB WILL BE CONSIDERED U/S 28(IV) OF INCOME TAX AC T. HENCE DEDUCTION ON SALE PROCEEDS OF DEPB AMOUNT INSTEAD O F PROFITS WILL BE CONSIDERED FOR THE PURPOSE OF U/S 28(III)(D). ITA NOS.1654 1655 & 1676/DEL/2008 2 THAT RETROSPECTIVE APPLICABILITY OF THE TAXATION LA WS AMENDMENT (ACT ) 2005 NO.55 OF 2005 IS BAD IN LAW. 3. APART FROM ABOVE ISSUE THE OTHER ISSUE RAISED F OR ASSESSMENT YEAR 2004- 05 IS WITH REGARD TO DEDUCTION U/S 80HHC VIS--VIS OTHER INCOME IN THE SHAPE OF INTEREST RENT AND OTHER INCOME THE GRIEVANCE OF WH ICH IS EXPRESSED IN THE FOLLOWING GROUNDS:- (4) THAT THE LEARNED CIT(A) WHILE CALCULATING DEDUC TION UNDER SECTION 80HHC HAS REDUCED THE 100% OF INTEREST RE NT & OTHER INCOME FROM THE BUSINESS INCOME INSTEAD OF 90 %. (5) THAT THE LEARNED CIT(A) HAVE CONSIDERED INTERES T ON FDR RS.2 26 003/- AS INCOME FROM OTHER SOURCES. THE FDR WERE MADE TO OBTAIN BANK GUARANTEE FROM THE BANK IN FAVO UR OF VARIOUS GOVT. DEPARTMENTS. THE FDRS ARE NOT IN TH E NATURE OF INVESTMENT OF SURPLUS FUNDS HENCE INCOME THEREO F CANNOT BE CONSIDERED AS INCOME FROM OTHER SOURCE INSTEAD CONSIDERING IT AS INCOME FROM BUSINESS OR PROFESSIO N. 4. AT THE OUTSET IT WAS POINTED OUT BY THE LD. A.R. THAT SO FAR AS IT RELATES TO DEDUCTION U/S 80HHC VIS--VIS DEPB RECEIPTS THE MA TTER MAY BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE SAID ISSUE IN ACCORDANCE WITH THE DECISION OF SPECIAL BENCH IN THE CASE OF TOPMAN EXP ORTS VS. ITO 33 SOT 337 (MUMBAI)( SB). HOWEVER THE LD. D.R. RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. NOW THE CONTROVERSY IF ANY ON THE ISSUE HAS BEEN RESOLVED BY THE AFOREMENTIONED DECISION OF THE SPECIAL BENCH IN THE CASE OF TOPMAN EXPORTS (SUPRA) THE HEAD NOTES OF WHICH READ AS UN DER:- I. SECTION 28(IIID) OF THE INCOME-TAX ACT 1961 BUSINESS INCOME- DUTY ENTITLEMENT PASS BOOK SCHEME ASSESSM ENT YEARS 2002-03 AND 2003-04 WHETHER ONLY PROFIT ELE MENT ON TRANSFER OF DEPB IS TO BE CONSIDERED UNDER CLAUSE ( IIID) OF SECTION 28 AND NOT SALE PROCEED ITSELF AND THEREFO RE UNLESS ITA NOS.1654 1655 & 1676/DEL/2008 3 BOTH CONDITIONS : (1) THAT THERE SHOULD BE TRANSFER OF DEPB AND (2) SUCH TRANSFER SHOULD RESULT INTO ANY PROFIT ARE CUMULATIVELY SATISFIED TRANSACTION CANNOT FORM PAR T OF SECTION 28(IIID) HELD YES WHETHER WORD PROFIT IN SEC TION 28(IIID) REFERS TO EXCESS OF SALE PROCEEDS OVER FACE VALUE OF DEPB HELD YES WHETHER THEREFORE ENTIRE AMOUNT RECEI VED ON SALE OF DEPB ENTITLEMENTS DOES NOT REPRESENT PROFIT CHAR GEABLE UNDER SECTION 28(IIID) AND PROFIT REFERRED TO THER EIN REQUIRES ARTIFICIAL COST TO BE INTERPOLATED TO EXTENT THAT FACE VALUE OF DEPB WOULD BE DEDUCTED FROM SALE PROCEEDS HELD Y ES WHETHER FACE VALUE OF DEPB IS CHARGEABLE TO TAX UND ER SECTION 28(IIIB) AT TIME OF ACCRUAL OF INCOME THAT IS WHE N APPLICATION FOR DEPB IS FILED WITH COMPETENT AUTHORITY PURSUANT TO EXPORTS AND PROFIT ON SALE OF DEPB REPRESENTING EXCESS OF S ALE PROCEEDS OF DEPB OVER ITS FACE VALUE IS LIABLE TO B E CONSIDERED UNDER SECTION 28(IIID) AT TIME OF ITS SALE HELD YES. SECTION 28 (IIIE) OF THE INCOME-TAX ACT 1961 BUS INESS INCOME DUTY FREE REPLENISHMENT CERTIFICATE (DFRC) WHET HER WHATEVER IS SAID ABOUT DEPB WOULD ALSO APPLY FOR DF RC ON BOTH ITS COMPONENTS VIZ. FACE VALUE OF DFRC AND P ROFIT ON ITS TRANSFER EXCEPT FOR FACT THAT PROFIT ON SALE OF DF RC SHOULD BE CHARGED TO TAX UNDER SECTION 28(IIIE) HELD YES. SECTION 80HHC OF INCOME-TAX ACT 1961 DEDUCTIONS EXPORTERS ASSESSMENT YEARS 2002-03 AND 2003-04 WHETHER INCOME ARISING FROM EXPORT BUSINESS DOES NOT ONLY M EAN PROFIT ON REALIZATION OF EXPORT PROCEEDS IN CONVERT IBLE FOREIGN EXCHANGE BUT ALSO ITEMS OF INCOME WHICH ARE DIRECTL Y INCIDENTAL TO EXPORT BUSINESS BEING EXPORT INCENTI VES VIZ. DEPB DUTY DRAWBACK ETC. COVERED UNDER SECTION 28 WHICH HAVE BEEN REFERRED TO IN FIVE PROVISOS TO SUB-SECTI ON (3) OF SECTION 80HHC HELD YES WHETHER EXPENSES AGAINS T SUCH INCENTIVES GET AUTOMATIC REDUCTION AT A FIXED PERCE NTAGE OF TEN PER CENT UNDER SCHEME OF SECTION 80HHC HELD YES WHETHER RELATION BETWEEN ACT OF EXPORTING GOODS AND DEPB EXISTS ONLY UPTO STAGE OF ITS ACQUISITION AND NOT T HEREAFTER HELD YES WHETHER THEREFORE SUBSEQUENT SALE OF D EPB IS A STEP DIVORCED FROM EXPORT AND PROFIT ON SALE OF DEP B WOULD NOT FORM PART OF EXPORT TURNOVER HELD YES. SECTION 2(24) READ WITH SECTION 28(IIID) OF THE I NCOME-TAX ACT 1961 INCOME DEFINITION OF ASSESSMENT YEARS 20 02-03 AND 2003-04 WHETHER ANY RECEIPTS ENSUING FROM BUSINES S HAVING CHARACTERISTICS OF INCOME CANNOT BE EXCLUDED FROM D EFINITION OF INCOME HELD YES WHETHER THEREFORE PROFIT ON TRANSFER OF DDEPB AS WELL AS DEPB ENTITLEMENT ITSELF BEING I N NATURE OF INCOME HAVE TO BE INCLUDED WITHIN GENERAL MEANING OF INCOME EVEN IF IT IS NOT SPECIFICALLY ENSHRINED IN SECTION 2(24) HELD YES. ITA NOS.1654 1655 & 1676/DEL/2008 4 II. SECTION 56 READ WITH SECTION 80HHC OF THE INC OME-TAX ACT 1961 INCOME FROM OTHER SOURCES CHARGEABLE AS ASSESSMENT YEARS 2002-03 AND 2003-04 WHETHER WHER E ASSESSEE EARNED INTEREST INCOME FROM PARKING OF SUR PLUS BUSINESS FUNDS AND THERE WAS NO CO-RELATION OF SUCH DEPLOYMENT OF FUNDS WITH EXPORT BUSINESS MUCH LESS ANY BUSINESS PURPOSE SUCH INTEREST INCOME WOULD FALL U NDER HEAD INCOME FROM OTHER SOURCES AND HENCE INELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC HELD YES. IN THIS VIEW OF THE SITUATION AFTER HEARING BOTH THE PARTIES ACCEPTING THE REQUEST OF THE LD. A.R. FOR RESTORATION OF THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER TO DECIDE THE SAME AS PER AFOREMENTIONED DECISION OF THE SPECIAL BENCH. WE D IRECT ACCORDINGLY. FOR STATISTICAL PURPOSES THE ISSUE REGARDING GRANT OF DEDUCTION U/S 80HHC ON DEPB IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFIC ER FOR ALL THE THREE YEARS TO BE DECIDED AS PER AFOREMENTIONED DECISION OF SPECIAL B ENCH. FOR STATISTICAL PURPOSES THIS GROUND FOR ALL THE THREE YEARS IS ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. 6. NOW WE ARE LEFT WITH GROUND NOS.4 & 5 RAISED F OR ASSESSMENT YEAR 2004- 05. THE GROUNDS HAVE BEEN REPRODUCED IN THE EARLIE R PART OF THIS ORDER. THE FACTS AS STATED IN THE ORDER OF THE CIT(A) ARE TH AT THE INCOME RECEIVED BY THE ASSESSEE IN THE SHAPE OF RENT AND INTEREST AGGREGAT ING TO A SUM OF RS.3 42 597/- WAS CLAIMED AS INCOME FROM BUSINESS FOR THE PURPOSE OF GRANT OF DEDUCTION U/S 80HHC. THE ASSESSING OFFICER ASSESSED SUCH INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AND THUS EXCLUDED 100% OF THE I NCOME FROM BUSINESS INCOME AS AGAINST THE CLAIM OF THE ASSESSEE THAT ON LY 90% WAS REQUIRED TO BE ITA NOS.1654 1655 & 1676/DEL/2008 5 REDUCED AND INTEREST INCOME WAS TO BE ASSESSED AS B USINESS INCOME. THE LD. CIT(A) HAS UPHELD THE ACTION OF THE ASSESSING OFFIC ER. 7. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. H ONBLE JURISDICTIONAL HIGH COURT HAS CLEARLY HELD THAT INTEREST WHICH HAS BEE N ASSESSED AS INCOME FROM OTHER SOURCES CANNOT BE CONSIDERED FOR THE PURPOSE OF DEDUCTION U/S 80HHC AND REFERENCE IN THIS REGARD CAN BE MADE TO THE FOL LOWING DECISIONS:- I) CIT VS. GRATEWAYS PVT. LTD. 171 TAXMAN 316 (PUNJAB) II) CIT VS. MALWA COTTON SPINNING MILLS LTD. 302 ITR 53 (PUNJAB). SIMILAR TREATMENT WAS GIVEN TO RENT ALSO IN THE DEC ISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MALWA COTTON SPINNING MIL LS LTD. (SUPRA). IN THIS VIEW OF THE MATTER WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) VIDE WHICH THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE. WE DISMISS T HESE GROUNDS OF APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2004-05. 8. IN THE RESULT THE APPEALS FOR ASSESSMENT YEARS 1999-2000 AND 2001-02 ARE ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FOR ASSESSMENT YEAR 2004-05 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE M ANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 30.3.2010. SD/- SD/- ( R.C. SHARMA ) ( I.P. BANSAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30.3.2010 VSK ITA NOS.1654 1655 & 1676/DEL/2008 6 COPY TO: 1. APPELLANT-ASSESSEE 2. RESPONDENT-REVENUE 3. CIT (A) 4. CIT 5. DR ITAT NEW DELHI. ASSISTANT REGISTRAR