The Jt. CIT., Navsari Range,, Navsari v. M/s. Ravi Exports, Navsari

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND BHAVESH SAINI JUDICIAL MEMBER) ITA.NO.2400 2401 AND 2402/AHD/2007 ASSTT.YEAR : 1999-2000 2000-2001 AND 2004-2005 JCIT NAVSARI RANGE NAVSARI. VS. M/S.RAVI EXPORTS LTD. FLAT NO.205 ADESH CO-OP. HSG. SOC. LTD. OPP: NOP MANEKLAL ROAD VIJALPORE NAVSARI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI AMARGIT SINGH ASSESSEE BY : SHRI M.K. PATEL O R D E R PER G.D. AGARWAL VICE-PRESIDENT: THESE ARE THREE APPEALS BY THE REVENUE AGAINST THE ORDERS OF THE CIT(A) VALSAD DA TED 28.02.2007 ARISING OUT OF ORDERS OF THE ASSESSING OFFICER UNDER SECTION 1 43(3) R.W.S. 147 OF THE INCOME TAX ACT 1961. SINCE ASSESSEE BEING SAME AN D THE GROUNDS RAISED IN THE APPEALS BEING SIMILAR FOR THE SAKE OF CONVENIE NCE WE DISPOSE OF THE APPEALS BY THIS COMMON ORDER. 2. AT THE OUTSET IT IS ADMITTED BY BOTH THE PARTIE S THAT THE GROUNDS RAISED IN THE APPEALS ARE SIMILARLY WORDED EXCEPT FIGURE OF A MOUNTS. THEREFORE WE SHALL TAKE UP THE FACTS STATED IN ITA NO.2400/AHD/2007 FO R A.Y.1999-200 FOR THE CONVENIENCE OF ADJUDICATION OF BOTH THE APPEALS. T HE GROUNDS RAISED IN ITA NO.2400/AHD/2007 ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD.CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S.80HHC OF RS.54 29 782/- ON THE DEPB BENEFITS IN CONTRAVENTION TO THE PROVISION OF THE THIRD PROVISO OF THE SECTION 80HHC(3) OF THE AC THOUGH THE ASSESSEE HAS FAILED TO FULFILL THE CONDITIONS LAID DOWN THEREIN. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) HAS ERRED IN HOLDING THAT THERE IS COST COMPONENT I N THE SALE VALUE OF THE DEPB LICENSE. ITA.NO.2400 2401 AND 2402/AHD/2007 -2- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) HAS ERRED IN ALLOWING A PART OF SALES VALUE OF THE DEPB LICENSE I.E. RS.1 02 56 895/- AS A PROFIT OF THE BUSINESS AND ON LY RS.437621 AS A PROFIT ON SALE OF THE DEPB LICENSE U/S.28(IIID) OF THE ACT. 4. AT THE TIME OF HEARING BEFORE US BOTH THE PARTI ES ADMITTED THAT THE ISSUE INVOLVED IN BOTH THE APPEALS IS WITH REGARD TO THE COMPUTATION OF DEDUCTION UNDER SECTION 80HHC VIS--VIS SALE PROCEED OF THE D EBP LICENSE. BOTH THE PARTIES ALSO ADMITTED THAT THE ISSUE NOW COVERED BY THE DECISION OF THE SPECIAL BENCH OF THE ITAT MUMBAI IN THE CASE OF TOPMAN EXP ORTS VS. ITO (2009) 125 TTJ (MUMBAI)(SB) 289 = 318 ITR (AT) 87. 5. WE HAVE CAREFULLY CONSIDERED SUBMISSIONS OF BOTH THE SIDES AND PERUSED MATERIAL PLACED ON RECORD. WE FIND THAT THE SPECIA L BENCH OF THE ITAT MUMBAI IN THE CASE OF TOPMAN EXPORTS (SUPRA) HAS HE LD AS UNDER: DEDUCTION UNDER S. 80HHCPROFITS DERIVED FROM EXPO RTSALE OF DEPB ENTITLEMENTSEXPORT INCENTIVES THOUGH STRICTL Y GOING BY THE MEANING OF THE EXPRESSION DERIVED FROM ARE NO T TO FORM PART OF THE PROFITS DERIVED FROM SUCH EXPORTS UNDER SUB-S. (1) BUT BY VIRTUE OF SUB-S. (3) R/W EXPLANATION ARE TO BE INCLUDED IN THE ELIG IBLE AMOUNTENTIRE MECHANISM FOR COMPUTATION OF PROFITS DERIVED FROM E XPORTS UNDER S. 80HHC HAS BEEN SPECIFICALLY PROVIDED FOR IN THE SEC TION ITSELF AND THERE IS NO NEED TO BE GOVERNED BY THE UNDERSTANDING OF T HE EXPRESSION PROFITS DERIVED FROM EXPORT IN COMMON PARLANCEIT IS OBVIOUS THAT 10 PER CENT OF SUCH INCOMES REPRESENTING THE EXPENSE S ARE REDUCED FROM THE TOTAL EXPENSES AT THE TIME OF COMPUTING THE PRO FITS DERIVED FROM EXPORT UNDER SUB-S. (3) OF S. 80HHC AND HENCE THERE IS NO SCOPE FOR GRANTING ANY FURTHER DEDUCTION TOWARDS SUCH EXPENSE S WHILE WORKING OUT THE PROFITS ON TRANSFER OF DEPB UNDER S. 28(III D)FACE VALUE OF DEPB CANNOT BE REDUCED FROM THE COST OF PURCHASES A ND HAS TO BE CONSIDERED AS A SEPARATE SPECIES OF BUSINESS INCO ME IF THE INTENTION OF THE LEGISLATURE HAD BEEN TO ALLOW THE REDUCTION OF THE FACE VALUE OF DEPB FROM THE COST OF PURCHASES AS HAS BEEN CONTEN DED THEN THERE WAS NO NEED TO HAVE CLS. (IIIA) TO (IIIE) OF S. 28 AND ALSO THE FIRST TO FIFTH PROVISOS TO S. 80HHC(3) ALONG WITH THE NECESSARY IN GREDIENTS OF EXPLANATION BELOW S. 80HHCNATURAL OUTCOME FOLLOWIN G THE PRESCRIPTION OF CLS. (IIIA) TO (IIIE) OF S. 28 ALON G WITH S. 80HHC(3) IS THAT ALL THE EXPORT INCENTIVES INCLUDING DEPB AND DFRC E TC. BE CONSIDERED AS SEPARATE BUSINESS INCOME AND NOT TO REDUCE THEM FROM THE COST OF ITA.NO.2400 2401 AND 2402/AHD/2007 -3- PURCHASESTHEREFORE IN THE SCHEME OF S. 80HHC THE FACE VALUE OF DEPB CANNOT BE REDUCED FROM THE PURCHASE COST BUT I S SEPARATE INCOME UNDER S. 28(IIID) WHICH ACCRUES AT THE TIME OF MAK ING APPLICATION PURSUANT TO EXPORTSONLY THE PROFIT ELEMENT ON THE SALE OF DEPB THAT IS THE AMOUNT IN EXCESS OF SALE PROCEEDS OVER THE F ACE VALUE IS COVERED UNDER S. 28(IIID)SINCE THE NECESSARY FACTS FOR THE DETERMINATION OF THE QUANTUM OF DEDUCTION UNDER S. 80HHC ARE NOT AVAILAB LE ON RECORD THE IMPUGNED ORDERS ARE SET ASIDE AND THE AO IS DIRECTE D TO COMPUTE THE AMOUNT OF RELIEF IN ACCORDANCE WITH LAW RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE SP ECIAL BENCH WE DIRECT THE AO TO RE-COMPUTE THE DEDUCTION UNDER SECTION 80HHC IN THE LIGHT OF THE ABOVE DECISION. 6. IN THE RESULT APPEALS OF THE REVENUES ARE TO B E TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 30 TH APRIL 2010. SD/- SD/- (BHAVESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 30-04-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER AR ITAT AHMEDABAD