THE WELSPUN ZUCCHI TEXTILES PVT. LTD, MUMBAI v. M/S. ACIT RG RG 2(3), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI D.K.AGARWAL(J.M) & SHRI R.K.PANDA ( A.M) ITA NO.2717/MUM/2008(A.Y. 2003-04) ITA NO.2718/MUM/2008(A.Y. 2004-05) WELSPUN ZUCCHI TEXTILES PRIVATE LIMITED 9 TH FLOOR B-WING TRADE WORLD KAMALA MILLS COMPOUND PAREL MUMBAI 13. PAN: AAACW 2067L (APPELLANT) VS. THE ACIT RANGE 2(3) AAYKAR BHAVAN MK ROAD MUMBAI 20. (RESPONDENT) ITA NO.2880/MUM/2008(A.Y.2003-04) ITA NO.2881/MUM/2008(A.Y. 2004-05) THE ACIT RANGE 2(3) AAYKAR BHAVAN MK ROAD MUMBAI 20. (APPELLANT) VS. WELSPUN ZUCCHI TEXTILES PRIVATE LIMITED 9 TH FLOOR B-WING TRADE WORLD KAMALA MILLS COMPOUND PAREL MUMBAI 13. PAN: AAACW 2067L (RESPONDENT) ASSESSEE BY : SHRI D.S.MAINKAR REVENUE BY : SHRI SUSHIL KUMAR ORDER PER BENCH THESE ARE CROSS APPEALS FOR THE ASSESSMENT YEARS 2 003-04 AND 2004-05 AND ARE DIRECTED AGAINST THE COMMON ORDER DATED 21/1/2 008 OF THE LD. CIT(A) XXX MUMBAI. FOR THE SAME OF CONVENIENCE THESE WERE HEA RD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER. ITA NO.2717& 2880/MUM/08(A.Y. 2003-04): 2. THE GROUND RAISED BY THE ASSESSEE AS WELL AS THE REVENUE ARE AS UNDER:- ITA NO.2717 2718 2880&2881/M/08 2 ASSESSEES GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT ERRED IN CONFIRMING DISALLOWANCE OF DEDUCTION O F PROFIT AND SALE OF DEPB LICENCES CLAIMED UNDER THIRD PROVISO TO SEC. 80 HHC (3) READ WITH SEC. 28(IIID). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT ERRED IN CONFIRMING THE TREATMENT OF INTEREST INCOM E AS INCOME FROM OTHER SOURCES AND FURTHER ERRED IN CONFIRMING THE DEDUCTI ON OF 90% OF SUCH INTEREST FROM PROFITS OF BUSINESS IN COMPUTING DEDUCTION UND ER SECTION 80HHC. REVENUES GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW: 1. THE CIT(A) HAS ERRED IN HOLDING THAT THE FACE VA LUE OF DEPB CREDIT SHOULD NOT BE EXCLUDED FOR COMPUTING DEDUCTION U/S. 80 HHC STATING THAT THE PROFIT ON SALE OF DEPB ENTITLEMENT AS PER CLAUSE (IIID) OF SECTION 28 IS THE DIFFERENCE BETWEEN THE CONSIDERATION RECEIVED AND T HE SALE OF DEPB CREDIT SOLD WITHOUT APPRECIATING THE FACT THAT THE ASSESSE E HAS NOT INCURRED ANY COST FOR GETTING DEPB CREDIT AND THEREFORE THE ENT IRE SALE PROCEEDS NEEDS TO BE CONSIDERED AS THE PROFIT AS PER CLAUSE (IIID ) OF SECTION 28. 2. FOR THIS AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE DID NOT PRESS GROUND NO.2 OF THE ASSESSEES APPEAL FOR WHICH THE LD. D.R HAS NO OBJECTION. ACCORDINGLY GROUND NO.2BY THE ASSESSEE IS DISMISSED AS NOT PR ESSED. 4. AS REGARDS GROUND OF APPEAL NO.1 BY THE ASSESSEE AND GROUNDS OF APPEAL BY THE REVENUE THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ISSUE SHOULD GO BACK TO THE FILE OF THE A.O FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS VS. ITO & OTHERS REPORTED IN 318 ITR 87(AT). THE LD. D.R ON THE OT HER HAND SUBMITTED THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE SPE CIAL BENCH OF THE TRIBUNAL IN THE ABOVE CITED CASE AND HAS GONE TO THE HIGH COURT.. HE ACCORDINGLY RELIED ON THE ORDER OF THE A.O. 5. AFTER HEARING BOTH THE SIDES WE ARE OF THE CONSI DERED OPINION THAT THE MATTER NEEDS FRESH ADJUDICATION BY THE A.O IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH ITA NO.2717 2718 2880&2881/M/08 3 OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS (SUP RA). WE THEREFORE RESTORE THE ISSUE BACK TO THE FILE OF THE A.O FOR FRESH ADJUDIC ATION OF THE ISSUE IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF TOPMAN EXPORTS (SUPRA) AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GRO UNDS RAISED BY THE ASSESSEE AND REVENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSES. ITA NO.2718 & 2881/MUM/08(A.Y. 2004-05). 6. AFTER HEARING BOTH THE SIDES WE FIND THE GROUN DS RAISED BY THE ASSESSEE AS WELL AS THE REVENUE IN THIS CROSS APPEAL ARE IDENT ICAL TO THE GROUND OF CROSS APPEAL NO.2717 & 2880/MUM/08 FOR THE ASSESSMENT YEAR 2003- 04. IN THE SAID CROSS APPEALS THE SECOND GROUND OF THE ASSESSEE HAS BEEN DISMISS ED AS NOT PRESSED AND THE FIRST GROUND OF THE ASSESSEE AND THE GROUNDS OF THE REVEN UE HAVE BEEN RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN THE LIGHT OF TH E DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS (SUPRA). FO LLOWING THE SAME RATIO THE SECOND GROUND OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. SIMILARLY THE FIRST GROUND OF THE ASSESSEE AND THE GROUNDS OF THE REVENUE ARE RESTORE D TO THE FILE OF THE A.O FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION OF THE SP ECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS(SUPRA). 7. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 28 TH DAY OF JAN.2010. SD/- SD/- (D.K.AGARWAL) (R.K.PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED. 28 TH JAN.2010 ITA NO.2717 2718 2880&2881/M/08 4 COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT CITY CONCERNED MUMBAI THE CIT(A)- CONCERNED 5. THE D.RG BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR ITAT MUMBAI BENCHES MUMBAI. VM. ITA NO.2717 2718 2880&2881/M/08 5 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 27/1/2010 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 27/1/2010 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER ITA NO.2717 2718 2880&2881/M/08 6