Spentex Industries Ltd, v. CIT XXV,

ITA 324/DEL/2007 | 2003-2004
Pronouncement Date: 22-09-2011 | Result: Dismissed

Appeal Details

RSA Number 32420114 RSA 2007
Assessee PAN AAAFL6511G
Bench Delhi
Appeal Number ITA 324/DEL/2007
Duration Of Justice 4 year(s) 8 month(s) 2 day(s)
Appellant Spentex Industries Ltd,
Respondent CIT XXV,
Appeal Type Income Tax Appeal
Pronouncement Date 22-09-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 22-09-2011
Date Of Final Hearing 20-09-2011
Next Hearing Date 20-09-2011
Assessment Year 2003-2004
Appeal Filed On 19-01-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER ITA NO.324/DEL/2007 ASSESSMENT YEAR : 2003-04 SPENTEX INDUSTRIES LTD. (FOR AND ON BEHALF OF ERSTWHILE CLC CORPORATION) A 60 OKHLA INDUSTRIAL AREA PHASE II NEW DELHI 110 020. PAN : AAAFL6511G VS. ACIT CIRCLE-29(1) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ROHIT GARG ADVOCATE REVENUE BY : MRS. GEETMALA MOHNANY CIT DR ORDER PER I.P. BANSAL JUDICIAL MEMBER EARLIER THE PRESENT APPEAL WAS DECIDED BY THE TRIBUN AL VIDE ORDER DATED 16 TH OCTOBER 2009 IN ITA NO.324/DEL/2007. IN THE SAID ORDER THE ISSUE REGARDING GRANT OF DEDUCTION U/S 80HHC ON DEPB C REDITS WAS DECIDED IN FAVOUR OF THE ASSESSEE FOLLOWING THE SPECIAL BENCH DECISION IN THE CASE OF TOPMAN EXPORTS VS. ITO (ITA NO.5769/MUM /2006). THE REVENUE BEING AGGRIEVED BY THE SAID ORDER OF THE TRI BUNAL HAD PREFERRED AN APPEAL BEFORE HONBLE DELHI HIGH COURT AND VIDE ORDER DATED 18 TH FEBRUARY 2011 HONBLE HIGH COURT IN ITA NO.1080/ 2010 HAS RESTORED THE MATTER BACK TO THE FILE OF THE TRIBUNAL WITH THE FOLLOWING OBSERVATIONS:- ITA NO.324/DEL/2007 2 1. ALL THESE APPEALS INVOLVED COMMON QUESTION OF LAW. FOR THE SAKE OF CONVENIENCE WE CAN REPRODUCE THE QUESTIONS O F LAW FRAMED IN ONE OF THESE APPEALS:- '(A) WHETHER ON A CORRECT INTERPRETATION OF THE RELEVANT STATUTORY PROVISIONS TRIBUNAL WAS JUSTIFIED N LAW IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80HHC OF THE ACT IN RESPECT OF 'PROFIT' ON SALE OF DEPB? (B)WHETHER ON THE FACTS OF THE PRESENT CASE TRIBUNAL WAS JUSTIFIED IN LAW IN IMPLIEDLY HOLDING THAT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION AS PER THE FIRST PROVISO BELOW SUB-SECTION 3 OF SECTION 80HHC IN RESPECT OF DEPB CREDIT UTILIZED BY THE ASSESSEE?' 2. THE ORDERS PASSED BY THE TRIBUNAL IN ALL THESE CAS ES ARE BRIEF BECAUSE OF THE REASON THAT THE TRIBUNAL HAS SIMPLY FOLL OWED (WHICH IT WAS SUPPOSED TO) THE DECISION OF THE ITAT SPE CIAL BENCH MUMBAI IN THE CASE OF TOPMAN EXPORT VS. ITO [I TA NO. 5769/MUM./2006 DECIDED ON DATED 11TH AUGUST 2009.]. B Y THAT JUDGMENT THE SPECIAL BENCH OF THE ITA NO. ITA 12/2011 & ORS. CONNECTED MATTERS PAGE 5 OF 6 TRIBUNAL HAS HELD THAT THE FACE VALUE OF DEPB IS CHARGEABLE TO TAX U/S 28 (IIIB) AT THE TIME OF ACCRUAL OF INCOME THAT IS WHEN THE APPLICATION FOR DE PB IS FILED WITH THE COMPETENT AUTHORITY PURSUANT TO EXPORTS AND PROFIT I N SALE OF DEPB REPRESENTING THE EXCESS OF SALE PROCEEDS OF DEPB OVER ITS FACE VALUE IS LIABLE TO BE CONSIDERED U/S 28 (IIID) AT THE TIME OF ITS SALE. 3. THE REVENUE HAD FILED THE APPEAL IN THE HIGH COURT ADJUDICATE AT BOMBAY AGAINST THE AFORESAID DECISION OF THE SPECIAL BENCH OF THE ITAT. THE BOMBAY HIGH COURT HAS REVERSED THE DECIS ION OF THE TRIBUNAL AND THE JUDGMENT OF THE BOMBAY HIGH COURT I S REPORTED AS COMMISSIONER OF INCOME TAX VS. KALPATARU COLOURS COMMISSIONER OF INCOME TAX VS. KALPATARU COLOURS COMMISSIONER OF INCOME TAX VS. KALPATARU COLOURS COMMISSIONER OF INCOME TAX VS. KALPATARU COLOURS AND CHEMICALS AND CHEMICALS AND CHEMICALS AND CHEMICALS 328 ITR 451. 4. SINCE THE TRIBUNAL HAD SIMPLY FOLLOWED SPECIAL BE NCH DECISION IN TOPMAN EXPORTS TOPMAN EXPORTS TOPMAN EXPORTS TOPMAN EXPORTS (SUPRA) WHICH STANDS OVER RULED WE S ET ASIDE THE ORDER PASSED BY THE TRIBUNAL IN ALL THESE CASES AN D REMIT THE CASES BACK TO THE TRIBUNAL TO DECIDE THESE APPEALS ON M ERITS AFTER TAKING INTO ACCOUNT FACTUAL POSITION IN ALL THESE CA SES. 5. THESE APPEALS STAND DISPOSED OF ON ABOVE TERMS. 2. ACCORDING TO THE AFOREMENTIONED DIRECTIONS OF HON BLE HIGH COURT THE PRESENT APPEAL WAS FIXED TO DECIDE THE ISSUE REGARDING GRANT OF DEDUCTION U/S 80HHC IN RESPECT OF DEPB CREDITS. TH E CLAIM OF ITA NO.324/DEL/2007 3 DEDUCTION U/S 80HHC ON DEPB CREDITS WAS DISALLOWED BY T HE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS:- IN THE COMPUTATION OF INCOME FILED BY THE ASSESSEE THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80HHC AT RS.212952 87/-. IN VIEW OF TAXATION LAWS (AMENDMENT) ACT 2005 NO.55 OF 2 005 DT. 28.12.2005 THE ASSESSEE VIE THIS OFFICE QUESTIONNAIRE DT.03.02.2006 WAS ASKED TO REWORK HIS CLAIM FOR DEDU CTION U/S 80HHC. THE ASSESSEE VIDE HIS LETTER DT. 17.03.2006 HA S STATED THAT HE ASSESSEE OPTED FOR DEPB LICENCE EVEN THOUGH HE WAS ENTITLED FOR DUTY DRAW BACK ALSO. AS PER THE TAXATION LA WS (AMENDMENT) ACT 2005 NO.55 OF 2005 DATED 28.12.05 THE FOLLOWING CLAUSE IS APPLICABLE ON THE ASSESSEES HAVI NG TURNOVER EXCEEDING RS.10 CRORES:- PROVIDED ALSO THAT IN THE CASE OF AN ASSESSEE HAVING EXPORT TURNOVER EXCEEDING RUPEES TEN CRORES DURING THE PREVIO US YEAR THE PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF THIS SUBSECTION OR AFTER GIVING EFFECT TO THE FIRST PRO VISO AS THE CASE MAY BE SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO NINETY PER CENT. OF ANY SUM REFERRED TO IN CLA USE (IIID) OF SECTION 28 THE SAME PROPORTION AS THE EXPORT TURNOVER BE ARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSE SSEE IF THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVIDENCE TO PROVE THAT - (A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAWBACK OR THE DUTY ENTITLEMENT PASS BOOK SCHEME BEING THE DUTY REMISSION SCHEME; AND (B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE D UTY ENTITLEMENT PASS BOOK SCHEME BEING THE DUTY REMISSION SCHEME: SINCE FOR THE ASSESSEE TO BECOME ELIGIBLE FOR DEDUCTIO N U/S 80HHC ON EXPORT INCENTIVES IN THE FORM OF DEPB RECEIVE D BY HIM AS PER CLAUSE B REFERRED TO ABOVE THE ASSESSEE H AS TO PROVE THAT DUTY DRAW BACK CREDIT ATTRIBUTABLE TO THE CUSTOM DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE DEPB SCHEME WHICH THE ASSESSEE HAS FAILED TO DO. AS SUCH THE ASS ESSEE IS NOT ENTITLED TO DEDUCTION U/S 80HHC ON THE EXPORT INCENTIVE S RECEIVED BY HIM. ITA NO.324/DEL/2007 4 3. LD. CIT (A) HAS SIMPLY CONFIRMED THE FINDINGS OF A SSESSING OFFICER VIDE WHICH IT HAS BEEN HELD THAT THE ASSESSEE IS NOT ENTI TLED FOR BENEFIT OF DEDUCTION U/S 80HHC ON DEPB CREDITS. 4. FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE DOES NOT FULFILL THE AFOREMENTIONED TWO CONDITIONS AND THE TURNOVER OF TH E ASSESSEE IS EXCEEDING ` 10 CRORE. THE LEARNED AR OF THE ASSESSEE HA S ALSO FAIRLY CONCEDED THAT THE ASSESSEE DOES NOT FULFILL THE AFOREMEN TIONED TWO CONDITIONS. THEREFORE AFTER CONSIDERING THE FACTS OF THE CASE WE HOLD THAT THE ASSESSEE IS NOT ENTITLED TO BENEFIT OF DEDUCTIO N UNDER SECTION 80HHC ON DEPB CREDITS. 5. THIS VIEW OF OURS IS IN ACCORDANCE WITH THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU CO LOURS AND CHEMICALS (2010) 328 ITR 451 (BOM) WHEREIN THEIR LOR DSHIPS HAVE HELD AS UNDER:- ADMITTEDLY IN THE ASSESSMENT YEAR IN QUESTION THE ASSE SSEE HAD AN EXPORT TURNOVER EXCEEDING RS.10 CRORES AND DID NOT FULFILL THE CONDITIONS SET OUT IN THE THIRD PROVISO TO SECTION 80HHC ( 3) INTRODUCED BY THE FINANCE ACT OF 2005. AS A RESULT THE ASSESSEE WAS NOT ENTITLED TO A DEDUCTION UNDER SECTION 80HHC ON THE AMOUNT RECEIVED ON TRANSFER OF DEPB. 6. THEREFORE THE AFOREMENTIONED GROUND TAKEN BY TH E ASSESSEE WITH REGARD TO DEDUCTION U/S 80HHC ON ACCOUNT OF DEP B CREDIT IS REJECTED. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISM ISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 22.09.20 11. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 22.09.2011. ITA NO.324/DEL/2007 5 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES