ACIT 8(1), MUMBAI v. AGIO PHARMACEUTICALS LTD, MUMBAI

ITA 4439/MUM/2010 | 2004-2005
Pronouncement Date: 23-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 443919914 RSA 2010
Assessee PAN AABCA8426A
Bench Mumbai
Appeal Number ITA 4439/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 23 day(s)
Appellant ACIT 8(1), MUMBAI
Respondent AGIO PHARMACEUTICALS LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-09-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 23-09-2011
Date Of Final Hearing 11-02-2015
Next Hearing Date 11-02-2015
Assessment Year 2004-2005
Appeal Filed On 31-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A : MUMBAI BEFORE SHRI D. MANMOHAN (VICE PRESIDENT [MZ]) AND SHRI RAJENDRA SINGH (ACCOUNTANT MEMBER) ITA NO.4423/MUM/2010 ASSESSMENT YEAR : 2003-04 ITA NO.4439/MUM/2010 ASSESSMENT YEAR : 2004-05 ASSTT. COMMISSIONER OF INCOME TAX -8(1) ROOM NO.210 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-20. ..( APPELLANT ) VS. M/S. AGIO PHARMACEUTICALS LTD. A-38 NANDJYOT INDUSTRIAL ESTATE A.K. ROAD ANDHERI (E) MUMBAI-400 059. ..( RESPONDENT ) P.A. NO. (AABCA 8426 A) APPELLANT BY : SHRI P.C. MAURYA RESPONDENT BY : SHRI M. SUBRAMANIAN DATE OF HEARING : 15.9.2011 DATE OF PRONOUNCEMENT : 23 RD SEPTEMBER 2011 O R D E R PER RAJENDRA SINGH (AM). THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST D IFFERENT ORDERS DATED 22.3.2010 AND 23.3.2010 OF CIT(A) FOR THE AS SESSMENT YEAR 2003-04 AND 2004-05. AS THE DISPUTE RAISED IN BOTH THE APP EALS ARE IDENTICAL THESE ITA NO.4423 & 2239/M/10 A.Y:03-04 & 04-05 2 ARE BEING DISPOSED OF BY SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. THE DISPUTE IS REGARDING ALLOWABILITY OF DEDUCTION UNDER SECTION 80-HHC IN RESPECT OF DEPB INCOME AND EXCISE D UTY REFUND. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE WHO IS AN EXPORTER HAD RECEIVED DEPB INCOME AMOUNTING TO RS.1 70 09 500/- IN ASSESSMENT YEAR 2003-04 AND RS.1 05 35 559/- IN ASS ESSMENT YEAR 2004- 05. THE ASSESSEE HAD ALSO RECEIVED EXCISE DUTY REFU ND OF RS.1 00 64 611/- AND RS.74 84 406/- RESPECTIVELY FOR THE TWO YEARS. THE PROFIT OF BUSINESS IN BOTH THE YEARS AFTER REDUCING 90% OF INCENTIVE AS P ER EXPLANATION (BAA) WAS NEGATIVE. HOWEVER THE ASSESSEE CLAIMED DEDUCTION I N RESPECT OF INCENTIVES UNDER THE AMENDED PROVISIONS WHICH HAD BEEN COMPUTE D AT RS.66 95 457/- AND RS.20 67 395/- RESPECTIVELY. THE AO DID NOT AL LOW DEDUCTION UNDER SECTION 80HHC IN RESPECT OF DEPB INCOME ON THE GROUND THAT THE SAME WAS INCOME UNDER SECTION 28(IIID) AND AS THE EXPORT TUR NOVER EXCEEDED RS.10.00 CRORES AND THE CONDITIONS MENTIONED IN THE 3 RD PROVISO TO SECTION 80 HHC(3) WERE NOT SATISFIED DEDUCTION IN RELATION TO DEPB W AS NOT ALLOWABLE. THE AO DID NOT ALLOW DEDUCTION IN RESPECT OF EXCISE DUTY R EFUND ALSO THOUGH HE TREATED THE SAME AS BUSINESS INCOME. THE AO HELD T HAT THERE WAS NO EVIDENCE TO SHOW THAT EXCISE DUTY REFUND WAS PART O F EXPORT INCENTIVE. THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED BEFORE CIT(A) THAT ASSESSEE WAS 100% EXPORT ORIENTED UNIT AND THEREFOR E NO PAYMENT OF EXCISE DUTY WAS REQUIRED IN RESPECT OF GOODS EXPORTED. TH E ASSESSEE HAD EXPORTED GOODS AFTER PAYMENT OF EXCISE DUTY AND THEN HAD CLA IMED THE REFUND OF ITA NO.4423 & 2239/M/10 A.Y:03-04 & 04-05 3 EXCISE DUTY ON THE BASIS OF ARE-I FORM AND PROOF OF EXPORT. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D THAT UNDER THE PROVISIONS OF SECTION 28(III)(C) ANY DUTY OF CUSTO M OR EXCISE REPAID OR REPAYABLE AS DRAWBACK TO ANY PERSON AGAINST EXPORT MADE IS CHARGEABLE TO INCOME TAX AS PROFITS AND GAINS OF BUSINESS. CIT(A ) THEREFORE HELD THAT EXCISE DUTY REFUND HAD TO BE CONSIDERED AS INCENTIV E UNDER SECTION 28(III)(C) AND DEDUCTION UNDER SECTION 80HHC IS TO BE ALLOWED IN RESPECT OF SUCH INCENTIVE UNDER THE PROVISIONS OF THE ACT. AS REGA RDS DEPB INCOME CIT(A) HELD FOLLOWING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS LTD. (33 SOT 337) THAT THE FACE VALU E OF DEPB HAS TO BE CONSIDERED AS BUSINESS INCOME UNDER SECTION 28(IIIB ) AND SALE PRICE IN EXCESS OF FACE VALUE HAS TO BE CONSIDERED AS INCOME UNDER SECTION 28(IIID). THUS DEDUCTION IN RESPECT OF FACE VALUE HAS TO BE ALLOWE D AND NOT IN RESPECT OF THE EXCESS OF SALE PRICE OVER FACE VALUE WHICH IS TO BE CONSIDERED AS INCOME UNDER SECTION 28(IIID) AS CONDITIONS MENTIONED IN T HIRD PROVISO OF SECTION 80HHC (3) WERE NOT FULFILLED. AGGRIEVED BY THE SAID DECISION OF CIT(A) THE REVENUE IS IN APPEAL IN BOTH THE YEARS. 3. WE HAVE HEARD BOTH THE PARTIES PERUSED THE RECO RDS AND CONSIDERED THE MATTER CAREFULLY. THE FIRST DISPUTE IS REGARDIN G COMPUTATION OF DEDUCTION UNDER SECTION 80HHC IN RESPECT OF DEPB INCOME. BOTH T HE PARTIES AGREED THAT THE ISSUE WAS COVERED BY THE JUDGMENT OF HONBLE BO MBAY HIGH COURT IN THE CASE OF TOPMAN EXPORTS . IN CIT VS. KALPATARU COLOURS & CHEMICALS (2010) (328 ITR 451). IN WHICH IT HAS BEEN HELD THA T ENTIRE DEPB INCOME ITA NO.4423 & 2239/M/10 A.Y:03-04 & 04-05 4 INCLUDING FACE VALE HAS TO BE CONSIDERED AS BUSINES S INCOME UNDER SECTION 28(IIID) AND IN CASE ASSESSEE IS NOT FULFILLING THE TWO CONDITIONS MENTIONED IN THIRD PROVISO TO SECTION 80HHC(3) DEDUCTION CANNOT B E ALLOWED IF TURNOVER EXCEEDS RS.10.00 CRORES. IN THIS CASE THERE IS NO DISPUTE THAT THE EXPORT TURNOVER EXCEEDS RS.10.00 CRORES AND THERE IS A FIN DING BY AUTHORITIES BELOW WHICH HAS NOT BEEN CONTROVERTED BEFORE US THAT THE TWO CONDITIONS MENTIONED IN THIRD PROVISO TO SECTION 80HHC ARE NOT FULFILLED. THEREFORE CLAIM OF DEDUCTION IN RESPECT OF DEPB INCOME CANNOT BE ALLOW ED. THE ORDER OF CIT(A) IS SET ASIDE ON THIS COUNT AND DISALLOWANCE OF CLAI M OF DEDUCTION IN RESPECT OF DEPB INCOME BY AO IS UPHELD. 3.1 THE OTHER DISPUTE IS REGARDING DEDUCTION UNDER SECTION 80HHC IN RESPECT OF EXCISE DUTY REFUND. THE CIT(A) HAS HELD THAT BEING A 100% EXPORT ORIENTED UNIT THE ASSESSEE IS ENTITLED TO R EFUND OF EXCISE DUTY IN RELATION TO GOODS EXPORTED. THERE IS NO DISPUTE TH AT THE ASSESSEE HAS RECEIVED THE REFUND OF EXCISE DUTY AGAINST THE EXPO RTS MADE. UNDER THE PROVISIONS OF SECTION 28(IIIC) ANY DUTY OF CUSTOM O R EXCISE REPAID OR REPAYABLE AS DUTY DRAWBACK TO ANY PERSON AGAINST EXPORTS HAS TO BE TREATED AS BUSINESS INCOME WHICH IS ELIGIBLE FOR DEDUCTION UND ER SECTION 80HHC. CIT(A) HAS TREATED THE EXCISE DUTY REFUND AS INCENTIVE UND ER SECTION 28(IIIC). THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT POINTED OUT ANY ERROR IN THE APPROACH ADOPTED BY CIT(A). THE LD. AR FOR THE ASSESSEE ARG UED THAT EXCISE DUTY REFUND SHOULD BE TREATED AS PART OF OPERATIONAL INC OME AND SHOULD NOT BE COVERED UNDER EXPLANATION (BAA) BUT WE FIND THAT TH E ASSESSEE IS NOT IN ITA NO.4423 & 2239/M/10 A.Y:03-04 & 04-05 5 APPEAL AGAINST THE ORDER OF CIT(A) TREATING EXCISE DUTY REFUND AS INCENTIVE TO BE COVERED BY THE EXPLANATION (BAA). ARGUMENT RAIS ED BY THE LD. AR IS THEREFORE REJECTED. WE SEE NO INFIRMITY IN THE ORD ER OF THE CIT(A) AND THE SAME IS THEREFORE UPHELD. 4. IN THE RESULT BOTH THE APPEALS OF THE REVENUE A RE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/9/2011. SD/- SD/- (D. MANMOHAN) (RAJENDRA SINGH ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 23/9/2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. ITA NO.4423 & 2239/M/10 A.Y:03-04 & 04-05 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 19.9.11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 20.9.11 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