DCIT RG 14(1), MUMBAI v. OCEANIC EXPORTS, MUMBAI

ITA 6134/MUM/2009 | 2001-2002
Pronouncement Date: 17-09-2010 | Result: Allowed

Appeal Details

RSA Number 613419914 RSA 2009
Assessee PAN AAAFC5086E
Bench Mumbai
Appeal Number ITA 6134/MUM/2009
Duration Of Justice 9 month(s) 24 day(s)
Appellant DCIT RG 14(1), MUMBAI
Respondent OCEANIC EXPORTS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 17-09-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted C
Tribunal Order Date 17-09-2010
Date Of Final Hearing 09-09-2010
Next Hearing Date 09-09-2010
Assessment Year 2001-2002
Appeal Filed On 23-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI D.K. AGARWAL JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NOS. 6131 & 6132/MUM/2009 (ASSESSMENT YEARS: 2004-05 & 2006-07) ADDL. CIT RANGE 14(1) M/S. CHEMPRO EXPORTS (INDIA) 201 2ND FLOOR EARNEST HOUSE PUSHPWATI BLDG. NO. 1 NARIMAN POINT MUMBAI 400021 VS. 1ST FLOOR OPP. CHANDANWADI CHEERA BAZAR MUMBAI 400002 PAN - AAAFC 5086 E APPELLANT RESPONDENT ITA NOS. 6133 6134 & 6135/MUM/2009 (ASSESSMENT YEARS: 1998-99 2001-02 & 2006-07) DCIT RANGE 14(1) M/S.OCEANIC EXPORTS 201 2ND FLOOR EARNEST HOUSE 576 CHIRA BASAR 3RD FLOOR NARIMAN POINT MUMBAI 400021 VS. J.S.S. ROAD MUMBAI 400002 PAN - AAAFC 0225 F APPELLANT RESPONDENT APPELLANT BY: SHRI HARI GOVIND SINGH RESPONDENT BY: SHRI I.P. RATHI O R D E R PER BENCH THESE APPEALS ARE BY THE REVENUE AGAINST THE ORDERS OF THE CIT(A) XXV MUMBAI FOR VARIOUS ASSESSMENT YEARS IN WHICH COMMON ISSUE IS INVOLVED AND HENCE THEY ARE HEARD TOGETHER AND DECIDED AS UN DER. 2. GROUNDS RAISED IN ALL THE REVENUE APPEALS ARE COMMO N AND ARE AS UNDER: - 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND F ACTS OF THE CASE. 2. THE HON'BLE CIT(A) ERRED IN HOLDING THAT THE ENT IRE AMOUNT RECEIVED ON SALE OF DEPB ENTITLEMENT DOES NOT REPRESENT PROF IT CHARGEABLE U/S. 28(III) OF THE I.T. ACT. 3. THE HON'BLE CIT(A) FURTHER ERRED IN HOLDING THAT THE PROFIT REFERRED TO IN SECTION 28(IIID) REQUIRES ANY ARTIFICIAL COST TO BE INTERPOLATED WHEN NO COST IS ACTUALLY INCURRED BY THE ASSESSEE. ITA NOS. 6133 TO 6135/MUM/2009 CHEMPRO EXPORTS (INDIA) & OCEANIC EXPORTS 2 3. THE ISSUE INVOLVED IN ALL THE APPEALS ARE WITH REFE RENCE TO ALLOWANCE OF DEPB RECEIPTS. THE CIT(A) FOLLOWING THE ORDER OF T HE SPECIAL BENCH IN THE CASE OF TOPMAN EXPORTS VS. ITO IN ITA NO. 5769/MUM/ 2006 DATED 11.08.2009 DIRECTED THE A.O. TO TREAT THE PROFIT O N TRANSFER OF DEPB AFTER REDUCING FACE VALUE OF THE DEPB PROCEEDS. THE FACE VALUE OF DEPB SHALL BE ASSESSABLE UNDER SECTION 28(IIIB) AND WILL BE ELIGI BLE FOR DEDUCTION UNDER SECTION 80HHC. HE DIRECTED THE A.O. TO ALLOW THE CL AIM OF 80HHC ACCORDINGLY. 4. AT THE OUTSET IT WAS SUBMITTED THAT THE ORDER OF TH E SPECIAL BENCH IN TOPMAN EXPORTS WAS NOT APPROVED BY THE HON'BLE BOMB AY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS IN ITA NO. 2887 OF 2009 DATED 28/29 JUNE 2010 IN WHICH THE HON'BLE HIGH COU RT HAS HELD AS UNDER: - S. 28(IIID) PROVIDES THAT ANY PROFIT ON THE TRANS FER OF DEPB SHALL BE BUSINESS PROFITS. UNDER EXPLANATION (BAA) TO S. 80H HC 90T OF THE SUM REFERRED TO IN S. 28(IIID) HAS TO BE REDUCED FROM THE BUSINESS PROFITS. UNDER THE THIRD PROVISO TO S. 80HHC(3) IN THE CASE OF AN ASSESSEE HAVING AN EXPORT TURNOVER EXCEEDING RS.10 CRORES T HE PROFITS REFERRED TO IN S. 80HHC(3) CAN BE INCREASED BY 90% OF THE SUM REFERRED TO IN S. 28(IIID) ONLY IF TWO CONDITIONS ARE SATISFIED. IF THE SAID CONDITIONS ARE NOT SATISFIED NO RELIEF ON ACCOUNT OF DEPB CAN BE GRAN TED U/S 80HHC. IN TOPMAN EXPORTS VS. ITO 318 ITR 87 (MUM)(SB)(AT) THE SPECIAL BENCH OF THE TRIBUNAL HELD THAT THE SUM REFERRED TO IN S. 2 8(IIID) MEANT ONLY THE PROFITS ON TRANSFER OF THE DEPB AND NOT THE ENTIR E SALE PROCEEDS. THE TRIBUNAL HELD THAT THE AMOUNT RECEIVED ON ACCOUNT O F DEPB HAD TO BE BIFURCATED INTO THE FACE VALUE OF THE DEPB AND TH E PROFIT AND THAT WHILE THE FACE VALUE WAS ASSESSABLE U/S 28(IIIB) THE PROFIT WAS ASSESSABLE U/S 28(IIID). THE CONSEQUENCE WAS THAT O NLY THE PROFIT SUFFERED THE RIGORS OF THE THIRD PROVISO TO S. 80HH C(3) AND NOT THE FACE VALUE. ON APPEAL BY THE DEPARTMENT HELD REVERSING THE SPECIAL BENCH: THE ARGUMENT THAT S. 28(IIID) COVERS ONLY THE PROF IT (DIFFERENCE BETWEEN SALE CONSIDERATION AND FACE VALUE OF THE DEPB CREDI T) AND THAT THE FACE VALUE IS ASSESSABLE U/S 28(IIIB) IS NOT CORRECT. T HE ENTIRE AMOUNT RECEIVED ON TRANSFER OF THE DEPB CREDIT IS PROFITS AND FALLS UNDER S. 28(IIID). THERE WAS NO BASIS OR JUSTIFICATION FOR T HE TRIBUNAL TO HOLD THAT THE FACE VALUE OF THE DEPB CREDIT CAN BE REDUCED FR OM THE SALE CONSIDERATION. IT IS NOT PERMISSIBLE TO BIFURCATE T HE PROCEEDS OF THE DEPB INTO FACE VALUE AND EXCESS OF FACE VALUE. THE A PPROACH OF THE TRIBUNAL IS MISCONCEIVED AND UNSUSTAINABLE. AS THE ASSESSEE HAD AN EXPORT TURNOVER EXCEEDING RS.10 CRORES AND DID NOT FULFIL THE CONDITIONS ITA NOS. 6133 TO 6135/MUM/2009 CHEMPRO EXPORTS (INDIA) & OCEANIC EXPORTS 3 SET OUT IN THE THIRD PROVISO TO S.80HHC(3) IT WAS NOT ENTITLED TO A DEDUCTION U/S 80HHC ON THE AMOUNT RECEIVED ON TRANS FER OF DEPB. 5. IN VIEW OF THIS THE ISSUE INVOLVED IN THE APPEALS ARE TO BE RESTORED TO THE FILE OF THE A.O. TO CONSIDER AND PASS NECESSARY ORDERS GIVING DUE REGARD TO THE QUESTION OF LAW AS DETERMINED BY THE HON'BLE BOMBAY HIGH COURT IN THE ABOVE SAID CASE. THE A.O. WILL FURNISH AN OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. ALL SUBMISSIONS AND FACTS CAN BE URGE D BY THE ASSESSEE BEFORE THE A.O. WHO SHALL CONSIDER THEM IN ACCORDANCE WITH LAW. WITH THIS GENERAL DIRECTION THE ISSUE IN EACH OF THE ASSESSMENT YEAR IS ALSO CONSIDERED AFRESH FOR THE SAKE OF RECORD. ITA NO. 6131/MUM/2009: A.Y. 2004-05 6. IN THE ASSESSMENT ORDER DATED 28.12.2007 VIDE PARA 4 OF THE ORDER THE A.O. DENIED DEDUCTION UNDER SECTION 80HHC AS THE AS SESSEES EXPORT TURNOVER WAS ABOVE ` 10 CRORES AND THE ASSESSEE DID NOT ESTABLISH THAT T HE DEPB RATES WERE LOWER THAN THE DUTY DRAWBACK RATES ON THE DATE OF EXPORT AND ACCORDINGLY THE CLAIM OF DEDUCTION UNDER SECTIO N 80HHC ON THE DPEB RECEIPTS WAS DISALLOWED BY THE A.O. BEFORE THE CIT( A) IT WAS CONTENDED THAT THE ASSESSEE HAS CREDITED DEPB LICENCE VALUE OF ` 61 68 810/- TO THE P & L ACCOUNT WHICH REPRESENT THE ENTIRE SALE PROCEEDS O F DEPB AND BENEFITS ACCRUED DURING THE YEAR. SINCE THE PROFIT OF SALE O F THE ABOVE DEPB WAS NIL THE ASSESSEE WAS ENTITLED TO DEDUCTION AND NO AMOUN T SHOULD BE EXCLUDED WHILE WORKING OUT THE DIRECT COST WHICH WAS CONTES TED IN GROUND NOS. 4 TO 6. THESE ISSUES HAVE BEEN CONSIDERED BY THE HON'BLE BOMBAY HIGH COURT IN DETAIL IN THE ABOVE REFERRED CASE OF KALPATARU COLO URS AND CHEMICALS (SUPRA). ACCORDINGLY THE A.O. IS DIRECTED TO EXAMIN E THE ISSUE AFRESH IN THE LIGHT OF THE ABOVE JUDGEMENT AND IN ACCORDANCE WITH LAW. ACCORDINGLY THE ISSUE IS SET ASIDE TO THE FILE OF THE AO. ITA NO. 6132/MUM/2009: A.Y. 2006-07 7. IN THIS YEAR THE A.O. HAS RE-EXAMINED THE ISSUE VID E PARA 6.2 AND HAS RAISED VARIOUS QUESTIONS IN PARA (A) (B) (C) AND (D) OF THE ORDER AND ACCORDINGLY TREATED AN AMOUNT OF ` 18 36 668/- THE DIFFERENCE BETWEEN DEPB ON ACCRUED BASIS AND RECEIVED BASIS THAT WAS EXCLUDED BY THE ITA NOS. 6133 TO 6135/MUM/2009 CHEMPRO EXPORTS (INDIA) & OCEANIC EXPORTS 4 ASSESSEE AND VALUE OF LICENCES WHICH WERE NOT SOLD IN THE YEAR TO THE EXTENT OF ` 43 96 246/- WAS TAXED ON ACCRUAL BASIS. THE ASSESSE ES COUNSEL REQUESTED THAT THE A.O. MAY BE DIRECTED TO MAKE NEC ESSARY ADJUSTMENTS IN EARLIER/ LATER YEARS IF REQUIRED CONSEQUENT TO TH E FINDINGS GIVEN IN THIS ASSESSMENT ORDER. SINCE THE A.O. HIMSELF HAS RAISED VARIOUS QUESTIONS AND ACCORDINGLY BROUGHT TO TAX SOME OF THE AMOUNTS WHI CH WERE OFFERED IN EARLIER YEARS OR IN LATER YEARS THIS ASPECT MAY BE EXAMINED BY THE A.O. AND PASS NECESSARY ORDERS IN LINE WITH THE FINDINGS GIV EN IN THIS ASSESSMENT ORDER. WITH THIS DIRECTION THE ISSUE IS RESTORED BA CK TO THE FILE OF THE A.O. ITA NOS. 6133 & 6134/MUM/2009: A.Y. 1998-99 & 20 01-02 8. IN THIS CASE THE MATTER WAS RESTORED BACK TO THE A. O. VIDE ITA NOS. 2825 & 2826/MUM/2005 DATED 10.03.2006 ON THE ISSUE OF 80HHC TO BE REDONE IN THE LIGHT OF AMENDED PROVISIONS OF LAW. I N THE CONSEQUENTIAL ORDERS VIDE PARA 7 OF THE ASSESSMENT ORDER DATED 06.12.200 7 THE A.O. GIVE A FINDING THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION OF DEPB RECEIPTS AS TURNOVER EXCEEDS ` 10 CRORES. AS ALREADY STATED THE ISSUE WAS PARTLY C ONSIDERED BY THE CIT(A) FOLLOWING THE DECISION OF THE ITAT IN TOPMAN EXPORTS (SUPRA) AND THE REVENUE IS AGGRIEVED. 9. SINCE THE LAW ON THIS ISSUE IS ALSO CRYSTALLISED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT THE A.O. IS DIRECTED TO RE-EXAMINE THE ISSUE IN THE LIGHT OF THE JUDICIAL PRINCIPLES ESTABLISHED AN D ON FACTS AS PER THE PROVISIONS OF SECTION 80HHC. THIS ISSUE IS RESTORED BACK TO THE FILE OF THE A.O. ACCORDINGLY. ITA NO. 6135/MUM/2009: A.Y. 2006-07 10. IN THIS YEAR THE A.O. HAS RE-EXAMINED THE ISSUE VID E PARA 5.2 AND HAS RAISED VARIOUS QUESTIONS IN PARA (A) (B) (C) AND (D) OF THE ORDER AND ACCORDINGLY TREATED AN AMOUNT OF ` 23 31 687/- THE DIFFERENCE BETWEEN DEPB ON ACCRUED BASIS AND RECEIVED BASIS THAT WAS EXCLUDED BY THE ASSESSEE AND THE VALUE OF LICENCES WHICH WERE NOT SOLD IN THE YEAR TO THE EXTENT OF ` 87 06 027/- ON ACCRUAL BASIS. THE ASSESSEES COUNSE L REQUESTED THAT THE A.O. MAY BE DIRECTED TO MAKE NECESSARY ADJ USTMENTS IN EARLIER / ITA NOS. 6133 TO 6135/MUM/2009 CHEMPRO EXPORTS (INDIA) & OCEANIC EXPORTS 5 LATER YEARS IF REQUIRED CONSEQUENT TO THE FINDING S GIVEN IN THIS ASSESSMENT ORDER. SINCE THE A.O. HIMSELF HAS RAISED VARIOUS QU ESTIONS AND ACCORDINGLY BROUGHT TO TAX SOME OF THE AMOUNTS WHICH WERE OFFE RED IN EARLIER YEARS OR IN LATER YEARS THIS ASPECT MAY BE EXAMINED BY THE A.O . AND PASS NECESSARY ORDERS IN LINE WITH THE FINDINGS GIVEN IN THIS ASSE SSMENT ORDER. WITH THIS DIRECTION THE ISSUE IS RESTORED BACK TO THE FILE OF THE A.O. 11. THE A.O. IS DIRECTED TO GIVE ADEQUATE OPPORTUNITY T O THE ASSESSEE TO SUBSTANTIATE ITS CLAIMS AND PASS NECESSARY ORDERS I N ACCORDANCE WITH LAW. 12. IN THE RESULT APPEALS ARE CONSIDERED ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER 2010. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 17 TH SEPTEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXV MUMBAI 4. THE CIT XIV MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.