M/s. ENCEE OVERSEAS, MUMBAI v. ACIT CIR.-14(2), MUMBAI

ITA 6872/MUM/2006 | 2003-2004
Pronouncement Date: 15-07-2011 | Result: Allowed

Appeal Details

RSA Number 687219914 RSA 2006
Assessee PAN AAAFE7481R
Bench Mumbai
Appeal Number ITA 6872/MUM/2006
Duration Of Justice 4 year(s) 6 month(s) 28 day(s)
Appellant M/s. ENCEE OVERSEAS, MUMBAI
Respondent ACIT CIR.-14(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted K
Tribunal Order Date 15-07-2011
Date Of Final Hearing 27-11-2007
Next Hearing Date 27-11-2007
Assessment Year 2003-2004
Appeal Filed On 18-12-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K MUMBAI BEFORE SHRI J. SUDHAKAR REDDY (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO. 6872/MUM/2006 ASSESSMENT YEAR- 2003-04 M/S. ENCEE OVERSEAS 80A BABU GENU MARG KALBADEVI ROAD MUMBAI-400 002 PAN-AAAFE 7481R VS. THE ACIT CIR - 14(2) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.C. JAIN RESPONDENT BY: SHRI P. NAIK O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 28.9.2006 PASSED BY THE LD. CIT(A)-XIV FOR TH E ASSESSMENT YEAR 2003-04. 2. THE FACTS IN BRIEF ARE THAT THE APPELLANT IS A M ANUFACTURER AND 100% EXPORTER ENGAGED IN THE BUSINESS OF EMBROIDERE D FABRICS. DURING THE RELEVANT PREVIOUS YEAR THE APPELLANT HAD RECEI VED EXPORT INCENTIVES BY WAY OF DEPB AT RS. 2 11 99 230/-. 3. THE ONLY ISSUE RAISED IN APPEAL BY THE ASSESSEE PERTAINS TO THE DISALLOWANCE OF DEDUCTION U/S. 80HHC IN RESPECT OF DEPB INCOME AT RS. 2.12 CRORES. 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS (SUPRA) WHICH WAS ITA NO.6872/M/2006 2 IN FAVOUR OF THE ASSESSEE HAS SINCE BEEN REVERSED B Y THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KALPATARU COLOURS & CHEMICALS REPORTED IN 233 CTR 313 WHICH READS AS FOLLOWS: AS REGARDS THE DEDUCTION UNDER SECTION 80HHC THE LEGISLATURE SUBSTITUTED EXPLANATION (BAA) IN SECTION 80HHC SO AS TO EXCLUDE 90 PER CENT. OF THE PROFITS RECEIVED ON TRANSFER OF DE PB FROM THE PROFITS OF BUSINESS FOR THE PURPOSES OF SECTION 80H HC AND INSERTED THE SECOND AND THIRD PROVISOS TO SECTION 80HHC(3). THE SECOND PROVISO PROVIDED THAT IN THE CASE OF AN ASSESSEE HA VING AN EXPORT TURNOVER NOT EXCEEDING RS. 10 CRORES THE PROFITS C OMPUTED UNDER SECTION 80HHC(3) SHALL BE INCREASED BY 90 PER CENT. OF THE SUM REFERRED TO IN SECTION 28(IIID). THE THIRD PROVISO PROVIDED THAT IN THE CASE OF AN ASSESSEE HAVING AN EXPORT TURNOVER EXCEE DING RS. 10 CRORES THE PROFITS COMPUTED UNDER SECTION 80HHC(3) SHALL BE INCREASED BY 90 PER CENT. OF THE SUM REFERRED TO IN SECTION 28(IIID) SUBJECT TO THE TWO CONDITIONS SET OUT THEREIN. WHAT CONSTITUTES PROFITS UNDER SECTION 28(IIID) IS THE AMOUNT RECEIV ED ON TRANSFER OF THE DEPB CREDIT AND NOT THE AMOUNT OF CREDIT WHICH T HE ASSESSEE WAS ENTITLED TO UNDER THE DEPB SCHEME. IN OTHER WORD S THE AMOUNT EQUIVALENT TO THE FACE VALUE OF DEPB AS WELL AS THE AMOUNT RECEIVED IN EXCESS OF THE DEPB WOULD CONSTITUTE PROF ITS OF BUSINESS UNDER SECTION 28(IIID) AND MERELY BECAUSE A PART OF SUCH PROFITS OF BUSINESS (FACE VALUE) WAS OFFERED TO TAX IN THE YEA R IN WHICH THE CREDIT ACCRUED TO THE ASSESSEE WOULD NOT BE A GROUN D TO HOLD THAT SUCH PRO-FIT WAS NOT COVERED UNDER SECTION 28(IIID) . WHERE THE FACE VALUE OF THE DEPB CREDIT IS OFFERED TO TAX AS BUSINE SS PROFITS UNDER SECTION 28(IIID) IN THE YEAR IN WHICH THE CREDIT AC CRUED TO THE ASSESSEE THEN ANY FURTHER PROFIT ARISING ON TRANSF ER OF THE DEPB CREDIT WOULD BE TAXED AS PROFITS OF BUSINESS UNDER SECTION 28(IIID) IN THE YEAR IN WHICH THE TRANSFER OF THE DEPB CREDIT TO OK PLACE. THERE IS ANOTHER PERSPECTIVE FROM WHICH THE ISSUE C AN BE LOOKED AT. THE DEPB CREDIT TO WHICH AN EXPORTER IS E NTITLED IS A FORM OF AN EXPORT INCENTIVE. NO PART OF THE CREDIT THAT IS AVAILABLE UNDER THE DEPB SCHEME CAN FALL FOR CLASSIFICATION UN DER CLAUSE (IIIB) OF SECTION 28 WHICH DEALS WITH CASH ASSISTANCE REC EIVED OR RECEIVABLE AGAINST ANY SCHEME OF THE GOVERNMENT OF INDIA. CLAUSE (IIIB) WAS ENACTED AT A TIME WHEN THE EXPORT INCENT IVES THAT WERE AVAILABLE WERE (I) IMPORT ENTITLEMENT LICENCES; (II ) CASH COMPENSATORY SUPPORT ; AND (III) DUTY DRAWBACK. THE DEPB SCHEME WAS NOT IN EXISTENCE WHEN CLAUSE (IIIB) CAME TO BE ENACTED INTO ITA NO.6872/M/2006 3 SECTION 28 BY THE FINANCE ACT OF 1990. THE DEPB SCHE ME WAS BROUGHT INTO EXISTENCE WITH EFFECT FROM APRIL 1 19 97. CLAUSE (IIID) OF SECTION 28 WAS INSERTED BY THE AMENDING ACT OF 2 005 WITH EFFECT FROM APRIL 1 1998. THE VALUE OF THE DEPB CREDIT CA NNOT BE REGARDED AS A CASH ASSISTANCE WHICH IS RECEIVED OR RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVE RNMENT OF INDIA. IT CANNOT BE INFERRED FROM THE SPEECH OF THE FINANC E MINISTER THAT THE INSERTION OF CLAUSE (IIID) IN SECTION 28 W AS MADE WITH A VIEW TO TAX ONLY THE AMOUNT WHICH HAS BEEN RECEIVED IN EXCESS OF THE FACE VALUE OF THE DEPB CREDIT. DEPB CREDIT WAS I NTRODUCED WITH EFFECT FORM APRIL 1 1997 WHICH WAS AFTER THE INSE RTION OF CLAUSE (IIIB) IN SECTION 28 ; SECTION 28(IIIB) REFERS TO C ASH ASSISTANCE RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT PURSUA NT TO A SCHEME OF THE GOVERNMENT. THE AMOUNT RECEIVED ON TH E TRANSFER OF THE DEPB CREDIT IS NOT RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT PURSUANT TO A SCHEME OF THE GOVERNMENT W ITHIN THE MEANING OF CLAUSE (IIIC) ; AND WHEN SECTION 28(IIID ) SPECIFICALLY DEALS WITH PROFITS REALISED ON THE TRANSFER OF THE DEPB CR EDIT IT WOULD BE IMPERMISSIBLE AS A MATTER OF FIRST PRINCIPLE TO BIF URCATE THE FACE VALUE OF THE DEPB AND THE AMOUNT RECEIVED IN EXCESS OF THE FACE VALUE OF THE DEPB. THE ENTIRETY OF THE SALE CONSIDER ATION WOULD FALL WITHIN THE PURVIEW OF SECTION 28(IIID). IN THESE CIRCUMSTANCES WE SET ASIDE THE ISSUE TO THE FILE OF THE AO TO DECIDE IN LIGHT OF THE DECISIONS OF THE BOMBAY HIGH COURT IN THE CASE OF KALPATARU COLOURS & CHEMICALS(SUPRA) 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 15 TH DAY OF JULY 2011 SD/- SD/- (J. SUDHAKAR REDDY) (ASHA VIJA YARAGHAVAN) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED 15 TH JULY 2011 RJ ITA NO.6872/M/2006 4 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR K BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO.6872/M/2006 5 DATE INITIALS 1. DRAFT DICTATED ON: 12.7.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 12.07.2011 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. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: