Income Tax Appellate Tribunal - Mumbai
Prabhat Industries, Mumbai vs Department Of Income Tax on 20 February, 2014
आयकर अपील य अ धकरण "J" यायपीठ मब
ंु ई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "J" BENCH, MUMBAI
ी पी.एम. जगताप, लेखा सद य एवं ववेक वमा;
या यक सद य के सम ।
BEFORE SHRI P.M. JAGTAP, AM AND SHRI VIVEK VARMA, JM
आयकर अपील सं./I.T.A. No.5220 /Mum/2006
( नधारण वष / Assessment Year : 2003-2004
Dy. Commissione r of बनाम/ M/s Prabh at Indus trie s,
Income Tax - 13(3) , Prabhat Bhav an,
Vs.
Room No. 427, 4 t h floor, Opp. Sipl a,
Aayakar Bhav an, 96, LBS Marg,
Mumbai - 20. Vikhroli (We st),
Mumbai - 400 083.
थायी ले खा सं . /PAN : AAAFP 0470H
(अपीलाथ /Appellant) .. ( यथ / Respondent)
आयकर अपील सं./I.T.A. No.4976/Mum/2006
( नधारण वष / Assessment Year : 2003-2004
M/s Prabh at Indus trie s, बनाम/ Dy. Commissione r of
Prabhat Bhav an, Vs. Income Tax - 13(3) ,
Opp. Sipl a, Room No. 427, 4 t h floor,
96, LBS Marg, Aayakar Bhav an,
Vikhroli (We st), Mumbai - 20.
Mumbai - 400 083.
थायी ले खा सं . /PAN : AAAFP 0470H
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Assessee by Dr. K. Shivram &
Shri Paras S. Savla
Revenue by : Shri Surendra Kumar
ु वाई क तार ख / Date of Hearing
सन : 23-12-13
घोषणा क तार ख /Date of Pronouncement : 20-02-2014
[
2 ITA 5220/M/06 & 4976/M/06
आदे श / O R D E R
PER P.M. JAGTAP, A.M. :
पी.एम. जगताप, लेखा सद य These cross appeals filed against the order of ld. CIT(A) XIII, Mumbai dtd. 10-07-2006 are fixed before us to decide some issues raised therein as per the direction of the Hon'ble Bombay High Court after giving both the sides an opportunity of being heard.
2. The assessee in the present case is a partnership firm which is engaged in the business of export of rubber goods, auto spare parts with accessories and marine products as a trader. The return of income for the year under consideration was filed by it on 8-10-2003 declaring total income of Rs. 15,18,620/- after claiming deduction of Rs. 51,37,094/- u/s 80HHC of the Income Tax Act, 1961. The said deduction u/s 80HHC of the Act was computed by the assessee as a trader u/s 80HHC(3)(b) of the Act and since such computation resulted in a loss, the said loss was set off by the assessee against 90% of all export incentives as per the 5th proviso to section 80HHC(3) thereby claiming deduction of Rs. 51,37,094/- u/s 80HHC of the Act. In the assessment originally completed u/s 143(3) of the Act vide an order dtd. 28.2.2006, the claim of the assessee for deduction u/s 80HHC of the Act was examined by the A.O. On such examination, he held that no deduction for 10% of export incentives towards in-direct cost was allowable as claimed by the assessee. He also held that the resultant loss as computed by the assessee u/s 80HHC(3)(b) of the Act was liable to be set off only against duty drawback of Rs. 1,33,09,615/- and not against the export incentives as claimed by the assessee. He was also of the opinion that the loss of USA branch of the assessee was liable to be set off against the business income for the purpose of computing the deduction u/s 80HHC of the Act. Accordingly the claim of the assessee for deduction u/s 80HHC of the Act was restricted by the A.O. On appeal, the ld. CIT(A) allowed the claim of the assessee for 3 ITA 5220/M/06 & 4976/M/06 reducing the Central Excise refund of Rs. 99,58,658/- from the cost of purchase. He also held that the loss of USA branch could not be set off against the business income of the assessee for the purpose of computing deduction u/s 80HHC of the Act. As regards the claim of the assessee for deduction of 10% from the export incentive towards in-direct cost, the ld. CIT(A) found that such in-direct cost on proportionate basis was only 3.06% and accordingly the claim of the assessee for such deduction was allowed by him only to the extent of 3.06% as against 10% claimed by the assessee. As regards the loss computed by the assessee as per section 80HHC(3)(b) of the Act, the ld. CIT(A) held that the duty drawback was rightly considered by the A.O. on the ground that only one item of export incentive could be added back as per the 5th proviso to section 80HHC(3) of the Act. He held that the claim of the assessee for deduction u/s 80HHC of the Act on DEPB thus was rightly disallowed by the A.O.
3. Against the order of the ld. CIT(A) allowing partly the appeal of the assessee, both Revenue and assessee preferred their appeals before the ITAT and the ITAT vide its order dated 18-11-2009 decided the issues involved in those appeals as under:
"a) Central Excise Refund / Rebate cannot be reduced from purchases but they will be income u/s. 28(iiib) and A.O. was directed to compute S. 8OHHC accordingly.
b) DEPB was not considered for deduction u/s. 8OHHC in view of 5th proviso to 8OHH( (3)
c) Loss of USA Branch was to be setoff for computing profits elib1e for claiming deduction u/s. 80HHC."
4. Against the order of the ITAT, both the Revenue and the assessee preferred their appeals before the Hon'ble Bombay High Court and while disposing of the said appeals by separate orders, the Hon'ble Bombay High 4 ITA 5220/M/06 & 4976/M/06 Court restored some of the issues involved therein to the file of the Tribunal for deciding the same afresh as per the direction given in its order.
5. At the time of hearing before us, the ld. Representatives of both the sides have agreed that as per the directions given by the Hon'ble Bombay High Court in its orders, ground No. 1(a) of the assessee's appeal and ground No. 1,2 & 4 of the Revenue's appeal are required to be decided by the Tribunal afresh. The said grounds read as under:-
Grounds raised by the assessee:
"1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in directing the Assessing Officer to allow the deduction under Section 8OHHC of the income Tax Act, 1961 of Rs.21,27,720/- only out of claim of the Appellant of Rs.5 1,3 7,094 thereby confirming the disallowance of the claim to the extent of Rs.30,09,374/- on all or any of the following grounds:-
a) The learned Commissioner of income Tax (Appeals) has erred in not directing the A. 0. to calculate the deduction as per amended provisions of Section 8OHHC(3) under fifth proviso on all the items referred to in Clause (iiia), (iiib), (iiic), (iiid) or (iiie) of Section 28 instead of only one item and has thereby erred in not directing, the A. 0. to consider the claim on DEPB amount of Rs.59,91,226/- for the working of deduction under Section 8OHNC under the said proviso."
Grounds raised by the Revenue:
"i) On the facts and in the circumstances of the case, the Id.
CIT(A) has grossly erred in fact and in law in directing the AO to reduce the Central Excise Duty Refund of Rs.99,48,658/- from the cost of goods as against taken as income not derived from export for the purpose of deduction u/s. 8OHHC, since the said receipts had no linkage to the export activity and mainly not derived from the export goods.
ii) On the facts and in the circumstances of the case, the Id. CIT(A) erred both in facts and in law in directing the AD not to consider the overseas branch loss without appreciating the fact that the Overseas branch is also engaged in the business of the export carried on by the assessee and is dealing with the export 5 ITA 5220/M/06 & 4976/M/06 of the goods made by the assessee and is a part and parcel of the export business carried on by the assessee.
iv) On the facts and in the circumstances of the case, the Id. CIT(A) erred both in facts and in law in deleting the addition of Rs. 28,188/- representing the delayed payment of contribution to employees provident fund by holding that the amended provision of section 43B is applicable retrospective even though as per the legislature the amendment is prospective."
6. We have heard the arguments of both the sides and also perused the relevant material available on record. As regards the issue involved in ground No. 1(a) of the assessee's appeal, it is observed that as per the 5th proviso to section 80HHC(3) of the Act, in case the computation under Clause (a) or (b) or (c) of sub section 3 of section 80HHC of the Act is a loss, such loss is to be set off against the amount which bears to 90% of any sum referred to in clause (iiia) or clause (3) or clause (iiic) of section 28 of the Act as the case may be. As held by the Hon'ble Supreme Court in the case of Topman Exports vs. CIT, 342 ITR 249 (SC), the face value of DEPB falls u/s 28(iiib) while the duty drawback falls u/s 28(iiic) of the Act. Both DEPB and duty drawback thus falls under clause (a) of 5th proviso to section 80HHC(3) of the Act and as held by the co-ordinate Bench of this Tribunal in the case of Yasmeen Silk Corporation vs. ITO, 16 DTR 507 (Mumbai), the assessee is entitled for deduction u/s 80HHC of the Act with reference to all the receipts falling under clause (iiia) to (iiic) of section 28 in view of the provisions of 5th proviso to section 80HHC of the Act. This issue thus is covered in favour of the assessee by the decision of co-ordinate Bench of this Tribunal in the case of Yasmeen Silk Corporation (supra) and there being no other case law cited by the ld. D.R. taking a different view on this issue, we respectfully follow the said decision of the co-ordinate Bench of this Tribunal and decide this issue in favour of the assessee. The A.O. is accordingly directed to recompute the deduction allowable to the assessee u/s 80HHC of the Act after allowing the loss as worked out as per section 80HHC (3)(b) of the Act as against the 6 ITA 5220/M/06 & 4976/M/06 amount which bears to 90% of the face value of DEPB and duty drawback. Ground No. 1(a) of the assessee's appeal is accordingly allowed.
7. As regards the issue raised in ground No. 1 of the Revenue's appeal, it is observed that the assessee during the year under consideration was only a trader exporter who paid the excise duty at the moment of purchase and claimed the refund of excise duty so paid once the export of the said goods was effected. What the assessee thus received was the refund of excise duty actually paid and there was no element of any profit involved in the said receipt. In the case of CIT vs. Sudarshan Chemicals Industries Ltd. (2000) 245 ITR 769 cited by the ld. Counsel for the assessee, it was held by the Hon'ble Bombay High Court the turnover should be restricted to the such receipts which have element of profit in it and anything charged by the assessee by way of excise duty and sales tax cannot be taken into account as they do not have any element of profit. Even otherwise, the excise duty refund is liable to be netted against excise duty paid and once such netting is allowed, the excise duty cannot be part of any direct cost as per the principles laid down by the Hon'ble Delhi High Court in the case of CIT vs. Crown Computerised reported in (2007) 289 ITR 151 (Del). This issue thus is squarely covered in favour of the assessee by the judicial pronouncements discussed above and even the ld. D.R. at the time of hearing before us has accepted this position. Respectfully following the said judicial pronouncements, we uphold the impugned order of the ld. CIT(A) directing the A.O. to reduce the central excise duty refund from the cost of goods for the purpose of computing deduction u/s 80HHC of the Act and dismiss ground No. 1 of Revenue's appeal.
8. As regards the issue raised in ground No. 2 of the revenue's appeal relating to the treatment to be given to the loss of overseas branch of the assessee for the purpose of computing deduction u/s 80HHC, the ld. D.R. has 7 ITA 5220/M/06 & 4976/M/06 submitted that a similar issue has been decided against the assessee by the Tribunal in assessee's own case for the earlier years. The ld. Counsel for the assessee, on the other hand, has submitted that the relevant facts involved during the year consideration are materially different from the earlier years inasmuch as the entire export of the assessee out of India during the year under consideration was that of trading goods whereas the same was of merchandise manufactured also in the earlier years. He has contended that the deduction u/s 80HHC of the Act for the year under consideration thus is liable to be computed as per clause (b) of sub section (3) of section 80HHC of the Act by reducing the direct cost and indirect cost attributable to the export from the export turnover and Explanation (baa) is not relevant. He has submitted that the A.O. may be directed to verify this claim of the assessee and decide the issue afresh. Since the ld. D.R. has not raised any material objection in this regard, we set aside the impugned order of the ld. CIT(A) on this issue and restore the matter to the file of the A.O. with a direction to decide the same afresh after verifying the claim of the assessee as per clause
(b) of sub section (3) of section 80HHC of the Act. Ground No. 3 of the Revenue's appeal is accordingly treated as allowed for statistical purpose.
9. As regards ground No. 4 of the Revenue's appeal, the ld. Representatives of both the sides have agreed that the issue involved therein relating to belated payment of employees' contribution to provident fund after the due date but before the due date of filing of return of income is squarely covered in favour of the assessee inter alia by the decision of the Hon'ble Uttarakhand High Court in the case of CIT vs. Kichha Sugar Company (ITA No. 50 of 2009 dtd. 20-5-2013) wherein it was held that due date referred in section 36(1)(va) means due date of filing the return of income. Respectfully following the said decision of Hon'ble Uttarakhand High Court in the case of Kichha Sugar Company (supra), we uphold the impugned order of the ld. CIT(A) deleting the disallowance made by the A.O. on account of belated 8 ITA 5220/M/06 & 4976/M/06 payment of employees' contribution to the provident fund and allow ground No. 4 of Revenue's appeal.
11. In the result, appeal of the assessee is allowed whereas the appeal of the Revenue is treated as partly allowed for statistical purpose.
Order pronounced in the open court on 20th February, 2014.
.
आदे श क घोषणा खल
ु े यायालय म दनांकः 20-2-14 को क गई ।
Sd/- sd/-
(VIVEK VARMA) (P.M. JAGTAP)
या यक सद य JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
मुंबई Mumbai; दनांक Dated 20-02-2014.
[
व. न.स./ RK , Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु त(अपील) / The CIT(A)--XIII, Mumbai.
4. आयकर आयु त / CIT - 13, Mumbai
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai J Bench
6. गाड फाईल / Guard file.
ु ार/ BY ORDER,
आदे शानस
स या पत त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai