Income Tax Appellate Tribunal - Panji
M/S. Polisetty Somasundaram,, Guntur vs The Acit,, Guntur on 28 June, 2017
आयकर अपीलीय अधधकरण, धिशाखापटणम पीठ, धिशाखापटणम
IN THE INCOME TAX APPELLATE TRIBUNAL,
VISAKHAPATNAM BENCH, VISAKHAPATNAM
श्री िी. दुगााराि, न्याधयक सदस्य एिं श्री धड.एस. सुन्दर ससह, लेख ा सदस्य के समक्ष
BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER &
SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A.No.328/Viz/2016
(धनधाारण िर्ा / Assessment Year: 1999-2000)
आयकर अपील सं./I.T.A.No.329/Viz/2016
(धनधाारण िर्ा / Assessment Year: 2003-04)
आयकर अपील सं./I.T.A.No.341/Viz/2016
(धनधाारण िर्ा / Assessment Year: 2004-05)
The Asst. Commissioner of Income Tax M/s Polisetty Somasundaram
Circle-2(1), 2nd Floor 8-24-31,Mangalagiri Road
Rajkamal Complex Guntur
Lakshmipuram, Guntur
[PAN No.AACFP7251J]
(अपीलाथी / Appellant) (प्रत्याथी / Respondent)
CO No.16/Viz/2017 arising out of ITA 328/Viz/2016
(धनधाारण िर्ा / Assessment Year:1999-2000)
CO No.17/Viz/2017 arising out of ITA 329/Viz/2016
(धनधाारण िर्ा / Assessment Year: 2003-2004)
CO No.18/Viz/2017 arising out of ITA 341/Viz/2016
(धनधाारण िर्ा / Assessment Year:2004-2005)
अपीलाथी की ओर से / Appellant by : Shri S.R.S.Narayan, Sr.DR
प्रत्याथी की ओर से / Respondent by : Shri G.V.N.Hari, AR
सुनिाई की तारीख / Date of hearing : 21.06.2017
घोर्णा की तारीख/ Date of : 28.06.2017
Pronouncement
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ITA Nos328/Viz/2016,329/Viz/2016 and 341/Viz/2016
CO Nos.16-18/Viz/2017
M/s Polisetty Somasundaram
आदेश / O R D E R
PER Bench:
These appeals are filed by the Revenue against the order of the
Ld. Commissioner of Income Tax (Appeals) [CIT(A)]-1, Guntur
vide ITA No.335 /CIT(A)-1/GNT/2013-14, 332&333/CIT(A)-1/GNT/2013-
dated 29.09.2016 for the A.Ys. 1999-2000, 2003-04 and 2004-05 and
the Cross Objections were filed by the Assessee. Since, in all the
appeals common grounds are involved, all the appeals are heard
together and disposed off in common order as under.
The common issue for all the three in these appeals is the
deduction claimed u/s 80HHC of the Act on the amount received on
transfer from DEPB Licenses as the assessee had the turnover
exceeding Rs.10 crores.
2. During the assessment proceedings, the assessing officer found
that the assessee has received the sums on transfer of DEPB licences
and the entire amount received on transfer of DEPB licence was treated
as income u/s 28(iiid) of Income Tax Act and excluded the amounts
received on transfer of DEPB licence from the profits for the purpose
computing the deduction u/s 80HHC. The Ld. AO relied on the decision
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ITA Nos328/Viz/2016,329/Viz/2016 and 341/Viz/2016
CO Nos.16-18/Viz/2017
M/s Polisetty Somasundaram
of Hon'ble Bombay High Court in the case of CIT Vs. Kalpataru Colours
& Chemicals, 192 taxmann.com 435. The assessee went on appeal
before the CIT(Appeals). The CIT(Appeals) allowed the assessee's
appeal following the judgement of Hon'ble Supreme Court in the case of
Topman Exports Vs. CIT 342 ITR 49. For ready reference, we reproduce
here under the relevant para of the order of the Ld.CIT(Appeals) as
under :
"After careful examination of facts of the case it is very clear
that the judgement of Hon'ble Supreme Court in the case of
Topman Exports Vs. CIT (2012) 342 ITR 0049 (sec) squarely applies
to the appellant case because when DEPB is sold by a person, his
profit on transfer of DEPB will be sale value of DEPB less its face
value. Respectfully, following the precedent I set aside the
impugned order on this issue an direct the AO to allow the claim in
accordance with the afore noted judgement of Hon'ble Supreme
Court."
3. We have heard both the parties and perused the material placed
on record. The issue is settled by Hon'ble Supreme Court in the case
Law relied upon by the Ld.CIT (Appeals). The Ld.CIT(Appeals) allowed
the appeal of the assessee following the judgement in the case of
Hon'ble Supreme Court. Therefore we do not find any infirmity in the
order of the Ld.CIT(Appeals) and the same is upheld. Appeals of the
revenue are dismissed.
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ITA Nos328/Viz/2016,329/Viz/2016 and 341/Viz/2016
CO Nos.16-18/Viz/2017
M/s Polisetty Somasundaram
4. In ITA No.329 for the assessment year 1999-2000, Ground
No.3 is related to insurance premium. The assessee has received
insurance claim of Rs.40,66,631/- relating to the stock-in-trade and
claimed 90% of the gross amount of insurance claim for computing the
deduction u/s 80HHC of the IT Act. The assessing officer excluded 90%
of the insurance claim from the profits of the business for computing the
deduction u/s 80HHC and recomputed the allowable deduction u/s
80HHC. The assessing officer relied on the decision of Hon'ble Supreme
Court judgement in the case of Pandian Chemicals Vs. CIT (263 ITR
278), wherein, it was held that the amount of insurance claim received
by the assessee cannot be held to be income derived from the industrial
undertaking. Aggrieved by the order of the assessing officer, the
assessee went on appeal before the Ld.CIT(Appeals). Ld.CIT(Appeals)
allowed the appeal of the assessee and deleted the addition made by
the AO. The Ld.CIT(Appeals) deleted the addition as under :
"I have gone through the facts of the case, contents of the
assessment order, written submissions filed by the assessee and
the case laws relied by the assessed and the AO. In the present
case the insurance claim, relates to the stock-in-trade and it is only
an insurance claim of that nature which forms the subject matter of
the appeal. Now, it cannot be disputed that if the stock-in-trade of
the assessee were to be sold the-income that were to be received
from the sale of goods would constitute the profits of the business
as computed under the head of profits and gains of business or
profession. The income emanating from the sale would not be
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ITA Nos328/Viz/2016,329/Viz/2016 and 341/Viz/2016
CO Nos.16-18/Viz/2017
M/s Polisetty Somasundaram
sustainable to a reduction of ninety per cent for the simple reason
that it would not constitute a receipt of a nature similar to
brokerage, commission, interest, rent or charges. A contract of
insurance is contract of indemnity. The insurance claim in essence
indemnifies the assessed for the loss of the stock-in-trade. The
indemnification that is made to the assessed must stand on the
same footing as the income that would have been realized by the
assessed on the sale of the stock-in-trade. Under these
circumstances, I am clearly of the view that the insurance claim on
account of the stock-in-trade does not constitute an independent
income or a receipt of a nature similar to brokerage, commission,
interest, rent or charges. Hence, such a receipt would not be
subject to a deduction of ninety per cent under clause (1) of Expin.
(baa).
In view of the detailed discussion of facts and
circumstances of the case and various court judgements, 90% of
insurance claim of Rs.40,66,631/- considered for arriving at
adjusted profits of the business is to be deleted since the claim is
against the loss of stock. Hence, the addition made by the AO is
deleted and assessee's ground of appeal is allowed."
5. We have heard the rival submissions and perused the material
placed on record. The deduction u/s 80HHC is allowable on export
profits. For the sake of convenience, the relevant part of the section
80HHC is reproduced as under :
[Deduction in respect of profits retained for export
business.
80HHC. [(1) Where an assessee, being an Indian company or a
person (other than a company) resident in India, is engaged in the
business of export out of India of any goods or merchandise to
which this section applies, there shall, in accordance with and
subject to the provisions of this section, be allowed, in computing
the total income of the assessee, [a deduction to the extent of
profits, referred to in sub-section (1B),] derived by the assessee
from the export of such goods or merchandise :
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ITA Nos328/Viz/2016,329/Viz/2016 and 341/Viz/2016
CO Nos.16-18/Viz/2017
M/s Polisetty Somasundaram
6. From the above, it is clear that the assessee is entitled for
deduction u/s 80HHC only on the profits derived from the export of
goods. Insurance receipt is the trading receipt and while computing the
deduction under section it goes to increase the total turnover but not
includable in the export turnover. It also cannot be held as separate
source of income. Therefore we do not find any infirmity in the order of
the Ld.CIT(A) and the same is upheld. The appeal of the revenue is
dismissed.
Cross objections:
7. Grounds raised in the Cross objections are supporting the orders
of the Ld.CIT(Appeals) with regard to the sale of DEPB Licenses. Since
we have upheld the orders of the Ld.CIT(Appeals), no separate
adjudication is required on the cross objections and the cross objections
stands allowed.
8. In the result the appeals of the revenue are dismissed and the
cross objections are allowed.
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ITA Nos328/Viz/2016,329/Viz/2016 and 341/Viz/2016
CO Nos.16-18/Viz/2017
M/s Polisetty Somasundaram
The above order was pronounced in the open court
on 28th Jun 2017.
Sd/- Sd/-
(िी. दुगााराि) (धड.एस. सुन्दर ससह)
(V. DURGA RAO) (D.S. SUNDER SINGH)
न्याधयक सदस्य/JUDICIAL MEMBER लेख ा सदस्य/ACCOUNTANT MEMBER
धिशाखापटणम /Visakhapatnam
ददनांक /Dated : 28.06.2017
L. Rama, SPS
आदेश की प्रधतधलधप अग्रेधर्त/Copy of the order forwarded to:-
1. अपीलाथी / The Appellant, The Asst. Commissioner of Income Tax, Circle-2(1),
2nd Floor, Rajkamal Complex, Lakshmipuram, Guntur
2. प्रत्याथी / The Respondent - M/s Polisetty Somasundaram, 8-24-31,Mangalagiri
Road, Guntur
3. आयकर आयुक्त / The Pr.CIT, Guntur
4. आयकर आयुक्त (अपील) / The CIT (A), Visakhapatnam
5. धिभागीय प्रधतधनधध, आय कर अपीलीय अधधकरण, धिशाखापटणम / DR, ITAT, Visakhapatnam
6. गाडा फ़ाईल / Guard file
आदेशानुसार / BY ORDER
// True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM