Income Tax Appellate Tribunal - Ahmedabad
Draft Air International, Ahmedabad vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH - AHMEDABAD
(BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI, JM)
ITA No.219/Ahd/2009
A. Y.: 2004-05
Draft Air International, Vs The A. C. I. T., Circle -12,
3701/B, GIDC, Phase-V, Ahmedabad
Vatva,
Ahmedabad
PA No. AACFD 2183M
(Appellant) (Respondent)
Appellant by Shri J. M. Trivedi, AR
Respondent by Shri R. K. Dhanista, DR
ORDER
PER BHAVNESH SAINI: This appeal by the assessee is directed against order of the learned CIT(A)-XX, Ahmedabad dated 22-10-2007 for assessment year 2004-05.
2. We have heard the learned representatives of both the parties, perused the findings of the authorities below and the material available on record.
Ground No. I "I.A) That the learned A. O. erred in allowing deduction u/s 80 HHC of the Act at Rs.4,62,619/- as against Rs.10,56,643/- claimed by the appellant and the learned CIT(A) erred in confirming the same.
B) That while reducing claim, the learned A. O. erred in not considering Sale proceeds of $20,000/- and $12,000/-
ITA No.129/Ahd/2009 2Draft Air International Vs ACIT, Cir-12, Ahmedabad for the purpose of turnover relying on the provision of S. 80 HHC (2) (a) of the act."
3. In the assessment order the AO has mentioned that the assessee is carrying on the business of export of machinery mainly Humidification and Ventilation system used in the Textile Mills. It has been further stated that there was export turnover of Rs.3,14,58,848/- and the assessee had claimed deduction u/s. 80 HHC of the IT Act to the extent of Rs.10,56,643/-. The AO further observed on perusal of the details furnished by the assessee during the course of assessment proceedings that the sale proceeds in respect of sum of 20000 US $ for which the bill was raised by the assessee on 27-7- 2003 received as late as on 11-12-2004. Similarly, in another amount of 12000 US $ for which the bill date is 30-12-2003. The AO stated that the remittance which received by the assessee in both these cases in India was not within the statutory period of six months as per provisions of section 80 HHC (2) (a) of the IT Act. After considering the explanation made by the assessee, the AO observed that the assessee was not allowed any permission either by Reserve Bank of India, Ahmedabad or any Competent Authority and as such the limitation of bringing the sale proceeds in foreign exchange to the extent of US $ 32000 was not brought to India within the statutory limit. Accordingly, the AO reduced an amount of US $ 32000 i.e. Rs.14,72,000/- from the export sales and had taken the export sales amounting to Rs.2,99,86,848/- (Rs.2,99,86,848 - Rs.14,72,000) for the computation of deduction u/s. 80 HHC of the IT Act. Further, while working out the deduction u/s. 80 HHC of the IT Act, the AO excluded the interest income claimed by the assessee for deduction u/s. 80 ITA No.129/Ahd/2009 3 Draft Air International Vs ACIT, Cir-12, Ahmedabad HHC of the IT Act, as the interest received in FDR and R. D. account do not have direct nexus with the export turnover.
4. The addition was challenged before the learned CIT(A) and it was submitted that section 80 HHC (2) of the IT Act speaks of sale proceeds within six months from the end of previous year or within such further time as competent authority may allow on this behalf. So, the grant of time is not within the purview of the assessee but is within the domain of other independent authority on whom the assessee had no command or control. It is further submitted that the assessee had applied to Reserve Bank of India for necessary permission through its banker Canara Bank, Maninagar Branch. It has been further stated that the assessee cannot be compelled to do something which is beyond his control. The learned Counsel for the assessee also relied upon the following case laws in support of his contentions:
Uttam Corporation Vs CIT (1998) 2 DTC (Bombay High Court Azad Tobacco Factory (P) Ltd. Vs CIT 225 ITR 1002 (All.) Geekay Exim (India) Ltd. Vs CIT 234 ITR 560 Gordhandas Jethabhai 142 ITR 84 (Guj.) CIT Vs M. Chandrashekhar 151 ITR 433 (SC) Bajaj Tempo Ltd. Vs CIT 196 ITR 188 (SC) Mehra International Vs CIT 273 ITR 8 (All.) CIT Vs Cholamandalam Investment and Finance Co. Ltd. 294 ITR 118 (Madras).
5. The learned CIT(A) considering the submissions of the assessee and material on record rejected the claim of the assessee. His findings in Para 2.3 of the impugned order are reproduced as under:
ITA No.129/Ahd/2009 4Draft Air International Vs ACIT, Cir-12, Ahmedabad "2.3 I have carefully considered the facts of the case, observation made by the A. O. in his order and submission made by the appellant. I have also gone through the case laws relied upon by the A. O. In this case, it is a clear fact that the remittance received by the appellant in respect of both the aforementioned transactions made were not within the statutory period of six months as per provisions of section 80 HHC (2) (a) of the Act. The above factual position is very clear in this case. The case laws relied upon by the appellant are not squarely applicable to the facts of the present case. It is not a case against authorities to issue certificate. It is a case when income and deduction have to be determined under the previsions laid down in the I. T. Act. Cases quoted by the appellant are either not applicable to the facts of the present case or against the rejection or non issuance of certificate by authorities. In view of the above stated facts and circumstances, I am of the opinion that the A. O. was justified in excluding the sales proceeds of Rs.14,72,000/- out of total export sales. This ground is therefore, rejected."
6. The learned Counsel for the assessee submitted that the assessee made requests to the competent authority for extension of time for receipt of the amount in convertible foreign exchange but the same has not been disposed of and even today the same is pending. Copies of the letters are filed at PB 8 to 12 where requests were made through Canara Bank for extension of period and the details of the payments received are mentioned at PB 21 which payments have been received as late on 11-12-2004 and 01-12-2005. He has relied upon the order of ITAT Delhi Bench in the case of ACIT Vs Banaras Beads Ltd. 5 ITR (Trib.) 761.
ITA No.129/Ahd/2009 5Draft Air International Vs ACIT, Cir-12, Ahmedabad
7. On the other hand, the learned DR relied upon the orders of the authorities below and submitted that admittedly the convertible foreign exchange is not received within the period of six months and no further extension has been granted by the competent authority. He has further submitted that in the case of ACIT Vs Banaras Beads Ltd. (supra) extension of time was granted by the competent authority. Therefore, above decision is clearly distinguishable.
8. The learned Counsel for the assessee in the rejoinder further submitted that the AO should have amended the order as per provisions of section 155(13) of the IT Act which is also considered by the Tribunal in the case of Banaras Beads Ltd. (supra).
9. We have considered the rival submissions. Sub Section (2) (a) of Section 80 HHC of the IT Act provides as under:
"Section 80 HHC (2) (a):
(2)(a) This section applies to all goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of India are [received in, or brought into, India] by the assessee [(other than the supporting manufacturer)] in convertible foreign exchange [, within a period of six months from the end of the previous year or, [within such further period as the competent authority may allow in this behalf].] [Explanation.--For the purposes of this clause, the expression "competent authority" means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.] ITA No.129/Ahd/2009 6 Draft Air International Vs ACIT, Cir-12, Ahmedabad
(b) This section does not apply to the following goods or merchandise, namely :--
(i) mineral oil ; and
(ii) minerals and ores [(other than processed minerals and ores specified in the Twelfth Schedule)].
[Explanation 1.--The sale proceeds referred to in clause
(a) shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India.
Explanation 2.--For the removal of doubts, it is hereby declared that where any goods or merchandise are transferred by an assessee to a branch, office, warehouse or any other establishment of the assessee situate outside India and such goods or merchandise are sold from such branch, office, warehouse or establishment, then, such transfer shall be deemed to be export out of India of such goods and merchandise and the value of such goods or merchandise declared in the shipping bill or bill of export as referred to in sub-section (1) of section 50 of the Customs Act, 1962 (52 of 1962), shall, for the purposes of this section, be deemed to be the sale proceeds thereof.]"
It is admitted fact that the assessee was not allowed any permission either by Reserve Bank of India or any local authority for receipt of sales in convertible foreign exchange after a period of six months as is provided under the provisions of sub section (2) (a) to Section 80 HHC of the IT Act. The assessee's Counsel however, submitted that the assessee has sent several letters for extension of period which have not been yet disposes of. It would not support the contention of the assessee that the assessee should be granted relief because of ITA No.129/Ahd/2009 7 Draft Air International Vs ACIT, Cir-12, Ahmedabad non-disposal of his requests. The assessee would be entitled for relief if extension of time is granted by competent authority. In the absence of any extension of time granted by the competent authority, the authorities below were justified in rejecting the claim of the assessee.
9.1 The learned Counsel for the assessee relied upon the decision in the case of ACIT Vs Banaras Beads Ltd. (supra) in which extension of time was granted by the competent authority which was disputed by the AO because the assessee claimed that competent authority was CIT, Allahabad but according to the AO the said authority was not having jurisdiction over the case of the assessee. The Tribunal considered the fact that the CIT, Allahabad was approached for extension of time because the assessee was earlier assessed at Allahabad and in that bona fide belief the CIT, Allahabad granted extension of time in the case of the assessee. The Tribunal further considered the provisions of section 155 (13) of the IT Act according to which the AO was required to amend the order since the amount had been received before completion of the assessment. The provisions of section 155 (13) of the IT Act read as under:
"[(13) Where in the assessment for any year, the deduction under section 80HHB or section 80HHC or section 80HHD or section 80HHE or section 80-O or section 80R or section 80RR or section 80RRA has not been allowed on the ground that such income has not been received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, has not been brought into ITA No.129/Ahd/2009 8 Draft Air International Vs ACIT, Cir-12, Ahmedabad India, by or on behalf of the assessee with the approval of the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange and subsequently such income or part thereof has been or is received in, or brought into, India in the manner aforesaid, the Assessing Officer shall amend the order of assessment so as to allow deduction under section 80HHB or section 80HHC or section 80HHD or section 80HHE or section 80-O or section 80R or section 80RR or section 80RRA, as the case may be, in respect of such income or part thereof as is so received in, or brought into, India; and the provisions of section 154 shall, so far as may be, apply thereto, and the period of four years shall be reckoned from the end of the previous year in which such income is so received in, or brought into, India.]"
The language of the above section as noted above is very clear which provides the cases where in the assessment for any year the claim under different provisions including section 80 HHC of the IT Act had not been allowed on the ground that such income has not been received in convertible foreign exchange in India or having been received in convertible foreign exchange outside India or having been converted into convertible foreign exchange outside India, has not been brought into India by or on behalf of the assessee with the approval of Reserve Bank of India or other authorities which is authorized under any law for the time being in force for regulating the payment of foreign exchange and subsequently such income has been received or brought into India in the manner aforesaid, the AO shall amend the order of assessment as the case may be in respect of such income which is so received or brought into India and the provisions of section 154 of the IT Act shall/may apply to such cases.
ITA No.129/Ahd/2009 9Draft Air International Vs ACIT, Cir-12, Ahmedabad Thus, the provisions of section 155(13) of the IT Act would show that the assessee shall have to move before the AO for rectification u/s 154 of the IT Act by satisfying the conditions of section 155(13) of the IT Act when such income was received subsequent to the passing of the assessment. Therefore, the above provision is independent to that of the assessment order and the assessee shall have to take steps in the matter as per law. Therefore, it is the duty of the assessee to move properly before the AO in accordance with law as noted above. Considering the above discussions, we are of the view that no interference is called for in the orders of the authorities below. We confirm their orders and dismiss the appeal of the assessee on ground No.1. However, assessee is at liberty to move before the AO for grant of appropriate relief, if so advised, in accordance with law as provided u/s 155 (13) of the IT Act. With this observation, this ground of appeal of the assessee is dismissed.
GROUND NO.II "II) That the learned CIT(A) erred in not considering the ground in respect of int. received of Rs.4,90,995/- for the purpose of the S. 80 HHC of the act."
10. The learned Counsel for the assessee submitted that principle of netting may be applied while granting relief under the above provisions. The learned DR relied upon the order of the AO and submitted that interest was received on FDR which have no direct nexus with the export turnover and therefore, claim of the assessee has been rightly rejected. The learned DR submitted that even the ITA No.129/Ahd/2009 10 Draft Air International Vs ACIT, Cir-12, Ahmedabad assessee is not entitled for netting of the interest while calculating deduction u/s 80 HHC of the IT Act in respect of interest on FDR.
11. On consideration of the rival submissions, we do not find it to be a fit case for interference. It is settled law that interest on FDR has no direct nexus with export turnover. Therefore, it was rightly excluded while calculating deduction u/s 80 HHC of the IT Act. The assessee's Counsel merely argued that netting of interest could be considered but such request cannot also be allowed. The issue is covered in favour of the revenue by the decision of the Hon'ble Bombay High Court in the case of CIT Vs Asian Star Co. Ltd., Income Tax Appeal NO.2000/2009 dated 18/19/03/2010 in which the following question of law was considered:
"Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was correct in holding that net interest on fixed deposits in banks received by the assessee company should be considered for the purpose of working out the deduction u/s 80 HHC of the Act and not the gross interest?
The Hon'ble High Court held that the Tribunal was not justified in coming to the conclusion that net interest on fixed deposits in the banks received by the assessee should be considered for the purpose of working out the deduction u/s 80 HHC of the Act and not the gross interest. The above question of law was answered accordingly in favour of the revenue and against the assessee. The issue is, therefore, covered against the assessee by the judgment of the Hon'ble Bombay High Court in the case of Asian Star Co. Ltd.ITA No.129/Ahd/2009 11
Draft Air International Vs ACIT, Cir-12, Ahmedabad (supra). In the result, this ground of appeal of the assessee is dismissed.
GROUND NO. III "III. That the learned A. O. erred in disallowing Rs.56,272/- out of Telephone ex. Rs.84,603/- and vehicle expenses Rs.1,33,982/- depreciation on car (36430 + 133982) being 1/6 of said expenses."
12. The AO disallowed one sixth of these expenditure because the same were for non-business purposes and personal use cannot be ruled out. The learned CIT(A) in the absence of the details confirmed the addition and dismissed this ground of appeal of the assessee.
13. On consideration of the rival submissions, we do not find it to be a fit case for interference. The learned Counsel for the assessee submitted hat the addition is excessive in nature and may be modified suitably. However, no cogent reasons and details have been furnished during the course of argument. In the absence of any argument on the above issue, we do not find any merit in this ground of appeal of the assessee. The same is accordingly dismissed.
14. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on 04-03-2011 Sd/- Sd/-
(G. D. AGARWAL) (BHAVNESH SAINI)
VICE PRESIDENT JUDICIAL MEMBER
Date : 04-03-2011
Lakshmikant/-
ITA No.129/Ahd/2009 12
Draft Air International Vs ACIT, Cir-12, Ahmedabad Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File BY ORDER Dy. Registrar, ITAT, Ahmedabad