Income Tax Appellate Tribunal - Mumbai
Lovson Exports Ltd, Mumbai vs Assessee
आयकर अपील य अ धकरण "A" यायपीठ मुंबई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI
ी एच.एल. कावा, अ य एवं
ी डी. क णाकरराव,ु लेखा सद य के सम ।
BEFORE SHRI H.L. KARWA, PRESIDENT AND
SHRI D. KARUNAKARA RAO, AM
आयकर अपील सं./I.T.A. No.7705/M/2011
( नधारण वष / Assessment Year :2003-04)
M/s. Lovson Exports Ltd, बनाम/ ACIT-Circle-3(2),
98, Bajaj Bhavan, Nariman Vs. Aayakar Bhavan,
Point, Mumbai - 400 021. Mumbai - 400 020.
थायी ले खा सं . /PAN : AAACL 2808 C
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ क ओर से / Appellant by : Shri Biren Gabhawala
यथ क ओर से/ Respondent by : Shri Manoj Kumar, DR
सन
ु वाई क तार ख /Date of Hearing : 9. 5.20 13
घोषणा क तार ख /Date of Pr onouncement 16.5. 2013
आदे श / O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the assessee on 15.11.2011 is against the order of CIT (A)-4, Mumbai dated 16.9.2011 for the assessment year 2003-2004.
2. In this appeal, assessee raised the following grounds which read as under:
"1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in upholding the stand of the AO in rejecting your appellant's claim for deduction u/s 80 HHC amounting to Rs. 37,79,080/- holding that if 90% of DEPB of Rs. 1,36,70,906/- is ignored for the purpose of computation of deduction u/s 80 HHC, the assessee will be left with a negative profit.
2. On the facts and in the circumstances of the case and in law, the Ld CIT erred in failing to appreciate the correct interpretation of the legal position after the amendment brought n by the Taxation Laws Amendment, 2005 in the provision of section 80 HHC, 28(iiid) and 28(iiie) which has been now clarified by the Special Bench of the ITAT, Mumbai vide order dated 15.8.2009 in ITA No.5769/M/2006 and 5653/M/2006 I the cases of M/s. Topman Exports & M/s. Kalpataru Colours & Chemicals respectively.
3. On the facts and the circumstances of the case and in law, the Ld CIT (A) failed to appreciate that the profit on sale of DEPB is to be considered for deduction u/s 80 HHC irrespective of whether the annual turnover of the exporter exceeds Rs. 10 Crs."
3. Briefly stated relevant facts of the case are that the assessee is engaged in the business of automobiles, automobiles parts, rice, cotton, cloth etc. Assessee filed the return of income declaring the total income of Rs. 54,66,510/-, after claiming deduction u/s 80HHC of the Act. During the assessment proceedings, AO noticed from the computation of deduction u/s 80HHC of the Act that the assessee earned export incentives, being DEPB receipts, amounting to Rs. 1,36,70,906/-. AO denied the claim of deduction in respect of the said DEPB receipts in view of the assessee's failure to substantiate by necessary and sufficient evidences to prove (i) assessee had an option to chose export incentive either in the form of duty drawback or DEPB and (ii) the rate of duty drawback attributable to custom duty is higher than the rate of DEPB. Further, by virtue of amendment brought in by insertion of section 28(iiid) and (iiie), the third proviso to section 80HHC (3) requires that the profit which has been arisen on "transfer" of DEPB only is to be considered for the purpose of deduction u/s 80HHC. Eventually, the AO denied deduction u/s 80HHC of the Act. Aggrieved, assessee filed an appeal before the first appellate authority.
4. During the proceedings before the first appellate authority, the said issue relating to allowability of deduction u/s 80HHC in respect of DEPB issues was raised. In this regard, assessee relied on the then Special Bench decision of the ITAT in the case of M/s. Topman Exports vs. ITO (124 ITD 1) (Mum) (SB) in support of the claim. However, CIT (A) did not allow the claim of the assessee for the following reasons given in para 5 of the impugned order and the same reads as follows.
"5. I have considered the facts of the case and submissions of the assessee. The reliance of the assessee on the case of Topman Exports is wrongly placed because the issue in Topman was whether the entire amount of DEPB receipts on sale of DEPB is taxable which included the face value plus extra amount received or it is only the extra amount received which is taxable and not whether deduction u/s 80HHC on DEPB receipts is allowable after the amendment of the Act or not. Whereas, after the amendment of section 28 by insertion of Clause (iiid) and (iiie), the profit on sale of DEPB has become taxable. Whereas, by insertion of proviso 3 below sub-section 3 of 80HHC the deduction u/s 80HHC on DEPB receipts is restricted to those assessees, whose turnover is less than Rs. 10 Cr and for others, two other conditions are required to be fulfilled before becoming eligible for deduction u/s 80HHC on DEPB sale receipts, the conditions are that assessee should have a choice between duty drawback and DEPB schemes and the second condition is that the duty drawback credit was higher than the entitlement under DEPB scheme. Whereas, in the case of assessee admittedly the export turnover is more than Rs. 10 Cr but assessee does not fulfill the other conditions of having choice between duty drawback and DEPB scheme and duty drawback credit being higher than the DEPB benefit. Therefore, the AO has rightly rejected the claim of the assessee on DEPB u/s 80HHC. Hence, the grounds of appeal are rejected."
4.1. Aggrieved with the same, assessee filed the present appeal before the Tribunal.
5. During the proceedings before us, Shri Biren Gabhawala, Ld Counsel for the assessee brought our attention to the Apex Court judgment in the case of M/s. Topman Exports vs. CIT (205 Taxmann. 119) and demonstrated before us that the issue which stands covered in his favour by the said binding judgment, may be remanded to the files of the AO for re-compute the allowable deduction in respect of DEPB receipts in the light of the ratio in the case of Topman Exports (supra). He also mentioned that the Apex Court has set aside the judgment of the Hon'ble Bombay High Court judgment in the case of CIT vs. Kalpataru Colours & Chemicals (328 ITR 451).
6. On the other hand, Ld DR dutifully relied on the orders of the Revenue Authorities.
7. We have heard both the parties, perused the orders of the Revenue Authorities. We have also perused the cited judgment in the case of Topman Exports (supra) and find that the impugned issue stands covered in favour of the assessee. We have also gone through the decision of the ITAT, Chandigarh Bench in the case of Jacob Export House vs. ACIT [2012] 137 ITD 117 for the proposition that the deduction u/s 80HHC on DEPB licenses is to be computed as per the judgment of the Hon'ble Supreme Court in the case of Topman Exports (supra) and the matter requires remanding for re-computation to the AO. It is also noticed that para 6 of the said decision of the Tribunal is relevant in this regard which is reproduced as under:
"6. We have heard the rival submissions and have also perused the materials available on record. At the very outset, Shri Sudhir Sehgal, Ld Counsel for the assessee submitted that the issue is no longer res integra. The Hon'ble Supreme Court is the case of Topman Exports vs. CIT [2012] 205 Taxman 119/18 taxmann.com 120 set aside the judgment and others of Hon'ble Bombay High Court in the case of CIT vs. Kalpataru Colours and Chemicals [2010] 328 ITR 451 / 192 Taxman 435,Topman Exports (supra) and other connected appeals. A copy of the judgment of the Hon'ble Supreme Court was filed before us. Shri Sudhir Sehgal, Ld Counsel for the assessee submitted that the issue may be restored to the files of the Assessing Officer with a direction to decide the same afresh in accordance with law following the ratio laid down by the Hon'ble Supreme Court in the case of Topman Exports (supra) and compute the deduction u/s 80HHC on DEPB / DFRC licenses in this case as per judgment of the Hon'ble Supreme Court referred to above. We find substance in the above submissions of Shri Sudhir Sehgal and, therefore, we set aside the order of CIT (A) and remand the issue to Assessing Officer with a direction to decide the same afresh keeping in view the decision of Hon'ble Supreme Court in the case of Topman Exports (supra). The Assessing Officer should give an opportunity of being heard to the assessee. For statistical purposes, the appeal is allowed."
8. Thus, in substance, the prayer of the Ld Counsel is that the issue raised in the grounds stands covered in favour of the assessee by the said Apex Court judgment in the case of Topman Exports (supra), is acceptable. Further, we also find that it is the prayer of Ld Counsel that the matter may be set aside for the limited purpose of re-computation of allowable deduction on the DEPB receipts. In this regard, referred decision of the Tribunal in the case of Jacob Export House (supra), is relevant and the same is evident from the contents of para 6 reproduced above. Accordingly, we find substance in the submissions of the Ld Counsel for remanding too. Therefore, we set aside the order of the CIT (A) and remand the issue to the files of the AO with a direction to decide the issue afresh keeping in view the judgment of Apex Court in the case of Topman Exports (supra). AO shall grant an adequate opportunity of being heard to the assessee. Accordingly, grounds raised by the assessee are remanded.
9. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 16/5/2013.
आदे श क घोषणा खुले यायालय म दनांकः 16/5/2013 को क गई ।
Sd/- Sd/-
(H.L. KARWA) (D. KARUNAKARA RAO )
अ य / PRESIDENT लेखा सद य / ACCOUNTANT MEMBER
मुंबई Mumbai; दनांक Dated 16/5/2013.
व. न.स./ OKK , Sr. PS
आदे श क त ल प अ े षत/Copy
षत of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT(A)-
4. आयकर आयु / CIT
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR,
ITAT, Mumbai
6. गाड फाईल / Guard file.
स या पत त //True Copy//
आदे शानस
ु ार/
ार BY ORDER,
उप/सहायक
उप सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण,
धकरण मुंबई / ITAT, Mumbai