Aia Engineering Ltd.,, Ahmedabad vs Assessee

सम ी अ नल चतुव द , लेखा सद य एवं ी कुल भारत, या यक सद य । BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER And SHRI KUL BHARAT, JUDICIAL MEMBER

आयकर अपील सं./I.T.A. No.2746/Ahd/2011 ( नधा रण वष / Assessment Year : 2004-05) AIA Engineering Ltd. बनाम/ The Asst.CIT 115, GVMM Estate Vs. Circle-1 Odhav Road, Odhav Ahmedabad Ahmedabad - 382 415 थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AABCA 2777 J (अपीलाथ% /Appellant) .. (&'यथ% / Respondent) अपीलाथ% ओर से / Appellant by : Shri Tushar Hemani, AR &'यथ% क) ओर से/Respondent by : Shri M.K. Singh, Sr.DR

ु वाई क) तार ख / सन Date of Hearing 14/05/2015 घोषणा क) तार ख /Date of Pronounce ment 05/06/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-6, Ahmedabad ('CIT(A)' in short) dated 04/10/2011 pertaining to Assessment Year (AY) 2004-05. The assessee has raised the following grounds of appeal:-

ITA No.2746/Ahd/2011 AIA Engineering Ltd. vs. ACIT Asst.Year - 2004-05 -2-

Your appellant being aggrieved by the order passed by the learned Commissioner of Income Tax (Appeals)-VI, Ahmedabad presents this appeal against the same before your Honor on the following grounds:

1. The Ld. Commissioner of Income-tax (Appeals) erred both in law and on facts in holding that Assessing Officer's action in reducing the claim of deduction U/s. 80HHC by Rs. 30,85,077/- was correct. On the facts and circumstances as well as in view of the correct legal position, the deduction u/s. 80HHC in respect of Export Incentives ought to have been allowed as claimed. It is submitted that the same be held so now.

2. The Ld. Commissioner of Income-tax (Appeals) erred in law and on facts in not allowing the ground of the appellant that deduction U/s. 80HHC was allowable as claimed in the Return of Income considering the Export Incentives as income U/s. 28 of the Income Tax Act.

3. The Ld. Commissioner of Income-tax (Appeals) erred in law and on facts in holding that as the Export Turnover exceeded Rs. 10 Crores, the appellant was not entitled to any deduction u/s. 80HHC in respect of DEPB Income.

4. The Ld. Commissioner of Income-tax (Appeals) ought to have ordered to grant the deduction u/s. 80HHC as calculated by the appellant the same being allowable. The same be so held now and deduction be ordered to be allowed fully as claimed.

5. The order passed by the Ld.Commissioner of Income-tax (Appeals) is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now.

6. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing.

2. This is second round of litigation. The only effective ground in this appeal is regarding the claim of deduction u/s.80HHC of the Act on ITA No.2746/Ahd/2011 AIA Engineering Ltd. vs. ACIT Asst.Year - 2004-05 -3-

the DEPB income. The ld.CIT(A) has recorded in para-2.1 of his order the direction of this Tribunal which reads as under:-

" 2.1 The A.O. has stated in the assessment order dtd.22/11/2010 which is under:

"The Hon'ble ITAT vide its order under consideration in ITA No.2940/Ahd/2006 dated-05/10/2009 has set aside and restored back the issue to the file of the Assessing Officer with a direction to decide the issue afresh in accordance with law, after allowing sufficient opportunity to the assessee and keeping in view the decision of the Special Bench in the case of Topman Exports vs. ITO. The relevant part of the order of the Hon'ble ITAT is reproduced hereunder:

"5.2 In the light of aforesaid findings of the Special Bench and the undisputed submissions of the Id. A.R. we consider if fair and appropriate to set aside the order of the Id. CIT(A) and restore the matter to the file of the AO for deciding the issue relating to claim of deduction u/s. 80HHC of the Act in relation to the amount of DEPB, afresh in accordance with law, after allowing sufficient opportunity to the assessee and keeping in view the aforesaid decision of the Special Bench. With these directions, ground Nos. I to 3 in the appeal are disposed of."

2.2. In pursuance of the direction of the Tribunal, the Assessing Officer (AO in short) passed order dated 22/11/2010 u/s.143(3) r.w.s.254 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The assessee feeling aggrieved by the order, preferred an appeal before the ld.CIT(A). The ld.CIT(A) confirmed the addition made by the A.O. ITA No.2746/Ahd/2011 AIA Engineering Ltd. vs. ACIT Asst.Year - 2004-05 -4-

2.3. Against the aforesaid finding of the ld.CIT(A), the assessee is further in appeal before us.

3. At the outset, ld.counsel for the assessee submitted that the AO did not follow the direction given by the Hon'ble ITAT to follow the decision of the Special Bench of ITAT, Mumbai in the case of Topman Exports vs. ITO (125 TTJ (Mumbai)[SB] 289 on the basis that the decision of the Special Bench was overruled by the Hon'ble Bombay High Court in the case of Kalpataru Colours and Chemicals rendered in ITA No.2887 of 2009. He submitted that the Hon'ble Supreme Court in the case of Topman Exports vs. CIT reported at (2012) 342 ITR 49(SC) has reversed the judgement of the Hon'ble Mumbai High Court rendered in the case of CIT vs. Kalpataru Colour and Chemicals(supra).

3.1. On the contrary, ld.Sr.DR fairly conceded the submission of the ld.counsel for the assessee.

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has decided this issue by observing as under:-

ITA No.2746/Ahd/2011 AIA Engineering Ltd. vs. ACIT Asst.Year - 2004-05 -5-

"2.3. I have considered the facts of the case; assessment order and appellant's submission. The issue of claim of deduction under section 80HHC on DEPB income was set-aside by ITAT to the file of AO to be decided as per amended provisions and special bench decision in the case of Topman exports. Assessing officer examined this issue in detail and found that appellant did not fulfill the requirements of the amended provisions and the decision of special bench of ITAT in the case of Topman exports is overruled by Bombay High Court in the case of Kalpataru colours and chemicals. It is true that the matter is pending in Supreme Court however as things stands today, the decision of Bombay High Court is binding and the same is to be followed. The decision of Bombay High Court is quoted by the assessing officer in the assessment order and as per that appellant is not entitled to get any relief. It is wrong on the part of appellant to claim that decision of top man exports is to be applied as per ITAT's direction. When the said decision is overruled by High Court, such decision cannot be applied and accordingly assessing officer is justified in applying Bombay High Court decision and rejecting the appellant's claim of deduction under section 80 HHC on DEPB income. The addition made by the AO is accordingly confirmed."

4.1. We find that the Hon'ble Apex Court rendered in the case of Topman Exports vs. CIT(supra) held as under:-

"22. The aforesaid discussion would show that where an assessee has an export turnover exceeding Rs. 10 crores and has made profits on transfer of DEPB under cl. (d) [sic.-(iiid)] of s. 28, he would not get the benefit of addition to export profits under third or fourth proviso to sub-s. (3) of s. 80HHC, but he would get the benefit of exclusion of a smaller figure from "profits of the business" under Expln. (baa) to s. 80HHC of the Act and there is nothing in Expln. (baa) to s. 80HHC to show that this benefit of ITA No.2746/Ahd/2011 AIA Engineering Ltd. vs. ACIT Asst.Year - 2004-05 -6-

exclusion of a smaller figure from "profits of the business" will not be available to an assessee having an export turnover exceeding Rs. 10 crores. In other words, where the export turnover of an assessee exceeds Rs. 10 crores, he does not get the benefit of addition of ninety per cent of export incentive under cl. (iiid) of s. 28 to his export profits, but he gets a higher figure of profits of the business, which ultimately results in computation of a bigger export profit. The High Court, therefore, was not right in coming to the conclusion that as the assessee did not (sic) have the export turnover exceeding Rs. 10 crores and as the assessee did not fulfill the conditions set out in the third proviso to s. 80HHC(3), the assessee was not entitled to a deduction under s. 80HHC on the amount received on transfer of DEPB and with a view to get over this difficulty the assessee was contending that the profits on transfer of DEPB under s. 28(iiid) would not include the face value of the DEPB. It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Expln. (baa) to s. 80HHC read with the words used in cls. (iiid) and (iiie) of s. 28, the assessee was entitled to a deduction under s. 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee.

23. The impugned judgment and orders of the Bombay High Court are accordingly set aside. The appeals are allowed to the extent indicated in this judgment. The AO is directed to compute the deduction under s. 80HHC in the case of the appellants in accordance with this judgment. There shall be no order as to costs."

4.2. Reliance has been placed by the ld.counsel for the assessee on the judgement of Hon'ble Gujarat High Court rendered in the case of Avani ITA No.2746/Ahd/2011 AIA Engineering Ltd. vs. ACIT Asst.Year - 2004-05 -7-

Exports and Others vs. CIT reported at (2012) 348 ITR 391, wherein the Hon'ble Jurisdictional High Court has held as under:-

"26. On consideration of the entire materials on record, we, therefore, find substance in the contention of the learned counsel for the petitioners that the impugned amendment is violative for its retrospective operation in order to overcome the decision of the Tribunal, and at the same time, for depriving the benefit earlier granted to a class of the assessees whose assessments were still pending although such benefit will be available to the assessees whose assessments have already been concluded. In other words, in this type of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessee but not in a case where it affects even a fewer section of the assesses.

27. We, accordingly, quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of amendment and not in respect of earlier assessment years of the assessees whose export turnover is above Rs. 10 Crore. In other words, the retrospective amendment should not be detrimental to any of the assessees."

4.3. Respectfully following the judgment of the Hon'ble Apex Court rendered in the case of Topman Exports vs. CIT(supra) and the judgement of Hon'ble Jurisdictional High Court rendered in the case of Avani Exports and Others vs. CIT(supra), we hereby set aside the order of the ld.CIT(A) and direct the AO to allow the claim of the assessee u/s.80HHC of the Act in respect of DEPB income and re-compute the deduction in the light of the above judgements of the Hon'ble Apex ITA No.2746/Ahd/2011 AIA Engineering Ltd. vs. ACIT Asst.Year - 2004-05 -8-

Court and Hon'ble Jurisdictional High Court. Thus, grounds raised by the assessee are allowed.

5. In the result, the appeal of the Assessee is allowed.

Order pronounced in the Court on Friday, the 5th day of June, 2015 at Ahmedabad.

Sd/- Sd/- (अ नल चतव ु द ) (कुल भारत) लेखा सद य या यक सद य ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 05 / 06 /2015 ट .सी.नायर, व. न.स./T.C. NAIR, 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. संब4ं धत आयकर आय6 ु त / Concerned CIT

4. आयकर आय6 ु त(अपील) / The CIT(A)-6 Ahmedabad

5. 7वभागीय & त न4ध, आयकर अपील य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड; फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स'या7पत & त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 14.5.15 (dictation-pad 6+ pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ...27.5.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......05.06.15

7. Date on which the file goes to the Bench Clerk.....................05.06.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................