Associated Dyestuff Pvt.Ltd.,, ... vs Assessee

ी जी.डी.अ वाल,उपा य (अहम. े ) एवं ी कुल भारत, या यक सद य के सम । BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) And SHRI KUL BHARAT, JUDICIAL MEMBER

आयकर अपील सं./I.T.A. No.2622/Ahd/2011 ( नधा रण वष / Assessment Year : 2003-04) Associated Dyestuff Pvt.Ltd. बनाम/ The ACIT Plot No.A-1/5, GIDC Estate Vs. Circle-1 Phase I, Nr.Shah Textile Ahmedabad Vatva, Ahmedabad थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AACCA 4885 C (अपीलाथ( /Appellant) .. ()*यथ( / Respondent)

अपीलाथ( ओर से /Appellant by : Ms.Urvashi Shodhan, A.R. )*यथ( क, ओर से/Respondent by : Shri Santosh Karnani, Sr.DR

ु वाई क, तार/ख / सन Date of Hearing 02/07/2015 घोषणा क, तार/ख /Date of Pronounce ment 17/07/2015

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 17/08/2011 pertaining to Assessment Year (AY) 2003-04. The Assessee has raised the following grounds of appeal:-

1. Ld.CIT(A) erred in law and in facts in confirming the erroneous order of the ld.AO holding that the deduction under s.80HHC was ITA No.2622/Ahd/2011 Associated Dyestuff Pvt.Ltd. vs. ACIT Asst.Year - 2003-04 -2-

to be computed at NIL and not granting deduction of Rs.38,08,898/- under s.80HHC as computed by the appellant.

2. The ld. CIT(A) erred both in law and on facts in holding that the appellant did not satisfy the conditions as required by the provisions of s.80HHC of the Act. The ld.CIT(A) failed to appreciate that overall computation of deduction under s. 80HHC will not be different under the judgments rendered in the case of Topman Exports and Kalpataru Colours and Chemicals case as specifically contended in ground No:4 before ld.CIT(A). It be so held now and the deduction as claimed as per CA certificate in Form No:

10CCAC be allowed.

3. Both the lower authorities have erred in law and on facts in not appreciating that the appellant satisfied all the conditions of amended provisions of s. 80HHC and was eligible for deduction computed at Rs.38,08,898/-. It be so held now.

4. Without prejudice to the above, the ld.CIT(A) erred in confirming the order of the ld.AO which was against the specific direction of the Hon'ble Income tax Appellate Tribunal which remanded the matter with a direction to allow the claim as per Para 9 of its order.

Not following the specific direction of the Tribunal is against the judicial discipline. It be so held now.

5. The revised computation under s.80HHC being correctly made, the same ought to have been accepted by both the authorities below. The same be directed to be accepted now.

6. The order passed by the ld.CIT(A) is illegal, and bad in law.

7. Levy of interest u/s.234A, 234B, 234C and 234D of the act is unjustified, since the disallowances are based on retrospective amendments.

8. Initiation of penalty proceedings u/s.271(1)(c) of the act are unjustified.

The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.

ITA No.2622/Ahd/2011 Associated Dyestuff Pvt.Ltd. vs. ACIT Asst.Year - 2003-04 -3-

2. Briefly stated facts are that this is second round of litigation. In the earlier round, the Tribunal (ITAT 'C' Bench Ahmedabad) vide its order dated 30/10/2009 was pleased to direct the AO to compute deduction u/s.80HHC of the Income Tax Act, 1961 (hereinafter referred to as "the Act") in accordance with the decision of ITAT, Special Bench, Mumbai in the case of Topman Exports vs. ITO reported at (2009) 318 ITR (A.T.) 87 (Mum.)[Special Bench]. In pursuance to the order of the Tribunal, the AO computed the deduction allowable u/s.80HHC to NIL. The assessee feeling aggrieved by the order of the AO, preferred an appeal before the ld.CIT(A), who after considering the submissions and following the judgement of Hon'ble High Court of Bombay in the case of CIT vs. Kalpataru Colours and Chemicals reported at (2010) 328 ITR 451(Bombay High Court), dismissed the appeal of the assessee. Now, the assessee is further in appeal before us.

3. Ground Nos.1 to 5 are inter-connected and, therefore, the same are being decided together. The ld.counsel for the assessee reiterated the submissions as were made before the ld.CIT(A) and submitted that the AO grossly erred in disallowing the claim of deduction u/s.80HHC(3) of the Act amounting to Rs.38,08,898/-. The ld.counsel for the assessee further submitted that the AO declined the claim of the assessee on the basis that the export turnover of assessee is more than Rs.10 crores. The ld.counsel for the assessee submitted that in the earlier round of ITA No.2622/Ahd/2011 Associated Dyestuff Pvt.Ltd. vs. ACIT Asst.Year - 2003-04 -4-

litigation, this Tribunal was pleased to restore the matter back to the file of AO to compute the deduction u/s.80HHC of the Act, 1961 in accordance with the decision of the ITAT, Special Bench, Mumbai rendered in the case of Topman Exports vs. ITO(supra). The ld.counsel for the assessee submitted that the Hon'ble Jurisdictional High Court in the case of Avani Exports vs. CIT reported at 348 ITR 391(Guj.) has quashed the amendment to the extent that the operation of the impugned provision should be given effect from the date of amendment and not in respect of earlier assessment years of the assessee whose export turnover is above Rs.10 crores. She submitted that this judgment of the Hon'ble High Court of Gujarat has been further affirmed by the Hon'ble Supreme Court in the case of CIT vs. Avani Exports reported at (2015) 58 taxmann.com 100(SC) by holding that the cases of exporters having a turnover below Rs.10 crores and those above Rs.10 crores would be treated similarly during period prior to amendment.

3.1. On the contrary, ld.Sr.DR supported the orders of the authorities below and submitted that there is no infirmity in the orders of the authorities below. He submitted that direction of the Hon'ble Tribunal was clear to compute the deduction in accordance with the decision of the Special Bench of the Mumbai Tribunal rendered in the case of Topman Exports vs. ITO(supra).

ITA No.2622/Ahd/2011 Associated Dyestuff Pvt.Ltd. vs. ACIT Asst.Year - 2003-04 -5-

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 Tribunal (ITAT 'C' Bench Ahmedabad) in ITA No.776/Ahd/2007 for Y 2003-04 (assessee's own case) vide its order dated 30/10/2009 was pleased to restore the issue in respect of deduction u/s.80HHC of the Act, by observing as under:-

"9. Respectfully following the above judgment of the Tribunal, we hold that profit element on DEPB licence will be covered by section 28(iiid) and, accordingly, by third proviso to section 80HHC(3) of the I.T.Act, 1961 as the turnover of the assessee exceeds Rs.10 crores. This amount shall be excluded for the purpose of computing deduction u/s.80HHC of the I.T.Act, 1961, if condition laid down in that proviso are not satisfied. The face value of the DEPB licence will be covered u/s.28(iiib) of the I.T.Act, 1961 and, therefore, 90% thereof would be added to the export profits as per first proviso to section 80HHC(3) of the I.T.Act.1961.

10. In order to compute deduction u/s.80HHC of the I.T.Act, 1961 in accordance with the decision of the Special Bench in the case of M/s.Topman Exports (supra), we restore the matter to the file of Assessing Officer."

4.1. There is no dispute with regard to the fact that the decision of the Special Bench rendered in the case of Topman Exports vs. ITO(supra) has been upheld by the Hon'ble Supreme Court. Therefore, the issue remains to be examined whether the AO has computed the deduction as per the decision of the Special Bench rendered in the case of Topman Exports(supra). The contention of the ld.counsel for the assessee is that the computation of "profit of the business" as per Explanation(baa) of ITA No.2622/Ahd/2011 Associated Dyestuff Pvt.Ltd. vs. ACIT Asst.Year - 2003-04 -6- Section 80HHC, whether made on the basis of the judgment of Topman Exports or on the basis of Kalpataru Colours and Chemicals, will not make any difference because whatever amount is reduced from the "profit of the business" as per Explanation (baa), the same will be increased by the identical amount as per various provisos of Section 80HHC(3) of the Act. In other words, the overall computation of claim of deduction u/s.80HHC will not materially be different under both the judgments. Thus, the amount of deduction of Rs.38,08,898/- u/s.80HHC as shown will remain unchanged. The AO did not accept the contention on the basis that the export turnover of the assessee is more than Rs.10 crores. Further, it was noticed that profits derived from export in respect of goods or merchandise manufactured are at loss. Profits derived from export in respect of trading goods is at Rs.12,13,054/-. Thus, the assessee-company has a net loss derived from export of goods or merchandise manufactured and trading goods at Rs.15,55,222/-. The contention of the assessee is that the amendment was made in the provisions of section 80HHC of the Act as brought w.e.f. 01/04/1997, by the Taxation Laws (Amendment) Act, 2005 would not be applicable since the assessment is AY 2003-04. In support of this contention, the ld.counsel for the assessee has relied upon the judgement of the Hon'ble Jurisdictional High Court rendered in the case of Avani Exports vs. CIT reported at reported at 348 ITR 391(Guj.). The Hon'ble Supreme Court in the case of CIT vs. Avani Exports reported at 58 taxmann.com ITA No.2622/Ahd/2011 Associated Dyestuff Pvt.Ltd. vs. ACIT Asst.Year - 2003-04 -7-

100(SC) has categorically ruled that having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, the cases of exporters having a turnover below and those above 10 crores should be treated similarly.

4.2. In view of the above judgement of Hon'ble Supreme Court, we are of the considered view that the ld.CIT(A) was not justified in confirming the action of the AO. Therefore, respectfully following the judgement of Hon'ble Supreme Court rendered in the case of CIT vs. Avani Exports, we hereby direct the AO to allow the deduction u/s.80HHC of the Act. Thus, ground Nos.1 to 5 of assessee's appeal are allowed.

5. Ground No.6 is general in nature which requires no independent adjudication.

6. Ground No.7 is against levy of interest u/s.234A, 234B, 234C and 234D of the Act. This ground is consequential in nature.

7. Ground No.8 is against initiation of penalty proceedings u/s.271(1)(c) of the Act. Since we have allowed the ground Nos.1 to 5 of assessee's appeal, this ground has become infructuous and dismissed as such.

ITA No.2622/Ahd/2011 Associated Dyestuff Pvt.Ltd. vs. ACIT Asst.Year - 2003-04 -8-

8. In the result, the appeal of the assessee is partly allowed.

Order pronounced in the Court on Friday, the 10th day of July, 2015 at Ahmedabad.

Sd/- Sd/- (जी.डी.अ वाल) (कुल भारत) उपा य (अहम. े ) या यक सद य ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER Ahmedabad; Dated 17/ 07 /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. संबं8धत आयकर आयु:त / Concerned CIT

4. आयकर आयु:त(अपील) / The CIT(A)-6, Ahmedabad

5. ;वभागीय ) त न8ध, आयकर अपील/य अ8धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड= फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स*या;पत ) त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 6/7.7.15 (dictation-pad 12- pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ..7.7.15

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.......17.7.15

7. Date on which the file goes to the Bench Clerk.....................17.7.15

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..................