Lmj Internationsl Ltd;, Kolkata vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "C " BENCH: KOLKATA

[Before Hon'ble Shri Mahavir Singh, JM & Hon'ble Shri B.P.Jain, AM ]

I.T.A No.1804/Kol/2009 Assessment Year: 2004-05

D.C.I.T., Circle-8, Vs. M/s.LMJ International Ltd. Kolkata Kolkata (Appellant) (Respondent) (PAN:AAACL 4483 H)

For the Appellant : Smt.Ranu Biswas, JCIT For the Respondent : Mrs.Arati Debnath, Advocate

Date of hearing : 20.04.2015. Date of pronouncement: 30.04.2015.

ORDER

Per Shri B.P.Jain, AM :

This appeal of the Revenue arises out of the order of ld.CIT(A)-VIII, Kolkata dated 31.08.2009 for Assessment Year 2004-05.

2. The Revenue has raised the following grounds of appeal :

"1. The Ld.CIT(A) erred on facts and circumstances of the case and in law in relying on decision of Special Bench, Mumbai in the case of M/s. Topman Exports and M/s. Kalpataru Colours & Chemicals and holding that 3rd and 4th provision of section 80HHC(3) of Income Tax Act, 1961 is not applicable in the case of the assessee.

2. The Ld. CIT(A) erred in admitting the appeal of the assessee in violation of the provision of clause (a) of sub section (4) of section 249 of Income Tax Act, 1961.

3. The appellant craves leave to add, alter, or abrogate any ground of appeal at the time of hearing."

3. The brief facts of the case are that AO in para 4 and 7.1. has stated that claim of deduction u/s 80HHC of the Act cannot be allowed and necessary evidence as required in the Third and Fourth proviso to section 80HHC(3) were not submitted by the assessee company. The ld. CIT(A) decided the issue in favour of assessee by observing as under :-

"With regard to the third issue of sufficient evidence as required as per the Third and Fourth provisos to Sec.80HH(3), it should be mentioned that the Hon'ble "A" Bench of ITA No.1087/Kol/2012 2 Mohua Sinha A.Yr.2009-10

ITAT, Kolkata had, in the appellant's own case for Asstt.Years 2000-01 and 2001-02 by their order dated 16.01.2009 directed that the Special Bench at Mumbai's decision in the cases of M/s.Topman Exports & M/s. Kalpataru Colours & Chemicals should be followed in this regard as the issues involved in the appellant's case were identical. The said decision has been rendered by the Special Bench and copy thereof has been filed by the appellant. Respectfully, following the same, I decide this issue in favour of the appellant. "

The grievance of the revenue in ground no.1 is that the third and fourth provisos to Section 80HHC(3) of the Act is not applicable to the case of the assessee. Whereas the ld. AR invited our attention to the decision of the Hon'ble Supreme Court in the case of Topman Exports vs CIT (2012) 342 ITR 49 (SC) where the decision of Special Bench of Mumbai has been confirmed by the Hon'ble Supreme Court, copy of the same is placed on record at Judgement pages to 1 to 15.

4. We have heard the rival contentions and perused the facts of the case. There is no dispute to the fact that the Hon'ble Supreme Court in the case of Topman Exports vs CIT (2012) 342 ITR 49 (SC) has confirmed the decision of Special Bench of Mumbai and the relevant head notes of the decision of the Hon'ble Supreme Court are reproduced herein below :-

"Business income - Benefit or perquisite under s. 28(iiid) - Sale of DEPB entitlement - DEPB is a kind of assistance given by the Government of India to an exporter to pay customs duty on its imports and it is receivable once exports are made and an application is made by the exporter - Thus, DEPB is "cash assistance" receivable by a person against exports under the scheme of Government of India and falls under cl.(iiib) of s.28 and is chargeable to tax even before it is transferred by the assessee - As per cl.(iiid) of s.28, any profit on transfer of DEPB is chargeable to tax under the head "Profits and gains of business or profession" as an item separate from cash assistance under cl.(iiib) - Word "profit" means the gross proceeds of a business transaction less the cost of the transaction - Since DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessee over and above the DEPB on its transfer would represent profit on the transfer of DEPB - Thus, while the face value of the DEPB falls under cl.(iiib) of s.28, the difference between the sale value and face value of the DEPB falls under cl.(iiid) of s.28 - cost of acquiring DEPB is not nil since the person acquires it by paying customs duty on the import content of the export product and thus, the DEPB which accrues to a person against exports has a cost element in it - Accordingly, when DEPB is sold by a person, his profit on transfer of DEPB would be the sale value of DEPB less its face value which represents the cost of the DEPB - Therefore, when DEPB is transferred by a person, the entire sum received by him on such transfer does not become his profits - DEPB is chargeable as income under cl.(iiib) of s.28 in the year in which a person applies for DEPB credit against the exports whereas the profit on transfer of DEPB by that person is chargeable as income under cl.(iiid) of s.28 in the year in which he makes the transfer - Where, ITA No.1087/Kol/2012 3 Mohua Sinha A.Yr.2009-10

however, the DEPB accrues to a person and he also earns profit on the transfer of DEPB in the same previous year, the DEPB would be business profits under cl.(iiib) of s.28 and the difference between the sale value and the DEPB (face value) would be profits on transfer of DEPB under cl.(iiid) for the same assessment year."

4.1. Accordingly we find no infirmity in the order of the ld. CIT(A), who has rightly allowed the claim of assessee. Thus ground No.1 of the revenue is dismissed.

5. As regards ground no.2 of the revenue's appeal the ld. DR has not pointed out that the assessee has not paid any tax due on the income returned by the assessee. Therefore in the absence of any argument on this point the same is dismissed. Thus ground no.2 of the revenue is dismissed.

6. Ground no.3 of the revenue, being general in nature does not require any adjudication.

7. In the result the appeal of the Revenue is dismissed.

Order pronounced in the court on 30.04.2015.

Sd/- Sd/- [ Mahavir Singh ] [B.P.Jain] Judicial Member Accountant Member

Date: 30.04.2015.

R.G.(.P.S.) Copy of the order forwarded to:

1. M/s. LMJ International Limited, 15B, Hemanta Basu Sarani, 5 floor, Kolkata-

th

700001.

2 D.C.I.T., Circle-8, Kolkata

3. CIT(A)-VIII, Kolkata 4. CIT - Kolkata.

5. CIT-DR, Kolkata Benches, Kolkata

True Copy, By order,

Deputy /Asst. Registrar, ITAT, Kolkata Benches ITA No.1087/Kol/2012 4 Mohua Sinha A.Yr.2009-10