9911796707
TMI Blog2015 (4) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s.80HHC on DEPB receivables & accruals and deduction u/s.80HHC on 90% of other income and in Revenue's appeal the issue related to insurance claim received of Rs. 39,78,429/- and C&F Stockist interest at Rs. 5,77,309/- from the profit of the business for the purpose of computation of deduction u/s.80HHC of the I.T.Act. 3. First, we take up the Assessee's appeal in ITA No.1591/Ahd/2007 for AY 20033-04. The assessee has raised the following grounds of appeal:- 1. The learned CIT(A) has erred in disallowing deduction u/s.80HHC on DEPB receivables and accruals of Rs. 251.43 lacs and treating recognition of DEPB income in the year of realization of sale proceeds and not on accrual basis. 2. The learned CIT(A) has erred in disallowing deduction u/s.80HHC on 90% of other income being (i) Interest income (FDR) Rs. 21,88,854 (ii) Interest income of Rs. 1,63,618 (iii) Rent income Rs. 12,70,000 (iv) other misc.income Rs. 14,18,854/-. 3 The assessee reserves right to add, or alter any grounds of appeal till the disposal of appeal. 4. Apropos to ground No.1, the ld.counsel for the assessee submitted that the ld.CIT(A) erred in disallowing deduction u/s.80HHC on DEPB receivables a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sments 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 assessees but not in a case where it affects even a fewer section of the assessees. 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 the amendment and not in respect of earlier assessment years of the assessees whose export turnover is above Rs. 10 crores. In other words, the retrospective amendment should not be detrimental to any of the assessees." 5. It is respectfully submitted that the foresaid finding recorded by the Hon'ble jurisdictional High Court has resulted into reversal of the legal position and, therefore, now the twin conditions of the third Proviso to Section 80HHC(3) have no applicability to A.Y. 2003-04 which is the subject matter of this Miscellaneous Application. It is humbly submitted that this gives rise to a mistake apparent from record which requires rectification. Further the question of DEPB income visa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. & Ors. vs. CIT (1954) 26 ITR 27 (SC) has quoted the following observations of Lord Justice Fletcher Moulton in The Spanish Prospecting Company Ltd. (1911) I Ch. 92 on the meaning of the word "profits" : ".... 'Profits' implies a comparison between the state of a business at two specific dates usually separated by an interval of a year. The fundamental meaning is the amount of gain made by the business during the year. This can only be ascertained by a comparison of the assets of the business at the two dates." 'Profits', therefore, imply a comparison of the value of an asset when the asset is acquired with the value of the asset, when the asset is transferred and the difference between the two values is the amount of profit or gain made by a person. As DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB. 14. We are, thus, of the considered opinion that while the face value of the DEPB will fall under cl. (iiib) of s. 28 of the Act, the difference between the sale value and the face value of the DEP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It is only the amount that he receives in excess of the DEPB which represents his profits on transfer of the DEPB. 16. The High Court has sought to meet the argument of double taxation made on behalf of the assessees by holding that where the face value of the DEPB was offered to tax in the year in which the credit accrued to the assessee as business profits, then any further profit arising on transfer of DEPB would be taxed as profits of business under s. 28(iiid) in the year in which the transfer of DEPB took place. This view of the High Court, in our considered opinion, is contrary to the language of s. 28 of the Act under which "cash assistance" received or receivable by any person against exports such as the DEPB and "profit on transfer of the DEPB" are treated as two separate items of income under cls. (iiib) and (iiid) of s. 28. If accrual of DEPB and profit on transfer of DEPB are treated as two separate items of income chargeable to tax under cls. (iiib) and (iiid) of s. 28 of the Act, then DEPB will be chargeable as income under cl. (iiib) of s. 28 in the year in which the person applies for DEPB credit against the exports and the profit on transfer of the DEPB by tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear and the assessee transfers the DEPB certificate in the second previous year, as appears to have happened in the present batch of cases, only ninety per cent of the profits on transfer of DEPB covered under cl. (iiid) and not ninety per cent of the entire sale value including the face value of the DEPB will get excluded from the "profits of the business". Thus, where the ninety per cent of the face value of the DEPB does not get excluded from "profits of the business" under Expln. (baa) and only ninety per cent of the difference between the face value of the DEPB and the sale value of the DEPB gets excluded from "profits of the business", the assessee gets a bigger figure of "profits of the business" and this is possible when the DEPB accrues to the assessee in one previous year and transfer of the DEPB takes place in the subsequent previous year. The result in such case is that a higher figure of "profits of the business" becomes the multiplier in the aforesaid formula under sub-s. (3)(a) of s. 80HHC for arriving at the figure of profits derived from exports. 21. To the figure of profits derived from exports worked out as per the aforesaid formula under sub-s. (3)(a) of s. 80H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 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 wellsettled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in Ground No. 2 of the assessee have to be excluded under clause (baa) of the Explanation. It is further observed that to take care of any expenditure which may have been incurred in earning this income, an ad hoc deduction of 10% has been allowed by the Legislature and as per the Bombay High Court judgment no further deduction is permissible. 4. It is respectfully submitted that the Hon'ble Bombay High Court decision in the case of Asian Star Co. (supra) has been overruled by the Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. (343 ITR 89). The Head Note of this judgment is reproduced below for ready reference: "Under clause (1) of Explanation (baa) to section 80HHC of the Act, ninety per cent, of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in any such profits are to be deducted from the profits of the business as computed under the head "Profits and gains of business or profession". The expression "included any such profits" would mean only such receipts by way of brokerage, commission, interest, rent, charges or any other receipt which are included in the profits of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly overruled." 5. From the above it may kindly be appreciated that 90% of only net income can be excluded under clause (baa) of the Explanation to Section 80HHC while determining the profits of the business eligible for deduction. This judgment has been rendered by larger Bench of the Hon'ble Supreme Court comprising of three Judges and they have also followed the earlier Supreme Court decision in the case of Topman Exports v. CIT (342 ITR 49)." 7.2. Ld.Sr.DR fairly conceded the legal position as enunciated in the above referred judgement of the Hon'ble Supreme Court rendered in the case of ACG Associated Capsules (P) Ltd. vs. CIT (supra). 7.3. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. It is contended by the ld.Sr.Counsel for the assessee that the issue is covered by the judgement of Hon'ble Apex Court in the case of ACG Associated Capsules Pvt.Ltd.(supra), wherein the Hon'ble Supreme Court held that ninety percent of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profits of the business of the assessee as computed under the he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal position. He submitted that the issue is now squarely covered by the decision of Hon'ble Jurisdictional High Court rendered in the case of Milton Laminates Ltd. vs. ACIT reported at (2014) 43 taxmann.com 93 (Guj.) and also the judgement of Hon'ble Supreme Court rendered in the case of ACG Associated Capsules Pvt.Ltd. vs. CIT (2012) 343 ITR 89. 9.2. Ld.Sr.DR fairly conceded the legal position as enunciated in the above referred case-laws. 9.3. We have heard the rival contentions of the respective representatives of the parties, perused the material available on record and gone through the orders of the authorities below. So far as ground Nos.1 to 3 are concerned, this Tribunal had dismissed the same and need no fresh adjudication. Therefore, the ground Nos.1 to 3 of the Revenue's appeal are dismissed. Ground Nos.5 & 6 are general in nature need no separate adjudication. 9.4. Apropos to Ground No.4, the contention of ld.Sr.counsel for the assessee is that the issue is covered by the judgement of Hon'ble Gujarat High Court rendered in the case of Milton Laminates Ltd. vs. ACIT (43 taxmann.com 93) and the judgement of Hon'ble Apex Court in the case of ACG Associated Capsules Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54 of the Income-tax Act, 1961 was not debatable at all? (ii) Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in excluding 90% of the ' Other Income' viz. Interest, Misc. Income and Insurance Claim from the profits of the Business while calculating the deduction u/s. 80HHC of the Act? (iii) Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in not allowing the "Netting Off of interest income against interest expenditure?" 9. 6. We find that the Hon'ble High Court answered the above questions by holding as under:- "3. Heard Shri S.N. Soparkar, learned Senior Advocate for the assessee and Shri MR Bhatt, learned Senior advocate for the revenue. 4. At the outset it is required to be noted that so far as question Nos. 2 and 3 are concerned, they are squarely covered by the decision of the Hon'ble Supreme Court in the case of ACG Associated Capsules (P.)Ltd. CIT [2012] 343 ITR 89/205 Taxman 136 (Mag.)/l 8 taxmann.com 137 in favour of assessee. Under the circumstances, the aforesaid issues / questions are now not res integra. In the case of ACG Associated Cap ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
