TMI Blog2009 (11) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... ormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin-top:0cm; mso-para-margin-right:0cm; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0cm; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-fareast-language:EN-US;} <![endif]--> SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER For the Appellant : Shri Samir Tekriwala Sr. D.R. For the Respondent: Shri T.P.Hemani Shri Tushar Vasa A.R. ORDER PER N.S.SAINI , ACCOUNTANT MEMBER :- These are the Cross Appeals filed by the Revenue and Assessee against the order of the ld.CIT(Appeals)-VIII, Ahmedabad, dated 29.01.2007 in Appeal No.CIT(A)-VIII/DC-4/122/06-07. 2. Grounds of the appeal of the Assessee reads as under: 1. That the order of Learned Commissioner of Income Tax(Appeals) directing the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant for deduction under section 80HHC vide para-3 of his order. During the course of examination of the claim the Learned Assessing Officer found that other than export incentives, the business profit of the appellant was a negative figures i.e. Rs.(-) 2,06,11,673/-. Accordingly, he held that in the absence of positive profit, the assessee was not eligible for deduction under section 80HHC and he relied on the decision of Hon'ble Apex Court in the case of IPCA Laboratories Ltd., 266 ITR 521. According to his working, the deduction under section 80HHC(3) was Rs.(-)1,31,43,026/- and as per the provisions of section 80HHC(3), the deduction available was Nil. Thus, the total eligible deduction under section 80HHC was taken at Rs.Nil. The Learned Assessing Officer also discussed the amendments to section 80HHC(3) by the Taxation Laws Amendment Act, 2005 and specifically examined the DEPB entitlements. Vide Para 3-4, he held that the appellant did not satisfy the twin conditions specified in the 3rd proviso to section 80HHC(3) and accordingly, the deduction in respect of profit on transfer of DEPB entitlements was disallowed. He also made adjustments to total turnover b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: 2.2 I have perused the relevant part of the assessment order and also carefully examined the various submissions and arguments of the appellant in this regard. At the outset, it is to be stated that deduction with reference to the export incentive was disallowed on the ground of absence of positive profit as Computed under section 80HHC(3) before giving effect to the provisos thereof. In view of the amendment to section 80HHC(3), the deduction has to be worked out with reference to section 80HHC(3)as well as the proviso as amended. The Learned Assessing Officer though examined the issue of DEPB/DFRC entitlements, did not consider the various components of export incentives under the respective provisos. Also the claim of the appellant that only the profit on transfer of DEPB entitlements (sale value-DEPB receivable taken as cost) should be considered under the proviso to section 80HHC(3) is not tenable and is not the legislative intention. If the contention of the appellant is accepted, then the accrued value of the DEPB/DFRC is shown as business profit under the Mercantile System of account and deduction under section 80HHC is claimed without subjecting themselves to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igures accounted earlier. The Learned Assessing Officer is hence, directed to take the sale value of export entitlements either brought forward from the earlier year or received during the current year. However, the income on such sale is not entitled to deduction under section 80HHC in view of the fact that the conditions specified under 3rd 4th proviso were not satisfied with any corroborative evidences by the appellant. As regards excise duty element included in the export entitlements shown under other income, it was claimed by the assessee that it was revenue neutral, hence, sales-tax and excise duty are not chargeable or payable on the exports. In this regard the Learned Assessing Officer has not given any finding in his order as to exclusion of the same and treatment thereof, has taken the gross export incentive and disallowed the deduction referable to that in toto. In the absence of specific discussion in the order and reliance of the appellant that the accounting of sales tax and excise duty were revenue neutral not adding to the profit of the business, (Alfa Level Ltd. Vs. CIT, 266 ITR 418 (Mum.)), the Assessing Officer may examine whether necessary contra entries are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the assessee is covered by the clause (iiib) of section 28 of the Act. Further, the Special Bench also concluded that the face value of DEBP is assessable in the year in which the assessee makes application in respect thereof and the profit on sale of DEBP is assessable in the year of actual sale of DEBP. Further, the Learned Authorised Representative of the Assessee submitted that the assessee was not allowed any opportunity by the lower authorities to adduce the evidences to show that the conditions of 3rd proviso to section 80HHC(3) was satisfied in the case of the assessee. In the above circumstances, in our considered view, it shall be in the interest of the justice to restore the issue back to the file of the Learned Assessing Officer for adjudication afresh in light of the observations made hereinabove after allowing reasonable opportunity of hearing to the assessee. The assessee also directed to produce evidences to show that provisions of 3rd proviso to section 80HHC has been complied in its case when called for by the Learned Assessing Officer. Thus, the appeal of the assessee is allowed for statistical purposes. ITA No.1594/Ahd/2007 8. Ground no.1 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to pass the order after verification, in our considered opinion, such direction requires no interference by us. Therefore, this ground of appeal of revenue is rejected. 13. Ground no.3 of the Revenue s appeal reads as under:- 3. The Ld.CIT(A) has erred in law and on the fact of the case in directing the Learned Assessing Officer to delete the disallowance of ₹ 1,53,431/-. 14. The brief facts of the case are that Learned Assessing Officer disallowed 25% of business promotion expenses of ₹ 6,13,726/- holding that the assessee did not furnish complete details with supporting evidences. 15. In appeal before the Learned Commissioner of Income Tax(Appeals) the assessee contended that the entire expenditure incurred exclusively for sales promotion, which were all furnished before the Learned Assessing Officer. 16. The Learned Commissioner of Income Tax(Appeals) observing that disallowance was made on ad-hoc basis and that the expenditure claimed cannot be considered as unreasonable considering the turnover and volume of the business and any disallowance could be made with reference to the specific omission and not on ad-hoc estimate deleted the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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