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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Chandra Poojari, AM & Shri George George K, JM
Per George George K, JM:
This appeal was originally disposed off by this Tribunal vide order dated 30th October, 2009. Aggrieved, the Department filed an appeal u/s 260A of the I.T.Act to the Hon’ble High Court of Kerala. The Hon’ble High Court by judgment dated 07.08.2018 directed the Tribunal to consider the following issues, namely – (i) Deduction u/s 80HHC of the I.T.Act (ii) Claim u/s 10A of the I.T.Act
Deduction u/s 80HHC of the I.T.Act 2. The claim of deduction u/s 80HHC was disallowed by the Assessing Officer, but the same was allowed by the first
ITA No.249/Coch/2007 2 M./s.Abad Exim Private Limited. appellate authority. The first appellate authority allowed the claim of the assessee by finding that the decision of the Hon’ble Supreme Court in the case of IPCA Laboratories Ltd. v. DCIT [(2004) 266 ITR 521 (SC)] was not applicable to the assessee. The Income Tax Appellate Tribunal found that both the supporting manufacturer and the export house have profits and hence the decision in the case of IPCA Laboratories Ltd. (supra) would not be applicable and the assessee was entitled to the deduction u/s 80HHC of the I.T.Act.
2.1 The Hon’ble High Court in the judgment dated 07.08.2018, in para 3 (page 3) of the judgment, agreed with the finding of the ITAT and held that the decision of the Hon’ble Supreme Court in the case of IPCA Laboratories Limited (supra) does not apply to the assessee’s case. However, on a request from the Revenue’s Counsel that the aspect as to whether the export house had profits during the year or not was not verified by the first appellate authority as well as the Tribunal, the Hon’ble High Court remanded the matter back to the Tribunal with the following directions:-
(i) The respondent assessee shall produce the profit and loss account of the Exporter with an application before the Tribunal (which can be verified by the Revenue also). (ii) The assessee shall produce the disclaimer certificate issued by the Export House.
ITA No.249/Coch/2007 3 M./s.Abad Exim Private Limited. (iii) Tribunal shall verify the documents and dispose the appeal.
2.2 In compliance with the directions of the Hon’ble High Court, the assessee submitted the following documents before the Tribunal, namely –
(a) copy of the audited profits and loss account (extracts) of the Export House, M/s.Abad Exports Private Limited. (b) Copy of disclaimer certificate in Form 10CCAB, issued by the Export House, M/s.Abad Exports Private Limited dated 22.12.2004, along with the copy of revised CA certificate in Form 10CCAC dated 23.02.2005. (c) A copy of letter issued to AO, along with relevant attachments to the effect that the Export House has not availed deduction u/s 80HHC of the Act in respect of Export sales made under `on Account’ arrangements.
We have heard the rival submissions and perused the material on record. On perusal of the audited profits and loss account of the Export house, namely, M/s.Abad Exports Private Limited, it is clear that the Export House had earned profits before tax of Rs.1,26,22,112. The claim of assessee’s deduction u/s 80HHC of the I.T.Act is confined only to sale to Export House, M/s.Abad Exports Private Limited. This is
ITA No.249/Coch/2007 4 M./s.Abad Exim Private Limited. evident from para 11 page 19 of the scrutiny assessment order dated 28.03.2005. The Export House had issued disclaimer certificate in Form No.10CCAB dated 22.12.2004, along with copy of revised CA certificate in Form No.10CCAC dated 23.02.2005. There is also evidence on record that the Export House, M/s.Abad Exports Private Limited had not claimed deduction u/s 80HHC of the I.T.Act with regard to export of goods manufactured by the assessee. Therefore, the assessee undoubtedly, is entitled to deduction u/s 80HHC of the I.T.Act with regard to goods sold to the Export House, M/s.Abad Exports Private Limited. However, we noticed that deduction u/s 80HHC of the I.T.Act claimed by the assessee on account of sale to Export House, M/s.Abad Exports Private Limited is Rs.1,67,23,392 which is in excess of the profits earned by the Export House. Therefore, for the limited purpose of quantification of deduction u/s 80HHC of the I.T.Act, the issue is restored to the Assessing Officer. It is ordered accordingly.
Claim of deduction u/s 10A of the I.T.Act
With regard to exemption u/s 10A of the I.T.Act, the Hon’ble High Court held that the undertaking which were entitled under earlier provision should also be entitled even under the new provision for the unexpired period of entitlement as per the earlier provision. The observation of the Hon’ble High Court reads as follows:-
ITA No.249/Coch/2007 5 M./s.Abad Exim Private Limited. “4. The respondent-assessee submits that they also have a valid claim under Section 10A of the Act. They can claim it before the Tribunal as has been provided in (1998) 229 ITR 383 (SC) [NTPC v. CIT]. However if the claim is with respect to individual Quick freezing (IQF), the same cannot be termed to be a manufacture or production as declared in 2012 (2) KLT SN 86 (C.No.79) [CIT v. Choice Trading Corporation Ltd.]. It has to be noticed that for the subject year, after the amendment to Section 10A, mere processing does not entitle a claim under Section 10A But by the proviso added on amendment by substitution, the undertakings which were entitled under the earlier provision would be so entitled even under the new provision for the unexpired period of entitlement as per the earlier provision. Hence in considering such claim necessarily it would have to be examined whether the assessee had claimed and obtained the exemption in the years earlier to the amendment.”
The Tribunal in its earlier order dated 30.10.2009, concerning assessment year 2002-2003, in ITA No.249/Coch/ 2007, did not adjudicate the issue of deduction u/s 10A of the I.T.Act. The issue of deduction u/s 10A of the I.T.Act was not raised by the Revenue in its grounds of appeal. The assessee had admittedly claimed deduction u/s 10A of the I.T.Act in the return of income filed, however, in the course of assessment proceedings, the assessee made an alternative claim u/s 80HHC of the I.T.Act. The assessee whether is entitled to deduction u/s 10A and 80HHC of the I.T.Act with regard to the same export?, the answer would be in the negative. With regard to the exports proceeds from frozen seafood by involving the process of Individual Quick Freezing
ITA No.249/Coch/2007 6 M./s.Abad Exim Private Limited. (IQF), the Hon’ble High Court itself had held that the assessee is not entitled to the claim of deduction u/s 10A of the I.T.Act. The Hon’ble High Court had followed its earlier judgment in the case of CIT v. Choice Trading Corporation Ltd. [(2012 (2) KLT SN 86 (C.No.79)]. The assessee submits that the claim of deduction u/s 10A of the I.T.Act was made and allowed in the appeal for the earlier assessment years, i.e., from assessment year 1994-1995 to 2001-2002. This submission of the assessee was verified from the facts on record and the same is correct. The details of deduction u/s 10A of the I.T.Act claimed and allowed for and from assessment year 1994-1995 to 2001-2002 are as follows:- Assessment Years Treatment by AO From A.Y.1994-95 to AY 1998- Claimed and allowed for initial 5 1999, as per sec. 10A, stood before years. the amendment w.e.f. 01.04.1999.
A.Y. 1999-2000 No claim in view of loss as per return and treated as claimed and allowed.
A.Y. 2000-2001 No claim in view of loss as per return and treated as claimed and allowed.
A.Y. 2001-2002 AO / CIT(A) denied the claim. ITAT allowed.
5.1 Therefore, going by the judgment of the Hon’ble High Court, the assessee would be entitled to the claim of deduction u/s 10A of the I.T.Act for the unexpired period, i.e., assessment year 2002-2003 in respect of exports to Exports
ITA No.249/Coch/2007 7 M./s.Abad Exim Private Limited. House other than IQF. The quantification of the amount that the assessee is entitled for deduction u/s 10A of the I.T.Act for the relevant assessment year has to be computed by the Assessing Officer for the reason that the Hon’ble High Court had stated that the claim of IQF, deduction u/s 10A of the I.T.Act cannot be granted. So also, there shall not be overlapping of deduction u/s 10A and 80HHC of the I.T.Act with regard to the same export (i.e. export made to Export House, M/s. Abad Exports Private Limited). Therefore, for the limited purpose of computation of deduction u/s 10A of the I.T.Act, the issue is restored to the Assessing Officer. It is ordered accordingly.
In the result, appeal filed by the Revenue is allowed for statistical purposes. Order pronounced on this 06th day of March, 2019.
Sd/- Sd/- (Chandra Poojari) (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER
Cochin ; Dated : 06th March, 2019. Devdas* Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The CIT (A)-IV, Kochi 4. The CIT, Kochi. 5. DR, ITAT, Cochin 6. Guard file. BY ORDER,
(AR-ITAT, Cochin)