GELSULES EXPORTS,MUMBAI vs. ASST CIT CIR 21(3), MUMBAI

आयकर अपीलीय आयकर अपीलीय अिधकरण अिधकरण, मुंबई मुंबई “ जी जी” खंडपीठ खंडपीठ आयकर आयकर अपीलीय अपीलीय अिधकरण अिधकरण मुंबई मुंबई जी जी खंडपीठ खंडपीठ Income-tax Appellate Tribunal -“G”Bench Mumbai सव"ी सव"ी सव"ी राजे"" सव"ी राजे"" राजे"",लेखा राजे"" लेखा लेखा सद"य लेखा सद"य सद"य एवं सद"य एवं एवं, राम एवं राम राम लाल राम लाल लाल नेगी लाल नेगी नेगी, "याियक नेगी "याियक "याियक सद"य "याियक सद"य सद"य सद"य Before S/Shri Rajendra,Accountant Member and Ram Lal Negi,Judicial Member आयकर आयकर अपील आयकर आयकर अपील अपील संसंसंसं./I.T.A./7771/Mum/2014, िनधा"रण अपील िनधा"रण िनधा"रण वष" िनधा"रण वष" वष" /Assessment Year: 2001-02 वष" M/s. Gelsules Exports Addl. CIT, Circle 21- (3) B-203, Godrej Colleseum Mumbai. Off. Eastern Express Highway Vs. Sion(E),Mumbai-400 022. PAN:AAAFG 1651 P (अपीलाथ" /Appellant) (""यथ" / Respondent) Revenue by: Shri R.K.Sahu Assessee by: Shri Nitesh Joshi सुनवाई क" तारीख / Date of Hearing: 31.05.2017 घोषणा क" तारीख / Date of Pronouncement: 02.06.2017 आयकर आयकर आयकर अिधिनयम आयकर अिधिनयम अिधिनयम,1961 क" अिधिनयम क" क" धारा क" धारा धारा 254(1)केकेकेके अ"तग"त धारा अ"तग"त अ"तग"त आदेश अ"तग"त आदेश आदेश आदेश Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद"य लेखा लेखा सद"य सद"य राजे"" सद"य राजे"" राजे"" केकेकेके अनुसार राजे"" अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the orders,dated 20/10/2014,of the CIT (A)-32,Mumbai,the Assessee has filed the present appeals.Assessee-company,a 100% trading exporter,filed its return of income on 29/10/2001,declaring total income at Rs. 72.50 lakhs. The Assessing Officer (AO) completed the assessment u/s.143 (3) r.w.s.147 of the Act, on 28/11/2006, determining its income at Rs. 2.54 crores.The matter travelled up to the Tribunal and vide its order dated 12/09/2010 (ITA/ 7175/ Mum/2008 and 581/Mum/2009) it restored back the issue to the file of the AO. 2.First ground of appeal is about not reducing the excise duty refund of Rs.17.22 lakhs,while computing the amount of direct cost under section 80HHC of the Act. To give effect to the directions of the Tribunal,the AO completed the assessment u/s.143(3)r.w.s. 254, on 27/09/ 2013,determining its income at Rs.63.79 lakhs.While completing the assessment, the AO held that the excise duty refund of Rs.17,22,305/-could not be reduced from the direct cost while computing deduction under section 80HHC, that excise duty refund was an independent item of income as per the decision of Dresser Rand India Private Ltd (323 ITR 429)of the Hon’ble Bombay High Court. 3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA)and argued that facts of the case under consideration were distin - guishable from the facts of Dresser Rand India Private Ltd (supra).Besides it made elaborate submissions arguing that the excise duty refund had to be reduced while computing the amount of direct cost for the purposes of calculating the deduction under section 80HHC. 1 7771/M/14-)01-02) Gelsules Exports After considering the available material,he held that there was no merit in the contention of the assessee that the decision of Dresser Rand India Private Ltd (supra) was not applicable to the facts of the case, that excise duty refund was an independent item of income not related to the export activities of the assessee, that the AO was justified in not reducing the excise duty refund from the purchases of the assessee and treating it as an independent item of income not liable for deduction under section 80HHC of the Act. 4.During the course of hearing before us, the Authorised Representative (AR) referred to the case of Valiant Glassworks (P) Ltd.(110 DTR 281). The Departmental Representative (DR) left the issue to the discretion of the Bench. 5.We find that the issue has been deliberated upon and decided by the Hon'ble Jurisdictional High Court in the case of Valiant Glassworks (P) Ltd.(supra). We would like to reproduce the relevant portion of the judgment and it reads as under: “The CENVAT incentive being the refund of tax and duty paid on inputs consumed for goods manufactured and exported would automatically reduce the cost of manufacture of exported goods, thereby necessarily increasing the profit. In view thereof, the deemed credit under the CENVAT incentive scheme at Rs. 89, 34, 87 would be a part of business profit eligible for a deduction under s.80HHC. It can hardly be argued that deemed credit under the CENVAT incentive scheme would not reduce the material/manufacturing cost of the goods exported by the assessee. This was not the case of the revenue also. That being the case, under the provisions of s. 80HHC, the assessee would be entitled to deduction to the extent of profits referred to in subsection (1B) they are of derived by the assessee from the export of such goods or merchandise. No other provision was brought to notice that would justify the disallowance of incentive whilst computing the admissible deduction under s.80HHC. In this view of the matter, in the regular facts and circumstances of the present case, the Tribunal was justified in coming to the conclusion that the amount of deemed credit under the CENVAT Incentive Scheme was a part of the business profit of the assessee eligible for deduction under s.80HHC despite the fact that it did not specifically find place in section 80HHC (3).” Respectfully following the above,we hold that the revenue authorities were not justified in reducing the excise duty refund while computing the amount of direct cost under section 80HHC of the Act.So,reversing the order of the FAA,we decide First ground of appeal in favour of the assessee.Next two grounds are academic in nature and stand allowed for statistical purposes. As a result,appeal filed by the assessee stands allowed. फलतः िनधा"रती "ारा दािखल क" गई अपील सांि"यक" उ"े"य" के िलए मंजूर क" जाती है. Order pronounced in the open court on 2nd , June, 2017. आदेश क" घोषणा खुले *यायालय म+ ,दनांक 2 जून, 2017 को क" गई । (राम लाल नेगी राम लाल नेगी राम लाल नेगी / Ram Lal Negi) (राजे"" / Rajendra) राम लाल नेगी "याियक सद"य / JUDICIAL MEMBER लेखा लेखा लेखा सद"य लेखा सद"य सद"य / ACCOUNTANT MEMBER सद"य मुंबई Mumbai; ,दनांक/Dated : 02.06.2017. Jv.Sr.PS. 2