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Income Tax Appellate Tribunal, ‘C BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
In this appeal filed by the assessee, its grievance is that it was denied deduction claimed by it u/s.80HHC of the Income Tax Act , 1961 (hereafter referred to ‘’the Act’’).
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Facts apropos are that assessee is a manufacturer, purchaser and seller of cotton lunghies had filed its return for the impugned assessment year declaring an income of Rs.56,96,110/-. Assessee had claimed deduction for a sum of Rs.24,27,932/- u/s.80HHC of the Act.
Original assessment was completed on 20.09.2006 denying such claim.
Assessee thereafter moved in appeal before ld. Commissioner of Income Tax (Appeals) where it did not get a favourable order. When it came in appeal before Tribunal, the Tribunal vide order dated 24.11.2008, setaside the matter to the Assessing Officer with a direction to decide the issue regarding deduction u/s.80HHC of the Act afresh after giving an opportunity to the assessee. It seems assessee had moved in further appeal before the Hon’ble Jurisdictional High Court and the case is pending.
Thereafter based on the directions of the Tribunal, ld. Assessing Officer took up the matter once again. Ld. Assessing Officer noted that assessee had incurred a loss on export business. As per ld. Assessing Officer, export business of trading goods resulted in loss of Rs.18,19,240/-, and such business of manufacturing resulted in a loss of Rs.18,00,271/-. However, the assessee had received duty draw back incentive and profit on sale of DEPB licences aggregating to Rs.1,31,69,535/-. Ld. Assessing Officer was of the opinion that ITA No. 1555/Mds/2016. :- 3 -:
assessee could not avail deduction u/s.80HHC of the Act on duty draw back incentive and sale of DEPB licences by virtue of Judgment of Apex Court in the case of IPCA Laboratories vs. CIT 226 ITR 521. As
per ld. Assessing Officer unless and until there was profit from export business, assessee would not be eligible for deduction u/s.80HHC of the Act. Ld. Assessing Officer mentioned that amended provisions of Sec.80HHC of the Act whereby provisos were added to the said section, applied to the assessee.
Aggrieved assessee once again moved in appeal before ld. Commissioner of Income Tax (Appeals). It was argued that amendment to Sec. 80HHC(3) of the Act made from Taxation Laws (Second Amendment) Act, 2005 whereby two categories of exporters were carved out would not apply retrospectively since it deprived a benefit granted earlier to a class of the assessee whose assessments were pending although such benefits were available to the assesses whose assessment were completed. Argument of the assessee was that provisos (ii)(iii) and (iv) had no applicability to the assessee.
Reliance was placed on the judgment of Gujarat High Court in the case of Avani Exports & Ors vs. CIT & Ors 348 ITR 391 and that of Hon’ble Apex Court in the case of CIT vs. Avani Exports (2016) 007 ITR-OL 0046. Ld. Commissioner of Income Tax (Appeals) was not impressed
ITA No. 1555/Mds/2016. :- 4 -: by the above arguments. According to him, what Assessing Officer had applied was judgment of Hon’ble Apex Court in the case of M/s.
IPCA Laboratories Ltd (supra). As per ld. Commissioner of Income Tax (Appeals) assessee would be eligible for claim of deduction u/s.80HHC of the Act only if there were profit from export business.
Observation of the ld. Commissioner of Income Tax (Appeals) was that assessee having incurred a loss in its export business, it was not eligible for claim of deduction u/s.80HHC of the Act.
Before us, ld. Authorised Representative strongly relying on the judgment of Hon’ble Apex Court in the case of Avani Exports (supra) submitted that the claim of deduction under section 80HHC of the Act was unjustly denied.
Per Contra, the ld. Departmental Representative strongly 6.
supported the orders of the authorities below.
We have considered the rival contentions and perused the 7. orders of the authorities below. If the duty draw incentive and profit on sale of DEPB licences aggregating to �1,31,69,535/- is excluded, the export business of the assesse was in a loss. The loss was �18,19,240/- for trading export and �18,00,271/- for manufacturing export. No doubt by virtue of judgment of Apex Court in the case of ITA No. 1555/Mds/2016. :- 5 -:
IPCA Laboratories (supra), unless an assessee has to have profit from export business, a deduction u/s.80HHC of the Act cannot be given.
Ld. Assessing Officer had relied on this judgment while disallowing the claim of the assessee. Ld. Assessing Officer did not consider duty draw back incentive and profit on sale of DEPB licences as profit derived by the assessee from export of goods or merchandise. One other reason why ld. Assessing Officer denied the claim was that assessee could not show satisfaction of the conditions specified in second proviso to Sec. 80HHC of the Act. By virtue of judgment of Apex Court in the case of Avani Exports & Ors (supra), second proviso would not have any applicability in the case of the assessee, since the said proviso was held to have no retrospective effect. However, this does not take away the sheen of the first reason cited by the ld. Assessing Officer, that the assessee had suffered a loss in its export business.
The question that arises here is whether profit/loss that is to be computed for application of Sec. 80HHC(1) of the Act is one after taking into account the export incentives namely duty draw back incentive and profit on sale of DEPB licences or before that. Meaning of the term ‘profit’ as contained in Sec. 80HHC (1) or (3)(a) or 3(b) of the Act was considered by Hon’ble Apex Court in the case of A.M. Moosa vs. CIT, 294 ITR 01. Hon’ble Apex Court in this judgment had made a specific reference to earlier judgment in the case of IPCA Laboratories
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(supra). We are of the opinion that lower authorities have not addressed the issue, whether the term profit as it appears in Sec.
80HHC(1) of the Act is one which is to be computed after considering export incentives or not. We are of the opinion that the matters requires a fresh look by the lower authorities. We setaside the orders of the lower authorities and remit the issue regarding applicability of Sec. 80HHC of the Act on export incentives derived by the assessee, when the export business operations was running on a loss, back to the file of the ld. Assessing Officer for consideration a fresh in accordance with law.
In the result, assessee appeal is partly allowed for statistical purpose.
Order pronounced on Wednesday, the 23rd day of November, 2016, at Chennai.