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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAOSmt. Sangeetha Jain,
O R D E R Per VIJAY PAL RAO, JM :
This appeal by the revenue is directed against the order of dated 3/2/2015 of the CIT(A) for the assessment year 1993-94.
The revenue has raised the following grounds:
“1. The order of the learned CIT(Appeals) insofar as it is prejudicial to the interest of revenue is opposed to law and the facts and circumstances of the case.
Smt.Sangeetha Jain Page 2 of 9 2. The CIT(A) erred in directing the AO to compute the allowable deduction u/s 80HHC by adopting Rs.1,23,58,206/- as the total turnover in place of Rs.1,26,63,139/- adopted by the assessee by placing reliance on the decision of Madras High Court in the case of Sarathy Palayacat Co (1993) 103 Taxman 53 wherein interalia reliance was placed on the decision of Hon’blel Supreme Court in the case of Ajantha Electricals (1995) 215 ITR 114 without appreciating the fact that an affidavit filed by the CA cannot be a substitute for the necessary certificate and the same should not be the basis for the additional grounds submitted by the assessee.
For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(Appeals) be reversed in so far as the above mentioned issues are concerned and that of the assessing officer be reversed.
4. The appellant craves leave to add, alter, amend or delete any of the grounds that may b e urged at the time of hearing of the appeal.”
3. This is second round of litigation arising from denial of claim of deduction u/s 80-HHC of the IT Act, 1961 by the AO while framing original assessment u/s 143(3) r.w.s. 147. The matter was carried by the assessee to this Tribunal in and this Tribunal vide its order dated 13/10/2011 remitted the issue to the record of the AO for deciding the same in accordance with law after taking into consideration decision of the Hon’ble Allahabad High Court in the case of Azad Tobacco Factory (P) Ltd. vs. CIT (225 ITR 1003). The AO denied deduction u/s 80-HHC on the ground that the Smt.Sangeetha Jain Page 3 of 9 assessee failed to bring export proceeds within time prescribed under the Act i.e. on or before 30th September 1993. The assessee claimed that the assessee made an application before the CIT for extension of time and therefore, in view of the decision of the Hon’ble Allahabad High Court in the case of Azad Tobacco Factory (P) Ltd (supra), the claim of the assessee cannot be denied when the delay in bringing the export sale realization is beyond the control of the assessee. In the remand proceedings, the AO repeated the disallowance while passing the order dated 30/3/2013 on the ground that the assessee failed to establish that the assessee made an application before CIT for extension of time. On further appeal, CIT(A) allowed claim of the assessee by observing that the fact that the AO failed to place the matter before the CIT when he noticed that sale proceeds were received beyond stipulated time.
Before us, learned Departmental Representative has submitted that the assessee has failed to bring on record any evidence to show that the reasons for not bringing export sale proceeds within stipulated time were beyond the control of the assessee. He has further contended that onus is on the assessee to explain reasons for not bringing convertible foreign exchange within stipulated period and therefore, if the reasons for delay are beyond the control of the assessee, time for bringing the same can be extended by the authority. In the absence of any such proposal or such application of extension of time, assessee has Smt.Sangeetha Jain Page 4 of 9 violated the conditions as stipulated u/s 80-HHC(2)(a). He has relied upon the order of the AO.
On the other hand, learned AR of the assessee has submitted that while remitting issue to the record of the AO, this Tribunal has given a specific direction to AO to decide the issue as per law and in light of the judgment of the Hon’ble Allahabad High Court in the case of Azad Tobacco Factory (P) Ltd (supra). He has further submitted that once the assessee has made a claim in the return of income and explained reasons for delay as beyond control of assessee, then it was the duty of the AO to place the matter before the CIT or CCIT for extension of time. Since assessee has failed to place matter before the CIT or CCIT and therefore, denial of deduction u/s 80-HHC is not justified. He has supported the impugned order of the CIT(A).
We have considered the rival submissions as well as relevant material on record. The claim of deduction u/s 80-HHC was denied by the AO on the ground that the assessee failed to bring export sale realization in convertible foreign exchange within stipulated period as provided u/s 80-HHC.
6.1 In the earlier round of litigation, the matter was carried to this Tribunal and the Tribunal vide its order dated 3/10/2011 has remitted the issue to the record of the AO in para.6 as under:
“6. Having heard both the parties and having considered the rival contentions, we find that the Smt.Sangeetha Jain Page 5 of 9 assessee has mentioned the ack. no as well as the date of application are submitted before the CIT(A) for extension of time in the CA's certificate. As rightly pointed out by the learned counsel for the assessee the application has not been verified by the authorities below. This the very root of the matter, as the assessee would entitled to the entire claim of deduction u/s BOHHC, if the assessee had really made the application for extension of time within the period of six months or even thereafter as held by the Hon’ble Allahabad High Court, cited supra. In view of the same, we deem it fit and proper to remand the entire issue to the file of the AO to decide the issue in accordance with law, after verification of records with CIT-Kar-III and after taking into consideration the decision of the Hon'ble Allahabad High Court reported in 225 ITR 1003(All.)”
6.2 Thus jurisdiction of the AO in the remand proceedings was circumscribed by the directions of this Tribunal in the order dated 13/10/2011. The AO was supposed to decide the issue in accordance with law after verification of the record with CIT and taking into consideration the decision of the Hon’ble Allahabad High Court in the case of Azad Tobacco Factory (P) Ltd (supra). However, the AO himself has decided the issue that the assessee failed to bring export sale proceeds within the period stipulated by the Act and therefore, not entitled for benefit u/s 80-HHC.
6.3 The CIT(A) while deciding the issue has held in paras.8 to 12 as under:
“8. The Hon'ble ITAT in its order directed the AO to decide the issue in accordance with law in the light of the decision of the Hon'ble Allahabad High Court in the case of Azad tobacco Factory reported in 225 ITR 1002. In the aforesaid decision, at para 18 of the order their lordships held that Smt.Sangeetha Jain Page 6 of 9 'In fine, according to our view, a plain reading of section 80HHc(2)(a) does not contemplate making of any application by the assessee within a period of six months either for availing of the deductibility with respect to sale proceeds received in or brought into India as contemplated therein within a period of six months from the end of the previous year or for the purpose of invoking the power of the Chief Commissioner or Commissioner to allow further period in case the assessee is unable to receive in or bring into India the sale proceeds for reasons beyond his control. If such a position is accepted, then there is no scope for making any application for the purpose of having the benefit of further period before the expiry of six months. On the other hand, it is our considered view that the deductibility claimed in the return is to be decided in computing the total income in case six months.' period has expired before the assessee received or brought into India the sale proceeds, in that event, it is for the assessing authority to p Lace the same before the Chief Commissioner or Commissioner if the assessee proposes to satisfy that he was unable to do so for reasons beyond his control. Inasmuch as the assessing authority having not been invested with the power granted under sub-section (2)( a) for allowing further period, he neither can refuse nor can deal with the same. Therefore, it is imperative on its part to p Lace the same before the Chief Commissioner or Commissioner, as the case may be. The assessee may also bring the fact to the notice of the Chief Commissioner or Commissioner, but in that event, no time limit can be applied except that the claim is to be made in the return to be filed".
In the present proceedings, apparently the AO has not taken any action as enunciated in the aforesaid decision. The AO has merely enquired with the ITO(HQ) to the CIT Karnataka-Ill as to the availability of appellant's application on the records and has failed to place the matter before the CIT when he has noticed that the sale proceeds were received beyond the stipulated time and rather decided himself to deal with the same which is not permissible.
Smt.Sangeetha Jain Page 7 of 9 10. Further, in the present case the material placed on record from time to time and at the time of earlier proceedings before CIT(A) would go to show that the RBI has extended time for receiving the sale proceeds beyond the stipulated date and such delay was caused on account of the exported goods being rejected by the importer and the appellant had to find out an alternative buyer abroad itself instead of getting the goods back to India. In the end, appellant had received the sale proceeds to the tune of Rs.12358206 in convertible foreign exchange and has placed on record the relevant bank records evidencing the same, which fact was examined by the AO at the time of earlier appellate proceedings before my predecessor and is undisputed. Thus, in the overall situation, appellant had failed to receive only a small fraction of the export proceeds and there is no default on the substantial requirement. In this back ground, in my opinion,, the insistence on procedural formalities of obtaining sanction from the CIT would only defeat the purpose of the Section 80 HHC. In fact the CBDT's memorandum explaining the provisions of Section 80HHC vide finance Act 1990 and 1999 place emphasis on actual receipt of convertible foreign currency as a condition to avail the deduction and the approval of the CIT or RBI as the case may be was to address the hardship if any faced by the tax payers in complying with the said requirement and not to impose a further impediment or a requirement in the form of approval.
The Hon'ble Madras High Court in the case of Sarathy Palayacat Co. vs Chief Commissioner of Income Tax (1999) 103 Taxman 53 after relying on the decision of the Hon'ble Supreme Court decision in the case of CIT vs. Ajanta Electricals (1995) 215 ITR 114 held at para 5 as under: "These observations of the Apex Court apply with equal force for determining the proper construction to be placed on section 8OHHC(2)(a). The provisions here fixing the time within which the monies have to be brought into India is a procedural provision. That time can vary by an order of the Chief Commissioner by extending the period within which the money has to be brought in. The primary object of the section is that the sale proceeds realized from the exports of the goods should be brought into India in convertible foreign exchange. It is that primary
Smt.Sangeetha Jain Page 8 of 9 purpose which should be shown to have been satisfied for the purpose of claiming the benefit granted u/s 80HHC. The period within which the monies are to be brought into India is a matter which is governed by the procedural aspect of the section which fixes time Limit, which time Limit is not rigid but is cable of being extended by the Chief Commissioner". In view of the above discussion, I am of the considered opinion that the appellant is entitled for deduction u/s 80HHC of the Act in respect of the convertible -foreign exchange received of Rs.12358206. Accordingly, the AO is directed to compute the allowable deduction by treating the aforesaid amount as total turnover in the place of Rs.12663139 adopted by the appellant. Appellant gets relief on this issue to the above extent.”
6.4 There is no dispute that assessee made the claim of deduction u/s 80-HHC in the return of income and the AO while passing the assessment order u/s 143(3) r.w.s. 147 disallowed the claim of the assessee on the ground that the assessee failed to bring export sales realization in convertible foreign exchange within stipulated period. Therefore, in the original assessment when this claim was denied by the AO, after noticing that there was a delay in bring sale proceeds and despite that the assessee made a claim u/s 80-HHC. In the remand proceedings, the claim of the assessee was to be considered and decided in the light of the judgment of the Hon’ble Allahabad High Court in the case of Azad Tobacco Factory (P) Ltd (supra) wherein it has been held that once the assessee has made a claim u/s 80-HHC and there is a delay in bringing sale proceeds within stipulated period, then the assessing authority has neither vested power for allowing the further period nor can he deal with the same. It was held by the Smt.Sangeetha Jain Page 9 of 9 Hon’ble High Court that the Chief Commissioner or Commissioner, as the case may be, is the competent authority to extend the period on satisfaction that the assessee was unable to do so for the reasons beyond his control. Therefore, once the assessee made a claim, the AO was required to place the same before the CCIT or CIT, as case may be, and the assessee was required to explain the reason for delay. In the case in hand, AO has not followed the procedure as required to place the matter before the CCIT or CIT, as the case may be, but himself has decided to refuse the extension of time claimed by the assessee which is beyond the jurisdiction of the AO. Accordingly, in the facts and circumstances of the case, we do not find any error or illegality in the order of the CIT(A). The same is upheld.
In the result, the appeal of the revenue is dismissed.