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Income Tax Appellate Tribunal, BENCH “B”, KOLKATA
Before: Shri Mahavir Singh, JM & Shri M.Balaganesh, AM]
Per Shri M.Balaganesh, AM
This appeal of the assessee arises out of the order of the Learned CIT(A)- Central-II, Kolkata in Appeal No.17/CC-XIII/CIT(A)C-II/05-06 for the Asst Year 2002-03 passed against the order of assessment framed by the Learned AO u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).
The issues to be decided in this appeal is as to whether, the assessee is entitled for deduction u/s 80HHC of the Act in respect of premium on account of transfer of Duty Entitlement Pass Book (DEPB) scheme, in the facts and circumstances of the case and also whether the interest income earned by the assessee is eligible for deduction u/s 80HHC of the Act.
The brief facts of this case are that the assessee is a partnership firm having business income of export of shrimps, other marine products and leather goods. The return of income for the Asst Year 2002-03 was filed by the assesese showing total income of Rs. 12,03,620/- after claiming deduction u/s 80HHC of the Act amounting to Rs. 27,69,783/-. During the course of assessment proceedings, the Learned AO observed that assessee is not entitled for the deduction u/s 80HHC in respect of M/s. Veejay Impex A.Y.2002-03 premium on account of transfer of DEPT amounting to Rs. 1,39,02,385/- , interest income from fixed deposit with canara bank amounting to Rs. 2,79,017/- and interest income from deposit with CESC Ltd amounting to Rs. 17,294/- which were included in the business income by the assessee. This action of the Learned AO was triggered pursuant to the Taxation Laws (Second Amendment) Bill, 2005 , wherein amendment was sought to be brought with retrospective effect in section 80HHC of the Act, among others. The assessee had independently challenged the said amendment by way of a writ petition and was also a party before the Hon’ble Gujarat High Court wherein all the pending disputes with regard to this addition before various High Courts were consolidated pursuant to the directions of the Hon’ble Supreme Court were heard. The Learned AO observed that the interest income derived by the assessee as stated above would not be eligible for deduction u/s 80HHC of the Act as the same were not derived out of export business. He further observed that this issue is of academic value because after reducing the premium on account of transfer of DEPB Scheme of Rs. 1,39,02,385/-, the resultant income from business is a loss and therefore no claim of deduction u/s 80HHC of the Act is eligible to the assessee. The action of the Learned AO was also upheld by the Learned CITA on first appeal. Aggrieved, the assessee is in appeal before us on the following grounds:- “
1. For that the Learned Revenue Authority on mis-interpretation of the provisions of law wrongly proceeded to assume that premium on account of transfer of DEPB scheme was not part of income of the appellant’s business for purpose of arriving at the amount of claim u/s 80HHC of I.T.Act.
2. For that the Learned Assessing Officer without having any materials in possession on a wrong view considered the amount of Rs.1,39,02,385 on account of premium of transfer of DEPB not related part of export sale of the appellant which deserves consideration.
3. For that the Learned CIT(A) without going through the facts and circumstances of the case whether the appellant had an option to choose either the duty draw back or DEPB and rate of Duty Drawback being higher than DEPB concluded to an unwarranted inferences on surmise and conjectures which is ultravires to the provision of law.
4. For that the Learned CIT(A) was wrong in asserting that rate of credit allowable under DEPB Scheme for shrimp was much lower than rate of drawback credit attributable to custom duty. Since in terms of the provision of Law applicability of rate on account of duty drawback on export of shrimp be treated uncalled for.
5. For that the Learned Assessing Officer was wrong in non inclusion of duty draw back in calculation of deduction u/s 80HHC of the I.T.Act.
6. For that the Learned Assessing officer on wrong appreciation of facts conceded that interest on fixed deposit amounting to Rs.2,79,017 and interest on deposit with CESC
M/s. Veejay Impex A.Y.2002-03 amounting to Rs.17,294 thus making a total interest amounting to Rs.2,96,311 was not eligible for purpose of calculation of deduction u/s 80HHC of I.T.Act. since considered allegedly not related to appellant’s business income which also stands subject to reconsideration of claim of deduction u/s 80HHC of the Act.”
The Learned AR placed reliance on the decision of the Hon’ble Gujarat High Court in the case of Avani Exports vs CIT and argued that the assessee is entitled for deduction u/s 80HHC of the Act in respect of premium on account of transfer of DEPB Scheme. The Learned DR heavily relied on the order of the lower authorities.
We have heard the rival submissions . We find that the issue before us is squarely covered by the decision of the Hon’ble Gujarat High Court in the case of Avani Exports & Ors vs CIT & Ors reported in (2012) 348 ITR 391 (Guj) wherein it was held that the amendment brought out by the Taxation Laws (Second Amendment) Bill, 2005 in section 80HHC of the Act could have only prospective operation. The Court held as under:- 26. On consideration of the entire materials on record, we, therefore, find substance in the contention of the learned counsel for the petitioners that the impugned amendment is violative for its retrospective operation in order to overcome the decision of the Tribunal, and at the same time, for depriving the benefit earlier granted to a class of assesses whose assessments were still pending although such benefit will be available to the assesses whose assessments have already been concluded. In other words, in this type of substantive assessment, retrospective operation can be given only if it is for the benefit of the assessee but not in a case where it affects even a fewer section of the assesses.
We, accordingly, quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of amendment and not in respect of earlier assessment years of the assesses whose export turnover is above Rs 10 crore. In other words, the retrospective amendment should not be detrimental to any of the assesses.
The writ-applications are, thus, disposed in terms of the above order. In the facts and circumstances, there will be, however, no order as to costs.
28.1. In view of the above ordre passed in the writ-applications, the Civil Applications do not survive and are disposed of accordingly.
Respectfully following the aforesaid judgement, we hold that the amendment in section 80HHC by Taxation laws (Second Amendment) Bill, 2005 is not applicable M/s. Veejay Impex A.Y.2002-03 for Asst Year 2002-03 and hence hold that the assessee is entitled for deduction u/s 80HHC of the Act in respect of premium on account of transfer of DEPB Scheme. Accordingly the grounds 1 to 5 raised by the assessee are allowed. With regard to the interest income on fixed deposits with banks and from electricity deposits with CESC Ltd, no specific arguments were advanced by the Learned AR with regard to the eligibility of claim of deduction u/ s 80HHC of the Act. We find that the Hon’ble Supreme Court in the case of Pandian Chemicals Ltd vs CIT reported in (2003) 262 ITR 278 (SC) had held that the interest income from deposits with electricity boards would be taxable as income from other sources. Hence respectfully following the said decision, we hold that the assessee is not entitled for deduction u/s 80HHC of the Act in respect of interest income. Accordingly, the ground no. 6 raised by the assessee is dismissed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the court on 04.05.2016.