TaxTMI 
TaxTMI 
TaxTMI 
2009 (11) TMI 901
X X X X Extracts X X X X
X X X X Extracts X X X X
....ross Appeals filed by the Revenue and Assessee against the order of the ld.CIT(Appeals)-VIII, Ahmedabad, dated 29.01.2007 in Appeal No.CIT(A)-VIII/DC-4/122/06-07. 2. Grounds of the appeal of the Assessee reads as under: "1. That the order of Learned Commissioner of Income Tax(Appeals) directing the assessing officer to recomputed deduction U/s. 80HHC as per his directions and findings is against the principles of law, facts and evidence on record. 2. The Learned Commissioner of Income Tax(Appeals) erred in directing the Learned Assessing Officer "to take the sale value of export entitlements either brought forward from the earlier year or received during the current year." and further erred in observing that the appellant did not satisfy the condition specified under 3rd and 4th proviso and assessee did not lead any corroborative evidence in compliance of the conditions. 3. Learned Commissioner of Income Tax(Appeals) erred n considering and coming to the conclusion that as per the amended provision of section 80HHC and in view of the decision of Income-Tax Appellate Tribunal, Chandigarh "A" bench in the case of ACIT Vs. Parker Cycles reported at 104 TTJ 983; income from sale of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he DEPB entitlements. Vide Para 3-4, he held that the appellant did not satisfy the twin conditions specified in the 3rd proviso to section 80HHC(3) and accordingly, the deduction in respect of profit on transfer of DEPB entitlements was disallowed. He also made adjustments to total turnover by including excise duty and sale-tax and also excluded 90% of sales-tax refund, miscellaneous income and insurance claimed at ₹ 1,24,892/- in arriving at the profit of the business at Rs.(-)2,06,11,673/- as against the profit of the business as per Form No.10CCAC at Rs.(-)2,04,86,781/-. As regard the incentives, he worked out nil deduction. Apparently, this was on account of application of decision of the Apex Court in the case of IPCA Laboratories Ltd. on the ground that when there was no profit from the export activity, the assessee was not eligible for deduction under section 80HHC. The appellant is aggrieved by the total disallowance of deduction claimed under section 80HHC and hence, this appeal. 5. Before Learned Commissioner of Income Tax(Appeals), the Learned Authorised Representative of the Assessee argued forcefully that pursuant to the decision of IPCA Laboratories Ltd. by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3) is not tenable and is not the legislative intention. If the contention of the appellant is accepted, then the accrued value of the DEPB/DFRC is shown as business profit under the Mercantile System of account and deduction under section 80HHC is claimed without subjecting themselves to stipulations provided in the 3rd and 4th proviso to section 80HHC(3). Such a course would amount to rendering the very amended provisions unworkable. For example, the appellant may show the DEPB receivable at ₹ 100/- and claim deduction under section 80HHC the entire amount as business profit and on the sale value of a ₹ 105/- with reference to the said entitlements, only ₹ 5/- would be offered as profit as against ₹ 105/- to be considered as export incentives hit by the amended provisions. This method of accounting is not tenable and has to be disturbed. To this extent, the action of the Learned Assessing Officer in not accepting the computation of the appellant is justified. However, the various components of the export incentives forming part of other income have not been examined in the proper perspective. In the light of the above, the following directions are given. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....c discussion in the order and reliance of the appellant that the accounting of sales tax and excise duty were revenue neutral not adding to the profit of the business, (Alfa Level Ltd. Vs. CIT, 266 ITR 418 (Mum.)), the Assessing Officer may examine whether necessary contra entries are passed and if they are found to be for clearance of the export goods and subsequent reimbursement with necessary debit and credit entries not adding upto the profit, then no exclusion from the profit of the business is called for. This requires specific examination with reference to entries of the current year and in the light of the same, deduction under section 80HHC is to be reworked. In short, it is held that the appellant is not entitled to deduction under section 80HHC in respect of DEPB/DFRC entitlements and as regards other export incentives, the same will have to be examined and reworked in the light of the above directions. Thus, Ground No.1 to 16 are treated as Partly Allowed." 7. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. In the instant case, the deduction under section 80HHC was disallowed by the Learned Asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cted to produce evidences to show that provisions of 3rd proviso to section 80HHC has been complied in its case when called for by the Learned Assessing Officer. Thus, the appeal of the assessee is allowed for statistical purposes. ITA No.1594/Ahd/2007 8. Ground no.1 of the Revenue's appeal reads as under:- "1. The Ld.CIT(A) erred in law and on the facts of the case in directing the Learned Assessing Officer to take into account the DEPB income on actual sale basis and not on accrual basis while holding that the Assessee is not entitled for deduction under section 80HHC on DEPB/DFRC entitlements." 9. In respect of ground no.1 of appeal, we find that in view of our decision in respect of the appeal of the assessee, this ground of appeal has become infructuous. Therefore, the same is dismissed. 10. Ground no.2 of the Revenue's appeal reads as under:- "2. The LD.CIT(A) has erred in law and on the facts of the case in directing the AO to exclude only the net amount of other export entitlements such as sale tax and Excise duty refund for computation of deduction under section 80HHC of the I.T.Act." 11. In respect of ground of appeal, we find that the Learned Commissioner of Inco....