The Commissioner Of Income Tax Trichy v. M/S.asian Handlooms1-D, Pugalur Road,Karur

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 28.01.2019 CORAM : THE HONOURABLE MR. JUSTICE T.S.SIVAGNANAMANDTHE HONOURABLE MR. JUSTICE N.SATHISH KUMAR Tax Case Appeal Nos.212 to 214 of 2011 The Commissioner of Income Tax Trichy. ...Appellant in all Appeals -Vs- M/s.Asian Handlooms1-D, Pugalur Road,Karur. ...Respondent in TCA No.212/2011 M/s.R.K.Textiles22, Kamarajapuram West,Karur....Respondent in TCA Nos.213 and 214/2011 Tax Case Appeals filed under Section 260A of the Income TaxAct, 1961 against the order of the Income Tax Appellate TribunalChennai 'D' Bench, dated 14.09.2007 in I.T.A.Nos.373, 376 and378/Mds/2007 for the Assessment Years 2003-04, 2003-04 and 2001-02 respectively. T.C.A.No.212 of 2011:- Appeal against the order of theCommissioner Income Tax(Appeals) No.4, Williams Road,Cantonment, Tiruchirapalli - 620 001 in ITA No.17/05-06 dated17.11.06 in GI No.PA.No.20PA24/AABFA 0568Q against theassessment order made in PAN/GIR No.20PA-24/CIRII/TRY for theyear 2003-04 on the file of the Deputy Commissioner of IncomeTax Circle-II, 10, Wiliams Road, Cantonment, Trichy. T.C.A.No.213 of 2011:- Appeal against the order of theCommissioner of Income Tax(Appeals), No.4, Williams Road,Cantonment, Tiruchirapalli - 620 001 in ITA No.33/06-07, dated17.11.06 in G.I.No.PA.No.AAAFR6620 against the Assessment ordermade in PAN/GIR No. /CIR-11/TRY/ for the Assessment https://hcservices.ecourts.gov.in/hcservices/ year 2003-04 on the file of the Deputy Commissioner of IncomeTax Circle-II 10, Wiliams Road, Cantonment, Trichy. T.C.A.No.214 of 2011:- Appeal against the order of theCommissioner of Income Tax(Appeals) No.4, Williams Road,Cantonment, Tiruchirapalli - 620 001 in ITA No.32/06-07, dated17.11.06 in G.I.No.PA.No.AAAFR6620 against the Assessment ordermade in PAN/GIR No. /CIR-II/TRY for the Assessment year2001-02 on the file of the Deputy Commissioner of Income TaxCircle-II 10, Wiliams Road, Cantonment, Trichy. For Appellant: Mrs.V.PushpaStanding Counsel For Respondent : Mr.N.Quadir Hoseyn C O M M O N J U D G M E N T(Delivered by T.S.Sivagnanam, J.] These appeals are directed against the order passed bythe Income Tax Appellate Tribunal, Chennai 'D' Bench dated14.09.2007 in I.T.A.Nos.373, 376 and 378/Mds/2007 for theAssessment Years 2003-04, 2003-04 and 2001-02 respectively. 2. These Appeals have been filed raising the followingSubstantial Question of Law:- "1.Whether on the facts and in thecircumstances of the case, the Tribunal was rightin holding that the assessee was entitled todeduction under Section 80HHC of the Income TaxAct, 1961?" 3. The learned counsel on either side fairly submits thatthe issue involved in these appeals is squarely covered by thedecision of the Division Bench in Commissioner of Income Tax,Trichirappalli v. M/s.Asian Handlooms, Karur in T.C.A.Nos.1013,401, 1106 and 567 of 2009 dated 23.09.2013. 4. The operative portion of the judgment reads as follows:-"12. In the decision reported in (2012) 342 ITR49 in the case of Topman Exports Vs. Commissionerof Income Tax, the Apex Court pointed out that asfar as the receipts on Duty Entitlement PassbookScheme (DEPB) is concerned, the same would bepart of the profits and gains of the business, it"12. In the decision reported in (2012) 342 ITR49 in the case of Topman Exports Vs. Commissionerof Income Tax, the Apex Court pointed out that asfar as the receipts on Duty Entitlement PassbookScheme (DEPB) is concerned, the same would bepart of the profits and gains of the business, it https://hcservices.ecourts.gov.in/hcservices/ 4. The operative portion of the judgment reads as follows:-"12. In the decision reported in (2012) 342 ITR49 in the case of Topman Exports Vs. Commissionerof Income Tax, the Apex Court pointed out that asfar as the receipts on Duty Entitlement PassbookScheme (DEPB) is concerned, the same would bepart of the profits and gains of the business, it"12. In the decision reported in (2012) 342 ITR49 in the case of Topman Exports Vs. Commissionerof Income Tax, the Apex Court pointed out that asfar as the receipts on Duty Entitlement PassbookScheme (DEPB) is concerned, the same would bepart of the profits and gains of the business, it https://hcservices.ecourts.gov.in/hcservices/ being the assistance given by the Government ofIndia to an exporter to pay customs duty on itsimports, therefore, the "cash assistance"received under the DEPB scheme would fall underClause (iiib) of Section 28 and is chargeable toincome-tax under the head "Profits and gains ofbusiness or profession" even before it wastransferred to the assessee by the export house.Thus, the Apex Court held that there was nojustification to treat the amount which isreceived by an exporter on the transfer of theDEPB any differently than the profits which aremade on the sale of an import licence underclause (iiia) of Section 28 of the Act. The ApexCourt further pointed out that having regard tothe decisions of 80HHC of the Act and theExplanation (baa) under Section 80 HHC of the Actgiving the formula for working out the deduction,"profits of the business" means the profits ofthe business as computed under the head "Profitsand gains of business or profession" as reducedby ninety per cent., of any sum referred to inclause (iiia), (iiib), (iiic), (iiid) and (iiie)of Section 28 or any receipts by way ofbrokerage, commission, interest, rent, charges orany other receipt of similar nature including anysuch receipts and (2) the profits of any branch,office, warehouse or any other establishment ofthe assessee situated outside India. Thus,ninety per cent., of the DEPB which is "cashassistance" against exports and is covered underclause (iiib) of Section 28 will get excludedfrom the "profits of the business" of theassessee, if such DEPB has accrued to theassessee during the previous year. 13. Considering the pronouncement of the ApexCourt on this, we hold that the assessee's claimcould not be rejected straight away by theRevenue. Thus on the findings given by theAssessing Officer that export incentive was notpart of the sale consideration, the only aspectthat has to be decided is how much was the valueof the incentives received by the assessee as aSupporting Manufacturer from the export house.To that end, this Court feels that the matterdemands remittal to the Assessing Officer toconsider the assessee's claim and apply thedecision of the Apex Court reported in (2012) 342ITR 49 in the case of Topman Exports Vs. Commissioner of Income Tax, as stated above andpass orders under the claim of the assessee underSection 80 HHC of the Income Tax Act, 1961. " 5. Following the above decision, the appeals are disposed ofby remanding the matter to the Assessing Officer to consider theassessee's claim and apply the decision of the Hon'ble SupremeCourt in (2012) 342 ITR 49 in the case of Topmen Exports Vs.Commissioner of Income Tax, as mentioned in the above referreddecision and pass orders under the claim of the assessee underSection 80HHC of the Income Tax Act, 1961. No costs. svki Sd/- Assistant Registrar //True Copy// Sub Assistant RegistrarTo1. The Income Tax Appellate Tribunal, Chennai 'D' Bench.2. The Commissioner of Income Tax(Appeals), No.4,Williams Road Cantonment, Tiruchirapalli - 1.3. The Deputy Commissioner of Income Tax Circle- II, No.10 Williams Road, Cantonment Trichy.+3cc to Mr.M.Swaminathan, Advocate, S.R.No.7028,7029 & 7030 svki Sd/- Assistant Registrar //True Copy// Sub Assistant RegistrarTo1. The Income Tax Appellate Tribunal, Chennai 'D' Bench.2. The Commissioner of Income Tax(Appeals), No.4,Williams Road Cantonment, Tiruchirapalli - 1.3. The Deputy Commissioner of Income Tax Circle- II, No.10 Williams Road, Cantonment Trichy.+3cc to Mr.M.Swaminathan, Advocate, S.R.No.7028,7029 & 7030 +3cc to Mr.N.Quadir Huseyn, Advocate, S.R.No.7156Tax Case Appeal Nos.212 to 214 of 2011 ks(CO)kak(11/03/2019)