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Income Tax Officer,Ward 18(1),C.R. Building,New Delhi. Vs Ultimate Fashion Maker Ltd.,B-286, Okhla Industrial Area,Phase-I, New Delhi 110020
June, 12th 2012
                                               ITA 4493, 4494 & 4495/D/2011


            IN THE INCOME TAX APPELLATE TRIBUNAL
                 DELHI BENCH `H' NEW DELHI

      BEFORE SHRI A.N. PAHUJA, ACCOUNTANT MEMBER
                         AND
      SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

                        I.T.A.No.4493/Del/2011
                        Assessment Year : 1999-00

                        I.T.A.No.4494/Del/2011
                        Assessment Year : 2003-04

                        I.T.A.No.4495/Del/2011
                        Assessment Year : 2004-05

Ultimate Fashion Maker Ltd., Vs       Income Tax Officer,
B-286, Okhla Industrial Area,         Ward 18(1),
Phase-I, New Delhi 110020             C.R. Building,
(PAN: AAACU2099N)                      New Delhi.
 (Appellant)                         (Respondent)

                  Appellant by: Shri R.K. Mehra
                Respondent by : Dr. B.R.R.Kumar, Sr. DR

                               ORDER

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

      These appeals have been preferred by the assessee on the same

grounds against the order dated 9.8.2011 of the CIT(A)-XXI, New Delhi by

which ld. CIT(A) upheld the order of the AO dated 16.12.2010 passed u/s

254/143(3) of the Income Tax Act (hereinafter referred to as "the Act"). As

the grounds of all these appeals are same, therefore, for the sake of
                                     2           ITA 4493, 4494 & 4495/D/2011


convenient and proper adjudication, we are deciding these appeals by this

common order.




2.    The appeals are pertaining to A.Y. 1999-2000, 2003-04 and 2004-05

on identical grounds which read as under:-

             "1. That on the facts and in the circumstances of
           the petitioner company's case, the ld. CIT(A) erred
           in law and on facts in upholding the order of the
           learned assessing officer ignoring the fact that the
           specific directions were given by the Hon'ble
           Tribunal to decide the issue of deduction under
           section 80HHV vis--vis receipts on account of sale
           of DEPB by following the decision of the Special
           Bench of the Tribunal in the case of Topman Exports
           vs ITO (2009) 318 ITR 87 (Mum) which the learned
           assessee failed to do so.

           2. That on the facts and in the circumstances of the
           petitioner company's case, the ld. CIT(A) erred in
           law and on facts in not allowing appropriate amount
           of deduction under section 80HHC by holding that
           the entire amount received on the sale of DEPB
           represents profits chargeable to tax under section 28
           (iiid) of the Income Tax Act, 1961.

           3. That on the facts and in the circumstances of the
           petitioner company's case, the ld. CIT(A) erred in
           law in upholding the charging of the interest under
           section 234B of the Act, by completely ignoring the
           beneficial circular no. 2/2006 dated 17.01.2006
           issued by the Central Board of Direct Taxes.


           4. That the order made is bad in law."
                                      3           ITA 4493, 4494 & 4495/D/2011


3.    Briefly stated, the facts of the case are that the fact that there were

specific directions by the ITAT to decide the issue of deduction u/s 80HHC

of the Act vis--vis receipts on account of sale of DEPB but the AO

disallowed the same with a finding that profit earned from the sale of DEPB

benefits are also to be included in the income of the assessee besides its face

value. The above assessment order was upheld by the CIT(A) by the

impugned orders by holding that the entire amount received on the sale of

DEPB represents profit chargeable to tax u/s 28(iiid) of the Act and he also

upheld the action of the AO in charging of interest u/s 234B of the Act.

Hence, these appeals by the assessee before this Tribunal.

4.    The assessee's representative submitted before us that the AO passed

the assessment order on 16.12.2010 which was upheld by the CIT(A)

passing the impugned order dated 9.8.2011 and these appeals were filed on

7.10.2011 and during the pendency of these appeals, the decision by the

Hon'ble Supreme Court of India in the case of Topman Exports vs CIT,

Mumbai (2012) 205 Taxman 119(SC) was pronounced on 8.2.2012. The

relevant operating paras of the judgment of Hon'ble Supreme Court in the

case of Topman Exports (supra) are being reproduced hereinbelow:-

      "11.    We may now consider the relevant provisions of
      Section 28 for determining whether DEPB will fall under
      clause (iiib) or under clause (iiid) of Section 28. The
                                           4            ITA 4493, 4494 & 4495/D/2011


        relevant provisions of Section 28 of the Act are reproduced
        hereunder:

                Section 28. Profits and Gains of Business or Profession.--
         The following income shall be chargeable to income-tax under
         the head "Profits and gains of business or profession",--
      .........................................................................
            (iiia) profits on sale of a licence granted under the
         Imports (Control) Order, 1955, made under the Imports
         and Exports (Control)Act, 1947 (18 of 1947);

        (iiib)     cash assistance (by whatever name called) received
        or receivable by any person against exports under any
        scheme of the Government of India;]
         (iiic) ..................................................................
         (iiid) any profit on the transfer of the Duty Entitlement Pass
          Book Scheme, being the Duty Remission Scheme under the
        export and import policy formulated and announced under
        section 5 of the Foreign Trade (Development and Regulation)
        Act, 1992 (22 of 1992)

         (iiie) any profit on the transfer of the Duty Free Replenishment
         Certificate, being the Duty Remission Scheme under the
        export and import policy formulated and announced under
        section 5 of the Foreign Trade (Development and Regulation)
        Act, 1992 (22 of 1992)."




12.     It will be clear from the aforesaid provisions of Section 28 that
        under clause (iiib) cash assistance (by whatever name called)
        received or receivable by any person against exports under
        any scheme of the Government of India is by itself income
        chargeable to income tax under the head "Profits and
        Gains of Business or Profession". DEPB is a kind of
        assistance given by the Government of India to an exporter to
        pay customs duty on its imports and it is receivable once
        exports are made and an application is made by the exporter
        for DEPB. We have, therefore, no doubt that DEPB is "cash
        assistance" receivable by a person against exports under the
        scheme of the Government of India and falls under clause
        (iiib) of Section 28 and is chargeable to income tax under the
                                  5           ITA 4493, 4494 & 4495/D/2011


  head "Profits and Gains of Business or Profession" even
  before it is transferred by the assessee.

  13. Under clause (iiid) of Section 28, any profit on transfer
  of DEPB is chargeable to income tax under the head "Profits
  and Gains of Business or Profession" as an item separate
  from cash assistance under clause (iiib).          The word
  "profit" means the gross proceeds of a               business
  transaction less the costs of the transaction. To quote from
  Black's LawDictionary (Fifth Edition):

  "Profit. Most commonly, the gross proceeds of a business
  transaction less the costs of the transaction, i.e. net proceeds.
  Excess of revenues over expenses for a transaction; sometimes
  used synonymously with net income for the period. Gain
  realized from business or investment over and above
  expenditures."

This Court in E.D. Sassoon & Company Ltd. and Others v.
Commissioner of Income-Tax, Bombay City (1954) 26 ITR 27
(SC) has quoted the following observations of Lord Justice
Fletcher Moulton in The Spanish Prospecting Company Limited
[(1911) I Ch. 92] on the meaning of the word "profits":

".... `Profits' implies a comparison between the state of a business
at two specific dates usually separated by an interval of a year.
The fundamental meaning is the amount of gain made by the
business during the year. This can only be ascertained by a
comparison of the assets of the business at the two dates."

`Profits', therefore, imply a comparison of the value of an asset
when theasset is acquired with the value of the asset when the
asset is transferredand the difference between the two values is
the amount of profit or gain made by a person. As DEPB has
direct nexus with the cost of imports for manufacturing an
export product, any amount realized by the assessees over and
above the DEPB on transfer of the DEPB would represent profit
on the transfer of DEPB.
                                      6           ITA 4493, 4494 & 4495/D/2011


     14. We are, thus, of the considered opinion that while the face
     value of the DEPB will fall under clause (iiib) of Section 28 of
     the Act, the difference between the sale value and the face value
     of the DEPB will fall under clause (iiid) of Section 28 of the Act
     and the High Court was not right in taking the view in the
     impugned judgment that the entire sale proceeds of the DEPB
     realized on transfer of the DEPB and not just the difference
     between the sale value and the face value of the DEPB represent
     profit on transfer of the DEPB."


5.     The AR has drawn our attention towards above judgement of the

Hon'ble Apex Court by submitting that now the position and interpretation

of Section 28(iiib) r/w section 28(iiid) of the Act make it clear that the cash

assistance receivable by the assessee is covered under clause (iiib) of Section

28, whereas profit on transfer of DEBP takes place on a subsequent date

when DEBP is sold by the assessee and is covered under clause (iiid) of

Section 28. The ld. DR also admitted that the judgment of Topman Exports

(supra) was delivered by Hon'ble Supreme Court during the pendency of

these appeals in hand and in the light of above judgement, it would be just

and proper that the AO may be allowed to decide the matter afresh in

accordance with the directions given by Hon'ble Supreme Court in this

regard.

6.     We have considered the rival arguments of both the parties in the facts

and circumstances of the present case and carefully perused the entire record

before us. We observe that the action of the AO upheld by the ld. CIT(A) is
                                         7          ITA 4493, 4494 & 4495/D/2011


not in accordance with the proper interpretation of provisions in the

judgment of Hon'ble Supreme Court in the case of Topman Exports (supra).

In the light of above judgement of Hon'ble Supreme Court, we set aside the

impugned orders and restore all these issues to the file of the AO with the

direction that he will decide the matter afresh de novo in accordance with

directions given by the Hon'ble Apex Court in the case of Topman Exports

(supra) after affording opportunity of being heard to the assessee. The

assessee would cooperate with the AO during fresh adjudication.

7.        In the result, the appeals of the assessee are allowed for statistical

purposes.

          Order pronounced in the open court on 8th June, 2012.


    Sd/-                                           Sd/-
(A.N. PAHUJA)                            (CHANDRA MOHAN GARG)
ACCOUNTANT MEMBER                           JUDICIAL MEMBER

DT. 8th JUNE, 2012
`GS'

Copy forwarded to:-

     1.      Appellant
     2.      Respondent
     3.      CIT(A)
     4.      CIT 5. DR                                               By order


                                                                  Asstt. Registrar
8   ITA 4493, 4494 & 4495/D/2011
 
 
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