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2008 DIGILAW 1020 (PNJ)

Commissioner Of Income-tax v. Carpet India

2008-05-13

RAJIVE BHALLA, RAKESH KUMAR GARG

body2008
Judgment Rajive Bhalla, J. 1. This order shall dispose of ten Income-tax Appeals; seven, filed by the Revenue, namely, I.T.A. Nos. 544, 603, 604, 619, 620, 621 and 622 of 2007, and three filed by the assessees, namely, I.T.A. Nos. 576 and 628 of 2007 and 21 of 2008, as they involved a common question of law which, in essence, is whether a supporting manufacturer can claim deduction under Section 80HHC of the Income-tax Act at par with a direct exporter. 2. The assessees, who are supporting manufacturers, are receiving export incentives as duty draw back and claimed deduction of this amount, under Section 80HHC of the Income-tax Act, 1961 (for short hereinafter referred to as "the Act"). The assessees are deriving income from manufacturing and sale of textile goods as supporting manufacturers. In the returns of income, the assessees are claiming deduction under Section 80HHC of the Act, claiming themselves at par with the direct exporter on the basis of the judgment of the Income-tax Appellate Tribunal, Delhi Bench, "A" in Eastern Leather Products (P.) Ltd. v. Deputy CIT [1998] 68 ITD 358. 3. In I.T.A. Nos. 544, 603, 604, 619, 620, 621 and 622 of 2007, the Assessing Officer did not accept the assessees prayer and held that the assessees could not be treated at part with the supporting manufacturer. In appeals filed by the assessees before the Commissioner of Income-tax (Appeals), the assessees contention was accepted and it was held that the assessees were entitled to deduction under Section 80HHC of the Act in the same manner as in the case of a direct exporter. Reliance was placed upon Eastern Leather Products (P.) Ltd. v. Deputy CIT [1998] 68 ITD 358 (Delhi), and Sharda Exports v. ITO in I.T.A. No. 254 of 2001. 4. Aggrieved by the aforementioned orders of the Commissioner of Income-tax (Appeals), the Revenue filed appeals before the Tribunal, where the claim of the assessees was accepted. The appeals filed by the Revenue, as aforesaid, against the order of the Commissioner of Income-tax (Appeals) were dismissed, by placing reliance upon the judgment of the Kerala High Court in Baby Marine (Eastern) Exports v. Asst. CIT. Hence, the Revenue has filed seven appeals, namely, I.T.A. Nos. The appeals filed by the Revenue, as aforesaid, against the order of the Commissioner of Income-tax (Appeals) were dismissed, by placing reliance upon the judgment of the Kerala High Court in Baby Marine (Eastern) Exports v. Asst. CIT. Hence, the Revenue has filed seven appeals, namely, I.T.A. Nos. 544, 603, 604, 619, 620, 621 and 622 of 2007, challenging the order of the Tribunal, granting benefit to the assessees, under Section 80HHC of the Act, by raising the following question of law: Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was right in law in upholding the order of the Commissioner of Income-tax (Appeals) directing the Assessing Officer to allow deduction under Section 80HHC to the assessee who is a supporting manufacturer in the same manner, as in the case of a direct exporter, treating the supporting manufacturer at par with the direct exporter and ignoring the provisions of Section 80HHC(1A) read with Section 80HHC(3A) read with Clause (baa) of Explanation to Section 80HHC of the Act. 5. However, in I.T.A. Nos. 576 and 628 of 2007 and 21 of 2008, the appeals filed by the assessees before the Commissioner of Income-tax (Appeals) against the order of the Assessing Officer were rejected by the Commissioner of Income-tax (Appeals). The assessees thereafter filed appeals before the Tribunal, challenging the order of the Commissioner of Income-tax (Appeals), where their claim was rejected by the Tribunal. 6. The assessees have challenged the order of the Tribunal before this court in I.T.A. Nos. 576 and 628 of 2007 and 21 of 2008 and have sought to raise the following questions of law: 1. Whether the ex parte Tribunal order is sustainable being against the principles of natural justice? 2. Whether there is an onerous duty of the Tribunal to grant the opportunity of hearing for passing a speaking and judicious order? 3. Whether the duty draw back received is an amount derived and eligible for claim as per Section 28(iiie) though the Customs and Central Excise Duties Drawback Rules, 1971, stands repealed? 4. Whether the Duty Entitlement Pass Book Scheme received is an amount derived and eligible for claim as per Section 28(iiid)? 5. 3. Whether the duty draw back received is an amount derived and eligible for claim as per Section 28(iiie) though the Customs and Central Excise Duties Drawback Rules, 1971, stands repealed? 4. Whether the Duty Entitlement Pass Book Scheme received is an amount derived and eligible for claim as per Section 28(iiid)? 5. Whether there can be an interpretation of the word derived distinct from as laid down in CIT v. Sterling Foods, being a broader interpretation per the judgments of State of West Bengal v. Anwar Ali, relevant page 103 and the judgment of Katikara Chintamani Dora v. Guntreddi Annamanaidu, relevant page 589? 6. Whether the action of the executive is sustainable in denying the claim of the duty draw back which is having a direct nexus and being germane to the business as per the judgments of Union of India v. Rajindra Dyeing and Printing Mills Ltd. [2005] 180 ELT 433 (SC) and Sun Industries. 7. Whether the duty draw back received by the appellant is derived from an industrial undertaking as per the genesis of the word derived in its true sense and spirits? 7. We have heard Counsel for the parties and perused the impugned orders. It is relevant to mention at this stage that in the meanwhile, the aforementioned judgment of the Kerala High Court has been affirmed by the honble Supreme Court in CIT v. Baby Marine Exports, and it has been held that a supporting manufacturer can claim deduction under Section 80HHC of the act at par with the direct exporter. The question of law, framed by the Revenue, in these appeals, has been answered against the Revenue by the honble Supreme Court. The matter does not require any further consideration. Consequently, I.T.A. Nos. 544, 603, 604, 619, 620, 621 and 622 of 2007 Bled by the Revenue are dismissed. 8. As regards the appeals filed by the assessees, namely, I.T.A. Nos. 576 and 628 of 2007 and 21 of 2008, in view of questions of law having been answered in favour of the assessee by the honble Supreme Court in CIT v. Baby Marine Exports and the controversy having been settled by the honble Supreme Court, the orders passed by the Assessing Officer, Panipat, the Commissioner of Income-tax (Appeals), Karnal, and the Income-tax Appellate Tribunal, Delhi Bench, New Delhi, would necessarily have to be set aside. 9. Consequently, I.T.A. Nos. 9. Consequently, I.T.A. Nos. 576 and 628 of 2007 and 21 of 2008 are v allowed, and the orders passed by the Assessing Officer, Panipat, the Commissioner of Income-tax (Appeals), Karnal, and the Income-tax Appellate Tribunal, Delhi Bench, New Delhi, are set aside.