Chhotalal Samji Vs. Income Tax Officer - Court Judgment

Excerpt:
- central excise act, 1944.[c.a. no. 1/1944]. sections 4 & 2(f): [s.h. kapadia & b. sudershan reddy, jj] excise duty valuation assessee manufacturing plant and equipment falling under sub-heading 8479.90, cet act, 1985 under a composite contract with certain other parties, it supplying to them in addition to the equipments manufactured by it, various duty-paid bought-out items to facilitate the setting up of the plants at their sites held, value of such bought-out items if includible in the assessable value of the equipments manufactured, depends on the facts of each case. even erection of a plant by assembling certain items at site could constitute manufacture under the excise law. -- section 11aa: rate of interest in the peculiar circumstances of the case, demand reduced and payment directed to be made within eight weeks. further directed that in case of non-compliance therewith, the department would be entitled to levy interest @ 9% p.a. -- sections 35-b & 35-a(3) (as amended in 2001) & central excise tariff act, 1985, sub-heading 8479.90: appeal to appellate tribunal maintainability assessee manufacturing plant and equipment falling under sub-heading 8479.90, cet act, 1985 under a composite contract with certain other parties, it supplying to them in addition to the equipments manufactured by it, various duty-paid bought-out items to facilitate the setting up of the plants at their sites department raising demand for a certain period in respect of such bought-out items and rejecting the assessees contention that no duty was payable on those items later, it reducing the period but maintaining the quantum of excise duty commissioner (appeals) holding the value of the bought-out items to be includible in value of the equipments but remanding the matter for quantification of duty liability keeping in view the reduction in the demand period this time, the assessee pointing out to the adjudicating authority that in the alternative it was entitled too modvat credit adjudicating authority, however, confirming the demand assessee again approaching commissioner (appeals) who in turn deciding against the assessee for want of evidence in its favour moreover, he not considering the assessees claim to modvat credit held, in such circumstances, held, the assessee could rightly raise in the second round before the adjudicating authority, its contentions on the quantification of the duty. the assessees alternative claim to the benefit of modvat credit raised at that stage, did not mean that the conclusion reached by the commissioner (a) in the first round of litigation as to excisability or dutiability of the items in question had become final. nor was that order binding on the appellate tribunal. after 2001 amendment to section 35-a, the commissioner (a) continues to exercise the powers of adjudicating authority in the matters of assessment. hence, appeal to appellate tribunal against the order of commissioner (a) passed in the second round, is maintainable. -- sections 35-l, 35-g, 3 & 4: quantification of excise duty relevant factors assessee manufacturing plant and equipment falling under sub-heading 8479.90, cet act, 1985 under a composite contract with certain other parties, it supplying to them in addition to the equipments manufactured by it, various duty-paid bought-out items to facilitate the setting up of the plants at their sites quantification of duty payable on such bought-out items duty initially demanded for one-year period but by a corrigendum the period reduced to six months liability to duty disputed held, in such circumstances, even if the bought-out goods were dutiable, the assessee is entitled to benefit of modvat credit. moreover, the duty for the reduced period of six months could not be the same as for the larger period of one year. in the peculiar circumstances of the case, instead of remanding it, the demand was reduced from rs.94,03,500 to rs.23,56,000/.order1. leave granted.2. this civil appeal pertains to assessment year 2001-02.3. by the finance act, 1990, section 28 of the income-tax act, 1961 has been amended by inserting therein, clauses (iiia), (iiib) and (iiic) with retrospective effect with a view to ensure that cash compensatory support (ccs), duty drawback (dd) and profit on sale of import entitlement licences (il) shall be taxable under the head 'profits and gains of business or profession'. in view of this amendment, the above three export incentives have got to be included in the profits of the business for computing the deduction under section 80hhc.4. in this case we are only concerned with two out of three above-mentioned export incentives, namely, duty drawback and profits arising from sale of depb licence. we quote hereinbelow section 28(iiia) and (iiic) of the 1961 act which read as under:profits and gains of business or profession.28. 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); ...(iiic) any duty of customs or excise re-paid or re-payable as drawback to any person against exports under the customs and central excise duties drawback rules, 1971.5. according to the a.o., under section 28(iiia) of the said act, profits on sale of a licence granted under imports (control) order, 1955, made under the import and exports (control) act, 1947 and duty drawback repayable against exports under the customs and central excise duties drawback rules, 1971, are alone includible in the profits of a business for computing the deduction under section 80hhc. however, according to the a.o., in the present case, the assessee claims to have earned profits on the sale of depb licence under foreign trade (development and regulation) act, 1992 and not under imports (control) order, 1955, made under the import and exports (control) act, 1947 and, therefore, such profits were not includible in business profits for computing the deduction under section 80hhc of the said act. similarly, according to the a.o., in this case, the assessee has earned duty drawback under customs and central excise duties drawback rules, 1995. it has not earned duty drawback under customs and central excise duty drawback rules, 1971 and, therefore, the assessee was not entitled to include such incentives in the business profits for computing the deduction under section 80hhc. one more finding has been given by the a.o., namely, that the assessee was not entitled to claim the benefit under section 80hhc because the assessee during the assessment year in question has derived negative profits (loss) from export of trading goods.6. none of the above questions have been decided by the high court. in the circumstances, we set aside the impugned order and restore tax appeal no. 1127 of 2006 for de novo consideration by the high court in accordance with law.7. accordingly, the civil appeal stands allowed with no order as to costs.

Judgment:
ORDER

1. Leave granted.

2. This civil appeal pertains to assessment year 2001-02.

3. By the Finance Act, 1990, Section 28 of the Income-tax Act, 1961 has been amended by inserting therein, clauses (iiia), (iiib) and (iiic) with retrospective effect with a view to ensure that cash compensatory support (CCS), duty drawback (DD) and profit on sale of import entitlement licences (IL) shall be taxable under the head 'Profits and Gains of Business or Profession'. In view of this amendment, the above three export incentives have got to be included in the profits of the business for computing the deduction under Section 80HHC.

4. In this case we are only concerned with two out of three above-mentioned export incentives, namely, duty drawback and profits arising from sale of DEPB licence. We quote hereinbelow Section 28(iiia) and (iiic) of the 1961 Act which read as under:

Profits and gains of business or profession.

28. 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); ...

(iiic) any duty of customs or excise re-paid or re-payable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971.

5. According to the A.O., under Section 28(iiia) of the said Act, profits on sale of a licence granted under Imports (Control) Order, 1955, made under the Import and Exports (Control) Act, 1947 and duty drawback repayable against exports under the Customs and Central Excise Duties Drawback Rules, 1971, are alone includible in the profits of a business for computing the deduction under Section 80HHC. However, according to the A.O., in the present case, the assessee claims to have earned profits on the sale of DEPB licence under Foreign Trade (Development and Regulation) Act, 1992 and not under Imports (Control) Order, 1955, made under the Import and Exports (Control) Act, 1947 and, therefore, such profits were not includible in business profits for computing the deduction under Section 80HHC of the said Act. Similarly, according to the A.O., in this case, the assessee has earned duty drawback under Customs and Central Excise Duties Drawback Rules, 1995. It has not earned duty drawback under Customs and Central Excise Duty Drawback Rules, 1971 and, therefore, the assessee was not entitled to include such incentives in the business profits for computing the deduction under Section 80HHC. One more finding has been given by the A.O., namely, that the assessee was not entitled to claim the benefit under Section 80HHC because the assessee during the assessment year in question has derived negative profits (loss) from export of trading goods.

6. None of the above questions have been decided by the High Court. In the circumstances, we set aside the impugned order and restore Tax Appeal No. 1127 of 2006 for de novo consideration by the High Court in accordance with law.

7. Accordingly, the civil appeal stands allowed with no order as to costs.