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TMI Blog2013 (8) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s 32(1)(iia) – Held that:- Relying upon the judgment in the case of ACIT vs. SIL Investment Ltd. [2012 (6) TMI 83 - ITAT DELHI], eligibility for additional depreciation stands admitted Profit element of DEPB can be reduced from the export profits for the purpose of working out the deduction u/s. 80HHC – Held that:- It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Explanation (baa) to section 80HHC read with the words used in clauses (iiid) and (iiie) of section 28; the assessee was entitled to a deduction under section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee – Appeal allowed – Decided in favor of Assessee. - ITA No. 11/Hyd/2012 - - - Dated:- 12-7-2013 - Shri Chandra Poojari And Shri Saktijit Dey,JJ. For the Appellant : Sri S. Rama Rao For the Respondent : Sri R. Laxman ORDER Per Chandra Poojari, AM:- This appeal by the assessee is directed against the order of the CIT(A)-II, Hyderabad dated 13.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of income so as to warrant the re-assessment. The claim of additional depreciation by the assessee is in accordance with law. The assessee has claimed additional depreciation at 50% spread over in two years. In the immediately preceding assessment year the assessee claimed 50% of the eligible additional depreciation and the balance was claimed in the current assessment year. The new industrial undertaking of the company has commenced the commercial operations w.e.f. 1.3.2003 relevant to the A.Y. 2003-04. The plant and machinery acquired to this unit is eligible for additional depreciation u/s. 32(1)(iia) of the Income-tax Act, 1961. However, 50% of the eligible depreciation has been claimed for the A.Y. 2003-04 in pursuance of the provisions of second proviso to section 32(1)(ii) of the Income-tax Act, 1961. The remaining 50% of the eligible additional depreciation is being claimed for the current A.Y. 2004-05. There is no mistake in that claim. For this purpose he relied on the decision of Delhi Bench of this Tribunal in ACIT vs. SIL Investment Ltd. (148 TTJ 213). Further the submitted that the claim of deduction u/s. 80HHC on export profit representing sale proceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction or after giving effect to the first proviso, as the case may be shall be further increased by the amount which bears to 90% of any sum referred to in clause (iiid) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee, if the assessee has necessary and sufficient evidence prove that - a) He had an option to choose either the duty drawback or the duty entitlement plan scheme being the duty remission scheme and b) The rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the duty entitlement pass book scheme, being the duty remission scheme. 8. The DR submitted that since the assessee's turnover was ₹ 250.89 crores, it was necessary to file evidence as above, in absence of evidences/explanation by the assessee, the proportionate deduction on 90% export incentives was rightly not allowed by the Assessing Officer which was confirmed by the CIT(A). 9. We have heard both the parties and perused the material on record. In this case the assessee's original assessment was completed u/s. 143(3) of the Act on 28.3.2005. Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has reason to believe that income has escaped assessment and if there is tangible material to come to the conclusion that there is escapement of income; mere change of opinion cannot per se the reason for reopening of assessment. In the present case, the Assessing Officer granted additional depreciation in the regular assessment and also agreed for deduction u/s. 80HHC on DEPB entitlement. The earlier order travelled up to the Tribunal. Thereafter the Assessing Officer not came in to possession of any tangible fresh material to come to the conclusion that the deduction granted to the assessee in respect of additional depreciation and 80HHC deduction in respect of sale proceeds of DEPB entitlement is incorrect. If the Assessing Officer got certain additional information which was not available to him in the course of original/regular assessment, that may legitimately be utilised as a ground for reopening of completed assessment. The new information which has come to the knowledge of the Assessing Officer, therefore, constitutes tangible material. If there is a material that would not preclude the Assessing Officer to reopen the assessment on the basis of such material which came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation under s. 32(1)(iia) in respect of new plant and machinery installed at the new eligible industrial undertaking having been allowed in the immediately preceding assessment year, eligibility for additional depreciation stands admitted and, therefore, balance 50 per cent of the depreciation is allowable in the current year. 13. The other issue raised by the Assessing Officer is with regard to 80HHC deduction on DEPB entitlement is covered by the judgement of Supreme Court in the case of Topman Exports (supra) wherein the Apex Court held as follows:- The objective of the Duty Entitlement Passbook Scheme (DEPB) is to neutralize the incidence of customs duty on the import content of the export products. Hence, it has direct nexus with the cost of the imports made by an exporter for manufacturing the export products. The neutralization of the cost of customs duty under the DEPB credit scheme, however, is by granting a duty credit against the export product and this credit can be utilized for paying customs duty on any item which is freely importable. The DEPB credit is issued against the exports to the exporter and is transferable by the exporter. The DE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EPB credit are treated as two separate items of income under clauses (iiib) and (iiid). As a result, the DEPB credit will be chargeable as income under clause (iiib) of section 28 in the year in which the person applies for the DEPB credit against the exports and the profit on transfer of the DEPB credit by that person will be chargeable as income under clause (iiid) of section 28 in his hands in the year in which he makes the transfer. There is no double taxation of the same income. Sub-section (3)(a) of section 80HHC provides that where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such exports shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. Explanation (baa) under section 80HHC states that profits of the business means the profits of the business as computed under the head Profits and gains of business or profession as reduced, inter alia, by ninety per cent, of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t turnover bears to the total turnover of the business carried on by the assessee. In this first proviso, there is no addition of any sum referred to in clause (iiid) or clause (iiie). Hence, profit on transfer of the DEPB credit or DFRC are not to be added under the proviso. Where therefore in the previous year no DEPB credit or DFRC accrues to the assessee, he would not be entitled to the benefit of the first proviso to sub-section (3) of section 80HHC because he would not have any sum referred to in clause (iiib) of section 28 of the Act. The second proviso to sub-section (3) of section 80HHC states that in the case of an assessee having export turnover not exceeding ₹ 10 crores during the previous year, after giving effect to the first proviso, the export profits are to be increased further by the amount which bears to ninety per cent of any sum referred to in clauses (iiid) and (iiie) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. The third proviso to sub-section (3) states that in the case of an assessee having export turnover exceeding ₹ 10 crores, similar addition of ninety ..... X X X X Extracts X X X X X X X X Extracts X X X X
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