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TMI Blog2014 (6) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... tions u/s 80HHC and 80lB of the Act could not be the subject matter of assessment u/s 153A, obviously, the order passed u/s 153A is not revisable by invoking the provisions of Section 263. Deduction u/s 80HHC and deduction u/s 801B, have been the subject matter of appeal, as above. That being so, the assessment order dated 30.11.04, passed u/s 143 (3) of the Act, cannot, by any stretch of imagination, be said to have become irrelevant or shall abate – Relying upon CIT vs. Smt. Shaila Aggarwal [2011 (11) TMI 213 - ALLAHABAD HIGH COURT] - Section 153A does not have the effect of abatement of an appeal pending against the regular assessment – the proceedings have already terminated are not allowable for abatement unless the statute expressly provides for it. The limitation period for passing the order u/s 263 would start running from the date of the passing of the original assessment order, i.e., 30.11.04 - That being so, the limitation expired on 31.03.07, whereas the notice u/s 263 itself was issued on 24.01.12 – Decided in favour of Assessee. - ITA Nos. 1398 & 1399/Del/2012 - - - Dated:- 16-5-2014 - Shri A. D. Jain And Shri Shamim Yahya,JJ. For the Petitioner : Dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HC of the Act, returning a total income of Rs.51,41,350/-; that the regular assessment of the assessee had been completed at a total income of Rs.8,60,59,100/- on 30.11.2004, by making certain additions/disallowances and recomputing the deductions u/ss 80HHC and 80IB of the Act; that while filing its return of income, the assessee had claimed deduction of Rs.7,19,78,869/- u/s 80HHC; that it being a case of a supporting manufacturer, deduction of Rs.1,40,49,120/- was allowed as per the provisions of Section 80HHC (1A) read with those of Section 80HHC (3A) read with Clause (baa) of Explanation to Section 80HHC; that thereafter, an assessment order was passed on 29.12.2000, u/s 153A(1) (b) of the Act, in which, deduction of Rs.1,40,49,113/- was given to the assessee u/s 80HHC and the deduction claimed u/s 80IB was also allowed; that deduction of Rs.27,16,741/- was allowed u/s 80IB in the original assessment order and while giving appeal effect on 28.01.2009, it was given at Rs.17,20,320/-; that it had been observed that the assessee had claimed deductions under Sections 80HHC and 80IB simultaneously, whereas according to the provisions of the Act, the deduction u/s 80IB was required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not been considered; that these provisions have been considered in detail in the case of 'M/s Friends Castings (P) Ltd. vs. CIT, by the Hon'ble Punjab Haryana High Court, vide its judgement dated 20.09.2010; and that as per this decision of the Hon'ble jurisdictional High Court, the deduction to be allowed under any other provision of Chapter VIA with the heading 'C' is to be reduced by the amount of deduction allowed u/s 80IB/80IA. 4. Before us, challenging the impugned order, the Id. Counsel for the assessee has contended that the original assessment was completed u/s 143 (3) of the Act; that this assessment involved the issue of deduction under Sections 80HHC and 801B; that this issue travelled upto the stage of Hon'ble High Court; that thus, it got merged in the decision of the Hon'ble High Court; and that as such, the CIT could not have assumed jurisdiction in respect of the issue of deduction u/s 80HHC in terms of the Explanation to Section 263. The assessee has placed reliance on the following decisions in this regard:- i) 'Sonal Garments vs. Jt. CIT , 95 ITD 363 (Mum); ii) 'Saw Pipes Ltd. vs. Addl. CIT , 94 TTJ 1036 (Del); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tings' (supra), the deduction to be allowed under any provision of Chapter VI-A with the heading C , is to be reduced by the amounts of deduction allowed under Sections 80IB/80IA, as rightly noted by the Ld. CIT; and that therefore, there being no merit therein, the appeal of the assessee be dismissed. 9. We have heard the parties and have perused the material on record. In the computation of income and acknowledgement of return for Assessment Year 2002-03 (APB 1-2), the claim of deduction under Sections 80HHC and 80lB of the Act stand shown. The assessee claimed deduction of Rs.7,19,78,869/- u/s 80HHC and of Rs.2,57,06,739/- u/s 80lB of the Act. The statement of assessable income and note for computation of deduction u/s 80HHC filed by the assessee are at APB 3-4, respectively. The assessee's audit report u/s 80HHC (4)/80HHC (4A) of the Act, giving the working of deduction u/s 80HHC, is at APB 5. In this audit report, Annexure-B (APB-8) gives the details relating to the claim of deduction u/s 80HHC. The audit report u/s 80lB of the Act is at APB-9. 10. In the original assessment order dated 30.11.04, passed u/s 143 (3) of the Act (APB 10-14), the Assessing Officer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits to be considered for deduction'u/s 80HHC 2,00,70,171/- Deduction u/s 80HHC(4B)(baa) as supporting manufacturer is calculated as under:- Business profit x Exports sales as supporting manufacturer Total turnover =20070171 x 909498982/909498982 = 20070171 70% Deduction allowable u/s 80HHC works out to Rs. 1,40,49,120/- 3. The assessee has claimed deduction u/s 80IB at Rs. 25706739/- during the year under consideration. The assessee was required to justify its claim in view of the judgement of the Hon'ble Supreme Court in the case of CIT Vs. Sterling Foods Ltd. Reported at 237 ITR 579. Vide written explanation filed on 27.9.2004, it was stated that the assessee is engaged in manufacturing of Durries, rugs and carpets etc. exclusively for export purposes. The assessee has further stated that the deduction u/s 80IB is allowable on export incentives also in view of the fact that the export incentive is allowable to the manufacturer of goods meant for export i.e. textiles products. The export incentives is available to the exporter as rebate of duty chargeable on any imported material/ excise-able material which is used in the manufacturing of such goods. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, not includible in income for computing special deductions. The judgement of Hon ble Apex court has followed by the Hon'ble Delhi High Court in the case of CIT Vs. Ritesh Industries Ltd. reported at (2004)192 CTR(Del) 81 wherein it has been held that duty drawback is not profits derived from industrial undertaking and cannot reckon in computing deduction u/s 801. Similar view has been taken by the Hon'ble Madras Court in the cases of CIT Vs. Jameel Leather and Uppers 246 ITR 97 and CIT Vs. Vishwanathan Co. 261 ITR 737. The export incentives given in the form of Duty Draw back and other export incentives are not a profit and loss derived from Industrial undertaking. There is no direct nexus between the profits and gains of industrial undertakings and the above incentives. In view of the ratio of the Hon'ble Supreme Court and High Courts in the case laws referred to above, the claim of deduction u/s 80IB of the assessee is not admissible to the extent of incentives which have been credited to the profit and loss account. The decisions of the Hon'ble ITAT. Hyderabad Bench relied upon by the assessee is not acceptable in view of provisions of law as contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Respectfully following the aforesaid decision we dismiss this ground of the revenue. 4. The next ground raised by the revenue pertains to allowability of deduction under section 80lB on duty draw back which as per the Id Sr. DR is not an income derived from an industrial undertaking. On perusal of record and after hearing the rival submissions, we are of the view, that duty draw back cannot be said to be an allowable deduction as the same is not said to be derived from industrial undertaking being arose due to promotional incentive by the Central Government Scheme. Identical ratio was laid down by the Hon'ble jurisdictional High Court in the case of Liberty Shoes India Ltd. (207 CTR 543)(P H) wherein various decisions has been considered including the decision from the Hon'ble Apex Court pronounced in the case of CIT vs Sterling Foods (237 ITR 579)(S.C.), Jameel Leathers (246 ITR 97) (Mad), and Ritesh Industries (274 ITR 324)(del). Respectfully, following the aforesaid decisions, this ground of the revenue is allowed. 13. The Hon'ble High Court, vide order dated 23.11.09 (APB 35-37), has held as follows:- The revenue has filed this appeal under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porting manufacturer at par with direct exporter and ignoring the provisions of Section 80 HHC (1A) read with Section 80 HHC (3A) read with clause (baa) of explanation to Section 80 HHC of the Act? The aforesaid appeal was dismissed by this Court, while relying upon the judgment of the Supreme Court in Commissioner 0f Income Tax, Thiruvanantapuram v. Babv Marine Exports(2007) 290 ITR 323 (SC), and upheld the claim of the assessee under Section 80 HHC of the Act as a supporting manufacturer at par with the direct exporter. This fact has not been disputed by learned counsel for the appellant. In view of the above, no substantial question of law survives for our determination. Thus, we do not find any merit in this appeal and the same is, hereby, dismissed. 14. Against the said order of the Hon'ble High Court, the department filed appeal before the Hon'ble Supreme Court, which is hitherto pending. 15. The above position has also been taken into account in the assessment order dated 29.12.2009, passed u/s 153A of the Act, as follows:- 3. It is pertinent to record that the assessee bad filed its return of income for the instant assessment year under section 139 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has claimed deduction u/s 80lB at Rs.2,57,06,739/- on business profit of Rs. 10,28,26,956/- which included export incentives at Rs. 9,19,51,993/- i.e. duty drawback at Rs. 9,04,69,146/- and DEPB at Rs. 14,82,847/-. While framing assessment u/s 143(3) the deduction claimed u/s 801B was denied in view of the decision of Hon'ble Supreme Court in the case of CIT vs. Sterling Foods Ltd. reported at 237, ITR 579. On appeal, the Ld. CIT(A) had allowed the appeal of the assessee thereby allowing the deduction u/s 80lB on the amount of duty drawback. On further appeal by the department, the Hon'ble ITAT decided this issue in favour of the department. Therefore, the concomitant total income of Rs. 2,63,44,800/- on granting appeal effect to the orders of the Tribunal, is assumed to have attained finality and is taken as the base for the instant assessment u/s 153A. 16. It is, thus, seen that whereas the issue of deduction u/s 80HHC was the subject matter of proceedings upto the stage of the Hon'ble High Court, that of deduction u/s 80IB was contested upto before the Tribunal. The issue is as to whether in such a circumstance, it was within the ambit of the powers of the Id. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings which are pending on the date . 21. To reiterate, both the issues at hand, i.e., deduction u/s 80HHC and deduction u/s 801B, have been the subject matter of appeal, as above. That being so, the assessment order dated 30.11.04, passed u/s 143 (3) of the Act, cannot, by any stretch of imagination, be said to have become irrelevant or shall abate. In this regard, the assessee has rightly placed reliance on 'CIT vs. Smt. Shaila Aggarwal', 346 ITR 130 (All), wherein, it has been held, inter alia, that Section 153A does not have the effect of abatement of an appeal pending against the regular assessment; and that proceedings which have already terminated are not allowable for abatement unless the statute expressly provides for it. 22. Hence, the limitation period for passing the order u/s 263 would start running from the date of the passing of the original assessment order, i.e., 30.11.04. That being so, the limitation expired on 31.03.07, whereas the notice u/s 263 itself was issued on 24.01.12. 23. Then, reliance by the Id. CIT on the decision of the Hon'ble jurisdictional High Court in the case of M/s Friends Castings (P) Ltd. vs. ClT , (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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