2007 (2) TMI 357 - AT - Income Tax

Summary

Issues Involved:
The judgment involves common issues raised in two appeals and two cross objections regarding the tax treatment of advance import licenses and cost of steam recovered, under section 80HHC of the Income Tax Act.

Advance Import Licenses Issue:
The Assessing Officer contended that the value of advance licenses obtained by the assessee should be included in the income under section 28(iv) of the Act, leading to a denial of exemption under section 80HHC. The CIT(A) held that advance licenses should be considered as export incentives under section 28(iiib) of the Act, allowing only 90% of such incentives to be added to the eligible profits. The Tribunal noted that the advance license scheme involves duty-free imports with an obligation to export specific goods, and the duty-free imports do not constitute a benefit of income nature. The Tribunal rejected the revenue's appeal, upholding the cross objections filed by the assessee.

Cost of Steam Recovered Issue:
The second issue pertains to the cost of steam recovered from Cyanamid Agro Ltd. The CIT(A) allowed the appeal of the assessee based on a decision of the jurisdictional High Court, which the revenue did not accept. The Tribunal held that the decision of the High Court is binding and confirmed the CIT(A)'s conclusions, declining to interfere with this grievance of the revenue.

Conclusion:
The Tribunal dismissed the revenue's appeals while allowing the cross objections filed by the assessee in relation to the tax treatment of advance import licenses and the cost of steam recovered. The judgment clarified that duty-free imports under advance licenses do not constitute a benefit of income nature, thereby rejecting the revenue's contentions and upholding the CIT(A)'s decision regarding the tax treatment under section 80HHC of the Income Tax Act.