2009 (12) TMI 717 - AT - Income Tax

Summary

Issues:
- Deduction under section 80HHC in respect of Duty Entitlement Pass Book.
- Requisite conditions under the third proviso to section 80HHC(3).
- Compliance with conditions for claiming benefit under the third proviso.
- Interpretation of provisions of law by the Commissioner of Income-tax (Appeals).

Analysis:
The appeals before the Appellate Tribunal ITAT DELHI concerned the deduction under section 80HHC in relation to Duty Entitlement Pass Book for the assessment years 2003-04 and 2004-05. The Revenue appealed against the decision of the Commissioner of Income-tax (Appeals), Bareilly, who allowed the claim of the assessee regarding the inclusion of Duty Entitlement Pass Book in the deduction under section 80HHC. The Revenue contended that the Commissioner did not address the requisite conditions specified in the third proviso to section 80HHC(3), which were crucial for claiming the benefit. The Tribunal noted that the third proviso applies when the export turnover exceeds Rs. 10 crores, and the assessee must fulfill specific conditions to avail the benefit, including the option between duty draw back and Duty Entitlement Pass Book Scheme, with higher rates of credit under the former. The Tribunal found that the Commissioner's decision did not align with the law as the conditions of the third proviso were not met by the assessee. Therefore, the Tribunal set aside the issue for the Commissioner to reexamine the case in light of the third proviso and make a decision based on the merits.

The Tribunal emphasized that for the computation of deduction under section 80HHC(1), export profit is determined as per section 80HHC(3), with the profit of business calculated under the Explanation to section 80HHC. The export profit is then computed under section 80HHC(3), with specific increases as per the provisos. The third proviso applies to cases where export turnover exceeds Rs. 10 crores, requiring the fulfillment of laid down conditions for claiming the benefit. The Tribunal highlighted the necessity for the assessee to provide evidence of choosing between duty draw back and Duty Entitlement Pass Book Scheme, with higher credit rates under the former. The Tribunal found that the Commissioner's direction to allow the deduction without considering the provisions of the third proviso was not in accordance with the law, leading to the decision to remand the issue for proper examination by the Commissioner.

Ultimately, the appeals filed by the Revenue were allowed for statistical purposes, and the case was remanded to the Commissioner of Income-tax (Appeals) for a thorough review based on the provisions of the third proviso to section 80HHC(3). The judgment was delivered by the Appellate Tribunal ITAT DELHI, with the order pronounced in open court on December 10, 2009, following the conclusion of the hearing.