2011 (11) TMI 640 - HC - Income Tax

Summary

Issues involved:
The issues involved in the judgment are related to the determination of questions of law in a Tax Appeal arising from an order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench. The questions revolve around the treatment of DEPB income for deduction under section 80HHC and the exclusion of other export entitlements for computation of the deduction.

Issue 1 - Treatment of DEPB income for deduction under section 80HHC:
The Appellate Tribunal confirmed the order passed by CIT(A) regarding the Assessing Officer's treatment of DEPB income on actual sale basis instead of accrual basis for deduction under section 80HHC. The Tribunal held that the assessee is not entitled to deduction under section 80HHC on DEPB/DFRC entitlements. The High Court considered the matter and found that the issue was similar to a previous judgment and concluded that the benefit of DEPB upon sale of credit by the assessee is eligible for deduction under section 80HHC. The Court analyzed the statutory provisions applicable to the assessment year 2003-04 and emphasized that the entire sale proceeds of DEPB credit should be covered under section 28(iiid) of the Act, with 90% to be excluded for the purpose of working out the 80HHC deduction.

Issue 2 - Exclusion of other export entitlements for computation of deduction u/s 80HHC:
The Appellate Tribunal confirmed the order passed by CIT(A) directing the Assessing Officer to exclude only the net amount of other export entitlements such as Sales Tax and Excise Duty refund for computation of deduction under section 80HHC of the Income Tax Act. The High Court noted that the matter was restored back to the Assessing Officer by CIT(A) with certain observations, and the Tribunal confirmed such order. The Court found that no question of law arose regarding this issue.

The judgment highlighted the interpretation of statutory provisions, the treatment of DEPB income, and the exclusion of export entitlements for deduction under section 80HHC. The Court's decision provided clarity on the eligibility of DEPB income for deduction and the correct method of computation under the Income Tax Act.