2010 (4) TMI 1091 - AT - Income Tax

Summary

Issues involved: Appeal by Revenue against CIT(A) orders u/s 143(3) r.w.s. 147 for deduction u/s 80HHC on DEPB benefits, cost component in sale value of DEPB license, computation of profit on sale of DEPB license.

Deduction u/s 80HHC on DEPB benefits:
The ITAT Ahmedabad considered the grounds raised by both parties regarding the deduction u/s 80HHC of Rs. 54,29,782 on DEPB benefits. The ITAT referred to a decision by the Special Bench of the ITAT, Mumbai in the case of Topman Exports, which clarified that export incentives, including DEPB, are to be included in the eligible amount for deduction under s. 80HHC. The ITAT directed the Assessing Officer to re-compute the deduction under Section 80HHC in accordance with the decision of the Special Bench.

Cost component in sale value of DEPB license:
The ITAT also addressed the issue of the cost component in the sale value of the DEPB license. The parties admitted that the issue involved the computation of deduction under Section 80HHC in relation to the sale proceeds of the DEPB license. The ITAT relied on the decision of the Special Bench in the Topman Exports case to determine that the face value of DEPB cannot be reduced from the purchase cost but should be considered as separate income under s. 28(iiid). Only the profit element on the sale of DEPB, i.e., the amount exceeding the sale proceeds over the face value, is covered under s. 28(iiid).

Computation of profit on sale of DEPB license:
Regarding the computation of profit on the sale of the DEPB license, the ITAT found that the Special Bench's decision provided clarity on the treatment of DEPB and other export incentives as separate business income. The ITAT emphasized that the face value of DEPB should not be reduced from the cost of purchases but should be considered as a distinct income under s. 28(iiid). The ITAT directed the Assessing Officer to re-calculate the relief amount in accordance with the law.

In conclusion, the ITAT allowed the appeals of the Revenue for statistical purposes based on the directions provided in the Special Bench's decision. The order was pronounced in Open Court on 30th April 2010.