2008 (6) TMI 357 - HC - Income Tax

Deduction under section 80HHC - appellant-company, engaged in the business of processing and exporting sea foods, filed its return of income - income under the head Capital gains and under the head of Profits and gains of business , which was reduced to nil after claiming the entire income as deduction under section 80HHC of the Act - AO denied the deduction under section 80HHC - Assessing Officer excluded 90 per cent. of the processing charges, lease rent receipts, sale of DEPB licence and additional consider-ation in excess of FOB from the profits of business under section 80HHC(4C), Explanation (baa)(1) which resulted in the negative figure - Both the parties agreed that the issue is covered by the decision of the hon ble Supreme Court in the case of IPCA Laboratory Ltd. 2004 266 ITR 51 - Held that - following the decision of the hon ble Supreme Court, we hold that the assessee is not entitled for deduc-tion under section 80HHC - Appeal is dismissed

Summary

Issues:
1. Entitlement to deduction under section 80HHC of the Income-tax Act.
2. Inclusion of processing charges and additional consideration in profits for section 80HHC.
3. Interpretation of section 28(iiid) regarding exclusion of profit on transfer of DEPB license.

Analysis:
1. The appellant, engaged in processing and exporting sea foods, filed an appeal against the Income-tax Appellate Tribunal's order denying deduction under section 80HHC of the Income-tax Act. The Assessing Officer excluded various components from the profits of business under section 80HHC(4C), leading to a negative figure. The Commissioner of Income-tax (Appeals) also held that the appellant was not entitled to any deduction under section 80HHC. The Tribunal upheld this decision, citing a Supreme Court judgment. The appellant contended that the Tribunal did not appreciate the exclusion under section 28(iiid) was limited to profit on the transfer of DEPB license, not the entire sale consideration. However, as the issue was not raised before the Tribunal, the High Court dismissed the appeal, suggesting the appellant approach the Tribunal again for relief.

2. The dispute revolved around whether processing charges and additional consideration should be included in the profits for section 80HHC calculation. The Commissioner of Income-tax (Appeals) opined that these components should be included, resulting in a negative profit figure under section 80HHC(3). The Tribunal agreed with this interpretation, referencing a Supreme Court decision that had settled the matter. The High Court noted that the appellant had not raised this issue before the Tribunal, and therefore, could not challenge the decision at this stage.

3. The appellant argued that the Tribunal failed to understand that section 28(iiid) only excluded profit on the transfer of DEPB license, not the entire sale consideration. However, the High Court emphasized that since this argument was not presented before the Tribunal and the issue was considered settled based on a Supreme Court ruling, the appellant could not raise this question of law at the appellate stage. The High Court ultimately dismissed the appeal, suggesting the appellant explore further relief options within the provisions of the Income-tax Act, 1961.