2011 (3) TMI 783 - HC - Income Tax

Chargeable profit - Sale consideration of DEPB - The matter is covered in favour of the revenue by orders of this Court, CIT v. M/s Victor Forgings and CIT v. F.C. Sondhi (2010 - TMI - 203399 - PUNJAB AND HARYANA HIGH COURT), wherein after noticing the judgment of the Bombay High Court in CIT v. Kalpataru Colours & Chemicals (2010 - TMI - 76895 - BOMBAY HIGH COURT), the matter was remanded to the Tribunal for fresh decision in accordance with law

Summary

Issues:
1. Interpretation of profit under Sections 28(iiid) and 28(iiie) of the Income Tax Act, 1961.
2. Calculation of profit on transfer of Duty Entitlement Passbook (DEPB) entitlement.
3. Deduction of face value of DEPB from sale price for profit calculation.
4. Requirement of artificial cost interpolation for profit determination under Section 80HHC.
5. Computation of deduction under Section 80HHC in accordance with the Taxation Laws (Amendment) Act, 2005.

Issue 1:
The appeal raised questions regarding the interpretation of profit under Sections 28(iiid) and 28(iiie) of the Income Tax Act, 1961. The Income Tax Appellate Tribunal (ITAT) was questioned for not considering the total sale consideration inclusive of face value of DEPB and premium amount as profit chargeable under the Act. The ITAT was also challenged for not acknowledging that profit on transfer of DEPB entitlement includes the entire amount, including the premium of sale. Furthermore, the ITAT's interpretation of the word "profit" in Sections 28(iiid) and 28(iiie) was disputed, arguing that the entire amount should be considered as profit in the hands of the assessee. The ITAT's deduction of the face value of DEPB from the sale price for profit calculation was also contested.

Issue 2:
The matter was referred to previous court orders where judgments in similar cases favored the revenue. The counsel for the appellant cited cases like CIT v. M/s Victor Forgings and CIT v. F.C. Sondhi, where the Bombay High Court's judgment in CIT v. Kalpataru Colours & Chemicals was considered. Based on these precedents, the matter was disposed of in favor of the revenue, and the appeal was concluded in the same terms without issuing notice to the respondent.

Issue 3:
The judgment highlighted that the matter was already covered by earlier court orders, leading to the disposal of the appeal in line with those decisions. The respondent was granted the liberty to approach the Court if they had any grievances against the order, despite not being issued a notice in this instance.