2012 (6) TMI 228 - HC - Income Tax

Deduction under Section 80HHC - appellant submitted that the Tribunal committed a fundamental error inasmuch as they have not considered eligibility of the respondent-assessees for deduction under Section 80HHC with respect to the profit on transfer of DEPB benefit Held that - matters remanded to the Tribunal with specific direction to them to consider the eligibility of the respondent-assessees for benefits under the proviso introduced, and if the respondent-assessees are found eligible then only to consider the question of computation of the relief Expenditure on issue of bonus shares Held that - in view of the case of General Insurance Corpn. (2006 - TMI - 6547 - SUPREME Court - Income Tax), decided in favor of assessee.

Summary

Issues:
1. Eligibility of the respondent-assessees for deduction under Section 80HHC with respect to the profit on transfer of DEPB benefit.
2. Reversal of Bombay Tribunal's order by the Bombay High Court in Commissioner of Income Tax v. Kalpataru Colours & Chemicals.
3. Consideration of expenditure on the issue of bonus shares in ITA No. 267/2010.

Analysis:
1. The judgment revolves around the challenge to remand orders issued by the Tribunal regarding the computation of deduction under Section 80HHC for the respondent-assessees. The Assessing Officer had denied the benefit of the proviso introduced through an amendment by Finance Act, 2005 with retrospective effect from 1-4-1998 to the assessees. The CIT (Appeals) confirmed the assessments, and the Tribunal directed the Assessing Officer to recompute the deduction based on the decision of the Bombay Tribunal. However, the High Court highlighted that the issue was not about computation but rather the eligibility of the respondents for the benefits under the proviso. The High Court allowed the appeals by setting aside the Tribunal's orders solely on the eligibility issue and directed the Tribunal to first consider eligibility before computation based on the Bombay High Court's decision.

2. The judgment also addressed the reversal of the Bombay Tribunal's order by the Bombay High Court in Commissioner of Income Tax v. Kalpataru Colours & Chemicals. The High Court noted that the issue in this case was not about computation but the eligibility of the respondents for the benefits under the proviso. The High Court decided to allow the appeals by setting aside the Tribunal's orders on this issue and restoring the matters to the Tribunal for a fresh consideration of eligibility before computation.

3. Another issue raised in ITA No. 267/2010 was regarding the expenditure on the issue of bonus shares. The High Court referred to the decision in CIT v. General Insurance Corpn., where the Supreme Court had already decided against the Revenue on this issue. Following the Supreme Court's judgment, the High Court dismissed the appeal on the expenditure related to the issue of bonus shares, aligning with the precedent set by the Supreme Court in this regard.