2012 (9) TMI 13 - HC - Income Tax

Reopening of assessment u/s 147 - disallowance of the claim under Section 80HHC on inclusion of sale of DEPB licence - Held that - On determining the constitutional validity of the amendment of 2005 under Section 80HHC every assessee having turnover exceeding Rs.10 crores for claiming entitlement of profits on sale of DEPB under Section 80 HHC has to satisfy two conditions regarding availability of an option to choose either duty drawback or DEPB scheme and also that the duty drawback credit was higher than that available under DEPB. Exporters of cashew having no such option and the assessee having failed to produce any evidence the claim made by the assessee was disallowed - against assessee.

Summary

Issues:
1. Disallowance of deduction claimed under Section 80HHC for profit on sale of DEPB.
2. Validity of retrospective amendment of Section 80HHC.
3. Treatment of income from DEPB for computing deduction under Section 80HHC.
4. Applicability of Supreme Court judgment on sale of DEPB.
5. Challenge to retrospective amendment by High Court of Gujarat.
6. Scope of Tribunal's jurisdiction in considering the validity of a provision.
7. Interpretation of Section 260A of the Income Tax Act, 1961.

Issue 1: Disallowance of deduction claimed under Section 80HHC for profit on sale of DEPB:
The case involved the disallowance of a deduction claimed under Section 80HHC for profit on the sale of Duty Entitlement Pass Book (DEPB). The assessing authority disallowed the claim as the exporter failed to satisfy conditions imposed by an amendment in 2005, resulting in the disallowance of the claim.

Issue 2: Validity of retrospective amendment of Section 80HHC:
The appellant challenged the retrospective amendment of Section 80HHC, arguing that no retrospective amendment could withdraw exemptions or concessions already granted. The first appellate authority upheld the retrospective amendment, stating it was valid and within the prescribed time limit.

Issue 3: Treatment of income from DEPB for computing deduction under Section 80HHC:
The income from DEPB was accounted for by the appellant only at the time of the actual sale of the DEPB license. The first appellate authority confirmed this treatment, emphasizing that income from DEPB was recognized only upon the sale of the license.

Issue 4: Applicability of Supreme Court judgment on sale of DEPB:
The Supreme Court judgment in M/s. Topman Exports Vs. Commissioner of Income Tax addressed the treatment of DEPB sale value for tax purposes. The Court affirmed that the profit on the transfer of DEPB should be calculated as the sale value of DEPB minus the face value, avoiding double taxation.

Issue 5: Challenge to retrospective amendment by High Court of Gujarat:
The appellant cited a decision by the High Court of Gujarat striking down the retrospective amendment affecting exporters with turnover exceeding Rs.10 crores. However, the Tribunal could not consider the validity of the retrospective amendment.

Issue 6: Scope of Tribunal's jurisdiction in considering the validity of a provision:
The Tribunal's jurisdiction is limited to deciding disputes under the Act and cannot adjudicate on the validity of provisions. The Tribunal cannot consider the constitutional validity of a retrospective amendment, which falls outside its scope.

Issue 7: Interpretation of Section 260A of the Income Tax Act, 1961:
Section 260A allows appeals from the Tribunal on substantial questions of law arising from its order. The High Court's jurisdiction under Section 260A does not extend to considering the validity of a retrospective amendment. The Court rejected the appeals as the constitutional validity of the amendment was not raised by the appellant.

In conclusion, the judgment addressed various issues related to the deduction under Section 80HHC, treatment of DEPB income, retrospective amendments, and the Tribunal's jurisdiction, providing detailed analysis and legal interpretations for each issue raised in the case.