2013 (12) TMI 842 - HC - Income Tax

Deduction under Section 80HHC on sale of DEPB - Held that - allowance of relief under Section 80HHC(3)of the Act only the profit and not entire sales proceeds arising out of the DEPB is required to be reduced / considered. - Applying the law laid down by the Hon ble Supreme Court in the case of Topman Exports (Topman Exports), the question raised / formulated in the present appeals is answered in favour of assessee.

Summary

Issues:
1. Eligibility for deduction under Section 80HHC on sale of DEPB
2. Computation of deduction under Section 80HHC - exclusion of gross sale price or profit on sale

Analysis:

Issue 1: Eligibility for deduction under Section 80HHC on sale of DEPB
The appellant challenged the judgment of the Income Tax Appellate Tribunal (ITAT) regarding the eligibility for deduction under Section 80HHC on the sale of Duty Entitlement Pass Book (DEPB). The Division Bench framed the substantial question of law on whether the ITAT was correct in holding that the appellant was ineligible for such deduction. The appellant's counsel argued that the ITAT relied on a decision by the Special Bench of ITAT Bombay, which was later confirmed by the Supreme Court. The appellant contended that the Bombay High Court's contrary view had been set aside by the Supreme Court, reinstating the Special Bench's decision. The respondent did not dispute this argument. The High Court, considering the Supreme Court's decision in the case of Taxman Exports, held that only the profit, not the entire sales proceeds from DEPB, should be considered for relief under Section 80HHC(3) of the Income Tax Act. Consequently, the High Court quashed and set aside the ITAT's order, allowing the appeal in favor of the assessee.

Issue 2: Computation of deduction under Section 80HHC - exclusion of gross sale price or profit on sale
Another question raised was whether the ITAT was correct in holding that, while computing the deduction under Section 80HHC, only the gross sale price received on the sale of DEPB should be excluded, not the profit on such sale. The appellant's counsel vehemently argued against this interpretation, citing the Supreme Court's decision in the case of Taxman Exports. The respondent did not contest this argument. The High Court, after considering the arguments and the legal position established by the Supreme Court, concluded that the issue was no longer res integra. Relying on the Supreme Court's decision in Taxman Exports, the High Court held that only the profit, and not the entire sales proceeds from DEPB, should be reduced or considered for relief under Section 80HHC(3) of the Act. Consequently, the High Court quashed and set aside the ITAT's order, allowing the appeal in favor of the assessee.