2014 (3) TMI 27 - HC - Income Tax

Partial allowability of deduction u/s 80HHC(3) of the Act - Whether the Tribunal has committed any error in restoring the issue to the file of the Assessing Officer for allowance of relief under section 80HHC(3) of the Income Tax Act by reducing only profit and not entire sale proceeds arising out of the DEPB Held that - The decision in M/s Topman Exports Versus Commissioner of Income Tax, Mumbai 2012 (2) TMI 100 - SUPREME COURT OF INDIA followed - for 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 Decided against Revenue.

Summary

Issues:
1. Whether the Tribunal erred in restoring the issue to the Assessing Officer for relief under section 80HHC(3) of the Income Tax Act by reducing only profit and not entire sale proceeds arising from DEPB.

Analysis:
The High Court heard a group of appeals arising from a common question of law and facts related to the judgment of the Income Tax Appellate Tribunal (ITAT) concerning the allowance of relief under section 80HHC(3) of the Income Tax Act for different assessment years. The appeals were filed by the revenue against the ITAT's decision dated 30.4.2010. The main issue in all the appeals was whether the ITAT made an error in directing the Assessing Officer to allow relief under section 80HHC(3) by reducing only profit and not the entire sale proceeds from Duty Entitlement Passbook (DEPB) schemes.

The counsel for the assessee referred to a decision of the Special Bench of ITAT Bombay in the case of Topman Exports v. ITO, which was later confirmed by the Supreme Court in the case of Topman Exports v. CIT. The counsel argued that the Supreme Court's decision overruled the contrary view taken by the Bombay High Court, thereby establishing the principle that only profits and not entire sale proceeds from DEPB should be considered for relief under section 80HHC(3). The revenue's advocate did not contest this argument or present any contradictory decisions.

After considering the arguments and the legal precedents cited, the High Court held that the issue was no longer res-integra due to the Supreme Court's decision in the Topman Exports case. The Supreme Court had clarified that only profits, and not the entire sales proceeds from DEPB, should be taken into account for claiming relief under section 80HHC(3) of the Income Tax Act. Therefore, the Court ruled in favor of the assessee and dismissed all the appeals filed by the revenue, without any costs being awarded.

In conclusion, the High Court's judgment clarified the legal position regarding the treatment of profits versus entire sale proceeds from DEPB schemes for the purpose of claiming relief under section 80HHC(3) of the Income Tax Act, based on the Supreme Court's decision in the Topman Exports case.