2014 (5) TMI 970 - HC - Income Tax

Interpretation of section 80HHC of the Act Denial of claim of DEPB Held that - Following Topman Exports v. Commissioner of Income Tax 2012 (2) TMI 100 - SUPREME COURT OF INDIA - DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Eligibility to claim deduction u/s 80IB of the Act - Whether amount of DEPB is derived from and eligible for claim on the true and correct interpretation of Section 80IB of the Act Held that - Following Liberty India v. Commissioner of Income Tax 2009 (8) TMI 63 - SUPREME COURT - duty drawback, DEPB benefits, rebates etc. cannot be credited against the cost of manufacture of goods debited in the Profit & Loss account for purposes of Sections 80-IA/80-IB as such remissions (credits) would constitute independent source of income beyond the first degree nexus between profits and the industrial undertaking Decided against Assessee.

Summary

Issues:
1. Interpretation of Section 80HHC in declining DEPB claim.
2. Eligibility of DEPB claim under Section 80IB.

Analysis:
1. The appeal was filed against the Income Tax Appellate Tribunal's order for the assessment year 2004-05. The primary issue was the interpretation of Section 80HHC regarding the DEPB claim. The assessee, engaged in manufacturing and exporting goods, had its case taken up for scrutiny. The Commissioner of Income Tax (Appeals) partly allowed the appeal, leading to further appeals by both the assessee and the revenue before the Tribunal. The Tribunal dismissed the appeal, prompting the current Income Tax Appeal before the High Court.

2. The High Court, after hearing both parties, addressed the substantial questions of law raised in the appeal. For question (I) related to the sustainability of the Tribunal order on Section 80HHC interpretation, the Court referred to the judgment in Topman Exports v. Commissioner of Income Tax. The matter was remanded to the Assessing Officer for fresh consideration in light of the Supreme Court's decision in Topman Exports. Concerning question (II) on the DEPB claim's eligibility under Section 80IB, the Court noted that the issue was settled against the assessee based on the judgment in Liberty India v. Commissioner of Income Tax. Consequently, the appeal was disposed of accordingly, with the decision against the assessee on question (II).

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the legal interpretations considered, and the final decision rendered by the High Court in the Income Tax Appeal.