2015 (6) TMI 496 - AT - Income Tax

Claim of deduction u/s.80HHC on the DEPB income - Held that - Respectfully following the judgment of Topman Exports vs. CIT (2012 (2) TMI 100 - SUPREME COURT OF INDIA) and Avani Exports and Others vs. CIT (2012 (7) TMI 190 - GUJARAT HIGH COURT ) we hereby set aside the order of the ld.CIT(A) and direct the AO to allow the claim of the assessee u/s.80HHC of the Act in respect of DEPB income and re-compute the deduction in the light of the above judgements of the Hon ble Apex Court and Hon ble Jurisdictional High Court. - Decided in favour of assessee.

Summary

Issues:
- Disallowance of deduction under section 80HHC for Export Incentives
- Disallowance of deduction under section 80HHC for DEPB Income exceeding Rs. 10 Crores
- Failure to follow ITAT direction regarding Special Bench decision
- Conflict between ITAT direction, Bombay High Court decision, and Supreme Court judgment

Analysis:

Issue 1: Disallowance of deduction under section 80HHC for Export Incentives
The appellant challenged the Commissioner of Income Tax (Appeals)'s decision to reduce the claim of deduction under section 80HHC by Rs. 30,85,077 for Export Incentives. The appellant argued that the deduction should have been allowed as claimed, but the CIT(A) upheld the Assessing Officer's action. The Tribunal noted the appellant's contention and directed the AO to recompute the deduction in accordance with law and relevant judgments.

Issue 2: Disallowance of deduction under section 80HHC for DEPB Income exceeding Rs. 10 Crores
The main issue in this appeal was the claim of deduction under section 80HHC for DEPB Income exceeding Rs. 10 Crores. The Tribunal observed that the AO had not followed the ITAT's direction to consider the Special Bench decision in the Topman Exports case. The CIT(A) confirmed the addition made by the AO, citing the Bombay High Court's decision overruling the Special Bench decision. However, the Tribunal referred to the Supreme Court's judgment in the Topman Exports case, which held that the benefit of deduction under section 80HHC cannot be denied based on the export turnover exceeding Rs. 10 Crores. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to allow the claim of deduction for DEPB income.

Issue 3: Failure to follow ITAT direction regarding Special Bench decision
The appellant contended that the AO did not adhere to the ITAT's direction to follow the Special Bench decision in the Topman Exports case. The AO relied on the Bombay High Court's decision, which the Supreme Court later reversed. The Tribunal acknowledged the discrepancy and directed the AO to compute the deduction in line with the Special Bench decision and relevant judgments.

Issue 4: Conflict between ITAT direction, Bombay High Court decision, and Supreme Court judgment
The Tribunal addressed the conflict between the ITAT direction, the Bombay High Court decision, and the Supreme Court judgment regarding the deduction under section 80HHC. It emphasized the binding nature of the Supreme Court's decision in the Topman Exports case, overturning the Bombay High Court's ruling. By following the Supreme Court and the Jurisdictional High Court's judgments, the Tribunal allowed the appellant's appeal and ordered the AO to recompute the deduction accordingly.

In conclusion, the Tribunal allowed the appeal, set aside the CIT(A)'s order, and directed the AO to grant the deduction under section 80HHC for both Export Incentives and DEPB Income exceeding Rs. 10 Crores, in compliance with the relevant legal precedents.