2017 (3) TMI 272 - HC - Income Tax

Deduction u/s 80HHC computation - inclusion of income arising from the sale of DEPB licence - Held that - It is the case on behalf of the assessee that the assessee never transferred / sold DEPB Licenses, for which deduction under section 80HHC was claimed and in fact the same were used for house consumption. Therefore, when the issue has been remanded to the A.O., the A.O. is required to consider whether, in fact, DEPB Licenses, for which deduction claimed under section 80HHC, has been transferred by the assessee or not and appropriate decision is required to be taken by the A.O. considering the decision in the case of Topman Exports (2012 (2) TMI 100 - SUPREME COURT OF INDIA ) wherein held if the assessee has not transferred and/or sold the DEPB Licenses, in that case, the assessee is entitled to deduction under section 80HHC. Thus it cannot be said that the learned tribunal has committed any error in confirming the order passed by the learned CIT(A) remanding the matter to the A.O. However, it is observed that on remand the A.O. is required to consider the case on behalf of the assessee whether DEPB Licenses for which deduction under section 80HHC has been claimed, were, in fact, transferred / sold by the assessee or not - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Interpretation of Section 80HHC of the Income Tax Act regarding the inclusion of income from the sale of DEPB license for deduction calculation.

Analysis:
The case involved a dispute over the deduction claimed under section 80HHC of the Income Tax Act, specifically regarding the inclusion of income from the sale of DEPB licenses for calculation purposes. The appellant, dissatisfied with the Income Tax Appellate Tribunal's decision dismissing their appeal, raised the question of whether the tribunal was correct in including income from the sale of DEPB license for deduction calculation under section 80HHC.

The assessee initially claimed a deduction under section 80HHC for export incentives in the form of DEPB licenses. However, in reassessment proceedings, the Assessing Officer (A.O.) restricted the deduction, stating that the DEPB licenses were not eligible for benefits under section 80HHC. The assessee appealed to the CIT(A), who partly allowed the appeal, directing the A.O. to grant the deduction. The revenue then appealed to the ITAT, arguing that since the DEPB licenses were not transferred, the CIT(A)'s decision should be upheld. The ITAT confirmed the CIT(A)'s order, leading to the current appeal.

During the hearing, it was noted that the CIT(A)'s order regarding the deduction claimed under section 80HHC, particularly related to DEPB licenses, was upheld by the ITAT. Reference was made to a Supreme Court decision stating that if an assessee has not transferred or sold DEPB licenses, they are entitled to the deduction under section 80HHC. In the present case, the assessee claimed they had not transferred the DEPB licenses but used them for personal consumption. The A.O. was directed to determine whether the DEPB licenses were indeed transferred by the assessee based on the Supreme Court's decision. The tribunal's decision to remand the matter to the A.O. was deemed appropriate, emphasizing the need for the A.O. to assess whether the DEPB licenses were sold or transferred by the assessee in line with the Supreme Court's ruling.

In conclusion, the appeal was disposed of with the direction for the A.O. to reevaluate the issue of the transfer of DEPB licenses by the assessee for the purpose of claiming deduction under section 80HHC, guided by the Supreme Court's decision in a similar case.