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2019 (3) TMI 141 - HC - Income TaxDeduction u/s section 80HHC - computation of benefit - entitled to claim only the Net value of the sale of DEPB (Duty Entitlements Pass Book) after deducting its face value - HELD THAT - The controversy is no longer res integra and the same is covered by the aforesaid decision of the Hon'ble Supreme Court in ED. SASSOON AND COMPANY LIMITED AND OTHERS VERSUS COMMISSIONER OF INCOME-TAX, BOMBAY CITY 1954 (5) TMI 2 - SUPREME COURT and the Assessee is entitled to take only the Net amount of the sale value after deducting the face value of the DEPB for the purpose of Section 80HHC while applying Explanation (baa) of the said provision in the present case. - Decided in favour of the Assessee
Issues:
1. Interpretation of Section 80HHC of the Income Tax Act regarding the treatment of Duty Entitlements Pass Book (DEPB) for computing benefits. 2. Whether the entire value of DEPB should be considered for income tax under the head "Profits and Gains of Business." 3. Clarification on whether only profit on transfer of duty drawback and DEPB scheme should be chargeable to income tax under the head "Profits and Gains of Business." Issue 1: Interpretation of Section 80HHC of the Income Tax Act regarding the treatment of Duty Entitlements Pass Book (DEPB) for computing benefits: The High Court addressed the appeal under Section 260A of the Income Tax Act, arising from the order of the Income Tax Appellate Tribunal. The Tribunal had dismissed the Assessee's appeal on whether the Assessee could claim only the Net value of the sale of DEPB after deducting its face value for computing the benefit under Section 80HHC. The Tribunal's decision was based on a misunderstanding regarding a previous judgment by the Bombay High Court. The Assessee argued that the Bombay High Court's view was later revised by the Supreme Court in the case of Topman Exports Vs. Commissioner of Income tax. The Supreme Court clarified that the Assessee is entitled to a deduction under Section 80HHC on export profits, and the benefit of exclusion from 'profits of the business' should be available despite the export turnover exceeding a certain threshold. Consequently, the High Court set aside the Tribunal's decision and directed the Assessing Officer to compute the deduction under Section 80HHC in accordance with the Supreme Court's judgment. Issue 2: Whether the entire value of DEPB should be considered for income tax under the head "Profits and Gains of Business": The Assessee contended that only the profit on the transfer of DEPB under Section 28(iiid) should be chargeable to income tax under the head "Profits and Gains of Business," not the entire value of DEPB. The High Court analyzed the relevant legal provisions and the Supreme Court's decision in Topman Exports case. It concluded that the Assessee is entitled to consider only the Net amount of the sale value after deducting the face value of the DEPB for the purpose of Section 80HHC. The High Court allowed the Assessee's appeal on this issue, ruling in favor of the Assessee and against the Revenue. Issue 3: Clarification on whether only profit on transfer of duty drawback and DEPB scheme should be chargeable to income tax under the head "Profits and Gains of Business": The High Court reviewed the arguments presented by the Assessee and the legal precedents cited. It noted that the Assessee's position aligns with the interpretation provided by the Supreme Court in the Topman Exports case. The Court emphasized that the Assessee should be able to exclude a smaller figure from 'profits of the business' under Explanation (baa) to Section 80HHC, even if the export turnover exceeds a specified threshold. Based on the Supreme Court's clarification, the High Court ruled in favor of the Assessee, allowing the appeal and answering the questions of law in favor of the Assessee and against the Revenue. No costs were awarded in this judgment. This comprehensive analysis of the legal judgment from the Madras High Court provides a detailed understanding of the issues involved and the court's decisions on each matter, incorporating relevant legal principles and case references.
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