2010 (8) TMI 101 - HC - Income Tax

Deduction u/s 80HHC- The AO allowed benefit of Section 80HHC of the Act in respect of export income on the sale of DEPB. Commissioner revised the order under Section 263 of the Act stating that conditions prescribed under Clause (a) and (b) of the third Proviso to Section 80HHC of the Act having not been met, the benefit thereof could not be given. Court confirmed the commissioner s action.

Summary

Issues:
- Entitlement to benefit of Section 80-HHC(3) on the sale of DEPB
- Justification of Tribunal's finding on failure to fulfill conditions under Section 80-HHC(3)
- Validity of invoking powers under Section 263 for revision of Assessment order

Entitlement to benefit of Section 80-HHC(3) on the sale of DEPB:
The appeal was filed against the order of the Income Tax Appellate Tribunal regarding the entitlement to the benefit of Section 80-HHC(3) on the sale of Duty Entitlement Pass Book (DEPB). The Assessing Officer allowed the benefit, but the Commissioner, under Section 263 of the Income Tax Act, held the assessment order to be erroneous concerning the income derived from the sale of DEPB. The Tribunal upheld the view that the conditions specified in the third proviso to Section 80-HHC had not been met, leading to the denial of the benefit. The Tribunal emphasized the lack of evidence provided by the assessee to demonstrate the fulfillment of the prescribed conditions, ultimately resulting in the withdrawal of the deduction under Section 80-HHC.

Justification of Tribunal's finding on failure to fulfill conditions under Section 80-HHC(3):
The Tribunal justified its decision by pointing out that the Assessing Officer failed to provide a satisfactory explanation on how the conditions in the third proviso to Section 80-HHC(3) were satisfied by the assessee. The Commissioner also noted the absence of material or evidence demonstrating the fulfillment of the conditions in the proviso. Consequently, the Tribunal upheld the Commissioner's order to withdraw the deduction under Section 80-HHC related to 90% of the DEPB income. The lack of material presented by the assessee on this crucial aspect led to the failure of the assessee in this regard.

Validity of invoking powers under Section 263 for revision of Assessment order:
The Commissioner invoked powers under Section 263 to revise the Assessment order due to the perceived error in granting the benefit of income from the sale of DEPB under Section 80-HHC. The Tribunal concurred with the Commissioner's decision, emphasizing that the case of the assessee did not meet the conditions specified in the Act for availing the benefit from DEPB under Section 80-HHC. The absence of evidence indicating compliance with the conditions under the third proviso to Section 80-HHC justified the intervention under Section 263, leading to the dismissal of the appeal.

In conclusion, the judgment highlighted the importance of fulfilling the prescribed conditions under Section 80-HHC(3) for claiming benefits related to the sale of DEPB. The failure to provide sufficient evidence demonstrating compliance with the statutory requirements resulted in the denial of the benefit and subsequent dismissal of the appeal.