2012 (9) TMI 253 - AT - Income Tax

Taxability of Sale proceed on DEPB - Weather entire sales proceeds received on transfer of DEPB is taxable - AO made addition of sales proceeds received on transfer of DEPB - Held that - As decided in the case of Topman Exports 2012 (2) TMI 100 - SUPREME COURT OF INDIA, Sales proceed of DEPB is not taxable under PGBP - DEPB is taxable on two basis, first under clause iiib of sec. 28 when it receivable and secondly profit on transfer or sale of DEPB fall under clause iiid of sec. 28. And profit implies difference between the sale value and the face value of the DEPB. Appeal decided against revenue.

Summary

Issues Involved:
1. Delay in filing appeals by the Revenue.
2. Disallowance of deduction under Section 80HHC of the Income Tax Act.
3. Reliance on the decision of Topman Exports vs ITO and its subsequent reversal by the Bombay High Court in Kalpataru Colors & Chemicals.
4. Verification of recomputed amounts by the Assessing Officer.

Detailed Analysis:

1. Delay in Filing Appeals by the Revenue:
The Revenue filed a petition to condone a delay of 76 days in filing the appeals. After considering the submissions, the delay was condoned by the Tribunal.

2. Disallowance of Deduction under Section 80HHC:
The main issue in all three appeals was the deletion of the disallowance of deduction under Section 80HHC by the CIT(A). The Assessing Officer (AO) had observed that the assessee incorrectly calculated its total income by including sales proceeds from the transfer of DEPB scheme credit, which the AO argued was not entitled to deduction under Section 80HHC.

3. Reliance on the Decision of Topman Exports vs ITO and its Subsequent Reversal by the Bombay High Court in Kalpataru Colors & Chemicals:
The CIT(A) recomputed the assessee's entitlement under Section 80HHC based on the Special Bench decision in Topman Exports vs ITO. The Revenue appealed, citing the Bombay High Court's reversal of this decision in Kalpataru Colors & Chemicals. However, during the hearing, both parties acknowledged that the Supreme Court had set aside the Bombay High Court's decision and upheld the Special Bench's decision in Topman Exports vs CIT.

4. Verification of Recomputation by the Assessing Officer:
The CIT(A) directed the AO to verify the recomputed amounts and make necessary adjustments if any discrepancies were found. The recomputation involved recalculating the Profit and Loss Account and the business profit as per the Income Tax Act, eventually determining the deduction under Section 80HHC.

Judgment:
The Tribunal noted that the Supreme Court upheld the Special Bench's decision in Topman Exports vs CIT, confirming that DEPB is "cash assistance" under Section 28(iiib) and the profit on its transfer falls under Section 28(iiid). The Tribunal found no infirmity in the CIT(A)'s order, which directed the AO to verify and adjust the figures as necessary. Consequently, the Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s decision to allow the deduction under Section 80HHC.

Conclusion:
The appeals were dismissed, and the CIT(A)'s orders were upheld, confirming the recomputation of the assessee's entitlement under Section 80HHC based on the Supreme Court's decision in Topman Exports vs CIT. The Tribunal emphasized that the recomputation should be verified by the AO, and any variations should be adjusted accordingly. The order was pronounced in the open court on 22.06.2012.