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2013 (2) TMI 597 - AT - Income TaxJurisdiction of CIT(A) CIT(A), to confirm the order of AO, followed the judgement of High court and ignored the direction of Tribunal Grievance of the assessee is that the CIT(A) was not justified in confirming the order of the AO and CIT(A) exceeded his jurisdiction in rejecting the claim of the assessee in respect of deduction u/s 80HHC on the value of DEPB - Held that - Decision of the Tribunal was reversed by the Hon ble Bombay High Court in the case of CIT v Kalpataru Colours and Chemicals 2010 (6) TMI 63 - BOMBAY HIGH COURT and thereafter even the Hon ble Punjab & Haryana High Court in a number of cases which have been mentioned by the AO in its assessment order have held that the said decision of the Hon ble Bombay High Court should be considered by the Hon ble Chandigarh ITAT and its earlier decision has been set aside Thus, under the circumstances, the action of the AO is justified. DEPB credit As decided in Kalaptaru Colours & Chemicals, DEPB credit being an export incentive received by the assessee in proportion to the FOB value of its export has no face value and the amount received on its transfer is to be considered while computing the profits allowable for deduction under section 80HHC of the Act - Therefore no merit was found in the stand of the assessee that DEPB credit has a face value and while determining the profits eligible for deduction under section 80HHC of the Act, only the profits arising on the transfer of DEPB credit are to be excluded However, the amount received by the assessee on the transfer of DEPB credit is includible as business profit in the hands of the assessee under section 28(iiid) of the Act Appeal dismissed. Charging of interest u/s 234D Assessee submitted that interest is not chargeable in re-assessment proceedings as held in the case of Dredging Corporation of India Ltd 2011 (7) TMI 584 - ITAT VISAKHAPATNAM Also submitted that interest u/s 234D is also not chargeable in order u/s 143(3) read with sect ion 254 of the Act, which is an order only to give effect to the Tribunal s directions.
Issues Involved:
1. Jurisdiction of CIT(A) in rejecting the claim of the appellant regarding deduction under section 80HHC on the value of DEPB. 2. CIT(A)'s reliance on the judgment of the Hon'ble Bombay High Court in Kalapataru Colours and Chemicals instead of the Special Bench judgment in M/s Topman Exports. 3. Legality and factual correctness of the CIT(A)'s order. 4. Charging of interest under section 234D and withdrawal of interest under section 244A. Detailed Analysis: 1. Jurisdiction of CIT(A) in Rejecting the Claim of the Appellant Regarding Deduction under Section 80HHC on the Value of DEPB: The appellant argued that CIT(A)-II exceeded his jurisdiction by not following the Tribunal's direction to decide the issue based on the Special Bench judgment in M/s Topman Exports v ITO. The CIT(A) instead followed the judgment of the Hon'ble Bombay High Court in Kalapataru Colours and Chemicals. The Tribunal had previously directed the Assessing Officer to adjudicate the issue afresh in conformity with the Special Bench judgment. However, the CIT(A) justified his decision by stating that the Special Bench judgment had been reversed by the Hon'ble Bombay High Court and upheld by the Hon'ble Punjab & Haryana High Court, thus legitimizing the Assessing Officer's action. 2. CIT(A)'s Reliance on the Judgment of the Hon'ble Bombay High Court in Kalapataru Colours and Chemicals Instead of the Special Bench Judgment in M/s Topman Exports: The CIT(A) followed the judgment in Kalapataru Colours and Chemicals, which held that the complete sale proceeds of DEPB/DFRC Licenses should be considered as profits for computing deduction under section 80HHC. The appellant contended that the Assessing Officer should have adhered to the Tribunal's direction based on the Special Bench judgment. The Tribunal found that the issue had been addressed similarly in the case of M/s R.N. Gupta & Co. Ltd., where the Hon'ble Punjab & Haryana High Court had remanded the issue for fresh adjudication in light of the Bombay High Court's judgment. 3. Legality and Factual Correctness of the CIT(A)'s Order: The Tribunal upheld the CIT(A)'s order, stating that the Assessing Officer's decision was in line with the prevailing legal position as established by the Bombay High Court. The Tribunal noted that the Assessing Officer did not deviate from the legal framework but applied the law as it existed at the time of passing the assessment order. Consequently, the Tribunal found no merit in the appellant's grounds challenging the CIT(A)'s order. 4. Charging of Interest under Section 234D and Withdrawal of Interest under Section 244A: The appellant argued that interest under section 234D is not chargeable in reassessment proceedings, citing the Visakhapatnam Bench of the Tribunal in Dredging Corporation of India Ltd v ACIT. The appellant also contended that interest under section 234D should not be charged in an order passed under section 143(3) read with section 254, which is only to give effect to the Tribunal's directions. The Tribunal restored this issue to the Assessing Officer for fresh consideration, directing him to take into account the appellant's submissions. Conclusion: The appeal was partly allowed for statistical purposes. The Tribunal dismissed the appellant's grounds regarding the rejection of the deduction claim under section 80HHC on DEPB value and upheld the CIT(A)'s reliance on the Bombay High Court's judgment. However, the issue of charging interest under section 234D was remanded to the Assessing Officer for fresh adjudication.
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