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2013 (3) TMI 353 - HC - Income TaxExclusion of sale proceeds of DEPB licence in the computation of 80HHC deduction - Whether the Tribunal was right in remanding the issue back to AO based on the case of Topman Exports v. Income Tax Officer, (2009 (8) TMI 827 - ITAT MUMBAI) - revenue submitted that the decision of the Topman Exports was reversed by the Bombay High Court - Held that - The decision of the Bombay High Court as appealed before Supreme court 2012 (2) TMI 100 - SUPREME COURT OF INDIA disposed of appeal by directing the AO to compute the deduction under Section 80HHC considering DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB and while the face value of the DEPB will fall under clause (iiib) of Section 28, difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28 Decided in favor of assessee.
Issues:
1. Exclusion of sale proceeds of DEPB license in the computation of 80HHC deduction. 2. Remanding the issue based on a reversed decision by Mumbai High Court. 3. Allowability of deduction under Section 80HHC for profits on sale of DEPB. Issue 1: Exclusion of sale proceeds of DEPB license in 80HHC deduction computation The case involved an appeal by the revenue challenging the exclusion of sale proceeds of DEPB license in the computation of 80HHC deduction. The assessee, a firm engaged in the business of manufacturing and exporting leather products, claimed a deduction under Section 80HHC for the assessment year 2004-2005. The Assessing Officer denied the deduction, stating that the firm was not eligible for the deduction in respect of export profits and also disallowed relief on income from the sale of DEPB license. Issue 2: Remanding the issue based on a reversed decision by Mumbai High Court The Commissioner of Income-tax (Appeals) upheld the Assessing Officer's decision, emphasizing that the firm had not complied with the conditions prescribed under the third proviso to Section 80HHC. The assessee then appealed to the Tribunal, which referred to a decision of the Special Bench of the Income-tax Appellate Tribunal, Mumbai. The Tribunal remitted the matter back to the Assessing Officer based on the Special Bench's decision, directing a reevaluation of the issue with the assessee's cooperation. Issue 3: Allowability of deduction under Section 80HHC for profits on sale of DEPB The revenue appealed the Tribunal's decision, highlighting that the Special Bench's decision had been reversed by the Bombay High Court. The case was further taken to the Supreme Court, which allowed the appeal in part and directed the Assessing Officer to compute the deduction under Section 80HHC in accordance with the Supreme Court's judgment in Topman Exports Vs. CIT. Consequently, the High Court disposed of the Tax Case appeal by instructing the Assessing Officer to recompute the deduction under Section 80HHC based on the Supreme Court's decision and provide a fresh order after giving the assessee an opportunity to present their case.
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