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2013 (4) TMI 637 - AT - Income TaxSection 154 of the Income-tax Act - Deduction u/s.80HHC in respect of DEPB licence - Held that - As held by the Special Bench of the Tribunal in the case of Topman Exports (2012 (2) TMI 100 - SUPREME COURT OF INDIA ) the face value of DEPB lincence has to be considered to be income u/s. 28(iiib) which will be covered by the first proviso to section 80HHC(3) and excess of sale proceeds over the sales value has to be considered as business profit u/s.28(iiid) to which only third proviso to section 80HHC(3) can be applied. Said decision of the Special Bench has been upheld by the Hon ble Supreme Court. We, therefore, modify the order passed by the CIT(A) in relation to deduction u/s.80HHC in respect of DEPB income and direct the AO to recompute the deduction in the light of judgment of Hon ble Supreme Court in the case of Topman Exports (2012 (2) TMI 100 - SUPREME COURT OF INDIA) - Appeal of the assessee is partly allowed.
Issues:
1. Legality of the order passed u/s.154 of the Income-tax Act. 2. Merit of additions made in the order regarding deduction u/s.80HHC in respect of sale proceeds of DEPB license. Analysis: Issue 1: Legality of the order passed u/s.154: The appeal was filed by the assessee against the order dated 21.05.2006 of CIT(A) for assessment year 2002-03 passed u/s.154 of the Income-tax Act. The dispute raised was regarding the legality of the order passed u/s.154 and on the merit of additions made in the said order. The CIT(A) initiated proceedings u/s.154 on the ground that there was an apparent mistake in the appellate order as the provisions amended by Taxation Laws Amendment Act, 2005 were not considered. The CIT(A) amended the appellate order and withdrew the deduction allowed u/s.80HHC in respect of DEPB sale proceeds, as the third proviso to section 80HHC(3) did not apply due to the turnover exceeding Rs. 10 crores. Issue 2: Merit of additions made in the order: During the appeal hearing, the Ld. AR did not press the ground regarding the legality of the order u/s.154. As for the merit of the case, it was argued that the entire DEPB income cannot be considered as business profit u/s. 28(iiid) based on the decision of the Special Bench of the Tribunal in the case of Topman Exports vs. CIT. The Ld. DR conceded that the order of the CIT(A) required modification in view of the judgment of the Hon'ble Supreme Court in the case of Topman Exports Ltd. The ITAT Mumbai modified the order passed by the CIT(A) and directed the AO to recompute the deduction in light of the judgment of the Hon'ble Supreme Court, considering the face value of DEPB license as income u/s. 28(iiib) and the excess of sale proceeds over the sales value as business profit u/s.28(iiid). In conclusion, the appeal of the assessee was partly allowed, emphasizing the correct application of provisions under section 80HHC and the need for reevaluation based on judicial precedents.
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