2013 (7) TMI 257 - AT - Income Tax

Deduction u/s 8OHHC on sale of DEPB license disallowed - whether as per Section 28(iiid) only profit realized from sale of DEPB license will not be eligible for deduction u/s 80 HHC or the full sale consideration received on DEPB license - Held that - As decided in M/s Topman Exports Versus CIT Mumbai 2012 (2) TMI 100 - SUPREME COURT OF INDIA 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 restore the matter back to the file of AO with a direction to allow deduction u/s. 80HHC in terms of the decision of Hon ble apex Court (supra). In favour of assessee for statistical purposes.

Summary

Issues:
1. Disallowance of deduction u/s 80HHC on sale of DEPB license.
2. Charging interest u/s 234B of the Income Tax Act 1961.

Issue 1: Disallowance of deduction u/s 80HHC on sale of DEPB license:

The appellant challenged the order of the CIT(A)-35, Mumbai, regarding the disallowance of deduction u/s 80HHC on the sale of a DEPB license. The original assessment rejected the claim for deduction u/s 80HHC, leading to a reassessment where the appellant claimed a deduction of Rs. 31.34 lakhs. However, the Assessing Officer (AO) did not accept the appellant's claim that the profit on the sale of DEPB was only Rs. 1.78 lakhs, considering the entire sale amount as profit. The AO also held that since the turnover exceeded Rs. 10 Crores, the appellant was not eligible for the deduction. The First Appellate Authority (FAA) upheld the AO's decision, stating that the appellant did not fulfill the conditions for claiming the deduction. The appellant argued citing judgments in favor, including the decision of the Hon'ble Supreme Court in the case of Topman Exports, leading the ITAT to allow the appeal, directing the AO to allow the deduction u/s 80HHC based on the Supreme Court's decision.

Issue 2: Charging interest u/s 234B of the Income Tax Act 1961:

The second ground of appeal involved the charging of interest u/s 234B amounting to Rs. 8,84,790. The FAA considered this interest as consequential and linked to the outcome of the first ground, thus allowing it in favor of the appellant for statistical purposes. The ITAT consequently allowed the appeal for statistical purposes, setting aside the orders of the authorities below and directing the AO to allow the deduction u/s 80HHC as per the decision of the Hon'ble Supreme Court. The order was pronounced on 13th June 2013, in line with the decisions and judgments discussed during the proceedings.

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