2016 (9) TMI 109 - HC - Income Tax

Taxability of privilege in the form of advanced licence allotted to the assessee - Held that - The Tribunal, after discussing the contentions advanced on behalf of the respective parties was of the view that income is to be taxed in accordance with the statutory provisions and not on the basis of the impression or the views which the assessee is supposed to have taken in the matter. On facts the Tribunal found that the assessee had advanced such a plea before the Assessing Officer also and was further of the view that the mere fact that the assessee had shown such amount as taxable receipt is not material and that the issue has to be examined as per the statutory provisions. Accordingly, it has remitted the matter to the Assessing Officer to reexamine the claim of the assessee under section 80HHC of the Act. In the opinion of this court, the approach adopted by the Tribunal in sending the matter back to the Assessing Officer for determination of the question as to whether benefit or privilege in the form of advance licence allotted to the assessee is taxable or not is a practical approach having regard to the facts and circumstances of the case. In these circumstances, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to warrant interference. The Appellate Tribunal has not erred in remanding the matter to the Assessing Officer for determination of the question as to whether the benefit or privilege in the form of advanced licence allotted to the assessee is taxable or not. The question stands answered accordingly, that is, in favour of the assessee and against the revenue. The appeal, therefore, fails and is, accordingly, dismissed.

Issues Involved:
1. Taxability of the benefit or privilege in the form of an advanced licence allotted to the assessee.
2. Whether the duty benefit derived by the assessee falls under section 28(iiia), (iiib), or (iiic) of the Income Tax Act, 1961.
3. The correctness of the Tribunal's decision to remand the matter to the Assessing Officer for re-examination.

Issue-wise Detailed Analysis:

1. Taxability of the Benefit or Privilege in the Form of an Advanced Licence:
The core issue was whether the advanced licence allotted to the assessee, valued at ?1,10,56,774/-, should be considered taxable income. The assessee initially claimed this amount as a duty benefit under section 80HHC of the Income Tax Act, 1961, but later contended that it was a capital receipt, taxable only upon sale under section 28(iiia). The Tribunal found that the Assessing Officer did not conclusively determine if the licence value was taxable income. The Tribunal emphasized that income must be taxed according to statutory provisions, not merely based on the assessee's entries in the books of accounts. Consequently, the Tribunal remanded the matter to the Assessing Officer to determine if the benefit or privilege in the form of the licence was taxable.

2. Duty Benefit Under Section 28(iiia), (iiib), or (iiic):
The assessee initially claimed the duty benefit as falling under section 28(iiia) of the Act. However, the Assessing Officer and the revenue argued that the duty benefit derived from duty-free imports should be classified under section 28(iiib) as "cash assistance." The Tribunal noted that the assessee's claim of the duty benefit as cash incentive was factually incorrect and needed re-examination. The Tribunal allowed the assessee to raise the claim that the duty benefit was not a taxable receipt, emphasizing that the statutory provisions should determine taxability, not the assessee's initial classification.

3. Tribunal's Decision to Remand the Matter:
The Tribunal's decision to remand the matter to the Assessing Officer was based on the need for a detailed examination of whether the advanced licence's value constituted taxable income. The Tribunal observed that the Assessing Officer had not fully addressed whether the licence, as a commercial asset, resulted in taxable income upon allotment. The Tribunal's approach was deemed practical, allowing for a thorough review in accordance with statutory provisions. The High Court upheld this decision, stating that the Tribunal's remand did not suffer from any legal infirmity and was appropriate given the circumstances.

Conclusion:
The High Court concluded that the Tribunal did not err in remanding the matter to the Assessing Officer to determine the taxability of the advanced licence. The appeal by the revenue was dismissed, and the Tribunal's order was affirmed, emphasizing that the issue should be examined comprehensively under the statutory provisions.

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