2020 (3) TMI 637 - HC - Income Tax

Taxability of DEPB licence and deduction u/s 80HHC - HELD THAT - Since the matter stands remanded back to the Assessing Authority in the present case, we leave it free for the assessing authority to comply with the law laid down in M/S TOPMAN EXPORTS VERSUS COMMISSIONER OF INCOME TAX, MUMBAI 2012 (2) TMI 100 - SUPREME COURT and pass appropriate orders in accordance with law, without answering the substantial questions of law raised in the present appeal as such.

Summary

Issues:
1. Jurisdiction of the Income Tax Appellate Tribunal under Section 254(2) in light of subsequent Bombay High Court decision.
2. Rectification of the Tribunal's order based on subsequent Bombay High Court decision.
3. Treatment of DEPB receivable as income under Section 28(iv) and its impact on deduction under Section 80HHC.

Analysis:

1. The appeal involved the jurisdiction of the Income Tax Appellate Tribunal under Section 254(2) in light of a subsequent decision by the Bombay High Court. The Tribunal initially remanded the matter back to the Assessing Authority based on the Special Bench decision in "Topman Exports -Vs- ITO." However, the Revenue filed a Miscellaneous Application citing the overruling of the Special Bench decision by the Bombay High Court. Despite this, the Tribunal upheld its remand order, emphasizing the need to maintain judicial discipline and directing a reconsideration of the issue based on evolving principles and higher judicial authorities' decisions. The matter was further complicated by subsequent developments, including a Supreme Court decision favoring the Assessee's position.

2. The Tribunal's decision to remand the issue back to the Assessing Authority was challenged on the grounds of rectifying the order based on the subsequent Bombay High Court decision. The questions of law raised pertained to the Tribunal's exercise of jurisdiction under Section 254(2) and the rectification of the order originally based on the Special Bench decision. The High Court, after considering the legal position and the Supreme Court's ruling, left it to the Assessing Authority to apply the law as per the Supreme Court's judgment without directly addressing the substantial questions of law raised in the appeal.

3. Another crucial issue revolved around the treatment of DEPB receivable as income under Section 28(iv) and its impact on the deduction under Section 80HHC. The Supreme Court's decision clarified that an Assessee with export turnover exceeding a specified amount is entitled to certain deductions under Section 80HHC, emphasizing strict interpretation of tax statutes to determine tax liability and exemptions. The Court set aside the Bombay High Court's judgment, directing the Assessing Officer to compute the deduction under Section 80HHC in accordance with the Supreme Court's ruling.

In conclusion, the High Court disposed of the appeal without addressing the specific questions of law raised, leaving it to the Assessing Authority to apply the law as per the Supreme Court's judgment. The judgment highlighted the importance of adhering to legal principles and higher judicial authorities' decisions in tax matters, particularly regarding the treatment of DEPB benefits and deductions under the Income Tax Act.