2021 (4) TMI 364 - HC - Income Tax

Taxability of proceeds generated in the hands of the assessee on sale of DEPB/DFRC entitled to it as an exporter - HELD THAT - .In view of the ratio laid down by the Hon'ble Supreme Court in the judgment Vikas Kalra Vs. Commissioner of Income Tax-VIII, New Delhi 2012 (2) TMI 99 - SUPREME COURT . we are of the considered view that the first question of law should be decided in favour of the assessee and against the Revenue. Accordingly, the first question of law is decided against the Revenue and in favour of the assessee.

Summary

Issues Involved:
Taxability of proceeds generated on sale of DEPB/DFRC licenses; Reopening of assessment for taxability of proceeds; Justification for reopening assessment; Failure to disclose details for deduction u/s 80 HHC.

Analysis:
The appeal challenged the order passed by the Income Tax Appellate Tribunal regarding the assessment year 2004-05 concerning the taxability of proceeds from the sale of DEPB/DFRC licenses. The appellant raised substantial questions of law regarding the justification for reopening the assessment and bringing the sale proceeds to tax, as well as the failure to fully disclose details for deduction under Section 80 HHC of the Income Tax Act.

The assessment was initially completed under Section 143(3) of the Income Tax Act, with the assessee claiming to have provided all necessary details during the assessment proceedings. The reopening of the assessment was based on an amendment regarding the taxability of DEPB/DFRC proceeds, made after the relevant previous year had ended. The issue revolved around whether the re-assessment was legally valid due to the failure to disclose all details for claiming deductions.

The respondent's counsel cited a Supreme Court decision where a similar issue was addressed, ruling in favor of the assessee. The Supreme Court's decision clarified the tax treatment of DEPB proceeds, supporting the assessee's position. As the first question of law was decided in favor of the assessee based on the Supreme Court's ruling, the second question became redundant according to the standing counsel for the appellant.

Given the Supreme Court's decision and the lack of contrary judgments presented by the appellant, the High Court concluded that the first question of law should be decided in favor of the assessee and against the Revenue. Consequently, as the second question was deemed redundant in light of the first question's resolution, the appeal was dismissed, with no costs imposed.