CIT-II LUDHIANA vs. M/S HIGHWAY CYCLS INDUSTRIES

ITA/542/2010HC Punjab & HaryanaPHHC01093487201010 December 2010Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL3 pages
AI SummaryRemanded

What were the facts?

The Revenue (Commissioner of Income Tax-II) filed several appeals under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (ITAT), Chandigarh. The appeals, including ITA No. 542 of 2010, involved common questions of law concerning the assessment of income related to DEPB (Duty Exemption Pass Book) entitlements. The specific dispute revolved around how the profit on the transfer of DEPB entitlements should be calculated and taxed under Sections 28(iiid) and 28(iiie) of the Act, and its impact on deductions under Section 80HHC. The ITAT had previously passed an order in ITA No. 124/CHANDI/2008 on August 31, 2009, which the Revenue challenged.

What did the High Court hold?

The High Court disposed of the appeals in terms of its earlier order dated September 13, 2010, in ITA No. 424 of 2010 (CIT v. M/s The Designer). While the specific findings of the ITAT or the reasoning in the cited High Court order are not detailed in this judgment, the operative part indicates that the appeals were decided based on that precedent. The principle established in the cited case likely addressed the interpretation of 'profit' under Sections 28(iiid) and 28(iiie) concerning DEPB entitlements and the consequential impact on Section 80HHC deductions. The High Court's decision in the referenced case would have determined whether the entire sale proceeds or the difference between sale price and face value constituted taxable profit, and how this affected the calculation of export profit for Section 80HHC. The judgment does not explicitly state any issue left undecided.

What were the issues?

The Tribunal was asked to decide the following substantial questions of law: 1. Whether the total sale consideration of DEPB, including any premium received, represents profit chargeable under Sections 28(iiid) and 28(iiie) of the Income Tax Act, 1961. 2. Whether the profit on transfer of DEPB entitlement includes the entire amount received, including any premium. 3. Whether the word "profit" in Sections 28(iiid) and 28(iiie) means the difference between the sale price and face value of DEPB, or the entire sale proceeds. 4. Whether the face value of DEPB should be deducted from the sale price to calculate profit under Sections 28(iiid) and 28(iiie), treating the face value as the cost incurred. 5. Whether an artificial cost (face value of DEPB/DFRC) should be interpolated to determine the deduction under Section 80HHC. 6. Whether the deduction under Section 80HHC was correctly computed in accordance with the amendment made by the Taxation Laws (Amendment) Act, 2005, retrospectively effective from April 1, 1998. The Revenue contended that the entire sale consideration of DEPB, including premium, represents profit. The Assessee's arguments are not explicitly detailed but are implied by the questions raised by the Revenue, suggesting the Assessee argued for deducting the face value from the sale price to determine profit and for the correct computation of Section 80HHC deduction. The Revenue relied on the High Court's order in CIT v. M/s The Designer (ITA No. 424 of 2010 dated 13.9.2010).

Which sections of the Income-tax Act were involved?

Section 260-A,Section 28(iiid),Section 28(iiie),Section 80HHC

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.542 of 2010 & other connected cases being I.T.A. Nos.543, 575, 577, 579, 581, 615 and 622 of 2010 Date of decision: 10.12.2010 Commissioner of Income Tax-II -----Appellant. Vs. M/s Highway Cycles Industries. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present:- Mr. Denesh Goyal, Standing Counsel for the appellant/revenue. --- ADARSH KUMAR GOEL, J.

1.

This order will dispose of I.T.A. Nos.542, 543, 575, 577, 579, 581 and 615 of 2010 as common questions of law are involved in all the appeals.

2.

I.T.A. No.542 of 2010 has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order of the Income Tax Appellate Tribunal, Chandigarh dated 31.8.2009 in I.T.A. No.124/ CHANDI/2008 proposing to raise following substantial questions of law:- (i) “Whether on the facts and circumstances of the case, the ITAT was right in law in not holding that total sale

I.T.A. No.542 of 2010 consideration inclusive of face value of DEPB and premium amount received thereof represents profit chargeable under sections 28(iiid) and 2

The order continues below.

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