CIT vs. M/S TRB EXPORTS P LTD

ITA/548/2010HC Punjab & HaryanaPHHC01093493201016 November 2010Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL3 pages
AI SummaryRemanded

What were the facts?

The Revenue, Commissioner of Income Tax-II, Ludhiana, has filed an appeal under Section 260A of the Income Tax Act, 1961, against the order dated 19.11.2009 passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench (B). The appeal pertains to the assessment year 2002-03 and concerns the assessee, M/s T.R.B. Export Pvt. Ltd. The core of the dispute revolves around the taxability of the sale consideration received from Duty Exemption Pass Book (DEPB) entitlements, specifically whether the entire sale proceeds or only the difference between the sale price and the face value of the DEPB constitutes profit chargeable to tax. The ITAT's decision is under challenge.

What did the High Court hold?

The High Court disposed of the appeals in terms of its earlier order dated 13.09.2010 in ITA No. 424 of 2010 (Commissioner of Income Tax v. M/s The Designer). While the specific reasoning of the ITAT's order being appealed is not detailed, the Revenue's appeal was based on the premise that the entire sale consideration of DEPB, including premium, should be treated as profit chargeable under Sections 28(iiid) and 28(iiie). The Revenue also questioned the deduction of the face value of DEPB from the sale price for calculating profit and for the purpose of Section 80HHC deduction. The Revenue further raised a question regarding the computation of deduction under Section 80HHC in light of a retrospective amendment. By disposing of the appeals in terms of the cited precedent, the High Court implicitly upheld the view taken in that case, which likely addressed the taxability of DEPB entitlements and the calculation of profits and deductions related thereto. The operative direction was to dispose of the appeals in the same terms as the cited case.

What were the issues?

The Tribunal had to decide several questions of law concerning the taxability of DEPB entitlements. The primary questions were: 1. Whether the total sale consideration of DEPB, including any premium, 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, inclusive of any premium. 3. Whether the word "profit" in Sections 28(iiid) and 28(iiie) means the difference between the sale price and the face value, or the entire sale amount. 4. Whether deducting the face value of DEPB from the sale price for calculating profit under Sections 28(iiid) and 28(iiie) is justified, treating the face value as a cost. 5. Whether an artificial cost (face value) needs to be interpolated for determining deduction under Section 80HHC by deducting the face value from sale proceeds. 6. Whether the deduction under Section 80HHC was correctly computed in accordance with the amendment made by the Taxation Law (Amendment) Act, 2005, retrospectively from 01.04.1998. The Revenue contended that the entire sale consideration of DEPB, including premium, represents profit. The assessee's arguments are not explicitly recorded in the provided text, but the ITAT's decision, which is being challenged, implies that the profit was considered as the difference between the sale price and the face value. The Revenue relied on the High Court's order dated 13.09.2010 in ITA No. 424 of 2010 (Commissioner of Income Tax v. M/s The Designer).

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 16.11.2010 The Commissioner of Income Tax-II, Ludhiana ....Appellant. Versus M/s T.R.B. Export Pvt. Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Denesh Goyal, Advocate for the appellant. ADARSH KUMAR GOEL, J.

1.

This order will dispose of ITA Nos. 548 and 623 of 2010. 2. ITA No. 548 of 2010 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 against order dated 19.11.2009 passed by the Income Tax Appellate Tribunal, Chandigarh Bench (B) in ITA No. 857/CHD/2009, for the assessment year 2002-03, proposing 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 the total sale consideration inclusive of face value of DEPB and premium amount received thereof represents profit chargeable under sections 28(iiid) and 28(iiie) of the -2- Income Tax Act, 1961? II. Whether on the facts and circumstances of the case, the ITAT was right in law in not holding that

The order continues below.

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