CIT-II LUDHIANA vs. M/S TRB EXPORTS P. LTD.

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ITA/546/2010HC Punjab & HaryanaPHHC01093491201008 December 2010Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court disposed of all the appeals in the same terms as its order dated September 13, 2010, in I.T.A. No. 424 of 2010 (CIT v. M/s The Designer). While the specific findings of the ITAT are not detailed in this judgment, the Revenue's appeals were based on the premise that the entire sale consideration of DEPB, including premium, should be treated as profit under Sections 28(iiid) and 28(iiie). The Revenue also questioned the deduction of the face value of DEPB as a cost and its impact on Section 80HHC calculations. The High Court's decision to follow its previous order suggests it found merit in the reasoning presented in that earlier case, which likely addressed the interpretation of 'profit' in relation to DEPB sales and the applicability of Section 80HHC. The operative direction was to dispose of the appeals in line with the precedent.

What were the facts?

The Revenue, the Commissioner of Income Tax, filed multiple 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 I.T.A. No. 546 of 2010, challenged the ITAT's decision dated August 31, 2009, concerning the assessment of profits from the transfer of Duty Exemption Pass Book (DEPB) entitlements. The core of the dispute revolves around how the profit on DEPB entitlements should be calculated for tax purposes, specifically whether the entire sale consideration or only the premium over the face value is taxable. The appeals were consolidated due to common questions of law.

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, 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 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 legally correct, treating the face value as cost. 5. Whether an artificial cost (face value of DEPB/DFRC) should be deducted from sale proceeds to determine profit under Sections 28(iiid) and 28(iiie) for the purpose of Section 80HHC deduction. 6. Whether the deduction under Section 80HHC was correctly computed in accordance with the amendment made by the Taxation Laws (Amendment) Act, 2005, with retrospective effect 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 recorded, but the ITAT's decision implies they argued for profit to be the difference between sale price and face value. The Revenue relied on the High Court's order in CIT v. M/s The Designer.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.546 of 2010 & other connected cases being I.T.A. Nos.544, 547, 550, 558, 564, 573, 574, 576, 580, 582, 600, 616, 617 and 622 of 2010 Date of decision: 8.12.2010 The Commissioner of Income Tax -----Appellant. Vs. M/s TRB Export (P) Ltd. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Denesh Goyal, Standing Counsel & Mr. Rajesh Katoch, Standing Counsel for the appellant/revenue. --- ADARSH KUMAR GOEL, J.

1.

This order will dispose of I.T.A. Nos.544, 546, 547, 550, 558, 564, 573, 574, 576, 580, 582, 600, 616, 617 and 622 of 2010 as common questions of law are involved in all the appeals.

2.

I.T.A. No.546 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.402/ 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 consideration inclusive of face value of DEPB and premium amount received thereof represents profit chargeable under sections 28(iiid) and 28(iiie) of the Income Tax Act, 1961? (ii) Whether on the facts and circumstances of the case, the ITAT was right in law in not holding that profit on transfer of DEPB entitlement represents the entire amount inclusive of premium of sale of such DEPB? (iii) Whether on the facts and circumstances of the case, the ITAT was right in law in holding that the word “profit” referred to in Sections 28(iiid) and 28(iiie) of the Income Tax Act, 1961 means the difference between the sale price of DEPB and the face value of DEPB ignoring the fact that the entire amount represents the profit in the hands of assessee? (iv) Whether on the facts and circumstances of the case, the ITAT was right in law in deducting the face value of DEPB from sale price of DEPB for calculating profit under Sections 28(iiid) and 28(iiie) of the Income Tax Act, 1961 as if the face value is the cost incurred by the assessee to acquire the DEPB? (v) Whether on the facts and circumstances of the case, the ITAT was right in law in holding that the word profit referred to in Sections 28(iiid) and 28(iiie) of the Income Tax Act, 1961 requires any artificial cost to be interpolated to the extent that the face value of DEPB/DFRC should be deducted from the sale proceed for the purpose of determination of deduction under Section 80HHC of the Income Tax Act, 1961? (vi) Whether on the facts and circumstances of the case, the ITAT has failed to appreciate that deduction u/s 80HHC of the Income Tax Act, 1961 was rightly computed in accordance with amendment made by the Taxation Laws (Amendment) Act, 2005 with retrospective effect from 1.4.1998?”

3.

Learned counsel for the revenue states that the matter is covered by order of this Court dated 13.9.2010 in ITA No.424 of 2010 (CIT v. M/s The Designer).

4.

Accordingly, these appeals are disposed of in same terms.

5.

A photocopy of this order be placed on the file of each connected case. (ADARSH KUMAR GOEL) JUDGE December 08, 2010 (AJAY KUMAR MITTAL) ashwani JUDGE 3

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