CIT, LUDHIANA vs. M/S TIPSON CYCLES PVT. LTD.

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ITA/434/2010HC Punjab & HaryanaPHHC01093367201013 September 2010Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court, in its order dated September 13, 2010, disposed of the appeal filed by the Commissioner of Income Tax. The Court noted that the matter was covered in favour of the revenue by its earlier orders dated August 16, 2010, in ITA No. 301 of 2010 (CIT v. M/s Victor Forgings) and ITA No. 299 of 2010 (CIT v. F.C. Sondhi). In those earlier orders, after considering the judgment of the Bombay High Court in CIT v. Kalpataru Colours & Chemicals (2010) 42 DTR 193, the High Court had remanded the matter to the Tribunal for a fresh decision in accordance with the law. Consequently, the present appeal was also disposed of in the same terms, meaning it was remanded to the ITAT for reconsideration. The Court did not issue notice to the respondent (assessee) but granted liberty to the respondent to approach the Court if they had any grievance against this order. No specific findings on the substantial questions of law were recorded by the High Court itself, as the matter was sent back to the Tribunal.

What were the facts?

The Revenue, Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh, dated October 28, 2009, for the assessment year 2004-05. The appeal challenges the ITAT's decision regarding the computation of profits for deduction under Section 80HHC, specifically concerning Duty Exporter Pass Book (DEPB) entitlements. The Revenue's appeal raises multiple substantial questions of law concerning the treatment of DEPB amounts, including whether 90% of the DEPB amount should be excluded, whether the entire consideration received for DEPB is profit, and how profit on transfer of export incentives should be computed in light of amendments made by the Taxation Laws (Amendment) Act, 2005.

What were the issues?

The Tribunal was asked to decide several questions of law and mixed law and fact concerning the assessment year 2004-05, primarily revolving around the treatment of Duty Exporter Pass Book (DEPB) entitlements for the purpose of calculating deductions under Section 80HHC of the Income Tax Act, 1961. The key questions were: 1. Whether the ITAT was justified in not holding that 90% of the DEPB amount was rightly excluded when working out "Profits of the Business" as per explanation (baa) to Section 80HHC read with Section 28(iiid) and 28(iiie) of the Act, as amended by the Taxation Laws (Amendment) Act, 2005. 2. Whether the entire consideration of DEPB received by the assessee is profit, given its nil cost. 3. Whether 90% of the profit on transfer of export incentives should not be increased while computing profits under Section 80HHC(3)(a) due to the assessee's export turnover exceeding Rs.10 Crores, as per the provisos inserted by the Taxation Laws (Amendment) Act, 2005. 4. Whether the total sale consideration of DEPB, including premium, represents profit chargeable under Sections 28(iiid) and 28(iiie). 5. Whether profit on transfer of DEPB entitlement represents the entire amount inclusive of premium. 6. Whether "profit" under Sections 28(iiid) and 28(iiie) means the difference between the sale price and face value of DEPB, or the entire amount received. 7. Whether the face value of DEPB should be deducted from the sale price as if it were a cost. 8. Whether an "artificial cost" should be interpolated by deducting the face value of DEPB from sale proceeds for Section 80HHC calculation. 9. Whether the deduction under Section 80HHC was rightly computed in accordance with the retrospective amendment made by the Taxation Laws (Amendment) Act, 2005. The Revenue contended that the entire DEPB amount or a significant portion thereof should be considered profit and that the ITAT's exclusion or specific computation was incorrect. The judgment does not explicitly record the assessee's arguments but frames the questions based on the Revenue's appeal against the ITAT's order.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 80HHC,Section 28

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

Date of decision: 13.9.2010 Commissioner of Income Tax. -----Appellant. Vs. M/s Tipson Cycles Pvt. Ltd. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Vivek Sethi, Advocate for the appellant. --- ADARSH KUMAR GOEL, J.

1.

This appeal has been preferred by the assessee under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order dated 28.10.2009 of the Income Tax Appellate Tribunal, Chandigarh in I.T.A. No.1044/CHD/2007 for the assessment year 2004-05 proposing to raise following substantial questions of law:- (i) Whether on the facts and circumstances of the case, the Hon’ble Income Tax Appellate Tribunal is justified in law in not holding that 90% amount of DEPB was rightly excluded while working “Profits of the Business” as per explanation (baa) to section 80HHC read with clause (iiid) and (iiie) of Section 28 of the Income Tax Act, 1961 inserted by Taxation Laws (Amendment) Act, 2005? (ii) Whether on the facts and circumstances of the case, the Hon’ble Income Tax Appellate Tribunal is justified in law in not holding that the whole amount of consideration of DEPB that the assessee received is profit, because of the cost of same is Nil to the assessee?

(iii) Whether on the facts and circumstances of the case, the Hon’ble Income Tax Appellate Tribunal is justified in law in not holding that 90% of profit on transfer of export incentives is not to be increased while computing profits u/S 80HHC(3)(a) as the assessee failed to fulfill the conditions as contained in Third or Fourth proviso inserted by the Taxation Laws (Amendment) Act, 2005 as the export turnover of the assessee company is more than Rs.10 Crores? (iv) Whether on the facts and circumstances of the case, the ITAT is 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 Income Tax Act, 1961? (v) Whether on the facts and circumstances of the case, the ITAT is 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? (vi) Whether on the facts and circumstances of the case, the ITAT is 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? (vii) Whether on the facts and circumstances of the case, the ITAT is 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? (viii) Whether on the facts and circumstances of the case, the ITAT is 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? (ix) Whether on the facts and circumstances of the case, the ITAT is right in law in not appreciating that deduction under Section 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?”

2.

Learned counsel for the appellant states that the matter is covered in favour of the revenue by orders of this Court dated 16.8.2010 in I.T.A. No.301 of 2010 CIT v. M/s Victor Forgings and I.T.A. No.299 of 2010 CIT v. F.C. Sondhi, wherein after noticing the judgment of the Bombay High Court in CIT v. Kalpataru Colours & Chemicals 2010 (42) DTR 193, the matter was remanded to the Tribunal for fresh decision in accordance with law.

3.

Since we find that the matter is covered by earlier orders of this Court, we dispose of this appeal in same terms. For this purpose, we have not considered it necessary to issue notice to the respondent, but we give liberty to the respondent to move this Court if they have any grievance against this order. (ADARSH KUMAR GOEL) JUDGE September 13, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 3

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