COMMISSIONER OF INCOME TAX-III vs. BHAVANI SEA FOODS

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TAXAP/1399/2008HC GujaratGJHC24025753200830 November 2013Bench: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE R.P.DHOLARIA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the questions raised in both appeals were squarely covered by the decision of the Hon'ble Supreme Court in the case of Topman Exports Versus Commissioner of Income Tax, reported in [2012] 342 ITR 49 (SC). The revenue's counsel did not dispute this fact. Applying the ratio laid down by the Supreme Court in Topman Exports, the High Court found that both appeals deserved to be dismissed. The reasoning hinges on the Supreme Court's pronouncement on the treatment of DEPB license profits for the purpose of Section 80HHC deduction and the interpretation of relevant sections under Chapter IV of the Income Tax Act. The operative direction was to dismiss the appeals.

What were the facts?

The appeals were filed by the Commissioner of Income Tax-III against the Income Tax Appellate Tribunal (ITAT). The ITAT had passed common orders in ITA Nos. 36-37/Rjt/2007 for Assessment Years 2002-2003 and 2003-2004, concerning the same assessee, Bhavani Sea Foods. The core of the dispute involved the deduction allowed to the assessee under Section 80HHC of the Income Tax Act, 1961, specifically concerning the treatment of profits from the transfer of DEPB licenses. The revenue challenged the ITAT's direction to recompute the deduction by excluding 90% of the profits on the transfer of DEPB licenses from the business profits, and also questioned the ITAT's interpretation of Sections 28(iv) and 28(iii)(d) of the Act.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether, on the facts and in the circumstances of the case and in law, the ITAT was right in directing the Assessing Officer to allow deduction under Section 80HHC after recomputing it by excluding 90% of the profits on the transfer of DEPB licenses from the business profits, as per explanation (baa) of Section 80HHC. 2. Whether, on the facts and in the circumstances of the case and in law, the ITAT erred in ignoring the provisions of Section 28(iv) of the IT Act, which charges the value of any benefit arising from business to tax, and therefore, erred in not taking the whole credit received under the DEPB Scheme as taxable under Section 28(iv), rendering those provisions redundant. 3. Whether, on the facts and in the circumstances of the case and in law, the ITAT erred in not giving a harmonious construction to Sections 28(iii)(d) and 28(iv) by taking the 'profit on transfer' of DEPB as taxable under Section 28(iii)(d) and ignoring the whole credit under the DEPB Scheme as taxable under Section 28(iv). Assessee's Contentions: Not recorded. Revenue's Contentions: The revenue contended that the ITAT erred in its interpretation of Section 80HHC and Sections 28(iv) and 28(iii)(d), arguing that the entire DEPB credit should be considered taxable under Section 28(iv) and that the ITAT's approach rendered these provisions redundant. The revenue relied on the specific wording of these sections.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 28(iv),Section 28(iii)(d)

AI-generated summary — verify with the full judgment below

O/TAXAP/1399/2008 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1399 of 2008 With TAX APPEAL NO. 1400 of 2008

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE M.R. SHAH Sd/- and HONOURABLE MR.JUSTICE R.P.DHOLARIA Sd/- ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2 To be referred to the Reporter or not ? NO 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? NO 5 Whether it is to be circulated to the civil judge ? NO ================================================================ COMMISSIONER OF INCOME TAX-III....Appellant(s) Versus BHAVANI SEA FOODS....Opponent(s) ================================================================ Appearance: MR PRANAV G DESAI, ADVOCATE for the Appellant(s) No. 1 MRS SWATI SOPARKAR, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA

Date : 30/11/2013 Page 1 of 3

O/TAXAP/1399/2008 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH)

1.00. As common question of law and facts arise in both these appeals, and as such arising out of the common judgement and order passed by the Income Tax Appellate Tribunal (hereinafter referred to as “the ITAT”) passed in ITA No.36-37/Rjt/2007 with respect to same assessee but differeNT year i.e. Assessment Years 2002-2003 and 2003-2004, both these appeals are heard, decided and disposed of by this common judgement and order. 2.00. At the outset, it is required to be noted that while admitting both these appeals, the Division Bench has framed the following substantial question of law : “(i) Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right in directing the Assessing Officer to allow deduction to the assessee under section 80HHC after recomputing the same by taking into consideration the profit of the business under explanation (baa) of section 80HHC, 90% of the profits on the transfer of DEPB licence should be excluded? (ii) Whether, on the facts and in the circumstances of the case and in law, the ITAT erred in ignoring the clear provisions of sections 28(iv) of the IT Act under which, inter alia, the value of any benefit arising from business shall be charged to tax, and therefore, whether the ITAT erred in not taking into account the whole credit received under DEPB Scheme as taxable under section 28(iv) and thus, whether the ITAT’s interpretation renders the provisions of section 28(iv) Page 2 of 3

O/TAXAP/1399/2008 JUDGMENT as redundant here? (iii) Whether on the facts and in the circumstances of the case and in law, the ITAT erred in not giving a harmonious construction to the provisions of section 28 (iii d) and 28 (iv) of the IT Act by taking the ‘profit on transfer’ of DEPB as taxable under section 28 (iii d) and ignoring the whole credit under the DEPB Scheme as taxable under section 28(iv)?” 3.00. It is reported that the questions raised in both these appeals are squarely covered by the decision of the Hon'ble Supreme Court in the case of Topman Exports Versus Commissioner of Income Tax, reported in [2012] 342 ITR 49 (SC) against the revenue. 4.00. Mr.Desai, learned counsel appearing on behalf of the revenue is not disputing the above. 5.00. Applying the ratio laid down by the Hon'ble Supreme Court in the case of Topman Exports (supra), both these appeals deserve to be dismissed and are accordingly dismissed. Sd/- (M.R.SHAH, J.) Sd/- (R.P.DHOLARIA,J.) Rafik. Page 3 of 3

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