COMMISSIONER OF INCOME TAX JALANDHAR-II vs. M/S HANSA EXPORT CORPORATION

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ITA/402/2010HC Punjab & HaryanaPHHC01093333201027 August 2010Bench: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court disposed of the appeal in terms of an identical matter, ITA No. 299 of 2010 (Commissioner of Income Tax v. M/s. F.C. Sondhi), decided on 16.8.2010. While the specific findings of the ITAT or the High Court on the individual questions of law are not detailed in this excerpt, the operative direction indicates that the appeal filed by the Revenue was decided in line with the precedent. The underlying principle in such cases typically concerns the correct computation of profit from the transfer of DEPB entitlements, specifically whether the entire sale proceeds or the net amount after deducting the face value constitutes taxable profit under Section 28(iiid) and 28(iiie), and its impact on deductions under Section 80HHC. The High Court's decision to follow a previous judgment suggests an affirmation or rejection of the ITAT's findings on these points based on established legal interpretations.

What were the facts?

The Revenue, Commissioner of Income-tax, Jalandhar-I, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 23.10.2009 passed by the Income Tax Appellate Tribunal (ITAT), Amritsar Bench. The appeal pertains to Assessment Year 2004-05 and concerns the computation of profit on the transfer of Duty Exemption Pass Book (DEPB) entitlement. The Revenue sought to raise substantial questions of law regarding the ITAT's decision not to consider the total sale consideration of DEPB, including any premium, as profit chargeable under Sections 28(iiid) and 28(iiie) of the Act. The dispute revolves around whether the profit should be the entire sale amount or the difference between the sale price and the face value of the DEPB.

What were the issues?

The Tribunal was asked to decide the following substantial questions of law: 1. Whether the ITAT was correct in not holding that the total sale consideration, inclusive of the face value of DEPB and any premium received, represents profit chargeable under Sections 28(iiid) and 28(iiie) of the Income Tax Act, 1961. 2. Whether the ITAT was correct in not holding that profit on transfer of DEPB entitlement represents the entire amount inclusive of premium of sale of such DEPB. 3. Whether the ITAT was correct in holding that the word "profit" in Sections 28(iiid) and 28(iiie) means the difference between the sale price and face value of DEPB, ignoring that the entire amount represents profit. 4. Whether the ITAT was correct in deducting the face value of DEPB from the sale price for calculating profit under Sections 28(iiid) and 28(iiie), as if the face value is the cost. 5. Whether the ITAT was correct in holding that "profit" requires artificial cost interpolation by deducting the face value from sale proceeds for Section 80HHC deduction. 6. Whether the ITAT failed to appreciate that deduction under Section 80HHC was rightly computed as per the amendment by the Taxation Law (Amendment) Act, 2005. The Revenue contended that the entire sale consideration of DEPB, including premium, should be treated as profit. The Assessee's contentions are not explicitly recorded in the provided text, but the questions posed by the Revenue imply that the Assessee likely argued that profit is the difference between sale price and face value, and that Section 80HHC deduction was correctly calculated.

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

ITA No. 402 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 402 of 2010 Date of Decision: 27.8.2010 Commissioner of Income-tax, Jalandhar-I ....Appellant. Versus M/s Hansa Export Corporation Basti Nau ...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 filed by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 23.10.2009 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) in ITA No. 228 (ASR)/2009 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 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

ITA No. 402 of 2010 -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 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 section 28(iiid) and 28(iiie) of 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 section 28(iiid) and 28(iiie) of 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

ITA No. 402 of 2010 -3- 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 Law (Amendment) Act, 2005 with retrospective effect from 01.04.1998?” 2. Learned counsel for the revenue states that this Court has disposed of identical matter being ITA No. 299 of 2010 (Commissioner of Income Tax v. M/s. F.C. Sondhi), decided on 16.8.2010. 3. Accordingly, this appeal is disposed of in same terms. (ADARSH KUMAR GOEL) JUDGE August 27, 2010 (AJAY KUMAR MITTAL) gbs JUDGE

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