COMMISSIONER OF INCOME TAX, KARNAL vs. M/S LIBERTY SHOES LTD.

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ITA/811/2010HC Punjab & HaryanaPHHC01093784201014 January 2011Bench: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court, in its decision, noted that the matter was covered by its earlier orders dated 16.8.2010 in ITA No. 301 of 2010 (CIT v. M/s Victor Forgings) and ITA No. 299 of 2010 (CIT v. F.C. Sondhi). These earlier orders had taken into account the judgment of the Bombay High Court in CIT v. Kalpataru Colours & Chemicals. Consequently, the High Court found it unnecessary to issue notice to the respondent (assessee) and disposed of the appeal in the same terms as the previous orders. This implies that the appeal was likely remanded to the Tribunal for a fresh decision in accordance with the law laid down by the High Court, particularly concerning the issues raised. The specific findings on each of the three questions of law are not detailed in this judgment, as the appeal was disposed of based on precedent. The operative direction was to dispose of the appeal in the same terms as earlier orders, with liberty to the respondent to move the court if aggrieved.

What were the facts?

The Commissioner of Income-tax, Karnal (the revenue) filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Delhi Bench. The appeal pertains to the assessment year 2003-04 and challenges the ITAT's decision to allow a deduction under Section 80HHC to M/s Liberty Shoes Ltd. (the assessee). The core of the dispute involves the eligibility of Duty Entitlement Passbook (DEPB) benefits for this deduction, particularly in light of amendments to the Income Tax Act and specific ITAT and High Court rulings. The revenue's appeal is based on substantial questions of law concerning the interpretation and application of Section 80HHC and related provisions.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the ITAT was justified in allowing deduction under Section 80HHC on the face value of DEPB when the turnover exceeded Rs. 10 crores, considering the retrospective insertion of provisos (ii), (iii), and (iv) by the Taxation Law (Amendment) Act, 2005, effective from 01.04.1998? 2. Whether the ITAT was justified in allowing deduction under Section 80HHC in respect of the entire DEPB amount by incorporating it into the computation of business profit under Section 28(iiib)? 3. Whether the ITAT was justified in relying on the decision of the ITAT Special Bench, Mumbai in M/s Topman Exports Vs. ITO, when this decision was reversed by the Bombay High Court in CIT Vs. Kalpataru Colours and Chemical? Assessee's contentions: The judgment does not record specific contentions made by the assessee. Revenue's contentions: The revenue argued that the ITAT was not justified in allowing the deduction under Section 80HHC on the face value of DEPB, especially considering the turnover exceeding Rs. 10 crores and the retrospective amendments. They also questioned the inclusion of the entire DEPB amount in business profit and the reliance on the ITAT Special Bench decision which was subsequently reversed by the Bombay High Court.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80HHC,Section 28(iiib)

AI-generated summary — verify with the full judgment below

ITA No. 811 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 811 of 2010 Date of Decision: 14.1.2011 The Commissioner of Income-tax, Karnal ....Appellant. Versus M/s Liberty Shoes Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 against order of the Income Tax Appellate Tribunal, Delhi Bench “E”, New Delhi in ITA No. 1066/DEL/2009 dated 11.2.2010, for the assessment year 2003-04, claiming following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the Ld. ITAT was justified in allowing deduction u/s 80HHC on the face value of DEPB in the case where turnover exceeds Rs.10 crores in view of proviso (ii), (iii) and (iv) inserted by the taxation Law (Amendment) Act, 2005 with retrospective effect from 01.04.1998? ii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was justified in allowing deduction u/s 80HHC in respect of entire DEPB

ITA No. 811 of 2010 -2- amount by incorporating the same in the computation of business profit u/s 28(iiib)? iii) Whether on the facts and in the circumstances of the case the Ld. ITAT was justified in placing reliance upon the decision of Income-tax Appellate Tribunal, Special Bench, Mumbi in the case of M/s Topman Exports Vs. ITO (209)-TOIL-531-ITAT dated 11.08.2009 despite the fact that the decision of the Mumbai ITAT Special Bench in the case of Tompan Export, supra has been reversed by the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Kalpataru Colours and Chemical, 2010-TIOL- 482-HC-Mum?” 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 ITA No. 301 of 2010 (CIT v. M/s Victor Forgings) and ITA No. 299 of 2010 (CIT v. F.C. Sondhi) wherein after noticing the judgment of 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 January 14, 2011 (AJAY KUMAR MITTAL) gbs JUDGE

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