NAV BHARAT ENGINEERING INDUSTRIES P LTD,MUMBAI vs. DCIT 7(1), MUMBAI

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ITA 2427/MUM/2015Status: DisposedITAT Mumbai12 July 2016AY 2004-052 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the face value of DEPB benefits is eligible for deduction under Section 80HHC, as it is considered profits and gains of business under Section 28(iiib) and covered by Explanation (baa) to Section 80HHC.

What were the facts?

The assessee claimed deduction under Section 80HHC on DEPB benefits. The Assessing Officer and CIT(A) rejected this claim, stating deduction is only on profit from transfer of DEPB license, not its face value.

What were the issues?

Whether the face value of DEPB benefits is eligible for deduction under Section 80HHC of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 28(iiib),Section 28(iiid)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai

Before: Shri B.R. Baskaran (AM)

For Appellant: Shri Rahul Hakani
For Respondent: Shri Ajay
Hearing: 12.7.2016Pronounced: 12.7.2016

The appeal filed by the assessee is directed against the order dated 23.3.2015 passed by learned CIT(A)-13, Mumbai and it relates to A.Y. 2004-05

2.

The assessee is aggrieved by the decision of learned CIT(A) in confirming the rejection of claim for deduction u/s. 80HHC of the Act on DEPB benefits.

3.

I heard the parties and perused the record. The Assessing Officer noticed that the assessee has made a provision for income of ` 10,49,758/- relating to DEPB license benefits receivable by it. The assessee also claimed deduction u/s. 80HHC of the Act on the above said receivables. The Assessing Officer took the view that deduction u/s. 80HHC shall be allowable only on the profit received on transfer of DEPB license and not on the value of DEPB. Accordingly, he denied deduction u/s. 80HHC in respect of DEPB amount of ` 10,49,758/- accounted for by the assessee. Learned CIT(A) also confirmed the same and hence the assessee has filed the appeal before the Tribunal.

2 M/s. Nav Bharat Engineering Industries P. Ltd.

4.

Learned counsel appearing for the assessee submitted that the face value of DEPB is assessable as profits and gains of business u/s. 28(iiib) of the Act and the profit arising on sale of DEPB license is assessable u/s. 28(iiid) of the Act. He further submitted that both the above said incomes are covered by Explanation (baa) to section 80HHC of the Act. He submitted that this legal position has been explained by Hon'ble Supreme Court in the case of Topman Exports (2012) 342 ITR 49. Accordingly, learned AR submitted that the tax authorities are not correct in law in holding that the face value of DEPB benefits is not eligible for deduction u/s. 80HHC of the Act.

5.

I heard the learned Departmental Representative and perused the record. Having gone through the order passed by Hon'ble Supreme Court in the case of Topman Exports (supra) and the provisions of section 80HHC and section 28 of the Act, I am of the view that there is merit in the contentions of assessee. Accordingly I set aside the order passed by learned CIT(A) and direct the Assessing Officer to allow deduction u/s. 80HHC of the Act on the face value of the DEPB benefits provided for by the assessee.

6.

In the result, appeal filed by the assessee is allowed. Order has been pronounced in the Court on 12.7.2016

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