CIT-II LUDHIANA V. M/S HIGHWAY CYCLS INDUSTRIES

ITA/542/2010

AI Insights

The case involves multiple appeals by the Commissioner of Income Tax-II against M/s Highway Cycles Industries concerning the interpretation and application of certain provisions under the Income Tax Act, 1961, specifically related to the DEPB (Duty Entitlement Pass Book) scheme. The primary legal questions revolved around the correct computation of profit and the applicability of deductions under Section 80HHC of the Income Tax Act. The Income Tax Appellate Tribunal had previously ruled on these issues, and the revenue sought to challenge this ruling in the High Court. However, the High Court decided to dispose of the appeals by referencing a similar case (CIT v. M/s The Designer), suggesting that the legal questions raised were already addressed in that precedent.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 737965 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 10-12-2010
• Assessment Year: misc
• Other Referred Cases: CIT v. M/s The Designer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Assessee Lawyers: DENESH GOYAL
• Keywords: Deduction; DEPB; Face Value; Premium amount; Profit; Sale price
• Section: 80HHC; 260-A; 28 (iiid); 28(iiie)

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.542 of 2010 & other connected cases being I.T.A. Nos.543, 575, 577, 579, 581, 615 and 622 of 2010 Date of decision: 10.12.2010 Commissioner of Income Tax-II -----Appellant. Vs. M/s Highway Cycles Industries. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present:- Mr. Denesh Goyal, Standing Counsel for the appellant/revenue. --- ADARSH KUMAR GOEL, J. 1. This order will dispose of I.T.A. Nos.542, 543, 575, 577, 579, 581 and 615 of 2010 as common questions of law are involved in all the appeals. 2. I.T.A. No.542 of 2010 has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order of the Income Tax Appellate Tribunal, Chandigarh dated 31.8.2009 in I.T.A. No.124/ CHANDI/2008 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 total sale I.T.A. No.542 of 2010 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? (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 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? (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 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? (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 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 Laws (Amendment) Act, 2005 with retrospective effect from 01.04.1998?” 2 I.T.A. No.542 of 2010 3. Learned counsel for the revenue states that the matter is covered by order of this Court dated 13.9.2010 in ITA No.424 of 2010 (CIT v. M/s The Designer). 4. Accordingly, these appeals are disposed of in same terms. 5. A photocopy of this order be placed on the file of each connected case. (ADARSH KUMAR GOEL) JUDGE December 10, 2010 (RAJESH BINDAL) ashwani JUDGE 3 "