COMMISSIONER OF INCOME TAX-I, LUDHIANA V. M/S TIPSON CYCLES PVT.LTD C-II

ITA/764/2010

AI Insights

The case involves an appeal by the Commissioner of Income Tax against the order of the Income Tax Appellate Tribunal, Chandigarh, concerning the assessment year 2001-02. The primary legal issue revolves around the interpretation of 'profit' in the context of the sale of Duty Entitlement Pass Book (DEPB) and its implications for tax deductions under Section 80HHC of the Income Tax Act, 1961. The Tribunal's decision was challenged on several grounds, including the calculation of profit from DEPB sales and the applicability of certain deductions. The High Court referenced its previous decisions and the judgment of the Bombay High Court in CIT v. Kalpataru Colours & Chemicals, which influenced the outcome.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 719274 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 10-01-2011
• Assessment Year: misc
• Other Referred Cases: CIT v. M/s Victor Forgings, CIT v. F.C. Sondhi, CIT v. Kalpataru Colours & Chemicals
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Assessee Lawyers: RAJESH KATOCH
• Keywords: DEPB; Export Incentives; Income tax appellate tribunal; Profit Calculation; Substantial questions of law
• Section: 80HHC; 260-A; 28 (iiid); 28(iiie)

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.764 of 2010 Date of decision: 10.1.2011 Commissioner of Income Tax. -----Appellant. Vs. M/s Tipson Cycles Pvt. Ltd. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Rajesh Katoch, Advocate for the appellant. --- ADARSH KUMAR GOEL, J. 1. This appeal 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 in I.T.A. No.61/CHD/2010 for the assessment year 2001-02 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 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? I.T.A. No.764 of 2010 (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 its sale price 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 is right in law in not appreciating 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?” (vii) Whether on the facts and circumstances of the case, the Hon’ble Income Tax Appellate Tribunal is justified in law in not holding that 90% amount of DEPB was rightly excluded while working “Profits of the Business” as per explanation (baa) to section 80 HHC read with clause (iiid) and (iiie) of section28 of the Income Tax Act, 1961 inserted by Taxation Laws (Amendment) Act 2005” (viii) Whether on the facts and circumstances of the case, the Hon’ble Income Tax Appellate Tribunal is justified in law in 2 I.T.A. No.764 of 2010 not holding that the whole amount of consideration of DEPB that the assessee received is profit, because of the cost of same is Nil to the assessee?” (ix) Whether on the facts and circumstances of the case, the Hon’ble Income Tax Appellate Tribunal is justified in law in not holding that 90% of profit on transfer of export incentives is not to be increased while computing profits u/s 80HHC(3)(a) as the assessee failed to fulfill the conditions as contained in Third or Fourth proviso inserted by the Taxation Laws (Amendment) Act, 2005 as the export turnover of the assessee company is more than Rs.10 Crores? (x) The decision of Hon’ble Special Bench of Mumbai Tribunal, in the case of M/s Topman Exports 318 ITR 87 (Mum) (SB) by relying upon which the Hon’ble ITAT Chandigarh decided the issue of deduction u/s 80 HHC on DEPB against the Department, has been reversed by the Hon’ble Mumbai High Court in the case of CIT Vs Kalpataru Colours and Chemicals in ITA (Lodg.) No.2887 of 2009 dated 28/29 June 2010 holding that it is not permissible to bifurcate the proceeds of the DEPB into “face value” for section 80 HHC r.w.s. 28(iiid) of the Income Tax Act. Further held that since the assessee had an export turnover exceeding Rs.10 crores and did not fulfill the conditions set out in the third proviso to sec.80HC (3), it was not entitled to deduction u/s 80HHC on the amount received on transfer of DEPB.” 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 I.T.A. No.301 of 2010 CIT v. M/s Victor Forgings and I.T.A. No.299 of 2010 CIT v. F.C. Sondhi, wherein after noticing the judgment of the Bombay High Court in CIT v. Kalpataru Colours & Chemicals 2010 (42) DTR 193, the matter was 3 I.T.A. No.764 of 2010 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 10, 2011 ( AJAY KUMAR MITTAL ) ashwani JUDGE 4 "