Commissioner Of Income-Tax v. M/S F.c. Sondhi & Company (P) Ltd

ITA No. 299 of 2010 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Commissioner of Income-tax Versus M/s F.C. Sondhi & Company (P) Ltd. ITA No. 299 of 2010 Date of Decision: 16.8.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Vivek Sethi, Advocate for the appellant. Mr. Pankaj Jain, Advocate for the respondent. ADARSH KUMAR GOEL, J. 1.The revenue has preferred this appeal under Section 260Aof the Income Tax Act, 1961 (in short “the Act”) against order dated23.9.2009 of the Income Tax Appellate Tribunal, Amritsar Bench(hereinafter referred to as “the ITAT”) passed in ITA No. 124(ASR)/2009for the assessment year 2003-04, proposing to raise the followingsubstantial questions of law:- “I.Whether on the facts and circumstances of thecase the ITAT was right in law in not holdingthat the total sale consideration inclusive offace value of DEPB and premium amountreceived thereof represents profit chargeablecase the ITAT was right in law in not holdingthat the total sale consideration inclusive offace value of DEPB and premium amountreceived thereof represents profit chargeable II. III. IV. V. under sections 28(iiid) and 28(iiie) of theIncome Tax Act, 1961? Whether on the facts and circumstances of thecase the ITAT was right in law in not holdingthat profit on transfer of DEPB entitlementrepresents the entire amount inclusive ofpremium of sale of such DEPB? Whether on the facts and circumstances of thecase the ITAT was right in law in holding thatthe word “profit” referred to in section 28(iiid)and 28(iiie) of Income Tax Act, 1961 meansthe difference between the sale price of DEPBand the face value of DEPB ignoring the factthat the entire amount represents the profit inthe hands of assessee? Whether on the facts and circumstances of thecase the ITAT was right in law in deducting theface value of DEPB from sale price of DEPBfor calculating profit under section 28(iiid) and28(iiie) of Income Tax Act, 1961 as if the facevalue is the cost incurred by the assessee toacquire the DEPB? Whether on the facts and circumstances of thecase the ITAT was right in law in holding thatthe word profit referred to in sections 28(iiid)and 28(iiie) of the Income Tax Act, 1961 requires any artificial cost to be interpolated tothe extent that the face value of DEPB/DFRCshould be deducted from the sale proceed forthe purpose of determination of deductionunder section 80HHC of the Income Tax Act,1961?” 2.The assessee is an exporter and while claiming deductionunder Section 80HHC of the Act, the assessee did not include the entireincome from Duty Draw Back (DBK), Duty Entitlement Pass Book(DEPB) and Duty Free Remission Scheme (DFRC) which was businessincome under Sections 28(iiid) and 28(iiie). The Assessing Officermade calculation after treating the said amount as business income.On appeal, the said view was upheld but on further appeal to the ITAT,following the judgment of the Special Bench, Income Tax AppellateTribunal, Mumbai, the view of the assessee was upheld. 3.We have heard learned counsel for the parties. 4.Learned counsel for the appellant states that the view takenby the Income Tax Appellate Tribunal, Mumbai was reversed by theBombay High Court in Commissioner of Income Tax v. KalpataruColours and Chemicals, (2010) 42 DTR (Bom) 193. 5.Learned counsel for the assessee does not dispute the factthat the view taken by the Income Tax Appellate Tribunal, Mumbaiwhich has been followed by the ITAT in the present case has sincebeen reversed by the Bombay High Court. 6.After hearing learned counsel for the parties, we are inagreement with the view taken by the Bombay High Court and are of ITA No. 299 of 2010 3.We have heard learned counsel for the parties. 4.Learned counsel for the appellant states that the view takenby the Income Tax Appellate Tribunal, Mumbai was reversed by theBombay High Court in Commissioner of Income Tax v. KalpataruColours and Chemicals, (2010) 42 DTR (Bom) 193. 5.Learned counsel for the assessee does not dispute the factthat the view taken by the Income Tax Appellate Tribunal, Mumbaiwhich has been followed by the ITAT in the present case has sincebeen reversed by the Bombay High Court. 6.After hearing learned counsel for the parties, we are inagreement with the view taken by the Bombay High Court and are of ITA No. 299 of 2010 the view that the income from DBK, DEPB and DFRC has to be treatedas business income and has to be taken into account for deductionunder Section 80HHC. The questions proposed are answeredaccordingly and matter is remanded to the ITAT for fresh decision inaccordance with law. 7.Parties may appear before the Tribunal for further proceedings on December 20, 2010. (ADARSH KUMAR GOEL) JUDGE August 16, 2010gbs (AJAY KUMAR MITTAL)JUDGE