Commissioner Of Income Tax v. M/S Tipson Cycles Pvt. Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.764 of 2010 Date of decision: 10.1.2011 Commissioner of Income Tax. Vs. M/s Tipson Cycles Pvt. Ltd. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. Rajesh Katoch, Advocatefor the appellant. ---for the appellant. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue underSection 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 year2001-02 proposing to raise following substantial questions of law:- “(i)Whether on the facts and circumstances of the case, theITAT was right in law in not holding that total saleconsideration inclusive of face value of DEPB andpremium amount received thereof represents profitchargeable under sections 28(iiid) and 28(iiie) of theIncome Tax Act, 1961?ITAT was right in law in not holding that total saleconsideration inclusive of face value of DEPB andpremium amount received thereof represents profitchargeable under sections 28(iiid) and 28(iiie) of theIncome Tax Act, 1961? (ii)Whether on the facts and circumstances of the case, theITAT was right in law in not holding that profit on transferof DEPB entitlement represents the entire amountinclusive of premium of sale of such DEPB?ITAT was right in law in not holding that profit on transferof DEPB entitlement represents the entire amountinclusive of premium of sale of such DEPB? (iii)Whether on the facts and circumstances of the case, theITAT was right in law in holding that the word “profit”referred to in Sections 28(iiid) and 28(iiie) of the IncomeTax Act, 1961 means the difference between the sale priceof DEPB and the face value of DEPB ignoring the fact thatthe entire amount represents the profit in the hands ofassessee?ITAT was right in law in holding that the word “profit”referred to in Sections 28(iiid) and 28(iiie) of the IncomeTax Act, 1961 means the difference between the sale priceof DEPB and the face value of DEPB ignoring the fact thatthe entire amount represents the profit in the hands ofassessee? (iv)Whether on the facts and circumstances of the case, theITAT was right in law in deducting the face value of DEPBfrom its sale price for calculating profit under Sections 28(iiid) and 28(iiie) of the Income Tax Act, 1961 as if the facevalue is the cost incurred by the assessee to acquire theDEPB?ITAT was right in law in deducting the face value of DEPBfrom its sale price for calculating profit under Sections 28(iiid) and 28(iiie) of the Income Tax Act, 1961 as if the facevalue is the cost incurred by the assessee to acquire theDEPB? (v)Whether on the facts and circumstances of the case, theITAT was right in law in holding that the word profitreferred to in Sections 28(iiid) and 28(iiie) of the IncomeTax Act, 1961 requires any artificial cost to be interpolatedto the extent that the face value of DEPB/DFRC should bededucted from the sale proceed for the purpose ofdetermination of deduction under Section 80HHC of theIncome Tax Act, 1961? (vi)Whether on the facts and circumstances of the case, theITAT is right in law in not appreciating that deduction u/s80HHC of the Income Tax Act, 1961 was rightly computedin accordance with amendment made by the TaxationLaws (Amendment) Act, 2005 with retrospective effectfrom 01.04.1998?”ITAT is right in law in not appreciating that deduction u/s80HHC of the Income Tax Act, 1961 was rightly computedin accordance with amendment made by the TaxationLaws (Amendment) Act, 2005 with retrospective effectfrom 01.04.1998?” (vi)Whether on the facts and circumstances of the case, theITAT is right in law in not appreciating that deduction u/s80HHC of the Income Tax Act, 1961 was rightly computedin accordance with amendment made by the TaxationLaws (Amendment) Act, 2005 with retrospective effectfrom 01.04.1998?”ITAT is right in law in not appreciating that deduction u/s80HHC of the Income Tax Act, 1961 was rightly computedin accordance with amendment made by the TaxationLaws (Amendment) Act, 2005 with retrospective effectfrom 01.04.1998?” (vii)Whether on the facts and circumstances of the case, theHon’ble Income Tax Appellate Tribunal is justified in law innot holding that 90% amount of DEPB was rightly excludedwhile working “Profits of the Business” as per explanation(baa) to section 80 HHC read with clause (iiid) and (iiie) ofsection28 of the Income Tax Act, 1961 inserted byTaxation Laws (Amendment) Act 2005” Hon’ble Income Tax Appellate Tribunal is justified in law innot holding that 90% amount of DEPB was rightly excludedwhile working “Profits of the Business” as per explanation(baa) to section 80 HHC read with clause (iiid) and (iiie) ofsection28 of the Income Tax Act, 1961 inserted byTaxation Laws (Amendment) Act 2005” (viii)Whether on the facts and circumstances of the case, theHon’ble Income Tax Appellate Tribunal is justified in law inHon’ble Income Tax Appellate Tribunal is justified in law in (ix) (x) not holding that the whole amount of consideration ofDEPB that the assessee received is profit, because of thecost of same is Nil to the assessee?” Whether on the facts and circumstances of the case, theHon’ble Income Tax Appellate Tribunal is justified in law innot holding that 90% of profit on transfer of exportincentives is not to be increased while computing profitsu/s 80HHC(3)(a) as the assessee failed to fulfill theconditions as contained in Third or Fourth proviso insertedby the Taxation Laws (Amendment) Act, 2005 as theexport turnover of the assessee company is more thanRs.10 Crores? The decision of Hon’ble Special Bench of MumbaiTribunal, in the case of M/s Topman Exports 318 ITR 87(Mum) (SB) by relying upon which the Hon’ble ITATChandigarh decided the issue of deduction u/s 80 HHC onDEPB against the Department, has been reversed by theHon’ble Mumbai High Court in the case of CIT VsKalpataru Colours and Chemicals in ITA (Lodg.) No.2887of 2009 dated 28/29 June 2010 holding that it is notpermissible to bifurcate the proceeds of the DEPB into“face value” for section 80 HHC r.w.s. 28(iiid) of theIncome Tax Act. Further held that since the assessee hadan export turnover exceeding Rs.10 crores and did notfulfill the conditions set out in the third proviso to sec.80HC(3), it was not entitled to deduction u/s 80HHC on theamount received on transfer of DEPB.” 2. Learned counsel for the appellant states that the matter iscovered in favour of the revenue by orders of this Court dated16.8.2010 in I.T.A. No.301 of 2010 CIT v. M/s Victor ForgingsandI.T.A. No.299 of 2010CITv. F.C. Sondhi, wherein after noticingthe judgment of the Bombay High Court in CITv. KalpataruColours & Chemicals2010 (42) DTR 193, the matter was remanded to the Tribunal for fresh decision in accordance withlaw. 3. Since we find that the matter is covered by earlierorders of this Court, we dispose of this appeal in same terms.For this purpose, we have not considered it necessary to issuenotice to the respondent, but we give liberty to the respondent tomove this Court if they have any grievance against this order. (ADARSH KUMAR GOEL) JUDGE January 10, 2011ashwani ( AJAY KUMAR MITTAL ) JUDGE