TMI Blog2012 (2) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... to AY 2004-05. 2. In appeal bearing ITA No. 956/Chd/2011, the Department has taken the following grounds: 1 That the ld. CIT(A) has erred in law and on facts in directing the AO for not reducing scrap sales from profit of the assessee-company for the purpose of calculating deduction u/s 80HHC of Income-tax Act, 1961. 2. That the order of ld. CIT(A) be set-aside and that of the AO be restored. 3. That the appellant craves leave to add or amend any ground of appeal before it is finally disposed off. 3. Briefly stated, the facts of the case are that the assessee filed its original return of income on 28.11.2003 returning total income at Rs.35,11,659/-. After processing, the return was selected for scrutiny as a result of which original assessment was completed u/s 143(3) assessing the total income at Rs.1,84,61,300/-. Notice u/s 147/148 was subsequently issued by the AO on 18.3.10 and served upon the assessee on 19.3.10 calling upon the assessee to furnish its return of income. In response, the assessee submitted before the AO that the original return filed earlier may be considered as a return filed in response to notice u/s 147/148. It is stated in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A). 8. We have heard both the parties and carefully considered their submissions. In CIT v. Bicycle Wheels, 335 ITR 388 (P H), the Hon'ble High Court has held that the turnover/sale of scrap is part of total turnover for the purpose of working out the relief u/s 80HHC. In this view of the matter, we hold that the ld. CIT(A) is justified in directing the AO to include the value of scrap sale in total turnover for working out the relief u/s 80HHC. 9. As regards the inclusion of value of scrap sale in the profits of the business for computing the relief u/s 80HHC, the entire value of scrap sales cannot be included in the profits of the business. What can be included in the profits of the business for working out the relief u/s 80HHC is the profit element in respect of sales of scrap and not the total sales of scrap. On the facts of the case, the profit element on sale of scrap is estimated at 7.5%. The AO is directed to include 7.5% of sales of scrap in the profits of the business for working out the relief u/s 80HHC. In this view of the matter, the order of the ld. CIT(A) directing the AO to include the total sales of scrap in the profits of the business is vacated. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an issue which was not subject matter of appeal before the ITAT and therefore no jurisdiction got vested in him. However, in the case under consideration the issue of taxability of DEPB has been before the Hon'ble Tribunal and therefore the jurisdiction to decide the case as per law duly vested in the AO. It is not that the AO proceeded disallow the claim of the assessee on entirely different grounds he has only applied the law as it existed on the date of passing the assessment order. Therefore the claim of the appellant on this issue is without any merit. 9. The A.R has also claimed in his submissions that Hon'ble Punjab Haryana High Court had allowed deduction u/s 80HHC on DEPB in CIT v. F.C. Sondhi. I have perused the order of the Hon'ble High Court which in facts has been quoted by the AO in the assessment order. A plain reading of eh order shows that the Hon'ble Bench was in agreement with the Hon'ble Bombay High Court decision in the case of CIT v. Kalpataru Colours and Chemicals and had accordingly directed the ITAT to pass the order in accordance with law. As such the AO has correctly appreciated the judgment of Hon'ble jurisdictional High Court and computed the ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the question or the profit referred to therein requires any artificial cost to be interpolated is replied in affirmative to the extent that the face value of DEPB shall be deducted from the sale proceeds. As regards the grounds raised in these appeals against the denial of deduction u/s 80HHC in full or part, we find that the computation of profits derived from exports and the resultant amount of deduction under this section can be made only when the decision is taken on the amount and the timing of taxability of the face value of DEPB and the profit on its sale. On this issue we hold that the face value of DEPB is chargeable to tax u/s 28(iiib) at the time of accrual of income, that is, when the application for DEPB is filed with the competent authority pursuant to exports and profit on sale of DEPB representing the excess of sale proceeds of DEPB over its face value is liable to be considered u/s 28(iiid) at the time of its sale. Whatever is said about DEPB shall also hold good for DFRC, on both its components viz. the face value of DFRC and profit on its transfer, except for the fact that the profit on sale of DFRC shall be charged to tax u/s 28(iiie). There is no disput ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
