9911796707
Advanced Search 
TMI Blog2012 (5) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... n 28(iiid) of the Act. In Topman Exports v. CIT [2012] 205 Taxman 119/18 taxmann.com 120 (SC) Hon'ble the Supreme Court has, however, held that the entire amount received by the assessee less the face value of the DEPB would represent profit on transfer of DEPB by the assessee. The view taken by Bombay High Court stands overruled and the judgment of Bombay High Court in CIT v. Topman Exports [IT Appeal No. (L) 3019 of 2009, dated 29.6.2010], has been reversed. It also follows that the view of this Court in CIT v. F.C. Sondhi & Co. (P) Ltd. [2011] 203 Taxman 99/16 taxmann.com 167 and in any other connected matter would no longer holds the field and are deemed to be overruled since the view of this Court is based on the judgment of Bombay High Court in the case of Kalpataru Colours & Chemicals (supra). 2. The facts are being referred from ITA No. 361 of 2011 wherein the common order, dated 30.6.2011, passed by the Chandigarh Bench of the Tribunal is subject matter of challenge. On 27.10.2004, the appellant M/s Turbo Impex filed its return for the Assessment Year 2004-05, declaring the income at Rs. 1,72,90,748/-. It was processed under Section 143(1) and selected for scrutiny. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the sale proceeds over the face value is liable to be considered under Section 28(iiid) at the time of sale? 5. In its judgment, on the first question of law formulated under (a), the Bombay High Court held that the Tribunal was not justified when it held that the entire amount received on the sale of the DEPB did not represent profits chargeable under Section 28(iiid) of the Act and that the face value of the DEPB shall be deducted from the sale proceeds of the DEPB. On the second question of law formulated under (b), the Bombay High Court in its judgment did not agree with the Tribunal that the face value of DEPB is to tax under Section 28(iiib) at the time of accrual of income of the Assessee. The High Court, thus, held that the entire sale consideration for transfer of DEPB would fall within the purview of Section 28(iiid) of the Act. In some of the cases, review petitions were filed before the Bombay High Court, but the same were dismissed. 6. Agreeing with the view taken by the Bombay High Court, the Division Bench of this Court answered the questions holding that the entire income from DBK, DEPB and DFRC has to be treated as business income and has to be taken into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s at length and perusing the paper books with their able assistance, we are of the considered view that the matter is no longer res integra as the same has been finally settled by Hon'ble the Supreme Court in a recent judgment rendered in the case of Topman Exports (supra). 10. It would be profitable to first notice a few facts of the case of Topman Exports (supra). Topman Exports-assessee was a manufacturer and exporter of fabrics and garments. During the previous year relevant to Assessment Year 2002-03 it sold DEPB and DFRC (Duty Free Replenishment Certificate), which had accrued on export of its products. The assessee filed a return for Assessment Year 2002-03 claiming a deduction of Rs. 83,69,303/- under section 80HHC of the Act. The Assessing Officer held that if the profit on transfer of the export incentives was deducted from the profits of the assessee, the figure would be a loss and there would be no positive income of the assessee from its export business and the assessee would not be entitled to any deduction under Section 80HHC of the Act. Aggrieved, the assessee filed an appeal before CIT (Appeals) contending that the profits on the transfer of DEPB and DFRC were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led appeals in all the cases before the Bombay High Court, which disposed of the appeals in terms of the judgment rendered in the case of Kalpataru Colours & Chemicals (supra). The judgment rendered by the Bombay High Court was subject matter of challenge before Hon'ble the Supreme Court. Affirming the reasoning of the Tribunal and allowing the appeals of the assessee, their Lordships' of Hon'ble the Supreme Court overruled the judgment of Bombay High Court rendered in the case of Kalpataru Colours & Chemicals (supra). After noticing paras 4.37 and 4.42 of the Handbook on DEPB issued by the Government of India and paras 7.14, 7.15, 716 and 7.38 of the Export and Import Policy, 1997-2002, as notified by the Central Government vide notification dated 31.3.2000, in para 17 of the judgment it has been observed as under: "17. ..........the objective of DEPB scheme is to neutralize the incidence of customs duty on the import content of the export products. Hence, it has direct nexus with the cost of the imports made by an exporter for manufacturing the export products. The neutralization of the cost of customs duty under the DEPB scheme, however, is by granting a duty credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DEPB would fall under Clause (iiid) of Section 28 of the Act. It has been specifically observed by their Lordships' that the Bombay High Court was not right in taking the view that the entire sale proceeds of the DEPB realised on transfer of the DEPB and not just the difference between the sale value and the face value of the DEPB represent profit on transfer of the DEPB. In paras 24 and 25 of the judgment, Hon'ble the Supreme Court found following errors in the view taken by the Bombay High Court: "24. In taking the view that when the import license is sold the entire amount is treated as profits of business, the High Court has visualized a situation where the cost of acquiring the import license is nil. The cost of acquiring DEPB, on the other hand, is not nil because the person acquires it by paying customs duty on the import content of the export product and the DEPB which accrues to a person against exports has a cost element in it. Accordingly, when DEPB is sold by a person, his profit on transfer of DEPB would be the sale value of the DEPB less the face value of DEPB which represents the cost of the DEPB. The second reason given by the High Court in the impugned ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the business" under Explanation (baa) to Section 80HHC of the Act and there is nothing in Explanation (baa) to Section 80HHC to show that this benefit of exclusion of a smaller figure from "profits of the business" will not be available to an Assessee having an export turnover exceeding Rs. 10 crores. In other words, where the export turnover of an Assessee exceeds Rs. 10 crores, he does not get the benefit of addition of ninety per cent of export incentive under Clause (iiid) of Section 28 to his export profits, but he gets a higher figure of profits of the business, which ultimately results in computation of a bigger export profit. 38. The High Court, therefore, was not right in coming to the conclusion that as the assessee did not have the export turnover exceeding Rs. 10 crores and as the assessee did not fulfil the conditions set out in the third proviso to Section 80HHC (iii), the assessee was not entitled to a deduction under Section 80HHC on the amount received on transfer of DEPB and with a view to get over this difficulty the assessee was contending that the profits on transfer of DEPB under Section 28(iiid) would not include the face value of the DEPB. 39. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
