TMI Blog2015 (6) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, DEPB is chargeable to income tax under the head 'Profits and Gains of Business or Profession' even before it is transferred by the taxpayer. Under Section 28(iiid) of the Act, any profit on transfer of DEPB is chargeable to income tax under the head 'Profits and Gains of Business or Profession' as an item separate from cash assistance under Section 28(iiib) of the Act. The face value of the DEPB will fall under Section 28(iiib) of the Act, the difference between the sale value and the face value of the DEPB will fall under Section 28(iiid) of the Act. The cost of acquiring DEPB 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, we direct the Assessing Officer to make assessment a fresh on this issue in view of the law laid down by Hon'ble Bombay High Court in the case of Vijaya Silk House (2012 (9) TMI 263 - BOMBAY HIGH COURT ) and further, if need be, as per the law laid down by Hon'ble Supreme Court in the case of Topman Exports (2012 (2) TMI 100 - SUPREME COURT OF INDIA ). - Decided in favour of assessee for statistical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) was claimed. The assessment was completed under section 143(3) of the Act on 18/9/2006 assessing total income at ₹ 5,95,91,520/-. The AO in the said assessment order had allowed deduction under section 80HHC at ₹ 86,78,486/- and deduction under section 80 IB at ₹ 2,11,10,855/-. The AO thereafter observed that while calculating deduction allowable under section 80HHC the total adjusted turnover was taken at ₹ 31,54,41,033/-. However, while doing so, turnover of 80IB unit was not included in the total turnover over. Thus, the assessment had resulted into under assessment to the extent of ₹ 18,53,039/-. The AO also observed that while calculating profits eligible for claim of deduction under section 80IB, the assessee had included DEPB of ₹ 92,62,828/-. Since DEPB was not a profit derived from industrial undertaking, therefore, the same was not eligible for deduction under section 80IB of the Act. He, therefore, relying upon the decision of Hon'ble Supreme Court in the case of Sterling Foods, 237 ITR 579(SC) reopened the assessment under section 147 of the Act. The assessee objected to the reopening of the assessment and also contested the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the income of the assessee had escaped assessment. He also upheld the findings/computation made by the AO with regard to section 80HHC and 80IB of the Act. He however, noticed that there were certain calculation mistake while computing the income which he directed the AO to rectify. Aggrieved by the order of Ld. CIT(A) the assessee has come in appeal before us. Ground No.1 2. 4. Vide ground No.1 2 the assessee has agitated the reopening of the assessment under section 147 of the Act. Ld. AR of the assessee drew our attention to paper book page -37, which is the copy of reasons recorded by the AO on the basis of which the AO formed the belief that the income of the assessee had escaped assessment during the assessment proceedings under section 143(3) of the Act. The first reason mentioned by the AO is that while calculating deduction allowable under section 80HHC the turnover of 80IB unit was not included which resulted into under assessment of income. The assessee has contended that it was maintaining separate accounts of both the units and the turnover of 80IB unit was not to be included in the total turnover. We find that as per the provisions of section 80HHC the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e no deduction is available u/s 80-I, 80-IA and 80- IB. This issue is accordingly decided against the assessee. So far the deduction u/s 80HHC in relation to receipts of DEPB is concerned, We may note here that certain amendments have been made in section 28 80HHC of the Income Tax Act vide Taxation Laws Amendment Act, 2005, according to which, the assessee whose total export turnover exceeds ₹ 10 crores, is not entitled for the deduction u/s.80-HHC on the receipt of DEPB licence premium unless he fulfills the following two conditions :- (a) he had an option to choose either the duty drawback or the duty entitlement pass book scheme, being the duty remission scheme; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the duty entitlement pass book scheme being the duty remission scheme. 5.2 The said amended provisions have been made operative retrospectively w.e.f. 1.4.1998. The Assessing Officer observed that in view of the amended provisions, the assessee was not entitled for deduction u/s. 80HHC on the receipt of DEPB incentives as the assessee did not furnish the relevant details in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash assistance' receivable by a person against exports under the scheme of the Government of India and falls under Section 28(iiib) of the Act. Accordingly, DEPB is chargeable to income tax under the head 'Profits and Gains of Business or Profession' even before it is transferred by the taxpayer. Under Section 28(iiid) of the Act, any profit on transfer of DEPB is chargeable to income tax under the head 'Profits and Gains of Business or Profession' as an item separate from cash assistance under Section 28(iiib) of the Act. The face value of the DEPB will fall under Section 28(iiib) of the Act, the difference between the sale value and the face value of the DEPB will fall under Section 28(iiid) of the Act. The cost of acquiring DEPB 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, we direct the Assessing Officer to make assessment a fresh on this issue in view of the law laid down by Hon'ble Bombay High Court in the case of Vijaya Silk House (Bangalore) (supra) and further, if need be, as per the law laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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