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M/s R.N. Gupta & Co Ltd. Versus ACIT

2011 (11) TMI 713 - ITAT CHANDIGARH

Computation of deduction u/s 80HHC on account of income by way of Duty Entitlement Pass Book (DEPB) - See M/s Fitex Industries And Ors. Versus ACIT [2011 (6) TMI 844 - ITAT CHANDIGARH] - Decided in favour of assessee. - ITA Nos. 926 to 928/Chd/2011 - Dated:- 21-11-2011 - SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER For the Petitioner : None For the Respondent : Smt. Jyoti Kumari ORDER PER H.L.KARWA, VP These three appeals filed by the assessee involving .....

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of Kalpataru Colours and Chemicals ignoring the specific directions of the Hon'ble Tribunal for deciding the issue on the basis of Special Bench Judgment in the case of M/s Topman Exports v ITO. 3. Briefly stated, the facts of the case are that the assessee is engaged in the business of manufacturing of steel forgings rigs and accessories. While framing the assessments for the year under consideration, the Assessing Officer disallowed the deduction claimed u/s 80HHC of the Income Tax Act, 1 .....

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f CIT(A) before the Tribunal. 5. We have heard Smt. Jyoti Kumari, Ld. DR at length and have also perused the materials available on record. 6. The issue arising in these appeals relates to computation of deduction u/s 80HHC of the Income Tax Act on account of income by way of Duty Entitlement Pass Book (DEPB). The issue was decided by the Chandigarh Bench of the Tribunal vide order dated 31.8.2009 following the decision of a Special Bench of Mumbai Tribunal in M/s Topman Exports v ITO (2009) 29 .....

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wable on such receipts u/s 80HHC observed after hearing the rival contentions of the parties that the view taken by Mumbai Bench in the case of M/s Topman Exports v ITO (supra) and M/s Kalpataru Chemicals v ACIT (ITA No. 5769/Mum/2006 and 5851/Mum/2006 order dated 11.8.2009, has been reversed by the Hon'ble Bombay High Court in CIT v Kalapataru Colour & Chemical (2010) 328 ITR 451 (Bom). The Hon'ble Punjab & Haryana High Court held as under:- 6. After hearing learned counsel for .....

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arh Bench of the Tribunal in the case of M/s Fitex Industries v ACIT-V, Ludhiana & Others in ITA No. 956/Chad/2006 relating to assessment years 2003-04 and others. The Tribunal vide its order dated 30.6.2011 after keeping in view of the observations and the directions of the Hon'ble High Court in the case of CIT Vs F.C.Sondhi and Co P.Ltd (2011) (2011) 334 ITR 141 (P&H) and following the ratio laid down by the Hon'ble Bombay High Court in the case of CIT v Kalapatru Colours and C .....

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h made by the Finance Minister while introducing the said amendment in 2005 and had also considered the reasons for the introduction of clause (iiid) in section 28 of the Act in view of the decision of Delhi Bench of the Tribunal in the case of P& G Enterprises (93 ITD 138) (Del) and had observed as under : 32. The Tribunal has relied to a considerable extent on a speech made by the then Finance Minister on the floor of Parliament in support of its conclusion that only the premium realized b .....

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fer of the DEPB credit and not the amount that was received in excess of the face value of the DEPB credit. As a matter of fact in that case the assessee had claimed that the entire receipt on the transfer of the DEPB credit including the face value of the credit as profits under section 28(iiia). The Tribunal in that case held that the entirety of the amount would be covered by section 28(iv). However, the view of the Tribunal was that since Explanation (baa) in section 80HHC did not envisage t .....

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dit which was sought to be included in section 28(iv) was brought in by Parliamentary amendment in the form of an insertion of clause (iiid) in section 28 with retrospective effect. There was no controversy regarding the taxability of the quantum of receipts on the transfer of the DEPB credit. Hence, for these reasons we are of the view that it cannot be inferred from the speech of the Finance Minister that the insertion of clause (iiid) in section 28 was made with a view to tax only the amount .....

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st the credit against the customs duty payable on any goods imported into India. However, where an exporter instead of utilizing the credit transfers the credit at a premium, it cannot be said that the exporter has utilized the credit ; (ii) the Legislature considers that the customs duty and excise duty paid on raw materials used in the export product, when repaid or repayable as duty drawback, would not constitute export profit. Similarly, when the DEPB credit is not utilized in the business b .....

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ld be excluded while computing the deduction under section 80HHC ; (iii) Parliament considered that an exporter who instead of utilizing the DEPB credit for paying customs duty on imported goods, makes a profit by transferring the DEPB, would form a separate class and seeks to tax the receipts on the transfer of the DEPB credit as business profits and not export profits. Exporters who transfer the DEPB credit and make a profit cannot be placed on par with those exporters who utilize the credit f .....

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transfer of the DEPB credit in excess of the face value of the DEPB and the amount received to the extent of the face value of the DEPB would be covered under section 28(iiib). There is no merit in this contention because (a) the DEPB credit was not in existence when section 28(iiib) was inserted by the Finance Act of 1990. DEPB credit was introduced with effect from April 1, 1997 which was after the insertion of clause (iiib) in section 28 ; (b) section 28(iiib) refers to cash assistance (by wh .....

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amount received in excess of the face value of the DEPB. 47. Respectfully following the abovesaid ratio laid down by the Hon'ble Bombay High Court in Kalaptaru Colours & Chemicals(supra) we find no merit in the stand of the assessee that DEPB credit has a face value and while determining the profits eligible for deduction under section 80HHC of the Act, only the profits arising on the transfer of DEPB credit are to be excluded. As observed by us in para 42 above the DEPB credit being an .....

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