DEPB receipts tax treatment clarified: only the excess over face value is taxable as transfer profit.

DEPB receipts are to be split into two tax components: the face value is cash assistance linked to exports under section 28(iiib), while only the surplus on sale over that face value is taxable as profit on transfer under section 28(iiid). Applying the Supreme Court's interpretation in Topman Exports, the Tribunal noted that assessment and appellate orders treating the entire sale proceeds as taxable could not stand. The matter was therefore restored for fresh adjudication after giving the assessee an opportunity of hearing, and the impugned orders were set aside.

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Issues: Whether the receipts from sale of DEPB were to be treated wholly as profit on transfer under section 28(iiid) or whether only the excess over the face value was taxable, and whether the matter required fresh consideration in the light of the Supreme Court's ruling in Topman Exports.

Analysis: The Tribunal noted that the later decision of the Supreme Court clarified the legal position that DEPB has two components for tax purposes. The face value of DEPB is cash assistance receivable against exports and falls under section 28(iiib), while only the difference between the sale price and the face value represents profit on transfer under section 28(iiid). Since the lower authorities had treated the entire sale proceeds as taxable profit on transfer, the assessment order and appellate order could not stand on the legal position declared by the Supreme Court. The proper course was to restore the matter to the Assessing Officer for fresh adjudication after giving the assessee an opportunity of hearing.

Conclusion: The impugned orders were set aside and the issues were remanded to the Assessing Officer for de novo decision in accordance with the Supreme Court's interpretation of DEPB receipts.

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