Section 80HHC deduction on DEPB transfers must follow non-retrospective amendment rules and be recomputed accordingly.

Deduction under section 80HHC on transfer of DEPB had to be recomputed by excluding only the profit on such transfer, because the amendment introduced by the Taxation Laws (Second Amendment) Act, 2005 was treated as not operating retrospectively. The Assessing Officer's computation under the amended regime could not stand in light of binding judicial pronouncements, so the deduction was directed to be reworked under the law applicable to the relevant period.

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Issues: Whether the deduction under section 80HHC was liable to be recomputed by excluding only the profit on transfer of DEPB and whether the amended provisions introduced by the Taxation Laws (Second Amendment) Act, 2005 applied retrospectively.

Analysis: The appeals were confined to the controversy relating to deduction under section 80HHC on transfer of DEPB. The issue was treated as covered by earlier binding judicial decisions holding that the amendment brought in by the Taxation Laws (Second Amendment) Act, 2005 did not operate retrospectively. In view of that legal position, the computation made by the Assessing Officer under the amended regime could not be sustained without reworking the deduction in accordance with the applicable law.

Conclusion: The issue was decided in favour of the assessee. The deduction under section 80HHC was directed to be recomputed by the Assessing Officer in light of the applicable judicial pronouncements.

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