TaxTMI 
TaxTMI 
TaxTMI 
2011 (11) TMI 713
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.... appellant in respect of deduction under section 80HHC on the value of DEPB. 2. That the Ld. CIT(A)-I has erred in following the judgment of the Hon'ble Mumbai High Court in the case 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, 1961 (in short 'the Act'). While disallowing the ded....
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....l 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 the parties, we are in agreement with the view taken by the Bombay High Court and are of the view that the income from DBK, DEPB and DFRC has to be treated as business income and has to be taken into account for deduction under Section 80HHC. The questions proposed are answered accordingly and matter is remanded to th....
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....unal 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 by an exporter on the sale of the DEPB credit would fall within the purview of clause (iiid) of section 28 and not the face value of the DEPB. The entire approach of the Tribunal is with respect misconceived and unsustainable. The Finance Minister sought to introduce clause (iiid) in section 28 in view of the decision of the Delhi Bench of the Tribunal in the case of P & G Enterprises [2005] 93 ITD 138 (Delhi). The dispute in that case related to taxing the entire amount received on the transfer of the DEPB credit and not the amount that was received in excess of the fa....
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.... The Hon'ble Court further held as under : "33. The submission that prior to the insertion of clause (iiid) in section 28, the face value of the DEPB credit realized on the transfer of such credit constituted export profits, but not the amount realized in excess of the face value of the DEPB is similarly without any basis. This is because (i) the object of the DEPB was to furnish an incentive to exporters so as to adjust 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 mat....
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....hat the entire amount received on the transfer of the DEPB credit is business profit, but it was contended that what is included in section 28(iiid) is the amount received on the 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 whatever name called) received by the assessee from the Government pursua....
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....it is to be excluded from the profits eligible for deduction under section 80HHC of the Act. However, the amount received by the assessee on the transfer of DEPB credit is includible as business profit in the hands of the assessee under section 28(iiid) of the Act." 8. Respectfully following the order of the Tribunal (supra), we do not find any merit in the appeals. 9. Vide Ground No.1 of the appeal, the assessee has challenged the action of the CIT(A) as well as that of Assessing Officer in not following the directions of the Tribunal dated 31.8.2009 wherein the Tribunal directed the Assessing Officer to follow the decision of ITAT Mumbai Special Bench in the case of Topman Exports v ITO-14(2) and in ITA No. 5769/Mum/2006 and in the cas....