IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN THURSDAY, THE 24TH FEBRUARY 2011 / 5TH PHALGUNA 1932 ITA.No. 265 of 2010() --------------------- AGAINST THE ORDER IN ITA.902/COCH/2007 DATED 05/02/2010 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): APPELLANT ------------------------ M/S.G T N EXPORTS LTD.,ERUMATHALA, ALUVA, PIN - 683 105. ADV. SRI.JOSEPH MARKOSE, SENIOR ADVOCATE FOR R SRI.MATHEWS K.UTHUPPACHAN FOR R SRI.BINU MATHEW FOR R SRI.TERRY V.JAMES FOR R SRI.B.J.JOHN PRAKASH FOR R SRI.TOM THOMAS (KAKKUZHIYIL) FOR R THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 24/02/2011, ALONG WITH ITA NO. 267 OF 2010 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & P.S.GOPINATHAN, JJ. ---------------------------------- I.T.A.Nos.265 & 267 of 2010 --------------------------------- Dated, this the 24th day of February, 2011 J U D G M E N T Ramachandran Nair, J. Heard learned Standing Counsel for the appellant and learned Senior Counsel Shri.Joseph Markose appearing for the respondent assessees. 2. Orders under challenge are remand orders issued by the Tribunal directing the Assessing Officer to recompute deduction under Section 80HHC in the case of the respondent assessees following the decision of Bombay Tribunal in the case of M/s.Topman Exports, reported in 318 ITR (AT) 87. However learned standing counsel appearing for the appellant submitted that the Tribunal committed a fundamental error in as much as they have not considered eligibility of the respondent assessees for deduction under Section 80HHC with respect to the profit on transfer of DEPB benefit. The benefit is extended to exporters through an amendment by Finance Act, 2005 with retrospective effect from ITA Nos.265 & 267/2010 -2- 01/04/1998. The Assessing Officer found that both the respondent assessees are not eligible for the benefit of the proviso introduced through the above amendment and so much so the relief was declined. The assessments were confirmed in first appeals by the CIT (Appeals), and on second appeals filed by the assessees the Tribunal wrongly assumed that the dispute is on computation and therefore they directed the Assessing Officer to compute eligible deduction based on the decision of the Tribunal. 3. In the first place, learned Standing Counsel brought to our notice that the Bombay Tribunal's order relied on by the Cochin Bench is reversed by the Bombay High Court in Commissioner of Income Tax v. Kalpataru Colours & Chemicals, reported in 328 ITR 451. The learned counsel appearing for the assessees submitted that SLP is pending against the said judgment. We do not think there is any need for us to consider whether we approve the decision of the Bombay High Court or not because in this case the issue is not on computation, but on the eligibility of the respondents, which the Assessing Officer found against them. Since the Tribunal has not considered the issue at all, we allow these ITA Nos.265 & 267/2010 -3- appeals by setting aside the orders of the Tribunal only on this issue and by restoring the matters to the Tribunal with specific direction to them to consider the eligibility of the respondent assessees for benefits under the proviso introduced, and if the respondent assessees are found eligible then only to consider the question of computation of the relief by considering the judgment of the Bombay High Court. One another question raised in ITA No.267/2010 pertains to the expenditure on issue of bonus shares. This issue stands decided against the Revenue in the decision in CIT v. General Insurance Corporation, reported in 286 ITR 232 (SC). Following the above judgment of the Supreme Court, we dismiss the appeal on this issue. (C.N.RAMACHANDRAN NAIR, JUDGE) (P.S.GOPINATHAN, JUDGE) jg