M/s Eastman International, Ludhiana V. ACIT, Ludhiana

ITA 1161/CHANDI/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7794 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 05-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Section: 80HHC; 6; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1161/CHD/2011 ASSESSMENT YEAR: 2001-02 M/S EASTMAN INTERNATIONAL, V THE ACIT, CIRCLE-1, B-XXX-2185/C-203/1, LUDHIANA. PHASE-VII, FOCAL POINT, LUDHIANA. PAN: AAAFE-3449D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SMT.JYOTI KUMARI DATE OF HEARING : 21.03.2012 DATE OF PRONOUNCEMENT : 19.04.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 22.09.2011 PASSED BY THE LD . CIT(A) LUDHIANA U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE ACT') RELATING TO ASSESSMENT YEAR 2001-02. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME-TAX ACT,1961 IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH THE LD. CIT(A)-I LUDHIANA HAS ERRED IN FOLLOWING THE DIRECTIONS OF THE HON'BLE TRIBUNAL AN D HAS THUS, EXCEEDED HIS JURISDICTION IN REJECTING TH E CLAIM OF THE APPELLANT IN RESPECT OF DEDUCTION U/S 80HHC ON THE VALUE OF DEPB. 2 2. THAT THE LD. CIT(A) HAS GRAVELY ERRED IN FOLLOWI NG THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V KALPATARU COLOURS AND CHEMICALS IGNORING THE SPECIFIC DIRECTIONS OF 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. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI LED ITS RETURN ON 31.10.2001, DECLARING NET INCOME AT RS.2,70,77,225/-. SUBSEQUENTLY, THE CASE WAS SCRUTI NIZED AND ASSESSMENT ORDER WAS PASSED DETERMINING TOTAL INCOM E AT RS.2,80,10,754/-. THE ASSESSEE HAD CLAIMED DEDUCTIO N U/S 80HHC OF THE INCOME-TAX ACT,1961. THE AO DISALLOWED THE DEDUCTION CLAIM U/S 80HHC AND HELD THAT THE PROFIT ON TRANSFER OF DEPB RECEIVED BY THE ASSESSEE IS COVERE D UNDER CLAUSE (IIID) OF SECTION 28 OF THE INCOME-TAX ACT. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A), LUDHIANA, WHO DISMISS ED THE APPEAL OF THE ASSESSEE. THE ASSESSEE FURTHER FILED APPEAL BEFORE THIS TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 31.8.2009 IN ITA NO. 124/CHD/2009 RESTORED THE ISSUE TO THE F ILE OF THE AO. 4. LD. 'AR' CONTENDED THAT THE ISSUE IS COVERED AGA INST THE REVENUE BY THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF M/S TOPMAN EXPORTS V CIT IN CIVIL APPEALNO. 199 OF 2012 AND OTHERS, VIDE JUDGEMENT DATED 8.2.2012. 5. LD. 'DR' FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE CIT(A). 3 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE FIND THAT THE PRESENT ISSUE OF COMPUTAT ION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT ON ACCOUNT OF DEPB/DFRC HAS BEEN CONSIDERED AT LENGTH BY THE HON' BLE SUPREME COURT IN M/S TOPMAN EXPORTS VS. CIT (SUPRA) . THE HON'BLE APEX COURT IN VIEW OF THE PROVISIONS OF SECTION 28(IIIB) AND 28(IIID) OF THE ACT OBSERVED A S UNDER: 12. IT WILL BE CLEAR FROM THE AFORESAID PROVISIONS OF SECTION 28 THAT UNDER CLAUSE (IIIB) CASH ASSISTANCE (BY WHATEVER NAME CALLED) RECEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVERNMENT OF INDIA IS BY ITSELF INCOME CHARGEABLE TO INCOME TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. DEPB IS A KIND OF ASSISTAN CE GIVEN BY THE GOVERNMENT OF INDIA TO AN EXPORTER TO PAY CUSTOMS DUTY ON ITS IMPORTS AND IT IS RECEIVABLE ON CE EXPORTS ARE MADE AND AN APPLICATION IS MADE BY THE EXPORTER FOR DEPB. WE HAVE, THEREFORE, NO DOUBT THA T DEPB IS 'CASH ASSISTANCE' RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER THE SCHEME OF THE GOVERNMENT OF INDIA AND FALLS UNDER CLAUSE (IIIB) OF SECTION 28 A ND IS CHARGEABLE TO INCOME TAX UNDER THE HEAD 'PROFITS AN D GAINS OF BUSINESS OR PROFESSION' EVEN BEFORE IT IS TRANSFERRED BY THE ASSESSEE. 13. UNDER CLAUSE (IIID) OF SECTION 28, ANY PROFIT ON TRANSFER OF DEPB IS CHARGEABLE TO INCOME TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AS AN ITEM SEPARATE FROM CASH ASSISTANCE UNDER CLAUSE (IIIB). THE WORD 'PROFIT' MEANS THE GROSS PROCEEDS OF A BUSINESS TRANSACTION LESS THE COSTS OF THE TRANSACT ION. TO QUOTE FROM BLACK'S LAW DICTIONARY (FIFTH EDITION ): ' PROFIT . MOST COMMONLY, THE GROSS PROCEEDS OF A BUSINESS TRANSACTION LESS THE COSTS OF THE TRANSACT ION, I.E. NET PROCEEDS. EXCESS OF REVENUES OVER EXPENSES FOR A TRANSACTION; SOMETIMES USED SYNONYMOUSLY WITH NET INCOME FOR THE PERIOD. GAIN REALIZED FROM BUSINESS OR INVESTMENT OVER AND ABOVE EXPENDITURES.' THIS COURT IN E.D. SASSOON & COMPANY LTD. AND OTHER S V. COMMISSIONER OF INCOME-TAX, BOMBAY CITY [1954] 26 ITR 27 (SC) HAS QUOTED THE FOLLOWING OBSERVATION S OF LORD JUSTICE FLETCHER MOULTON IN THE SPANISH PROSPECTING COMPANY LIMITED [1911] I CH. 92 ON THE MEANING OF THE WORD 'PROFITS': '. 'PROFITS' IMPLIES A COMPARISON BETWEEN THE STAT E OF A BUSINESS AT TWO SPECIFIC DATES USUALLY SEPARATED BY AN 4 INTERVAL OF A YEAR. THE FUNDAMENTAL MEANING IS THE AMOUNT OF GAIN MADE BY THE BUSINESS DURING THE YEAR . THIS CAN ONLY BE ASCERTAINED BY A COMPARISON OF THE ASSETS OF THE BUSINESS AT THE TWO DATES.' 'PROFITS', THEREFORE, IMPLY A COMPARISON OF THE VAL UE OF AN ASSET WHEN THE ASSET IS ACQUIRED WITH THE VALUE OF THE ASSET WHEN THE ASSET IS TRANSFERRED AND THE DIFFERENCE BETWEEN THE TWO VALUES IS THE AMOUNT OF PROFIT OR GAIN MADE BY A PERSON. AS DEPB HAS DIRECT NEXUS WITH THE COST OF IMPORTS FOR MANUFACTURING AN EXPORT PRODUCT, ANY AMOUNT REALIZED BY THE ASSESSEE S OVER AND ABOVE THE DEPB ON TRANSFER OF THE DEPB WOULD REPRESENT PROFIT ON THE TRANSFER OF DEPB. 7. THE HON'BLE COURT THUS HELD AS UNDER: 14. WE ARE, THUS, OF THE CONSIDERED OPINION THAT WHILE THE FACE VALUE OF THE DEPB WILL FALL UNDER CLAUSE ( IIIB) OF SECTION 28 OF THE ACT, THE DIFFERENCE BETWEEN TH E SALE VALUE AND THE FACE VALUE OF THE DEPB WILL FALL UNDE R CLAUSE (IIID) OF SECTION 28 OF THE ACT AND THE HIGH COURT WAS NOT RIGHT IN TAKING THE VIEW IN THE IMPUG NED JUDGMENT THAT THE ENTIRE SALE PROCEEDS OF THE DEPB REALIZED ON TRANSFER OF THE DEPB AND NOT JUST THE DIFFERENCE BETWEEN THE SALE VALUE AND THE FACE VALU E OF THE DEPB REPRESENT PROFIT ON TRANSFER OF THE DEPB. 15. WE MAY NOW POINT OUT THE ERRORS IN THE IMPUGNED JUDGMENT OF THE HIGH COURT. THE FIRST REASON GIVEN BY THE HIGH COURT IS THAT CLAUSE (IIIA) OF SECTION 28 TREATS PROFITS ON THE SALE OF AN IMPORT LICENSE AS INCOME CHARGEABLE TO TAX AND WHEN THE LICENSE IS SOLD, THE ENTIRE AMOUNT IS TREATED AS PROFITS OF BUSINESS UND ER CLAUSE (IIIA) OF SECTION 28 AND THUS THERE IS NO JUSTIFICATION TO TREAT THE AMOUNT WHICH IS RECEIVED BY AN EXPORTER ON THE TRANSFER OF THE DEPB ANY DIFFERE NTLY THAN THE PROFITS WHICH ARE MADE ON THE SALE OF AN IMPORT LICENSE UNDER CLAUSE (IIIA) OF SECTION 28 OF THE ACT. IN TAKING THE VIEW THAT WHEN THE IMPORT LICENS E IS SOLD THE ENTIRE AMOUNT IS TREATED AS PROFITS OF BUS INESS, THE HIGH COURT HAS VISUALIZED A SITUATION WHERE THE COST OF ACQUIRING THE IMPORT LICENSE IS NIL. THE CO ST OF ACQUIRING DEPB, ON THE OTHER HAND, IS NOT NIL BECAU SE THE PERSON ACQUIRES IT BY PAYING CUSTOMS DUTY ON TH E IMPORT CONTENT OF THE EXPORT PRODUCT AND THE DEPB WHICH ACCRUES TO A PERSON AGAINST EXPORTS HAS A COS T ELEMENT IN IT. ACCORDINGLY, WHEN DEPB IS SOLD BY A PERSON, HIS PROFIT ON TRANSFER OF DEPB WOULD BE THE SALE VALUE OF THE DEPB LESS THE FACE VALUE OF DEPB WHICH REPRESENTS THE COST OF THE DEPB. THE SECOND REASON GIVEN BY THE HIGH COURT IN THE IMPUGNED JUDGMENT IS THAT UNDER THE DEPB SCHEME, DEPB IS GIVEN AT A PERCENTAGE OF THE FOB VALUE OF THE EXPOR TS SO AS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY O N THE IMPORT CONTENT OF THE EXPORT PRODUCTS, BUT THE EXPO RTER 5 MAY NOT HIMSELF UTILIZE THE DEPB FOR PAYING CUSTOMS DUTY BUT MAY TRANSFER IT TO SOMEONE ELSE AND THEREF ORE THE ENTIRE SUM RECEIVED ON TRANSFER OF DEPB WOULD B E COVERED UNDER CLAUSE (IIID) OF SECTION 28. THE HIGH COURT HAS FAILED TO APPRECIATE THAT DEPB REPRESENTS PART OF THE COST INCURRED BY A PERSON FOR MANUFACTU RE OF THE EXPORT PRODUCT AND HENCE EVEN WHERE THE DEPB IS NOT UTILIZED BY THE EXPORTER BUT IS TRANSFERRED TO ANOTHER PERSON, THE DEPB CONTINUES TO REMAIN AS A COST TO THE EXPORTER. WHEN, THEREFORE, DEPB IS TRANSFERRED BY A PERSON, THE ENTIRE SUM RECEIVED BY HIM ON SUCH TRANSFER DOES NOT BECOME HIS PROFITS. IT IS ONLY THE AMOUNT THAT HE RECEIVES IN EXCESS OF THE DEPB WHICH REPRESENTS HIS PROFITS ON TRANSFER OF THE DEP B. 8. THE HON'BLE COURT FURTHER HELD AS UNDER: 16. THE HIGH COURT HAS SOUGHT TO MEET THE ARGUMENT OF DOUBLE TAXATION MADE ON BEHALF OF THE ASSESSEES BY HOLDING THAT WHERE THE FACE VALUE OF THE DEPB WAS OFFERED TO TAX IN THE YEAR IN WHICH THE CREDIT ACCR UED TO THE ASSESSEE AS BUSINESS PROFITS, THEN ANY FURTHER PROFIT ARISING ON TRANSFER OF DEPB WOULD BE TAXED AS PROFI TS OF BUSINESS UNDER SECTION 28(IIID) IN THE YEAR IN W HICH THE TRANSFER OF DEPB TOOK PLACE. THIS VIEW OF THE H IGH COURT, IN OUR CONSIDERED OPINION, IS CONTRARY TO TH E LANGUAGE OF SECTION 28 OF THE ACT UNDER WHICH 'CASH ASSISTANCE' RECEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS SUCH AS THE DEPB AND 'PROFIT ON TRANSFER OF THE DEPB' ARE TREATED AS TWO SEPARATE ITEMS OF INCOME UNDER CLAUSES (IIIB) AND (IIID) OF SECTION 28. IF ACCRUAL OF DEPB AND PROFIT ON TRANSF ER OF DEPB ARE TREATED AS TWO SEPARATE ITEMS OF INCOME CHARGEABLE TO TAX UNDER CLAUSES (IIIB) AND (IIID) O F SECTION 28 OF THE ACT, THEN DEPB WILL BE CHARGEABLE AS INCOME UNDER CLAUSE (IIIB) OF SECTION 28 IN THE YEA R IN WHICH THE PERSON APPLIES FOR DEPB CREDIT AGAINST TH E EXPORTS AND THE PROFIT ON TRANSFER OF THE DEPB BY T HAT PERSON WILL BE CHARGEABLE AS INCOME UNDER CLAUSE (I IID) OF SECTION 28 IN HIS HANDS IN THE YEAR IN WHICH HE MAKES THE TRANSFER. ACCORDINGLY, IF IN THE SAME PRE VIOUS YEAR THE DEPB ACCRUES TO A PERSON AND HE ALSO EARNS PROFIT ON TRANSFER OF THE DEPB, THE DEPB WILL BE BUSINESS PROFITS UNDER CLAUSE (IIIB) AND THE DIFFER ENCE BETWEEN THE SALE VALUE AND THE DEPB (FACE VALUE) WOULD BE THE PROFITS ON THE TRANSFER OF DEPB UNDER CLAUSE (IIID) FOR THE SAME ASSESSMENT YEAR. WHERE, HOWEVER, THE DEPB ACCRUES TO A PERSON IN ONE PREVIO US YEAR AND THE TRANSFER OF DEPB TAKES PLACE IN A SUBSEQUENT PREVIOUS YEAR, THEN THE DEPB WILL BE CHARGEABLE AS INCOME OF THE PERSON FOR THE FIRST ASSESSMENT YEAR CHARGEABLE UNDER CLAUSE (IIIB) OF SECTION 28 AND THE DIFFERENCE BETWEEN THE DEPB CRED IT AND THE SALE VALUE OF THE DEPB CREDIT WOULD BE INCO ME IN HIS HANDS FOR THE SUBSEQUENT ASSESSMENT YEAR CHARGEABLE UNDER CLAUSE (IIID) OF SECTION 28. THE 6 INTERPRETATION SUGGESTED BY US, THEREFORE, DOES NOT LEAD TO DOUBLE TAXATION OF THE SAME INCOME, WHICH THE LEGISLATURE MUST BE PRESUMED TO HAVE AVOIDED. 9. THE HON'BLE APEX COURT ALSO ADDRESSED THE ISSUE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT WHERE EXPORT TURNOVER WAS BELOW OR ABOVE RS.10 CROR ES AND HELD AS UNDER: 19. SUB-SECTION (1) OF SECTION 80HHC QUOTED ABOVE MAKES IT CLEAR THAT AN ASSESSEE ENGAGED IN THE BUSI NESS OF EXPORT OUT OF INDIA OF ANY GOODS OR MERCHANDISE TO WHICH THIS SECTION APPLIES SHALL BE ALLOWED, IN COMPUTING HIS TOTAL INCOME, A DEDUCTION TO THE EXTE NT OF PROFITS REFERRED TO IN SUB-SECTION (1B), DERIVED BY HIM FROM THE EXPORT OF SUCH GOODS OR MERCHANDISE. SUB- SECTION (1B) OF SECTION 80HHC GIVES THE PERCENTAGES OF DEDUCTION OF THE PROFITS ALLOWABLE FOR THE DIFFEREN T ASSESSMENT YEARS FROM THE ASSESSMENT YEARS 2001-200 2 TO 2004-2005. SUB-SECTION (3)(A) OF SECTION 80HHC PROVIDES THAT WHERE THE EXPORT OUT OF INDIA IS OF G OODS OR MERCHANDISE MANUFACTURED OR PROCESSED BY THE ASSESSEE, THE PROFITS DERIVED FROM SUCH EXPORTS SHA LL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINE SS, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPE CT OF SUCH GOODS BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. IN COMMISSIONE R OF INCOME-TAX V. K. RAVINDRANATHAN NAIR [2007] 295 ITR 228 (SC), THE FORMULA IN SUB-SECTION (3)(A) OF SECTION 80HHC WAS STATED BY THIS COURT TO BE AS FOLLOWS: PROFITS OF THE BUSINESS EXPORT TURNOVER PROFITS DERIVED FROM EXPORTS = TOTAL TURNOVER 20. EXPLANATION (BAA) UNDER SECTION 80HHC STATES THAT 'PROFITS OF THE BUSINESS' IN THE AFORESAID FORMULA MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AS REDUCED BY (1) NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSES (IIIA), (IIIB), (IIIC), (IIID) AND (IIIE) O F SECTION 28 OR OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSI ON, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF SIM ILAR NATURE INCLUDING ANY SUCH RECEIPTS AND (2) THE PROF ITS OF ANY BRANCH, OFFICE, WAREHOUSE OR ANY OTHER ESTABLISHMENT OF THE ASSESSEE SITUATED OUTSIDE INDI A. THUS, NINETY PER CENT OF THE DEPB WHICH IS 'CASH ASSISTANCE' AGAINST EXPORTS AND IS COVERED UNDER CL AUSE 7 (IIIB) OF SECTION 28 WILL GET EXCLUDED FROM THE 'PR OFITS OF THE BUSINESS' OF THE ASSESSEE IF SUCH DEPB HAS ACCRUED TO THE ASSESSEE DURING THE PREVIOUS YEAR. SIMILARLY, IF DURING THE SAME PREVIOUS YEAR, THE ASSESSEE HAS TRANSFERRED THE DEPB AND THE SALE VALU E OF SUCH DEPB IS MORE THAN THE FACE VALUE OF THE DEP B, THE DIFFERENCE BETWEEN THE SALE VALUE OF THE DEPB A ND THE FACE VALUE OF THE DEPB WILL REPRESENT THE PROFI T ON TRANSFER OF DEPB COVERED UNDER CLAUSE (IIID) OF SEC TION 28 AND NINETY PER CENT OF SUCH PROFIT ON TRANSFER O F DEPB CERTIFICATE WILL GET EXCLUDED FROM 'PROFITS OF THE BUSINESS'. BUT, WHERE THE DEPB ACCRUES TO THE ASSES SEE IN THE FIRST PREVIOUS YEAR AND THE ASSESSEE TRANSFE RS THE DEPB CERTIFICATE IN THE SECOND PREVIOUS YEAR, AS APPEARS TO HAVE HAPPENED IN THE PRESENT BATCH OF CA SES, ONLY NINETY PER CENT OF THE PROFITS ON TRANSFER OF DEPB COVERED UNDER CLAUSE (IIID) AND NOT NINETY PER CENT OF THE ENTIRE SALE VALUE INCLUDING THE FACE VALUE OF T HE DEPB WILL GET EXCLUDED FROM THE 'PROFITS OF THE BUSINESS'. THUS, WHERE THE NINETY PER CENT OF THE F ACE VALUE OF THE DEPB DOES NOT GET EXCLUDED FROM 'PROFI TS OF THE BUSINESS' UNDER EXPLANATION (BAA) AND ONLY NINETY PER CENT OF THE DIFFERENCE BETWEEN THE FACE VALUE OF THE DEPB AND THE SALE VALUE OF THE DEPB GETS EXCLUDED FROM 'PROFITS OF THE BUSINESS', THE ASSESS EE GETS A BIGGER FIGURE OF 'PROFITS OF THE BUSINESS' A ND THIS IS POSSIBLE WHEN THE DEPB ACCRUES TO THE ASSES SEE IN ONE PREVIOUS YEAR AND TRANSFER OF THE DEPB TAKES PLACE IN THE SUBSEQUENT PREVIOUS YEAR. THE RESULT I N SUCH CASE IS THAT A HIGHER FIGURE OF 'PROFITS OF TH E BUSINESS' BECOMES THE MULTIPLIER IN THE AFORESAID FORMULA UNDER SUBSECTION (3)(A) OF SECTION 80HHC FO R ARRIVING AT THE FIGURE OF PROFITS DERIVED FROM EXPO RTS. 21. TO THE FIGURE OF PROFITS DERIVED FROM EXPORTS WORK ED OUT AS PER THE AFORESAID FORMULA UNDER SUB-SECTION (3)(A) OF SECTION 80HHC, THE ADDITIONS AS MENTIONED IN FIRST, SECOND, THIRD AND FOURTH PROVISO UNDER SUB- SECTION (3) ARE MADE TO PROFITS DERIVED FROM EXPORT S. UNDER THE FIRST PROVISO, NINETY PER CENT OF THE SUM REFERRED TO IN CLAUSES (IIIA), (IIIB) AND (IIIC) OF SECTION 28 ARE ADDED IN THE SAME PROPORTION AS EXPORT TURNO VER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. IN THIS FIRST PROVISO, THERE IS NO ADDITION OF ANY SUM REFERRED TO IN CLAUSE (IIID) OR CLAUSE (IIIE). HENCE, PROFIT ON TRANSFER OF DEPB OR DFRC ARE NOT TO BE ADDED UNDER THE FIRST PROVISO. WHERE THEREFORE IN THE PREVIOUS YEAR NO DEPB OR DFRC ACCRUES TO THE ASSESSEE, HE WOULD NOT BE ENTIT LED TO THE BENEFIT OF THE FIRST PROVISO TO SUB-SECTION (3) OF SECTION 80HHC BECAUSE HE WOULD NOT HAVE ANY SUM REFERRED TO IN CLAUSE (IIIB) OF SECTION 28 OF THE A CT. THE SECOND PROVISO TO SUB-SECTION (3) OF SECTION 80HHC STATES THAT IN CASE OF AN ASSESSEE HAVING EXPORT TURNOVER NOT EXCEEDING RS. 10 CRORES DURING THE PREVIOUS YEAR, AFTER GIVING EFFECT TO THE FIRST PRO VISO, THE EXPORT PROFITS ARE TO BE INCREASED FURTHER BY T HE 8 AMOUNT WHICH BEARS TO NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSES (IIID) AND (IIIE) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO TH E TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. THE THIRD PROVISO TO SUB-SECTION (3) STAT ES THAT IN CASE OF AN ASSESSEE HAVING EXPORT TURNOVER EXCEEDING RS. 10 CRORES, SIMILAR ADDITION OF NINETY PER CENT OF THE SUMS REFERRED TO IN CLAUSE (IIID) OF SE CTION 28 ONLY IF THE ASSESSEE HAS THE NECESSARY AND SUFFI CIENT EVIDENCE TO PROVE THAT (A) HE HAD AN OPTION TO CHOO SE EITHER THE DUTY DRAWBACK OR THE DUTY ENTITLEMENT PA SS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME; AND (B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME. THEREFORE, IF THE ASSESSEE HAVING EXPORT TURNOVER OF MORE THAN RS. 10 CRORES DOES NOT SATISFY THESE TWO CONDITIONS, HE WILL NOT BE ENTITLED TO THE ADDITION OF PROFIT ON TRANSF ER OF DEPB UNDER THE THIRD PROVISO TO SUB-SECTION (3) OF SECTION 80HHC. 22. THE AFORESAID DISCUSSION WOULD SHOW THAT WHERE AN ASSESSEE HAS AN EXPORT TURNOVER EXCEEDING RS. 10 CRORES AND HAS MADE PROFITS ON TRANSFER OF DEPB UND ER CLAUSE (D) OF SECTION 28, HE WOULD NOT GET THE BENE FIT OF ADDITION TO EXPORT PROFITS UNDER THIRD OR FOURTH PR OVISO TO SUB-SECTION (3) OF SECTION 80HHC, BUT HE WOULD G ET THE BENEFIT OF EXCLUSION OF A SMALLER FIGURE FROM 'PROFITS OF THE BUSINESS' UNDER EXPLANATION (BAA) T O SECTION 80HHC OF THE ACT AND THERE IS NOTHING IN EXPLANATION (BAA) TO SECTION 80HHC TO SHOW THAT THI S BENEFIT OF EXCLUSION OF A SMALLER FIGURE FROM 'PROF ITS OF THE BUSINESS' WILL NOT BE AVAILABLE TO AN ASSESSEE HAVING AN EXPORT TURNOVER EXCEEDING RS.10 CRORES. I N OTHER WORDS, WHERE THE EXPORT TURNOVER OF AN ASSESS EE EXCEEDS RS. 10 CRORES, HE DOES NOT GET THE BENEFIT OF ADDITION OF NINETY PER CENT OF EXPORT INCENTIVE UND ER CLAUSE (IIID) OF SECTION 28 TO HIS EXPORT PROFITS, BUT HE GETS A HIGHER FIGURE OF PROFITS OF THE BUSINESS, WH ICH ULTIMATELY RESULTS IN COMPUTATION OF A BIGGER EXPOR T PROFIT. THE HIGH COURT, THEREFORE, WAS NOT RIGHT IN COMING TO THE CONCLUSION THAT AS THE ASSESSEE DID N OT HAVE THE EXPORT TURNOVER EXCEEDING RS. 10 CRORES AN D AS THE ASSESSEE DID NOT FULFILL THE CONDITIONS SET OUT IN THE THIRD PROVISO TO SECTION 80HHC (III), THE ASSES SEE WAS NOT ENTITLED TO A DEDUCTION UNDER SECTION 80HHC ON THE AMOUNT RECEIVED ON TRANSFER OF DEPB AND WITH A VIEW TO GET OVER THIS DIFFICULTY THE ASSESSEE WAS CONTENDING THAT THE PROFITS ON TRANSFER OF DEPB UND ER SECTION 28 (IIID) WOULD NOT INCLUDE THE FACE VALUE OF THE DEPB. IT IS A WELL-SETTLED PRINCIPLE OF STATUTORY INTERPRETATION OF A TAXING STATUTE THAT A SUBJECT W ILL BE LIABLE TO TAX AND WILL BE ENTITLED TO EXEMPTION FRO M TAX ACCORDING TO THE STRICT LANGUAGE OF THE TAXING STAT UTE AND IF AS PER THE WORDS USED IN EXPLANATION (BAA) T O SECTION 80HHC READ WITH THE WORDS USED IN CLAUSES 9 (IIID) AND (IIIE) OF SECTION 28, THE ASSESSEE WAS E NTITLED TO A DEDUCTION UNDER SECTION 80HHC ON EXPORT PROFIT S, THE BENEFIT OF SUCH DEDUCTION CANNOT BE DENIED TO T HE ASSESSEE. 10. THE ISSUE IN THE PRESENT APPEAL STANDS COVERED BY THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN M/S TOPMAN EXPORTS VS. CIT (SUPRA) AND FOLLOWING THE SA ME WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE DEDUCTI ON UNDER SECTION 80HHC OF THE ACT, IN LINE WITH THE DIRECTIONS OF THE APEX COURT (SUPRA). REASONABLE OPPORTUNITY OF HEARING SHALL BE GIVEN TO THE ASSESS EE. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWE D FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH APRIL,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19 TH APRIL,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH