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

ITA 1162/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57737 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-03-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 05-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Section: 143(3); 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACOUNTANT MEMBER ITA NOS.1162 TO 1164/CHD/2011 (ASSESSMENT YEARS: 2002-03 TO 2004-05) M/S EASTMAN IMPEX, VS THE A.C.I.T., INDUSTRIAL AREA-C, CIRCLE-I, DHANDARI KALAN, LUDHIANA. LUDHIANA. PAN NO. AAAFE3448C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY: SMT JYOTI KUMARI, CIT DR DATE OF HEARING : 21.03.2012 DATE OF PRONOUNCEMENT : 22.03.2012 O R D E R PER SUSHMA CHOWLA, JM THESE THREE APPEALS FILED BY THE ASSESSEE ARE AGAIN ST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (A)-I, LUD HIANA ALL DATED 22.09.2011 RELATING TO ASSESSMENT YEARS 2002-03 TO 2004-05 AGAINST THE ORDER/S PASSED UNDER SECTION 143(3) OF THE I.T. ACT , 1961. 2. THE THREE APPEALS RELATING TO THE SAME ASSESSEE ON THE SAME ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. COMMON GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ALL THE APPEALS ARE AS UNDER : 1. THE ORDER PASSED U/S 250(6) OF THE INCOME TAX A CT, 1961 IS AGAINST LAW AND FACTS ON THE FILE IN AS MUC H THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, LUDHIANA HAS ERRED IN FOLLOWING THE DIRECTIONS OF 2 THE HON'BLE TRIBUNAL AND HAS THUS, EXCEEDED HIS JURISDICTION IN REJECTING THE CLAIM OF THE APPELLAN T IN RESPECT OF DEDUCTION U/S 80HHC ON THE VALUE OF DEPB. 2. THAT THE LD CIT(A) HAS GRAVELY ERRED IN FOLLOWIN G THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS AND CHEMICALS IGNORING THE SPECIFIC DIRECTIONS OF HON'BLE TRIBUNAL FOR DECIDING THE ISSUE ON THE BASI S OF SPECIAL BENCH JUDGMENT IN THE CASE OF M/S TOPMAN EXPORTS VS ITO. 4. THE ISSUE RAISED VIDE GROUND NO.1 IS IN RELATION OF DEDUCTION UNDER SECTION 80HHC OF THE INCOME TAX ACT WITH REFERENCE TO EXPORT INCENTIVES BEING DEPB. 5. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CLAIMED DEDUCTION UN DER SECTION 80HHC OF THE ACT ON THE VALUE OF DEPB CREDITED TO PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER DENIED THE DEDUCTION UNDER SECTIO N 80HHC OF THE ACT, FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT, CHANDIGARH HAD VIDE ITS ORDER DATED 7.9.2010 AND 13.9.2010 IN ITA NO.438 OF 2010 AND 434 OF 2010, RESPECTIVELY, I N THE CASE OF M/S TIPSON CYCLES PVT. LTD. IN TURN FOLLOWING ITS ORDER DATED 16.08.2010 IN INCOME TAX APPEAL NO.299 OF 2010 IN THE CASE OF CIT VS. F.C. SONDHI & COMPANY P. LTD., JALANDHAR. THE CIT (APPEALS) UPH ELD THE ORDER OF ASSESSING OFFICER. 6. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORD ER OF THE CIT (APPEALS) AND HAS POINTED OUT THAT THE ISSUE NOW ST ANDS COVERED BY THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN M/S TOPMAN EXPORTS VS. CIT IN CIVIL APPEAL NO.199 OF 2012 & OTHERS VID E JUDGMENT DATED 8.2.2012. 7. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE AUTHORITIES BELOW. 3 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE FIND THAT THE PRESENT ISSUE OF COMPUTATION OF DEDUC TION UNDER SECTION 80HHC OF THE ACT ON ACCOUNT OF DEPB/DFRC HAS BEEN C ONSIDERED AT LENGTH BY THE HON'BLE SUPREME COURT IN M/S TOPMAN E XPORTS VS. CIT (SUPRA). THE HON'BLE APEX COURT IN VIEW OF THE PRO VISIONS OF SECTION 28(IIIB) AND 28(IIID) OF THE ACT OBSERVED AS UNDER: 12. IT WILL BE CLEAR FROM THE AFORESAID PROVISIONS OF SECTION 28 THAT UNDER CLAUSE (IIIB) CASH ASSISTANCE (BY WHATEVER NA ME CALLED) RECEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS UNDER A NY SCHEME OF THE GOVERNMENT OF INDIA IS BY ITSELF INCOME CHARGEABLE TO INCOME TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON'. DEPB IS A KIND OF ASSISTANCE GIVEN BY THE GOVERNMENT OF INDIA TO A N 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 THAT DEPB IS 'CASH ASSISTANCE' RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER THE SCHEME OF THE GOVE RNMENT OF INDIA AND FALLS UNDER CLAUSE (IIIB) OF SECTION 28 AND IS CHAR GEABLE TO INCOME TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION' EVEN BEFORE IT IS TRANSFERRED BY THE ASSESSEE. 13. UNDER CLAUSE (IIID) OF SECTION 28, ANY PROFIT ON T RANSFER OF DEPB IS CHARGEABLE TO INCOME TAX UNDER THE HEAD 'PROFITS AN D GAINS OF BUSINESS OR PROFESSION' AS AN ITEM SEPARATE FROM CASH ASSIST ANCE UNDER CLAUSE (IIIB). THE WORD 'PROFIT' MEANS THE GROSS PROCEEDS OF A BUSINESS TRANSACTION LESS THE COSTS OF THE TRANSACTION. TO Q UOTE FROM BLACK'S LAW DICTIONARY (FIFTH EDITION): ' PROFIT . MOST COMMONLY, THE GROSS PROCEEDS OF A BUSINESS T RANSACTION LESS THE COSTS OF THE TRANSACTION, I.E. NET PROCEED S. EXCESS OF REVENUES OVER EXPENSES FOR A TRANSACTION; SOMETIMES USED SYN ONYMOUSLY 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 I TR 27 (SC) HAS QUOTED THE FOLLOWING OBSERVATIONS OF LORD JUSTICE F LETCHER 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 INTERVAL OF A YEAR. THE FUNDAMENTAL MEANING IS THE AMOUNT OF GAIN MADE BY T HE BUSINESS DURING THE YEAR. THIS CAN ONLY BE ASCERTAINED BY A COMPARI SON 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 AM OUNT 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 REALIZE D BY THE ASSESSEES 4 OVER AND ABOVE THE DEPB ON TRANSFER OF THE DEPB WOU LD REPRESENT PROFIT ON THE TRANSFER OF DEPB. 9. 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 2 8 OF THE ACT, THE DIFFERENCE BETWEEN THE SALE VALUE AND THE FACE VALU E OF THE DEPB WILL FALL UNDER CLAUSE (IIID) OF SECTION 28 OF THE ACT A ND THE HIGH COURT WAS NOT RIGHT IN TAKING THE VIEW IN THE IMPUGNED JUDGME NT THAT THE ENTIRE SALE PROCEEDS OF THE DEPB REALIZED ON TRANSFER OF THE DE PB 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 JU DGMENT OF THE HIGH COURT. THE FIRST REASON GIVEN BY THE HIGH COUR T IS THAT CLAUSE (IIIA) OF SECTION 28 TREATS PROFITS ON THE SALE OF AN IMPO RT LICENSE AS INCOME CHARGEABLE TO TAX AND WHEN THE LICENSE IS SOLD, THE ENTIRE AMOUNT IS TREATED AS PROFITS OF BUSINESS UNDER 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 DIFFERENTL Y THAN THE PROFITS WHICH ARE MADE ON THE SALE OF AN IMPORT LICENSE UND ER CLAUSE (IIIA) OF SECTION 28 OF THE ACT. IN TAKING THE VIEW THAT WHEN THE IMPORT LICENSE IS SOLD THE ENTIRE AMOUNT IS TREATED AS PROFITS OF BUS INESS, THE HIGH COURT HAS VISUALIZED A SITUATION WHERE THE COST OF ACQUIR ING THE IMPORT LICENSE IS NIL. THE COST OF ACQUIRING DEPB, ON THE OTHER HA ND, IS NOT NIL BECAUSE 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 COST 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 T HE COST OF THE DEPB. THE SECOND REASON GIVEN BY THE HIGH COURT IN THE IMPUGNED JUDGMENT IS THAT UNDER THE DEPB SCHEME, DEPB IS GIV EN AT A PERCENTAGE OF THE FOB VALUE OF THE EXPORTS SO AS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY ON THE IMPORT CONTENT OF THE EXPORT PR ODUCTS, BUT THE EXPORTER MAY NOT HIMSELF UTILIZE THE DEPB FOR PAYIN G CUSTOMS DUTY BUT MAY TRANSFER IT TO SOMEONE ELSE AND THEREFORE THE E NTIRE SUM RECEIVED ON TRANSFER OF DEPB WOULD BE COVERED UNDER CLAUSE (III D) OF SECTION 28. THE HIGH COURT HAS FAILED TO APPRECIATE THAT DEPB R EPRESENTS PART OF THE COST INCURRED BY A PERSON FOR MANUFACTURE OF TH E EXPORT PRODUCT AND HENCE EVEN WHERE THE DEPB IS NOT UTILIZED BY THE EX PORTER BUT IS TRANSFERRED TO ANOTHER PERSON, THE DEPB CONTINUES T O 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 NO T BECOME HIS PROFITS. IT IS ONLY THE AMOUNT THAT HE RECEIVES IN EXCESS OF THE DEPB WHICH REPRESENTS HIS PROFITS ON TRANSFER OF THE DEPB. 10. 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 WHE RE THE FACE VALUE OF THE DEPB WAS OFFERED TO TAX IN THE YEAR IN WHICH TH E CREDIT ACCRUED TO THE ASSESSEE AS BUSINESS PROFITS, THEN ANY FURTHER PROFIT ARISING ON TRANSFER OF DEPB WOULD BE TAXED AS PROFITS OF BUSIN ESS UNDER SECTION 28(IIID) IN THE YEAR IN WHICH THE TRANSFER OF DEPB TOOK PLACE. THIS VIEW 5 OF THE HIGH COURT, IN OUR CONSIDERED OPINION, IS CO NTRARY TO THE LANGUAGE OF SECTION 28 OF THE ACT UNDER WHICH 'CASH ASSISTAN CE' RECEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS SUCH AS TH E DEPB AND 'PROFIT ON TRANSFER OF THE DEPB' ARE TREATED AS TWO SEPARAT E ITEMS OF INCOME UNDER CLAUSES (IIIB) AND (IIID) OF SECTION 28. IF A CCRUAL OF DEPB AND PROFIT ON TRANSFER OF DEPB ARE TREATED AS TWO SEPAR ATE 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 YEAR IN WHICH THE PERSON APPLIES FOR DEPB CREDIT AGAINST THE EXPORTS AND THE PROFIT ON TRANSFER OF THE DEPB BY T HAT PERSON WILL BE CHARGEABLE AS INCOME UNDER CLAUSE (IIID) OF SECTION 28 IN HIS HANDS IN THE YEAR IN WHICH HE MAKES THE TRANSFER. ACCORDINGL Y, IF IN THE SAME PREVIOUS YEAR THE DEPB ACCRUES TO A PERSON AND HE A LSO EARNS PROFIT ON TRANSFER OF THE DEPB, THE DEPB WILL BE BUSINESS PRO FITS UNDER CLAUSE (IIIB) AND THE DIFFERENCE BETWEEN THE SALE VALUE AN D THE DEPB (FACE VALUE) WOULD BE THE PROFITS ON THE TRANSFER OF DEPB UNDER CLAUSE (IIID) FOR THE SAME ASSESSMENT YEAR. WHERE, HOWEVER, THE D EPB ACCRUES TO A PERSON IN ONE PREVIOUS YEAR AND THE TRANSFER OF DEP B TAKES PLACE IN A SUBSEQUENT PREVIOUS YEAR, THEN THE DEPB WILL BE CHA RGEABLE AS INCOME OF THE PERSON FOR THE FIRST ASSESSMENT YEAR CHARGEA BLE UNDER CLAUSE (IIIB) OF SECTION 28 AND THE DIFFERENCE BETWEEN THE DEPB C REDIT AND THE SALE VALUE OF THE DEPB CREDIT WOULD BE INCOME IN HIS HAN DS FOR THE SUBSEQUENT ASSESSMENT YEAR CHARGEABLE UNDER CLAUSE (IIID) OF SECTION 28. THE INTERPRETATION SUGGESTED BY US, THEREFORE, DOES NOT LEAD TO DOUBLE TAXATION OF THE SAME INCOME, WHICH THE LEGISLATURE MUST BE PRESUMED TO HAVE AVOIDED. 11. THE HON'BLE APEX COURT ALSO ADDRESSED THE ISSUE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC OF THE ACT WHERE EXPO RT TURNOVER WAS BELOW OR ABOVE RS.10 CRORES AND HELD AS UNDER: 19. SUB-SECTION (1) OF SECTION 80HHC QUOTED ABOVE MAKE S IT CLEAR THAT AN ASSESSEE ENGAGED IN THE BUSINESS OF EXPORT OUT O F INDIA OF ANY GOODS OR MERCHANDISE TO WHICH THIS SECTION APPLIES SHALL BE ALLOWED, IN COMPUTING HIS TOTAL INCOME, A DEDUCTION TO THE EXTENT OF PROFITS REFERRED TO IN SUB-SECTION (1B), DERIVED BY HIM FROM THE EXPORT OF SUCH GOODS OR MER CHANDISE. SUB-SECTION (1B) OF SECTION 80HHC GIVES THE PERCENTAGES OF DEDUCTION OF THE PROFITS ALLOWABLE FOR THE DIFFERENT ASSESSMENT YEARS FROM THE ASSESSMENT YEARS 2001-2002 TO 2004- 2005. SUB-SECTION (3)(A) OF SECTION 80HHC PROVIDES THAT WHERE THE EXPORT OUT OF INDIA IS OF GOODS OR MERCHANDISE MANUFACTURED OR PR OCESSED BY THE ASSESSEE, THE PROFITS DERIVED FROM SUCH EXPORTS SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH GOODS BEARS TO THE TOTAL TURNOVER OF THE BUSIN ESS CARRIED ON BY THE ASSESSEE. IN COMMISSIONER 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 6 20. EXPLANATION (BAA) UNDER SECTION 80HHC STATES THAT 'PROFITS OF THE BUSINESS' IN THE AFORESAID FORMULA MEANS THE PROFIT S OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION' AS REDUCED BY (1) NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSES ( IIIA), (IIIB), (IIIC), (IIID) AND (IIIE) OF SECTION 28 OR OF ANY RECEIPTS BY WAY OF B ROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF SIMILAR NATUR E INCLUDING ANY SUCH RECEIPTS AND (2) THE PROFITS OF ANY BRANCH, OFFICE, WAREHOUS E OR ANY OTHER ESTABLISHMENT OF THE ASSESSEE SITUATED OUTSIDE INDIA. THUS, NINET Y PER CENT OF THE DEPB WHICH IS 'CASH ASSISTANCE' AGAINST EXPORTS AND IS COVERED UNDER CLAUSE (IIIB) OF SECTION 28 WILL GET EXCLUDED FROM THE 'PROFITS OF THE BUSIN ESS' OF THE ASSESSEE IF SUCH DEPB HAS ACCRUED TO THE ASSESSEE DURING THE PREVIOU S YEAR. SIMILARLY, IF DURING THE SAME PREVIOUS YEAR, THE ASSESSEE HAS TRANSFERRE D THE DEPB AND THE SALE VALUE OF SUCH DEPB IS MORE THAN THE FACE VALUE OF T HE DEPB, THE DIFFERENCE BETWEEN THE SALE VALUE OF THE DEPB AND THE FACE VAL UE OF THE DEPB WILL REPRESENT THE PROFIT ON TRANSFER OF DEPB COVERED UN DER CLAUSE (IIID) OF SECTION 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 ASSESSEE IN THE FIRST PREVIOUS YEAR AND THE ASSESSE E TRANSFERS THE DEPB CERTIFICATE IN THE SECOND PREVIOUS YEAR, AS APPEARS TO HAVE HAPPENED IN THE PRESENT BATCH OF CASES, 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 THE DEPB WILL GET EXCLU DED 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 'PROFITS OF THE BUSINESS' UND ER 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 ASSESSEE GETS A BIGGER FIGURE OF 'PROFITS OF THE BUSINESS' A ND THIS IS POSSIBLE WHEN THE DEPB ACCRUES TO THE ASSESSEE IN ONE PREVIOUS YEAR A ND TRANSFER OF THE DEPB TAKES PLACE IN THE SUBSEQUENT PREVIOUS YEAR. THE RE SULT IN SUCH CASE IS THAT A HIGHER FIGURE OF 'PROFITS OF THE 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 EXPORTS. 21. TO THE FIGURE OF PROFITS DERIVED FROM EXPORTS WORK ED OUT AS PER THE AFORESAID FORMULA UNDER SUB-SECTION (3)(A) OF SECTI ON 80HHC, THE ADDITIONS AS MENTIONED IN FIRST, SECOND, THIRD AND FOURTH PROVIS O UNDER SUB-SECTION (3) ARE MADE TO PROFITS DERIVED FROM EXPORTS. UNDER THE FIR ST 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 TURNOVER 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 (III E). HENCE, PROFIT ON TRANSFER OF DEPB OR DFRC ARE NOT TO BE ADDED UNDER THE FIRST PR OVISO. WHERE THEREFORE IN THE PREVIOUS YEAR NO DEPB OR DFRC ACCRUES TO THE AS SESSEE, HE WOULD NOT BE ENTITLED TO THE BENEFIT OF THE FIRST PROVISO TO SUB -SECTION (3) OF SECTION 80HHC BECAUSE HE WOULD NOT HAVE ANY SUM REFERRED TO IN CL AUSE (IIIB) OF SECTION 28 OF THE ACT. THE SECOND PROVISO TO SUB-SECTION (3) OF S ECTION 80HHC STATES THAT IN CASE OF AN ASSESSEE HAVING EXPORT TURNOVER NOT EXCE EDING RS. 10 CRORES DURING THE PREVIOUS YEAR, AFTER GIVING EFFECT TO THE FIRST PROVISO, THE EXPORT PROFITS ARE TO BE INCREASED FURTHER BY THE AMOUNT WHICH BEARS TO N INETY PER CENT OF ANY SUM REFERRED TO IN CLAUSES (IIID) AND (IIIE) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE 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, SIM ILAR ADDITION OF NINETY PER CENT OF THE SUMS REFERRED TO IN CLAUSE (IIID) OF SE CTION 28 ONLY IF THE ASSESSEE HAS 7 THE NECESSARY AND SUFFICIENT EVIDENCE TO PROVE THAT (A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAWBACK OR THE DUTY ENTITLE MENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME; AND (B) THE RATE O F DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN TH E RATE OF CREDIT ALLOWABLE UNDER THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME. THEREFORE, IF THE ASSESSEE HAVING EXPORT TU RNOVER OF MORE THAN RS. 10 CRORES DOES NOT SATISFY THESE TWO CONDITIONS, HE WI LL NOT BE ENTITLED TO THE ADDITION OF PROFIT ON TRANSFER OF DEPB UNDER THE TH IRD 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 MAD E PROFITS ON TRANSFER OF DEPB UNDER CLAUSE (D) OF SECTION 28, HE WOULD NOT G ET THE BENEFIT OF ADDITION TO EXPORT PROFITS UNDER THIRD OR FOURTH PROVISO TO SUB -SECTION (3) OF SECTION 80HHC, BUT HE WOULD GET THE BENEFIT OF EXCLUSION OF A SMAL LER FIGURE FROM 'PROFITS OF THE BUSINESS' UNDER EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT AND THERE IS NOTHING IN EXPLANATION (BAA) TO SECTION 80HHC TO SH OW THAT THIS BENEFIT OF EXCLUSION OF A SMALLER FIGURE FROM 'PROFITS OF THE BUSINESS' WILL NOT BE AVAILABLE TO AN ASSESSEE HAVING AN EXPORT TURNOVER EXCEEDING RS.10 CRORES. IN OTHER WORDS, WHERE THE EXPORT TURNOVER OF AN ASSESSEE EXC EEDS RS. 10 CRORES, HE DOES NOT GET THE BENEFIT OF ADDITION OF NINETY PER CENT OF EXPORT INCENTIVE UNDER CLAUSE (IIID) OF SECTION 28 TO HIS EXPORT PROFITS, BUT HE GETS A HIGHER FIGURE OF PROFITS OF THE BUSINESS, WHICH ULTIMATELY RESULTS IN COMPUTATI ON OF A BIGGER EXPORT PROFIT. THE HIGH COURT, THEREFORE, WAS NOT RIGHT IN COMING TO THE CONCLUSION THAT AS THE ASSESSEE DID NOT HAVE THE EXPORT TURNOVER EXCEEDING RS. 10 CRORES AND AS THE ASSESSEE DID NOT FULFILL THE CONDITIONS SET OUT IN THE THIRD PROVISO TO SECTION 80HHC (III), THE ASSESSEE WAS NOT ENTITLED TO A DED UCTION 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 PRO FITS ON TRANSFER OF DEPB UNDER 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 WILL BE LIABLE TO TAX AND WILL BE ENTITLED TO EXEMPTION FROM TAX ACCORDING TO THE STRICT LANGUAGE OF THE TAXING STATUTE AND IF AS PER THE WO RDS USED IN EXPLANATION (BAA) TO SECTION 80HHC READ WITH THE WORDS USED IN CLAUSE S (IIID) AND (IIIE) OF SECTION 28, THE ASSESSEE WAS ENTITLED TO A DEDUCTION UNDER SECTION 80HHC ON EXPORT PROFITS, THE BENEFIT OF SUCH DEDUCTION CANNOT BE DE NIED TO THE ASSESSEE. 12. THE ISSUE IN THE PRESENT APPEAL STANDS COVERED BY THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN M/S TOPMAN EXP ORTS VS. CIT (SUPRA) AND FOLLOWING THE SAME WE DIRECT THE ASSESS ING OFFICER TO COMPUTE THE DEDUCTION UNDER SECTION 80HHC OF THE AC T, IN LINE WITH THE DIRECTIONS OF THE APEX COURT (SUPRA). REASONABLE O PPORTUNITY OF HEARING 8 SHALL BE GIVEN TO THE ASSESSEE. THE GROUNDS OF APP EAL RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF MARCH, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 22 ND MARCH, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH