The Deputy Commissioner of Income tax, Jalandhar V. M/s. H.R. International, Jalandhar

ITA 364/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5795 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-07-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 18-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAVISH SOOD
• Keywords: Business income; Retrospective amendment; Question of law
• Section: 80HHC; 148; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR. BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER. I.T.A. NO.364(ASR)/2010. (ASSESSMENT YEAR: 2002-03) THE DY. C.I.T., M/S. H.R. INTERNATIONAL, RANGE I, MODEL HOUSE ROAD, JALANDHAR. JALANDHAR. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI TARSEM LAL, D.R. RESPONDENT BY: SHRI RAVISH SOOD, ADV. ORDER PER H.L. KARWA, VICE PRESIDENT. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A), JALANDHAR DATED 24-6-2010, RELATING TO THE ASSESSMENT YEAR 2002-03. 2. IN THIS APPEAL, THE REVENUE HAS TAKEN THE FOLLOW ING GROUNDS:- 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DIRECTING THE AO TO RECO MPUTE THE DEDUCTION U/S.80HHC IN RESPECT OF DEPB BENEFIT RECE IVED BY THE ASSESSEE IN LIGHT OF THE DIRECTIONS OF THE HON BLE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF M/S.TOPMAN EXP ORTS, MUMBAI VS. THE INCOME TAX OFFICER (OSD), 14(2), MUM BAI IN ITA NO.5769/MUM/2006. 1.1 WHILE DOING SO, THE CIT(A) FAILED TO APPRECIATE THA T: I. WHETHER CIT(A) IS RIGHT IN LAW IN NOT HOLDING TH AT THE TOTAL SALE CONSIDERATION INCLUSIVE OF FACE VALUE OF DEPB AND PREMIUM AMOUNT RECEIVED THEREOF REPRESENTS PROF IT 2 CHARGEABLE UNDER SECTIONS 28(IIID) AND 28(IIIE) OF THE INCOME TAX ACT, 1961? II. WHETHER CIT(A) IS RIGHT IN LAW IN NOT HOLDING T HAT PROFIT ON TRANSFER OF DEPB ENTITLEMENT REPRESENTS THE ENTI RE AMOUNT INCLUSIVE OF PREMIUM OF SALE OF SUCH DEPB. III. WHETHER CIT(A) IS RIGHT IN LAW IN HOLDING THAT THE WORD PROFIT REFERRED TO IN SECTION 28(IIID) AND 28(III E) OF INCOME TAX ACT, 1961 MEANS THE DIFFERENCE BETWEEN T HE SALE PRICE OF DEPB AN THE FACE VALUE OF DEPB IGNORI NG THE FACT THAT THE ENTIRE AMOUNT REPRESENTS THE PROF IT IN THE HANDS OF ASSESSEE. IV. WHETHER CIT(A) IS RIGHT IN LAW IN DEDUCTING THE FAC E VALUE OF DEPB FROM SALE PRICE OF DEPB FOR CALCULATI NG PROFIT UNDER SECTION 28(IIID) AND 28(IIIE) OF INCOM E TAX ACT, 1961 AS IF THE FACE VALUE IS THE COST INCURRED BY THE ASSESSEE TO ACQUIRE THE DEPB. V. WHETHER CIT(A) IS RIGHT IN LAW IN HOLDING THAT T HE WORD PROFIT REFERRED TO IN SECTIONS 28(IIID) AND 28(IIIE ) OF THE INCOME TAX ACT, 1961 REQUIRES ANY ARTIFICIAL COST T O BE INTERPOLATED TO THE EXTENT THAT THE FACE VALUE OF DEPB/DFRC SHOULD BE DEDUCTED FROM THE SALE PROCEED FOR THE PURPOSE OF DETERMINATION OF DEDUCTION UNDER SECTION 80HHC OF THE INCOME TAX ACT, 1961? V. THAT THE CIT(A) FAILED TO APPRECIATE THAT DEDUCTION U/S.80HHC OF THE INCOME TAX ACT, 1961WAS RIGHTLY COMPUTED IN ACCORDANCE WITH AMENDMENT MADE BY THE TAXATION LAW (AMENDMENT) ACT, 2005 WITH RETROSPECTI VE EFFECT FROM 1-4-1998. 2. THAT, IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE SET-ASIDE AN THAT OF THE ASSESSING OFFICER RESTORED. 3. THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AN D DISPOSE OF. 3 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT I N THE RETURN OF INCOME FILED ON 28-10-2002, THE ASSESSEE CLAIMED DEDUCTION U/S.80HHC OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) AMOUNTIN G TO RS.1,95,17,718/-. THE A.O. REQUESTED THE ASSESSEE TO SUBMIT NECESSARY AND SUFFICIENT EVIDENCE TO PROVE THE GENUINENESS OF THE CLAIM OF DEDUCTION U/S.80HHC OF THE ACT IN VIEW OF 3 RD AND 4 TH PROVISOS BELOW SECTION 80HHC(3) OF THE ACT, INSERT ED BY THE TAXATION LAWS (AMENDMENT) ACT, 2005. IN RESPON SE TO THIS QUERY, THE ASSESSEE INFORMED THE A.O. THAT THE PREMIUM ON SALE OF LICENSE WAS RECEIVED UNDER THE DEPB SCHEME. THE A.O. CAME TO THE CONCLUS ION THAT SINCE THE ASSESSEE HAD FAILED TO SHOW THAT IT SATISFIED THE C ONDITIONS PRESCRIBED IN THE 3 RD PROVISO TO SECTION 80HHC(3) OF THE ACT, DEDUCTION U/S.80HHC WAS NOT ALLOWABLE TO IT. THE A.O. ISSUED THE NOTICE UNDER SECTION 148 OF THE ACT ON THE GROUND THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT BY WAY OF EXCESS DEDUCTION U/S.80HHC. AFTER AFFORDING AN OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE, THE A.O. TOOK A VIEW THAT NO DEDUC TION IS ALLOWABLE TO THE ASSESSEE UNDER SECTION 80HHC OF THE ACT, 4. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE A SSESSEE OBSERVING AS UNDER:- 3.3 IN LIGHT OF THE DECISION OF HONBLE JURISDICTI ONAL TRIBUNAL IN THE CASE OF APPELLANT ITSELF (SUPRA), IT IS HELD THAT T HE ENTIRE SALE PROCEEDS OF DEPB ARE NOT CHARGEABLE TO TAX U/S.23(IIID) OF T HE ACT. THE FACE VALUE OF THE DEPB IS HELD TO BE CHARGEABLE AS INCOM E U/S.28(IIID) OF THE ACT AND THE DIFFERENCE BETWEEN THE SALE PROCEED S OF DEPB AND ITS ACE VALUE IS ONLY CHARGEABLE U/S.28(IIID) OF THE AC T. THE A.O. IS DIRECTED TO RECOMPUTE THE DEDUCTION U/S.80HHC ALLOW ABLE TO THE ASSESSEE AFTER OBTAINING COMPLETE PARTICULARS AND I N LIGHT OF THE DIRECTION OF HONBLE TRIBUNAL IN THE ASSESSEES CAS E FOR ASSTT. YEAR 2003-04 (SUPRA).GROUND NOS.4 AND 5 ARE, THEREFORE, PARTLY ALLOWED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE 4 MATERIAL AVAILABLE ON RECORD. THE ISSUE INVOLVED I N THIS APPEAL IS WITH REGARD TO THE ASSESSEES CLAIM OF DEDUCTION U/S.80H HC WITH REFERENCE TO THE DEPB (DUTY ENTITLEMENT PASS BOOK). WE FIND THA T A SIMILAR ISSUE CAME BEFORE THIS BENCH OF THE TRIBUNAL IN THE CASES OF M/S. VICTOR FORGINGS, JALANDHAR VS. ASSTT. C.I.T., RANGE II, JA LANDHAR AND OTHERS IN I.T.A. NOS.611 & 612ASR)/2008, RELATING TO THE ASSE SSMENT YEARS 2003- 04 AND 2004-05 AND THE TRIBUNAL DECIDED THE ISSUE I N FAVOUR OF THE DEPARTMENT AND AGAINST THE ASSESSEE FOLLOWING THE D ECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KALPATARU COLOURS & CHEMICALS, MUMBAI VS. ADDL. C.I.T. (2009) 318 ITR ( AT) 87 (MUMBAI). IN PARA 4 OF THE ORDER, THIS TRIBUNAL OBSERVED AS U NDER:- 4. THE ISSUE INVOLVED IN THESE APPEALS IS WITH REG ARD TO THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80HHC W ITH REFERENCE TO THE DEPB (DUTY ENTITLEMENT PASS BOOK) AND DFRS (DUT Y FREE REMISSION SCHEME) WITHIN THE MEANING OF EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT READ WITH SECTION 28(IIID) AND (IIIE) OF THE ACT. THIS ISSUE WAS DECIDED BY THE TRIBUNAL IN THE FIRST ROUND IN THE LIGHT OF THE VIEW TAKEN BY THE SPECIAL BENCH OF THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI IN THE CASE OF TOPMAN EX PORTS, MUMBAI VS. ITO AND IN THE CASE OF KALPATARU COLOURS & CHEM ICALS, MUMBAI VS. ADDL. C.I.T.(SUPRA) AGAINST WHICH THE DEPARTMEN T PREFERRED AN APPEAL BEFORE THE HONBLE PUNJAB & HARYANA HIGH COU RT. FROM THE ORDER OF THE HONBLE HIGH COURT, IT IS CLEAR TO US THAT THE AFORESAID DECISION OF THE SPECIAL BENCH OF THE INCOME TAX APP ELLATE TRIBUNAL, MUMBAI IN THE CASE OF TOPMAN EXPORTS, MUMBAI VS. IT O AND IN THE CASE OF KALPATARU COLOURS & CHEMICALS, MUMBAI VS. A DDL. C.I.T. (SUPRA) HAS BEEN REVERSED BY THE HONBLE MUMBAI HIG H COURT IN THE CASE OF CIT VS. KALPATARU COLOURS & CHEMICALS, (201 0) 328 ITR 451(BOM). THE HONBLE PUNJAB & HARYANA HIGH COURT WHILE REMITTING THIS MATTER BACK TO THE TRIBUNAL FOR FRES H DECISION IN ACCORDANCE WITH LAW, HAS OBSERVED THAT THEIR LORDSH IPS ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE HONBLE BOMBAY HIGH COURT, WHICH GOES TO SHOW THAT THE VIEW TAKEN BY THE HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS & CH EMICALS (SUPRA) 5 HAS BEEN ACCEPTED BY THE HONBLE PUNJAB AND HARYANA HIGH COURT. VARIOUS ASPECTS OF THE MATTER RELATING TO THE DEDUC TION OF THE CLAIM UNDER SECTION 80HHC WITH REFERENCE TO THE DEPB AN D FRS HAS BEEN ELABORATELY CONSIDERED BY THE HONBLE BOMBAY HIGH C OURT IN THE ABOVE-REFERRED CASE OF CIT VS. KALPATARU COLOURS & CHEMICALS (SUPRA). 6. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS & CHEMICALS (SUPRA) HELD AND OBSERVED AS UN DER:- D. THE LEGISLATIVE SCHEME SECTION 28 AND SECTION 80H HC 9. AT THE OUTSET IT WOULD BE NECESSARY TO ADVERT TO THE LEGISLATIVE SCHEME UNDERLYING THE PROVISIONS OF SECTION 28 ON THE ONE HAND AND SECTION 80HHC ON THE OTHER. (I) CLAUSES (IIIA), (IIIB) AND (IIIC) OF SECTION 28 10. SECTION 28 ELUCIDATES INCOMES WHICH SHALL BE CH ARGEABLE TO INCOME TAX UNDER THE HEAD OF PROFITS AND GAINS OF BUSINES S OR PROFESSION. CLAUSES (IIIA), (IIIB) AND (IIIC) WERE INSERTED INT O THE SECTION BY THE FINANCE ACT OF 1990. CLAUSE (IIIA) WAS INSERTED WITH RETROS PECTIVE EFFECT FROM 1 APRIL 1962, CLAUSE (IIIB) WITH EFFECT FROM 1 APRIL 1967 A ND CLAUSE (IIIC) WITH EFFECT FROM 1 APRIL 1972. CLAUSES (IIIA), (IIIB) AND (IIIC ) AS INSERTED INTO SECTION 28 PROVIDE AS FOLLOWS : (IIIA) PROFITS ON SALE OF A LICENCE GRANTED UNDER THE IMPORTS (CONTROL) ORDER 1955, MADE UNDER THE IMPORTS AND EXPORTS (CONTROL) ACT, 1947 (18 OF 1947); (IIIB) CASH ASSISTANCE (BY WHATEVER NAME CALLED) RE CEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVERNMENT OF INDIA; (IIIC) ANY DUTY OF CUSTOMS OR EXCISE REPAID OR REPA YABLE AS DRAWBACK TO ANY PERSON AGAINST EXPORTS UNDER THE CUSTOMS AND CE NTRAL EXCISE DUTIES DRAWBACK RULES, 1971. 11. PRIOR TO THE INSERTION OF CLAUSES (IIIA) TO (II IIC), THE QUESTION AS REGARDS THE TAXABILITY OF EXPORT INCENTIVES WAS DEALT WITH IN A JUDGMENT OF THIS COURT IN METAL ROLLING WORKS PVT. LTD. V. COMMISSIONER OF INCOME TAX3 AND BY THE ALLAHABAD HIGH COURT IN AGRA CHAIN MANUFACTURING CO. V. COMMISSIONER OF INCOME T AX4 . THE PREVAILING VIEW OF THESE TWO COURTS WAS THAT IN THE CASE OF AN ASSESSEE WHO IS ENGAGED IN EXPORTS IMPORT ENTITLEME NTS RECEIVED 3 (1983) 142 ITR 170 (BOM.) AND BY THE ALLAHABAD HIGH COURT IN AGRA CHAIN MFG. CO. V. CIT [1978] 114 (1978) 114 ITR 840 (ALLAHABAD ). THE PREVAILING VIEW 6 OF THESE TWO COURTS WAS THAT IN THE CASE OF AN ASSE SSEE WHO IS ENGAGED IN EXPORTS IMPORT ENTITLEMENTS RECEIVED UNDER INCEN TIVE SCHEMES OF THE GOVERNMENT OF INDIA WOULD BE TAXABLE UNDER CLAUSE U NDER CLAUSE (IV) OF SECTION 28 AS THE VALUE OF A BENEFIT, WHETHER CONVE RTIBLE INTO MONEY OR OTHERWISE ARISING FROM BUSINESS OR THEEXERCISE OF A PROFESSION. HOWEVER, THERE APPEARED TO BE A CONFLICT OFOPINION AMONG COU RTS ON THE ISSUE WHICH WAS RESOLVED BY PARLIAMENTBY THE INSERTION OF CLAUS ES (IIIA), (IIIB) AND (IIIC) BY THE FINANCE ACT OF1990. WHILE EXPLAINING THE REA SONS UNDERLYING THE AMENDMENT, CIRCULAR 572 DATED 3 AUGUST 1990 OF THE BOARD NOTED THAT AT THAT POINT IN TIME THE INCENTIVES WHICH WERE GIVEN TO EXPORTERS FELL INTOTHREE CATEGORIES (I) CASH COMPENSATORY SUPPORT; (II) DRAW BACK OF DUTY AND (III) IMPORT ENTITLEMENT LICENCE. THE VIEW OF THE REVENUE HAD ALL ALONG BEEN THAT SUCH EXPORT INCENTIVES WERE REVENUE RECEIPTS A ND WERE TAXABLE, WHETHER THEY TOOK THE FORM OF CASH COMPENSATORY SUP PORT, A DRAWBACK OF DUTY OR A PROFIT ON THE SALE OF AN IMPORT ENTITLEME NT LICENCE. PARLIAMENT STEPPED IN TO SETTLE THE QUESTION AS REGARDS THE TA XABILITY OF THESE INCENTIVES BY ENACTING WITH RETROSPECTIVE EFFECT TH AT PROFITS ON THE SALE OF AN IMPORT LICENCE, CASH ASSISTANCE UNDER ANY SCHEME OF THE CENTRAL GOVERNMENT AND A DRAWBACK OF DUTY OF CUSTOMS OR EXC ISE WOULD CONSTITUTE INCOME THAT WOULD BE CHARGEABLE TO INCOME TAX UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS. CLAUSES (IIIA), (IIIB) AND ( IIIC) THEREFORE CONSTITUTE A RECOGNITION BY PARLIAMENT THAT THE THREE FORMS IN W HICH INCENTIVES WERE GRANTED BY THE UNION GOVERNMENT VIZ. IMPORT LICENCE , CASH COMPENSATORY ASSISTANCE AND A DRAWBACK OF DUTY WOULD CONSTITUTE TAXABLE INCOME THAT WOULD BE EXIGIBLE TO INCOME TAX. (II) THE DEPB SCHEME UNDER THE EXIM POLICY 12. WITH EFFECT FROM 1 APRIL 1997 THE EXIM POLICY C AME TO RECOGNIZE AN ADDITIONAL FORM OF EXPORT INCENTIVES, IN THE NATURE OF THE DUTY ENTITLEMENT PASS BOOK SCHEME. THE EXIM POLICY FOR THE PERIOD 1 APRIL 1997 TO 31 MARCH 2002 ELUCIDATES THE NATURE OF EXPORT INCENTIV ES. THE POLICY CLARIFIES IN CHAPTER VII THAT THE ADVANCE LICENCE SCHEME ENAB LES THE IMPORT OF INPUTS REQUIRED FOR EXPORT PRODUCTION. ON THE OTHER HAND, THE DUTY EXEMPTION SCHEME ENABLES POST EXPORT REPLENISHMENT / REMISSION OF THE DUTY ON INPUTS USED IN THE EXPORT PRODUCT. AN ADVAN CE LICENCE IS ISSUED UNDER THE DUTY EXEMPTION SCHEME TO ALLOW IMPORT OF INPUTS WHICH ARE PHYSICALLY INCORPORATED IN THE EXPORT PRODUCT. PARA GRAPH 7.3(A) STATES THAT AN ADVANCE LICENCE IS ISSUED FOR THE DUTY FREE IMPO RT OF INPUTS SUBJECT TO AN ACTUAL USER CONDITION. 13. THE DUTY ENTITLEMENT PASS BOOK SCHEME IS EXPLAI NED IN PARAGRAPH 7.14 OF THE POLICY. THE SCHEME IS AN OPTIONAL FACI LITY WHICH IS GRANTED TO EXPORTERS WHO ARE NOT DESIROUS OF GOING THROUGH THE LICENSING ROUTE. THE OBJECT OF THE DEPB SCHEME IS TO NEUTRALIZE THE INCI DENCE OF CUSTOMS DUTY ON THE IMPORT CONTENT OF THE EXPORT PRODUCT. NEUTRA LIZATION IS PROVIDED BY GRANTING A DUTY CREDIT AGAINST THE EXPORT PRODUCT. THE MANNER IN WHICH THE 7 DEPB SCHEME OPERATES IS THAT AN EXPORTER IS ALLOWED TO APPLY FOR CREDIT WHICH IS COMPUTED AS A SPECIFIED PERCENTAGE OF THE FOB VALUE OF EXPORTS MADE IN FREELY CONVERTIBLE CURRENCY. THE EXPORT PRO DUCTS AND THE RATES GOVERNING THE GRANT OF DEPB CREDIT ARE NOTIFIED. TH E DEPB CREDIT AND ITEMS IMPORTED AGAINST IT ARE MADE FREELY TRANSFERA BLE UNDER PARAGRAPH 7.16. THE DUTY CREDIT UNDER THE SCHEME IS CALCULATE D BY TAKING INTO ACCOUNT WHAT IS DESCRIBED AS A DEEMED IMPORT CONTEN T OF THE EXPORT PRODUCT IN ACCORDANCE WITH STANDARD INPUT OUTPUT NO RMS AND THE BASIC CUSTOMS DUTY PAYABLE ON SUCH DEEMED IMPORT. IN OTHE R WORDS, THE CREDIT WHICH IS MADE AVAILABLE TO AN EXPORTER UNDER THE DE PB SCHEME REPRESENTS A SPECIFIED PERCENTAGE OF THE FOB VALUE OF THE GOODS EXPORTED. THE GOODS WHICH ARE EXPORTED NEED NOT, AS A MATTER OF FACT, NECESSARILY UTILIZE IMPORTED INPUTS. THE POLICY CAL CULATES A DEEMED IMPORT CONTENT ON THE BASIS OF STANDARD INPUT OUTPUT NORMS AND A CREDIT IS MADE AVAILABLE TO THE EXPORTER. THE CREDIT NEED NOT BEUT ILIZED BY THE EXPORTER HIMSELF NOR FOR THAT MATTER IS IT NECESSARY FOR THE EXPORTER TO UTILIZE THE GOODS THAT MAY BE IMPORTED AGAINST THE UTILIZATION OF THE DEPB CREDIT. THE DEPB CREDIT IS TRANSFERABLE. (III) SECTION 80HHC PROFITS RECEIVED FROM EXPORT 14. UNDER SUB SECTION (1) OF SECTION 80HHC, A DEDUC TION IS ALLOWED TO THE EXTENT OF PROFITS DERIVED BY THE ASSESSEE FROM TH E EXPORT OF GOODS TO WHICH THE SECTION APPLIES. SINCE THE DEDUCTION IS I N RESPECT OF PROFITS DERIVED FROM EXPORT, PARLIAMENT HAS IN SUB SECTION (3) LAID DOWN A FORMULA ON THE BASIS OF WHICH EXPORT PROFITS HAVE TO BE COM PUTED. SUB SECTION (3) OF SECTION 80HHC CONSISTS OF THREE CLAUSES. CLAUSE (A) DEALS WITH THE EXPORT OF GOODS MANUFACTURED OR PROCESSED BY THE AS SESSEE; CLAUSE (B) DEALS WITH THE EXPORT OF TRADING GOODS AND CLAUSE ( C) DEALS WITH THE EXPORT OF GOODS MANUFACTURED OR PROCESSED BY THE ASSESSEE AND OF TRADING GOODS. SUB SECTION (3) OF SECTION 80HHC READS AS FO LLOWS : (3)(A) WHERE THE EXPORT OUT OF INDIA IS OF GOODS O R MERCHANDISE MANUFACTURED OR PROCESSED BY THE ASSESSEE, THE PROF ITS DERIVED FROM SUCH EXPORT SHALL BE THE AMOUNT WHICH BEARS TO THE PROFI TS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT O F SUCH GOODS BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E ASSESSEE; (B) WHERE THE EXPORT OUT OF INDIA IS OF TRADING GOO DS, THE PROFITS DERIVED FROM SUCH EXPORT SHALL BE THE EXPORT TURNOVER IN RE SPECT OF SUCH TRADING GOODS AS REDUCED BY THE DIRECT COSTS AND INDIRECT C OSTS ATTRIBUTABLE TO SUCH EXPORT; (C) WHERE THE EXPORT OUT OF INDIA IS OF GOODS OR ME RCHANDISE MANUFACTURED OR PROCESSED BY THE ASSESSEE AND OF TRADING GOODS, THE PROFITS DERIVED FROM SUCH EXPORT SHALL - I) IN RESPECT OF THE GOODS OR MERCHANDISE MANUFACTU RED OR PROCESSED BY THE ASSESSEE, BE THE AMOUNT WHICH BEARS TO THE ADJU STED PROFITS OF THE 8 BUSINESS, THE SAME PROPORTION AS THE ADJUSTED EXPOR T TURNOVER IN RESPECT OF SUCH GOODS BEARS TO THE ADJUSTED TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE; AND (II) IN RESPECT OF TRADING GOODS, BE THE EXPORT TUR NOVER IN RESPECT OF SUCH TRADING GOODS AS REDUCED BY THE DIRECT AND INDIRECT COSTS ATTRIBUTABLE TO EXPORT OF SUCH TRADING GOODS. 15. UNDER CLAUSE (A) OF SUB SECTION (3) THE EXPRESS ION PROFITS DERIVED FROM EXPORT ARE DEFINED TO BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVE R IN RESPECT OF SUCH GOODS BEARS TO THE TOTAL TURNOVER OF THE BUSINESS C ARRIED ON BY THE ASSESSEE. IN OTHER WORDS, THE PROPORTION BETWEEN TH E EXPORT TURNOVER TO THE TOTAL TURNOVER OF THE BUSINESS IS APPLIED TO TH E PROFITS OF THE BUSINESS OF THE ASSESSEE AND THE RESULT CONSTITUTES EXPORT PROF ITS. HOWEVER, WHERE AN ASSESSEE CARRIES ON THE BUSINESS OF EXPORT OF TRADI NG GOODS, CLAUSE (B) DEFINES EXPORT PROFITS TO BE THE EXPORT TURNOVER IN RESPECT OF SUCH TRADING GOODS WHICH IS TO BE REDUCED BY THE DIRECT AND INDI RECT COSTS ATTRIBUTABLE TO THE EXPORT. PROFITS OF BUSINESS 16. IN THE APPLICATION OF THE FORMULA TO A MANUFACT URER EXPORTER, CLAUSE (A) REFERS TO THE PROFITS OF THE BUSINESS. THE EXPRESSI ON PROFITS OF THE BUSINESS IS ELUCIDATED IN EXPLANATION (BAA) TO SECTION 80HHC . EXPLANATION (BAA) IS TO THE FOLLOWING EFFECT : (BAA) PROFITS OF THE BUSINESS MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION AS REDUCED BY - 1) NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSE S (IIIA), (IIIB), (IIIC), (IIID) AND (IIIE) OF SECTION 28 OR OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR A NY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFITS; AND (2) THE PROFITS OF ANY BRANCH, OFFICE, WAREHOUSE OR ANY OTHER ESTABLISHMENT OF THE ASSESSEE SITUATE OUTSIDE INDIA . 17. THE EXPRESSION PROFITS OF THE BUSINESS MEANS PROFITS AS COMPUTED UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SECTIONS 28 TO 44D AND THEY ARE THEREUPON TO BE RED UCED TO THE EXTENT PROVIDED BY CLAUSES (1) AND (2). CLAUSE (1) AS IT N OW STANDS IS BIFURCATED IN TWO PARTS. THE FIRST CONSISTS OF THE SUMS REFERR ED TO IN CLAUSES (IIIA), (IIIB), (IIIC), (IIID) AND (IIIE) OF SECTION 28; AN D THE SECOND CONSISTS OF RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFITS. THE FIRST PART OF CLAUSE (1) PROVIDES FOR THE EXCLUSION OF NINETY PER CENT OF INCENTIVE PROFITS (THOSE REFERRED TO IN CLAUSES (IIIA) TO (IIIE) OF S ECTION 28) AND INDEPENDENT INCOMES WHICH ARE NOT RELATABLE TO EXPORTS. 9 RATIONALE FOR EXCLUSION OF INDEPENDENT INCOMES AND INCENTIVE PROFITS 18. THE RATIONALE FOR THIS EXCLUSION IS EXPLAINED I N THE JUDGMENT OF THE SUPREME COURT IN THE COMMISSIONER OF INCOME TAX V. K.RAVINDRANATHAN NAIR5 . THE SUPREME COURT HELD THAT THE EXPRESSION DERIVED FROM THAT IS USED IN SUB SECTI ON (1) OF SECTION 80HHC IS NARROWER IN ITS AMBIT THAN THE WORDS ATTRIBUTAB LE TO AND CONSEQUENTLY, IT IS ONLY PROFITS THAT ARE DERIVED FROM EXPORT THAT Q UALIFY FOR A DEDUCTION. THE SECOND IMPORTANT FACET OF THE JUDGMENT OF THE SUPRE ME COURT IS IN EXPLAINING THE PROVISIONS OF EXPLANATION (BAA). THE SUPREME COURT HAS OBSERVED THAT WHAT THE EXPLANATION POSTULATES IS TH AT THOUGH INCENTIVE PROFITS AND INDEPENDENT INCOMES CONSTITUTE A PART O F THE GROSS TOTAL INCOME, THEY HAVE TO BE EXCLUDED FROM THE GROSS TOTAL INCOME BECAUSE SUCH RECEIPTS H AVE NO NEXUS WITH THE EXPORT TURNOVER. IN REFERRING TO INCENTIVE PROFITS THE SUPREME COURT HAD IN CONTEMPLATION CLAUSES (IIIA) TO (IIIE) OF SECTION 2 8. SIMILARLY, THE INDEPENDENT INCOMES TO WHICH A REFERENCE HAS BEEN M ADE IN THE JUDGMENT OF THE SUPREME COURT ARE RECEIPTS BY WAY O F BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES AND ANY OTHER R ECEIPT OF A SIMILAR NATURE INCLUDED IN THE PROFITS OF THE BUSINESS. (IV) THE AMENDMENT OF 2005 : CLAUSES (IIID) AND (IIIE) O F SECTION 28 19. THE REFERENCE TO CLAUSES (IIID) AND (IIIE) IN E XPLANATION (BAA) TO SECTION 80HHC WAS BROUGHT IN UNDER THE TAXATION LAWS (AMEND MENT) ACT 2005. THE AMENDING ACT BROUGHT ABOUT A CORRESPONDING AMENDMENT TO SECTION 28 BY THE INSERT ION OF CLAUSES (IIID) AND (IIIE). CLAUSES (IIID) AND (IIIE) AS INSERTED I NTO SECTION 28 BY THE AMENDING ACT OF 2005 ARE TO THE FOLLOWING EFFECT : (IIID) ANY PROFIT ON THE TRANSFER OF THE DUTY ENT ITLEMENT PASS BOOK SCHEME BEING THE DUTY REMISSION SCHEM E UNDER THE EXPORT AND IMPORT POLICY FORMULATED AND ANNO UNCED UNDER SECTION 5 OF THE FOREIGN TRADE (DEVELOPME NT AND REGULATION) ACT, 1992 (22 OF 1992); (IIIE) ANY PROFIT ON THE TRANSFER OF THE DUTY FREE REPLENISHMENT CERTIFICATE, BEING THE DUTY REMISSION SCHEME UNDER THE EXPORT AN D IMPORT POLICY FORMULATED AND ANNOUNCED UNDER SECTION 5 OF THE FOR EIGN TRADE (DEVELOPMENT AND REGULATION) ACT, 1992 (22 OF 1992) . 20. CLAUSE (IIID) CONTEMPLATES THAT ANY PROFIT ON T HE TRANSFER OF THE DUTY ENTITLEMENT PASS BOOK SCHEME WOULD BE CHARGEABLE TO INCOME TAX AS A BUSINESS PROFIT. THE CIRCUMSTANCES IN WHICH THE AME NDMENT WAS BROUGHT ABOUT WOULD HAVE A BEARING ON THE SUBJECT MATTER OF THE CONTROVERSY IN THE PRESENT CASE AND WILL THEREFORE NEED SOME ELABORATI ON. IN P & G ENTERPRISES (SUPRA) A BENCH OF THE INCOME TAX APPELLATE TRIBUNAL AT DELHI CONSIDERED THE CASE OF AN EXPORTER TO WHOM A CREDIT WAS AVAILABLE UNDER THE DUTY ENTITLEMENT PASS BOOK SCHEME. THE DE PB CREDIT WAS 10 TRANSFERRED AND THE RECEIPTS WERE SHOWN AS BUSINESS RECEIPTS UNDER SECTION 28(IIIA). THE ASSESSING OFFICER HELD THAT T HE RECEIPTS UPON THE TRANSFER OF THE DEPB ENTITLEMENT FELL FOR CLASSIFIC ATION UNDER SECTION 28(IV) AND HE EXCLUDED NINETY PERCENT OF THOSE RECEIPTS UN DER SECTION 80HHC. THE COMMISSIONER (APPEALS) HELD THAT THE RECEIPTS W ERE IN THE NATURE OF REVENUE RECEIPTS AND THE ENTIRETY OF THOSE RECEIPTS WAS ASSESSABLE AS BUSINESS RECEIPTS UNDER SECTION 28(IV). THE COMMISS IONER HELD THAT THOSE RECEIPTS WERE NOT DERIVED FROM EXPORT THOUGH THEY M AY HAVE BEEN ATTRIBUTABLE TO THAT BUSINESS AND UPHELD THE ACTION OF THE ASSESSING OFFICER IN EXCLUDING NINETY PERCENT OF THE DEPB RECEIPTS UN DER EXPLANATION (BAA). BEFORE THE TRIBUNAL THERE WAS NO DISPUTE ABOUT THE FINDING THAT THE DEPB RECEIPTS WERE IN THE NATURE OF REVENUE AND THAT THE ENTIRETY OF THOSE RECEIPTS WAS CHARGEABLE TO TAX UNDER SECTION 28(IV) . THE TRIBUNAL HELD THAT SECTION 28(IV) WAS NOT REFERRED TO IN EXPLANAT ION (BAA) AND THE OMISSION TO INCLUDE THAT PROVISION SUGGESTED THAT T HE LEGISLATURE DID NOT INTEND THE EXCLUSION OF NINETY PERCENT OF THOSE INC OMES WHICH FELL WITHIN THE PURVIEW OF SECTION 28(IV). THE TRIBUNAL WAS ALS O OF THE VIEW THAT DEPB RECEIPTS DID NOT CONSTITUTE A RECEIPT OF A SIMILAR NATURE WITHIN THE MEANING OF EXPLANATION (BAA) AND WERE NOT THEREFORE LIABLE TO BE REDUCED IN COMPUTING THE PROFITS OF BUSINESS. THE JUDGMENT OF THE TRIBUNAL WOULD THEREFORE SHOW THAT (I) THE ENTIRETY OF THE DEPB RE CEIPTS WERE TREATED AS OF A REVENUE NATURE; (II) THE DEPB RECEIPTS WERE HE LD TO FALL WITHIN THE PURVIEW OF SECTION 28(IV); AND (III) SUCH RECEIPTS WEREHELD NOT TO BE SUSTAINABLE TO A REDUCTION OF NINETY PERCENT UNDER EXPLANATION (BAA). 21. IT IS IN THIS BACKGROUND THAT PARLIAMENT STEPPE D IN BY AMENDING SECTION 28 AND CORRESPONDINGLY, EXPLANATION (BAA), SO AS TO SPECIFICALLY BRING IN DEPB RECEIPTS WITHIN THE FOLD OF TAXABILIT Y UNDER SECTION 28. THE FACT THAT THE ENTIRETY OF THE DEPB RECEIPTS WAS TAX ABLE WAS ELUCIDATED IN THE JUDGMENT OF THE TRIBUNAL. THE TRIBUNAL HAD, HOW EVER, HELD THAT SUCH RECEIPTS WERE NOT LIABLE TO SUSTAIN A REDUCTION OF NINETY PERCENT UNDER EXPLANATION (BAA). PARLIAMENT CONSIDERED IT APPROPR IATE TO AMEND SECTION 28 BY BRINGING IN A SPECIFIC PROVISION THAT WOULD C OVER DEPB RECEIPTS ON THE ONE HAND AND BY CLARIFYING THROUGH THE AMENDMEN T OF EXPLANATION (BAA) THAT DEPB RECEIPTS ALSO CONSTITUTE INCENTIVE PROFITS WHICH WERE LIABLE TO SUSTAIN A REDUCTION OF NINETY PERCENT. 22. PARLIAMENT INCORPORATED SEVERAL PROVISOS TO SUB SECTION (3) OF SECTION 80HHC. UNDER THE FIRST PROVISO THE PROFI TS COMPUTED UNDER CLAUSES (A), (B) OR (C) OF SUB SECTION (3) HAVE TO BE INCREASED BY THE AMOUNT WHICH BEARS TO NINETY PERCENT OF ANY SUM REF ERRED TO ANY CLAUSES (IIIA), (IIIB) AND (IIIC) OF SECTION 28, THE SAME P ROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINES S CARRIED ON BY THE ASSESSEE. THE SECOND AND THIRD PROVISOS TO SUB SECT ION (3) ARE OF SOME SIGNIFICANCE IN THE PRESENT CASE AND THEY READ AS F OLLOWS : 11 PROVIDED FURTHER THAT IN THE CASE OF AN ASSESSEE H AVING EXPORT TURNOVER NOT EXCEEDING RUPEES TEN CRORES DURING THE PREVIOUS YEAR, THE PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF THIS SUB SECTION OR AFTER GIVING EFFECT TO THE FIRS T PROVISO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOUNT WH ICH BEARS TO NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSE (I IID) OR CLAUSE (IIIE) AS THE CASE MAY BE, OF SECTION 28, THE SAME PROPORT ION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE; PROVIDED ALSO THAT IN THE CASE OF AN ASSESSEE HAVIN G EXPORT TURNOVER EXCEEDING RUPEES TEN CRORES DURING THE PRE VIOUS YEAR, THE PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF THIS SUB SECTION OR AFTER GIVING EFFECT TO THE FIRST PRO VISO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOUNT WH ICH BEARS TO NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSE (I IID) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE , IF THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVIDENCE TO P ROVE THAT- A) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAWB ACK OR THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMIS SION 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. 23. PARLIAMENT HAS MADE, BY THE SECOND AND THE THI RD PROVISOS A CLASSIFICATION BETWEEN EXPORTERS WITH AN EXPORT TUR NOVER NOT EXCEEDING RS.10 CRORES AND THOSE EXPORTERS WHOSE TURNOVER EXC EEDS THAT AMOUNT. FOR THOSE EXPORTERS WHOSE TURNOVER IS LESS THAN RS. 10 CRORES, PARLIAMENT HAS LEGISLATED THAT THE PROFITS COMPUTED UNDER SUB SECTION (3) OF SECTION 80HHC ARE LIABLE TO A FURTHER INCREASE BY THE AMOUN T WHICH BEARS TO NINETY PERCENT OF THE SUM REFERRED TO IN CLAUSES (I IID) OR (IIIE) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER. IN THE CASE OF AN EXPORTER WITH A TURNOVER IN EXCESS O F RS.10 CRORES, THE GRANT OF THIS ADDITIONAL BENEFIT IS, HOWEVER, CONDI TIONED BY THE FULFILLMENT OF THE TWO CONDITIONS WHICH ARE REFERRED TO THEREIN. T HOSE CONDITIONS ARE THAT THE ASSESSEE MUST HAVE NECESSARY AND SUFFICIENT EVI DENCE THAT (I) HE HAD AN OPTION TO CHOOSE EITHER DUTY DRAWBACK OR THE DUT Y ENTITLEMENT PASS BOOK SCHEME; AND (II) THE RATE OF DUTY DRAWBACK CRE DIT ATTRIBUTABLE TO CUSTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALL OWABLE UNDER THE DEPB SCHEME. BEFORE THIS COURT, IT IS AN ADMITTED POSITI ON, ON WHICH THERE IS NO DISPUTE THAT THE ASSESSEE DID NOT FULFILL THE REQUI REMENT OF THE THIRD PROVISO. 12 WHAT THE TRIBUNAL HAS, HOWEVER, DONE IN THE COURSE OF ITS DECISION IS TO OBSERVE THAT CLAUSE (IIID) OF SECTION 28 WOULD COVE R ONLY THE DIFFERENCE BETWEEN THE SALE CONSIDERATION REALIZED BY THE ASSE SSEE ON THE TRANSFER OF THE DEPB CREDIT AND THE DEPB CREDIT THAT WAS THE SU BJECT OF TRANSFER. AS REGARDS THE DEPB CREDIT, DESCRIBED AS THE FACE VALU E, THE TRIBUNAL OBSERVED THAT IT WAS LIABLE TO BE BROUGHT IN UNDER SECTION 28(IIIB). E. ANY PROFIT ON THE TRANSFER OF DEPB CREDIT 24. THE SUBMISSION WHICH HAS BEEN URGED BEFORE THE COURT BY THE ASSESSEE IS THAT SECTION 28(IIID) BRINGS WITHIN THE FOLD OF INCOME CHARGEABLE TO TAX ANY PROFIT ON THE TRANSFER OF THE DUTY ENTITLEMENT PASS BOOK SCHEME. ACCORDING TO THE ASSESSEE, THE EXPRESS ION PROFIT MEANS THE DIFFERENCE BETWEEN THE SALE CONSIDERATION REALIZED FROM THE TRANSFER OF THE DEPB RECEIPTS AND THE FACE VALUE OF THE DEPB CREDIT THAT HAS BEEN TRANSFERRED. THE TRIBUNAL, WHILE ACCEPTING THE CONT ENTION OF THE ASSESSEE HAS ALSO HELD THAT IT IS ONLY THIS DIFFERENCE WHICH WOULD FALL WITHIN THE PURVIEW OF CLAUSE (IIID) AND THAT THE DEPB CREDIT W OULD FALL WITHIN THE PURVIEW OF CLAUSE (IIIB). (CLAUSE (IIIB) DEALS WITH A CASH ASSISTANCE RECEIVED OR RECEIVABLE UNDER ANY SCHEME OF THE GOVE RNMENT OF INDIA.) 25. EXPORT INCENTIVES, SUCH AS IMPORT LICENSES, CAS H ASSISTANCE, DUTY DRAWBACK, DEPB CREDIT, OR DUTY FREE REPLENISHM ENT CERTIFICATES ARE ALL INTENDED TO ENCOURAGE EXPORTS. THE OBJECT OF THESE INCENTIVES IS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY ON THE IMP ORT CONTENT OF THE EXPORT PRODUCT. UNDER THE INCOME TAX ACT, 1961 NOT ONLY THE PROFITS ON SALE OF AN IMPORT LICENCE AND PROFITS ON TRANSFER O F DEPB CREDIT/DFRC, BUT ALSO THE DUTY DRAWBACK RECEIVED BY AN ASSESSEE ARE CONSIDERED AS PROFITS OF BUSINESS. DUTY DRAWBACK IS NOTHING BUT RECEIVING BACK THE AMOUNT OF DUTY ACTUALLY PAID BY THE ASSESSEE. SIMILARLY, THE DEPB CREDIT IS A CREDIT TO BE UTILIZED IN PAYING THE CUSTOMS DUTY ON GOODS TO BE IMPORTED. WHEN THE DUTY DRAWBACK RECEIVED BY THE ASSESSEE CONSTITUTES PROFITS OF BUSINESS, THEN, IT IS OBVIOUS THAT THE AMOUNT REALIZED ON TRA NSFER OF THE DEPB CREDIT WOULD ALSO BE BUSINESS PROFITS. THUS, THE AMOUNT RE CEIVED ON TRANSFER OF DEPB CREDIT WOULD BE PROFITS OF BUSINESS COVERED UNDER SECTION 28(IIID). 26. CLAUSE (IIIA) TREATS AS INCOME CHARGEABLE TO TA X, PROFITS ON THE SALE OF AN IMPORT LICENCE. WHEN THE LICENCE IS SOLD, THE ENTIRE AMOUNT IS RECEIVED AS PROFIT. THE ENTIRE AMOUNT THAT IS RE CEIVED ON THE SALE OF A LICENCE IS CONSIDERED AS PROFITS OF BUSINESS UNDER SECTION 28(IIIA). SIMILARLY, THE ENTIRE AMOUNT OF CASH ASSISTANCE REC EIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS UNDER A SCHEME OF THE GO VERNMENT OF INDIA IS TREATED AS INCOME FOR THE PURPOSES OF CHARGEABILITY TO TAX. BY CLAUSE (IIIC) THE ENTIRE DUTY OF CUSTOMS OR EXCISE REPAID OR REPA YABLE AS DRAWBACK AGAINST EXPORTS IS ALSO TREATED AS INCOME THAT WOUL D BE SUBJECT TO TAX. 13 UNDER THE EXIM POLICY, THE SCHEME RELATING TO THE D EPB ENTITLEMENT IS IN THE NATURE OF AN OPTION WHICH IS MADE AVAILABLE TO AN EXPORTER WHO DOES NOT WISH TO GO THROUGH THE LICENSING PROCEDURE. THE TRANSFER OF A DEPB CREDIT IS SIMILAR TO TRADING IN A LICENCE. AS WE HA VE NOTED, WHEN A LICENCE IS SOLD, THE HOLDER RECEIVES THE ENTIRE AMOUNT AS P ROFIT WHICH IS TREATED BY THE LEGISLATURE AS PROFITS OF BUSINESS WITHIN THE M EANING OF SECTION 28. LOGICALLY AND AS A MATTER OF FIRST PRINCIPLE, THERE WOULD BE NO JUSTIFICATION FOR THIS COURT TO TREAT THE AMOUNT WHICH IS RECEIVE D BY AN EXPORTER ON THE TRANSFER OF THE DEPB CREDIT ANY DIFFERENTLY THAN TH E PROFITS WHICH ARE MADE ON THE SALE OF AN IMPORT LICENCE UNDER CLAUSE (IIIA ). BOTH WOULD HAVE TO BE TREATED AS PROFITS OF BUSINESS UNDER SECTION (IIID) . 27. PRIOR TO THE INSERTION OF CLAUSE (IIID) IN SEC TION 28, THE DISPUTE WAS, WHETHER THE PROFITS OF BUSINESS SUCH AS THE AMOUNT RECEIVED ON TRANSFER OF DEPB WOULD CONSTITUTE EXPORT PROFIT FOR THE PURPOSE S OF DEDUCTION UNDER SECTION 80HHC OR NOT. ACCORDING TO THE EXPORTERS, T HE ENTIRE AMOUNT RECEIVED ON TRANSFER OF A DEPB CREDIT WOULD CONSTIT UTE EXPORT PROFIT AND ACCORDING TO THE REVENUE IT WOULD NOT. THUS, THERE WAS NO DISPUTE THAT THE ENTIRE AMOUNT RECEIVED ON TRANSFER OF DEPB WAS PROF ITS OF BUSINESS BUT THE DISPUTE WAS WHETHER OR NOT SUCH PROFITS WOULD C ONSTITUTE EXPORT PROFITS. 28. BY THE FINANCE ACT OF 2005, PARLIAMENT RESOLVED THE CONTROVERSY BY INSERTING A SPECIFIC CLAUSE, NAMELY CLAUSE (IIID) I N SECTION 28 TO THE EFFECT THAT PROFITS ON TRANSFER OF DEPB I.E., THE AMOUNT R ECEIVED ON TRANSFER OF DEPB IS INCOME CHARGEABLE TO TAX UNDER THE HEAD P ROFITS AND GAINS OF BUSINESS AND PROFESSION. AS REGARDS THE DEDUCTION U NDER SECTION 80 HHC, THE LEGISLATURE SUBSTITUTED EXPLANATION (BAA) IN SECTION 80HHC SO AS TO EXCLUDE 90% OF THE PROFITS RECEIVED ON TRANSF ER OF DEPB FROM THE PROFITS OF BUSINESS FOR THE PURPOSES OF SECTION 80H HC AND INSERTED THE SECOND AND THIRD PROVISOS TO SECTION 80HHC(3). BY T HE SECOND PROVISO IT WAS PROVIDED THAT IN THE CASE OF AN ASSESSEE HAVING AN EXPORT TURNOVER NOT EXCEEDING RS.10 CRORES, THE PROFITS COMPUTED UN DER SECTION 80HHC(3) SHALL BE INCREASED BY 90% OF THE SUM REFER RED TO IN SECTION 28(IIID). BY THE 3RD PROVISO IT WAS PROVIDED THAT I N THE CASE OF AN ASSESSEE HAVING AN EXPORT TURNOVER EXCEEDING RS.10 CRORES, T HE PROFITS COMPUTED UNDER SECTION 80HHC(3) SHALL BE INCREASED BY 90% OF THE SUM REFERRED TO IN SECTION 28(IIID) SUBJECT TO THE TWO CONDITIONS S ET OUT THEREIN. 29. ADMITTEDLY, IN THE ASSESSMENT YEAR IN QUESTION , THE ASSESSEE HAD AN EXPORT TURNOVER EXCEEDING RS.10 CRORES AND DID N OT FULFILL THE CONDITIONS SET OUT IN THE THIRD PROVISO TO SECTION 80HHC(3),IN TRODUCED BY THE FINANCE ACT OF 2005. AS A RESULT THE ASSESSEE WAS NOT ENTIT LED TO A DEDUCTION UNDER SECTION 80HHC ON THE AMOUNT RECEIVED ON TRANS FER OF DEPB. 30. TO GET OVER THIS DIFFICULTY, THE ASSESSEE CONT ENDS THAT THE 14 PROFITS ON TRANSFER OF DEPB IN SECTION 28(IIID) WOU LD NOT INCLUDE THE FACE VALUE OF THE DEPB SO THAT THE ASSESSEE GETS A DEDUC TION UNDER SECTION 80HHC ON THE FACE VALUE OF THE DEPB. THERE IS NO ME RIT INTHE ABOVE CONTENTION FOR THE FOLLOWING REASONS : A) WHAT IS RECEIVED ON TRANSFER OF THE DEPB CREDIT IS THE PROFIT, BECAUSE DEPB CREDIT UNDER THE DEPB SCHEME IS GIVEN AT A PERCENTAGE OF THE FOB VALUE OF THE EXPORTS, SO AS T O NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY ON THE IMPORT CONTENT OF THE EXPORT PRODUCT. THE DEPB CREDIT IS ALSO GIVEN TO AN EXPORT ER WHO HAS EXPORTED GOODS WITHOUT IMPORTING RAW MATERIALS REQU IRED FOR THE EXPORT. DEPB CREDIT IS GIVEN FOR PAYING CUSTOMS DUT Y ON IMPORT OF GOODS WHICH MAY OR MAY NOT BE UTILIZED IN THE EXPOR T GOODS. WHEN THE DEPB CREDIT IS NOT UTILIZED FOR PAYING CUS TOMS DUTY BUT IS TRANSFERRED FOR ANY SUM, THEN SUCH SUM WOULD BE PRO FITS ON TRANSFER OF DEPB COVERED UNDER SECTION 28(IIID); B) EVEN THE ASSESSEE HAS NOT DISPUTED BEFORE THE CO URT THAT THE ENTIRE AMOUNT RECEIVED ON TRANSFER OF DEPB IS BUSIN ESS INCOME CHARGEABLE TO TAX AS PROFITS OF BUSINESS.HOWEVER, I T IS CONTENDED THAT THE FACE VALUE OF THE DEPB WOULD NOT BE COVERE D UNDER SECTION 28(IIID) BECAUSE IT IS A CREDIT EARNED BY T HE ASSESSEE. WHERE THE DUTY PAID IS RECEIVED BACK AS DUTY DRAWBA CK IT IS ALSO AN AMOUNT EARNED BY THE ASSESSEE, BUT SUCH A RECEIPT I S STILL CONSIDERED AS PROFITS OF BUSINESS. SIMILARLY, THE A MOUNT REALIZED ON TRANSFER OF DEPB, BE IT EQUIVALENT TO THE FACE VALU E OF THE DEPB; MORE THAN THE FACE VALUE OF DEPB; OR LESS THAN THE FACE VALUE OF DEPB, WOULD BE PROFIT ON TRANSFER OF DEPB COVERED U NDER SECTION 28(IIID); C) THE FACT THAT THE ASSESSEE HAD ACCOUNTED FOR THE DEPB CREDIT IMMEDIATELY AFTER MAKING AN APPLICATION SEEKING DEP B CREDIT WOULD MAKE NO DIFFERENCE TO THE TAXABILITY OF THE ENTIRE AMOUNT RECEIVED ON TRANSFER OF THE DEPB CREDIT UNDER SECTION 28(III D). WHAT CONSTITUTES PROFITS UNDER SECTION 28(IIID) IS THE A MOUNT RECEIVED ON TRANSFER OF THE DEPB CREDIT AND NOT THE AMOUNT OF C REDIT WHICH THE ASSESSEE WAS ENTITLED TO UNDER THE DEPB SCHEME.IN O THER WORDS, THE AMOUNT EQUIVALENT TO THE FACE VALUE OF DEPB AS WELL AS THE AMOUNT RECEIVED IN EXCESS OF THE DEPB WOULD CONSTIT UTE PROFITS OF BUSINESS UNDER SECTION 28(IIID) AND MERELY BECAUSE, A PART OF SUCH PROFITS OF BUSINESS (FACE VALUE) WAS OFFERED TO TAX IN THE YEAR IN WHICH THE CREDIT ACCRUED TO THE ASSESSEE WOULD NOT BE A GROUND TO HOLD THAT SUCH PROFIT WAS NOT COVERED UNDER SECTION 28(IIID). WHERE THE FACE VALUE OF THE DEPB CREDIT IS OFFERED TO TAX AS BUSINESS PROFITS UNDER SECTION 28(IIID) IN THE YEAR IN WHICH THE CREDIT ACCRUED TO THE ASSESSEE, THEN ANY FURTHER PROFIT ARISING ON TRANSFER OF DEPB 15 CREDIT WOULD BE TAXED AS PROFITS OF BUSINESS UNDER SECTION 28(IIID) IN THE YEAR IN WHICH THE TRANSFER OF DEPB CREDIT TOOK PLACE. THEREFORE, THE ARGUMENT OF THE ASSESSEE THAT IF THE FACE VALUE OF THE DEPB CREDIT IS HELD TO BE COVERED UNDER SECTION 28(IIID) , IT WOULD AMOUNT TO DOUBLE TAXATION IS WITHOUT ANY MERIT. 31. THERE IS ANOTHER PERSPECTIVE FROM WHICH THE IS SUE CAN BE LOOKED AT. THE DEPB CREDIT TO WHICH AN EXPORTER IS ENTITLED IS A FORM OF AN EXPORT INCENTIVE. THE SUPREME COURT IN RAVINDRANATHAN NAIR S CASE HAS HELD THAT ALL THE INCOMES WHICH FALL WITHIN CLAUSES (III A) TO (IIIE) OF SECTION 28 ARE INCENTIVE INCOMES. AS AN INCENTIVE, THAT IS MADE AVAILABLE TO THE EXPORTER THERE IS NO COST THAT IS ATTACHED TO THE GRANT OF T HE INCENTIVE. THE INCENTIVE, AS WE HAVE ALREADY NOTED, IS CALCULATED AS A PERCEN TAGE OF THE FOB VALUE OF THE GOODS EXPORTED. THE TRIBUNAL IN THE PRESENT CASE RECOGNIZED THE DIFFICULTY IN REDUCING THE FACE VALUE OF THE DEPB C REDIT FROM THE SALE CONSIDERATION WHEN IT OBSERVED, IN PARAGRAPH 48 OF ITS JUDGMENT, THAT NO DOUBT THE EXPORTER DOES NOT DIRECTLY PURCHASE THE D EPB FROM THE MARKET BY INCURRING ANY COST. HAVING SO OBSERVED, THE TRI BUNAL STILL CONSIDERED IT APPROPRIATE TO HOLD THAT CLAUSE (IIID) WOULD ONLY R EFER TO THE DIFFERENCE BETWEEN THE SALE CONSIDERATION AND THE VALUE OF THE DEPB CREDIT. WE FIND NO BASIS OR JUSTIFICATION FOR THE TRIBUNAL TO HAVE DONE SO. 32. WE DO NOT FIND ANY LOGICAL JUSTIFICATION IN BI FURCATING THE VALUE OF THE SALE CONSIDERATION REALIZED BY THE EXPORTER ON THE TRANSFER OF THE DEPB CREDIT. FOR ONE THING CLAUSE (IIID) OF SECTION 28 M UST COVER WITHIN ITS PURVIEW, THE ENTIRETY OF THE SALE CONSIDERATION WHI CH IS REALIZED BY THE EXPORTER ON THE TRANSFER OF THE DEPB CREDIT SINCE T HAT REPRESENTS THE PROFIT WHICH THE EXPORTER OBTAINS ON THE TRANSFER OF THE C REDIT. NO PART OF THE CREDIT THAT IS AVAILABLE UNDER THE DEPB SCHEME CAN FALL FOR CLASSIFICATION UNDER CLAUSE (IIIB) OF SECTION 28 WHICH DEALS WITH CASH ASSISTANCE, RECEIVED OR RECEIVABLE AGAINST ANY SCHEME OF THE GO VERNMENT OF INDIA. AS THE LEGISLATIVE HISTORY OF THE PROVISION WOULD SHOW CLAUSE (IIIB) WAS ENACTED BY PARLIAMENT AT A TIME WHEN THE EXPORT INC ENTIVES THAT WERE AVAILABLE WERE (I) IMPORT ENTITLEMENT LICENCES; (II ) CASH COMPENSATORY SUPPORT; AND (III) DUTY DRAWBACK. THE DEPB SCHEME W AS NOT EVEN IN EXISTENCE WHEN CLAUSE (IIIB) CAME TO BE ENACTED INT O SECTION 28 BY THE FINANCE ACT OF 1990. THE DEPB SCHEME WAS BROUGHT IN TO EXISTENCE WITH EFFECT FROM 1 APRIL 1997. CLAUSE (IIID) OF SECTION 28 WAS INSERTED BY THE AMENDING ACT OF 2005 WITH EFFECT FROM 1 APRIL 1998. THE VALUE OF THE DEPB CREDIT CAN BY NO MEANS BE REGARDED AS A CASH A SSISTANCE WHICH IS RECEIVED OR RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVERNMENT OF INDIA. 33. THE TRIBUNAL HAS RELIED TO A CONSIDERABLE EXTEN T ON A SPEECH MADE BY THE THEN FINANCE MINISTER ON THE FLOOR OF PARLIAMEN T IN SUPPORT OF ITS CONCLUSION THAT ONLY THE PREMIUM REALIZED BY AN EXP ORTER ON THE SALE OF 16 THE DEPB CREDIT WOULD FALL WITHIN THE PURVIEW OF CL AUSE (IIID) OF SECTION 28 AND NOT THE FACE VALUE OF THE DEPB. THE ENTIRE APPR OACH OF THE TRIBUNAL IS WITH RESPECT MISCONCEIVED AND UNSUSTAINABLE. THE FI NANCE MINISTER SOUGHT TO INTRODUCE CLAUSE (IIID)IN SECTION 28 IN V IEW OF THE DECISION OF THE DELHI BENCH OF THETRIBUNAL IN THE CASE OF P & G ENTERPRISES ( SUPRA). THE DISPUTE IN THAT CASE RELATED TO TAXING THE ENTIRE A MOUNT RECEIVED ON THE TRANSFER OF THE DEPB CREDIT AND NOT THE AMOUNT THAT WAS RECEIVED IN EXCESS OF THE FACE VALUE OF THE DEPB CREDIT. AS A M ATTER OF FACT IN THAT CASE THE ASSESSEE HAD CLAIMED THAT THE ENTIRE RECEI PT ON THE TRANSFER OF THE DEPB CREDIT INCLUDING THE FACE VALUE OF THE CRE DIT AS PROFITS UNDER SECTION 28(IIIA). THE TRIBUNAL IN THAT CASE HELD TH AT THE ENTIRETY OF THE AMOUNT WOULD BE COVERED BY SECTION 28(IV). HOWEVER, THE VIEW OF THE TRIBUNAL WAS THAT SINCE EXPLANATION (BAA) IN SECTIO N 80HHC DID NOT ENVISAGE THE EXCLUSION OF PROFITS COVERED BY SECTIO N 28(IV), SUCH PROFITS COULD NOT BE EXCLUDED WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC. HENCE, THERE WAS NO DISPUTE IN CONSIDERING T HE ENTIRETY OF THE RECEIPTS ON THE TRANSFER OF THE DEPB CREDIT AS PROF ITS OF BUSINESS. THE DISPUTE WAS ONLY IN NOT TREATING THE RECEIPTS BY WA Y OF TRANSFER OF THE DEPB CREDIT AS EXPORT RECEIPTS WHILECOMPUTING THE D EDUCTION UNDER SECTION 80HHC. CONSEQUENTLY, THE ENTIRETY OF THE RE CEIPTS ON THE TRANSFER OF THE DEPB CREDIT WHICH WAS SOUGHT TO BE INCLUDED IN SECTION 28(IV) WAS BROUGHT IN BY THE PARLIAMENTARY AMENDMENT IN THE FO RM OF AN INSERTION OF CLAUSE (IIID) IN SECTION 28 WITH RETROSPECTIVE EFFE CT. THERE WAS NO CONTROVERSY REGARDING THE TAXABILITY OF THE QUANTUM OF RECEIPTS ON THE TRANSFER OF THE DEPB CREDIT. HENCE, FOR THESE REASO NS WE ARE OF THE VIEW THAT IT CANNOT BE INFERRED FROM THE SPEECH OF THE F INANCE MINISTER THAT THE INSERTION OF CLAUSE (IIID) IN SECTION 28 WAS MADE W ITH A VIEW TO TAX ONLY THE AMOUNT WHICH HAS BEEN RECEIVED IN EXCESS OF THE FAC E VALUE OF THE DEPB CREDIT. 34. THE SUBMISSION THAT PRIOR TO THE INSERTION OF CLAUSE (IIID) IN SECTION 28, THE FACE VALUE OF THE DEPB CREDIT REALI ZED 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 W ITHOUT ANY BASIS. THIS IS BECAUSE (I) THE OBJECT OF DEPB WAS TO FURNI SH AN INCENTIVE TO EXPORTERS SO AS TO ADJUST THE CREDIT AGAINST THE CU STOMS DUTY PAYABLE ON ANY GOODS IMPORTED INTO INDIA. HOWEVER, WHERE AN EX PORTER INSTEAD OF UTILIZING THE CREDIT TRANSFERS THE CREDIT AT A PREM IUM, IT CANNOT BE SAID THAT THE EXPORTER HAS UTILIZED THE CREDIT; (II) THE LEGI SLATURE CONSIDERS THAT THE CUSTOMS DUTY AND EXCISE DUTY PAID ON RAW MATERIALS USED IN THE EXPORT PRODUCT, WHEN REPAID OR REPAYABLE AS DUTY DRAWBACK, WOULD NOT CONSTITUTE EXPORT PROFIT. SIMILARLY, WHEN THE DEPB CREDIT IS N OT UTILIZED IN THE BUSINESS BUT IS TRANSFERRED FOR VALUE, THE AMOUNT RECEIVED O N THE TRANSFER WOULD BE BUSINESS PROFITS AND NOT EXPORT PROFITS IRRESPECTIV E OF WHETHER THE AMOUNT WHICH IS REALIZED IS EQUAL TO, LARGER THAN OR LESS THAN THE FACE VALUE OF THE 17 DEPB CREDIT. PARLIAMENT HAS CONSIDERED THAT THE ENT IRETY OF THE AMOUNT RECEIVED ON THE TRANSFER OF THE DEPB SHALL CONSTITU TE PROFITS OF BUSINESS UNDER SECTION 28(IIID). SINCE SUCH PROFITS ARE NOT EXPORT PROFITS PARLIAMENT DIRECTED THAT NINETY PERCENT OF THOSE PROFITS WOULD BE EXCLUDED WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC; (III) PARLIAMENT CONSIDERED THAT AN EXPORTER WHO IN STEAD OF UTILIZING THE DEPB CREDIT FOR PAYING CUSTOMS DUTY ON IMPORTED GOO DS, MAKES A PROFIT BY TRANSFERRING THE DEPB, WOULD FORM A SEPARATE CLA SS AND SEEKS TO TAX THE RECEIPTS ON THE TRANSFER OF THE DEPB CREDIT AS BUSINESS PROFITS AND NOT EXPORT PROFITS. EXPORTERS WHO TRANSFER THE DEPB CRE DIT AND MAKE A PROFIT CANNOT BE PLACED ON PAR WITH THOSE EXPORTERS WHO UT ILIZE THE CREDIT FOR PAYING THE CUSTOMS DUTY ON THE IMPORTED GOODS; (IV) THE FACT THAT PARLIAMENT DID NOT CONSIDER THE AMOUNT RECEIVED ON THE TRANSFER OF THE DEPB TO BE EXPORT PROFIT CANNOT BE A GROUND TO HOLD THAT THE RECEIPTS ON THE TRANSFER OF DEPB CREDIT ARE NOT BUSINESS PROFIT S. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITS THAT THE ENTIRE AMOU NT 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 T HE 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 I N THIS CONTENTION BECAUSE (A) THE DEPB CREDIT WAS NOT IN EXISTENCE WH EN SECTION 28(IIIB) WAS INSERTED BY THE FINANCE ACT OF 1990. DEPB CREDI T WAS INTRODUCED WITH EFFECT FROM 1 APRIL 1997 WHICH WAS AFTER THE INSERT ION OF CLAUSE (IIIB) IN SECTION 28; (B) SECTION 28(IIIB) REFERS TO CASH ASS ISTANCE (BY WHATEVER NAME CALLED) RECEIVED BY THE ASSESSEE FROM THE GOVE RNMENT PURSUANT TO A SCHEME OF THE GOVERNMENT. THE AMOUNT RECEIVED ON THE TRANSFER OF THE DEPB CREDIT IS NOT RECEIVED BY THE ASSESSEE FROM TH E GOVERNMENT PURSUANT TO A SCHEME OF THE GOVERNMENT WITHIN THE M EANING OF CLAUSE (IIIC) AND (C) WHEN SECTION 28(IIID) SPECIFICALLY D EALS WITH PROFITS REALIZED ON THE TRANSFER OF THE DEPB CREDIT, IT WOULD BE IMP ERMISSIBLE AS A MATTER OF FIRST PRINCIPLE TO BIFURCATE THE FACE VALUE OF T HE DEPB AND THE AMOUNT RECEIVED IN EXCESS OF THE FACE VALUE OF THE DEPB. 35. FOR ALL THESE REASONS, WE HAVE COME TO THE CON CLUSION THAT THE VIEW OF THE TRIBUNAL ON THE TWO QUESTIONS OF LAW FO RMULATED BY THE REVENUE IS UNSUSTAINABLE. IN THE CIRCUMSTANCES, WE ALLOW TH E APPEAL BY ANSWERING THE FIRST QUESTION OF LAW AS FORMULATED IN THE NEGA TIVE. 36. INSOFAR AS THE SECOND QUESTION IS CONCERNED, W E ARE NOT IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL THAT THE FA CE VALUE OF THE DUTY ENTITLEMENT PASSBOOK REALIZED ON THE TRANSFER OF TH E ENTITLEMENT IS CHARGEABLE TO TAX UNDER SECTION 28(IIIB). WE HAVE A LREADY CLARIFIED THAT THE ENTIRETY OF THE SALE CONSIDERATION WOULD FALL WITHI N THE PURVIEW OF SECTION 28(IIID). WE ANSWER THE SECOND QUESTION OF LAW ACCO RDINGLY IN THE AFORESAID TERMS. 18 7. FOLLOWING THE JUDGMENT OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. KALPATARU COLOURS & CHEMICALS (SUPR A), THE TRIBUNAL CONCLUDED AS UNDER:- 5. IN THE LIGHT OF THE DISCUSSION MADE ABOVE, WE, THEREFORE, DECIDE THIS ISSUE IN THE LIGHT OF THE VIEW TAKEN BY THE HO NBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS & CH EMICALS (SUPRA), AND DIRECT THE AO TO COMPUTE THE DEDUCTION UNDER SE CTION 80HHC ACCORDINGLY IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KALPATARU COLOURS & CH EMICALS (SUPRA). 6. OUR THIS DECISION SHALL ALSO APPLY TO THE OTHER AFORESAID ASSESSEES, NAMELY, M/S.RAMCO INTERNATIONAL, JALANDH AR AND M/S.H.R. INTERNATIONAL, JALANDHAR, WHERE FACTS ARE IDENTICAL AND ALSO NO-ONE FOR THE ASSESSEES HAD APPEARED BEFORE US ON THE DATE FI XED ON 20-12-2010, AS SO DIRECTED BY THE HONBLE HIGH COURT. 7. IN THE RESULT, ALL THESE APPEALS OF THE THREE AS SESSEES OF VARIOUS ASSESSMENT YEARS, ON THE POINT REMANDED BY THE HON BLE HIGH COURT TO THE TRIBUNAL, HAS BEEN DISPOSED OF BY DECIDING T HE ISSUE AGAINST THE ASSESSEES AND IN FAVOUR OF THE REVENUE, IN THE LIGH T OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . KALPATARU COLOURS AND CHEMICALS (SUPRA). 8. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS OF THE CASE OF M/S.VICTOR FORGINGS, JALANDHAR (SUPRA) AND, THEREFO RE, FOLLOWING THE SAME, WE DECIDE THE ISSUE/ISSUES AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. 19 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 8 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE RESPONDENT: M/S.H.R. INTERNATIONAL, JAL. (2) THE DCIT, RANGE I, JAL. (3) THE CIT, JAL. (4) THE CIT(A), JAL. (5) THE SR.D.R., ITAT, ASR. TRUE COPY BY ORDER ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR.