The A.C.I.T, Amritsar. V. M/s Chaman Lal Setia Exports Ltd, Amritsar.

ITA 401/ASR/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60647 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-04-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 20-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI B.P.JAIN, ACCOUNTANT MEMBER. I.T.A. NOS.399 TO 401(ASR)/2010. (ASSESSMENT YEARS: 2000-01, 2003-04 & 2004-05) THE ASSTT. C.I.T., M/S.CHAMAN LAL SETIA EXPORTS LT D., CIRCLE V, AMRITSAR. AMRITSAR. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI AMRIK CHAND, D.R. RESPONDENT BY: SHRI SATISH BANSAL , C.A. DATE OF HEARING: 18 TH APRIL, 2012. DATE OF HEARING: 18 TH APRIL, 2012. ORDER PER BENCH. THE DEPARTMENT HAS FILED THE PRESENT APPEALS AGAIN ST THE DIFFERENT ORDERS DATED 1-7-2010 AND 2-7-2010 PASSED BY THE LE ARNED CIT(A), AMRITSAR FOR THE ASSESSMENT YEARS 2000-01, 2003-04 AND 2004- 05. THE REVENUE HAS RAISED IDENTICAL GROUNDS OF APPEALS (EXCEPT THE DIF FERENT AMOUNTS OF ADDITIONS) IN ALL THE APPEALS. FOR THE SAKE OF CONV ENIENCE, GROUNDS OF APPEAL INVOLVED IN I.T.A. NO.399(ASR)/2010, ASSESSMENT YEA R 2000-01, ARE REPRODUCED AS UNDER:- I. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER OF THE LD. CIT(A) IS BAD IN LAW. II. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE 2 THE LD. CIT(A) HAS ERRED IN ALLOWING A DEDUCTION U/ S.80HHC AT RS.13,02,235/- ON DEPB INCOME. III. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE ABOVE DEDUCTION DE SPITE THE FACT THAT THE TURNOVER OF THE ASSESSEE WAS MORE THA N 10 CRORES AND ITS CASE WAS COVERED UNDER 3 RD PROVISO TO SUB SECTION 3 OF 80HHC. IV. THE ORDER OF THE LD. CIT(A) BE VACATED AND THAT OF THE A.O. BE RESTORED. V. APPELLANT CRAVES LEAVE TOP AMEND OR ADD ANY OR M ORE GROUNDS OF APPEAL 2. THE FACTS NARRATED BY THE REVENUE AUTHORITIES AR E NOT DISPUTED BY BOTH THE PARTIES, NO NEED TO REPEAT THE SAME FOR THE SAK E OF CONVENIENCE. 3. AT THE TIME OF HEARING, BOTH THE PARTIES AGREED THAT THE ISSUE IN DISPUTE HAS ALREADY BEEN ADJUDICATED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF M/S.TOPMAN EXPORTS VS C.I.T., MUMBAI, IN CI VIL APPEAL NO.1699 OF 2012 (ARISING OUT OF SLP (C) NO.26558 OF 2010) VIDE ORDER DATED 8-2-2012. THE LEARNED COUNSEL FOR THE ASSESSEE FURT HER STATED THAT THE ORDER OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF M/S.TOPMAN EXPORTS (SUPRA) HAS ALREADY BEEN FOLLOWED BY THE I.T.A.T., CHANDIGARH BENCHES A CHANDIGARH IN I.T.A. NO.1224(CHD)/2010 ASSESSMENT YEAR 2002-03 IN THE CASE OF M/S.HERO EXPORTS, LUDHIANA VS. A.C.I.T., CI RCLE V, LUDHIANA, VIDE ITS ORDER DATED 27-2-2012, IN WHICH THE TRIBUNAL HA S DIRECTED THE A.O. TO COMPUTE THE DEDUCTION UNDER SECTION 80 OF THE INCOM E TAX ACT, 1961, INLINE WITH THE DIRECTIONS OF THE APEX COURT (SUPRA) AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS AVAILABLE WITH US, SPECIALLY THE ORDER PASSED BY THE HONBLE SUPR EME COURT OF INDIA IN THE 3 CASE OF M/S.TOPMAN EXPORTS VS. C.I.T., MUMBAI, IN CIVIL APPEAL NO.1699 OF 2012 (ARISING OUT OF SLP (C) NO.26558 OF 2010), ORDER DATED 8-2-2012. WE ARE OF THE CONSIDERED OPINION THAT I T IS VERY MUCH RELEVANT TO REPRODUCE THE RELEVANT OBSERVATIONS OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF M/S.TOPMAN EXPORTS VS. C.I.T., MUMBA I (SUPRA) 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 A 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 PR OFESSION. DEPB IS A KIND OF ASSISTANCE GIVEN BY THE GOVERNMENT OF INDIA TO AN EXPORTER TO PAY CUSTOMS DUTY ON ITS IMPORTS AND IT IS RECEIVABLE ONCE EXPORTS ARE MADE AND AN APPLICATION IS MADE BY THE EXPORTER FOR DEPB. WE HAVE, THEREFORE, NO DOUBT THAT DEPB IS C ASH ASSISTANCE RECEIVABLE BY A PERSON AGAINST EXPORTS UNDER THE SC HEME OF THE GOVERNMENT OF INDIA AND FALLS UNDER CLAUSE (IIIB) O F SECTION 38 AND IS CHARGEABLE TO INCOME TAX UNDER THE HEAD PROFITS AN D GAINS OF BUSINESS OR PROFESSION EVEN BEFORE IT IS TRANSFER RED BY THE ASSESSEE. 13. UNDER CLAUSE (IIID) OF SECTION 28, ANY PART ON TRAN SFER OF DEPB IS CHARGEABLE TO INCOME TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS AN ITEM SEPARATE FROM CA SH ASSISTANCE UNDER CLAUSE (IIIB). THE WORD PROFIT MEANS THE G ROSS PROCEEDS OF A BUSINESS TRANSACTION LESS THE COSTS OF THE TRANSACT IONS. TO QUOTE FROM BLACKS LAW DICTIONARY (FIFTH EDITION): PROFIT. MOST COMMONLY, THE GROSS PROCEEDS OF A BUS INESS TRANSACTION LESS THE COSTS OF THE TRANSACTION, I.E. NET PROCEEDS. EXCESS OF REVENUES OVER EXPENSES FOR A TRANSACTION; SOMETIMES USED SYNONYMOUSLY WITH NET INCOME FOR THE PERIOD. GAIN REALISED FROM BUSINESS OR INVESTMENT OVER AND ABOVE EXPENDITURES. THIS COURT IN E.D. SASSOON & COMPANY LTD. AND OTHER S VS COMMISSIONER OF INCOME TAX, BOMBAY CITY (1954) 26 I TR 27 4 (SC) HAS QUOTED THE FOLLOWING OBSERVATIONS OF LORD JUSTICE FLETCHER MOULTON IN THE SPANISH PROSPECTING COMPANY LIMITED [(1911) 1 CH. 92] ON THE MEANING OF THE WORD PROFITS: PROFITS IMPLIES A COMPARISON BETWEEN THE STATE OF A BUSINESS AT TWO SPECIFIC DATES USUALLY SEPARATED BY AN INTERVAL OF A YEAR. THE FUNDAMENTAL MEANING IS THE AMOUNT O F GAIN MADE BY THE BUSINESS DURING THE YEAR. THIS CAN ONL Y BE ASCERTAINED BY A COMPARISON OF THE ASSETS OF THE BU SINESS 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 W HEN THE ASSET IS TRANSFERRED AND THE DIFFERENCE BETWEEN THE TWO VALU ES IS THE AMOUNT OF PROFIT OR GAIN MADE BY A PERSON. AS DEPB HAS DIREC T NEXUS WITH THE COST OF IMPORTS FOR MANUFACTURING AN EXPORT PRODUCT , ANY AMOUNT REALIZED BY THE ASSESSEES OVER AND ABOVE THE DEPB ON TRANSFER OF THE DEPB WOULD REPRESENT PROFIT ON HE TRANSFER OF DEPB. 5. THE HONBLE COURT THUS HELD AS UNDER:- 14. WE ARE, THUS, OF THE CONSIDERED OPINION THAT W HILE THE FACE VALUE OF THE DEPB WILL FALL UNDER CLAUSE (IIIB) OF SECTION 28 OF THE ACT, THE DIFFERENCE BETWEEN HE SALE VALUE AND THE FACE VALUE OF THE DEPB WILL FALL UNDER CLAUSE (IIID) OF SECTION 28 OF THE ACT AND THE HIGH COURT WAS NOT RIGHT IN TAKING THE VIEW IN THE IMPUGNED JUDGMENT THAT THE ENTIRE SALE PROCEEDS OF THE DEPB REALIZED ON TRANSFER OF THE DEPB AND NOT JUS THE DIFFERENCE BETWEEN THE SALE VA LUE AND THE FACE VALUE OF THE DEPB REPRESENT PROFIT ON TRANSFER OF T HE 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 S ALE OF AN IMPORT LICENSE IS SOLD, THE ENTIRE AMOUNT IS TREATED AS P ROFITS OF BUSINESS UNDER CLAUSE (IIIA) OF SECTION 28 AND THUS THERE IS NO JUSTIFICATION TO TREAT THE AMOUNT WHICH IS RECEIVED BY AN EXPORTER O N THE TRANSFER OF THE DEPB ANY DIFFERENTLY 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 LICENSE IS SOL D THE ENTIRE AMOUNT IS TREATED AS PROFITS OF BUSINESS, THE HIGH COURT H AS VISUALISED A 5 SITUATION WHERE THE COST OF ACQUIRING THE IMPORT LI CENSE IS NIL. THE COST OF ACQUIRING DEPB, ON THE OTHER HAND, IS NOT NIL BECAUSE THE PERSON ACQUIRES IT BY PAYING CUSTOMS DUTY ON THE I MPORT CONTENT OF THE EXPORT PRODUCT AND THE DEPB WHICH ACCRUES TO A PERSON AGAINST EXPORTS HAS A COST ELEMENT IN IT. ACCORDINGLY, WHE N DEPB IS SOLD BY A PERSON, HIS PROFIT ON TRANSFER OF DEPB WOULD BE T HE 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 NEUTRALISE THE INCIDENCE OF CUSTOMS DUTY ON THE IMPORT CONTENT OF THE EXPORT PRODUCTS, BUT THE EXPORTER MAY NOT HIMSELF UTILIZE THE DEPB FOR PAYING CUSTOMS DUTY BUT MAY TRANSFER IT TO SOMEONE ELSE AND THEREFORE THE ENTIRE SUM RECEIVED ON TRANSFER OF DEPB WOULD B E COVERED UNDER CLAUSE (IIID) OF SECTION 28. THE HIGH COURT HAS FA ILED TO APPRECIATE THAT DEPB REPRESENTS PART OF THE COT INCURRED BY A PERSON FOR MANUFACTURE OF THE EXPORT PRODUCT AND HENCE EVEN WH ERE 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 REC EIVED BY HIM ON SUCH TRANSFER DOES NOT BECOME HIS PROFITS. IT IS O NLY THE AMOUNT THAT HE RECEIVES IN EXCESS OF THE DEPB WHICH REPRESENTS HIS PROFITS ON TRANSFER OF THE DEPB. 6. THE HONBLE 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 YE AR IN WHICH THE CREDIT ACCRUED TO THE ASSESSEE AS BUSINESS PROFITS, THEN ANY FURTHER PROFIT ARISING ON TRANSFER OF DEPB WOULD BE TAXED A S PROFITS OF BUSINESS UNDER SECTION 28(IIID) IN THE YEAR IN WHIC H THE TRANSFER OF DEPB TOOK PLACE. THIS VIEW OF THE HIGH COURT, IN O UR CONSIDERED OPINION, IS CONTRARY TO THE LANGUAGE OF SECTION 28 OF THE ACT UNDER WHICH CASH ASSISTANCE RECEIVED OR RECEIVABLE BY A NY PERSON AGAINST EXPORTS SUCH AS THE DEPB AND PROFIT ON TRANSFER OF THE DEPB ARE TREATED AS TWO SEPARATE ITEMS OF INCOME UNDER CLAUS ES (IIIB) AND (IIID) OF SECTION 28. IF ACCRUAL OF DEPB AND PROFIT ON T RANSFER OF DEPB ARE TREATED AS TWO SEPARATE ITEMS OF INCOME CHARGEABLE TO TAX UNDER CLAUSES (IIIB) AND (IIID) OF SECTION 28 OF THE ACT, THEN DEPB WILL BE 6 CHARGEABLE AS INCOME UNDER CLAUSE (IIIB) OF SECTION 28 IN THE YEAR IN THE YEAR IN WHICH THE PERSON APPLIES FOR DEPB CREDI T 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. ACCORDING LY, 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 PROFITS UNDER CLAUSE (IIIB) AND THE DIFFERENCE BETWEEN THE SALE V ALUE AND THE DEPB (FACE VALUE) WOULD BE THE PROFITS ON THE TRANSFER O F DEPB UNDER CLAUSE (IIID) FOR THE SAME ASSESSMENT YEAR. WHERE, HOWEVE R, THE DEPB ACCRUES TO A PERSON IN ONE PREVIOUS YEAR AND THE TR ANSFER OF DEPB TAKES PLACE IN A SUBSEQUENT PREVIOUS YEAR, THEN THE DEPB WILL BE CHARGEABLE AS INCOME OF THE PERSON FOR THE FIRST AS SESSMENT YEAR CHARGEABLE UNDER CLAUSE (IIIB) OF SECTION 28 AND TH E DIFFERENCE BETWEEN THE DEPB CREDIT AND THE SALE VALUE OF THE D EPB CREDIT WOULD BE INCOME IN HIS HANDS FOR THE SUBSEQUENT ASSESSMEN T YEAR CHARGEABLE UNDER CLAUSE (IIIB) OF SECTION 28 AND THE DIFFERENC E BETWEEN THE DEPB CREDIT AND THE SALE VALUE OF THE DEPB CREDIT WOULD BE INCOME IN HIS HANDS 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. 7. THE HONBLE 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 QUOTED ABOVE MAKES IT CLEAR THAT AN ASSESSEE ENGAGED IN THE BUSINESS OF EXPORT OUT OF I NDIA 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 FRO M THE EXPORT OF SUCH GOODS OR MERCHANDISE. SUB-SECTION (1B) OF SEC TION 80HHC GIVES THE PERCENTAGES OF DEDUCTION OF THE PROFITS A LLOWABLE FOR THE DIFFERENT ASSESSMENT YEARS FROM THE ASSESSMENT YEAR S 2001-2002 TO 2004-2005. SUB-SECTION (3)(A) OF SECTION 80HHC PRO VIDES THAT WHERE THE EXPORT OUT OF INDIA IS OF GOODS OR MERCHANDISE MANUFACTURED OR PROCESSED BY THE ASSESSEE, THE PROFITS DERIVED FROM SUCH EXPORTS SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUS INESS, THE SAME 7 PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUC H GOODS BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE AS SESSEE. IN COMMISSIONER OF INCOME TAX VS. K. RAVINDRANATHAN NA IR (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 DERIVED = PROFITS OF THE BUSINESS X EXPORT TURNOVER FROM EXPORTS TOTAL TURNOVER 20. EXPLANATION (BAA) UNDER SECTION 80HHC STATES THAT PROFITS OF THE BUSINESS IN THE AFORESAID FORMULA MEANS THE PR OFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GA INS OF BUSINESS OR PROFESSION 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 BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF SIMILAR NATURE INCLUDING ANY S UCH RECEIPTS AND (2) THE PROFITS OF ANY BRANCH, OFFICE, WAREHOUSE OR AN Y 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 CLAUSE (IIID) OF SECTION 28 WILL GET EXCLUDED FROM THE PROFITS OF THE BUSINESS OF THE ASSESSEE IF SUCH D EPB HAS ACCRUED TO THE ASSESSEE DURING THE PREVIOUS YEAR. SIMILARLY, IF DURING THE SAME PREVIOUS YEAR, THE ASSESSEE HAS TRANSFERRED THE DEP B 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 T HE FACE VALUE OF THE DEPB WILL REPRESENT THE PROFIT ON TRANSFER OF D EPB COVERED UNDER CLAUSE (IIID) OF SECTION 28 AND NINETY PER CENT OF SUCH PROFIT ON TRANSFER OF DEPB CERTIFICATE WILL GET EXCLUDED FROM PROFITS OF THE BUSINESS. BUT, WHERE THE DEPB ACCRUES TO THE ASS ESSEE IN THE FIRST PREVIOUS YEAR AND THE ASSESSEE TRANSFERS THE DEPB C ERTIFICATE IN THE SECOND PREVIOUS YEAR, AS APPEARS TO HAVE HAPPENED I N THE PRESENT BATCH OF CASES, ONLY NINETY PER CENT OF THE PROFITS ON TRANSFER OF THE DEPB COVERED UNDER CLAUSE (IIID) AND NOT NINETY PER CENT OF THE ENTIRE SALE VALUE INCLUDING THE FACE VALUE OF THE DEPB WIL L GET EXCLUDED FROM THE PROFITS OF THE BUSINESS. THUS, WHERE TH E NINETY PER CENT OF THE FACE VALUE OF THE DEPB DOES NOT GET EXCLUDED FR OM PROFITS OF THE BUSINESS UNDER EXPLANATION (BAA) AND ONLY NINETY P ER CENT OF THE DIFFERENCE BETWEEN THE FACE VALUE OF THE DEPB AND T HE SALE VALUE OF THE DEPB GETS EXCLUDED FROM PROFITS OF THE BUSINES S, THE ASSESSEE GETS A BIGGER FIGURE OF PROFITS OF THE BUSINESS A ND THIS IS POSSIBLE 8 WHEN THE DEPB ACCRUES TO THE ASSESSEE IN ONE PREVIO US YEAR AND TRANSFER OF THE DEPB TAKES PLACE IN THE SUBSEQUENT PREVIOUS YEAR. THE RESULT IN SUCH CASE IS THAT A HIGHER FIGURE OF PRO FITS OF THE BUSINESS BECOMES THE MULTIPLIER IN THE AFORESAID FORMULA UND ER SUB-SECTION (3)(A) OF SECTION 80HHC FOR ARRIVING AT THE FIGURE OF PROFITS DERIVED FROM EXPORTS. 21. TO THE FIGURE OF PROFITS DERIVED FROM EXPOR TS WORKED 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 F ROM EXPORTS. UNDER THE FIRST PROVISO, NINETY PER CENT OF THE SUM REFER RED TO IN CLAUSES (IIIA), (IIIB) AND (IIIC) OF SECTION 28 ARE ADDED I N THE SAME PROPORTION AS EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF T HE BUSINESS CARRIED ON BY THE ASSESSEE. IN THE FIRST PROVISO, THERE IS NO ADDITION OF ANY SUM REFERRED TO IN CLAUSE (IIID) OR CLAUSE (IIIE). HEN CE, PROFIT ON TRANSFER ON DEPB OR DFRC ARE NOT TO BE ADDED UNDER THE FIRST PR OVISO. WHERE THEREFORE IN THE PREVIOUS YEAR NO DEPB OR DFRC ACCR UES TO THE ASSESSEE, HE WOULD NOT BE ENTITLED TO THE BENEFIT O F THE FIRST PROVISO TO SUB-SECTION (3) OF SECTION 80HHC BECAUSE HE WOULD N OT HAVE ANY SUM REFERRED TO IN CLAUSE (IIIB) OF SETON 28 OF TH E ACT. 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 THE AMOUNT WHICH BEA RS 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 THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. THE TH IRD PROVISO TO SUB- SECTION (3) STATES THAT IN CASE OF AN ASSESSEE HAVI NG EXPORT TURNOVER EXCEEDING RS.10 CRORES, SIMILAR ADDITION OF NINETY PER CENT OF THE SUMS REFERRED TO IN CLAUSE (IIID) OF SECTION 28 ONLY IF THE ASSESSEE HAS 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) TH E RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WA S 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 ENTITL ED TO THE ADDITION OF PROFIT ON TRANSFER OF DEPB UNDER THE THIRD PROVISO TO SUB-SECTION (3) 9 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 UNDER CLAUSE (D) OF SECTION 28, HE WOULD NOT GET THE BENEFIT OF ADDITION TO EXPORT PROFITS UNDER THI RD OR FOURTH PROVISO TO SUB-SECTION (3) OF SECTION 80HHC, BUT HE WOULD GET THE BENEFIT OF EXCLUSION OF A SIMILAR FIGURE FROM PROFITS OF THE BUSINESS UNDER EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT AND T HERE IS NOTHING IN EXPLANATION (BAA) TO SECTION 80HHC TO SHOW THAT THI S BENEFIT OF EXCLUSION OF A SIMILAR 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 EXCEEDS 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 PROF ITS OF THE BUSINESS, WHICH ULTIMATELY RESULTS IN COMPUTATION OF A BIGGE R EXPORT PROFIT. THE HIGH COURT, THEREFORE, WAS NOT RIGHT IN COMING TO THE CONCLUSION THAT AS THE ASSESSEE DID NOT HAVE THE EXPORT TURNOV ER EXCEEDING RS.10 CRORES AND AS THE ASSESSEE DID NOT FULFILL THE COND ITIONS SET OUT IN THE THIRD PROVISO TO SECTION 80HHC, THE ASSESSEE WAS NO T ENTITLED TO A DEDUCTION UNDER SECTION 80HHC ON THE AMOUNT RECEIVE D ON TRANSFER OF DEPB. IT IS A WELL-SETTLED PRINCIPLE OF STATUTO RY 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 WORDS USED IN EXPLANATION (BAA) TO SECTION 80HHC READ WITH THE WORDS USED IN CLAUSES (IIID) A ND (IIIE) OF SECTION 28, THE ASSESSEE WAS ENTITLED TO A DEDUCTION UNDER SECTION 80HHC ON EXPORT PROFITS, THE BENEFIT OF SUCH DEDUCTION CANNO T BE DENIED TO THE ASSESSEE. 8. KEEPING IN VIEW THE OBSERVATION MADE BY THE HON BLE SUPREME COURT OF INDIA IN THE AFORESAID PARAGRAPHS, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE INVOLVED IN THE PRESENT APPEALS STANDS CO VERED BY THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA IN THE C ASE OF M/S.TOPMAN EXPORTS VS. CIT ( SUPRA) AND RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE SUPREME COURT OF INDIA, WE DIRECT THE A.O. TO COMPU TE THE DEDUCTION UNDER 10 SECTION 80HHC OF THE ACT, IN LINE WITH THE DIRECTIO NS OF THE HONBLE APEX COURT (SUPRA) AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN ALL THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, ALL THE APPEALS FILED BY THE REVE NUE ARE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 18 TH APRIL, 2012. SD/- SD/- (B.P.JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER. JUDICIAL MEMBER. DATED: 18 TH APRIL, 2012. LALIT/ COPY OF THE ORDER FORWARDED TO: (1) THE RESPONDENT: M/S.CHAMAN LAL SETIA EXPORTS LTD., ASR. (2) THE ACIT, CIRCLE V,ASR. (3) THE CIT, ASR. (4) THE CIT(A), ASR. (5) THE SR. D.R., ITAT, ASR. TRUE COPY BY ORDER ASSTT. REGISTAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR.