Dynamic Industries Ltd., Ahmedabad V. The ACIT., Circle-1, Ahmedabad

ITA 503/AHD/2007

• Counselvise Citation: [2010] 137 COUNSELVISE.COM (IT) 0149 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-01-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 02-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: P M MEHTA
• Keywords: Capital asset; Cost of acquisition; Competent authority; Revised return
• Section: 80HHC; 80IB; 54; 28

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI T.K. SHARMA, JM AND D.C.AGRAWAL, AM DYNAMIC INDUSTRIES LTD., PLOT NO.125, PHASE-1, GIDC, VATVA, AHMEDABAD. V/S . ASSTT. CIT, CIR.1, AHMEDABAD. PAN NO.AAACD 9872E (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI P. M. MEHTA, AR RESPONDENT BY:- SHRI SHELLEY JINDAL, SR.DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FOL LOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS NOT JUSTIFIED IN REJECTING THE ASSESSEE'S BASIS OF QUANTIFICATION OF DEDUCTION U/S.8OHHC. 2. WITHOUT PREJUDICE ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE THE CIT(A) WAS NOT JUSTIFIED IN REJECTING THE ASSESSEE' S SUBMISSION THAT FOR THE QUANTIFICATION OF THAT DEDUCTION U/S.80HHC 10% OF COMMON EXPENSES WERE REQUIRED TO BE CONSIDERED. 3 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) WAS NOT JUSTIFIED IN REJECTING THE ASSESSEE'S CLAIM THAT IT WAS NOT AT ALL A FIT CASE FOR LEVY OF INTEREST U/S.234B AND WITHDRAWING INTEREST U/S.244A OF THE ACT ITA NO.503/AHD/2007 ASST. YEAR :2003-04 2 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF DYES & CHEMICALS. IT CLAIMED DEDUCT ION UNDER SECTION 80 HHC AT RS.1,32,54,610/-. THE AO IN HIS ORDER ALLOWE D DEDUCTION UNDER SECTION 80 HHC OF 90% ON EXPORT INCENTIVE AFTER SET TING OFF PROFITS FROM EXPORT OF TRADING GOODS AND LOSS FROM MANUFACTURING BUSINESS. HE FURTHER HELD THAT ASSESSEE IS NOT ENTITLED TO DEDUCTION UN DER SECTION 80 HHC ON DEPB INCOME AS PER TAXATION LAW (2 ND AMENDMENT) ACT, 2005 BECAUSE ASSESSEE FAILED TO ESTABLISH THAT RATE OF DUTY DRAW BACK WAS HIGHER THAN RATE OF DEPB CREDIT. THE AO ALSO DID NOT ALLOW DEDU CTION UNDER SECTION 80 HHC ON OTHER EXPORT INCENTIVE LIKE DUTY DRAW BAC K AND ADVANCE LICENCE. THE AO ACCORDINGLY ALLOWED DEDUCTION ON IN COME DERIVED FROM EXPORTS IN TRADING WHICH WAS WORKED OUT AT RS.9,30, 971. WHEN THE MATTER WENT TO LD. CIT(A), HE CONFIRMED THE ORDER OF THE A O HOLDING THAT ASSESSEE HAS NOT SATISFIED FOLLOWING CONDITIONS :- A) HE HAD AN OPTION TO CHOOSE EITHER DUTY DRAW BACK OR DUTY ENTITLEMENT PASS BOOK SCHEME, AND B) THE RATE OF DRAW BACK CREDIT ATTRIBUTABLE TO THE CU STOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER DEPB SCHEME. OR A) HE HAD AN OPTION TO CHOOSE EITHER DUTY DRAWBACK OR DUTY FREE REPLENISHMENT CERTIFICATE; AND B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUS TOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER DEPB CERTIFICATE. 3. BEFORE US LD. AR FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAD FILED REVISED RETURN AS PER TAXATION LAW (2 ND AMENDMENT) ACT 2005 AND CLAIM FOR DEDUCTION UNDER SECTION 80 HHC WAS REDUCED TO 8 1.29 LACS. THE CLAIM WAS MADE IN STATUTORILY PRESCRIBED FORMAT. IN ANY C ASE LD. AR SUBMITTED 3 SCOPE OF PROFITS AND GAINS OF BUSINESS HAS BEEN ENL ARGED BY INSERTING CLAUSES (IIID) AND (IIIE) IN SECTION 28 WHICH PERTA INED TO EXPORT BENEFITS. AS A CONSEQUENCE TO THIS INSERTION BY THE TAXATION LAW (AMENDMENT) ACT, 2005 FOUR MORE PROVISO WERE INSERTED TO THE AL READY EXISTING ONE PROVISO TO SECTION 80 HHC. THUS SECOND PROVISO SO I NSERTED IS APPLICABLE TO THE ASSESSEE AT ITS EXPORT TURNOVER EXCEEDED RS. 10 CRORES. IN FACT CLAUSE (IIID) AND (IIIE) OF SECTION 28 TREATED, AT PAR OF BUSINESS PROFIT, THE DUTY ENTITLEMENT PASS BOOK AND DUTY FREE REPLENISHM ENT CERTIFICATE RESPECTIVELY OF THE DUTY REMISSION SCHEME. HE SUBMI TTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT NO BENEFIT CAN BE ALLOWED UNDER SECTION 80 HHC ON ADVANCE IMPORT LICENCE. IN FACT HE SUBMIT TED THEY ARE ALSO COVERED BY CLAUSES (IIID) AND (IIIE) TO SECTION 28. IN FACT CONDITIONS AT (A) AND (B) AS NOTED BY LD. CIT(A) IN HIS ORDER BUT HEL D THAT ASSESSEE DOES NOT SATISFY THESE CONDITIONS. WITHOUT VERIFYING THE LD. CIT(A) HAS CONCLUDED THAT ASSESSEE DOES NOT SATISFY THESE CONDITIONS. IN FACT THERE HAS BEEN RECENT JUDGMENT OF ITAT AHMEDABAD BENCH IN THE CASE OF JHAWAR BIOTECH (P) LTD. VS. ITO IN ITA NO.17/AHD/2007 & IT A NO.619/AHD/2007 FOR ASST. YEARS 2004-05 AND 2003-04 , PRONOUNCED ON 30.10.2009 WHICH FOLLOWED WHERE THE DECISION OF ITA T, MUMBAI SPECIAL BENCH IN THE CASE OF M/S TOPMAN EXPORTS WHEREIN IT IS HELD THAT IT IS ONLY THE PROFIT ELEMENT ON DEPB LICENCE WHICH WILL BE CO VERED BY SECTION 28(IIID) AND ACCORDINGLY BY 3 RD PROVISO TO SECTION 80 HHC(3) AS TURNOVER OF ASSESSEE EXCEEDS RS.10 CRORES. THEREFORE, MATTER IS REQUIRED TO BE RESTORED TO THE AO FOR COMPUTING DEDUCTION UNDER SE CTION 80 HHC IN ACCORDANCE WITH THAT JUDGMENT. 4. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDER OF LD. CIT(A). 4 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ISSUE OF DEPB IS COVERED BY THE DECISION OF THE ITAT MUMBAI SPECIAL BENCH IN TOPMAN EXPORTS CASE WHICH IS REPRODUCED IN THE CASE OF JHAWAR BIOTECH (P) LTD. VS. ITO (SUPRA). FOR THE SAKE OF CONVENIENCE WE REPRODUCE P ARA 11 TO 13 OF THAT ORDER AS UNDER :- 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABL E ON RECORD. IN OUR CONSIDERED VIEW, THE ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT MUMBAI SPECIAL BENCH IN THE CASE OF M/S.TOP MAN EXPORTS (SUPRA). FOR THE SAKE OF CONVENIENCE, WE REPRODUCE THE OPERATIVE PART OF THE JUDGEMENT AS UNDER:- 43. THE MAJOR CONTROVERSY BEFORE US IS TO INTERPR ET SECTION 28 (IIID) IN WHICH THE EXPRESSION 'ANY PROFIT ON THE TRANSFER DU TY ENTITLEMENT PASS BOOK SCHEME' HAS BEEN USED. FROM THE FACTS OF THE CASES UNDER CONSIDERATION IT IS NOTED THAT THE AO TREATED THE ENTIRE SALE PROCEEDS AS COVERED UNDER SECTION 28(IIID), AS AGAINST THE CASE OF THE ASSESSEE THAT ONLY THE PREMIUM OR THE PROFIT ELEMENT ON THE TRANSFER OF DEPB BE CONSIDERED. TO P UT THE CONTROVERSY IN SIMPLE WORDS, IF, FOR EXAMPLE, THE ASSESSEE RECEIVE D DEPB WORTH THE FACE VALUE OF RS.100/- AND THEN SOLD IT FOR RS.110/-, TH E ASSESSEE IS CONTENDING THAT ONLY A SUM OF RS.10/- IS TO BE INCLUDED UNDER CLAUS E (IIID), WHEREAS, THE REVENUE'S CONTENTION IS THAT THE ENTIRE AMOUNT OF R S.110/- BE CONSIDERED. 44. THUS WE HAVE TO INTERPRET THE WORD 'PROFIT' AS FIELDED IN SECTION 28(IIID). AS NOTED SUPRA SECTION 28 HAS CLAUSES (I) TO (VI). ON A CAREFUL CIRCUMSPECTION OF THE LANGUAGE OF CLAUSE (IIIB) AND (IIIE), IT IS NOTED THAT THE REFERENCE IS TO THE GROSS SUM OF CASH ASSISTANCE AND DUTY DRAWBACK ETC. ON THE CONTRARY CLAUSES (IIIA), (IIID) AND (IIIE) USE THE WORD 'PROFIT' ON SALE/TRANSFER OF LICENCE/DEPB/DFRC. FROM HERE, IT CAN BE EASILY INFE RRED THAT THE EMPLOYMENT OF THE WORDS 'ANY PROFIT OF TRANSFER' IN CLAUSES (IIID) AND (IIIE) OF SECTION 28 IN CONTRADISTINCTION TO THE OMISSION OF SUCH WORD PROFIT IN CLAUSES (IIIB AND IIIE) IS NOT WITHOUT ANY OBJECT. 45. THE PRINCIPLE RULE OF INTERPRETATION IS THAT ME ANING IS TO BE GIVEN TO EACH AND EVERY WORD IN THE LANGUAGE OF SECTION. NO WORD CAN BE CLAIMED AS SUPERFLUOUS. EACH COMMA, FULL STOP OR EVERY SIGN OF PUNCTUATION HAS SIGNIFICANCE. IN OUR CONSIDERED OPINION THE NEED FO R INTERPRETATION WITH THE AID OF SOME EXTERNAL AIDS OF CONSTRUCTION OF A SECTION ARISES ONLY WHEN THERE IS SOME AMBIGUITY IN THE LANGUAGE OF SECTION AND THE I NTENTION OF THE LEGISLATURE IS NOT PROPERLY CONVEYED WITH THE WORDS SO USED. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN NUMEROUS JUDGMENTS INCLUDI NG THE CASE OF FEDERATION OF ANDHRA PRADESH CHAMBERS OF COMMERCE & INDUSTRY & ORS ETC. 5 VS STATE OF ANDHRA PRADESH & ORS. ETC. ETC. (2001) 165 CTR (SC) 672 (2001) 247 ITR 36 (SC) THAT THE TAXING STATUTE HAS TO BE S TRICTLY CONSTRUED AND NOTHING CAN BE READ IN IT. IDENTICAL VIEW HAS BEEN TAKEN IN THE CASE OF PADMASUNDARA RAO (DECD.) & ORS. VS. STATE OF TAMIL NADU & ORS (2002) 176 CTR (SC) 104 : (2002) 255 ITR 147 (SC) HOLDING THAT 'WHILE INTERPRETING A STATUTE LEGISLATIVE INTENTION MUST BE FOUND IN THE WORDS USED BY THE LEGISLATURE'. IN THE LIKE MANNER IT HAS BEEN REITER ATED IN THE CASE OF COMMR. OF AGRL, IT VS. PLANTATION CORPORATION OF KERALA LTD. (2000) 164 CTR (SC) 502 : (2001) 247 ITR 155 (SC) THAT : 'SO LONG AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO ANY INTERPRETATIVE PR OCESS TO UNFOLD THE LEGISLATIVE INTENT BECOMES IMPERMISSIBLE'. 46. COMING BACK TO THE ISSUE UNDER CONSIDERATION WE NOTE THAT THE LANGUAGE OF CLAUSE (IIID) AND (IIIE) OF SECTION 28 IS CRYSTAL CLEAR WHICH TALKS OF 'ANY PROFIT ON THE TRANSFER OF DEPB/DFRC. THE REFER ENCE IS NOT TO THE SALE PROCEEDS BUT TO THE PROFIT ON THE TRANSFER OF DEPB/ DFRC. A LINE OF DEMARCATION NEEDS TO BE DRAWN BETWEEN THE PROVISION S IN WHICH GROSS AMOUNT IS CONSIDERED AND THE PROVISIONS IN WHICH ONLY THE PROFIT DEMERIT HAS BEEN THE SUBJECT MATTER OF CONSIDERATION. WE NEED NOT WANDER HERE AND THERE IN SEARCH OF SUCH DISTINCTION, WHICH IS HIGHLIGHTED FROM SECT ION 28 ITSELF . APART FROM CLAUSES (IIIB) AND (IIIC) TO SECTION 28, CLAUSES (I V) AND (VI) ALSO REFER TO THE INCLUSION OF THE GROSS AMOUNT, AND NOT THE PROFIT E LEMENT THEREON, FURTHER THE LEGISLATURE IS NOT OBLIVIOUS TO SUCH DISTINCTION BE TWEEN THE GROSS AMOUNT AND THE PROFIT ELEMENT INASMUCH AS IT HAS USED THE APPR OPRIATE WORDS WHEREVER IT INTENDED SO. IT IS AMPLY DEMONSTRATED FROM THE LANG UAGE OF SECTION 54 WHICH GRANTS DEDUCTION FROM THE CAPITAL GAINS BY PROVIDIN G THAT IT THE AMOUNT OF CAPITAL GAIN' IS GREATER THAN THE COST OF THE RESID ENTIAL HOUSE SO PURCHASED OR CONSTRUCTED, THE DIFFERENTIAL AMOUNT SHALL BE CHARG ED UNDER SECTION 45; AS AGAINST SECTION 54E WHICH PROVIDES DEDUCTION IN RES PECT OF LONG TERM CAPITAL ASSETS BY PROVIDING THAT IF THE COST OF THE NEW ASS ET, IS NOT LESS THAN THE NET CONSIDERATION' IN RESPECT OF THE ORIGINAL ASSET, TH E WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45. IF WE CAREFU LLY PERUSE THE LANGUAGE OF SECTION 54 IN JUXTAPOSITION TO SECTION 54E IT CAN B E SEEN THAT WHEREAS THE FORMER SECTION PROVIDES DEDUCTION WITH REFERENCE TO THE INVESTMENT OF THE AMOUNT OF CAPITAL GAIN, THE LATER SECTION GRANTS DE DUCTION WITH REFERENCE TO THE EXTENT OF INVESTMENT OF THE NET CONSIDERATION AND N OT THE CAPITAL GAIN. THUS, IT CAN BE VISUALIZED THAT THE LEGISLATURE IS NOT UNMIN DFUL OF THE DISTINCTION BETWEEN 'SALE CONSIDERATION AND 'PROFIT' AND HAS US ED THE APPROPRIATE EXPRESSION TO EXHIBIT ITS INTENDMENT. REVERTING TO THE LANGUAGE OF (IIID) OF SECTION 28 WE OBSERVE THAT IT REFERS TO ANY PROFIT ON THE TRANSFER OF DEPB. THE WORDS USED IN THE PROVISION INDICATE THAT ONLY THE PROFIT ELEMENT ON THE TRANSFER OF DEPB IS TO BE CONSIDERED UNDER THIS CLA USE AND NOT THE SALE PROCEEDS ITSELF. THUS IN ORDER TO FEE COVERED WITH THE SCOPE OF THIS CLAUSE, TWO THINGS ARE ESSENTIAL. FIRST, THERE SHOULD BE TRANSF ER OF THE DEPB AND SECOND, SUCH TRANSFER SHOULD RESULT INTO ANY PROFIT. UNLESS BOTH THE CONDITIONS ARE CUMULATIVELY SATISFIED, THE TRANSACTION CANNOT FORM PART OF SECTION 28 (IIID). 47. THIS LEAVES US WITH THE DETERMINATION OF THE M EANING OF THE WORD 'PROFIT'. IN COMMON DIALECT THE WORD PROFIT' REFERS TO EXCESS OF SALE PROCEEDS OVER THE COST OF GOODS. THE WORD PROFIT' HAS ANOTHE R SHADE ALSO, WHICH 6 INVOLVES A COMPARISON BETWEEN THE STATE OF BUSINESS AT TWO SPECIFIC DATES AND THE EXCESS OF THE VALUE OF ASSET ON ONE DATE OVER T HE OTHER, CONSTITUTES PROFIT. THEIR LORDSHIPS OF THE HON'BLE SUPREME COURT IN E.D . SASSOON & COMPANY (SUPRA) HAS LAID DOWN TO THIS EFFECT. 'THE WORD 'PROFITS' HAS IN MY OPINION A WELL DEFINE D LEGAL MEANING, AND THIS MEANING CONSIDERS WITH THE FUNDAMENTAL CONCEPTION O F PROFITS IN GENERAL PARLANCE ALTHOUGH IN MERCANTILE PHRASEOLOGY THE WOR D MAY AT LIME BEAR MEANINGS INDICATED BY THE SPECIAL CONTEXT WHICH DEV IATE IN SOME RESPECTS FROM THIS FUNDAMENTAL SIGNIFICATION. 'PROFITS' IMPLIES A COMPARISON BETWEEN THE STATE OF A BUSINESS AT TWO SPECIFIC DATES USUALLY SEPARAT ED BY AN INTERVAL YEAR. THE FUNDAMENTAL MEANING IS THE AMOUNT OF GAIN MADE BY T HE BUSINESS DURING THE YEAR. THIS CAN ONLY BE ASCERTAINED BY A COMPARISON OF THE ASSETS OF THE BUSINESS AT THE TWO DATES'. 48. GOING BY THE CONCEPT OF COMPARISON OF THE ASSET S OF BUSINESS ON TWO DATES, IT CAN BE SEEN THAT AT THE STAGE OF RECEIPT OF DEPB ON ITS ACCRUAL THE FACE VALUE OF RS.100/- CONSTITUTED AN ASSET IN THE HANDS OF THE EXPORTER WHICH COULD BE UTILIZED BY HIM IN ANY OF THE WAYS OPEN TO HIM. IF THE EXPORTER CHOOSES TO SELL THE DEPB FOR RS. 110 AT A SUBSEQUEN T DATE, THEN THE PREVAILING MARKET RATE AT THE TIME OF SALE, THAT IS RS. 110 SH ALL REPRESENT THE VALUE OF ASSET ON SUCH DATE OF SALE. ACCORDINGLY, THE DIFFERENCE O F RS 10 BETWEEN THE VALUE OF TWO DATES, VIZ, ON THE DATE OF ITS SALE (RS.110/-) AND THE DATE WHEN IT WAS ACQUIRED ON ACCRUAL (RS.100/-), WILL CONSTITUTE PRO FIT. EVEN GOING BY THE MEANING OF 'PROFIT' AS COMMONLY UNDERSTOOD REPRESEN TING EXCESS OF SALE PROCEEDS OVER COST, WE FIND THAT SIMILAR RESULT WIL L FOLLOW. NO DOUBT THE EXPORTER DOES NOT DIRECTLY PURCHASE THE DEPB FROM T HE MARKET BY INCURRING ANY COST, BUT WHEN WE SEE THE SCHEME OF SECTION 28 IN WHICH THE FACE VALUE OF DEPB, AT THE TIME OF MAKING APPLICATION, RESULTS IN TO THE ACCRUAL OF INCOME AS INCLUDIBLE U/S 28(IIIB) AND THE CORRESPONDING AMOUN T REPRESENTS THE VALUE OF DEPB, SUCH VALUE, WHICH IS IN THE NATURE OF AN ASSE T, SHALL CONSTITUTE ITS COST WHEN DEPB IS MADE THE SUBJECT MATTER OF SALE AT A L ATER DATE. THE FOLLOWING ACCOUNTING ENTRY SHALL BE PASSED IN THIS SITUATION. CASH/BANK DR RS. 110 TO DEPB RS. 100 TO PROFIT ON SALE OF DEPB RS. 10 [AT THE TIME OF SALE, THE INCOME OF RS. 10 SHALL AR ISE TO THE ASSESSEE U/S 28(IIID) AS INCOME OF RS. 100 HAD ALREADY ACCRUED U/S 28(III B) AT TIME OF APPLICATION] 49. THE ABSURDITY IN THE RESULT CAN BE SEEN FROM TH E CONSEQUENCES FOLLOWING THE REASONING OF THE DEPARTMENT, THAT THE ENTIRE SA LE PROCEEDS SHALL BE TAXABLE U/S 28(IIID) AT THE TIME OF SALE. IN SUCH A SITUATI ON THERE WILL BE DOUBLE TAXATION OF THE FACE VALUE OF DEPB, FIRSTLY, WHEN APPLICATIO N FOR DEPB IS MADE RESULTING IN TO ACCRUAL OF INCOME U/S 28(IIIB) IF T HE EXTENT OF US FACE VALUE AT RS. 100 AND SUBSEQUENTLY WHEN DEPB IS SOLD FOR RS. 110, THE ENTIRE SALE CONSIDERATION OF RS. 110 SHALL STAND INCLUDED U/S 2 8(IIID) RESULTING INTO TOTAL INCOME OF RS. 210 ON ACCOUNT OF THE TRANSACTION OF DEPB, AS AGAINST, THE REAL INCOME ONLY TO THE TUNE OF RS.110. 7 .. .. 53. FROM THE ABOVE IT CAN BE NOTED THAT DEPB CREDIT SALE IS DIFFERENT FROM THE PREMIUM ON THE DEPB AND SUCH PROFIT OR THE PREMIUM, IS NOT EXPORT PROFIT SINCE IT DOES NOT ARISE OUT OF EXPORT ACTIVITY OR I MPORT ACTIVITY AND ARISES BECAUSE OF TRADING IN A 'LICENSE' WHICH HAS A PREMI UM IN THE MARKER SUCH PREMIUM OR PROFIT CANNOT TO BE COUNTED AS EXEMPTED EXPORT PROFIT AND SHOULD BE ADDED BACK AS TAXABLE PROFIT. THE SPEECH OF THE FINANCE MINISTER, AS EXTRACTED ABOVE, DIVULGES THE INTENTION OF THE SCOP E OF SECTION 28(IIID) AS COVERING ONLY THE PREMIUM ON SALE OF DEPB AND NOT T HE FACE VALUE. . . 72. REVERTING TO THE MAIN QUESTION POSTED BEFORE TH IS SPECIAL BENCH FOR CONSIDERATION AS TO WHETHER THE ENTIRE AMOUNT RECEI VED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE U/S 28 (I IID) OR SOME ARTIFICIAL COST IS TO BE INTERPOLATED, WE FIND THAT THE RELEVANCE OF T HIS QUESTION IS ONLY IN THE CONTEXT OF THE COMPUTATION OF DEDUCTION U/S 80HHC. WE HAVE HELD ABOVE THAT SUB-SECTION (3) DEALING WITH THE COMPUTATION OF THE PROFITS DERIVED FROM EXPORT OF GOODS OR MERCHANDIZE IS A COMPLETE CODE IN ITSEL F, THUS THE COMPUTATION OF ELIGIBLE PROFITS IS TO BE MADE FIRMLY AS PER THIS S UB-SECTION WITH THE AID OF EXPLANATION AS INTERPRETED BY THE HON'BLE SUPREME C OURT IN THE CASE OF HERO EXPORTS (SUPRA) AND K. RAVINDRANATHAN (SUPRA). THE AO HAS DENIED THE DEDUCTION U/S 80HHC BY HOLDING THAT THE ENTIRE SALE PROCEEDS OF DEPB FALL UNDER SECTION 28(IIID) AND SINCE IN THAT VIEW OF TH E MATTER, THERE IS NO POSITIVE INCOME, THE DEDUCTION IS IMPERMISSIBLE. ON THE CONT RARY THE VIEW POINT OF THE ASSESSEE IS THAT THE FACE VALUE OF DEPB SHOULD BE R EDUCED FROM THE COST OF PURCHASES AS IT IS GIVEN BY THE GOVERNMENT OF INDIA ONLY TO NEUTRALIZE THE INCIDENCE OF CUSTOM DUTY. ON THE IMPORT CONTENT OF THE EXPORTS. WE HAVE EXAMINED THE FORMAT OF DEPB SCHEME AND COME TO THE CONCLUSION THAT THE FACE VALUE OF DEPB IS NOTHING BUT PARTIAL REIMBURSE MENT OF THE PURCHASE PRICE OF GOODS. OUR THIS VIEW IS BASED ON THE UNDERSTANDI NG OF THE SCHEME OF DEPB IN COMMERCIAL SENSE AND IN THE TIGHT OF THE FOREIGN TRADE POLICY OF THE GOVERNMENT OF INDIA. BUT WHEN WE COME TO THE COMPUT ATION OF DEDUCTION AND THE PLACEMENT OF THE FACE VALUE OF DEPB IN THE SCHE ME OF SECTION 80HHC, THE GENERAL VIEW BASED ON THE FOREIGN TRADE POLICY ABOU T THE REDUCTION OF SUCH AMOUNT FROM THE PURCHASE COST, FAILS. WE HAVE SEEN ABOVE THE SUB-SECTION (3) OF SECTION 80HHC IS COMPLETE CODE IN ITSELF IN SO F AR AS THE COMPUTATION OF THE ELIGIBLE PROFITS DERIVED FROM EXPORT ARE CONCERNED. THE MANDATE OF SUB-SECTION (3) HAS TO BE RELIGIOUSLY FOLLOWED FOR DETERMINING THE AMOUNT OF ELIGIBLE PROFITS FOR DEDUCTION AND AS SUCH THE GENERAL VIEW ABOUT TH E UNDERSTANDING OF THE NATURE OF DEPB WILL BE SUBDUED AND THE ONE BASED ON THE PRESCRIPTION OF THIS PROVISION WILL COME TO FORE. IN THAT VIEW OF THE MA TTER WE HOLD THAT THE FACE VALUE OF DEPB CANNOT BE REDUCED FROM THE COST OF PU RCHASES AND HAS TO BE CONSIDERED AS A SEPARATE SPECIES OF' BUSINESS 'INCO ME'. THUS ALL THE CONTENTIONS PUT FORWARD ON BEHALF OF THE ASSESSES A ND THE INTERVENERS ABOUT THE REDUCTION OF THE FACE VALUE OF DEPB HAVE BECOME ACADEMIC IN THE CONTEXT OF SECTION 80HHC. SIMILARLY THE COMPARISON OF DEPB WITH MODVAT, WHICH IS AN OFF-SHOOT OF THE BASIC CONTENTION OF REDUCTIO N OF THE DEPB VALUE FROM THE PURCHASES AND ALSO THE ARGUMENTS BY THE LD. AR TOWA RDS THE REDUCTION OF THE 8 FACE VALUE OF DEPB FROM THE PURCHASE COST ON THE ST RENGTH OF CERTAIN DECISIONS RENDERED IN THE FRAMEWORK OF SECTION 80IB , LOSE THEIR RELEVANCE IN THE PRESENT CONTEXT OF SECTION 80HHC AND HENCE NEED NOT BE EXAMINED. 73. IF THE INTENTION OF THE LEGISLATURE HAD BEEN TO ALLOW THE REDUCTION OF THE FACE VALUE OF DEPB FROM THE COST OF PURCHASES, AS H AS BEEN, CONTENDED BEFORE US, THEN THERE WAS NO NEED TO HAVE CLAUSES (IIIA) T O (IIIE) OF SECTION 28 AND ALSO THE FIRST TO FIFTH PROVISOS TO SECTION 80HHC(3) ALO NG WITH THE NECESSARY INGREDIENTS OF EXPLANATION BELOW SECTION 80HHC(4C). WE HAVE HELD THAT THE FACE VALUE OF DEPB UNDER THE SCHEME OF THE INCOME-T AX ACT, 1961 FALLS UNDER SECTION 28(IIIB) AND THE PROFIT ELEMENT T ON THE SA LE OF DEPB, THAT IS THE EXCESS OF SALE PROCEEDS OVER THE FACE VALUE OF DEPB FALLS U/S 28(IIID). 'PROFITS OF BUSINESS' AS PER EXPLANATION (BAA) PROVIDES FOR THE EXCLUSION OF NINETY PER CENT OF ANY SUM REFERRED TO IN SECTION 28(IIIA TO I IIE). THEN FIRST PROVISO TO SUB- SECTION (3) STATES THAT THE PROFITS COMPUTED UNDER CLAUSES (A) OR (B) OR (C) SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS TO T HE NINETY PER CENT OF ANY SUM REFERRED TO IN SECTION 28(IIIA, IIIB AND IIIE). IT MEANS THAT THE NINETY CENT OF THE FACE VALUE OF DEPB WHICH WAS REDUCED WHILE COMPUTING THE 'PROFITS OF THE BUSINESS' SHALL STAND INCLUDED WHEN EFFECT IS GIVEN TO FIRST PROVISO. IF WE GO WITH THIS ARGUMENT THAT THE FACT VALUE OF DEPB IS TO BE REDUCED FROM THE COST OF PURCHASE THEN IN THE CASE OF MERCHANT EXPORTER WITH TURNOVER OF LESS THAN RS.10 CRORES, A N ANOMALOUS SITUATION WILL CROP UP INASMUCH AS THE AMOUNT OF ELIGIBLE PROFIT W ILL FAR EXCEED THE ACTUAL PROFIT AS DEMONSTRATED BELOW. EXPORT TURNOVER RS. 1,000 COST OF GOODS SOLD - DIRECT COSTS (WITHOUT DEPB) - NO INDIRECT COSTS RS. 800 FACE VALUE OF DEPB RS 100 74. GOING BY SUB-SECTION (3)(B) THE PROFITS DERIVED FROM SUCH EXPORT SHALL BE EXPORT TURNOVER MINUS THE DIRECT AND INDIRECT CO STS ATTRIBUTABLE TO SUCH EXPORT. GOING BY THE CONTENTION OF THE LD. AR, THE DIRECT COST WILL COME AL RS.700 (800 - 100) AS AGAINST THE EXPORT TURNOVER A T RS.1,000 RESULTING INTO PROFITS DERIVED FROM EXPORT AS PER CLAUSE (B) OF SU B-SECTION (3) COMING, TO RS.300 I.E. RS.1,000 MINUS RS.700. WHEN WE FURTHER GIVE EFFECT TO THE FIRST PROVISO TO SUB-SECTION (3), THE PROFIT OF RS.300 AS COMPUTED ABOVE WOULD REQUIRE TO BE FURTHER INCREASED BY THE NINETY PER C ENT OF THE FACE VALUE OF DEPB. THE AMOUNT OF RS.90 (I.E. 90% OF RS.100 I.E F ACE VALUE OF DEPB COULD, THEREFORE, BE ADDED AND THE PROFIT AS DETERMINED IN CLAUSE (B) OF 80HHC(3) WILL COME AT RS.390. AS AGAINST THAT WE FIND THE RE AL PROFIT FROM EXPORT AFTER GIVING EFFECT TO THE DEPB BENEFIT IS ONLY RS.300 [1 000 700 (800 - 100)]. THUS IT CAN BE EASILY ASCERTAINED THAT WHEREAS THE TOTAL BUSINESS FROM EXPORT IS RS.300 BUT IF WE ACCEPT THE CONTENTION THAT THE FAC E VALUE OF DEPB BE REDUCED FROM THE COST OF PURCHASES THEN THE AMOUNT OF PROFI TS DERIVED FROM EXPORT AS PER SECTION 80HHC(3)(B) WILL COME AT RS.390. OBVIOU SLY THIS CALCULATION DEFIES ALL LOGICS AND IS INCAPABLE OF ACCEPTANCE DU E TO AWKWARD SITUATION CREATED BY DETERMINING THE PROFITS DERIVED FROM EXP ORT AT A FIGURE HIGHER THAN 9 THE ACTUAL BUSINESS PROFIT, THE FORMER AMOUNT, IN N O CASE CAN BE HIGHER THAN THE LATER. WE FIND THAT THE LOGIC BEHIND INTRODUCIN G CLAUSES (IIIA) TO (IIIE) TO SECTION 28 IS TO DE LINK THE EXPORT INCENTIVES FROM THE BUSINESS PROFITS WHILE CONTINUING THEM TO BE GOVERNED BY CHAPTER IV-D AT T HE SAME TIME. THE NATURAL OUTCOME FOLLOWING THE PRESCRIPTION OF CLAUSES (IIIA ) TO (IIIC) OF SECTION 28 ALONG WITH SECTION 80HHC(3) IS THAT ALL THE EXPORT INCENT IVES INCLUDING THE DEPB AND DFRC ETC. BE CONSIDERED AS SEPARATE BUSINESS IN COME AND NOT TO REDUCE THEM FROM THE COST OF PURCHASES. 75. WE WILL NOW ENDEAVOR TO EVALUATE THE STAND POIN T OF THE AO FROM ANOTHER ANGLE THAT THE ENTIRE AMOUNT OF SALE PROCEE DS IS COVERED UNDER CLAUSE (IIID) AND; NOT ONLY THE PROFIT ELEMENT. CONTINUING WITH THE ABOVE EXAMPLE, WHERE WE SUPPOSED THAT THE EXPORTER MADE EXPORT TUR NOVER OF RS. 1000/- AND HE EARNED RS.200/- FROM THE EXPORT TRANSACTION IN A DDITION TO RS.100/- TOWARDS THE FACE VALUE OF DEPB. THE AMOUNT OF PROFITS DERIV ED FROM EXPORTS SHALL COME AT RS.300 AS PER CLAUSE (BAA) OF EXPLANATION B ELOW 80HHC(4C) READ WITH SUB-SECTION (3) INCLUDING THE FIRST PROVISO. F URTHER SUPPOSE THAT THE SAID DEPB IS HELD AS SUCH AT THE CLOSE OF THE YEAR AND I S THEN SOLD IN THE SUCCEEDING YEAR FOR RS. 110. IF WE AGREE WITH THE V IEW POINT OF THE DEPARTMENT THAT AT THE TIME OF SALE OF DEPB, THE ENTIRE AMOUNT OF RS . 110/- IS INCLUDIBLE IN SECTION 28 (IIID) THEN IT WOULD MEAN THAT IN ORD ER TO GIVE EFFECT TO SUB- SECTION (3), FIRSTLY THE SUM OF RS.100/- WILL REQUI RE INCLUSION IN THE PROFITS AND GAINS OF BUSINESS OR PROFESSION' IN THE YEAR OF SAL E, BECAUSE THE QUESTION OF 90% EXCLUSION SHALL ARISE ONLY IF 100% IS INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAI NS OF BUSINESS OR PROFESSION'. THAT OBVIOUSLY CANNOT BE THE DONE BECA USE THE SUM OF RS.100/- HAD ALREADY BEEN INCLUDED IN THE PROFITS AND GAINS OF BUSINESS OR PROFESSION' FOR THE LAST YEAR WHEN SUCH INCOME ACCRUED TO THE A SSESSEE U/S 28(IIIB). THE FURTHER INCLUSION OF RS.110/- IN SUCCEEDING YEAR AT THE TIME OF SALE IN THE 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' WOULD LEAD TO OBVIOUS INCONGRUITY AND AN IMPOSSIBLE SITUATION BECAUSE THE INCLUSION OF FACE VALUE OF RS.100/- IN THE PROFITS OF THE SECOND YEAR ALSO WIL L AMOUNT TO DOUBLE TAXATION OF RS.100/- FIRSTLY IN THE YEAR ONE WHEN THE INCOME ON ACCOUNT OF THE FACE VALUE OF DEPB ACCRUED U/S 28(IIIB) AND THERE IN THE YEAR TWO AT THE TIME OF SALE U/S 28(IIID). . . 79. THE SECOND PROVISO TO SECTION 80HHC PROVIDES T HAT IN THE CASE OF AN ASSESSEE HAVING EXPORT TURNOVER NOT EXCEEDING RS. 1 0 CRORES DURING THE PREVIOUS YEAR, THE PROFITS COMPUTED UNDER CLAUSE (A ) OR CLAUSE (B) OR CLAUSE (E) OF THIS SUB-SECTION OR AFTER GIVING EFFECT TO T HE FIRST 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 (IIID) OR CLA USE (IIIC) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. IN OTHER WORDS , IN THE CASE OF AN ASSESSEE WITH EXPORT TURNOVER NOT EXCEEDING RS. 10 CRORES, E VEN THE PROFIT ELEMENT OF RS.10/- IN THE ABOVE EXAMPLE ON THE SALE OF DEPB FO R RS.110/- WILL ALSO BE CONSIDERED AS ELIGIBLE FOR DEDUCTION DESPITE THE FA CT THAT IT IS OUT OF THE TRADING OF DEPB ENTITLEMENT IN INDIA ONLY. BUT FOR THIS PRO VISO NO PROFIT ON SALE OF 10 DEPB OR DFRC COULD HAVE BEEN CONSIDERED FOR DEDUCTI ON UNDER THIS SECTION. IN CONTRAST TO IT THE THIRD AND FOURTH PROVISOS ARE APPLICABLE TO THE CASE OF THE ASSESSEE HAVING EXPORT TURNOVER EXCEEDING RUPEES TE N CRORES IN WHICH CASE THE PROFIT COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR C LAUSE (C) OF SUB SECTION (3) OR AFTER GIVING EFFECT TO THE FIRST PROVISO, SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEARS 90% OF ANY SUM REFERRED TO IN SE CTION 28(IIID) OR (IIIE) IN PROPORTION TO THE EXPORT TURNOVER TO THE TOTAL TURN OVER ONLY IF THE FURTHER TWO CONDITIONS STIPULATED THEREIN ARE FULFILLED AND ALS O THE ASSESSEE HAS SUFFERED EVIDENCE TO PROVE THE FULFILLMENT OF SUCH CONDITION S. IT IS THIS CATEGORY OF EXPORTERS WHICH HAS BEEN STATUTORILY DISCRIMINATED VIS A VIS THE SMALL EXPORTERS HAVING TURNOVER NOT EXCEEDING RS. 10 CROR ES. THEY SHALL NOT BE ENTITLED TO INCREASE IN THE QUANTUM OF DEDUCTION BY PROFIT AT TRANSFER OF DEPB/DFRS WHICH IS OTHERWISE AVAILABLE TO SMALL EXP ORTERS, UNLESS THE TWO CONDITIONS AS SET OUT IN THESE PROVISOS ARE FULFILL ED. IN THE CASES UNDER CONSIDERATION IT IS AN ADMITTED POSITION THAT THE T WO CONDITIONS AS SO SPECIFIED IN THIRD AND, FOURTH PROVISOS ARE NOT CAPABLE OF CO MPLIANCE AND HENCE THE FURTHER INCREASE AS SUGGESTED IN THESE TWO PROVISOS CANNOT BE MADE TO THE COMPUTATION OF DEDUCTION U/S.80HHC. THUS, IT IS APP ARENT THAT THE STATUTORY DISCRIMINATION IS BETWEEN THE EXPORTERS HAVING EXPO RT TURNOVER NOT EXCEEDING RS. 10 CRORES AND THOSE HAVING EXCEEDING RS. 10 CRO RES. WHEREAS THE BENEFIT OF DEDUCTION IN RESPECT OF THE PROFIT OF SALE OF DE PB REALIZED FROM THE INDIAN MARKET IS ALSO AVAILABLE TO SMALL EXPORTERS HAVING EXPORT TURNOVER, IT IS NOT SO IN THE CASE OF THE LARGE EXPORTERS HAVING EXPORT TU RNOVER EXCEEDING RS. 10 CRORES. THIS APPEARS TO BE THE ONLY REASON FOR INSE RTING CLAUSES (IIID) AND (IIIE) TO SECTION 28 BY THE TAXATION, LAWS (AMENDMENT ACT, 2005), SIMULTANEOUS WITH THE INSERTION OF SECTION 3RD AND 4TH PROVISOS. .. .. 89. THE QUESTION RAISED BEFORE THE SPECIAL BENCH H AS TWO PARTS. IN SO FAR AS THE FIRST PART: 'WHETHER THE ENTIRE AMOUNT RECEIVED ON SALE OF DEPB ENTITLEMENTS REPRESENTS PROFIT CHARGEABLE UNDER SEC TION 28(IIID) OF THE INCOME TAX ACT, IS CONCERNED, WE ANSWER IT IN NEGATIVE AND THE SECOND PART OF THE QUESTION OR THE PROFIT REFERRED TO THEREIN REQUIRES ANY ARTIFICIAL COST TO BE INTERPOLATED IS REPLIED IN AFFIRMATIVE TO THE EXTEN T THAT THE FACE VALUE OF DEPB SHALL BE DEDUCTED FROM THE SALE PROCEEDS. AS REGARD S THE GROUNDS BASED IN THESE APPEALS AGAINST THE DENIAL OF DEDUCTION U/S 8 0HHC, IN FULL OR PART, WE FIND THAT THE COMPUTATION OF PROFITS DERIVED FROM E XPORTS AND THE RESULTANT AMOUNT OF DEDUCTION UNDER THIS SECTION CAN BE MADE ONLY WHEN THE DECISION IS TAKEN ON THE AMOUNT AND THE TIMING OF TAXABILITY OF THE FACE VALUE OF DEPB AND THE PROFIT ON ITS SALE. ON THIS ISSUE WE HOLD T HAT THE FACE VALUE OF DEPB IS CHARGEABLE TO TAX U/S 28(IIIB) AT THE TIME OF ACCRU AL OF INCOME, THAT IS, WHEN THE APPLICATION FOR DEPB IS FILED WITH THE COMPETEN T AUTHORITY PURSUANT TO EXPORTS AND PROFIT ON SALE OF DEPB REPRESENTING THE EXCESS OF SALE PROCEEDS OF DEPB OVER ITS FACE VALUE IS LIABLE TO BE CONSIDERED U/S 28(IIID) AT THE TIME OF ITS SALE. WHATEVER IS SAID ABOUT DEPB SHALL ALSO HO LD GOOD FOR DFRC, ON BOTH ITS COMPONENTS, VIZ THE FACE VALUE OF DFRC AND PROF IT ON ITS TRANSFER, EXCEPT FOR THE FACT THAT THE PROFIT ON SALE OF DFRC SHALL BE CHARGED TO TAX U/S 28(IIIE). THERE IS NO DISPUTE ABOUT THE DUTY DRAWBACK, WHICH SHALL BE CHARGEABLE TO TAX AT TIME OF ACCRUAL OF INCOME U/S 28(IIIC) WHEN APPL ICATION IS FILED WITH THE COMPETENT AUTHORITY AFTER MAKING EXPORTS. SINCE THE NECESSARY FACTS FOR THE 11 DETERMINATION OF THE QUANTUM OF DEDUCTION U/S 80HHC , AS DISCUSSED ABOVE, ARE NOT AVAILABLE ON RECORD, WE, THEREFORE, SET ASI DE THE IMPUGNED ORDERS AND DIRECT THE AO TO COMPUTE THE AMOUNT OF RELIEF IN AC CORDANCE WITH THE VIEW EXPRESSED BY US HERE IN ABOVE. 12. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF TH E TRIBUNAL, WE HOLD THAT PROFIT ELEMENT ON DEPB LICENCE WILL B E COVERED BY SECTION 28(IIID) AND, ACCORDINGLY, BY THIRD PROVISO TO SECTION 80HHC(3) OF THE I.T. ACT, 1961 AS THE TURNOVER OF T HE ASSESSEE EXCEEDS RS.10 CRORES THIS AMOUNT SHALL BE EXCLUDE D FOR THE PURPOSE OF COMPUTING DEDUCTION U/S.80HHC OF THE I. T. ACT, 1961, IF CONDITION LAID DOWN IN THAT PROVISO ARE NOT SATI SFIED . THE FACE VALUE OF THE DEPB LICENCE WILL BE COVERED U/S.28(II IB) OF THE I.T. ACT, 1961 AND, THEREFORE, 90% THEREOF WOULD BE ADDE D TO THE EXPORT PROFITS AS PER FIRST PROVISO TO SECTION 80HHC(3) OF THE I.T. ACT, 1961. 13. IN ORDER TO COMPUTE DEDUCTION U/S.80HHC OF THE I.T. ACT, 1961 IN ACCORDANCE WITH THE DECISION OF ITAT SPECI AL BENCH IN THE CASE OF M/S.TOPMAN EXPORTS(SUPRA), WE RESTORE THE M ATTER TO THE FILE OF ASSESSING OFFICER. THE ISSUE OF DEPB IS ACCORDINGLY COVERED BY THE ABO VE DECISION AND FOLLOWING THAT WE RESTORE THE MATTER TO THE FILE OF AO FOR CALCULATING DEDUCTION UNDER SECTION 80HHC IN ACCORDANCE WITH TH AT DECISION. 6. REGARDING DEDUCTION UNDER SECTION 80 HHC IN RESP ECT OF DUTY DRAW BACK AND IMPORT LICENCE, WE DIRECT THE AO TO LOOK I NTO THE ISSUE AFRESH IN THE LIGHT OF AMENDMENT MADE BY TAXATION LAW (AMENDM ENT) 2005 AND THE INTERPRETATION GIVEN IN THE CASE OF TOPMAN EXPO RTS (SUPRA). 7. IN OUR CONSIDERED VIEW EXPORT INCENTIVES, GIVEN BY THE GOVERNMENT EITHER IN THE FORM OF DEPB OR DUTY DRAW BACK OR ANY OTHER IMPORT ENTITLEMENT WILL HAVE TO BE CONSIDERED AT PAR. IN T HE CASE OF TOPMAN EXPORTS (SUPRA) THE ISSUE WAS MAINLY FOCUSED ON DEP B LICENCE BUT IN ESSENCE OTHER INCENTIVES STAND AT PAR WITH DEPB LIC ENCE, AND HAVE A COST 12 VALUE AS WELL AS MARKET VALUE. THE COST VALUE SHOUL D BE TREATED AS CASH ASSISTANCE AS PER REASONING GIVEN BY ITAT MUBAI SPE CIAL BENCH IN THE CASE OF TOPMAN EXPORTS (SUPRA) AND WOULD BE COVERED BY SECTION 28(IIIB) AND THEREFORE, IT WILL BE COVERED UNDER THE FIRST P ROVISO OF SECTION 80 HHC OF THE ACT AND ACCORDINGLY 90% OF THE COST VALUE TH EREOF WOULD BE ADDED IN THE EXPORT PROFIT DECLARED BY THE ASSESSEE. IF S UCH EXPORT INCENTIVES ARE UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS THEN T REATMENT WOULD AS WHAT WE HAVE STATED I.E. ITS FACE VALUE WOULD BE COVERED BY SECTION 28(IIIB) BUT WHERE IT IS SOLD OR PASSED ON TO OTHER CONCERNS AT A HIGHER PRICE THEN DIFFERENCE WOULD BE TREATED AS PROFIT AND WOULD BE COVERED BY SECTION 28(IIID) AND ACCORDINGLY BY 3 RD PROVISO TO SECTION 80 HHC. WE DO NOT FIND ANY REASON TO TAKE A DIFFERENT STAND IN RESPEC T OF DIFFERENT ENTITLEMENT RECEIVED BY THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 22/01/2010 MAHATA/- ORDER PRONOUNCED IN OPEN COURT ON 22/01/2010 13 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD