2007 (8) TMI 743 - AT - Income Tax

Summary

Issues:
The judgment involves the computation of deduction u/s 80HHC in the case of a supporting manufacturer. The main issue is whether export incentives received by the assessee are eligible for deduction under section 80HHC.

Issue 1: Computation of Deduction under Section 80HHC:
The case revolves around the eligibility of export incentives for deduction under section 80HHC. The Assessing Officer contended that such incentives are not profit from business and hence not eligible for deduction under sub-section (3A) of section 80HHC. The Commissioner (Appeals) held that duty drawback is not to be reduced while computing deduction under section 80HHC, but DEPB amount and profit on sale of DEPB license are not eligible for deduction. The cross appeal challenges the relief granted and denied by the Commissioner (A).

Issue 2: Interpretation of Export Incentives Eligibility:
The contention of the revenue is that export incentives are not eligible for deduction under section 80HHC. The revenue argued that 90% of such export incentives should be reduced as per the Explanation to section 80HHC. The assessee relied on previous Tribunal decisions and a Supreme Court case to support their claim that such incentives should be considered as part of business profits.

Judgment Summary:
The Tribunal analyzed the relevant provisions and previous decisions to determine the eligibility of export incentives for deduction under section 80HHC. The Tribunal referred to a case involving a supporting manufacturer and held that the assessee is entitled to deduction under section 80HHC for export incentives treated as business profits. The Tribunal emphasized that when export incentives are passed on to the supporting manufacturer, they become part of the sale proceeds and are eligible for deduction. The Tribunal upheld the order of the Commissioner (Appeals) and allowed the appeal of the assessee while dismissing the appeal of the revenue.