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2015 (4) TMI 800 - AT - Income TaxDeduction u/s 80HHC of Income Tax Act, 1961 on DEPB receivables & accruals - Denial of deduction u/s 80HHC on 90% of other income - Treatment of insurance claim received and C&F Stockist interest for the purpose of deduction u/s 80HHC - Addition on account of staff welfare expenses, selling & distribution expenses in absence of complete bills & vouchers - Treatment of Deferred revenue expenditure - Held that:- In the case of Topman Exports [2012 (2) TMI 100 - SUPREME COURT OF INDIA], apex court has held that 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 "cash assistance" receivable by a person against exports under the scheme of the Government of India and falls under cl. (iiib) of s. 28 and is chargeable to income-tax under the head "Profits and gains of business or profession" even before it is transferred by the assessee. We are, thus, of the considered opinion that while the face value of the DEPB will fall under cl. (iiib) of s. 28 of the Act, the difference between the sale value and the face value of the DEPB will fall under cl. (iiid) of s. 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 just the difference between the sale value and the face value of the DEPB represent profit on transfer of the DEPB. where the export turnover of an assessee exceeds ₹ 10 crores, he does not get the benefit of addition of ninety per cent of export incentive under cl. (iiid) of s. 28 to his export profits, but he gets a higher figure of profits of the business, which ultimately results in computation of a bigger export profit. The High Court, therefore, was not right in coming to the conclusion that as the assessee did not (sic) have the export turnover exceeding ₹ 10 crores and as the assessee did not fulfill the conditions set out in the third proviso to s. 80HHC(3), the assessee was not entitled to a deduction under s. 80HHC on the amount received on transfer of DEPB and with a view to get over this difficulty the assessee was contending that the profits on transfer of DEPB under s. 28(iiid) would not include the face value of the DEPB. It is a wellsettled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Expln. (baa) to s. 80HHC read with the words used in cls. (iiid) and (iiie) of s. 28, the assessee was entitled to a deduction under s. 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee.” Therefore, this ground is restored to the file of AO to decide it afresh in the light of judgement of Hon’ble Gujarat High Court rendered in the case of Avani Exports [2012 (7) TMI 190 - GUJARAT HIGH COURT] and the judgement of Hon’ble Apex Court in the case of Topman Exports [2012 (2) TMI 100 - SUPREME COURT OF INDIA]. This ground of assessee’s appeal is allowed for statistical purposes. Denial of deduction u/s 80HHC on 90% of other income - In the case of ACG Associated Capsules Pvt. Ltd. [2012 (2) TMI 101 - SUPREME COURT OF INDIA], it was held that only ninety per cent, of the net amount of any receipt of the nature mentioned in clause (1) of section 80HHC which is actually included in the profits of the assessee is to be deducted from the profits of the assessee for determining "profits of the business" of the assessee under Explanation (baa) to section 80HHC. It is contended by the ld.Sr.Counsel for the assessee that the issue is covered by the judgement of Hon’ble Apex Court in the case of ACG Associated Capsules Pvt.Ltd., wherein the Hon’ble Supreme Court held that ninety percent of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profits of the business of the assessee as computed under the head “profits and gains of business or profession” is to be deducted under clause(1) of Explanation (baa) to section 80HHC for determining the profits of business. Therefore, respectfully following the ration laid down by the Hon’ble Apex Court, we hereby restore the issue to the file of the AO for re-computation of deduction u/s.80-HHC in the light of the judgement of Hon’ble Supreme Court rendered in the case of ACG Associated Capsules Pvt.Ltd.(supra). - Accordingly, this ground of assessee’s appeal is allowed for statistical purposes. In the case of Milton Laminates Ltd. [2015 (4) TMI 804 - GUJARAT HIGH COURT], the same issue was raised whether the Income Tax Appellate Tribunal was right in law in excluding 90% of the ' Other Income' viz. Interest, Misc. Income and Insurance Claim from the profits of the Business while calculating the deduction u/s. 80HHC of the Act - it was held that Applying the law laid down by the Hon'ble Supreme Court in the case of ACG Associated Capsules (P.) Ltd. (supra) the aforesaid questions are held in favour of the assessee and order passed by the ITAT in ITA No.2053/Ahd/2004 for AY 1997-98 is hereby quashed and set aside. Now, the AO to recompute the deduction under Section 80HHC of the Income-tax Act considering the law laid down by the Hon’ble Supreme Court in the case of ACG Associated Capsules (P.) Ltd. Therefore, respectfully following the judgement of Hon’ble Gujarat High Court in the case of Milton Laminates Ltd. [2015 (4) TMI 804 - GUJARAT HIGH COURT], we hereby dismiss this ground of the Revenue’s appeal. In the result, appeal of the Revenue is dismissed. - Assessee appeal allowed for statistical purpose and revenue appeal dismissed.
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