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2018 (12) TMI 35 - HC - Income TaxDeduction u/s 80HHC in respect of the DEPB and duty drawback and similar incentives disclaimed in its favour by the exporter - Held that - As decided in assessee s own case 2013 (12) TMI 541 - MADRAS HIGH COURT Receipts on Duty Entitlement Passbook Scheme (DEPB) would form part of the profits and gains of the business it being the assistance given by the Government of India to an exporter to pay customs duty on its imports - The Explanation (baa) under Section 80HHC of the Act giving the formula for working out the deduction - profits of the business means the profits of the business as computed under the head Profits and gains of business or profession as reduced by ninety per cent. of any sum referred to in clause (iiia) (iiib) (iiic) (iiid) and (iiie) of Section 28 - 90% of the DEPB which is cash assistance against exports and is covered under clause (iiib) of Section 28 will get excluded from the profits of the business of the assessee if such DEPB has accrued to the assessee during the previous year - Decided against Revenue.
Issues:
Challenging the order passed by the Income Tax Appellate Tribunal regarding deduction under Section 80HHC for DEPB and duty drawback; interpretation of Third Proviso to Sub-Section (3) of Section 80HHC; consideration of DEPB and duty drawback benefits as part of sale consideration; applicability of Supreme Court decision in a specific case. Analysis: The High Court heard the appeals challenging the order passed by the Income Tax Appellate Tribunal for the assessment years 2000-01 and 2002-03. The substantial questions of law raised included the entitlement of a supporting manufacturer to deduction under Section 80HHC for DEPB, duty drawback, and similar incentives disclaimed by the exporter. The court referred to a previous decision in the same case where it was held that the DEPB incentives received by the assessee were part of the profits and gains of the business. The court emphasized that the DEPB scheme assistance from the government falls under Clause (iiib) of Section 28 and is chargeable to income tax. It was concluded that the export incentive should not be rejected outright by the Revenue, and the value of incentives received by the assessee needed further consideration. Regarding the interpretation of the Third Proviso to Sub-Section (3) of Section 80HHC, the court highlighted that the Revenue did not dispute the legal position established by the previous decision. The court emphasized the need for a detailed assessment by the Assessing Officer based on the decision of the Apex Court to determine the value of incentives received by the assessee. The court directed a remittal to the Assessing Officer for a thorough evaluation of the claim under Section 80HHC in line with the Apex Court's pronouncement. The court also addressed the issue of considering DEPB and duty drawback benefits as part of the sale consideration. It was noted that the claim of the assessee regarding the sale consideration was rejected by the Income Tax Appellate Tribunal based on specific rules. However, the court emphasized the need for a detailed assessment to determine the value transferred as part of the sale consideration, as highlighted in the previous decision. In conclusion, the appeals were disposed of in alignment with the previous decision, emphasizing the need for a detailed assessment by the Assessing Officer to determine the value of incentives received by the assessee. The court highlighted the importance of applying the decision of the Apex Court in assessing the claim under Section 80HHC of the Income Tax Act, 1961.
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