TMI Blog1999 (6) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... ved at after including the premium on export licence at Rs. 1,73,428 export subsidy of Rs. 4,70,426 and draw back Rs. 82,950. The Assessing Officer considered that the premium on export licence, duty draw back and export subsidy cannot be considered as profit derived from export in view of the decision of the Karnataka High Court in the case of Sterling Foods v. CIT [1984] 150 ITR 292/[1985] 20 Taxman 55. The Assessing Officer therefore, excluded the income from premium on export licence, export subsidy and duty draw back for the purpose of determining the profit from export business. He found that if the income from these three items are excluded, the result from export is a negative figure i.e. loss. The Assessing Officer therefore, concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Tribunal. 4. During the course of hearing the assessee's counsel relied on the decision of the Karnataka High Court in the case of Sterling Foods. But it was pointed out to him at the time of hearing that the said decision of the Karnataka High Court has not been approved by the Hon'ble Supreme Court in CIT v. Sterling Foods [1999] 237 ITR 579/104 Taxman 204. The ld. counsel for the assessee stated that the decision of the Hon'ble Supreme Court in Sterling Foods' case supports the case of the assessee. The ld. counsel relied on the decision of the Supreme Court in Sterling Foods case. 5. The ld. Departmental Representative, on the other hand, supported the orders of the authorities below and emphasised that deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case is whether the premium on export licence, duty draw back and export subsidy are profit derived from the business of export. The Hon'ble Supreme Court in the case of Sterling Foods reversed the Karnataka High Court's decision in the case of Sterling Foods and approved the decision of the Karnataka High Court in Sterling Foods' case . Their Lordships of the Supreme Court at page 585 observed as under : "We do not think that the source of the import entitlements can be said to be the industrial undertaking of the assessee. The source of the import entitlements can, in the circumstances, only be said to be the Export Promotion Scheme of the Central Government where under the export entitlements become available. There must be, for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible for the import entitlements only on account of its having exported goods out of India, the income derived by conversion of the import entitlements into money by a process of sale should be regarded as profits or gains derived from the said activity of the export of goods. We are unable to accept this contention. Profit or gain can be said to have been 'derived' from an activity carried on by a person only if the said activity is the immediate and effective source of the said profit of gain. There must be a direct nexus between the activity and the earning of the profit or gain. The income, profit or gain cannot be said to have been 'derived' from an activity merely by reason of the fact that the said activity may have helped to earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0HHC on premium on export licence, export subsidy and duty draw back. We, therefore, confirm the order of the CIT(A) and reject the grounds raised by the assessee. 8. It may be pointed out that as laid down in the proviso to section 80HHC, deduction under section 80HHC shall not exceeds the profit derived by an assessee from the export of goods. The Assessing Officer has given a finding that if duty draw back, premium on export licence and export subsidy is excluded from the profits, then the profit from export business would be a negative figure, which means after excluding the premium on export licence, export subsidy and duty draw back there is no profit from export business. If there is no profit derived by the assessee from the expor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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