TMI Blog2007 (2) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... vances are raised for both the years : "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to grant benefit of provisions of section 80HHC in respect of advance import licence of Rs. 31,10,980 by holding wrongly that it is covered under clause ( iiib ) of section 28. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal of the assessee on the point of cost of steam recovered from Cyanamid Agro Ltd. relying on the decision of jurisdictional High Court in the case of Bangalore Clothing Co. (260 ITR 371) though the Department has not accepted the decision." 3. We will first take up the second ground of appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sum of Rs. 5,07,239 recovered for cost of steam supplied. Your respondent submit that the CIT(A) ought to have held that, the said receipt do not fall within the ambit of clause ( baa ) of the Explanation to section 80HHC of the Act. Your respondent pray that the Assessing Officer be directed to reduce business profits by 90% of the above receipt in computing deduction under section 80HHC of the Act." This grievance in the appeals is thus interlinked with the issues raised in the cross objection. We, therefore, take up all these issues together. 5. To appreciate the issue requiring our adjudication, it is necessary to set out some relevant material facts first. The assessee is an exporter. The assessee made exports to the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntile method of accounting, the assessee should have reflected this benefit in the profits and loss account by disclosing the amount of duty exempted as a credit item therein, and that "the assessee has indirectly accounted for the same by accounting for purchases at net invoice value". In the background of this analysis by the Assessing Officer, while he did not make separate addition for advance licence benefits, as the same were accounted for by booking the purchases at net invoices values, the Assessing Officer did hold that the benefit on account of advance licence was not derived from the business of exports, but is on account of export promotion policy of the Government of India. Relying upon the judgment of Hon ble Supreme Court, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual matrix of the case as also the applicable legal position. 7. In order to adjudicate on this controversy, it is necessary to first of all appreciate the nature of advance licence benefit under the Export Import Policy. There is no variations in the perceptions of the parties so far as the basic traits of this scheme are concerned. The expression advance licence , it is necessary to appreciate, broadly refers to a licence to import input components of the goods that an exporter seeks to export on the understanding that the input components so imported shall be so used only for the purposes of manufacturing the specific goods for the purposes of exports. The advance licence is for the actual user only and thus selling the goods so im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts. The benefit of importing the input components duty free, is thus coupled with corresponding obligation to make necessary exports and not to claim duty drawback in respect of the same. It is indeed a concession inasmuch as the funds that an exporter has to block in the inventories of inputs get reduced by the import duty components on such inputs, but then the import duty itself is not a benefit of income nature since the assessee has a corresponding export obligation. The duty free imports of inputs by itself do not amount to a benefit of income nature. To that extent, the stand of the authorities below is incorrect. The question of parity with DEPB is also irrelevant because, as rightly noted by the CIT(A), advance licence is non-tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e into account that benefit. By no stretch of logic, however, a benefit of income nature can be said to arise when the assessee avails the advance licence and imports the input component duty free, with a corresponding obligation to either export the goods in which such input components are used or pay the import duties waived plus additional levies, in case of failure to discharge these export obligations. 10. We thus reject first ground of appeal raised by the revenue, and uphold the second and third ground of cross objection raised by the assessee. As for the first ground of cross objection, i.e. on the CIT(A) upholding validity of reassessment proceedings, the assessee did not press for the same and it is dismissed for want of p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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