TMI Blog2012 (11) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Apex Court – In the result, appeal filed by the assessee are allowed for statistical purposes - ITA Nos.923 & 924/Chd/2011 - - - Dated:- 30-7-2012 - SHRI T.R. SOOD AND Ms. SUSHMA CHOWLA, JJ. Appellant by : Shri J .C. Basin Respondent by : Shri Akhilesh Gupta , DR ORDER PER SUSHMA CHOWLA, J.M, : These two appeals filed by the assessee are against the separate orders of the Commissioner of Income - tax (Appeals) - I, Ludhiana dated 01.08.2011 relating to assessment years 1998-99 and 2000-01 against the order passed under section 143(3) of the Income Tax Act, 1961( in short the Act ). 2. The assessee in ITA No .923/Chd/2011 has raised the following grounds of appeal : 1. That the impugned order of the ld. CIT(A), dismissing the assessee s appeal on all the grounds raised, being most cryptic, sketchy, non speaking, and arbitrary, is per se not sustainable for all these reasons and liable to be held as void ab inito. 2. That without prejudice to above, the ld. CIT(A) has grossly erred in arbitrarily upholding the validity of order, even when he himself noted that the order under appeal, was passed without taking prior mandatory approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Section 28 that under clause (iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India is by itself income chargeable to income tax under the head "Profits and Gains of Business or Profession". 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 clause (iiib) of Section 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. 13. Under clause (iiid) of Section 28, any profit on transfer of DEPB is chargeable to income tax under the head "Profits and Gains of Business or Profession" as an item separate from cash assistance under clause (iiib). The word "profit" means the gross proceeds of a business transaction less the costs of the transaction. To quote from Black's Law Dictionary (Fifth Edition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er on the transfer of the DEPB any differently than the profits which are made on the sale of an import license under clause (iiia) of Section 28 of the Act. In taking the view that when the import license is sold the entire amount is treated as profits of business, the High Court has visualized a situation where the cost of acquiring the import license is nil. The cost of acquiring DEPB, on the other hand, is not nil because the person acquires it by paying customs duty on the import content of the export product and the DEPB which accrues to a person against exports has a cost element in it. Accordingly, when DEPB is sold by a person, his profit on transfer of DEPB would be the sale value of the DEPB less the face value of DEPB which represents the cost of the DEPB. The second reason given by the High Court in the impugned judgment is that under the DEPB scheme, DEPB is given at a percentage of the FOB value of the exports so as to neutralize the incidence of customs duty on the import content of the export products, but the exporter may not himself utilize the DEPB for paying customs duty but may transfer it to someone else and therefore the entire sum received on transfer of DE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the person for the first assessment year chargeable under clause (iiib) of Section 28 and the difference between the DEPB credit and the sale value of the DEPB credit would be income in his hands for the subsequent assessment year chargeable under clause (iiid) of Section 28. The interpretation suggested by us, therefore, does not lead to double taxation of the same income, which the legislature must be presumed to have avoided. 9. The Hon'ble Apex Court also addressed the issue of computation of deduction under section 80HHC of the Act where export turn over was below or above Rs.10 crores and held as under : 19. Sub-section (1) of Section 80HHC quoted above makes it clear that an assessee engaged in the business of export out of India of any goods or merchandise to which this Section applies shall be allowed, in computing his total income, a deduction to the extent of profits referred to in sub-section (1B), derived by him from the export of such goods or merchandise. Sub-section (1B) of Section 80HHC gives the percentages of deduction of the profits allowable for the different assessment years from the assessment years 2001-2002 to 2004- 2005. Sub-section (3)(a) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cent of the face value of the DEPB does not get excluded from "profits of the business" under explanation (baa) and only ninety per cent of the difference between the face value of the DEPB and the sale value of the DEPB gets excluded from "profits of the business", the assessee gets a bigger figure of "profits of the business" and this is possible when the DEPB accrues to the assessee in one previous year and transfer of the DEPB takes place in the subsequent previous year. The result in such case is that a higher figure of "profits of the business" becomes the multiplier in the aforesaid formula under subsection (3)(a) of Section 80HHC for arriving at the figure of profits derived from exports. 21. To the figure of profits derived from exports worked out as per the aforesaid formula under sub-section (3)(a) of Section 80HHC, the additions as mentioned in first, second, third and fourth proviso under sub-section (3) are made to profits derived from exports. Under the first proviso, ninety per cent of the sum referred to in clauses (iiia), (iiib) and (iiic) of Section 28 are added in the same proportion as export turnover bears to the total turnover of the business carried on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business" will not be available to an assessee having an export turnover exceeding Rs.10 crores. In other words, where the export turnover of an assessee exceeds Rs. 10 crores, he does not get the benefit of addition of ninety per cent of export incentive under clause (iiid) of Section 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 have the export turnover exceeding Rs. 10 crores and as the assessee did not fulfill the conditions set out in the third proviso to Section 80HHC (iii), the assessee was not entitled to a deduction under Section 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 Section 28 (iiid) would not include the face value of the DEPB. It is a well settled 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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