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TMI Blog2013 (7) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... TD. [2012 (6) TMI 65 - DELHI HIGH COURT] - Decided in favour of Revenue. - ITA NO.100/2007 - - - Dated:- 6-6-2013 - D. V. SHYLENDRA KUMAR AND B.S. INDRAKALA, JJ. For the Appellant : Sri K V Aravind, Adv. For the Respondent : Sri Mahesh Kiran Shetty, Adv. JUDGEMENT:- This appeal under Section 260(A) of the Income Tax Act, 1961 is directed against the order dated 16.6.2006 passed by the Income Appellate Tribunal, Bangalore in ITA 2648/Bang/2004 is by the revenue and being aggrieved by the order of the tribunal allowing the appeal of the assessee and directing the department to extend the benefit of Section 80HHC to the assessee under the Income Tax Act. 2. The assessee is a private limited company and exporter. The assessment year is 2001-02. This appeal has been admitted to consider, "Whether under the facts and circumstances of the case and law the finding of the Tribunal that the amount received towards premium by way of transfer of the export license is entitled for deduction will not fall within Explanation (baa) of Section 80HHC of the Act is justified or perverse?" 3. The brief facts relevant for the assessment year in question are that the assessee is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not applicable while the assessing officer erred in not granting any relief, the appellate commissioner also committed an error in directing exclusion of 90% of the amount by wrongly relying on explanation (baa) and therefore, the appeal should be allowed and the assessee be extended full benefit in terms of Section 80HHC. 6. This argument found favour with the appellate tribunal as the appellate tribunal opined that the earning of the assessee by the transfer of quotas cannot be said to be covered by the explanation (baa) to Section 80HHC as it had a link to the provisions of Section 28 (iiia), (iiib), (iiic), (iiid) and (iiie), assessee s profits from the business where such income is derived under Section 28(iv) of the Act and therefore, deduction of 90% of the claim was not justified and accordingly, extended full benefit to the assessee. 7. It is against this order of the tribunal, the present appeal by the revenue and as noticed earlier, the question of law is as indicated above. 8. Notice had been issued to the respondent and respondent is represented by counsel Sri Mahesh Kiran Shetty. 9. Submission of the learned standing counsel appearing on behalf of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 237 ITR 579 (SC) on which the assessing officer also placed reliance wherein the word derived from had come in for interpretation and it has been held that unless there is a direct nexus to the export activity, it cannot be called as derived but it may be incidental to the export activity in the sense, the quotas are incidental to the export made by the assessee in the earlier years. 12. Reliance is also placed on another decision of the Supreme Court in the case of LIBERTY INDIA vs COMMISSIONER OF INCOME TAX ((2009) 317 ITR 218) at paragraphs 13 to 18 wherein the words derived from had come in for further examination and the earlier view is also followed and though, these two decisions of the Supreme Court were rendered in the context of the provisions of Section 80HH, 80-IA and 80-IB of the Act respectively, they are also in the nature of export incentive deductions allowed and assessee s earnings attributable to an export activity and derived from export has been explained in these two decisions and the ratio equally applies to the deductions of Section 80HHC of the Act. It is therefore submitted that the view taken by the tribunal is not correct in reversing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aravind, learned counsel seeks to distinguish the Judgment of the Supreme Court in the case of COMMISSIONER OF INCOME `TAX, THIRUVANANTAPURAM vs BABY MARINE EXPORTS pointing that the case before the Supreme Court was of a manufacturer selling goods to export house coming under Section 80(HHC)(1) and the ratio of this case is also not applicable as in respect of a supporting manufacturer, the exporter would have issued a certificate to the value of the goods exported/purchased from the supporting manufacturer and the benefit of Section 80HHC(1) is regarding a claim either by the exporter or on the basis of the certificate to the extent of supply made by supporting manufacturer and cannot be claimed by both and therefore, the present case of the assessee/respondent has no comparison to case considered by the Supreme Court. It is further submitted that in the present case, the export activity is yet to take place; that there is no manufacturing of goods which are exported through an export house and no earning of foreign exchange and it is all speculative and at any rate it is not a benefit expressely conferred under Section 80HHC(1) of the Act and therefore, the assessee cannot clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and 2. the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India;] Section 28: The following income shall be chargeable to income-tax under the head profits and gains of business or profession" (i) .. (ii) .. (iii) [(iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947);] [(iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India;] [(iiic) any duty of customs or excise re-paid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971;] [(iiid) any profit on the transfer of the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the sense that the export quota is allotted only to an exporter who has effected export and based on the value of the exports of the earlier years, that does not mean that the transfer of export quota has resulted in the earning of foreign exchange in the hands of the assessee or transferor of the quota. It is also to be seen that the assessee in fact had derived the benefit of Section 80HHC already in respect of its exports and may be the transferee of the quota as and when the exports are effected, can claim benefit under this but not the assessee. The assessee does not qualify for the benefit under Section 80HHC(i) of the Act. 20. The reference to provisions of Sec.28(iv) of the Act by the Tribunal which in terms states that the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall be chargeable to tax, does not mean that any amount received by way of transfer of export quota is to be taken as a profit and gain of business and therefore does not automatically qualify as profit earned during an export activity to gain the benefit under Section 80HHC(i) of the Act. 21. We find that the referen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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