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TMI Blog2016 (11) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the CIT (A) confirming the action of the AO in short allowance of deduction under section 80HHC of the Act. For this assessee has raised the following Grounds No.2 & 3. "2. Erred in determining the deduction allowable under Section 80HHC of the Act at Rs. 12,36,692/- as against the deduction of Rs. 19,17,629/- claimed by the Appellant; 3. erred in not reducing the cost value of DEPB licenses of Rs. 75,05,816/- and also the cost value of DFRC licenses of Rs. 26,66,913/- from the total cost of goods sold as per the decision of the Supreme Court in Appellant's own case decided alongwith (2012) 342 ITR 49;" 3. Briefly stated, the facts are that assessee is engaged in only trading business of import and export. The assessee has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the issue and admittedly the assessee is a trader engaged in the business of import and export. During the year under consideration, assessee has exported 100% merchandise. Now coming to the computation part for claim of deduction, assessee has given his working in comparison to Assessing Officer's working, which reads as under:- Image No. 1 ** In working submitted before AO/CIT(A) appellant had claimed deduction of Rs. 19,17,630/-; However, the correct working as per Special Bench decision in case of Topman Exports 124 ITD 1(SB) Mumbai and Supreme Court decision (approving Special Bench in 342 ITR 49 (SC) read with provisions of 80HHC(3) will be Rs. 21,53,625/-)" 5. Ld. Representative for the assessee, Shri Rajan Vora argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 28 of the Act refers to the amount of profit whereas clause (iiib) and (iiic) refers to the entire amount of cash assistance and duty draw back received. In view of clause (iiid) of section 28 of the Act, only profit amount is to be taken into consideration for the purpose of computing profit of the business as per Explanation (baa) to section 80HHC of the Act. He explained that only profit on transfer of DEPB is to be excluded for computing deduction under section 80HHC of the Act. He explained that since, there is no profit on sale of the DEPB licence in the present case, as per comparative computation given above; nothing has to be reduced from the profits and gains of business for the purpose of deduction under section 80HHC o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over bears to the total turnover of the business carried on by the assessee, if the assessee has necessary and sufficient evidence to prove that," 6. Ld. Counsel stated that in the present case, there is actually loss on sale of export incentive and hence, nil income is to be taken while computing deduction under section 80HHC of the Act. He explained that the face value of export incentive will be added under first proviso to section 80HHC (3) of the Act to the above profit because face value of DEPB/DFRC would get covered under section 28(iiib) of the Act. And only profit on sale of DEPB/DFRC would be covered under third proviso to section 80HHC(3) and 90% of such profit would be eligible to be added to above profit as per third proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... working claiming deduction at Rs. 21,53,625/- as against submitted before the lower authorities claiming at Rs. 19,17,630/-. These figures need verification at the level of the AO. However, the claim of assessee is allowable, as the assessee has incurred a loss on sale of export incentive and hence no amount is to be excluded while calculating deduction in term of section 80HHC third proviso. Hence, I direct the Assessing Officer, as in the present case there is a loss, where there is a loss (and not profit) on sale of export incentives, no loss can be reduced while computing deduction under section 80HHC of the Act. I direct the Assessing Officer accordingly. 8. In the result, appeal of the assessee is allowed. Order pronounced in the op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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