TMI Blog2018 (5) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... porting manufacturer who receives export incentives in the form of duty draw back (DDB), Duty Entitlement Pass Book (DEPB) etc. is entitled for deduction under Section 80HHC of the Income Tax Act, 1961?” Accordingly, we refer this batch of appeals to the larger Bench. - CIVIL APPEAL NO. 4590 OF 2018, (Arising out of Special Leave Petition (C) No. 8368 OF 2009) - - - Dated:- 27-4-2018 - Mr. R.K. Agrawal And Mr. Abhay Manohar Sapre JJ. CIVIL APPEAL NO. 4601 OF 2018, (Arising out of Special Leave Petition (C) No. 7331 OF 2017), CIVIL APPEAL NO. 4602 OF 2018, (Arising out of Special Leave Petition (C) No. 9284 OF 2017), CIVIL APPEAL NO. 4591 OF 2018, (Arising out of Special Leave Petition (C) No. 19482 OF 2010), CIVIL APPEAL NO. 4597 OF 2018, (Arising out of Special Leave Petition (C) No. 20408 OF 2013), CIVIL APPEAL NO. 4599 OF 2018, (Arising out of Special Leave Petition (C) No. 10542 OF 2013), CIVIL APPEAL NO. 4592 OF 2018, (Arising out of Special Leave Petition (C) No. 20941 OF 2010), CIVIL APPEAL NO.4593 OF 2018, (Arising out of Special Leave Petition (C) No. 23683 OF 2010), CIVIL APPEAL NO. 4596 OF 2018, (Arising out of Special Leave Petition (C) No. 3133 OF 2012), CIV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of special leave. (f) Since a common question of law has arisen in these appeals, it will be disposed of by this common order. 4) Heard learned counsel for the parties and perused the records. Point(s) for consideration:- 5) The short but important question of law that arises before this court is whether in the facts and circumstances of the present case, supporting manufacturer who receives export incentives in the form of duty draw back (DDB), Duty Entitlement Pass Book (DEPB) etc., is entitled for deduction under Section 80HHC of the IT Act at par with the direct exporter? Rival contentions:- 6) At the outset, learned counsel for the Revenue submitted that the assessee deals in the manufacturing of the carpets which it usually sells to various entities including M/s IKEA Trading (India) Ltd. (Export House/Trading House) which, in turn, further exports the goods manufactured by the assessee. While filing the return, the assessee claimed deduction at par with the direct exporter under Section 80HHC of the IT Act since it receives export incentives in the form of duty draw back (DDB) etc. It was further contended that in view of the fact that the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, be allowed, in computing the total income of the assessee, a deduction to the extent of profits, referred to in sub-section (1B), derived by the assessee from the export of such goods or merchandise: Provided that if the assessee, being a holder of an Export House Certificate or a Trading House Certificate (hereinafter in this section referred to as an Export House or a Trading House, as the case may be), issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of export turnover specified therein, the deduction under this sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount which bears to the total profits derived by the assessee from the export of trading goods, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee in respect of such trading goods. (1A) Where the assessee, being a supporting manufacturer, has during the previous year, sold goods or merchandise to any Export House or Trading House in respect of which the Export House or Trading House h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transport of the goods or merchandise beyond the customs station as defined in the Customs act, 1962 (52 of 1962): Provided that in relation to any assessment year commencing on or after the 1st day of April, 1991, the expression total turnover shall have effect as if it also excluded any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28. (baa) profits of the business means the profits of the business as computed under the head Profits and gains of business or profession as reduced by (1) ninety per cent. of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28 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; (c) xxx (d) xxx (e) xxx Clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of Section 28 of IT Act read as follows: 28. Profits and gains of business or profession:- The following income shall be chargeable to income-tax under the head Profits and gains of busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally refers to profits on sale of import license, cash assistance received or receivable against exports, duty drawback against export (Customs Central Excise Duty Drawback Rules), any profit on the transfer of Duty Entitlement Pass Book (Duty Remission Scheme) and any profit on the transfer of Duty Free Replenishment Certificate. 11) It is well known fact that there can be diverse sources of income. These sources of income are clubbed together in order to find out the gross total income on which tax can be levied. However, the IT Act provides for allowing of certain deductions from the gross total income of the assessee. Broadly speaking, deductions reduce the taxable income. In the case at hand, it is evident that the total income of the assessee for the concerned Assessment Year was ₹ 1,97,10,927/- out of which it claimed deduction to the tune of ₹ 1,57,68,742/- under Section 80HHC of the IT Act which was partly disallowed by the Assessing Officer and deduction was allowed only to the tune of ₹ 1,08,96,505/-. However, the assessee claimed the deduction at par with the direct exporter under Section 80HHC of the IT Act which has been eventually upheld by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the export house in computing the total income. The export house premium can be included in the business profit because it is an integral part of business operation of the respondent which consists of sale of goods by the respondent to the export house. The aforesaid decision has been followed by another Bench of two Judges of this Court in Special Leave to Appeal (Civil) No. 7615 of 2009, Civil Appeal No. 6437 of 2012 and Others, Commissioner of Income Tax Karnal vs. Sushil Kumar Gupta decided on September 12, 2012. The question considered in the aforesaid case is reproduced below: 3. In these civil appeals the common question which arises for determination is as follows: Whether 90% of export benefits disclaimed in favour of a supporting manufacturer (assessee herein) have to be reduced in terms of Explanation (baa) of Section 80HHC of the Income Tax Act, 1961, while computing deduction admissible to such supporting manufacturer under Section 80HHC(3A) of the Act? 4. This question has been answered in favour of the assessee and against the Department in the case of CIT v. Baby Marine Exports [2007] 290 ITR 323/160 Taxman 160. 5. The civil appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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