TMI Blog2006 (11) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... ting a total income of Rs. 1,50,860. The return was processed under section 143(1)(a) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), after making prima facie adjustment and rejecting the assessee's claim of deduction under section 80HHC of the Act. Later, the assessment was taken up for scrutiny and the assessment was completed under section 143(3) of the Act determining a total income of Rs. 9,27,500. While completing the assessment, the Assessing Officer was of the view that the assessee is not entitled to deduction under section 80HHC of the Act, on the ground that there was no export during the year. Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) allowed the appeal and set aside the order of the lower authority. Aggrieved, the Revenue filed an appeal to the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal"). The Tribunal dismissed the Revenue's appeal and confirmed the order of the Commissioner of Income-tax (Appeals). Learned standing counsel appearing for the Revenue submitted that the assessee had not done any export and therefore, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centive amounts later and the quantified amounts were received by the assessee only during the year. The assessee is following the cash system and hence the incentive amounts received, was treated as income on receipt basis during the assessment year. The undisputed fact is that the assessee has not made any export during the relevant assessment year 1991.,92. Because of the amendment of section 28 of the Act, by the Finance Act, 1990 by inserting clauses (iiia), (iiib) and (iiic) with retrospective effect with a view to ensure that cash compensatory support, duty drawback and profit on sale of import entitlement licences shall be taxable under the head "Profits and gains of business or profession", the said amounts received could not be considered as export profit. Section 80HHC of the Act deals with granting deduction, which reads as under: "80HHC. Deduction in respect of profits retained for export business.-(1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 579, held as follows: "We do not think that the source of the import entitlements can be said to be the industrial undertaking of the assessee. The source of the import entitlements can, in the circumstances, only be said to be the Export Promotion Scheme of the Central Government whereunder the export entitlements become available. There must be, for the application of the words 'derived from', a direct nexus between the profits and gains and the industrial undertaking. In the instant case, the nexus is not direct but only incidental. The industrial undertaking exports processed sea food. By reason of such export, the Export Promotion Scheme applies. Thereunder, the assessee is entitled to import entitlements, which it can sell. The sale consideration therefrom cannot, in our view, be held to constitute a profit and gain derived from the assessee's industrial undertaking." Following the above Supreme Court judgment, it is evident that the cash compensatory support and duty drawback amounts could not be held as profits derived from export. Sub-section (3) of section 80HHC of the Act, deals with the formula for computing the profit derived from the export of goods for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no actual export during the year. Merely continuing the business is not sufficient to get the benefit provided under section 80HHC of the Act, unless there is actual export made during the year. In the case of P. R. Prabhakar v. CIT [2006] 284 ITR 548 (SC), the assessee carried on business of export of his own products and also procured export contracts for other exporters on commission. He derived income of Rs. 56,69,321 by way of commission, whereas as an exporter of goods, he incurred a loss of Rs. 6,372. The value of the total exported goods outside India, by the assessee, during the relevant assessment year was Rs. 3,67,600. The assessee claimed deduction under section 80HHC of the Act. The said exemption claimed was disallowed by the Assessing Officer on the ground that the assessee had incurred loss in respect of the export business. Aggrieved by the same, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) and the same was dismissed. Aggrieved, the assessee filed an appeal before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal was of the view that the commission received from other exporters has to be taken into consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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