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TMI Blog2019 (9) TMI 738X X X X Extracts X X X X X X X X Extracts X X X X ..... The marginal note to Section 80HHC reads - Deduction in respect of profits retained for export business. "80HHC. (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 of this section, 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 (hereafter 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 the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits on sale of a licence acquired from any other person), and clauses (iiib) and (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee: Provided further that in the case of an assessee having export turnover not exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiid) or clause (iiie), as the case may be, of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee: Provided also that in the case of an assessee having export turnover exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiid) of section 28, the same p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed export turnover" means the export turnover as reduced by the export turnover in respect of trading goods; (b) "adjusted profits of the business" means the profits of the business as reduced by the profits derived from the business of export out of India of trading goods as computed in the manner provided in clause (b) of sub-section (3); (c) "adjusted total turnover" means the total turnover of the business as reduced by the export turnover in respect of trading goods; (d) "direct costs" means costs directly attributable to the trading goods exported out of India including the purchase price of such goods; (e) "indirect costs" means costs, not being direct costs, allocated in the ratio of the export turnover in respect of trading goods to the total turnover; (f) "trading goods" means goods which are not manufactured or processed by the assessee. (3A) For the purposes of sub-section (1A), profits derived by a supporting manufacturer from the sale of goods or merchandise shall be, - (a) in a case where the business carried on by the supporting manufacturer consists exclusively of sale of goods or merchandise to one or more Export Houses or Trading Houses, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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." 4) Given this statutory scheme, it is clear that the exporter stands on a completely different footing from the supporting manufacturer as the parameters and scheme for claiming deduction relatable to exporters under 80HHC(1) read with (3) is completely different from that of supporting manufacturers under Section 80HHC (1A) read with (3A) thereof. 5) We may mention in passing that this matter has been placed before a bench of three judges by the judgment in Commissioner of Income Tax, Karnal (Haryana) vs. Carpet India, Panipat (Haryana) (2018) 6 SCC 620, where this Court analysed the provisions of Section 80HHC (3A) and thereafter adverted to the decision in Baby Marine Exports (supra) as follows:- "15) In Baby Marine Exports (supra), the question of law involved was "whether the export house premium received by the assessee is includible in the "profits of the business" of the assessee while computing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fically reduces deduction of 90% of the amount referable to Section 28 (iiia) to (iiie) of the IT Act, hence, we are of the view that these decisions require re-consideration by a larger Bench since this issue has larger implication in terms of monetary benefits for both the parties. After giving our thoughtful consideration, the following substantial question of law of general importance arises for re-consideration by this Court: "Whether in the light of peculiar facts and circumstances of the instant 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 Income Tax Act, 1961?" 6) We agree with the reasoning and analysis of the referring judgment, namely, that Baby Marine Exports (supra) dealt with an issue related to the eligibility of export house premium for inclusion in business profit for the purpose of deduction under Section 80HHC of the Act. Whereas in the present appeals, the point for consideration is completely different, being as to whether the assessees being supporting manufacturers, are to be treated on par with the direct expor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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