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TMI Blog2021 (10) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... nstead of DEPB credit of Rs. 91.43J52/- credited by the assessee in his P& L account. The issue was discussed elaborately in the assessment order along with various case laws. The AO was of the view that the profits were arising only on sale of licenses and the entire sales proceeds should be treated as profits. As per AO, it is clear that the sales proceeds received on transfer of DEPB licenses were to be taxed u/s.28(iiid). Hence, the income u/s 28(iiid) was worked out by the AO at Rs. 1,19,67,955/- and it was also held that 90% of the same will not be eligible for deduction u/s.80HHC. The assessee filed appeal against the said order of the AO. However, the CIT(A) confirmed the action of the AO in bringing to tax the DEPB income of Rs. 1,19,67,955/- as against Rs. 91,43.7527- credited by the appellant in its accounts. The assessee filed further appeal before the STAT against the order of CIT(A). The Hon'ble ITAT 'K' Bench, Mumbai, vide order in ITA.No.750/Mum/ 2007 dated 23.09,2009, relied on the decision of Special Bench (Mumbai) in the case of M/s. Topman Exports (ITA No.5769!Mum/20Q6) and M/s. Kalpataru Colours & Chemicals (ITA No.5651 /Mum/2006) [20Q9-TIOL-531-lTA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any of the aforesaid two orders and hence the same was not restored to me file of the AO. 17.8 The aforesaid view is proved beyond doubt by the fact that the appellant had filed Application No. 352/M/2013 on 24.09,2013 before the ITAT requesting the ITAT to adjudicated following ground stating that the same was inadvertently not adjudicated by the ITAT "2. Without prejudice to the above, on the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned Assessing Officer in bringing to tax as DEPB income an amount of Rs. 1,19,67,955 as against that of Rs. 91,43,752/- credited by the Appellant in its accounts." 17.9 The appellant in its latest submission dated 20.09.2019 did not communicate the outcome of the said miscellaneous application and even did not mention that the miscellaneous application was filed before the ITAT. In view of above, it seems that the appellant did not succeed before ITAT in getting any order in favour of the appellant on miscellaneous application. 17.10 Further, the appellant has not been able to point out any discrepancy in the order of the AO giving effect to the order of the High Court by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 28 that under clause (iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India is by itself income chargeable to income tax under the head 'Profits and Gains of Business or Profession'. DEPB is a kind of assistance given by the Government of India to an exporter to pay customs duty on its imports and it is receivable once exports are made and an application is made by the exporter for DEPB. Therefore, there is no doubt that DEPB is 'cash assistance' receivable by a person against exports under the scheme of the Government of India and falls under clause (iiib) of section 28 and is chargeable to income tax under the head 'Profits and Gains of Business or Profession' even before it is transferred by the assessee. [Para 12] Under clause (iiid) of section 28, any profit on transfer of DEPB is chargeable to income tax under the head 'Profits and Gains of Business or Profession' as an item separate from cash assistance under clause (iiib). The word 'profit' means the gross proceeds of a business transaction less the costs of the transaction. 'Profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he export products, but the exporter may not himself utilize the DEPB for paying customs duty but may transfer it to someone else and, therefore, the entire sum received on transfer of DEPB would be covered under clause (iiid) of section 28. The High Court has failed to appreciate that DEPB represents part of the cost incurred by a person for manufacture of the export product and, hence, even where the DEPB is not utilized by the exporter but is transferred to another person, the DEPB continues to remain as a cost to the exporter. When, therefore, DEPB is transferred by a person, the entire sum received by him on such transfer does not become his profits. It is only the amount that he receives in excess of the DEPB which represents his profits on transfer of the DEPB. [Para 15] The High Court has sought to meet the argument of double taxation made on behalf of the assessees by holding that where the face value of the DEPB was offered to tax in the year in which the credit accrued to the assessee as business profits, then any further profit arising on transfer of DEPB would be taxed as profits of business under section 28(iiid) in the year in which the transfer of DEPB took place. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of section 80HHC makes it clear that an assessee engaged in the business of export out of India of any goods or merchandise to which this section applies shall be allowed, in computing his total income, a deduction to the extent of profits referred to in sub-section (IB), derived by him from the export of such goods or merchandise. Sub-section (IB) of section 80HHC gives the percentages of deduction of the profits allowable for the different assessment years from the assessment years 2001-2002 to 2004-2005. Subsection (3)(a ) of section 80HHC provides that where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such exports shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. [Para 19] Explanation (baa ) under section 80HHC states that 'profits of the business' in the aforesaid formula means the profits of the business as computed under the head 'Profits and Gains of Business or Profession' as reduced by (I) ninety per cent of any sum referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fourth proviso under sub-section (3) are made to profits derived from exports. Under the first proviso, ninety per cent of the sum referred to in clauses (iiia), (iiib) and (iiic) of section 28 are added in the same proportion as export turnover bears to the total turnover of the business carried on by the assessee. In this first proviso, there is no addition of any sum referred to in clause (iiid) or clause (iiie). Hence, profit on transfer of DEPB or DFRC are not to be added under the first proviso. Where therefore in the previous year no DEPB or DFRC accrues to the assessee, he would not be entitled to the benefit of the first proviso to sub-section (3) of section 80HHC because he would not have any sum referred to in clause (iiib) of section 28. The second proviso to sub-section (3) of section 80HHC states that in case of an assessee having export turnover not exceeding Rs. 10 crores during the previous year, after giving effect to the first proviso, the export profits are to be increased further by the amount which bears to ninety per cent of any sum referred to in clauses (Hid) and (me) of section 28, the same proportion as the export turnover bears to the total turnover of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of DEPB under section 28 (iiid) would not include the face value of the DEPB. It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Explanation (baa) to section 80HIIC read with the words used in clauses i(iid ) and (iiie) of section 28, the assessee was entitled to a deduction under section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee. [Para 22] The impugned judgment and orders of the High Court are accordingly, set aside. The appeals are allowed to the extent indicated in this judgment. The Assessing Officer is directed to compute the deduction under section 80HHC in the case of the assessee in accordance with this judgment. [Para 23]". 11. Respectfully following the precedent we set aside the issue to the file of the Assessing Officer to decide the issue afresh in the light of judgement of Hon'ble Apex Court as above. 12. In the result, appeal filed by the assessee is allowed for statistical purposes. Pronounced in the open court on 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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