Supreme Court clarifies Section 80HHC deduction computation

The Supreme Court allowed the Civil Appeals, directing the Assessing Officer to compute the deduction under Section 80HHC for the appellants in accordance with statutory provisions. The Court emphasized adherence to the taxing statute's strict language and the assessee's entitlement to deductions, overturning the decisions of the lower courts. The judgment clarified the application of Section 80HHC to cases with export turnover exceeding Rs.10 crores and profits on the transfer of DEPB, providing clarity on deduction computation in such scenarios.

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Issues: Interpretation of Section 80HHC of the Income Tax Act, 1961 for export turnover exceeding Rs.10 crores and profits on transfer of DEPB.

In the judgment delivered by the Supreme Court, the Court addressed the interpretation of Section 80HHC of the Income Tax Act, 1961, specifically in cases where an assessee has an export turnover exceeding Rs.10 crores and has made profits on the transfer of Duty Entitlement Pass Book (DEPB) under clause (d) of Section 28. The Court referred to its earlier decision in Topman Exports case where it was concluded that such an assessee would not be eligible for certain benefits under the third or fourth proviso to sub-section (3) of Section 80HHC. However, the assessee would still benefit from the exclusion of a smaller figure from "profits of the business" under Explanation (baa) to Section 80HHC. The Court emphasized that the strict language of the taxing statute must be followed, and if the assessee is entitled to a deduction under Section 80HHC on export profits as per the statutory provisions, this benefit cannot be denied. The judgment set aside the impugned judgments and orders of the Bombay High Court and the Gujarat High Court, directing the Assessing Officer to compute the deduction under Section 80HHC for the appellants in accordance with the principles outlined in the Topman Exports case.

In conclusion, the Civil Appeals were allowed with no order as to costs, based on the interpretation provided by the Supreme Court regarding the application of Section 80HHC of the Income Tax Act, 1961 to cases involving export turnover exceeding Rs.10 crores and profits on the transfer of DEPB. The judgment emphasized adherence to the statutory provisions and the entitlement of the assessee to deductions as provided by law, overturning the decisions of the lower courts and providing clarity on the computation of deductions in such scenarios.

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