2015 (4) TMI 510 - HC - Income Tax

Commission on Export Orders Eligible for Deduction under Income Tax Act

The High Court interpreted Section 80-HHC of the Income Tax Act, 1961, ruling that commission received from Indian parties on transfer of export orders is ... Provisions of Section 80-HHC of the Income Tax Act, 1961 - Deduction for commission received from Indian parties on transfer of export orders - Held that:- At the outset this Court notices that the impugned order has relied upon a special bench decision of the ITAT - International Research Park Laboratories Ltd. [1994 (7) TMI 304 - ITAT DELHI].The view expressed in that order of the Tribunal by the special bench was that the income derived by the assessee towards commission/brokerage for procuring export orders for others is eligible for benefit under Section 80HHC(3) of the Income Tax Act. The said view has been in effect approved by the judgment of the Supreme Court in P.R. Prabhakar [2006 (7) TMI 121 - SUPREME Court]. This Court also notices that view expressed in P.R. Prabhakar and International Research Park Laboratories has been noticed and approved subsequently in two Division Bench judgments - Lotus Trans Travels Pvt. Ltd. [2010 (12) TMI 126 - DELHI HIGH COURT] and Anil Chanana [2012 (9) TMI 17 - DELHI HIGH COURT].For the above mentioned reasons the appeal is answered against the revenue and in favour of the assessee. -Decided against the revenue. Issues:Interpretation of Section 80-HHC of the Income Tax Act, 1961 regarding the eligibility of commission received from Indian parties on transfer of export orders for deduction under the said section.Analysis:The High Court addressed the question of law regarding the interpretation of Section 80-HHC of the Income Tax Act, 1961, specifically focusing on whether the commission received from Indian parties on transfer of export orders is entitled to deduction under this provision. The Court noted that the impugned order relied on a special bench decision of the ITAT, which held that income derived by the assessee towards commission for procuring export orders for others is eligible for benefit under Section 80-HHC(3) of the Income Tax Act. This view was further supported by a judgment of the Supreme Court in a related case. The Supreme Court emphasized the plain meaning of the expression 'business of export,' including the trading of goods, and referred to circulars issued by the Central Board of Direct Taxes and subsequent amendments to the provision. The Court approved the special bench's interpretation that commission received could form part of export profits, emphasizing the nexus between the commission and the export business. The Court concluded that the commission is profit derived from export and should not be excluded for the purpose of deduction under Section 80-HHC, ensuring a harmonious interpretation of the relevant clauses.Furthermore, the High Court highlighted that the views expressed in the Supreme Court judgment and the special bench decision were subsequently approved in two Division Bench judgments. The Division Bench judgments affirmed the interpretation that commission received for procuring export orders is eligible for deduction under Section 80-HHC of the Income Tax Act. Based on these precedents and the clear nexus between the commission and the export business, the Court dismissed the appeal, ruling in favor of the assessee and against the revenue. The Court held that the income derived from commission on export orders is eligible for deduction under Section 80-HHC, aligning with the consistent judicial interpretation provided by various judgments.