TaxTMI 
TaxTMI 
1999 (6) TMI 60
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....nder section 80HHC of the I.T. Act, 1961. The profit of Rs. 72,262 was arrived at after including the premium on export licence at Rs. 1,73,428 export subsidy of Rs. 4,70,426 and draw back Rs. 82,950. The Assessing Officer considered that the premium on export licence, duty draw back and export subsidy cannot be considered as profit derived from export in view of the decision of the Karnataka High Court in the case of Sterling Foods v. CIT [1984] 150 ITR 292/[1985] 20 Taxman 55. The Assessing Officer therefore, excluded the income from premium on export licence, export subsidy and duty draw back for the purpose of determining the profit from export business. He found that if the income from these three items are excluded, the result from ex....
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....80HHC. Aggrieved by the said order of the CIT(A) the assessee is in further appeal before the Tribunal. 4. During the course of hearing the assessee's counsel relied on the decision of the Karnataka High Court in the case of Sterling Foods. But it was pointed out to him at the time of hearing that the said decision of the Karnataka High Court has not been approved by the Hon'ble Supreme Court in CIT v. Sterling Foods [1999] 237 ITR 579/104 Taxman 204. The ld. counsel for the assessee stated that the decision of the Hon'ble Supreme Court in Sterling Foods' case supports the case of the assessee. The ld. counsel relied on the decision of the Supreme Court in Sterling Foods case. 5. The ld. Departmental Representative, on the other hand,....
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....is not applicable to the present assessee's case. The issue to be considered in this case is whether the premium on export licence, duty draw back and export subsidy are profit derived from the business of export. The Hon'ble Supreme Court in the case of Sterling Foods reversed the Karnataka High Court's decision in the case of Sterling Foods and approved the decision of the Karnataka High Court in Sterling Foods' case . Their Lordships of the Supreme Court at page 585 observed as under : "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 Gove....
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...."The argument advanced on behalf of the assessee is that since the assessee had become eligible for the import entitlements only on account of its having exported goods out of India, the income derived by conversion of the import entitlements into money by a process of sale should be regarded as profits or gains derived from the said activity of the export of goods. We are unable to accept this contention. Profit or gain can be said to have been 'derived' from an activity carried on by a person only if the said activity is the immediate and effective source of the said profit of gain. There must be a direct nexus between the activity and the earning of the profit or gain. The income, profit or gain cannot be said to have been 'derived' from....