TaxTMI 
TaxTMI 
2012 (12) TMI 455
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....ssessee would be entitled to deduction under Section 80 HHC by holding that the said DEBP credit utilized by the assessee itself, amounting to Rs.5,79,74,883 fell under Section 28 (iiic) of the Income Tax Act, 1961?" 2. We have extracted the above question of law framed in respect of ITA No. 201 of 2009. The question framed in the other appeals is the same, but for the variation in the amount mentioned in the question. Subsequently, on 7th March 2012, when the appeals were listed for hearing, it was pointed out on behalf of the Revenue that the question should refer to both DEPB credit as well as moneys received on sale of Special Import License ('SIL'). Accordingly, theses appeals are disposed of taking the questions to include both DEP....
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....) of Section 28 of the Act, again under the same head as an item separate from cash assistance under clause (iiib). It was further held in the judgment that for the purposes of Section 80 HHC (3)(a) of the Act, read with Explanation (baa), 90% of any sum referred to in clauses (iiia) to (iiie) of Section 28, has to be reduced from the assessed profits of the business. Accordingly, 90% of the DEPB credit which represents cash assistant under clause (iiib) of Section 28 will be excluded from the assessed profits. If during the same year the DEPB is transferred, the surplus arising on the transfer will represent the profit and will be covered by clause (iiid) of Section 28 of the Act and 90% thereof will get reduced from the assessed profits. ....
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....rts (supra). 5. We now turn to the second part of the substantial question of law that relates to deduction under Section 80HHC in respect of the moneys received on sale of SIL. The contention of the revenue before us was that SIL did not fall under any of the clauses of Section 28 enumerated in Explanation (baa), but the argument was that it would fall under the residuary provisions in clause (1) of the said Explanation as "any other receipt of a similar nature included in such profits". We are afraid that this is not the proper manner of interpreting the clause. The Explanation is reproduced below: "(baa) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or professi....
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....f the profits of sale of SIL would stand excluded from the assessed profits for the purposes of computing the deduction under Section 80HHC. 7. We are afraid that this is not the proper way of interpreting the Explanation. The Explanation cannot be split into three parts as contended by the Revenue. It has only two parts, which are as follows: (i) 90% of any sum referred to in the enumerated clauses of Section 28; and (ii) 90% of any receipt by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits. The reason why the words "or any other receipts of a similar nature included in such profits" cannot refer to the first part of the clause which contains references to var....
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....is was how the Explanation was understood even by the Revenue is reinforced by the CBDT Circular No.621 dated 19.12.1991 explaining the Finance (No.2) Act, 1991, which inserted the Explanation [pl. see (1992) 195 ITR (St.) 154 @ 178]: "The existing formula often gives a distorted figure of export profits when receipts like interest, commission, etc., which do not have an element of turnover are included in the profit and loss account. It has, therefore, clarified that "profits of the business" for the purpose of section 80HHC will not include receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature. As some expenditure might be incurred in earning these incomes, which in the generality....
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....0. The effect of this is that under Clause (iiia) of Section 28, a reference to Imports and Exports (Control) Act, 1947 should be taken to be a reference to Foreign Trade (Development and Regulation) Act and the scheme for SIL having been notified under the latter Act, which must be read into Section 28(iiia), the profits of sale of SIL would fall to be assessed under Section 28 (iiia). If that is so, the profits of sale of SIL would be assessed as business profits; then 90% thereof would be excluded from the business profits and, thereafter, the excluded profits would be added back under the first proviso to Section 80HHC (3) in the same proportion as the export turnover bears to the turnover of the business carried on by the assessee. Thi....