TaxTMI 
TaxTMI 
2013 (7) TMI 415
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....aa) of Section 80HHC of the Act is justified or perverse?" 3. The brief facts relevant for the assessment year in question are that the assessee is an exporter of readymade garments. He had carried on export activities in the earlier years and for the accounting year corresponding to the assessment year and had been allotted what is known as .quota rights issued in favour of the assessee for export to countries with which our country has reciprocal or bilateral agreement. The assessee did not make use of the quota which had been allotted to it for effecting export but instead transferred these quotas to others who paid a price or a premium to the quota which had been allotted to the assessee. In its return, the assessee had claimed in his returns that the consideration received for transferring the quota is akin to earning from export activity and had claimed the benefit of deduction as is provided under Section 80HHC of the Act. The Assessing Officer disallowed the deduction claimed in respect of the price of Rs.17,78,155/- received by the assessee by way of transfer of quota opining that the amount represented business income of the assessee; that it cannot be attributed to an....
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....respondent and respondent is represented by counsel Sri Mahesh Kiran Shetty. 9. Submission of the learned standing counsel appearing on behalf of the appellant/revenue Sri Aravind is that the assessing officer had rightly declined the benefit of Section 80HHC to the assessee as the amount earned by the assessee did not represent the income derived by an export activity; that it was an income earned by transfer of the quota within the country and the amount received is not by converting foreign exchange to any local currency; that it does not amount to an export activity; that the very purpose and object of giving benefit in respect of deduction is to augment the earning of foreign exchange; that by the activity of sale of quotas, the assessee had not earned any foreign exchange; that in fact the quota is earmarked fixing the quantity that can be exported by exporter depending on his earlier performances and the assessee has claimed the benefit of Section 80HHC on the actual exports which he had carried out during the earlier assessment year but, he had not carried on any export activities during the relevant year and therefore, the assessing officer had rightly declined the clai....
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....ratio equally applies to the deductions of Section 80HHC of the Act. It is therefore submitted that the view taken by the tribunal is not correct in reversing the order of the appellate commissioner as in the first instance, the assessee was not at all entitled to any benefit under Section 80HHC of the Act having not carried on any export activity nor the amount received from the transfer of quotas, is in the nature of income derived from the nature of export activities. Therefore submits that the question should be answered in the affirmative and appeal be allowed. 13. On the other hand Sri Mahesh Kiran Shetty - learned counsel appearing for the respondent/assessee submits that the assessee had been carrying on the activity of exports that the quota allotted to the assessee was very much incidental to the business of the assessee; that the quota was again only to export goods and earn foreign exchange; instead of the assessee exporting the goods directly, the assessee has transferred the quotas to another manufacturer or exporter who on effective utilization of the same, earned foreign exchange and therefore, the assessee cannot be denied the benefit of Section 80HHC(i) of the ....
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....exchange and it is all speculative and at any rate it is not a benefit expressely conferred under Section 80HHC(1) of the Act and therefore, the assessee cannot claim a benefit either by an analogy or by way of extension of a benefit provided under another Section. Section 80HHC and Section 28 reads as under: 80HHC- Where an assessee, being an Indian Company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, [ a deduction to the extent of profits, referred to in sub-section (1B), derived by the assessee from the export of such goods or merchandise: Provided that if the assessee, being a holder of an Export House Certificate or a Trading House Certificate (hereafter in this section referred to as an Export House or a Trading House, as the case may be,) issues a certificate referred to in clause (b) of subsection (4A), that in respect of the amount of the export turnover specified therein, the deduction und....
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....ent of India;] [(iiic) any duty of customs or excise re-paid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971;] [(iiid) any profit on the transfer of the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);] [(iiie).... [(iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession;] 16. We have bestowed our attention to the grounds urged in this appeal, submissions made at the bar by the learned counsel for the appellant and the respondent and examined the authorities relied upon by the learned counsel. 17. In the decision of this Court in the case of ANIL DANG vs THE INCOME TAX OFFICER (ITA 1252/2006) it is held that in order to qualify for benefit under Section 80HHC, the profit earned should have a nexus to th....
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..... The reference to provisions of Sec.28(iv) of the Act by the Tribunal which in terms states that the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall be chargeable to tax, does not mean that any amount received by way of transfer of export quota is to be taken as a profit and gain of business and therefore does not automatically qualify as profit earned during an export activity to gain the benefit under Section 80HHC(i) of the Act. 21. We find that the reference made to the provisions of explanation (baa) and the corresponding provisions of Section 28((iiia),(iiib),(iiic),(iiid)) etc. by the appellate commissioner and the corresponding benefit to the extent of 10% of the value in our considered opinion was not very apt but as in respect of this part of the order, the revenue has not appealed against further, we do not propose to examine this question any further as it has resulted in some benefit in favour of the assessee and that's not questioned by the revenue in this appeal nor before the tribunal. 22. Deduction under Section 80HHC is a specific incentive deduction provided in respect o....