TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 2038
X X X X Extracts X X X X
X X X X Extracts X X X X
....addition of Rs. 27,310/- u/s. 14A.The said addition may please be deleted. 3. The ld. CIT(A)IV has erred in law in not allowing reduction of 10% of Export Incentives from the Indirect Cost at the time of calculation of deduction u/s. 80HHC.The said deduction may please be allowed to the appellant. 4.The assessee craves leave to add, alter, amend, modify or drop the grounds of appeal at the time of hearing." During the course of hearing before us,the Authorised Representative (AR) of the assessee stated that assessee was not interested in pursuing ground No.2.Hence,same stands dismissed, as not pressed. 2. Assessee-company, engaged in the business of export of fabric made- ups and handicrafts filed its return of income on 26.10.2004 s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder of the AO the assessee preferred an appeal before the First Appellate Authority (FAA). Before him, it was stated that there was no transfer of DEPB amount to Rs. 1.16 crores. During the year that no profit could have been earned by the assessee. Referring to the provisions of section 28(iiid) of the Act it was argued that profit on transfer of DEPB should be considered at Rs. 70,70,739/- only for the current year, that DEPB license of Rs. 1.16 crores was not sold in the A.Y. 2005-06, that same were sold in the A.Y. 2006-07 and the profit arising out of the transaction was duly accounted for in that AY.After considering the submission of the assessee and the assessment order the FAA held that provisions of section 28(iiid) were very cle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ter and is transferable by the exporter. The DEPB credit is "cash assistance" receivable by a person against exports under the scheme of the Government of India and falls under clause (iiib) of section 28 of the Income-tax Act, 1961, and is chargeable to Income-tax under the head "Profits and gains of business or profession" even before it is transferred by the assessee. Under clause (iiid) of section 28 , any profit on transfer of the DEPB credit is chargeable to Income-tax under the head "Profits and gains of business or profession" as an item separate from cash assistance under clause (iiib) . The word "profit" means the gross proceeds of a business transaction less the costs of the transaction. Profits imply a comparison of the valu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....received or receivable by any person against exports such as the DEPB credit and "profit on transfer of the DEPB credit" are treated as two separate items of income under clauses (iiib) and (iiid) . As a result, the DEPB credit will be chargeable as income under clause (iiib) of section 28 in the year in which the person applies for the DEPB credit against the exports and the profit on transfer of the DEPB credit by that person will be chargeable as income under clause (iiid) of section 28 in his hands in the year in which he makes the transfer. There is no double taxation of the same income. Sub-section (3)(a) of section 80HHC provides that where the export out of India is of goods or merchandise manufactured or processed by the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evious year, only ninety per cent. of the profits on transfer of the DEPB credit covered under clause (iiid) and not ninety per cent of the entire sale value including the face value of the DEPB credit will get excluded from the "profits of the business". Thus, where the ninety per cent. of the face value of the DEPB credit does not get excluded from "profits of the business" under Explanation (baa) and only ninety per cent. of the difference between the face value of the DEPB credit and the sale value of the DEPB credit gets excluded from "profits of the business", the assessee gets a bigger figure of "profits of the business" and this is possible when the DEPB credit accrues to the assessee in one previous year and transfer of the DEPB cr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s allowed in favour of the assessee. 4. Ground No.3 is about not allowing reduction of 10% of export incentive from the indirect cost at the time of calculation of deduction u/s. 80HHC of the Act. 4.1. During the assessment proceedings,the assessee had not reduced 100% of the export incentives from indirect cost while calculating deduction u/.s. 80HHC.However,a claim was made before the FAA during the appellate proceedings.He rejected the claim made by the assessee on the basis of the decision of the Hon'ble Supreme Court delivered in the case of Goetz India Ltd.(204CTR 182).He held that a claim of deduction made by way of an application could not be entertained by the AO and that such claim could only be made by way of revised return....