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2015 (12) TMI 1030
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....e assess ment in this case relates to the assessment year 1994-95. During the assessment year in question, they claimed deduction under section 80HHC of the Income-tax Act as well as the export turnover with regard to the goods exported as a supporting manufacturer. The Assessing Officer, origi nally, completed the assessment allowing the total claim. Subsequently, the assessment was reopened since the Assessing Officer felt that the assessee was not entitled to claim deduction with regard to the exports done as a supporting manufacturer. The Assessing Officer, after taking into consideration Explanation (b) to sub-section (4B) of section 80HHC of the Income-tax Act read with sub-section (2)(a), held that the export turnover should not be included for the purpose of claiming deduction under section 80HHC of the Income-tax Act. Accordingly, the Assessing Officer restricted the claim of deduction claimed under section 80HHC of the Income-tax Act. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), who allowed the appeal holding as follows : "2.2 I have considered the issue keeping in view the assessment order as well as the subm....
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....ule of interpretation and as observed by the hon'ble Madhya Pradesh High Court we have no power to read something which has been left by the Legislature. But the matter ends there. We think if we simply go behind sub-section (3A) then it would become very clear that normally the supporting manufacturer would not be entitled to receive sums referred to in clauses (iiia), (iiib) and (iiic) of section 28, which comprises of profit on sale of licence granted under the Import Control Order, cash assistance received or receivable from the Government under any of the scheme of the Government of India and any duty or customs or excise which may be claimed and commonly known as duty draw back. Such incentives which is the common parlance known as export incentives can natu rally be claimed only by actual exporters of the goods and merchan dise and that is why the Legislature in its wisdom did not include profits arising from such items under sub-section (3A). 6. Now, let us examine the issue from two angles. If the actual exporter hands over the amount of export incentives to the supporting manufacturer by way of sale price, then such sale price becomes trad ing receipts in the hands....
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....t needs to be seen : "80HHC. Deduction in respect of profits retained for export busi ness.- . . . (1A) Where the assessee, being a supporting manufacturer, has during the previous year, sold goods or merchandise to any Export House or Trading House in respect of which the Export House or Trading House has issued a certificate under the proviso to sub-sec tion (1), there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the asses see, a deduction to the extent of profits, referred to in sub-section (1B), derived by the assessee from the sale of goods or merchandise to the Export House or Trading House in respect of which the certificate has been issued by the Export House or Trading House . . . (3) For the purposes of sub-section (1),- (a) where the export out of India is of goods or merchandise manu factured or processed by the assessee, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee ; (b) where the export o....
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....er of the business car ried on by the assessee, if the assessee has necessary and sufficient evidence to prove that,- (a) he had an option to choose either the duty drawback or the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme ; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Entitle ment Pass Book Scheme, being the Duty Remission Scheme : Provided also that in the case of an assessee having export turn over exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-sec tion or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent. of any sum referred to in clause (iiie) of section 28, the same proportion as the export turnover bears to the total turnover of the business car ried on by the assessee, if the assessee has necessary and sufficient evidence to prove that,- (a) he had an option to choose either the duty drawback or the Duty Free Replenishment Certificate, being the Duty Remission Scheme ; an....
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....y of sale of goods or merchandise to one or more Export Houses or Trading Houses, the profits of the busi ness ; (b) in a case where the business carried on by the supporting manufacturer does not consist exclusively of sale of goods or mer chandise to one or more Export Houses or Trading Houses, the amount which bears to the profits of the business the same proportion as the turnover in respect of sale to the respective Export House or Trading House bears to the total turnover of the business carried on by the assessee . . . (4A) The deduction under sub-section (1A) shall not be admissible unless the supporting manufacturer furnishes in the prescribed form along with his return of income,- (a) the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed on the basis of the profits of the supporting manufacturer in respect of his sale of goods or merchandise to the Export House or Trading House ; and (b) a certificate from the Export House or Trading House con taining such particulars as may be prescribed and verified in the man ner prescribed that in respect o....
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....sued by the export trading house in terms of sub-section (4A) of section 80HHC of the Income-tax Act, then it is a clear case that the trading house, which is entitled to seek benefit under section 80HHC(1), passed on the benefit to the supporting manufacturer. 11. If the trading house is agreed to and in terms of the said agreement, they have passed on the additional price-export incentive, supported by the certificate in terms of sub-section (4A) of section 80HHC, then the requirement under sub-section (1A) of section 80HHC is satisfied by the supporting manufacturer. The incentives stated in section 28(iiia), (iiib) and (iiic) of the Income-tax Act, no doubt, would accrue only to the export trading house. But once the said amount stands transferred to the supporting manufacturer by the export house or trading house, it takes the colour of additional price and that is in relation to the agreement between the parties subject to issuance of certificate in terms of sub-section (4A) of section 80HHC of the Income-tax Act. In the instant case, the assessee had directly exported the goods to the foreign constituents and received the export incentives directly from the Government bas....
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.... of goods to the export house. The Tribunal has arrived at definite conclusion that the export house premium is nothing but an integral part of sale price realized by the assessee-a supporting manufacturer from the export house. The Tribunal further held that the export house premium cannot pos sible be considered to be either commission or brokerage, as a person cannot earn commission or brokerage for himself. The High Court has upheld the findings of the Tribunal. In our considered view, the order of the Tribunal is based on proper con struction of section 80HHC(1A) of the Income-tax Act that the export house premium is an integral part of the sale price realised by the assessee from the export house. We find no merit in the submission of the appellant that Indian currency could not be subject-matter of deduction under section 80HHC. The requirement of realising the sale proceeds of the goods or merchandise in convertible merchandise (sic-foreign exchange) is applicable only to the export house and a claim for deduction under section 80HHC(1). The requirement of realisation of sale proceeds in foreign exchange expressly made inapplicable to the supporting manufacturer by....