TaxTMI 
TaxTMI 
2016 (9) TMI 156
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.... of a co-ordinate Bench on the issue which admittedly applied and had attained finality? The second question does not really arise as we intend deciding the question of law in any event. 2. The appellant-assessee admittedly availed the benefit under section 10B of the Income Tax Act, 1961 (for short 'the Act'). 3. Sections 10B and 80HHC of the Income Tax Act, 1961 (for short 'the Act') at the material time and in so far as they are relevant read as under:- ""10B. (1) Subject to the provisions of this section, any profits and gains derived by an assessee from a hundred per cent export- oriented undertaking (hereafter in this section referred to as the undertaking) to which this section applies shall not be included in the total income of the assessee. xx xx xx xx xx (3) The profits and gains referred to in sub- section (1) shall not be included in the total income of the assessee in respect of any five consecutive assessment years, falling within a period of eight years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things, specified by the assessee at his option: Provided that nothing in t....
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....turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods : Provided that the profits computed under clause (a) or clause (b) or clause (c) of this sub-section shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiia) (not being profits on sale of a licence acquired from any other person), and clauses (iiib) and (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee :............................." Explanation.-For the purposes of this section,- (a)................. (b) "export turnover" means the sale proceeds, received in, or brought into, India by the assessee in convertible foreign exchange in accordance with clause (a) of subsection (2)of any goods or merchandise to which this section applies and which are exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962) ;] [(ba) "total turnover" shall not include freight or insurance att....
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....s not refer to section 80HHC indicates strongly that the legislature did not intend denying an assessee who had availed the benefit of section 10B a deduction under section 80HHC. The contention on behalf of the department that to the extent of benefit received under section 10B the same cannot be included in the export turnover and total turnover in the formula stipulated in section 80HHC is not well founded. 6. Ms. Suri reliance upon a circular dated 16.12.1998 issued by the C.B.D.T. containing explanatory notes on the provisions relating to direct taxes in respect of the Finance Act, 1988 is well founded and the same insofar as it is relevant reads as under:- "New provision to extend tax holiday to hundred per cent export-oriented units:- 18.1 xx xx xx xx xx 18.2 The above tax holiday was not available to a hundred per cent export-oriented undertaking. Such undertakings were eligible only for deduction out of their export profits under section 80HHC of the Income-tax Act. With a view to providing further incentive for earning foreign exchange, a new section 10B has been inserted by the Act so as to secure that the income of a hundred per cent export-oriented undertaking sha....
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....this submission. Section 80HHC does not provide that it does not apply to goods which are the subject matter of deduction under section 10A or 10B of the Act. 9. Mr. Suri rightly submitted that wherever the legislature intends excluding the benefit under a provision on account of an assessee having availed a benefit under another provision, it was so provided. For instance, sections 10A(1) and 10A(4) and 10A(4)(iii) of the Act as it stood prior to the amendment w.e.f. 01.04.2001 read as under:- "Special provision in respect of newly established industrial undertakings in free trade zones. 10A (i) Special provision in respect of newly established undertakings in free trade zone, - Subject to the provisions of this section, any profits and gains derived by an assessee from an industrial undertaking to which this section applies shall not be included in the total income of the assessee. xx xx xx xx xx xx (4) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to an....
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....specified in Section 80HHC(3) which speaks of three components. The three components being the export turnover in respect of the goods in question, the total turnover of the business carried on by the assessee and the profits of the business. None of these components has reference to the expression ―total incomeǁ. The deduction has to be computed on the basis of these components. A literal reading of the provisions and literal application of the formula does not enable us to exclude the export turnover of the unit in the EPZ from the export turnover of such goods nor from the total turnover of the business. The profit arising out of these units in the EPZ is also not excludable from the profits of the business. We may note that Section 80HHC is a beneficial provision for the purposes of encouraging exports. Although in this case, there is no doubt with regard to the interpretation or the manner in which the deduction under Section 80HHC is to be computed, even if there were any such doubts, the provision would have to be interpreted to fulfill the objective of giving a benefit to the assessee who indulges in exports. Looked at in any manner, we are of the opinion that th....
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....onclusion of ours is apart from the conclusion of the Tribunal in having held that in that situation what was held by the Assessing Authority in the original assessment order was a possible view and that cannot be considered as an error apparent on the face of the records." 15. A similar view was taken by the judgment of a Division Bench of Bombay High Court dated 01.04.2014 in Income Tax Appeal No. 5794 of 2010 Commissioner of Income Tax v. M/s Hindustan Lever Ltd. Paragraph- 8 of the judgment reads as under:- "8. In so far as question (E) is concerned, the same reads as under:- "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was right in holding that while computing deduction u/s.80HHC of the Act, the net foreign exchange relating to export from Kandla Free Trade Zone has also to be considered even though such receipt is covered by Section 10A of the Income Tax Act ?" Even on this question our attention has been invited to the order of the Tribunal for the earlier assessment year. It is submitted that the Tribunal merely followed its view taken earlier, however, the argument is that this issue is raised for the first time, ther....
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....ny 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 the provision applies, then, in accordance with and subject to the provisions of this section, is allowed deduction in computing total income. There is nothing, according to the Tribunal, in the language to the contrary. What has been referred to by the Tribunal, in our opinion, rightly is sub-section (1) in its entirety. Even the provisos have been noted. Even sub-section (2) has been noted for the purpose of the present appeal. The Tribunal has found that the net foreign exchange realisation from Kandla Free Trade Zone alone has to be considered. The foreign exchange realization on the goods exported directly from Malaysia to Middle East cannot be considered. In such circumstances, merely because deduction under Section 10A was claimed by the assessee on such exports would not be a reason for dis-entitling it to claim deduction under section 80HHC(1) (Clause a) of the Income Tax Act,1961. The relief, therefore, has been confined to net foreign exchange realization in the form of export from Kandla Free Trade Zone. The other claim viz. net....