TaxTMI 
TaxTMI 
2006 (7) TMI 121
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....red there-against was rejected by the Commissioner of Income-tax (Appeals). The Income-tax Appellate Tribunal, however, on further appeal preferred by the appellant opined that the commission received by the appellant from the other exporters is to be taken into consideration for the said purpose. The respondent aggrieved by and dissatisfied with the said decision filed an application for reference to the High Court and by an order dated September 13, 1996, the following questions were referred by the Tribunal: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to deduction under section 80HHC of the Income-tax Act even though the export business resulted in a loss of Rs. 6,372? 2. Whether, on the facts and in the circumstances of the case the Tribunal is right in law in holding that commission and brokerage for procuring export contracts for other exporters is exempt under section 80HHC of the Act on the ground that the same is export profits?" By reason of the impugned judgment, the High Court opined that income derived by the appellant towards commission/brokerage for procuring orders of....
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....rred to as an Export House or a Trading House, as the case may be), issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of the export turnover specified therein, the deduction under this sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount which bears to the total profits derived by the assessee from the export of trading goods, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee in respect of such trading goods." ... (3) For the purposes of sub-section (1),- (a) where the export out of India is of goods or merchandise manufactured 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 out of India is of trading goods, the profits derived from such export shall be the export turnover in respect of such trading goods a....
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....of "export out of India" but also includes "trading of goods". Indisputably the Central Board of Direct Taxes issued a circular bearing No. 621 dated December 19, 1991, by way of explanatory notes to the said provision. Paragraph 32 of the said circular provides for modification of provisions relating to exemption of income from exports. The amendment by inserting sub-section (3) in the said provision was carried out so as to compensate the exporter from the comparative disadvantages faced by him in the international market. The formula, as was existing prior to 1991 as stated in the circular, often used to provide a distorted figure of export profits when receipts like interest, commission, etc. which did not have an element of turnover were included in the profit and loss account and, thus, it was clarified that "profits of the business" for the said provision would not include receipt by way of brokerage, commission, interest or any other receipt of a similar nature. It was, however, categorically stated: "As some expenditure might be incurred in earning these incomes, which in the generality of cases is part of common expenses, ad hoc 10 per cent, deduction from such inco....
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....licable, the same are required to be interpreted liberally. It is also trite law that an exemption is to be granted unless it is expressly taken away. The expression "income arising out of business of export" brings within its sweep not only the export of any goods or merchandise manufactured or processed by the assessee but also of trading goods. Parliament, therefore, intended to provide incentive when a positive profit is earned by an exporter. The question again came up for consideration before a Division Bench of this court in ITO v. Induflex Products P. Ltd. [2005] 10 Scale 132; [2006] 280 ITR 1 where it was opined: "It is no doubt true that the term 'profit' implies positive profit which has to be arrived at after taking into consideration the profit earned from export of both self-manufactured goods and the trading goods and the profits and losses in both the trades have, thus, to be taken into consideration." Indeed the question as to whether earning of income by way of commission/brokerage would attract section 80HHC of the Act or not, precisely came up for consideration before a Special Bench of the Income-tax Appellate Tribunal, Delhi Bench in Internation....