TaxTMI 
TaxTMI 
2018 (5) TMI 65
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....of Special Leave Petition (C) No. 27636 OF 2010), CIVIL APPEAL NO. 4603 OF 2018, (Arising out of Special Leave Petition (C) No. 27635 OF 2010), CIVIL APPEAL NO. 4595 OF 2018, (Arising out of Special Leave Petition (C) No. 29783 OF 2011), CIVIL APPEAL NO. 4598 OF 2018, (Arising out of Special Leave Petition (C) No. 33058 OF 2012) For the Petitioner(s) : Mrs. Anil Katiyar, AOR For the Respondent(s) : Mr. Avi Tandon, Adv., Mr. Anish Agarwal, Adv., Mr. T. Mahipal, AOR, Mr. Arvind Gupta, Adv., Mr. Ranjan Kumar, AOR, M/S Lex-peritia And Co., Dr. Rakesh Gupta, Adv., Mr. Ambhoj Kr. Sinha, Adv., Ms. Monika Ghai, Adv., Mr. Ambhoj Kumar Sinha, AOR, Mr. Jagdish Kumar Chawla, AOR, JUDGMENT R.K.Agrawal, J. 1) Leave granted. 2) The above batch of appeals is related to the interpretation of the provisions contained in Section 80HHC of the Income Tax Act, 1961 (in short 'the IT Act'). 3) SLP (C) 8368 of 2009 (a) M/s. Carpet India (P) Ltd.-the assessee is a partnership firm deriving income from the manufacturing and sale of carpets to M/s. IKEA Trading (India) Ltd. (Export House) as supporting manufacturer. (b) The assessee filed a 'Nil' return for the Assessment Year (AY) 2001-2002 on 30....
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....e assessee firm, hence, it is not entitled to claim the deduction at par with the direct exporter. However, the High Court erroneously relied on the judgment of this Court, namely, Commissioner of Income Tax, Thiruvantanpuram vs. Baby Marine Exports (2007) 290 ITR 323 (SC) and held that the assessee is entitled to claim deduction at par with the direct exporter which is not sustainable in the eyes of law since the issues and facts are distinguishable from the facts and the circumstances of the instant case. 7) At this juncture, it was also pointed out that the High Court as well as the Tribunal erred in law while deciding the issue as they treated the export incentive at par with the premium paid by the export houses or trading houses to supporting manufacturer and not appreciated the fact that the ratio of the facts and issues involved in the case of the assessee-firm are totally different from the case of Baby Marine Exports (supra). It was pointed out that the said case dealt with the issue of eligibility of export house premium for inclusion in the business profit and the turnover of the assessee firm. Hence, in no circumstances, it could be relied upon by the High Court. 8)....
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....mputing 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 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. (1B) xxx (2) xxx (3) xxx (3A) For the purposes of sub-section (1A), profits derived by a supporting manufacturer from the sale of goods or merchandise shall be:- (a) in a case where the business carried on by the supporting manufacturer consists exclusively of sale of goods or merchandise to one or more Export Houses or Trading Houses, the profits of the business; (b) in a case where the business carried on by the supporting manufacturer does not consist exclusively of sale of goods or merchandise 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." (4) xxx (4A) xxx (4B) xxx (4C) xxx Explanation:- For the purposes of this section:- (a) "conv....
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....ct, 1947 (18 of 1947); (iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India; (iiic) any duty of customs or excise repaid 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) any profit on the transfer of Duty Free Replenishment Certificate 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)." 10) The very purpose of Section 80HHC of the IT Act is to promote the export business as well as in order to keep the domestic products competitive in the global market by allowing tax deduction on export profits. Since the inception of Section 80HHC of the IT Act, these benefits were available only to the direct exporter which later on ext....
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....rovisions of the IT Act, it is clear that Section 80HHC of the IT Act provides for deduction in respect of profits retained from export business and, in particular, sub-Section (1A) and sub-Section (3A), provides for deduction in the case of supporting manufacturer. The "total turnover" has to be determined as per clause (ba) of the Explanation whereas "Profits of the business" has to be determined as per clause (baa) of the Explanation. Both these clauses provide for exclusion and reduction of 90% of certain receipts mentioned therein respectively. The computation of deduction in respect of supporting manufacturer, is contemplated by Section 80HHC (3A), whereas the effect to be given to such computed deduction is contemplated under Section 80HHC (1A) of the IT Act. In other words, the machinery to compute the deduction is provided in Section 80HHC (3A) of the IT Act and after computing such deduction, such amount of deduction is required to be deducted from the gross total income of the assessee in order to arrive at the taxable income/total income of the assessee, as contemplated by Section 80HHC (1A) of the IT Act. 13) In Baby Marine Exports (supra), the question of law involve....