2013 (7) TMI 271 - SC - Income Tax

Deduction u/s 80HHC - Held that - where the export turnover of an assessee exceeds Rs.10 crores, he does not get the benefit of addition of ninety per cent of export incentive under clause (iiid) of Section 28 to his export profits, but he gets a higher figure of profits of the business, which ultimately results in computation of a bigger export profit - Following decision of Topman Exports Vs. Commissioner of Income-Tax 2012 (2) TMI 100 - SUPREME COURT OF INDIA - Decided in favour of Assessee.

Summary

Issues: Interpretation of Section 80HHC of the Income Tax Act

1. Interpretation of Section 80HHC: The Supreme Court analyzed the interpretation of Section 80HHC of the Income Tax Act in light of the decision in Topman Exports case. The Court clarified that where an assessee has an export turnover exceeding Rs. 10 crores and has made profits on the transfer of Duty Entitlement Pass Book (DEPB) under Section 28, the assessee would not get the benefit of addition to export profits under certain provisions of Section 80HHC. However, the assessee would get the benefit of exclusion of a smaller figure from "profits of the business" under Explanation (baa) to Section 80HHC. The Court emphasized that the strict language of the taxing statute determines the liability to tax and entitlement to exemption.

2. Applicability to Assessees with Export Turnover Exceeding Rs. 10 Crores: The Court clarified that when the export turnover of an assessee exceeds Rs. 10 crores, the assessee does not get the benefit of addition of ninety per cent of export incentive to export profits under Section 28. Instead, the assessee gets a higher figure of profits of the business, leading to the computation of a bigger export profit. The Court emphasized that the benefit of deduction under Section 80HHC on export profits cannot be denied to an assessee based on the statutory interpretation of the relevant provisions.

3. Setting Aside High Court Judgments: The Supreme Court set aside the judgments and orders of the Bombay High Court and the Gujarat High Court, directing the Assessing Officer to compute the deduction under Section 80HHC in accordance with the interpretation provided in the Topman Exports case. The Court emphasized the correct application of the law in computing deductions under Section 80HHC for the appellants.

4. Conclusion and Disposition: The Civil Appeals were allowed with no order as to costs. The Court's decision was based on the interpretation of Section 80HHC and the principles of statutory interpretation outlined in the Topman Exports case. The Assessing Officer was directed to compute the deductions under Section 80HHC for the appellants based on the clarified interpretation provided by the Supreme Court.

By analyzing the issues related to the interpretation of Section 80HHC of the Income Tax Act in light of the Topman Exports case, the Supreme Court provided clarity on the entitlement to deductions for assessees with export turnovers exceeding Rs. 10 crores. The Court emphasized the importance of strict statutory interpretation in determining tax liability and exemption eligibility, setting aside High Court judgments and directing the proper computation of deductions by the Assessing Officer.