2013 (7) TMI 477 - SC - Income Tax

Deduction u/s 80HHC - Export profits - DEPB transfer - 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 - It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Explanation (baa) to Section 80HHC read with the words used in clauses (iiid) and (iiie) of Section 28, the assessee was entitled to a deduction under Section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee - 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, 1961 for export turnover exceeding Rs.10 crores and profits on transfer of DEPB.

In the judgment delivered by the Supreme Court, the Court addressed the interpretation of Section 80HHC of the Income Tax Act, 1961, specifically in cases 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 clause (d) of Section 28. The Court referred to its earlier decision in Topman Exports case where it was concluded that such an assessee would not be eligible for certain benefits under the third or fourth proviso to sub-section (3) of Section 80HHC. However, the assessee would still benefit from the 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 must be followed, and if the assessee is entitled to a deduction under Section 80HHC on export profits as per the statutory provisions, this benefit cannot be denied. The judgment set aside the impugned judgments and orders of the Bombay High Court and the Gujarat High Court, directing the Assessing Officer to compute the deduction under Section 80HHC for the appellants in accordance with the principles outlined in the Topman Exports case.

In conclusion, the Civil Appeals were allowed with no order as to costs, based on the interpretation provided by the Supreme Court regarding the application of Section 80HHC of the Income Tax Act, 1961 to cases involving export turnover exceeding Rs.10 crores and profits on the transfer of DEPB. The judgment emphasized adherence to the statutory provisions and the entitlement of the assessee to deductions as provided by law, overturning the decisions of the lower courts and providing clarity on the computation of deductions in such scenarios.