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2015 (9) TMI 858 - SC - Income TaxComputation of deduction under Section 80HHC - Whether entire amount received on sale of the Duty Entitlement Pass Book (DEPB) represents profit on transfer of DEPB for the purpose of the computation of deduction u/s 80HHC Held that - As decided in Topman Exports vs. Commissioner of Income-Tax 2012 (2) TMI 100 - SUPREME COURT OF INDIA DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB and while the face value of the DEPB will fall under clause (iiib) of Section 28, difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28 . Issue decided in favor of assessee. The impugned judgment and order passed by the High Court 2011 (11) TMI 640 - GUJARAT HIGH COURT is set aside and the Assessing Officer is directed to compute the deduction under Section 80HHC of the Income Tax Act, 1961, in the light of the observations made by this Court in Topman Exports (supra). - Decided in favour of assessee for statistical purposes.
Issues:
1. Interpretation of Section 80HHC of the Income Tax Act, 1961 regarding deduction eligibility for export profits exceeding Rs. 10 crores. 2. Application of the decision in Topman Exports case to the present case. Analysis: Issue 1: The main issue in this judgment revolves around the interpretation of Section 80HHC of the Income Tax Act, 1961, specifically concerning the eligibility for deduction of export profits exceeding Rs. 10 crores. The Supreme Court analyzed the provisions of Section 80HHC in light of the Topman Exports case. The Court emphasized 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, they would not be entitled to certain benefits under Section 80HHC. However, the Court clarified that such assessee would still get the benefit of exclusion of a smaller figure from "profits of the business" under Explanation (baa) to Section 80HHC. The Court highlighted that the strict language of the taxing statute determines the tax liability and exemptions, emphasizing that if an assessee is entitled to a deduction under Section 80HHC on export profits as per the statutory provisions, that benefit cannot be denied. Issue 2: The judgment also deals with the application of the decision in the Topman Exports case to the present scenario. The Court referred to the Topman Exports case where it was observed that an assessee with export turnover exceeding Rs. 10 crores would not be entitled to certain deductions under Section 80HHC. The Court set aside the impugned judgment and directed the Assessing Officer to compute the deduction under Section 80HHC in accordance with the observations made in the Topman Exports case. Consequently, the Civil Appeals were allowed, and no order was issued regarding costs. The judgment provides clarity on the interpretation of Section 80HHC and ensures consistency in the application of tax laws concerning export profits exceeding Rs. 10 crores.
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