2010 (5) TMI 171 - HC - Income Tax

Exemption to supporting manufacturer u/s 80HHC ITAT directed the AO allow deduction under Section 80-HHC, on export incentives, received by the assessee, as a supporting manufacturer in the same manner, as in the case of direct exporter, treating the supporting manufacturer at par with the direct exporter and ignoring the provisions of Section 80 HHC(IA) read with Section 80-HHC(3A) read with clause (baa) of explanation to Section 80HHC(4C) of the Act Held that - Assessee is a manufacturer and exporter of Handloom products, where assessee manufactured the products and supplied to another exporter who finally exported these products, therefore, the assessee is supporting manufacturer and exporter. The assessee has received a disclaimer certificate from the main exporter for claiming benefit u/s 80HHC Benefit of exemption to be extended to supporting manufacturer.

Summary

Issues:
Interpretation of Section 80-HHC of the Income-tax Act, 1961 regarding deduction on export incentives received by a supporting manufacturer.

Analysis:
The High Court was presented with an appeal challenging the order of the Income Tax Appellate Tribunal regarding the allowance of deduction under Section 80-HHC for export incentives received by the assessee as a supporting manufacturer. The main question was whether the Tribunal was correct in upholding the order of the CIT(A) directing the Assessing Officer to allow the deduction in the same manner as in the case of a direct exporter. The Court referred to the Supreme Court's judgment in Janatha Cashew Exporting Co. v. CIT, [2009] 309 ITR 440 (SC), which clarified that a supporting manufacturer could claim benefits under Section 80-HHC upon production of a disclaimer certificate. The Court emphasized the requirement of a disclaimer certificate for claiming benefits under Section 80-HHC and confirmed that the assessee, being a supporting manufacturer, had produced such a certificate from the main exporter. The Court noted that the factual and legal position regarding the assessee's status as a supporting manufacturer and the production of the disclaimer certificate were not disputed by the appellant-revenue. Consequently, the Court ruled in favor of the respondent-assessee based on the established facts and legal provisions.

In conclusion, the High Court's judgment upheld the Tribunal's decision and clarified the eligibility criteria for claiming benefits under Section 80-HHC for export incentives received by a supporting manufacturer. The Court emphasized the importance of a disclaimer certificate and affirmed that the assessee, in this case, met the necessary requirements to qualify for the deduction under Section 80-HHC. The judgment provided a clear interpretation of the relevant legal provisions and settled the dispute in favor of the respondent-assessee based on the established facts and legal precedents.

(M.M. KUMAR) JUDGE
(JITENDRA CHAUHAN) JUDGE
May 5, 2010