2013 (9) TMI 899 - SC - Income Tax

Deduction u/s 80HHC of the Income Tax Act profits on transfer of DEPB - Held that - 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 In view of the decision in Topman Exports Vs. Commissioner of Income-Tax 2012 (2) TMI 100 - SUPREME COURT OF INDIA matter remanded back - Decided in favor of Assessee.

Summary

Issues:
- Interpretation of Section 80HHC of the Income Tax Act, 1961 regarding deduction eligibility for export profits.
- Applicability of the decision in Topman Exports case to the present appeals.
- Setting aside judgments of Bombay High Court and Gujarat High Court.
- Direction to Assessing Officer for computation of deduction under Section 80HHC.

Interpretation of Section 80HHC:
The Supreme Court analyzed the provisions of Section 80HHC of the Income Tax Act, 1961, focusing on the eligibility criteria for deduction concerning export profits. The Court emphasized that the strict language of the taxing statute determines tax liability and exemption entitlement. It highlighted that where an assessee with an export turnover exceeding Rs. 10 crores makes profits on the transfer of Duty Entitlement Pass Book (DEPB) under Section 28, they are entitled to a deduction under Section 80HHC. The Court clarified that the benefit of exclusion of a smaller figure from "profits of the business" under Explanation (baa) to Section 80HHC is available even if the export turnover exceeds Rs. 10 crores. The judgment in Topman Exports case was referenced to support this interpretation.

Applicability of Topman Exports Decision:
The Court referred to the Topman Exports case, where it was concluded that an assessee with an export turnover exceeding Rs. 10 crores would not receive the benefit of addition to export profits under certain provisions of Section 80HHC. However, they would benefit from the exclusion of a smaller figure from "profits of the business" under Explanation (baa) to Section 80HHC. The Court held that the present Civil Appeals deserved to be allowed based on the principles established in the Topman Exports case, directing that the matters be sent back to the Assessing Officer for computation.

Setting Aside High Court Judgments:
The Supreme Court set aside the judgments and orders of both the Bombay High Court and the Gujarat High Court in the respective cases. The decisions of the High Courts were overturned in light of the observations and conclusions made by the Supreme Court in the Topman Exports case. The Court emphasized the correct interpretation of the provisions of Section 80HHC for determining the eligibility of deductions related to export profits.

Direction to Assessing Officer:
In the final decision, the Supreme Court allowed the Civil Appeals, with no order as to costs. The Court directed the Assessing Officer to compute the deduction under Section 80HHC for the appellants in accordance with the judgment, ensuring compliance with the interpretation and principles elucidated in the Topman Exports case.