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TMI Blog2007 (7) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on the payment of duty on corresponding inputs inasmuch as an attempt was made to neutralize the incidence of the said duty so that the exporter can export the goods at prices which are competitive in the international market. However, such quantification will not make the import duty paid by the assessee on inputs to be an expenditure incurred by the assessee for earning the benefit under DEPB. As observed, the said duty represents expenditure incurred by the assessee company wholly and exclusively for the purpose of its export business and the same cannot be deducted from the sale proceeds of DEPB to arrive at the profit as contemplated u/s 28(iiid). We, therefore, find no merits in the contention raised by the learned counsel for the assessee in this regard and rejecting the same, we uphold the impugned order of the learned CIT(A) confirming the order of the AO recomputing/restricting the claim of the assessee for deduction u/s 80HHC. Now, we shall take up the assessee s appeal for AY 2003-04. Interest levied u/s 234B and 234D - HELD THAT:- In our opinion, the said expression any fresh demand used in the Board s circular does not necessarily mean a revised demand raised agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt realised on transfer of DEPB/DFRC. 3. The material facts of the case relevant to this issue are as follows. The assessee is a company which is engaged in the business of export of cycle parts and light engineering goods. A return of income for the year under consideration i.e. asst. yr. 2001-02 was filed by it on dt.25th Oct., 2001declaring a total income of Rs. 5,28,660 after claiming deduction of Rs. 4,95,63,383 under s. 80HHC. The income so returned was originally accepted in the assessment completed under s. 143(3)(ii) on dt.24th Jan., 2003. Subsequently, a notice under s. 148 was issued by the AO on2nd Nov., 2004in response to which a return was filed by the assessee company on20th Dec., 2004declaring the same income as was declared in the return filed originally. During the course of reassessment proceedings, the claim of the assessee for deduction under s. 80HHC was examined by the AO and it was found on such examination, inter alia. that the export turnover of the assessee company for the year under consideration being more than Rs. 10 crores, the profit on transfer of the Duty Entitlement Pass Book (DEPB) could not be taken into account for the purpose of computing ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually sold during the year under consideration representing proportionate duty paid on FOB value of imported goods was to the extent of Rs. 1,56,74,648, the profit on transfer of DEPB actually earned by the assessee during the year under consideration was only to the extent of Rs. 15,25,701. He contended that the same alone, therefore, should have been deducted to the extent of 90 per cent while computing 'profits of the business' as per Expln. (baa) for computing deduction under s. 80HHC. He contended that the DEPB scheme allows drawback of import duty paid on inputs used in the export product and the intention of the said scheme being to reimburse such duty paid by the assessee, the amount so paid towards duty has to be reduced from the sale proceeds of DEPB to work out the profit on transfer of DEPB as contemplated in s. 28(iiid). He also contended that the legislature in its wisdom has used the word profit in s. 28(iiid) as against receipt and therefore, while computing the deduction under s. 80HHC, what needs to be deducted is the profit on transfer of DEPB and not the entire amount of realization on account of transfer of DEPB. 5. The learned CIT - Departmental Representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it has to be entirely taken into consideration for exclusion to the extent of 90 per cent while making adjustments as per Expln. (baa) below s. 80HHC for the purpose of computing 'profits of the business'. Before us, the learned counsel for the assessee has pleaded that going by the expression 'any profits on transfer of DEPB used in the provisions of s. 28(iiid), which are to be strictly construed, only the profit actually realised on transfer alone is covered by the said provisions. However, if at all this plea of the assessee is to be accepted, then only the amount actually realised/received on account of sale of DEPB would be liable to be included in the 'business income' of the assessee company for the year under consideration strictly construing the provisions of s. 28(iiid) as against the total amount received as well as receivable included in its business income by the assessee company and in that case, even if the exclusion as per Expln. (baa) is restricted to the amount actually received, there will be hardly any effect on the quantum of deduction permissible to the assessee under s. 80HHC. Looking from any angle, we are, therefore, of the view that the contention raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not make the import duty paid by the assessee on inputs to be an expenditure incurred by the assessee for earning the benefit under DEPB. As already observed, the said duty represents expenditure incurred by the assessee company wholly and exclusively for the purpose of its export business and the same cannot be deducted from the sale proceeds of DEPB to arrive at the profit as contemplated under s. 28(iiid). We, therefore, find no merits in the contention raised by the learned counsel for the assessee in this regard and rejecting the same, we uphold the impugned order of the learned CIT(A) confirming the order of the AO recomputing/restricting the claim of the assessee for deduction under s. 80HHC. 8. Now, we shall take up the assessee's appeal for asst. yr 2003-04 being ITA No. 3884/Del/2006. 9. Ground No. 1 raised by the assessee in this appeal challenging the action of the AO in not determining its income under s. 115JB has not been pressed by the learned counsel for the assessee at the time of hearing before us. The same is accordingly dismissed as not pressed. 10. The issue raised by the assessee in ground No. 2 relating to the computation of deduction under s. 80HHC is si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for deduction under s. 80HHC was restricted by the AO in the regular assessment completed under s. 143(3) for the first time and the demand raised consequent to the said assessment could not be said to be a fresh demand so as to make the assessee entitled for the benefit of the aforesaid CBDT circular. In our opinion, the expression any fresh demand used in the aforesaid CBDT circular has to be read with the following words of the sentence i.e. raised consequent to the enactment of Taxation Laws (Amendment) Act on account of variation in the returned/assessed income attributable to profit on sale of DEPB credits or DFRC so as to understand and appreciate the exact meaning thereof. In the present case, the income returned by the assessee was varied by the AO in the assessment by restricting the claim of the assessee for deduction under s. 80HHC as attributable to profits on sale of DEPB relying on the amendments made in the relevant provisions by Taxation Laws (Amendment) Act, 2005. The demand raised against the assessee as a result of the said assessment thus was clearly covered by the aforesaid CBDT circular and the said demand raised against the assessee for the first time wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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