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TMI Blog2007 (2) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... considered Taxation Laws (Amendment) Act, 2005, in which amendment has been carried out to section 80HHC. Since the assessee's export turnover was below Rs. 10 crores and there was loss on the total export turnover, he noted that the assessee was entitled to set off of 90 per cent of any one of the export incentives specified under section 28(iiia) to (iiie) as per the 5th proviso to sub-section (3) of section 80HHC. Accordingly, the amount of deduction under section 80HHC was scaled down to Rs. 4,39,641 as against the assessee's claim of Rs. 7,38,420 as under :-- Gross Income from export businessRs. 14,76,831 Less : 90% of Duty DrawbackRs. 24,96,816 Loss on export business(-) Rs. 10,19,985 Export turnoverRs. 24,28,231 Total TurnoverRs. 24,28,231 Export IncentiveRs. 27,74,240 Deduction (-) Rs. 10,19,985 + 90% of Duty drawback allowed of Rs. 21,10,298 (-) Rs. 10,19,985 + Rs. 18,99,268Rs. 8,79,283 Restricted to 50%Rs. 4,39,641 3. No relief was allowed in the first appeal. 4. Before us the learned Counsel for the assessee contended that the learned CIT(A) was not justified in upholding the action of the Assessing Officer by which 90 per cent of Duty drawback was considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EPB is to be considered. Since the amount of Duty draw back at Rs. 21.10 lakhs is higher than the amount of DEPB, such higher amount was considered by the Assessing Officer. 6. Before proceeding further it would be apt to note down the amendments brought out by the Taxation Laws (Amendment) Act, 2005 in section 80HHC(3). First proviso remains as it was earlier. Second to fourth provisos were inserted by the Amendment Act of 2005 with retrospective effect from 1-4-1998 whereas the fifth proviso, which is relevant for our purpose, was inserted with retrospective effect from 1-4-1992. 7. These five provisos to section 80HHC(3) read as under :-- "Provided that the profits computed under clause (a) or clause (b) or clause (c) of this sub-section shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiia) (not being profits on sale of a licence acquired from any other person), and clauses (iiib) and (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee : Provided further that in the case of an assessee having export turnover not exceeding rupees ten cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Duty Free Replenishment Certificate, being the Duty Remission Scheme calculated in the manner as may be notified by the Central Government: Provided also that in case the computation under clause (a) or clause (b) or clause (c ) of this sub-section is a loss, such loss shall be set off against the amount which bears to ninety per cent of-- (a)any sum referred to in clause (iiia) or clause (iiib) or clause (iiic), as the case may be, or (b)any sum referred to in clause (iiid) or clause (iiie), as the case may be, of section 28, as applicable in the case of an assessee referred to in the second or the third or the fourth proviso, as the case may be, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee." 8. Before we dwell upon the controversy in hand it is imperative to have a glance at the background which led to the insertion of 4 provisos to section 80HHC(3) simultaneous with insertion of section 28(iiid) and (iiie ) by the Taxation Laws (Amendment) Act, 2005. As per the pre-amended provisions of section 80HHC the assessee was entitled to deduction as per clause (a) or (b) or (c ) of section 80HHC(3) and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other hand, the 5th proviso deals with the cases in which the assessee has a loss under clause (a) or (b) or (c ) of section 80HHC(3). First proviso provides that the profits computed under clause (a) or (b ) or (c) of sub-section (3) shall be further increased by the amount which bears to 90 per cent of any sum referred to in clauses (iiia) and ( iiib) and (iiic) of section 28. It means that the amount of 'Profits of business' has to be increased by 90 per cent of three export incentives taken together as enumerated in section 28(iiia) to (iiic). So what is referred to here is the sum total of these three incentives. Second proviso to sub-section (3) provides that in the case of an assessee having export turnover not exceeding Rs. 10 crores during the previous year, the profits computed under sub-section (3) of section 80HHC, or after giving effect to the first proviso shall be further increased by the amount which bears to 90 per cent of any receipts referred to in clause (iiid) or (iiie) of section 28 as the case may be, the same proportion as export turnover bears to the total turnover of the business carried on by the assessee. The third and fourth provisos deal with the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by disregarding the method specifically provided in sub-section (3) along with these provisos. It is a settled legal position that equity is hardly relevant for the interpretation of a taxing statute. It has been held so by the Hon'ble Supreme Court in a good number of judgments including Hemlatha Gargya v. CIT [2003] 259 ITR 1 and Karamchari Union v. Union of India [2000] 243 ITR 143 (SC). Coming back to the facts of our case it has been noted supra that in the case of an assessee having loss under sub-section (3), the Hon'ble Courts initially denied the benefit of deduction under section 80HHC straight away. It was only with a view to relax such a view and allow benefit to such assessees that the fifth proviso was inserted by the Amendment Act of 2005. In the absence of such proviso there is absolutely no question of granting any deduction under this section when there is a loss under sub-section (3). Thus, when the Government has come out with insertion of the fifth proviso thereby allowing benefit to the assessee, one cannot expect to read more than what is actually contained in it. 11. We have observed that the first four provisos providing for granting of deduction under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent of any sum referred to in clauses (iiia), (iiib ), (iiic), (iiid) and (iiie ) of section 28 etc. Here also the intention of the Legislature becomes manifest that while working out the amount of "profits of the business" 90 per cent of all items as referred to in clauses (iiia) to (iiie) of section 28 are to be considered cumulatively. Commas have been used after clauses (iiia), (iiib), (iiic ), (iiid) and thereafter the words 'and' is used before clause (iiie). Therefore, it becomes crystal clear that the words 'or', 'and' or 'commas' have been deployed in different parts of section 80HHC to represent the intention of the Legislature for working out the quantum of deduction under this section. It is highly illogical to substitute the word "or" with "and" and vice versa in any part of the section. The things become more clear when we examine Circular No. 2 of 2006, dated 17-1-2006 providing as under : "Profits on sale of Duty Entitlement Pass Book Scheme (DEPB) credits or Duty Free Replenishment Certificate (DFRC) will be treated at par with duty drawback for the purposes of proportionate increase of profits derived from exports computed under clause (a) or clause (b) or clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR on the Supreme Court judgment in the case of Bajaj Tempo Ltd. (supra) to contend that a liberal view should be taken in assessee's favour while interpreting a statute. In our considered opinion the need for interpretation of a section arises when there is an ambiguity in the language of section, which does not properly convey the intention behind it. It has been held by the Hon'ble Supreme Court in numerous judgment including the case of Federation of AP Chambers of Commerce & Industry v. State of AP [2001] 247 ITR 36 that taxing statute has to be strictly construed and nothing can be read in it. Similar view has been taken in the case of Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147 (SC) in which it was held that "while interpreting a statute legislative intention must be found in the words used by the Legislature". Similar view has been reiterated in the case of CAIT v. Plantation Corpn. of Kerala Ltd. [2001] 247 ITR 155 (SC) providing that "So long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible". 15. In view of the foregoing discussion, we note that the word "or" has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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