9911796707
TMI Blog2012 (11) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... without taking prior mandatory approval of the Addl. CIT, as envisaged u/s 153D of the IT Act, 1961. 3. That the learned CIT(A) was also not justified in further upholding the AO's action of curtailing deduction u/s 80HHC to Rs.3,38,35,050/- against Rs.4,41,06,398/- claimed by assessee, on an erroneous interpretation of provisions of section 28(iiid) r.w.s. 80HHC." 3. The assessee in ITA No .924/Chd/2011 has raised the following grounds of appeal : "1. That the impugned order of the ld. CIT(A), dismissing the assessee's appeal on all the grounds raised, being most cryptic, sketchy, non speaking, and arbitrary, is per se not sustainable for all these reasons and liable to be held as void ab inito. 2. That without prejudice to above, the ld. CIT(A) has grossly erred in arbitrarily upholding the validity of order, even when he himself noted that the order under appeal, was passed without taking prior mandatory approval of the Addl.CIT, as envisaged u/s 153D of the IT Act, 1961. 3. That the learned CIT(A) was also not justified in further upholding the AO's action of curtailing deduction u/s 80HHC to Rs.1,95,90,254/- against Rs.3,40,50,313/- claimed by assessee, on an erron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Law Dictionary (Fifth Edition): "Profit. Most commonly, the gross proceeds of a business transaction less the costs of the transaction, i.e. net proceeds. Excess of revenues over expenses for a transaction; sometimes used synonymously with net income for the period. Gain realized from business or investment over and above expenditures." This Court in E.D. Sassoon & Company Ltd. and Others v. Commissioner of Income-Tax, Bombay City [1954] 26 ITR 27 (SC) has quoted the following observations of Lord Justice Fletcher Moulton in The Spanish Prospecting Company Limited [1911] I Ch. 92 on the meaning of the word "profits": ".... 'Profits' implies a comparison between the state of a business at two specific dates usually separated by an interval of a year. The fundamental meaning is the amount of gain made by the business during the year. This can only be ascertained by a comparison of the assets of the business at the two dates." 'Profits', therefore, imply a comparison of the value of an asset when the asset is acquired with the value of the asset when the asset is transferred and the difference between the two values is the amount of profit or gain made by a person. As DEPB has di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived on transfer of DEPB would be covered under clause (iiid) of Section 28. The High Court has failed to appreciate that DEPB represents part of the cost incurred by a person for manufacture of the export product and hence even where the DEPB is not utilized by the exporter but is transferred to another person, the DEPB continues to remain as a cost to the exporter. When, therefore, DEPB is transferred by a person, the entire sum received by him on such transfer does not become his profits. It is only the amount that he receives in excess of the DEPB which represents his profits on transfer of the DEPB." 8. The Hon'ble Court further held as under : "16. The High Court has sought to meet the argument of double taxation made on behalf of the assessees by holding that where the face value of the DEPB was offered to tax in the year in which the credit accrued to the assessee as business profits, then any further profit arising on transfer of DEPB would be taxed as profits of business under Section 28(iiid) in the year in which the transfer of DEPB took place. This view of the High Court, in our considered opinion, is contrary to the language of Section 28 of the Act under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05. Sub-section (3)(a) of Section 80HHC provides that where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such exports shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. In Commissioner of Income-Tax v. K. Ravindranathan Nair [2007] 295 ITR 228 (SC), the formula in sub-section (3)(a) of Section 80HHC was stated by this Court to be as follows: Profits derived from exports = Profits of the business x Export Turnover = Total Turnover 20. Explanation (baa) under Section 80HHC states that "profits of the business" in the aforesaid formula means the profits of the business as computed under the head "Profits and Gains of Business or Profession" as reduced by (1) ninety per cent of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of Section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of similar nature including any such receipts and (2) the profits of any branch, office, warehouse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the business carried on by the assessee. In this first proviso, there is no addition of any sum referred to in clause (iiid) or clause (iiie). Hence, profit on transfer of DEPB or DFRC are not to be added under the first proviso. Where therefore in the previous year no DEPB or DFRC accrues to the assessee, he would not be entitled to the benefit of the first proviso to sub-section (3) of Section 80HHC because he would not have any sum referred to in clause (iiib) of Section 28 of the Act. The second proviso to sub-section (3) of Section 80HHC states that in case of an assessee having export turnover not exceeding Rs. 10 crores during the previous year, after giving effect to the first proviso, the export profits are to be increased further by the amount which bears to ninety per cent of any sum referred to in clauses (iiid) and (iiie) of Section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. The third proviso to sub-section (3) states that in case of an assessee having export turnover exceeding Rs. 10 crores, similar addition of ninety per cent of the sums referred to in clause (iiid) of Section 28 only if th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
