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TMI Blog2013 (6) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in the circumstances of the case, the benefit of section 80HHC can be claimed on the total income after deduction of unabsorbed losses and unabsorbed depreciation or otherwise ? (4) Whether the Tribunal is justified in law in not giving its finding on specific ground raised before it on the facts and circumstances of the case ? (5) Whether, in the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in not holding that notional duty benefit derived by the assessee amounts to cash assistance under section 28(iiib) of the Income-tax Act ?" All these questions arise in the context of the computation of the amount the assessee can claim by way of deduction as per the provisions of section 80HHC of the Act, which provides for an export incentive to an exporter and allows the amount computed as per this section to be deducted from out of the gross total income of the assessee, so that the taxable total income will be the figure after arriving at subsequent to the deduction. We have heard Sri A. Shankar, learned counsel for the appellant-assessee and Sri E. R. Indra Kumar, learned senior counsel appearing for the respondent-Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nkar has submitted that the computation of profits of business as per Explanation (baa) to section 80HHC of the Act cannot be the same, as otherwise, it is generally computed as per the pro- visions of the Act ; that the language of Explanation (baa) to section 80HHC of the Act, reading as under : "80HHC. Deduction in respect of profits retained for export business.-...... Explanation.-For the purposes of this section,-. . . (baa) 'profits of the business' 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 a similar nature included in such profits ; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India ;" makes it very clear that it has reference to the method of computation of profits and gains of business, as it occurs in Chapter IV of the Act and indicated in section 29 of the Act and that this should be arrived at with reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticular attention is drawn to the first proviso to sub-section (3) of this section, reading as under: "80HHC. Deduction in respect of profits retained for export business.-...... (3) For the purpose of sub-section (1),-..... 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 :" The submission is that though the assessee had claimed the addition of the amount which qualified not only under clause (iiia) of section 28 of the Act but also amounts within the scope of clauses (iiib) and (iiic) of section 28 of the Act, not factoring these amounts for computing the amount of export incentives provided to export of products and what is submitted is that because of not allowing all incentive type deductions claimed, an error has crept in ; that the Appellate Commissioner while simply rejected the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iiic) it is submitted that the amount received or receivable in terms of these clauses are also to be taken as part of the business profits, in the sense, an income assessable. The submission of Sri Shankar is that the amount should be received or "receivable", but the word "receivable" cannot be construed as equivalent to notional income, in the sense that the entitlement will be only when the actual condition is fulfilled and when it is made part of the profit and part of taxable income in section 28, it is in the sense of either received or receivable and not when the actual event has not occurred, viz., that when the assessee has not either received or has not become entitled to receive a cash incentive in terms of clauses (iiib) and (iiic) of section 28 of the Act and when the assessee has not actually got a refund or is entitled for a refund as a drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971. The conclusion is that for the purpose of section 80HHC also, there cannot be a notional computation of these amounts, but it should be actual and either received or receivable, but not otherwise. Sri Shankar has drawn our atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I(1) of the Act while makes a specific reference to the gross total income, it is not so in the case of section 80HHC(1) of the Act. It is in this background, we have to examine the contentions urged by the learned counsel. In so far as the first contention urged by Sri Shankar is concerned, we do not find the question raised in the specific manner as is submitted before us, but more as a general question and as being part of a method of computation of deduction under section 80HHC of the Act is concerned. Nevertheless, we proceed to examine the contention. We find that the contention is totally untenable for the following reasons. While, it is no doubt true that the claim towards deduction as permitted/ allowed under sub-section (3) of section 80HHC of the Act and for arriving at the figure for the purpose of section 80HHC, the three components are: profits of the business, which is to be multiplied by the quotient of export turnover by total turnover and the argument is only related to the profits of the business and the profits of the business no doubt is also defined under clause (baa) in the Explanation to section 80HHC of the Act. It again relegates for working out the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicated in sub-section (2) of section 80A of the Act and not with reference to duplication or other views taken by the authorities under the Act. It is, therefore, the first contention urged by Sri Shankar fails. On a perusal of the judgment of the Bombay High Court, it indicates that the question arose in the context of arriving at the gross total income of the assessee and, while doing so, the Bombay High Court ruled that even losses incurred by the assessee from one priority unit has to be necessarily set off against another priority unit and if the resulting gross total income is "nil" then the assessee will not be entitled for claiming any deduction under Chapter VI-A in view of the provisions of sections 80A(2) and 80B(5) of the Act. The Bombay High Court taking this view of the matter had answered the question referred for examination in the affirmative, in favour of the Revenue and against the assessee and the assessee's appeal came to be dismissed. While we find a parallel drawn by learned counsel for the appellant is not very apt and as pointed out by Sri Indra Kumar, learned senior counsel, there is considerable difference between the language of section 80HHC(1) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (baa) to section 80HHC of the Act. In fact, it is a fallacy to contend that there is duplication of deduction as the set off of unabsorbed carried forward losses is an exercise that has to be undertaken even while arriving at the gross total income. When once that is achieved, it is because Explanation (baa) to section 80HHC of the Act further indicates as to what is the profits of the business for the purpose of section 80HHC of the Act, that again necessarily has to be factored. It is not a situation where the unabsorbed carried forward depreciation is again set off or adjusted, but it has already been done earlier in arriving at the gross total income. We reject the contention that computation of business profits for the purpose of section 80HHC(3) of the Act can only be in terms of Chapter IV and as set off or carried forward losses occurring in section 72 is in Chapter VI of the Act, cannot be factored, for the reason that computation should be in the first instance as per the provisions of the Act and, secondly, though section 72 of the Act does occur in Chapter VI, it qualifies for computation in a situation where there is carried forward unabsorbed depreciation allowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (3) of section 80HHC, in the sense that 90 per cent. of the amount referable in clauses (iiia) to (iiic) of section 28 of the Act is concerned, though the method of arriving at the qualified amount is the same as in respect of profits of qualification of this amount in sub-section (1) based on the actual export of goods or mercantile and employing the formula under sub-section (3) and that is not in dispute, the submission is that not all amounts claimed by the assessee is not allowed by the assessee. What we find here is that the only amount received by the assessee attributable to sale or export licence and as claimed by the assessee, has been allowed in full by the Assessing Officer. It is only in respect of other amounts such as amount attributable to the claim based on the excise duty on finished goods exported, the duty on duty free imports, interest and credit export and Central sales tax on finished goods exported. In the last item of the claim, we find straightaway it is not one to be allowed, as it is not contemplated even under section 28 of the Act itself. In so far as the other three items referred to above, the submission of Sri Shankar, learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been factored in computing the business profits in terms of Explanation (baa) of section 80HHC and, therefore, it has to be necessarily inferred that the assessee itself had not made good the claim, as is claimed and as contended by its learned counsel for the purpose of section 80HHC of the Act. In the absence of the assessee making good the claim in terms of the amount being either received or receivable or refund being paid or payable, the question of addition of this amount as per the first proviso to sub-section (3) of section 80HHC of the Act does not arise. Therefore, the second contention is also rejected. In so far as the second contention is concerned which we have discussed above, we also find that there is a connection between the first proviso to section 80HHC(3) of the Act and Explanation (baa) to section 80HHC of the Act. In both these provisions, there is a reference to clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28 of the Act. While for the purpose of computation under section 80HHC(3) of the Act, in view of the first proviso, the amount attributable to these activities has the effect of boosting the amount qualifying for deduction under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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