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TMI Blog2015 (2) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... the situation and amounts mentioned in the proviso cannot be added to the total turnover for the purpose of Section 80HHC. The IDEB partakes the character of the amounts covered by Clause (iii) of Section 28 of the Act. By operation of proviso to Clause (ba) of Explanation to Section 80HHC of the Act, it gets excluded from the total turnover.Tribunal has correctly taken the view that the balance of the unused IDEB can be added to the total turnover. - Decided in favour of assessee. - I.T.T.A.No.17 of 2004 - - - Dated:- 2-12-2014 - SRI L.NARASIMHA REDDY AND SRI CHALLA KODANDA RAM, JJ. For the Appellant : Sri J.V.Prasad For the Respondent: Sri Pushyam Kiran JUDGMENT (Per LNR,J) This is another case, in which we get an occasion to deal with certain facets of Section 80HHC of the Income Tax Act, 1961 (for short the Act) The respondent is an exporter and is assessed to income tax. It has been submitting returns year after year, claiming benefits under the relevant provisions of law. For the assessment year 1994-95, it claimed deduction under various heads. An order of assessment was passed on 28.02.1997. The claims of the respondent, referable to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extensive discussion, not only with reference to the relevant Sub-sections and clauses of Section 80HHC of the Act but also the Circulars issued by the Central Board of Direct Taxes (CBDT) and applied the correct principles. He submits that the IDEB, in a way, falls under Clause (iiic) of Section 28 of the Act and by operation of proviso to Clause (ba) of Explanation to Section 80HHC of the Act, it deserves to be kept outside the total turnover. He contends that even otherwise, the IDEB would be just in the form of an entitlement and it can be said to have accrued to an assessee, only when it is utilised, as and when the corresponding material is imported. He contends that the order passed by the Tribunal does not suffer from any legal or factual infirmity. The respondent herein undertakes not only business of export, but also the indigenous one. On account of the nature of business, as well as the location of the business activity, it is entitled to certain benefits under provisions of Chapter VIA of the Act. One of it is, the deduction under Section 80HH, in tandem with that under Section 80I of the Act. While the former gets attracted on account of the establishment of busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centives to Indian Companies that undertake the activity of export and earn foreign exchange. The amount that qualifies for deduction is broadly mentioned in Sub-section (1). However, working out of such amount is a complicated process. The Parliament did not intend to segregate export activity of an assessee, from the rest of his activities, obviously because it may pose several complications. A comprehensive method is stipulated thereunder. The turnover of the assessee, with reference to his export activity as well as the total turnover of all the activities are to be taken into account. The profit of the business, which qualifies for deduction is required to have the same proportion, which the export turnover would have to the total turnover. The amount that qualifies for deduction is to be derived through the following formula. Profits of Business x Export Turnover Total Turnover The Parliament has taken care to define the three different expressions that are employed in the formula. Export Turnover, Total Turnover and Profits of the Business are defined under Clauses (b) (ba) (baa) respectively of explanation to Section 80HHC of the ACt, which read: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired raw-material free of customs duty. For instance, if the total cost of the unit of exported item is $500, and the raw material accounts for 60% of its cost, the exporter would be entitled to import raw-material worth $ 300, without payment of excise duty. If the excise duty payable thereof is 40%, he would stand to the benefit of $120 or its equivalent Indian currency. The accrual of the benefit under such incentives is not immediate. It is always in the form of adjustment and each exporter or assessee would follow his own accounting procedure, to ensure that the benefit is properly derived. In the instant case, the respondent became eligible to the extent of ₹ 3,67,25,867/- in the form of IDEB. However, it has utilised the same to the extent of ₹ 3,35,26,436/-. What remained unused is only ₹ 31,99,431/-. The assessee did not include any component of these figures in his turnover. The Assessing Officer as well as the Commissioner were of the view that the figure of ₹ 3,67,25,867/- deserves to be added to the total turnover. The respondent pleaded that if at all any component of this IDEB is to be added, it is only unused and left over portion of it, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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