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TMI Blog2005 (3) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant under the proviso to section 80HHC(3) - - - - - Dated:- 31-3-2005 - Judge(s) : K. S. RADHAKRISHNAN., C. N. RAMACHANDRAN NAIR. JUDGMENT The judgment of the court was delivered by K.S. Radhakrishnan Actg. C.J.- Whether turnover on sales to export house undertaken by the assessee as a supporting manufacturer be included in the "export turnover" for the purpose of computation of deduction under the proviso to sub-section (3) of section 80HHC of the Income-tax Act, 1961, is the question that has come up for consideration in this case. The assessee is a cashew exporter who had made direct and indirect exports for the assessment year 1992-93 and claimed total deduction of an amount of Rs. 97,54,515 under section 80HHC(1) and (1A) of the Income-tax Act, 1961. The Assessing Officer granted separate deductions under sections 80HHC(1) and 80HHC(1A) in respect of both direct and indirect exports totalling an amount of Rs. 91,10,306 as against the claim of Rs. 97,54,515 while granting deduction under the proviso to section 80HHC(3) the Assessing Officer excluded sales to export houses from "export turnover" and reworked relief at Rs. 12,63,532. Aggrieved by the said or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l submitted that section 80HHC is a beneficial one and must be interpreted liberally. The assessee, as we have already indicated, had made direct and indirect exports during the assessment year 1992-93. The assessee had directly exported cashew kernels and also sold some quantity to an export house who in turn exported the same. The assessee as a supporting manufacturer effected sales to ITC Limited, Calcutta, and Britannia Industries Limited, Bangalore. The assessee had claimed deduction under sub-section (1A) of section 80HHC. Form No. 10CCAB issued by the export houses was produced to show that that they had exported the goods or merchandise manufactured and sold to them by the assessee during the relevant assessment year. The assessee had therefore claimed deduction both under section 80HHC(1) being an exporter and under sub-section (1A) in the capacity of a supporting manufacturer. Since the assessee had sold kernels locally computation of deduction under sub-section (1) has to be made as provided under clause (c) of sub-section (3) and also the provisos thereunder. Under the proviso the assessee is entitled to 90 per cent, of any sum referred to in clause (iiia) and clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India. Explanation 2.- For the removal of doubts, it is hereby declared that where any goods or merchandise are transferred by an assessee to a branch, office, warehouse or any other establishment of the assessee situate outside India and such goods or merchandise are sold from such branch, office, warehouse or establishment, then, such transfer shall be deemed to be export out of India of such goods and merchandise and the value of such goods or merchandise declared in the shipping bill or bill of export as referred to in sub-section (1) of section 50 of the Customs Act, 1962 (52 of 1962), shall, for the purposes of this section, be deemed to be the sale proceeds thereof ... (3) For the purposes of sub-section (1),- (a) where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such export 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; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section. (4A) The deduction under sub-section (1A) shall not be admissible unless the supporting manufacturer furnishes in the prescribed form along with his return of income,- (a) the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed on the basis of the profits of the supporting manufacturer in respect of his sale of goods or merchandise to the Export House or Trading House; and (b) a certificate from the Export House or Trading House containing such particulars as may be prescribed and verified in the manner prescribed that in respect of the export turnover mentioned in the certificate, the Export House or Trading House has not claimed the deduction under this section: Provided that the certificate specified in clause (b) shall be duly certified by the auditor auditing the accounts of the Export House or Trading House under the provisions of this Act or under any other law. Explanation.- For the purposes of this section,- (a) 'convertible foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al turnover. The dispute is with regard to the figure of Rs. 6,37,05,238 in the numerator adopted by the Assessing Officer as export turnover. We have already pointed out that the assessee wanted to include the sum of Rs. 3,19,47,436 being the indirect exports also in the export turnover. The assessee's contention is that this is the sum representing the goods sold to the export houses and is in the nature of indirect exports made by the assessee as a supporting manufacturer. Further the contention of the assessee is that the export houses had issued disclaimer certificate in respect of indirect exports and therefore the assessee would be entitled to deduction under sub-section (1) in respect of that turnover. We are of the view, the Tribunal has misunderstood the scope and ambit of section 80HHC and the benefits that are separately made available to direct exports and indirect exports, i.e., sales to export houses by the supporting manufacturer. We have already indicated that under sub-section (1) of section 80HHC the assessee is entitled to deduction in respect of profits derived from export of any goods or merchandise. Relief is also available under sub-section (1A) to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 497 wherein the Division Bench of this court held that section 80HHC of the Act is a special provision which provides for a deduction in respect of profits retained for export business and sub-section (1) provides that the deduction shall be allowed in accordance with and subject to the provisions of the section. The above decision came up for consideration before the apex court in IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521 and the apex court overruled the decision of this court in Smt. T.C. Usha [2004] 266 ITR 497. The apex court held: "Undoubtedly section 80HHC has been incorporated with a view to providing incentive to export houses. Even though a liberal interpretation has to be given to such a provision the interpretation has to be as per the wording of this section. If the wordings of the section are clear then benefits, which are not available under the section, cannot be conferred by ignoring or misinterpreting words in the section...." We are of the view that the benefits available to exporter and supporting manufacturer have to be separately computed in accordance with the specific provisions of the Act. While section 80HHC(1) read with section 80HHC(3) pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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