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TMI Blog2000 (8) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer treated the premium on import licence in the assessment order as local turnover whereas the assessee claimed that it was an export incentive and, therefore, was not entitled to be treated as turnover. Being aggrieved, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) who gave certain directions for verifications. Being aggrieved, the assessee preferred further appeal before the Tribunal which allowed the claim of the assessee, inter alia, directing the Assessing Officer to recompute the deductions under section 80HHC. The Tribunal directed the Assessing Officer not to treat an amount of Rs. 51,93,829 as part of the total turnover. The Tribunal also directed the profits of the business to be reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have enabled the assessee to import rough diamonds at a lower cost. However, with the introduction of full convertibility of the rupee, the exporters, who had completed their exports but who had not completed their imports, stood to lose if the goods were to be imported under the licences which they held. In order to compensate such exporters, a circular was issued by the Central Government (Ministry of Commerce) on May 5, 1993, whereby the Government offered to pay cash amount equivalent to eight per cent. of unutilised import licence. The above sum of Rs. 15,47,005 represents this eight per cent. of unutilised import licence. Besides this, the assessee also purchased import licences in respect of rough diamonds from the open market at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ota of import licence, the Government of India offered a premium of Rs. 51,93,829. The assessee had purchased the second category of licences from the market by paying a premium of Rs. 30,59,799. Accordingly, the assessee received a net licence premium of Rs. 21,34,030. Hence, it was an export incentive within the meaning of section 28(iiia), (iiib) and (iiic) and, accordingly, the assessee reduced 90 per cent. of Rs. 21,34,030 as provided in clause (baa) of the Explanation to section 80HHC. At the outset, it may be mentioned that the only point argued before us by learned counsel for the Department in this case was whether the above premium received on the import licences did not constitute export incentives. In other words, whether Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he exporters who had failed to utilise duty---free licences were stranded. They suffered losses. In order to compensate such exporters, the Government paid the above premium. The said premium was in the form of cash amount equal to eight per cent. of the unutilised import licences. In other words, the incentives which were otherwise receivable by such exporters in the form of import of raw materials came to be substituted by cash incentives equal to eight per cent. of unutilised import licences. This fact has been lost sight of by the Department. Hence, we are of the view that the premium received from the Government on import licences, constituted export incentives. Hence, the premium stood excluded by virtue of the proviso to clause (baa) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, but has directed the Assessing Officer to reduce 90 per cent. of Rs. 15,47,005 and not 90 per cent. of Rs. 21,34,030 from the profits of business as per clause (baa). Correspondingly having determined the profits under section 80HHC(3)(a), the Tribunal has directed the Assessing Officer to increase the profits by 90 per cent. of the export incentives on pro-rata basis on the ground that profits on sale of a licence acquired from another person cannot be used to augment the export profits. In this case, the assessee got a premium from the Government of Rs. 36,46,824 on licences acquired from other persons at a cost of Rs. 30,59,799. The Tribunal has held that the intention of the Legislature was only to grant deduction to the exporter on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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