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TMI Blog2008 (9) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008 (Arising out of SLP(C) No. 7323 of 2007) ORDER 1. Leave granted. 2. This Civil Appeal is directed against the judgment and order dated 18 th April, 2006 delivered by Karnataka High Court in I.T.R.C. No. 901 of 1998. 3. The assessee is a limited company. It purchased 105 computers for Rs.90,91,063/-. It exported them and realized export sales of Rs.90,91,063/-. There were no profits during that relevant Assessment Year on the export sales. The relevant Assessment Year is AY 1990-91. The I.T.O. allowed the claim of deduction under Section 80HHC at Rs.15,81,389/-. It may be noted that according to the calculations made by the I.T.O. the business income stood at Rs.55,31,941/- to which the I.T.O. applied the ratio in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under Section 80HHC. Accordingly, in this case I.T.A.T. allowed the assessee's appeal and restored the order of the I.T.O. giving deduction to the assessee. Aggrieved by the decision of the I.T.A.T. the matter was carried by way of Reference under Section 256 (2) of 1961 Act to the Karnataka High Court which took the view that in view of the decision of the Supreme Court in IPCA Laboratory Ltd. Vs. Deputy Commissioner of Income-Tax reported in 266 ITR , Page 521 since the assessee had not earned profits from export sales during the year in question, the assessee was not entitled to deduction under Section 80HHC. Accordingly, the Department's appeal came to be allowed. Hence, this Civil Appeal by the assessee. 5. At the outset it may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applies as under :- S. 80HHC concession = export profits = profits of business x Export T.O. Total T.O. In the first situation where the business of the assessee is only in terms of exports exclusively, the profits of business has to be multiplied by 1/1. However, when it comes tocomposite business the profits of business in the above formula has to multiplied by twodifferent figures in the denominator and nominator. This calculation has been correctlydone by the I.T.O. as indicated hereinabove. The I.T.O. took into account the businessincome at Rs.55,31,941/- to which he correctly applies the ratio of Rs. 90,91,063/Rs.3,81,01,941. In the case of composite business, as stated above, the figure of export turnover is quite d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of a proportion of the profits of business under the head "Profits and gains of business or profession" irrespective of what could strictly be described as "profits derived from the export of goods or merchandise out of India". The deduction is computed in the following manner :- Profit of the business x Export turnover = Total turnover 6. The term "export turnover" under the existing provisions, means the sale proceeds (excluding freight and insurance) receivable by the assessee in convertible foreign exchange. In other words, the FOB value of exports. The Finance Act, 1990 has restricted the definition of the term "export turnover" to mean FOB sale proceeds actually received by the assessee in convertible foreign exchange within s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 (b) Domestic rate ... 50 100 200 (c) Total turnover 100 150 200 300 (ii) Business profits before incentives (assumed figures) 10 15 20 30 (iii) CCS, DDK,I/L 10 10 10 10 Total Profits of the business 20 25 30 40 (iv) Deduction u/s 80HHC if entire export proceeds, i.e. Rs.100 lakhs is brought into India within the stipulated period = 20.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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