Sca/7970/2006 Of Amrut Cold Storage P. Ltd v. Commissioner Of Income Tax

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No.7926 of 2006ToSPECIAL CIVIL APPLICATION No.7951 of 2006WITHSPECIAL CIVIL APPLICATION No.10746 of 2007WITHSPECIAL CIVIL APPLICATION No.9261 of 2007WITHSPECIAL CIVIL APPLICATION No.27935 of 2007WITHSPECIAL CIVIL APPLICATION No.12181 of 2009WITHSPECIAL CIVIL APPLICATION No.12182 of 2009WITHSPECIAL CIVIL APPLICATION No.3179 of 2007WITHSPECIAL CIVIL APPLICATION No.7025 of 2010WITHSPECIAL CIVIL APPLICATION No.7953 of 2006WITHSPECIAL CIVIL APPLICATION No.7954 of 2006WITHSPECIAL CIVIL APPLICATION No.7955 of 2006WITHSPECIAL CIVIL APPLICATION No.7970 of 2006WITHSPECIAL CIVIL APPLICATION No.7971 of 2006WITHSPECIAL CIVIL APPLICATION No.7973 of 2006WITHSPECIAL CIVIL APPLICATION No.7974 of 2006WITHSPECIAL CIVIL APPLICATION No.11074 of 2006TOSPECIAL CIVIL APPLICATION No.11097 of 2006WITHSPECIAL CIVIL APPLICATION No.24952 of 2006WITHSPECIAL CIVIL APPLICATION No.4163 of 2012WITHCIVIL APPLICATION No.4040 of 2012INSPECIAL CIVIL 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2012WITHCIVIL APPLICATION No. 3137 of 2012IN SPECIAL CIVIL APPLICATION No.3359 of 2012WITHSPECIAL CIVIL APPLICATION No.3369 of 2012WITHCIVIL APPLICATION No. 3138 of 2012INSPECIAL CIVIL APPLICATION No.3369 of 2012WITHSPECIAL CIVIL APPLICATION No.3370 of 2012WITHCIVIL APPLICATION No. 3139 of 2012INSPECIAL CIVIL APPLICATION No.3370 of 2012WITHSPECIAL CIVIL APPLICATION No.3491 of 2012 WITHSPECIAL CIVIL APPLICATION No.3637 of 2012WITHSPECIAL CIVIL APPLICATION No.3714 of 2012WITHSPECIAL CIVIL APPLICATION No.3715 of 2012 For Approval and Signature: HONOURABLE THE ACTING CHIEF JUSTICE MR.BHASKAR BHATTACHARYAAND HONOURABLE MR.JUSTICE J.B.PARDIWALA ========================================================= 1 [Whether Reporters of Local Papers may be ]allowed to see the judgment ? 2 To be referred to the Reporter or not ?` 3 [Whether their Lordships wish to see the fair copy ]of the judgment ? Whether this case involves a substantial question 4of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ======================================================== AVANI EXPORTS & OTHERS Versus COMMISSIONER OF INCOME TAX RAJKOT & ORS.=========================================================Appearance:MR SN SOPARKAR with MS SWATI SOPARKAR, MR JAYAKUMAR WITH MR MANISH K KAJI, MR TUSHAR P HEMANI, MR MANISH J. SHAH, MR KETAN H. SHAH, MR YOGEN N. PANDYA, MR AKHILESHWAR SHARMA, ADVOCATES for the Petitioners. MR MOHAN PARASHARAN, ASG WITH MR. G.C. SRIVASTAVA, SPECIAL COUNSEL, MR GAURAV DHINGA, MR MANISH R. BHATT, SR. COUNSEL WITH MRS. MAUNA BHATT WITH MR. MISHRA, MR. PRANAV G DESAI, MS. PAURAMI SHETH, MR. KETAN PARIKH, MR SUDHIR MEHTA, SENIOR STANDING COUNSEL FOR INCOME TAX DEPARTMENT. ========================================== ===============CORAM : [HONOURABLE THE ACTING CHIEF JUSTICE ]MR.BHASKAR BHATTACHARYAandHONOURABLE MR.JUSTICE J.B.PARDIWALA Date : 02/07/2012 ORAL JUDGMENT (PER : HONOURABLE THE ACTING CHIEF JUSTICE MR.BHASKAR BHATTACHARYA) MR MOHAN PARASHARAN, ASG WITH MR. G.C. SRIVASTAVA, SPECIAL COUNSEL, MR GAURAV DHINGA, MR MANISH R. BHATT, SR. COUNSEL WITH MRS. MAUNA BHATT WITH MR. MISHRA, MR. PRANAV G DESAI, MS. PAURAMI SHETH, MR. KETAN PARIKH, MR SUDHIR MEHTA, SENIOR STANDING COUNSEL FOR INCOME TAX DEPARTMENT. ========================================== ===============CORAM : [HONOURABLE THE ACTING CHIEF JUSTICE ]MR.BHASKAR BHATTACHARYAandHONOURABLE MR.JUSTICE J.B.PARDIWALA Date : 02/07/2012 ORAL JUDGMENT (PER : HONOURABLE THE ACTING CHIEF JUSTICE MR.BHASKAR BHATTACHARYA) 1.All these writ-applications were taken up together pursuant to the order passed by the Supreme Court of India. By the said order, the Apex court transferred these matters pending before various High Courts to this court for considering whether the severable parts of the 3[rd] and 4[th] proviso to section 80 HHC (3) of the Income Tax Act, 1961 [the Act, hereafter] are ultra vires Articles 14 and 19 (1) (g) of the Constitution of India. By way of consequential relief, the petitioners have prayed for direction upon the respondents not to give effect to those severable parts of the third and the fourth proviso to section 80 HHC (3) of the Act and for prohibiting them from taking any action by taking aid of those provisos. 2.The facts giving rise to the filing of these matters may be summed up thus: 2.1In all these matters, the constitutional validity of insertion of conditions in the third and the forth provisos to section 80 HHC (3) of the Act by amendment of Taxation Laws (Second Amendment) Act, 2005 with retrospective effect is challenged. According to the petitioners, the benefit of deduction under section 80 HHC of the Act was available to them from the Assessment Year 1988-99 to the Assessment Year 2004-05. They claim that they have settled their affairs based on availability of the said benefit up to 31[st] March 2004 and by the amendment challenged in these writ-applications, the respondents seek to take away the benefit retrospectively after the entire period of benefit is over on 31[st] March 2004. They contend that the amendment seeks to grant some conditional benefit selectively to certain assessees in January 2006 with retrospective effect for the period from A.Y. 1988-89 to A.Y. 2004-05. The petitioners allege that the impugned portion of the said amendment discriminates between the assessee falling in the same class, which is prohibited by Article 14 of the Constitution of India and at the same time, imposes new pre-conditions retrospectively for being eligible for deduction under section 80 HHC of the Act. The petitioners further contend that the said amendment denies retrospectively the deduction under section 80 HHC to the exporters having turnover of more than Rs.10 Crore although as evident from the history of deduction u/s 80 HHC, the exporters were encouraged to increase the turnover as an incentive to avail the deduction u/s 80 HHC. The petitioners point out that the amendment grants deduction with respect to export having turnover of more than Rs.10 Crore whose products are notified or eligible for both Duty Drawback Scheme and Duty Entitlement Pass Book Scheme [for short, DEPB hereafter] and the rate of duty draw back is higher than DEPB while rest of the exporters are singled out without there being any rational basis for making the aforesaid classification. The petitioners contend that the said denial is against the principle of promissory estoppel. They further contend that the amendment seeks to upset the financial structuring based on which the assessees had arranged and planned their business affairs and the amendment also upsets the settled law laid down by the Tribunal which is binding on the petitioners and the respondents. of more than Rs.10 Crore whose products are notified or eligible for both Duty Drawback Scheme and Duty Entitlement Pass Book Scheme [for short, DEPB hereafter] and the rate of duty draw back is higher than DEPB while rest of the exporters are singled out without there being any rational basis for making the aforesaid classification. The petitioners contend that the said denial is against the principle of promissory estoppel. They further contend that the amendment seeks to upset the financial structuring based on which the assessees had arranged and planned their business affairs and the amendment also upsets the settled law laid down by the Tribunal which is binding on the petitioners and the respondents. 3.These applications have been opposed by the respondents thereby contending that the amendment made in section 80 HHC by the Taxation Law and (Amendment) Act, 2005 with retrospective effect from 1[st] April 1998 by way of adding second, third, forth and fifth proviso to section 80 HHC (3) and inserting clause (iiid) and (iiie) in section 28 with effect from 1[st] April 1998 and 1[st] April 2001 respectively was a beneficial legislation conferring the benefit of section 80 HHC on the assessees also in respect of the profit on the transfer of the DEPB Scheme and Duty Free Replenishment Certificate which was not available before this amendment. According to the respondents, it would appear from paragraph 3 of the Statement of Objects and Reasons made while introducing the Taxation Laws (Second Amendment) Bill 2005 that in order to extend certain tax incentive to the export business with effect from the Assessment Year 1998-99, it was proposed that the deductions allowable under section 80 HHC of the Act for export business may be extended to any profit on transfer of the DEPB Scheme or the Duty Free Replenishment Certificate subject to certain specified conditions. 3.1The respondents further contend that the classification of the assessees on the basis of quantum of export turnover being more or less than Rs.10 Crore is a reasonable classification permitted by Article 14 of the Constitution of India. The respondents contend that the classification in terms of quantum of income or quantum of turnover is embedded all through in the Act as can be seen from Section 44AA(2), 44AB and 139(4A). It is further contended by the respondents that the beneficial nature of the impugned amendments made by the Taxation Laws (Amendment) Act, 2005 in section 80 HHC is further clear from the first proviso to section 80 HHC(3) added by the same amendment Act providing for set off of loss worked out under clauses (a), (b) or (c) of section 80 HHC (3) against proportionate amount of ninety per cent of export incentives with effect from 1[st] April 1992. According to the respondents, it thus becomes clear from the fact that based on the ratio of the Supreme Court decision in the case of IPCA LABORATORIES v/s DCIT reported in 266 ITR 521 (SC) it had been held in several decisions that in case the result of computation under section 80 HHC (3) (a), (b) and (c) is a loss, no deduction was at all admissible with reference to the export incentives under the proviso to section 80 HHC (3) of the Act. According to the respondents, by the proposed amendment, the law was rationalized in favour of the assessees by overruling the above decisions, which were in favour of the Revenue and consequently, retrospectiveness of such legislation beneficial to the assessee is not questionable. The respondents have, therefore, prayed for dismissal of the writ-applications. to the export incentives under the proviso to section 80 HHC (3) of the Act. According to the respondents, by the proposed amendment, the law was rationalized in favour of the assessees by overruling the above decisions, which were in favour of the Revenue and consequently, retrospectiveness of such legislation beneficial to the assessee is not questionable. The respondents have, therefore, prayed for dismissal of the writ-applications. 4.Mr. S.N. Soparkar, Mr. Manish J. Shah, Mr. Ketan H. Shah, Mr. Jayakumar, Mr. Tushar Hemani and Mr. Akhileshwar Sharma, learned advocates made submissions in support of the petitioners while Mr. Mohan Parasaran, learned Additional Solicitor General, Mr. G.C. Srivastava, Mr. Gaurav Dhingra, Mr. Manish R Bhatt with Ms. Mauna R Bhatt, Mr. Pranav G Desai, Ms. Paurami Sheth, Mr. Ketan Parikh, Mr. Sudhir Mehta and Mr. Mishra appeared on behalf of the respondents to oppose the writ-applications. 5.The sum and substance of the contentions made by the learned counsel on behalf of the petitioners may be enumerated below:- 5.1.The impugned Amendment is arbitrary andunreasonable: According to the learned counsel for the petitioners, the benefit, which was conferred from A.Y. 1998-99 to A.Y. 2004-05, was obviously the basis of entire financial structuring of the petitioners’ business including the pricing of export, payments of dividends, distribution of profits etc. They contend that the impugned amendment purports to retrospectively take away the benefit on the basis that exporter having turnover of more than Rs.10 Crore will get the benefit if he has evidence to prove that he had an option to choose either duty drawback or DEPB and that he chose DEPB, even when he was entitled to higher benefit under the duty drawback scheme. This, according to the learned counsel for the petitioners, is an absurd condition which no sensible person can ever exercise the option to choose a scheme under which he would get lesser benefit. Moreover, according to the learned advocates for the petitioners, to impose such condition retrospectively and requiring such person to prove that he had such an option in past and he had exercised it to avail lesser benefit is totally arbitrary, capricious, unjust, unfair, discriminatory and violative of both Article 14 & Article 19 (1) (g) of the Constitution. In support of such contention, the learned advocates for the petitioners rely upon the following decisions:- (1)MARADIA CHEMICALS LTD. VS. UNION OF INDIA reported in (2004) 4 SCC 311 : AIR 2004 SC 2371reported in (2004) 4 SCC 311 : AIR 2004 SC 2371 (2)MALPE VISHWANATH ACHARYA & ORS. Vs. STATE OF MAHARASHTRA & ANR. reported in 1998 (2) SCC 1 : 1998 SC 602.MAHARASHTRA & ANR. reported in 1998 (2) SCC 1 : 1998 SC 602. (3)WELFARE ASSOCIATION A.R.P. reported in (2003) 9 SCC 358 : AIR 2003 SC 1266SCC 358 : AIR 2003 SC 1266 5.2.The Amendment is violative of Article 14: (1)MARADIA CHEMICALS LTD. VS. UNION OF INDIA reported in (2004) 4 SCC 311 : AIR 2004 SC 2371reported in (2004) 4 SCC 311 : AIR 2004 SC 2371 (2)MALPE VISHWANATH ACHARYA & ORS. Vs. STATE OF MAHARASHTRA & ANR. reported in 1998 (2) SCC 1 : 1998 SC 602.MAHARASHTRA & ANR. reported in 1998 (2) SCC 1 : 1998 SC 602. (3)WELFARE ASSOCIATION A.R.P. reported in (2003) 9 SCC 358 : AIR 2003 SC 1266SCC 358 : AIR 2003 SC 1266 5.2.The Amendment is violative of Article 14: On the above aspect, the learned counsel for the petitioners submit that the impugned amendment places two assessees of the same class on different footing and the amendment, in fact, seeks to take away the deduction from one retrospectively and continues to give the benefit to others although both are in the same class. Learned counsel for the petitioners contend that the impugned amendment thus violates Article 14 of the Constitution of India inasmuch as it is unreasonably discriminatory and leads to class legislation, which is not permissible by the Constitution of India. They contend that in the case of some assessees whose export turnover is more than Rs.10 Crore and who have claimed deduction u/s. 80 HHC on DEPB / DFRC in their return of income and the assessments have become final by the Respondents accepting the same cannot be reopened after a period of 6 years (31[st] March 2005) if no assessment is made u/s. 143 (3) and after a period of 4 years (31[st] March 2003) if the assessments are made under Section 143 (3). In this class of assessee, according to the petitioners, the deduction is granted without compliance of the conditions imposed by the Taxation Laws (Second Amendment) Act, 2005, since the assessments of these assessees cannot be reopened after 31[st] March 2005 and 31[st] March 2003 as the case may be. In contrast to the above, in the case of the assessees whose turnover is more than Rs.10 Crore, and who have claimed deduction u/s. 80 HHC on DEPB/DFRC and whose assessments are pending either before the Assessing Officer or the Appellate Authority would be required to comply with those two conditions retrospectively. According to the learned counsel for the petitioners, two assessees having export turnover of more than Rs.10 Crore are discriminated inasmuch as the assessees whose assessments have become final is not required to comply with the two conditions and would avail deduction u/s. 80 HHC as against the assessees whose assessments are pending and who would be required to comply with the two conditions. According to the learned advocates for the petitioners, exporters and non-exporters constitute two separate classes but within the class of exporter, further classification based on turnover would be unreasonable and even assuming that classification based on turnover is permissible, the amendment further makes a sub-class within the class of exporters having turnover of more than Rs.10 Crore, because it results into following 4 sub-classes:- [1].Exporters eligible for drawback and DEPB and rate of drawback is higher;drawback is higher; [2].Exporters eligible for drawback and DEPB and rate of drawback is lower;drawback is lower; [3].Exporters eligible for DEPB and not drawback; [4].Exporter eligible only for drawback and not DEPB. Learned counsel for the Petitioners further submit that the [1].Exporters eligible for drawback and DEPB and rate of drawback is higher;drawback is higher; [2].Exporters eligible for drawback and DEPB and rate of drawback is lower;drawback is lower; [3].Exporters eligible for DEPB and not drawback; [4].Exporter eligible only for drawback and not DEPB. Learned counsel for the Petitioners further submit that the impugned amendment further classifies the exporter into two classes, first, whose assessments have become final and secondly, whose assessments are pending. Such classification, according to them, is unintelligible and not in consonance with or have no relation with deduction u/s. 80 HHC and therefore, violative of Article 14 of the Constitution. They contend that sub-classification sought to be introduced/resulting due to impugned amendment has no rationale nexus with the object of the amendment and therefore, fails the test of Article 14. They contend that this leads to discrimination between the assessee placed in the same class by giving them unequal treatment and therefore, would be grossly violative of Article 14 of the Constitution of India and thus, the impugned amendment is ultra vires and bad in law. In support of this contention, they rely upon the decision in the case of S. K. DUTTA, ITO & ORS. V/s LAWRENCE SINGH INGTY reported in 68 ITR 272(SC) = AIR 1968 SC 658. 5.3.The amendment in its present form does not entitle asingle assessee to claim benefit of incentives under Section80HHC of the Act. So it makes the section completelyunworkable: While interpreting a statutory provision, according to the learned counsel for the petitioners, construction of provisions of the statute, which leads to absurdity, should not be preferred. The learned advocates for the petitioners contend that if the strict and literal construction of the statute is applied, then there is an absurd proposition that no assessee would be in a position to fulfill the twin conditions as laid down by the amendment under challenge. Resultantly, no assessee would ever get this benefit. In support of such contention, they rely on the judgments of the Supreme Court in the following cases: 1.CIT vs. HINDUSTAN BULK CARRIERS reported in 259 ITR 449, : AIR 2003 SC 3942. 2.K. P. VARGHESE vs. ITO & ANR. reported in (1981) 131 ITR 597 (SC) @ 604 = AIR 1981 SC 1922.131 ITR 597 (SC) @ 604 = AIR 1981 SC 1922. 3.CIT vs. J.H. GOKHLE reported in 156 ITR 323(SC) : AIR 1985 SC 1698. 5.4.The burden to prove that the restrictions imposed by theAct are reasonable is on the State. According to the learned advocates for the petitioners, in any case, the amendment is completely arbitrary, irrational and unreasonable and the legislature is completely silent as to what is the rationale and object behind introducing this amendment. According to them, it is for the State to justify how the amendment is not arbitrary, unreasonable and irrational and thus, not violative of Art. 19 (1) (g) of the Constitution and the State having failed to disclose such reasons, it should be set aside. In support of the aforesaid contention, the learned advocates for the petitioners rely on the following two judgments of the Supreme Court: 1.MOHAMMED FARUK vs. STATE OF MADHYA PRADESH & ORS. reported in 1969 (1) SCC 853 : AIR 1970 SC 93.PRADESH & ORS. reported in 1969 (1) SCC 853 : AIR 1970 SC 93. 2.MESSRS VIRAJLAL MANILAL & CO. & ORS. Vs. STATE OF MADHYA PRADESH & ORS. reported in 1969 (2) SCC 248 : AIR 1970 SC 129OF MADHYA PRADESH & ORS. reported in 1969 (2) SCC 248 : AIR 1970 SC 129 5.5.In any case, amendment cannot have retrospectiveeffect: it should be set aside. In support of the aforesaid contention, the learned advocates for the petitioners rely on the following two judgments of the Supreme Court: 1.MOHAMMED FARUK vs. STATE OF MADHYA PRADESH & ORS. reported in 1969 (1) SCC 853 : AIR 1970 SC 93.PRADESH & ORS. reported in 1969 (1) SCC 853 : AIR 1970 SC 93. 2.MESSRS VIRAJLAL MANILAL & CO. & ORS. Vs. STATE OF MADHYA PRADESH & ORS. reported in 1969 (2) SCC 248 : AIR 1970 SC 129OF MADHYA PRADESH & ORS. reported in 1969 (2) SCC 248 : AIR 1970 SC 129 5.5.In any case, amendment cannot have retrospectiveeffect: The learned advocates for the petitioners further submit that the impugned amendment is unreasonable, arbitrary, violative of fundamental rights guaranteed under the Constitution and ultra vires inasmuch as though it is a substantive amendment, the same is inserted with retrospective effect. According to them, it is well settled that only procedural amendments can have retrospective effect and any amendment, which is otherwise substantive in nature, can never have a retrospective effect, unless the same is beneficial to an assessee. They contend that in the facts of the present case, the impugned explanation added to section 80-IA(4) of the Act is a SCA/7926/2006 substantive amendment substantially curtailing the right of an assessee to claim the deduction under section 80HHC of the Act, which was otherwise available to it. Thus, according to them, the retrospective amendment is unduly oppressive and confiscatory. 5.6.Promissory Estoppel and Legitimate Expectations: Lastly, the learned advocates for the petitioners submit that it would appear from the history of section 80HHC of the Act that it was given to encourage the exports, and the petitioners, by virtue of the impugned amendment retrospectively cannot be deprived of the incentives / deductions. According to them, such an amendment is against the principle of promissory estoppel. They contend that the assessees have arranged their business affairs in the past when there were no conditions on the statute book, which is now sought to be upturned by making the amendment retrospectively and thus, is contrary to the representation as evident from history of deduction u/s. 80HHC of the Act. They contend that the principle of promissory estoppel applies in all areas of activities of a State including legislative field. In support of such contention, they rely on the following judgments: 1.MOTILAL PADAMPATH SUGAR MILLS LTD. reported in 1979) 2 SCC 409 : AIR 1979 SC 621. 2.STATE OF PUNJAB V. NESTLE INDIA LTD. reported in (2004) 6 SCC 465 : AIR 2004 SC 4559. 3.MAHAVIR VEGETABLES (PVT.) LTD. reported in (2006) 3 SCC 620. 764. UP POWER CORPORATION LTD. reported in (2008) 2 SCC 777 : AIR 2008 SC 693. 5. ACC LIMITED VS ASST. COMMISSIONER reported in (2011) 46 VST 244 (CAL).(2011) 46 VST 244 (CAL). (6)PRASAD FORMS PVT. LTD. VS. ASST. COMMISSIONER reported in (2005) 140 STC 11 (CAL).reported in (2005) 140 STC 11 (CAL). 6.Mr. Parasaran, the learned Additional Solicitor General, appearing on behalf of the Union of India and Mr. Bhatt, the learned Senior Advocate appearing on behalf of the Income Tax Authority have, on the other hand, opposed the aforesaid contentions of the petitioners and they have advanced their submission in the following ways: 6.1Challenge in the petitions is restricted to the severable parts of the Third and Fourth proviso to section 80HHC (3) but not to:the Third and Fourth proviso to section 80HHC (3) but not to:(a)Insertion of section 28(iiid), 28(iiie), and, (b) Reduction of 90% of these amounts as per clause (baa) of Explanation below to section 80HHC (4C). Explanation below to section 80HHC (4C). According to the learned counsel, the net result is that as per Explanation (baa), the profits of the business are required to be 6.1Challenge in the petitions is restricted to the severable parts of the Third and Fourth proviso to section 80HHC (3) but not to:the Third and Fourth proviso to section 80HHC (3) but not to:(a)Insertion of section 28(iiid), 28(iiie), and, (b) Reduction of 90% of these amounts as per clause (baa) of Explanation below to section 80HHC (4C). Explanation below to section 80HHC (4C). According to the learned counsel, the net result is that as per Explanation (baa), the profits of the business are required to be reduced by 90% of any sum referred to in section 28(iiia) to 28(iiie) as also receipts by way of brokerage, commission, etc. and any other receipts of similar nature included in such profits. Thus, there is no dispute that in the instant cases, profits of the business are required to be reduced by 90% of the sum referred to in section 28(iiid) and 28(iiie). The learned counsel for the Revenue point out that there is no challenge to such reduction and according to them, rightly such reduction is not challenged, for the following reasons: [a].When the formula of computation of deduction of section 80HHC(3) was substituted by the Finance Act [No. 2 of 1991] w.e.f. 1.4.1992, it has been specifically noted that the existing formula (pre 1.4.1992) gave a distorted figure in respect of profits when receipts like interest, commission, etc. which did not have the element of turnover were included in the profit and loss account. [b].As per the scheme of section 80HHC, such deduction is given on the profits derived from the export as per sub-section (1) and sub-section (3) explains the phrase “profits derived from exports” to mean the amount which bears to the profits of business in the same proportion as the export turnover to the total turnover of the business carried out by the assessee. Thus, the scheme of 80HHC for computing the profits derived from exports is thus first to exclude “independent incomes” and “export incentives” from the profits of business, but since the legislature intended to give deduction under section 80HHC in SCA/7926/2006 respect of “export incentives” it provided for the deduction by way of First to Fourth Proviso appended to sub-section (3) of section 80HHC. The rationale of first excluding the export incentives from the “profits of business” and then loading it back for calculating deduction under section 80HHC by way of provisos is attributed to the concept that the export incentives are not strictly to be construed as profits of business as the effective source of these incentives are the government schemes. [c]. After the decision of the Supreme Court in the case of TOPMAN EXPORTS reported in 342 ITR 49(SC), upholding the decision of Special Bench reported in TOPMAN EXPORTS vs. INCOME-TAX OFFICER reported in [2009] 318 ITR (AT) 87, it can be safely stated that the issue which now remains is only with regard to excess of realization over the face value of DEPB. [d].In the case of DEPB, any premium over and above the face value on transfer cannot be stated to be in the nature of export incentives and it would classify under the category of “independent income”. Thus, any independent income in any event was required to be reduced as per explanation (baa). The rationale of treating this premium as independent income is simple, as such premium is determined by market forces of demand and supply in creating premium in the market but the dominant element of premium in such a situation would be due to higher value of benefit available to intended buyer in the market and when such premium is created in the market due to market force of demand and supply it partakes the colour and character of independent income. 6.2 According to the learned counsel for the Revenue, to contend that the premium/profit on transfer of DEPB is a step removed from the actual activity and derivation of profits from export, reliance was placed on: to higher value of benefit available to intended buyer in the market and when such premium is created in the market due to market force of demand and supply it partakes the colour and character of independent income. 6.2 According to the learned counsel for the Revenue, to contend that the premium/profit on transfer of DEPB is a step removed from the actual activity and derivation of profits from export, reliance was placed on: (a)TOPMAN EXPORTS vs. INCOME-TAX OFFICER reported in [2009] 318 ITR (AT) 87 at page 145 [para 79].reported in [2009] 318 ITR (AT) 87 at page 145 [para 79]. (b)CIT vs. K. RAVIONDRANATHAN NAIR reported in [2007] 295 ITR 228 (SC).[2007] 295 ITR 228 (SC). (c)COMMISSIONER OF INCOME TAX vs. STERLING GOODS reported in [1999] 237 ITR 579 (SC) at Page 582GOODS reported in [1999] 237 ITR 579 (SC) at Page 582 (d)LIBERTY INDIA vs. COMMISSIONER OF INCOME-TAX reported in [2009] 317 ITR 218(SC) at Page 232.reported in [2009] 317 ITR 218(SC) at Page 232. 6.3The learned counsel for the Revenue contend that assuming the profit is export incentive profit, by a specific exclusion in explanation (baa) the same is reduced from the Business Profits. 6.4The learned counsel for the Revenue point out that the main averments of the petitioners are as under: [a].The benefit of deduction under section 80HHC in respect of profits arising from DEPB entitlements was available to them profits arising from DEPB entitlements was available to them from A.Y. 1998-99 to A.Y. 2004-05. [b].They have already acted on the basis of such benefits available to them and their entire financial restructuring including pricing of export was based on such benefits existing since 1998.to them and their entire financial restructuring including pricing of export was based on such benefits existing since 1998. [c].The amendment seeks to take away the available benefits retrospectively after the entire period of benefit is over on 31[st ]march 2004retrospectively after the entire period of benefit is over on 31[st ]march 2004 [d].The amendment granting conditional benefits selectively to certain assessees discriminates between the assessees falling in the same class which is violative of Article 14 of the Constitution.certain assessees discriminates between the assessees falling in the same class which is violative of Article 14 of the Constitution. [e].The conditions stipulated in third and fourth Provisos to sub-section (3) of section 80HHC are arbitrary, capricious, unjust and discriminatory thereby violating both Articles 14 and 19(1)(g) of the Constitution.section (3) of section 80HHC are arbitrary, capricious, unjust and discriminatory thereby violating both Articles 14 and 19(1)(g) of the Constitution. 6.5The Revenue contends that the aforesaid averments are incorrect both factually as also legally. In the first place, it is pointed out that prior to the impugned amendments, the Income Tax Act 1961 did not at any stage grant benefit of any kind to the exporters in respect of profits derived by them from the transfer/sale of their DEPB entitlements. This, according to the Revenue, is evident from the provisions of the Act as these existed prior to the impugned amendments. 6.6The Revenue submits that the Ministry of Commerce, with a view to give boost to the exports, does introduce from time to time certain schemes of cash assistance or other direct/indirect incentives under the EXIM Policy of the Govt. However, such incentives do not automatically get the analogous benefit under the direct tax laws. Parliament has to step in to amend the IT Act to provide corresponding benefits under the IT Act. The incentives which were included for benefits under the IT Act prior to the impugned amendments, it is pointed out, were only the following: 6.6The Revenue submits that the Ministry of Commerce, with a view to give boost to the exports, does introduce from time to time certain schemes of cash assistance or other direct/indirect incentives under the EXIM Policy of the Govt. However, such incentives do not automatically get the analogous benefit under the direct tax laws. Parliament has to step in to amend the IT Act to provide corresponding benefits under the IT Act. The incentives which were included for benefits under the IT Act prior to the impugned amendments, it is pointed out, were only the following: (a)Profit on sale of license under Imports(Control) order 1955 made under Imports and Exports ( Control) Act of 1947. (Section 28(iiia))made under Imports and Exports ( Control) Act of 1947. (Section 28(iiia)) (b)Repayment of customs/excise duty under the Customs and Central Excise Duties Drawback Rules 1971 ( Section 28(iiic))andand Central Excise Duties Drawback Rules 1971 ( Section 28(iiic))and (c)Cash assistance under any scheme of the Government( Section 28(iiib))Government( Section 28(iiib)) 6.7In the year 1997, it is submitted, the Ministry of Commerce introduced a new scheme called Duty Entitlement Pass Book Scheme (DEPB) under the EXIM Policy announced under Section 5 of the Foreign Trade (Development and Regulation) Act of 1992. A similar scheme named Duty Free Replenishment Certificate (DFRC) was introduced in the year 2000 and both of these schemes granted a new and distinct incentive to the exporters. These Schemes did not stipulate that the exporters would be entitled to higher deduction of export profits under the IT Act 1961 if they chose to sell their entitlements to third parties. Parliament did not prefer to amend the Act to provide for higher deduction of export profits on sale of these entitlements. Thus, according to the Revenue, while the exporters were entitled to take credit against the Customs Duty leviable at the time of import o