The Commissioner Of Incometax, Tiruchirapalli-1 v. M/S.asian Handlooms, Karur1.D, Pugalur Road, Karur

In the High Court of Judicature at Madras Coram : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN The Commissioner of IncomeTax, Tiruchirapalli-1 ... Appellant/Respondent in All Appeals Vs M/s.Asian Handlooms, Karur1.D, Pugalur Road, Karur. ...Respondent/Appellant in all Appeals Prayer:APPEALS under Section 260A of the Income Tax Act, 1961against the common order dated 21.4.2009 in ITA Nos.1819 to1821/Mds/2008 on the file of the Income Tax Appellate TribunalMadras 'C' Bench respectively for the assessment years 2001-02,2002-03 and 2004-05 against the order dated 17.08.2008, passedby the Commissioner of Income Tax (Appeals), Tiruchy, made inITA No.112/07-08, ITA No.113/07-08 and ITA No.114/07-08, againstthe order of the Deputy Commissioner of Income Tax Circle-II,dated 16.11.2007, made in AABFA0568Q. For Appellant : Mrs.R.HemalathaFor Respondent : Mr.Quadir Hoseyn 2. The Revenue has preferred these appeals challenging thecommon order passed by the Income Tax Appellate Tribunal inITA.Nos.1819 to 1821/ Mds/2008 respectively for the assessmentyears 2001-02, 2002-03 and 2004-05. https://hcservices.ecourts.gov.in/hcservices/ 3. These appeals have been admitted on 29.3.2010 on thefollowing substantial questions of law : “i. Whether, on the facts and in thecircumstances of the case, the AppellateTribunal was right in holding that theassessee, a supporting manufacturer, wasentitled to deduction under Section 80HHC inrespect of the DEPB and duty drawback andsimilar incentives disclaimed in its favourby the exporter ? ii. Whether, on the facts and in thecircumstances of the case, the AppellateTribunal was right in holding that theassessee, a supporting manufacturer, wasentitled to deduction under Section 80HHC inrespect of the DEPB and duty drawbackdisclaimed in its favour by the exporterwithout taking note of the Third Proviso toSub-Section (3) of Section 80HHC and thedifference between the provisions of Sub-Sections (3) and (3A) of Section 80HHC?iii. Whether, on the facts and in thecircumstances of the case, the AppellateTribunal had any material to come to theconclusion that the DEPB and duty drawbacketc. benefits received by the assessee byvirtue of disclaimer issued by the exporterin its favour should be regarded as part ofsale consideration when such benefits couldnot be treated as export benefits underSection 28(iiia) etc. ? Andiv. Whether, on the facts and in thecircumstances of the case, the AppellateTribunal was right in holding that thedecision of the Supreme Court in the case ofCommissioner of Income Tax Vs. Baby MarineExports (290 ITR 323) was applicable to theassessee's case without noticing that thesaid case related to export premium whereasin the assessee's case, the issue related toDEPB/duty drawback, etc. disclaimed in itsfavour by the exporter?” 4. In the assessee's own case, the above questions of lawwere decided by a Division Bench of this Court, to which, one ofus (TSSJ) was a party, in TCA.No.1013 of 2009. The said appealwas heard along with three other connected appeals inTCA.Nos.401, 567 and 1106 of 2009. By a common judgment dated 23.9.2013, the said appeals were disposed of. The relevantportions of the said decision read as follows : “10. As far as the issue as to whetherthe Duty Entitlement Passbook Scheme (DEPB)incentives received by the assessee is partof the sale consideration or not, we findfrom the order of the Income Tax AppellateTribunal that the claim of the assessee thatit is part of the sale consideration wasrejected in the background of Rule 18BBA(2)of Duty Drawback Rules. 4. In the assessee's own case, the above questions of lawwere decided by a Division Bench of this Court, to which, one ofus (TSSJ) was a party, in TCA.No.1013 of 2009. The said appealwas heard along with three other connected appeals inTCA.Nos.401, 567 and 1106 of 2009. By a common judgment dated 23.9.2013, the said appeals were disposed of. The relevantportions of the said decision read as follows : “10. As far as the issue as to whetherthe Duty Entitlement Passbook Scheme (DEPB)incentives received by the assessee is partof the sale consideration or not, we findfrom the order of the Income Tax AppellateTribunal that the claim of the assessee thatit is part of the sale consideration wasrejected in the background of Rule 18BBA(2)of Duty Drawback Rules. 11. As far as Commissioner of Income Tax(Appeals) is concerned, he had specificallypointed out that the rate of duty drawbackgiven to the assessee was less than thecredit available under the scheme. Beforethe Income Tax Appellate Tribunal, theRevenue did not raise this issue except theissue taken by the assessee as to theallowability of the claim. Thus, consideringthe finding given in the order of theAssessingOfficerthatreceiptsofincentives were not part of the saleconsideration, the only question thatremains to be considered is as regards thevalue that had been transferred as part ofthe sale consideration. 12. In the decision reported in (2012)342 ITR 49 in the case of Topman Exports Vs.Commissioner of Income Tax, the Apex Courtpointed out that as far as the receipts onDuty Entitlement Passbook Scheme(DEPB) isconcerned, the same would be part of theprofits and gains of the business, it beingthe assistance given by the Government ofIndia to an exporter to pay customs duty onitsimports,therefore,the"cashassistance" received under the DEPB schemewould fall under Clause (iiib) of Section 28and is chargeable to income-tax under thehead "Profits and gains of business orprofession" even before it was transferredto the assessee by the export house. Thus,the Apex Court held that there was nojustification to treat the amount which isreceived by an exporter on the transfer ofthe DEPB any differently than the profitswhich are made on the sale of an importlicence under clause (iiia) of Section 28 ofthe Act. The Apex Court further pointed out that having regard to the decisions of 80HHCof the Act and the Explanation (baa) underSection 80 HHC of the Act giving the formulafor working out the deduction, "profits ofthe business" means the profits of thebusiness as computed under the head "Profitsand gains of business or profession" asreduced by ninety per cent., of any sumreferred to in clause (iiia), (iiib),(iiic), (iiid) and (iiie) of Section 28 orany receipts by way of brokerage,commission, interest, rent, charges or anyother receipt of similar nature includingany such receipts and (2) the profits of anybranch, office, warehouse or any otherestablishment of the assessee situatedoutside India. Thus, ninety per cent., ofthe DEPB which is "cash assistance" againstexports and is covered under clause (iiib)of Section 28 will get excluded from the"profits of the business" of the assessee,if such DEPB has accrued to the assesseeduring the previous year. 13. Considering the pronouncement of theApex Court on this, we hold that theassessee's claim could not be rejectedstraight away by the Revenue. Thus on thefindings given by the Assessing Officer thatexport incentive was not part of the saleconsideration, the only aspect that has tobe decided is how much was the value of theincentives received by the assessee as aSupporting Manufacturer from the exporthouse. To that end, this Court feels thatthe matter demands remittal to the AssessingOfficer to consider the assessee's claim andapply the decision of the Apex Courtreported in (2012) 342 ITR 49 in the case ofTopman Exports Vs. Commissioner of IncomeTax, as stated above and pass orders underthe claim of the assessee under Section 80HHC of the Income Tax Act, 1961.14. In the result, the Tax Case(Appeals) stand disposed of with the abovedirection.”5. The learned Standing Counsel for the Revenue does notdispute the above legal position and the fact that thesubstantial questions of law raised in these appeals are alsoidentical. 6. In the result, these appeals are disposed of on similarlines. No costs. Sd/- Assistant Registrar(CS VI) //True Copy// Sub Assistant RegistrarTo1.The Income Tax Appellate Tribunal, Madras 'C' Bench.2.The Commissioner of Income Tax (Appeals), Tiruchy.3.The Deputy Commissioner of Income Tax, Circle-II, Tiruchy.4.The Commissioner of Income Tax, Tiruchy.5.The Assistant Registrar, Income Tax Appellant Tribunal, III Floor, Rajaji Bhavan, Besant Nagar, Chennai.+3cc to Mr.T.Ravikumar, Advocate Sr.73276, 73275 and 73273TCA.Nos.125 to 127 of 2010 ssv[co]srg 22/11/2018 https://hcservices.ecourts.gov.in/hcservices/