Judgment:
1. This appeal by the assessee for the asstt. year 1984-85 is directed against order of DC (Appeals) refusing to allow deduction to the assessee under Section 80HHC(1)(b) of I.T. Act.
2. The assessee exported certain merchandise and claimed deduction under Section 80HHC(1)(a) of the I.T. Act. This was allowed. The assessee further claimed deduction under Clause (b) of Sub-section (1) of Section 80HHC on export turnover in excess of turnover of the immediately preceding year. This deduction was denied as in last year business was carried only for 15 days and, therefore, the said year was not comparable for considering increase in export turnover for the purpose of above claim. The assessee challenged the disallowance in appeal before DC (Appeals) but without any success. The learned DC (Appeals) noted that export turnover in the lastyear was only a token turnover of Rs. 200 against Rs. 3,04,348 in this year. In his view it would be abuse of the legal provision to treat and compare last year's turnover with the annual turnover of this year and allow deduction under Section 80HHC of I.T. Act. The assessee being aggrieved, has brought the issue in appeal before the Appellate Tribunal.
3. Shri P.J. Khanna, learned representative of the assessee submitted that provision of Section 80HHC was introduced to encourage and increase export turn over from year to year. This section has two limbs. Under the first limb i.e. Clause (a) 1 per cent of export turnover of the year was eligible for deduction. Under the second limb i.e. Clause (b) 5 per cent of amount by which the export turnover of the year was in excess of export turn over of the immediately preceding year was entitled to deduction. He emphasised that there was no condition providing that export turnover of the preceding year to be comparable be turn over of full year. Shri Khanna further relied upon decision of ITAT, Delhi Bench in the case of Mid East Shipping Co. (P.) Ltd v. Asstt. CIT [1992] 40 ITD 611 (SMC). Shri K. Ramesh, learned departmental representative, strongly supported impugned order of CIT(A).
4. Rival contentions of the parties can be appreciated with reference to Clauses of Sub-section (1) of Section 80HHC which in the relevant period was as under :- 80HHC. Deduction in respe,ct of export turnover-(1) where the assessee, being an Indian company or a person (other than a company) who is resident in India, exports out of India during the previous year relevant to an assessment year any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, he allowed, in computing the total income of the assessee, the following deductions, namely :- (a) a deduction of an amount equal to one per cent of the export turnover of such goods or merchandise during the previous year; and (b) a deduction of an amount equal to five per cent of the amount by which the export turnover of such goods or merchandise during the previous year exceeds the export turnover of such goods or merchandise during the immediately preceding year.
The assessee has been allowed deduction under Clause (a) on export turn over of Rs. 3,04,348 of the year under consideration and there is no dispute that all the general conditions of Section 80HHC are satisfied.
The dispute relates to claim Under Clause (b) of Sub-section (1) which provides for further claim of 5 per cent of the amount by which export turn over of goods during the previous year exceeds export turn over of such goods in the immediately preceding year. For getting benefit of above clause assessee has to show increase in turnover over the export turn over of the immediately preceding year. To resolve the controversy we have to consider what is the scope and significance of words, "export turn over in the immediately preceding year". The "export turnover" is defined in clause (b) of explanation to this section and read in the relevant period as follows :- Export turnover" means the sale-proceeds (receivable) by the assessee in convertible foreign exchange (in accordance with Clause (a) of Sub-section (2) of any goods or merchandise to which this section applies and which are exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962).
The above definition is applicable to "export turn over" of the immediately preceding year as also to the year under consideration.
There is no dispute that goods were exported in the immediately preceding year and amount of Rs. 200 represented sale proceeds of goods exported out of India without including freight or insurance. On the language of clause (fa) and definition "export turn over" it is difficult to read in the provision any . requirement to carry on business in the immediately preceding year for the whole year and not for 15 days. The intendment of the provision as reflected by its language is to encourage export to earn foreign exchange. Clause (b) in particular is intended to encourage better export performance than in the immediately preceding year. The authorities below in imposing condition of export turn over of full year applied some unseen spirit of the provision. This deprivation of tax benefit on purely subjective analysis and beyond clear language, in our view, is not Justified. The provision is entitled to liberal construction in consonance with its avowed aim and objective. The assessee clearly fulfilled all the conditions of Clause (b) and is entitled to benefit of incremental turnover under clause (fa) of subsection. We direct the Assessing Officer to compute and allow the above deduction.