Chhotalal Samji Vs. Income Tax Officer - Court Judgment

Excerpt:

- central excise act, 1944.[c.a. no. 1/1944]. sections 4 & 2(f): [s.h. kapadia & b. sudershan reddy, jj] excise duty valuation assessee manufacturing plant and equipment falling under sub-heading 8479.90, cet act, 1985 under a composite contract with certain other parties, it supplying to them in addition to the equipments manufactured by it, various duty-paid bought-out items to facilitate the setting up of the plants at their sites held, value of such bought-out items if includible in the assessable value of the equipments manufactured, depends on the facts of each case. even erection of a plant by assembling certain items at site could constitute manufacture under the excise law. -- section 11aa: rate of interest in the peculiar circumstances of the case, demand reduced and payment directed to be made within eight weeks. further directed that in case of non-compliance therewith, the department would be entitled to levy interest @ 9% p.a. -- sections 35-b & 35-a(3) (as amended in 2001) & central excise tariff act, 1985, sub-heading 8479.90: appeal to appellate tribunal maintainability assessee manufacturing plant and equipment falling under sub-heading 8479.90, cet.....order1. leave granted.2. this civil appeal pertains to assessment year 2001-02.3. by the finance act, 1990, section 28 of the income-tax act, 1961 has been amended by inserting therein, clauses (iiia), (iiib) and (iiic) with retrospective effect with a view to ensure that cash compensatory support (ccs), duty drawback (dd) and profit on sale of import entitlement licences (il) shall be taxable under the head 'profits and gains of business or profession'. in view of this amendment, the above three export incentives have got to be included in the profits of the business for computing the deduction under section 80hhc.4. in this case we are only concerned with two out of three above-mentioned export incentives, namely, duty drawback and profits arising from sale of depb licence. we quote hereinbelow section 28(iiia) and (iiic) of the 1961 act which read as under:profits and gains of business or profession.28. the following income shall be chargeable to income-tax under the head 'profits and gains of business or profession'-(iiia) profits on sale of a licence granted under the imports (control) order, 1955, made under the imports and exports (control) act, 1947 (18 of 1947); ...(iiic).....

Judgment:

ORDER

1. Leave granted.

2. This civil appeal pertains to assessment year 2001-02.

3. By the Finance Act, 1990, Section 28 of the Income-tax Act, 1961 has been amended by inserting therein, clauses (iiia), (iiib) and (iiic) with retrospective effect with a view to ensure that cash compensatory support (CCS), duty drawback (DD) and profit on sale of import entitlement licences (IL) shall be taxable under the head 'Profits and Gains of Business or Profession'. In view of this amendment, the above three export incentives have got to be included in the profits of the business for computing the deduction under Section 80HHC.

4. In this case we are only concerned with two out of three above-mentioned export incentives, namely, duty drawback and profits arising from sale of DEPB licence. We quote hereinbelow Section 28(iiia) and (iiic) of the 1961 Act which read as under:

Profits and gains of business or profession.

28. The following income shall be chargeable to income-tax under the head 'Profits and gains of business or profession'-

(iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947); ...

(iiic) any duty of customs or excise re-paid or re-payable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971.

5. According to the A.O., under Section 28(iiia) of the said Act, profits on sale of a licence granted under Imports (Control) Order, 1955, made under the Import and Exports (Control) Act, 1947 and duty drawback repayable against exports under the Customs and Central Excise Duties Drawback Rules, 1971, are alone includible in the profits of a business for computing the deduction under Section 80HHC. However, according to the A.O., in the present case, the assessee claims to have earned profits on the sale of DEPB licence under Foreign Trade (Development and Regulation) Act, 1992 and not under Imports (Control) Order, 1955, made under the Import and Exports (Control) Act, 1947 and, therefore, such profits were not includible in business profits for computing the deduction under Section 80HHC of the said Act. Similarly, according to the A.O., in this case, the assessee has earned duty drawback under Customs and Central Excise Duties Drawback Rules, 1995. It has not earned duty drawback under Customs and Central Excise Duty Drawback Rules, 1971 and, therefore, the assessee was not entitled to include such incentives in the business profits for computing the deduction under Section 80HHC. One more finding has been given by the A.O., namely, that the assessee was not entitled to claim the benefit under Section 80HHC because the assessee during the assessment year in question has derived negative profits (loss) from export of trading goods.

6. None of the above questions have been decided by the High Court. In the circumstances, we set aside the impugned order and restore Tax Appeal No. 1127 of 2006 for de novo consideration by the High Court in accordance with law.

7. Accordingly, the civil appeal stands allowed with no order as to costs.