1. Eligibility of supporting manufacturers to claim deductions for export incentives under Section 80HHC of the Income Tax Act, 1961, on par with direct exporters. (Para 1 , 2 )
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2019 Supreme(SC) 2254
SUPREME COURT OF INDIA
Rohinton Fali Nariman, R. Subhash Reddy, Surya Kant, JJ.
Commissioner Of Income Tax, Karnal - Appellant
Versus
Carpet India, Panipat - Respondent
Civil Appeal Nos. 4590, 4591, 4592, 4593, 4594, 4595, 4596, 4597, 4598, 4599 and 4603 of 2018
Decided On : 27-08-2019
Important Points
The main legal point established in the judgment is the clear differentiation in the treatment of exporters and supporting manufacturers in claiming deductions under Section 80HHC of the Income Tax Act, 1961.
Subject
Taxation Law - Income Tax Act
Act Referred
Headnote
Income Tax Act - Deduction Under Section 80HHC - Summary of Acts and Sections: Section 80HHC(1), 80HHC(1A), 80HHC(3), 80HHC(3A) - The court discussed the provisions of Section 80HHC and its sub-sections, emphasizing the different treatment of exporters and supporting manufacturers in claiming deductions under the Income Tax Act. The court also highlighted the interpretation of the provisions in previous judgments and overruled a decision based on the distinction between export house premium and export incentives for supporting manufacturers.
Fact of the Case:
The appeals arose from a judgment passed by the High Court of Punjab and Haryana at Chandigarh, involving the deduction available under Section 80HHC of the Income Tax Act, 1961. The Assessees in each case were supporting manufacturers, and the court analyzed the statutory scheme and the distinction between exporters and supporting manufacturers in claiming deductions.
Finding of the Court:
The court found that the statutory scheme clearly differentiated the treatment of exporters and supporting manufacturers in claiming deductions under Section 80HHC. It overruled a previous decision and allowed the appeals in favor of the Revenue, setting aside the impugned judgments.
Issues: The main issue revolved around the eligibility of supporting manufacturers to be treated on par with direct exporters for the purpose of deduction of export incentives under Section 80HHC of the Income Tax Act, 1961.
Ratio Decidendi: The court's decision was based on the interpretation of the statutory provisions, the distinction between export house premium and export incentives for supporting manufacturers, and the overruling of a previous decision. It emphasized the different treatment of exporters and supporting manufacturers in claiming deductions.
Final Decision: The court allowed the appeals in favor of the Revenue, set aside the impugned judgments, and remanded some matters to the Appellate Tribunal for further consideration.
Legal Category Hierarchy
Table of Contents
2. Whether supporting manufacturers are entitled to the same deductions for export incentives as direct exporters under Section 80HHC of the Income Tax Act, 1961. (Para 1 )
JUDGMENT
Rohinton Fali Nariman, J. - Civil Appeal Nos. 4590, 4591, 4592 and 4603 of 2018:
1. This batch of appeals arises from a judgment passed by the High Court of Punjab and Haryana at Chandigarh in which the Appeals preferred by the Revenue have been dismissed relying upon Commissioner of Income Tax, Thiruvananthapuram vs. Baby Marine Exports, Kollam (2007) 4 SCC 555 in order to arrive at a conclusion that the supporting manufacturer is at par with the actual direct exporter of goods when it comes to deductions that are available Under Section 80HHC of the Income Tax Act, 1961 (in short 'the Act').
2. It is unnecessary to go into the facts of each of these cases as it is undisputed that the Assessee in each of these cases is a supporting manufacturer. The scheme insofar as Section 80HHC of the Act is concerned is crystal clear. The marginal note to Section 80HHC reads-Deduction in respect of profits retained for export business.
80HHC. (1) Where an Assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this Section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the Assessee, a deduction to the extent of profits, referred to in Sub-section (1B), derived by the Assessee from the export of such goods or merchandise:
Provided that if the Assessee, being a holder of an Export House Certificate or a Trading House Certificate (hereafter in this Section referred to as an Export House or a Trading House, as the case may be,) issues a certificate referred to in Clause (b) of Sub-section (4A), that in respect of the amount of the export turnover specified therein, the deduction under this Sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the Assessee shall be reduced by such amount which bears to the total profits derived by the Assessee from the export of trading goods, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the Assessee in respect of such trading goods.
(1A) Where the Assessee, being a supporting manufacturer, has during the previous year, sold goods or merchandise to any Export House or Trading House in respect of which the Export House or Trading House has issued a certificate under the proviso to Sub-section (1), there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the Assessee, a deduction to the extent of profits, referred to in Sub-section (1B), derived by the Assessee from the sale of goods or merchandise to the Export House or Trading House in respect of which the certificate has been issued by the Export House or Trading House.
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(3) For the purposes of Sub-section (1),--
(a) where the export out of India is of goods or merchandise manufactured or processed by the Assessee, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the Assessee;
(b) where the export out of India is of trading goods, the profits derived from such export shall be the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export;
(c) where the export out of India is of goods or merchandise manufactured or processed by the Assessee and of trading goods, the profits derived from such export shall,--
(i) in respect of the goods or merchandise manufactured or processed by the Assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the Asse
