INCOME TAX OFFICER Vs. NARSI SHAH SADH
LAWS(IT)-2008-5-6
INCOME TAX APPELLATE TRIBUNAL
Decided on May 30,2008

Appellant
VERSUS
Respondents

JUDGEMENT

Hari Om Maratha, J.M. - (1.) THESE are two appeals filed by the Revenue for asst. yr. 2001-02 against different assessees namely Shri Narsi Shah Sadh, Farrukhabad and Smt. Sheela Sadh, Farrukhabad. Identical issues are involved in these appeals. The orders appealed against are even dt. 9th March, 2005.
(2.) The only legal issue involved in these appeals is as to whether unrealized portion of the export incentive issued by the Ministry of Commerce is eligible for deduction under Section 80HHC or not. In the case of Shri Narsi Shah Sadh an amount of Rs. 4,34,477 and in the case of Smt. Sheela Sadh an amount of Rs. 10,94,255 remained unrealized. These were held by learned AO to be not eligible but held by learned CIT(A) to be eligible, for deduction under Section 80HHC. At the very outset it was concurred by both the parties that the issue involved in these appeals now stands covered in favour of the assessee by the decision of Hon'ble Supreme Court rendered in the case of B. Desraj v. CIT (2008) 7 DTR (SC) 54, a copy of which has been filed on record. In this case it has been held as under: At the relevant time an issue arose as to whether cash assistance though includible in business profits under Section 28(iiib) would or would not constitute eligible income for the purposes of deduction under Section 80HHC. Since there was some doubt, CBDT had issued a circular. By the circular, CBDT clarified that export incentives, namely, cash compensatory support and duty drawback have to be included in the profits of the business for computing the deduction under Section 80HHC. With the issuance of this circular the point is no more res integra. The formula indicated in Section 80HHC(3) itself shows that business profits include export incentives. This formula is also indicated in the circular referred to above issued by CBDT. It indicates that the Parliament as well as CBDT have taken into account the insertion of Clause (iiib) in Section 28 by the Finance Act, 1990. Further, it is also relevant to note that by the same Finance Act, 1990, Clause (iiib) was inserted into Section 28 and changes were also made in Section 80HHC(3). Therefore, Section 80HHC as it stood at the relevant time was required to be r/w Section 28(iiib) because both the sections have been amended by the same Finance Act of 1990.
(3.) IN the circumstances, the words 'business profits' in the above formula under Section 80HHC(3) would include cash compensatory allowance and duty drawback and accordingly the AO is directed to work out the deduction in accordance with the law as it stood during the relevant asst. yr. 1991-92.-CIT v. B. Desraj (2007) 207 CTR (Mad) 81 set aside.;


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