Supreme Court of India
Section 80 HHC has been enacted in the Income Tax Act, 1961 to encourage exports for the purpose of earning foreign exchange. The exporter gets certain deduction from the income, which is derived from the profits from export of goods, while computing taxable income.The assessee is a manufacturer and exporter of stainless steel utensils. Substantial amount from sale of scrap and the receipt from the sale of scrap was a regular feature of its business. For the purpose of availing deduction under Section 80HHC of the Act for the relevant Assessment Year, the assessee was not including the sale proceeds of scrap in the total turnover but was showing the same separately inP & L Account. The Revenue contended that the sale proceeds from the scrap should have been included in the ‘total turnover’ and was alsopart of the sale proceeds. Held that sale proceeds from scrap is not “turnover” for section 80HHC.
Commissioner of Income Tax - Appellant versus Punjab Stainless Steel Industries - Respondent
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.5592 OF 2008
Commissioner of Income Tax-VII, New Delhi
Punjab Stainless Steel Industries
Civil Appeal Nos. 3283 and 4491 of 2009 and 4898 of 2010
HON’BLE JUSTICE ANIL R. DAVE and
JUSTICE DIPAK MISRA
Date of Judgement: 5th May 2014
Judgement and facts of the case
1. Being aggrieved by the judgment delivered in ITA No. 520 of 2006dated 19th January, 2007, by the High Court of Delhi, this Appealhas been filed by the Commissioner of Income Tax.
2. The facts giving rise to the present appeal, in a nutshell, are as under:
So as to encourage export for the purpose of earning foreign exchange, Section 80 HHC has been enacted in the Income Tax Act,1961 (hereinafter referred to as ‘the Act’). By virtue of the provisions of the said section, subject to certain conditions, the exporter gets certain deduction from the income, which is derived from the profits from export of goods, while computing taxable income.
3. For the purpose of calculating the deduction, according to the provisions of Section 80HHC of the Act, one has to take into account the profits from the business of the assessee, export turnover and total turnover. The deduction, subject to several other conditions, incorporated in the Section, is determined as under:
Profits of the Business X Export Turnover
4. Thus, to determine the amount of deduction, the assessee and the Revenue must be aware of the following three ingredients:
i) Profits of the business
ii) Export turnover
iii) Total turnover
5. In the instant case, the issue is with regard to the term “Total turnover”.
6. The assessee is a manufacturer and exporter of stainless steel utensils. In the process of manufacturing stainless steel utensils, some portion of the steel, which cannot be used or reused for manufacturing utensils, remains unused, which is treated as scrap and the respondent-assessee disposes of the said scrap in the local market and the income arising from the said sale is also reflected in the profit and loss account. The respondent-assessee not only sells utensils in the local market but also exports the utensils.
7. For the purpose of availing deduction under Section 80HHC of the Act for the relevant Assessment Year, the assessee was not including the sale proceeds of scrap in the total turnover but was showing the same separately in the Profit and Loss Account.
8. According to the Revenue, the sale proceeds from the scrap should have been included in the ‘total turnover’ as the respondent-assessee was also selling scrap and that was also part of the sale proceeds.
9. The assessee had objected to the aforestated suggestion of the Revenue because inclusion of the sale proceeds of scrap into thetotal turnover would reduce the amount deductible under theprovisions of Section 80HHC of the Act.
To read the full judgement, please find the attached file.
Attached File: http://judis.nic.in/supremecourt/imgs1.aspx?filename=41507