B. DESRAJ vs. C.I.T., SALEM

C.A. No.-003245-003245 - 2008Supreme Court01 May 20086 pages
For Petitioner: KRISHNA KUMARFor Respondent: B. V. BALARAM DAS
AI SummaryAllowed

What were the facts?

The assessee, B. Desraj, a proprietor engaged in textile exports, is in appeal against the Supreme Court's decision. The dispute concerns the assessment year 1991-92. The assessee received Duty Drawback of Rs. 35,565 and Cash Compensatory Allowance of Rs. 7,74,785 on May 25, 1990, which fell within the accounting year ending March 31, 1991. These amounts related to exports made in the earlier accounting year ending March 31, 1990 (Assessment Year 1990-91). The assessee maintained a cash system of accounting. The Assessing Officer denied deduction under Section 80HHC for these amounts, stating no exports were made in AY 1991-92. The CIT(Appeals) and Tribunal allowed the deduction, holding the amounts relatable to earlier year's sales and includible as export incentives. The High Court reversed this, holding the amounts ineligible for deduction as no exports occurred in AY 1991-92.

What did the Supreme Court hold?

The Supreme Court held that the deduction under Section 80HHC is allowable in respect of Duty Drawback and Cash Compensatory Support even if no export was done by the assessee during the assessment year 1991-92, provided these incentives relate to exports made in an earlier year and the assessee follows a cash system of accounting. The Court reasoned that the formula for deduction under Section 80HHC(3) explicitly includes 'export incentives' in 'business profits'. Furthermore, the Finance Act, 1990, inserted clause (iiib) into Section 28, making cash assistance against exports taxable under 'business profits', and simultaneously amended Section 80HHC(3). Therefore, Section 80HHC, as it stood at the relevant time, was to be read in conjunction with Section 28(iiib). The Court found that the High Court failed to consider this vital aspect. The Supreme Court directed the Assessing Officer to work out the deduction in accordance with the law as it stood during AY 1991-92. The issue of whether these specific amounts constituted eligible income for deduction under Section 80HHC was decided in favour of the assessee.

What were the issues?

1. Whether, in the facts and circumstances, the deduction under Section 80HHC is allowable in respect of Duty Drawback and Cash Compensatory Support even though no export was done by the assessee during the assessment year 1991-92? (Question of law and fact, concerning Section 80HHC). Assessee's Contention: The assessee argued that the Duty Drawback and Cash Compensatory Allowance, though received in AY 1991-92, were relatable to exports made in the earlier year. They relied on the formula in Section 80HHC(3) and CBDT Circulars No. 564 and 571, which clarified that export incentives are to be included in business profits for computing the deduction under Section 80HHC. The assessee also highlighted that Section 28(iiib) and Section 80HHC(3) were amended by the same Finance Act, 1990, and should be read together. Revenue's Contention: The revenue contended that even if Cash Compensatory Support and Duty Drawback constituted business profits under Section 28(iiib), they would not be eligible income for deduction under Section 80HHC.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 28(iiib)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6 CASE NO.: Appeal (civil) 3245 of 2008 PETITIONER: B. DESRAJ RESPONDENT: C.I.T. SALEM DATE OF JUDGMENT: 01/05/2008 BENCH: S.H. KAPADIA & B. SUDERSHAN REDDY

JUDGMENT: JUDGMENT 1 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURI ICTION CIVIL APPEAL NO. 3245 OF 2008 (Arising out of SLP(C) No. 12697/2007) B. DESRAJ ...APPELLANT (S) VERSUS C.I.T. SALEM ...RESPONDENT(S) ORDER Leave granted.

The short question which arises for determination in this Civil Appeal is wheth er in the facts and circumstances of the case the Tribunal was right in holding that the deducti on under Section 80HHC in respect of Duty Drawback and Cash Compensatory Support is allowable even though no export was done by the assessee during the assessment year 1991- 92. Briefly stated th

The order continues below.

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