Export business — Deduction u/s.80HHC — If the assessee is a supporting manufacturer, on producing disclaimer certificates from export house, he would be entitled to claim the benefit u/s.80HHC.

[Janatha Cashew Exporting Co. v. CIT, (2009) 309 ITR
440 (SC)]

The assessee, a cashew exporter, had made direct and
indirect exports for the A.Y. 1992-93 and had claimed total deduction of an
amount of Rs.97,54,515 u/s.80HHC(1) and S. 80HHC(1A) of the Income-tax Act.
The Assessing Officer granted deduction u/s.80HHC(1) and u/s.80HHC(1A) in
respect of direct and indirect exports in all amounting to Rs.91,10,306 as
against the claim of Rs.96,54,515. However, while granting deduction under the
proviso to S. 80HHC(3) the Assessing Officer excluded sales to export houses
from the export turnover and he re-worked the relief at Rs.12,63,532.
Aggrieved by the said order the assessee took up the matter before the
Commissioner of Income-tax (Appeals). The order of the Assessing Officer was
upheld on the ground that export turnover included only direct exports since
S. 80HHC(3) dealt with quantification of deduction in case of direct exports
and the quantum of deduction had to be computed only on the basis of direct
export turnover. The Commissioner of Income-tax (Appeals) also took note of
the deduction separately granted on indirect exports u/s.80HHC(1A) of the Act.
However, when the assessee carried the matter in appeal to the Tribunal it
took the view that, the Assessing Officer should compute the income of the
assessee and allow benefits admissible to the export house if such export
house had issued a disclaimer certificate. Aggrieved by the said decision the
Department moved the High Court by way of appeal u/s.260A of the Income-tax
Act. The decision of the Tribunal was, however, set aside by the High Court
which took the view that since S. 80HHC(1) read with S. 80HHC(3) provided for
computation and deduction of profit on direct exports only and the assessee
was not entitled to the benefit in that regard qua indirect exports made
through the export house. The High Court also proceeded on the basis that the
sales turnover from sales effected by the assessee to the export houses did
not answer the description of export turnover and, therefore, the assessee was
not entitled to take the indirect exports into account while calculating sales
turnover in the formula mentioned in S. 80HHC(3).

On an appeal, the Supreme Court held that the matter needed
to be remitted to the Assessing Officer. Firstly, because in this case, there
was no factual finding recorded by the High Court as to whether the sales made
through the export houses by the assessee were supported by a disclaimer
certificate from such export houses. According to the Supreme Court, under the
provisions of S. 80HHC(3), if the assessee is a supporting manufacturer, on
his producing such disclaimer certificate the assessee would be entitled to
claim the benefit of deduction under the said section. Secondly, fresh
computation was now required to be done in view of three subsequent judgments,
in the case of CIT v. K. Ravindranath Nair, (295 ITR 228) A. M. Mosa
v. CIT, (294 ITR 1) and Lalsons v. Dy. CIT, (89 ITD 25).