P.R. PRABHAKAR versus COMMISSIONER OF INCOME TAX, COIMBATORE

Citation: [2006] SUPP. 3 S.C.R. 645 · Decided: 18-07-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

P.R. PRABHAKAR 
A 
v. 
COMMISSIONER OF INCOME TAX, COIMBATORE 
JULY 18, 2006 
[S.B. SINHA AND DAL VEER BHANDARI, JJ.] 
B 
Income Tax Act, 1961: 
ss. BOHHC(J) and (3)-"lncome arising out of business of export"-
Claim for deduction-Assessee carrying on business of ex;ort of its own C 
products as also procuring export contracts for other exporters on 
commission-Derived income by way of commission but incurred loss as 
exporter of goods-Claimed deduction in respect of income from commission 
in terms of s.80HHC-Held, the expression "income arising out of business 
of export" brings within its sweep not only export of any goods or merchandise D 
manufactured or processed by assessee but also of trading goods-Tribunal 
rightly held assessee entitled to claim deduction-Amendments by way of 
CBDT Circular No. 621 dated 19.12.1991 which were made effective from 
1.4.1992, cannot be interpreted to have retrospective operation-Central 
Board of Direct Taxes-Circular No. 621 dated 19.12.1991. 
Interpretation of Statutes-Tax statutes-Exemption provisions-
Interpretation of 
E 
Appellant-assessee, who was carrying on business of export of its own 
products as also procuring export contracts for other exporters on 
commission, derived an income by way of commission and incurred a loss in F 
export of goods, in the assessment year 1990-91. He claimed a deduction in 
respect of the income ~rom commission in terms of s.SOHHC of the Income 
Tax Act, 1961. The Assessing Officer and the Commissioner of Income Tax 
(appeals) disallowed the claim, but the Income Tax appellate Tribunal held in 
favour of the assessee observing that the commission received by the assessee G 
from other exporters was to be taken into consideration for the purpose of 
allowing deduction. However, the High Court answering the reference in favour 
of the Revenue, held that the income derived by the assessee towards 
commission/brokerage for procuring orders of export for others was not 
645 
H 
646 
SUPREME COURT REPORTS (2006] SUPP. 3 S.C.R. 
A eligible to exemption from tax u/s 80HHC of the Act. Aggrieved, the assessee 
filed the present appeal. 
It was contended for the appellant that earning of commission being a 
part of the export business, the income derived therefrom should be calculated 
for computing profit or loss for the purpose ofs.80HHC of the Act; and that 
B the circular issued by CBDT having clarified that the amendment would have 
a prospective operation with effect from 1.4.1992, the High Court erred in 
holding that the same would operate retrospectively. 
Allowing the appeal, the Court 
C 
HELD: 1,1. On a plain reading of Sub-sections (1) and (3) ofs.80HHC 
of the Income Tax Act, 1961, it is evident that it applies to the assessee engaged 
in the business of export out of India including trading of goods. The 
expression 'business of export' must be given its due meaning. It not only 
speaks of 'export out of India' but also includes 'trading of goods'. The 
D expression "income arising out of business of export" brings within its sweep 
processed not only the export of any goods or merchandise manufactured or 
by the assessee but also of trading goods. The Parliament, therefore, intended 
to provide incentive when a positive profit is earned by an exporter. By reason 
of the amendment the Parliament did not intend that the income derived by 
way of brokerage/commission by the assessee should not be reckoned for the 
E purpose of computing profit or loss earned by a person engaged in the business 
of export but by reason thereof the deduction to the extent of 10% held to be 
allowable thereby. (651-C-D; 652-E; 653-B] 
IPCA laboratory ltd. v. Dy. Commissioner of Income Tax, Mumbai, 
]2004( 12 SCC 742 and Income Tax Officer, Bangalore v. Mis !ndujlex Products 
F 
(P) ltd., (2005) IO SCALE 132, relied on. 
International Research Park laboratories ltd. v. Assistant 
Commissioner of Income-Tax, 212 ITR I, upheld. · 
1.2. The purport and reason for enacting Section 80HHC of the Income 
G Tax Act indisputably wa.; to provide incentive to export houses. It is now a 
well-settled principle of law that although the exemption provisions are to be 
construed strictly as regards the applicability thereof to the case of the 
assessee but once it is found that the same is applicable, the same are required 
to be interpreted liberally. It is also trite law that an exemption is to be granted 
H unless it is expressly taken away. (652-F-H; 653-A] 
P.R. PRAB

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