Delhi High Court
Commissioner Of Income Tax, Delhi vs Commer. And Associates P. Ltd. on 7 April, 2015
$~R-30
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on 7th April, 2015
+ ITA 69/2001
COMMISSIONER OF INCOME TAX, DELHI ..... Appellant
Through Mr. Rohit Madan, Mr. Ruchir Bhatia
and Mr. Akash Vajpai, Advs.
versus
COMMER. AND ASSOCIATES P. LTD. ..... Respondent
Through None
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE R.K.GAUBA
MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)
%
1. The following question of law arises :
"Whether the ITAT has rightly interpreted the provisions of Section 80-
HHC of the Income Tax Act, 1961 and whether ITAT is right in holding that
commission received from Indian parties on transfer of export orders is
entitled to deduction u/s 80-HHC of the Income Tax Act, 1961?"
2. At the outset this Court notices that the impugned order has relied
upon a special bench decision of the ITAT - International Research Park
Laboratories Ltd. V. Assistant Commissioner of Income Tax (1995) 212 ITR
(AT) 1. The view expressed in that order of the Tribunal by the special
bench was that the income derived by the assessee towards
commission/brokerage for procuring export orders for others is eligible for
ITA 69/2001 Page 1
benefit under Section 80HHC(3) of the Income Tax Act. The said view has
been in effect approved by the judgment of the Supreme Court in P.R.
Prabhakar V. CIT (2006) 284 ITR 548 SC. Facts
before the Supreme Court
in P. R. Prabhakar are extracted below :
"3. By reason of the impugned judgment, the High Court
opined that income derived by the appellant towards
commission/brokerage for procuring orders of export for
others is not eligible to exemption from tax under section
80HHC of the Act. Referring to the circulars issued by the
Central Board of Direct Taxes (CBDT), the High Court held
that although the said provision was amended with effect from
April 1, 1992, by inserting an Explanation whereby and
whereunder the profit derived out of such
commission/brokerage was confined to 10 per cent. of the
income, the same, being clarificatory in nature, would have
retrospective effect. On the said findings, answers to both the
questions were rendered in the negative and in favour of the
Revenue."
3. The Supreme Court took note of the plain meaning of the expression
"business of export" and held that it includes "trading of goods". The Court
also relied on the circular of Central Board of Direct Taxes i.e. No.621
dated 19.12.1991, as well as the amendment which was brought into force
from 1.4.1992. The Court expressed its conclusions in para 12 and 13 of the
said judgment and in para 17, the Supreme Court in fact extracted and
approved the order of the special bench in International Research Park
Laboratories (supra). The said passage of the Supreme Court is as follows:
"17. Indeed the question as to whether earning of income by
way of commission/brokerage would attract section 80HHC of
the Act or not, precisely came up for consideration before a
Special Bench of the Income-tax Appellate Tribunal, Delhi
ITA 69/2001 Page 2
Bench in International Research Park Laboratories Ltd. v.
Asst. CIT [1995] 212 ITR (AT) 1, wherein interpreting the
Central Board of Direct Taxes circular it was stated (at page
48) :
"Now, we come to whether the commission received could
form part of export profits. Here again, we are unable to
see it differently. It is no doubt true that this commission is
not turnover but it is a profit relatable to exports. Coming
back to section 80HHC(1), if the assessee is an exclusive
exporter without having any local sales, then the profit on
commission is admittedly includible as profit of the
business computed under the head „Profits and gains of
business or profession‟ and the whole of it would be
eligible for exemption under clause (a) of sub-section (3) of
section 80HHC. When such commission could be regarded
as profit derived from export for the purpose of clause (a),
how can the same be excluded for the purpose of clause (b)
unless it amounted to discrimination. The interpretation of
clauses (a) and (b) must be harmonious and not
discriminatory, cutting against each other. What is sauce
for the goose is also sauce for the gander. Secondly, we
have just mentioned that this profit is profit derived from
export and export is the basis or the foundation or the
nexus. The argument of Shri B. B. Ahuja and all his effort
to show to us that it has no reference to the export is,
therefore, unacceptable to us. In our opinion, the argument
advanced by Shri Ahuja overlooks the fact that the
commission would not have come to the assessee had he
not been engaged in the export business. He sought to
justify his argument by referring to subsequent amendments
made from April 1, 1992, whereunder as we have pointed
out above by adding clause (baa) to the Explanation at the
end of sub-section (4A) with effect from April 1, 1992, 90
per cent. of this commission, etc., is not to be regarded as
profits derived from export business and this amendment as
explained in the Memorandum of Bill was only to clarify
the position."
ITA 69/2001 Page 3
18. It is stated at the Bar that the Revenue did not prefer any
appeal thereagainst. We, for the reasons stated hereinbefore
agree with the law laid down by the Tribunal.
19. For the views, we have taken, the judgment of the High
Court cannot be sustained. It is set aside accordingly. The
appeal is, accordingly, allowed. The parties shall, however,
pay and bear their own costs.
4. This Court also notices that view expressed in P.R. Prabhakar (supra)
and International Research Park Laboratories (supra) has been noticed and
approved subsequently in two Division Bench judgments - Lotus Trans
Travels Pvt. Ltd. V. CIT (2011) 332 ITR 463 and CIT V. Anil Chanana
(2013) 350 ITR 47. For the above mentioned reasons the appeal is
answered against the revenue and in favour of the assessee.
5. The appeal is therefore dismissed.
S. RAVINDRA BHAT
(JUDGE)
R.K.GAUBA
(JUDGE)
APRIL 07, 2015
vld
ITA 69/2001 Page 4
