M/S TOPMAN EXPORTSversusCOMMISSIONER OF INCOME TAX, MUMBAI

                         [2012] 4 S.C.R. 684


A                 MIS TOPMAN EXPORTS
                              v.
           COMMISSIONER OF INCOME TAX, MUMBAI
               (Civil Appeal No. 1699 of 2012)
                        FEBRUARY 08, 2012
B
             [S.H. KAPADIA, CJI, A.K. PATNAIK AND
                    SWATANTER KUMAR, JJ.]

           Income Tax Act, 1961 - ss. 28(iiib) & (iiid) and s.80HHC
C   - Assessment Year 2002-2003 - Whether the entire amount
    received by an assessee on sale of Duty Entitlement Pass
    Book ('DEPB') represents profit on transfer of DEPB u/
    s.28(iiid) for purpose of computation of deduction in respect
    of profits retained for export business u/s. 80HHC - Held:
o   DEPB_ is "cash assistance" receivable by a person against
    exports under the scheme of the Government of India and
    falls under clause (iiib) of s.28 and is chargeable to income
    tax under the head "Profits and Gains of Business or
    Profession" even before it is transferred by the assessee -
E   Under clause(iiid) of s.28, any profit on transfer of DEPB is
    chargeable to income tax under the head "Profits and Gains
    of Business or Profession" as an item separate from cash
    assistance under clause (iiib) - As DEPB has direct nexus
    with the cost of imports for manufacturing an export product,
F   any amount realized by the assessees over and above the
    DEPB on transfer of the DEPB would represent profit on the
    transfer of DEPB - While the face value of the DEPB will fall
    under clause (iiib) of s.28, the difference between the sale
    value and the face value of the DEPB will fall under clause
G   (iiid) of s. 28 - High Court not right in taking the view that the
    entire sale proceeds of the DEPB realized on transfer of the
    DEPB and not just the difference between the sale value and
    the face value of the DEPB represent profit on transfer of the
    DEPB - High Court also not right in coming to the conclusion

H                                 684
   MIS TOPMAN EXPORTS v. COMMISSIONER OF                     685
             INCOME TAX, MUMBAI
that as the assessee did have the export turnover exceeding          A
Rs. 1O crores and as the assessee did not fulfill the conditions
set out in the third proviso to s. 80HHC(iii), it was not entitled
to a deduction u/s. 80HHC on the amount received on transfer
of DEPB and with a view to get over this difficulty the assessee
was contending that the profits on transfer of DEPB u!s.28(iiid)     B
would not include the face value of the DEPB - Where an
assessee has an export turnover exceeding Rs. 10 crores and
has made profits on transfer of DEPB under clause (d) of s. 28,
he would not get the benefit of addition to export profits under
third or fourth proviso to sub-section (3) of s. 80HHC, but he       c
would get the benefit of exclusion of a smaller figure from
''profits of the business" under explanation (baa) to s. BOHHC
and there is nothing in explanation (baa) to s. BOHHC to show
that this benefit of exclusion of a smaller figure from ''profits
of the business" will not be available to an assessee having
                                                                     0
an export turnover exceeding Rs. 10 crores - Well-settled
principle of statutory interpretation of a taxing statute that a
subject will be liable to tax and will be entitled to exemption
from tax according to the strict language of the taxing statute
and if as per the words used in explanation (baa) to s. BOHHC
read with the words used in clauses (iiid) and (iiie) of s.28, the   E
assessee was entitled to a deduction uls. BOHHC on export
profits, the benefit of such deduction cannot be denied to the
assessee - Interpretation of Statutes - Exemption provision.

     Customs - DEPB scheme - Nature and objective of - F
Held: The objective of DEPB scheme is to neutralize the
incidence of customs duty on the import content of the export
products - Hence, it has direct nexus with the cost of the
imports made by an exporter for manufacturing the export
products - The neutralization of the cost of customs duty under G
the DEPB scheme, however, is by granting a duty credit
against the export product and this credit can be utilized for
paying customs duty on any item which is freely importable -
DEPB is issued against the exports to the exporter and is
transferable by the exporter - Hand Book on DEPB issued by H
    686     SUPREME COURT REPORTS                   [2012] 4 S.C.R.

A the Government of India - Paragraphs 4.37 and 4.42 - Export
    and Import Policy, 1997-2002 as notified by the Central
    Government in the Notification No. 1(RE-99)/1997-2202 dated
    31st March, 2000 - Paragraphs 7.14, 7.15, 7.16 and 7.38.

         Words and Phrases - "Profit" - Meaning of - Held: The
8
    word "profit" means the gross proceeds of a business
    transaction less the costs of the transaction - 'Profits' imply a
    comparison of the value of an asset when the asset is
    acquired with the value of the asset when the asset is
    transferred and the difference between the two values is the
C   amount of profit or gain made by a person.

        The instant appeals were filed against the judgment
  of the High Court holding that the entire amount received
  by an assessee on sale of the Duty Entitlement Pass
D Book ('DEPB') represents profit on transfer of DEPB
  under Section 28(iiid) of the Income Tax Act, 1961 for the
  purpose of computation of deduction in respect of profits
  retained for export business under Section 80HHC of the
  Act.
E
        The appellants submitted that DEPB was cash
  assistance receivable by a person against exports and
  was covered under clause (iiib) of Section 28 of the Act
  and it has a direct relation with the costs of the inputs
  imported by an exporter from manufacturer of the export
F product, hence, the DEPB cannot form part of the profits
  on transfer of DEPB under Section 28(iiid) of the Act; that
  as and when DEPB is transferred and the sale value
  realized on such transfer of DEPB is more than the face
  value of the DEPB, the difference between the sale value
G and face value of the DEPB will constitute profit on
  transfer of DEPB and would be covered under clause
  (iiid) of Section 28 of the Act; and that if the entire sale
  proceeds of the DEPB is treated as profits arising on
  transfer of DEPB for the purpose of clause (iiid) of
H Section 28 as contended by the Revenue, then the
  M/S TOPMAN EXPORTS v. COMMISSIONER OF                 687
            INCOME TAX, MUMBAI
assessee will be taxed twice for the same income, once         A
as cash assistance under clause (iiib) of Section 28
equivalent to the face value of the DEPB and for the
second time as profit on transfer of DEPB under clause
(iiid) of Section 28, the face value of the DEPB being part
of the sale proceeds of the DEPB on transfer and that as       B
the legislature could not have intended such double
taxation of the same income, the interpretation suggested
by the Revenue should not be accepted by the Court.

    Disposing of the appeals, the Court
                                                               c
     HELD: 1. For appreciating the nature of the DEPB,
paragraphs 4.37 and 4.42 of the Hand Book on DEPB
issued by the Government of India and paragraphs 7.14,
7.15, 7.16 and 7.38 of the Export and Import Policy, 1997-
2002 as notified by the Central Government in the              D
Notification No.1(RE-99)/ 1997-2202 dated 31st March,
2000 are relevant. On a reading of the aforesaid
paragraphs of the Hand Book on DEPB and the Export
and Import Policy of the Government of India, 1997-2002,
it is clear that the objective of DEPB scheme is to            E
neutralize the incidence of customs duty on the import
content of the export products. Hence, it has direct nexus
with the cost of the imports made by an exporter for
manufacturing the export products. The neutralization of
the cost of customs duty under the DEPB scheme,                F
however, is by granting a duty credit against the export
product and this credit can be utilized for paying customs
duty on any item which is freely importable. DEPB is
issued against the exports to the exporter and is
transferable by the exporter. (Para 10] (703-D; 705-E-F]
                                                               G
    IPCA Laboratories Ltd. v. Deputy C.I. T. (2004) 266 ITR
521 (SC) and Commissioner of the Income Tax vs. Kalpataru
Colours and Chemicals, (ITA (L) 2887 of 2009] - referred to.

    2.1. It is clear from the provisions of Section 28 that    H
    688     SUPREME COURT REPORTS               [2012] 4 S.C.R.


A under clause (iiib) cash assistance (by whatever name
  called) received or receivable by any person against
  exports under any scheme of the Government of India is
  by itself income chargeable to income tax under the head
  "Profits and Gains of Business or Profession". DEPB is
B a kind of assistance given by the Government of India to
  an exporter to pay customs duty on its imports and it is
  receivable once exports are made and an application is
  made by the exporter for DEPB. Therefore, DEPB is
  "cash assistance" receivable by a person against expo • .s
c under the scheme of the Government of India and falls
  under clause (iiib) of Section 28 and is chargeable to
  income tax under the head "Profits and Gains of
  Business or Profession" even before it is transferred by
  the assessee. [Paras 11, 12] [706-F-H; 707-A]

D       2.2. Under clause (iiid) of Section 28, any profit on
  transfer of DEPB is chargeable to income tax under the
  head "Profits and Gains of Business or Profession" as
  an item separate from cash assistance under clause (iiib).
  The word "profit" means the gross proceeds of a
E business transaction less the costs of the transaction.
  'Profits', therefore, imply a comparison of the value of an
  asset when the asset is acquired with the value of the
  asset when the asset is transferred and the difference
  between the two values is the amount of profit or gain
F made by a person. As DEPB has direct nexus with the
  cost of imports for manufacturing an export product, any
  amount realized by the assessees over and above the
  DEPB on transfer of the DEPB would represent profit on
  the transfer of DEPB. [Para 13] [707-B, G-H; 708-A]
G
       2.3. While the face value of the DEPB will fall under
  clause (iiib) of Section 28 of the Act, the difference
  between the sale value and the face value of the DEPB
  will fall under clause (iiid) of Section 28 of the Act and the
  High Court was not right in taking the view in the
H impugned judgment that the entire sale proceeds of the
  M/S TOPMAN EXPORTS v. COMMISSIONER OF                 689
            INCOME TAX, MUMBAI
DEPB realized on transfer of the DEPB and not just the         A
difference between the sale value and the face value of
the DEPB represent profit on transfer of the DEPB. (Para
14) (708-B-C]

   E.D. Sassoon & Company Ltd. and Others v.                   8
Commissioner of Income-Tax, Bombay City (1954) 26 ITR 27
(SC) - relied on.

     The Spanish Prospecting Company Limited (1911) I Ch.
92 - referred to.
                                                               c
    Black's Law Dictionary (Fifth Edition) - referred to.

     3.1. The first reason given by the High Court is that
clause (iiia) of Section 28 treats profits on the sale of an
import license as income chargeable to tax and when the
license is sold, the entire amount is treated as profits of    D
business under clause (iiia) of Section 28 and thus there
is no justification to treat the amount which is received
by an exporter on the transfer of the DEPB any differently
than the profits which are made on the sale of an import
license under clause (iiia) of Section 28 of the Act. In       E
taking the view that when the import license is sold the
entire amount is treated as profits of business, the High
Court has visualized a situation where the cost of
acquiring the import license is nil. The cost of acquiring
DEPB, on the other hand, is not nil because the person         F
acquires it by paying customs duty on the import content
of the export product and the DEPB which accrues to a
person against exports has a cost element in it.
Accordingly, when DEPB is sold by a person, his profit
on transfer of DEPB would be the sale value of the DEPB        G
less the face value of DEPB which represents the cost
of the DEPB. [Para 15) [708-D-G]

     3.2. The second reason given by the High Court in
the impugned judgment is that under the DEPB scheme,           H
    690     SUPREME COURT REPORTS                [2012] 4 S.C.R.


A DEPB is given at a percentage of the FOB value of the
  exports so as to neutralize the incidence of customs duty
  on the import content of the export products, but the
  exporter may not himself utilize the DEPB for paying
  customs duty but may transfer it to someone else and
B therefore the entire sum received on transfer of DEPB
  would be covered under clause (iiid) of Section 28. The
  High Court has failed to appreciate that DEPB represents
  part of the cost incurred by a person for manufacture of
  the export product and hence even where the DEPB is
c not utilized by the exporter but is transferred to another
  person, the DEPB continues to remain as a cost to the
  exporter. When, therefore, DEPB is transferred by a
  person, the entire sum received by him on such transfer
  does not become his profits. It is only the amount that he
  receives in excess of the DEPB which represents his
0
  profits on transfer of the DEPB. [Para 15] [708-G, H; 709-
    A, BJ
         3.3. The High Court has sought to meet the argument
    of double taxation made on behalf of the assessees by
E   holding that where the face value of the DEPB was
    offered to tax in the year in which the credit accrued to
    the assessee as business profits, then any further profit
    arising on transfer of DEPB would be taxed as profits of
    business under Section 28(iiid) in the year in which the
F   transfer of DEPB took place. This view of the High Cour:t
    is contrary to the language of Section 28 of the Act under
    which "cash· assistance" received or receivable by any
    person against exports such as the DEPB and "profit on
    transfer of the DEPB" are treated as two separate items
G   of income under clauses (iiib) and (iiid) of Section 28. If
    accrual of DEPB and profit on transfer of DEPB are
    treated as two separate items of income chargeable to tax
    under clauses (iiib) and (iiid) of Section 28 of the Act, then
    DEPB will be chargeable as income under clause (iiib) of
H   Section 28 in the year in which the person applies for
  M/S TOPMAN EXPORTS v. COMMISSIONER OF               691
            INCOME TAX, MUMBAI
DEPB credit against the exports and the profit on transfer   A
of the DEPB by that person will be chargeable as income
under clause (iiid) of Section 28 in his hands in the year
in which he makes the transfer. Accordingly, if in the
same previous year the DEPB accrues to a person and
he also earns profit on transfer of the DEPB, the DEPB       8
will be business profits under clause (iiib) and the
difference between the sale value and the DEPB (face
value) would be the profits on the transfer of DEPB under
clause (iiid) for the same assessment year. Where,
however, the DEPB accrues to a person in one previous        C
year and the transfer of DEPB takes place in a
subsequent previous year, then the DEPB will be
chargeable as income of the person for the first
assessment year chargeable under clause (iiib) of
Section 28 and the difference between the DEPB credit
and the sale value of the DEPB credit would be income        D
in his hands for the subsequent assessment year
chargeable under clause (iiid) of Section 28. The
interpretation suggested by this Court, therefore, does
not lead to double taxation of the same income, which the
legislature must be presumed to have avoided. [Para 16]      E
[709-C-H; 710-A-C]

      3.4. The High Court has held that as the assessees
had an export turnover exceeding Rs.10 crores and did
not fulfill the conditions set out in the third proviso to   F
Section 80HHC(3) of the Act, the assessees were not
entitled to a deduction under Section 80HHC on the
amount received on transfer of DEPB and to get over this
difficulty the assessees have contended that the profits
on transfer of DEPB in Section 28(iiid) would not include    G
the face value of the DEPB so that the assessees get a
deduction under Section 80HHC on the face value of the
DEPB. This finding of the High Court is not based on an
accurate understanding of the scheme of Section 80HHC
of the Act. [Para 17] [710-D, E]
                                                             H
    692      SUPREME COURT REPORTS                   [2012] 4 S.C.R.


A      4.1. Sub-section (1) of Section 80HHC makes it clear
  that an assessee· engaged in the business of export out
  of India of any goods or merchandise to which this
  Section applies shall be allowed, in computing his total
  income, a deduction to the extent of profits referred to in
8 sub-section (1 B), derived by him from the export of such
  goods or merchandise. Sub-section (1 B) of Section
  80HHC gives the percentages of deduction of the profits
  allowable for the different assessment years from the
  assessment years 2001-2002 to 2004-2005. Sub-section
  (3)(a) of Section 80HHC provides that where the export
C out of India is of goods or merchandise manufactured or
  processed by the assessee, the profits derived from such
  exports shall be the amount which bears to the profits of
  the business, the same proportion as the export turnover
  in respect of such goods bears to the total turnover of
D the business carried on by the assessee. In the case of
  K. Ravindranathan Nair, the formula in sub-section (3)(a)
  of Section 80HHC was stated by this Court to be as
  follows:

E                           =
        Profits derived Profits of the business x Export
    Turnoverfrom exports Total Turnover [Para 19) [714-B-F]

       4.2. Explanation (baa) under Section 80HHC states
  that "profits of the business" in the aforesaid formula
  means the profits of the business as computed under the
F head "Profits and Gains of Business or Profession" as
  reduced by (1) ninety per cent of any sum referred to in
  clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of Section 28 or of
  any receipts by way of brokerage, commission, interest,
  rent, charges or any other receipt of similar nature
G including any such receipts and (2) the profits of any
  branch, office, warehouse or any other establishment of
  the assessee situated outside India. Thus, ninety per cent
  of the DEPB which is "cash assistance" against exports
  and is covered under clause (iiib) of Section 28 will get
H
   M/S TOPMAN EXPORTS v. COMMISSIONER OF                693
             INCOME TAX, MUMBAI
excluded from the "profits of the business" of the             A
assessee if such DEPB has accrued to the assessee
during the previous year. Similarly, if during the same
previous year, the assessee has transferred the DEPB
and the sale value of such DEPB is more than the face
value of the DEPB, the difference between the sale value       B
of the DEPB and the face value of the DEPB will
represent the profit on transfer of DEPB covered under
clause (iiid) of Section 28 and ninety per cent of such
profit on transfer of DEPB certificate will get excluded
from "profits of the business". But, where the DEPB            c
accrues to the assessee in the first previous year and the
assessee transfers the DEPB certificate in the second
previous year, as appears to have happened in the
present batch of cases, only ninety per cent of the profits
on transfer of DEPB covered under clause (iiid) and not        0
ninety per cent of the entire sale value including the face
value of the DEPB will get excluded from the "profits of
the business". Thus, where the ninety per cent of the face
value of the DEPB does not get excluded from "profits
of the business" under explanation (baa) and only ninety       E
per cent of the difference between the face value of the
DEPB and the sale value of the DEPB gets excluded from
"profits of the business", the assessee gets a bigger
figure of "profits of the business" and this is possible
when the DEPB accrues to the assessee in one previous
year and transfer of the DEPB takes place in the               F
subsequent previous year. The result in such case is that
a higher figure of "profits of the business"' becomes the
multiplier in the aforesaid formula under sub-section (3)(a)
of Section SOHHC for arriving at the figure of profits
derived from exports. [Para 20] [714-F-H; 715-A-F]             G

   4.3. To the figure of profits derived from exports
worked out as per the aforesaid formula under sub-
section (3)(a) of Section SOHHC, the additions as
mentioned in first, second, third and fourth proviso under     H
   694      SUPREME COURT REPORTS                  [2012] 4 S.C.R.

A sub-section (3) are made to profits derived from exports.
  Under the first proviso, ninety per cent of the sum
  referred to in clauses (iiia), (iiib) and (iiic) of Section 28 are
  added in the same proportion as export turnover bears
  to the total turnover of the business carried on by the
B assessee. In this first proviso, there is no addition of any
  sum referred to in clause (iiid) or clause (iiie). Hence,
  profit on transfer of DEPB or DFRC are not to be ~dded
  under the first proviso. Where therefore in the previous
  year no DEPB or DFRC accrues to the assessee, he
c would not be entitled to the benefit of the first proviso to
  sub-section (3) of Section 80HHC because he would not
  have any sum referred to in clause (iiib) of Section 28 of
  the Act. The second proviso to sub-section (3) of Section
  80HHC states that in case of an assessee having export
  turnover not exceeding Rs.10 crores during the previous
0
  year, after giving effect to the first proviso, the export
  profits are to be increased further by the amount which
  bears to ninety per cent of any sum referred to in clauses
  (iiid) and (iiie) of Section 28, the same proportion as the
E export turnover bears to the total turnover of the business
  carried on by the assessee. The third proviso to sub-
  section (3) states that in case of an assessee having
  export turnover exceeding Rs.10 crores, similar addition
  of ninety per cent of the sums referred to in clause (iiid)
  of Section 28 only if the assessee has the necessary and
F sufficient evidence to prove that (a) he had an option to
  choose either the duty drawback or the Duty Entitlement
  Pass Book Scheme, being the Duty Remission Scheme;
  and (b) the rate of drawback credit attributable to the
  customs duty was higher than the rate of credit allowable
G under the Duty Entitlement Pass Book Scheme, being the
  Duty Remission Scheme. Therefore, if the assessee
  having export turnover of more than Rs.10 crores does
  not satisfy these two conditions, he will not be entitled
  to the addition of profit on transfer of DEPB under the
H
  M/S TOPMAN EXPORTS v. COMMISSIONER OF                  695
            INCOME TAX, MUMBAI
third proviso to sub-section (3) of Section 80HHC. [Para         A
21] [715-G, H; 716-A-F]

       4.4. Where an assessee has an export turnover
exceeding Rs.10 crores and has made profits on transfer
of DEPB under clause (d) of Section 28, he would not get         8
the benefit of addition to export profits under third or
fourth proviso to sub-section (3) of Section 80HHC, but
he would get the benefit of exclusion of a smaller figure
from "profits of the business" under explanation (baa) to
Section 80HHC of the Act and there is nothing in
explanation (baa) to Section 80HHC to show that this             C
benefit of exclusion of a smaller figure from "profits of the
business" will not be available to an assessee having an
export turnover exceeding Rs.10 crores. In other words,
where the export turnover of an assessee exceeds Rs.10
crores, he does not get the benefit of addition of ninety        D
per cent of export incentive under clause (iiid) of Section
28 to his export profits, but he gets a higher figure of
profits of the business, which ultimately results in
computation of a bigger export profit. The High Court,
therefore, was not right in coming to the conclusion that        E
as the assessee did have the export turnover exceeding
Rs.10 crores and as the assessee did not fulfill the
conditions set out in the third proviso to Section 80HHC
(iii), the assessee was not entitled to a deduction under
Section 80HHC on the amount received on transfer of              F
DEPB and with a view to get over this difficulty the
assessee was contending that the profits on transfer of
DEPB under Section 28 (iiid) would not include the face
value of the DEPB. It is a well-settled principle of statutory
interpretation of a taxing statute that a subject will be        G
liable to tax and will be entitled to exemption from tax
according to the strict language of the taxing statute and
if as per the words used in explanation (baa) to Section
80HHC read with the words used in clauses (iiid) and (iiie)
of Section 28, the assessee was entitled to a deduction          H
    696      SUPREME COURT REPORTS               [2012] 4 S.C.R.

A   under Section 80HHC on export profits, the benefit of
    such deduction cannot be denied to the assessee. [Para
    22) [716-G-H; 717-A-F]

        Commissioner of Income-Tax v. K. Ravindranathan
    Nair (2007) 295 ITR 228 (SC) - referred to.
8
        5. The Assessing Officer is directed to compute the
    deduction under Section 80HHC in the case of the
    appellants in accordance with this judgment. [Para 23)
    [717-G]
c
                         Case Law Reference:
          (2004) 266 ITR 521 (SC)      referred to    Para 3
          ITA (L) 2887 of 2009   referred to          Para 5
D         (1954) 26 ITR 27 (SC) relied on             Para 13
          (2007) 295 ITR 228 (SC)      referred to   Para 19
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    1699 of 2012 etc.
E
        From the Judgment & Order dated 29.06.2010 of the High
    Court of Judicature at Bombay in Income Tax Appeal No. (L)
    3019 of 2009.
                                    WITH
F
  Civil Appeal Nos. 1700, 1701, 1704, 1705, 1706, 1707, 1708,
  1709, 1710, 1711, 1728, 1729, 1730, 1731, 1732, 1733, 1734,
  1735, 1736, 1737, 1738, 1739, 1740, 1741, 1712, 1713, 1714,
  1715, 1716, 1717, 1718, 1719, 1720, 1721, 1722, 1723-1724,
G 1725, 1726-1727, 1742, 1743, 1744, 1745, 1746, 1747, 1748,
  1749, 1750, 1754, 1755, 1756, 1757, 1758-1759, 1760, 1761,
  1762, 1763, 1764, 1765, 1766, 1767, 1768, 1769, 1770, 1771,
  1772, 1773, 1774, 1775, 1776, 1777, 1778, 1779, 1780, 1781,
  1782, 1783, 1784, 1785, 1786, 1787, 1788, 1789, 1790, 1791,
  1792, 1793, 1794, 1795, 1796-1799, 1800, 1801, 1802, 1803,
H
   M/S TOPMAN EXPORTS v. COMMISSIONER OF                  697
            INCOME TAX, MUMBAI

1804, 1805, 1806, 1807, 1808, 1809, 1810, 1811, 1812, 1813,       A
1814, 1815, 1816, 1817, 1818, 1819, 1820, 1821, 1822, 1823,
1824, 1825, 1826, 1827, 1828, 1829, 1830, 1831, 1832, 1833,
1834, 1835, 1836, 1837, 1838, 1839, 1840, 1841, 1842, 1843,
1844, 1845, 1846, 1847, 1848, 1850, 1851, 1852, 1853, 1854,
1855-1856, 1858, 1859, 1860, 1861, 1862, 1863, 1864, 1865,        B
1866, 1867, 1868, 1869, 1870, 1871-1872, 1873, 1874, 1875,
1876, 1877, 1878, 1879, 1880-1881, 1882-1883 1884-1885,
1886, 1887, 1888, 1889, 1890, 1891, 1892, 1893, 1894, 1895,
1896, 1897, 1898, 1899, 1900, 1901, 1902, 1903, 1904, 1905,
1906, 1907, 1908, 1909, 1910, 1911, 1912, 1913 of 2012.           c
     S. Ganesh, Shyam Divan, R.P. Bhatt, V. Shakhar, Porus
Kaka, Kavin Gulati, R.N. Karanjawala, Ruby Singh Ahuja,
Ronak Dhillon, Deepti Sarin, Akhileshwar Sharma, Manik
Karanjawala (for Karanjawala & Co.), S.C. Tiwari, Jatin Zaveri,   D
Gaurav Aggarwal, Nikhil Nayyar, T.V.S. Raghavendra Sreyas,
Rajendra Singhvi, Maitreyi Singhvi, K.K.L. Gautam, Brij
Bhushan, M.P. Shorawala, Jyoti Saxena, Sashi Kiran, Atulbhai
K. Jasani, Rashmikumar Manila! Vithlani, Aditi Singh, S. Ravi
Shankar, Vibha Datta Makhijia, Rustom, B. Hathikhanawala, Dr.
P. Daniel, Bharat L. Gandhi, Vijay Kumar, Jay Savla, Renuka       E
Sahu, Ragvesh Singh, P.S. Sudheer, Rishi Maheswari, V.
Lakshmikumaran, Tarun Jain, M.P. Devanath, Vandana Sehgal,
Rohal Thawani, Hardeep Singh Anand, Ankur Saigal, Abhay A.
Jena, Bina Gupta, Gaurav Singh, N.D.B. Raju, Akhileshwar
Sharma, Bharathi Raju, N. Ganpathy, A.R. Thadani, Ashwani         F
Kumar, Arijit Prasad, D.D. Kamat, Aman Ahluwalia Kunal Bahri,
Fuzail A. Ayyubi Abhigya, Jatin Rajput, Deepakshi Jain, Vishal
Saxena, B.V. Balaram Das for the appearing parties.

    The Judgment of the Court was delivered by                    G
    A.K. PATNAIK, J. 1. Delay condoned. Leave granted in
Special Leave Petitions.

    2. These are appeals by way of special leave under Article
136 of the Constitution against the judgment and orders of the    H
    698      SUPREME COURT REPORTS                   [2012] 4 S.C.R.


A   Bombay High Court holding that the entire amount received by
    an assessee on sale of the Duty Entitlement Pass Book {for
    short 'the DEPB') represents profit on transfer of DEPB under
    Section 28(iiid) of the Income Tax Act, 1961 {for short 'the Act')
    for the purpose of the computation of deduction in respect of
B   profits retained for export business under Section 80HHC of
    the Act.

         3. For appreciating the controversy between the parties,
    we will state the facts of only the lead case of Mis Topman
    Exports (hereinafter referred to as 'the assessee'). The
C   assessee is a manufacturer and exporter of fabrics and
    garments. During the previous year relevant to the assessment
    year 2002-2003, the assessee sold the DEPB and DFRC
    (Duty Free Replenishment Certificate) which had accrued to the
    assessee on export of its products. The assessee filed a return
D   for the assessment year 2002-2003 claiming a deduction of
    Rs.83,69,303/- under Section 80HHC of the Act. The
    Assessing Officer held that if the profit on transfer of the export
    incentives was deducted from the profits of the assessee, the
    figure would be a loss and there will be no positive income of
E   the assessee from its export business and the assessee will
    not be entitled to any deduction under Section 80HHC of the
    Act as has been held by this Court in IPCA Laboratories Ltd.
    v. Deputy C.I. T. (2004) 266 ITR 521 (SC). Aggrieved, the
    assessee filed an appeal before the Commissioner of Income
F   Tax (Appeals) and contended that the profits on the transfer of
    DEPB and DFRC were not the sale proceeds of DEPB and
    DFRC amounting to Rs.2,06,84,841/- and Rs.1,65,616/-
    respectively, but the difference between the sale value and face
    value of DEPB and DFRC amounting to Rs.14,35,097/- and
G   Rs.19,902/- respectively and if these figures of profits on
    transfer of DEPB and DFRC are taken, the income of
    assessee would be positive and the assessee would be entitled
    to the deduction under Section 80HHC of the Act. The
    Commissioner of Income Tax (Appeals) rejected this contention
H   of the assessee and held that the assessee had received an
  M/S TOPMAN EXPORTS v. COMMISSIONER OF                   699
     INCOME TAX, MUMBAI [A.K. PATNAIK, J.]
amount of Rs.2,06,84,841/- on sale of DEPB and an amount         A
of Rs.1,65,612/- on sale of DFRC and the costs of acquisition
of the DEPB and DFRC are to be taken as nil and hence the
entire sale proceeds of DEPB and DFRC realized by the
assessee are to be treated as profits on transfer of DEPB and
DFRC for working out the deduction under section 80HHC of        B
the Act and directed the Assessing Officer to work out the
deduction under Section 80HHC of the Act accordingly.

     4. Aggrieved, the assessee filed an appeal before the
Income Tax Appellate Tribunal (for short 'the Tribunal'). A C
Special Bench of the Tribunal heard the appeal and held that .
there was a direct relation between the entitlement under the
DEPB Scheme and the custom duty component in the cost of
imports used in the manufacture of the export product. The
Tribunal further held that DEPB accrues to the exporter soon
after export is made and application is filed for DEPB and D
DEPB is a "cash assistance" receivable by the assessee and
is covered under clause (iiib) of Section 28 of the Act, whereas
profit on the transfer of DEPB takes place on a subsequent
date when the DEPB is sold by the assessee and is covered
under clause (iiid) of Section 28 of the Act. The Tribunal E
compared the language of Section 28(iiib) of the Act in which
the expression "cash assistance" is used, with the language
of Section 28(iiia), (iiid) and (iiie) of the Act in which the
expression "profit" is used and held that the words "profit on
transfer'' in Section 28 (iiid) and (iiie) of the Act would not F
represent the entire sale value of DEPB but the sale value of
DEPB less the face value of the DEPB. With these reasons,
the Tribunal set aside the orders of the Assessing Officer and
the Commissioner of Income Tax (Appeals) and directed the
Assessing Officer to compute the deduction under Section G
80HHC of the Act accordingly.

     5. This judgment of the Special Bench of the Tribunal was
followed by the Tribunal in all the cases in appeal before us.
Against the judgment and orders of the Tribunal, the             H
    700       SUPREME COURT REPORTS                   [2012] 4 S.C.R.


A Commissioner of Income Tax, .Mumbai filed appeals in all the
  cases under Section 260A of the Act before the High Court and
  by the impugned orders the High Court disposed of the
  appeals in terms of the judgment delivered in Commissioner
  of the Income Tax vs. Kalpataru Colours and Chemicals (ITA(L)
B 2887 of 200!:1). In Commissioner of the Income Tax vs.
  Kalpataru Colours and Chemicals (supra), the High Court
  formulated the following two substantial questions of law:

          "(a) Whether the Tribunal is justified in holding that the
          entire amount received on the sale of the Duty Entitlement
c         Passbook does not represent profits chargeable under
          Section 28(iiid) of the Income Tax Act, 1961 and that the
          face value of the Duty Entitlement Passbook shall be
          deducted from the sale proceeds;

D         (b) Whether the Tribunal is justified in holding that the face
          value of the Duty Entitlement Passbook is chargeable to
          tax under Section 28(iiib) at the time of accrual of income
          i.e. when the application for Duty Entitlement Passbook is
          filed with the competent authority pursuant to the exports
E         made and that the profits on the sale of Duty Entitlement
          Passbook representing the excess of the sale proceeds
          over the face value is liable to be considered under
          Section 28(iiid) at the time of sale."

  In its judgment, on the first question of law formulated under (a),
F the High Court held that the Tribunal was not justified in holding
  that the entire amount received on the sale of the DEPB does
  not represent profits chargeable under Section 28(iiid) of the
  Act and in holding that the face value of the DEPB shall be
  deducted from the sale proceeds of the DEPB. On the second
G question of law formulated under (b), the High Court in its
  judgment did not agree with the Tribunal that the face value of
  DEPB is chargeable to tax as income of the assessee under
  Section 28(iiib) of the Act and instead held that the entirety of
  sale consideration for transfer of DEPB would fall within the
H purview of Section 28(iiid) of the Act. In some of the cases, the
   M/S TOPMAN EXPORTS v. COMMISSIONER OF                    701
      INCOME TAX, MUMBAI [A.K. PATNAIK, J.]
appellants filed review petitions before the High Court, but the    A
High Court dismissed the review petitions.

      6. Learned counsel for the appellants submitted, relying on
the provisions of the DEPB Scheme, that the Tribunal was right
in coming to the conclusion that DEPB was cash assistance           B
receivable by a person against exports and accrued to the
exporter as soon as he files an application for DEPB. They
submitted that DEPB was therefore chargeable to income tax
under the head "Profits and Gains of Business or Profession"
under clause (iiib) of Section 28 of the Act. They submitted that   C
the contention of the Revenue that DEPB would be income
chargeable to tax only on transfer and would be covered under
clause (iiid) of Section 28 of the Act is not correct. They
submitted that it will be clear from different provisions of the
DEPB Scheme that the object of granting DEPB to an exporter
is to neutralize the incidence of custom duties which has been      D
incurred on the import component of the export product and this
neutralization is achieved by grant of duty credit of the amount
specified in the DEPB Scheme. They submitted that the
Tribunal, therefore, was right in coming to the conclusion that
there was a direct relation between the DEPB and the cost of        E
inputs imported for manufacture of the export product.

      7. Learned counsel for the appellants submitted that since
DEPB was cash assistance receivable by a person against
exports and was covered under clause (iiib) of Section 28 of        F
the Act and it has a direct relation with the costs of the inputs
imported by an exporter from manufacturer of the export product,
the DEPB cannot form part of the profits on transfer of DEPB
under Section 28(iiid) of the Act. They argued that as and when
DEPB is transferred and the sale value realized on such             G
transfer of DEPB is more than the face value of the DEPB, the
difference between the sale value and face value of tile DEPB
will constitute profit on transfer of DEPB and would be covered
under clause (iiid) of Section 28 of the Act. They argued that if
the intention of the legislature was to cover the entire sale       H
    702     SUPREME COURT REPORTS                  [2012] 4 S.C.R.


A proceeds arising on transfer of DEPB under clause (iiid) of
  Section 28 of the Act then they would have used the expression
  "sale proceeds" instead of profit on transfer of DEPB in clause
  (iiid) of Section 28 of the Act.

         8. Learned counsel for the appellants argued that if the
8
    entire sale proceeds of the DEPB is treated as profits arising
    on transfer of DEPB for the purpose of clause (iiid) of Section
    28 as contended by the Revenue, then the assessee will be
    taxed twice for the same income, once as cash assistance
C   under clause (iiib) of Section 28 equivalent to the face value of
    the DEPB and for the second time as profit on transfer of
    DEPB under clause (iiid) of Section 28, the face value of the
    DEPB being part of the sale proceeds of the DEPB on transfer.
    They submitted that as the legislature could not have intended
    such double taxation of the same income, the interpretation
D   suggested by the Revenue should not be accepted by the
    Court. They submitted that in the present batch of cases, DEPB
    accrued to the assessees in the first year when the assessees
    made the export and applied for DEPB and the assessee sold
    the DEPB in subsequent year and the Revenue has taken a
E   stand that in the subsequent year, the entire sale proceeds
    comprising both the face value of the DEPB and the profits on
    transfer of DEPB are covered under Section 28(iiid) of the Act
    and this stand of the Revenue has been accepted by the High
    Court in the impugned orders on an incorrect interpretation of
F   the DEPB scheme and the provisions of Section 28 of the Act
    and 80HHC of the Act.

       9. Learned counsel for the Revenue, on the other hand,
  supported the impugned judgment and orders of the High Court
G and submitted that profit on transfer of DEPB would represent
  the entire sale value realized by the assessee on transfer of
  the DEPB. He submitted that the High Court has rightly held
  that the assessee does not incur any cost in obtaining the
  DEPB. He argued that DEPB is an export incentive granted
H by the Government under DEPB Scheme and it has no direct
  M/S TOPMAN EXPORTS v. COMMISSIONER OF                     703
     INCOME TAX, MUMBAI [A.K. PATNAIK, J.]
relation with the cost of purchases made by the assessee and        A
therefore the assessee is not entitled to deduct the face value
of the DEPB from the sale proceeds for determining the profit
arising on transfer of DEPB and the entire sale proceeds of
the DEPB represent the profits earned by the assessee on
transfer of the DEPB. He argued that the findings of the Tribunal   B
that there is a direct relation between DEPB and the costs
incurred by the assessee for importing inputs for manufacture
of export products is, therefore, not correct and the High Court
was right in setting aside the findings of the Tribunal and in
coming to the conclusion that the entire sale proceeds of DEPB      c
represent the profits on transfer of DEPB within the meaning
of clause (iiid) of Section 28 of the Act.

     10. For appreciating the nature of the DEPB, paragraphs
4.37 and 4.42 of the Hand Book on DEPB issued by the
Government of India and paragraphs 7.14, 7.15, 7.16 and 7.38        D
of the Export and Import Policy, 1997-2002 as notified by the
Central Government in the Notification No.1 (RE-99)/ 1997-2202
dated 31st March, 2000 are extracted hereinbelow:

                      Hand Book on DEPB                             E

     "4.37 Duty Entitlement Passbook Scheme (DEPB)

    The Policy relating to Duty Entitlement Passbook (DEPB)
    Scheme is given in Chapter-4 of the Policy. The duty credit
    under the scheme shall be calculated by taking into             F
    account the deemed import content of the said export
    product as per SION and the basic custom duty payable
    on such deemed imports. The value addition achieved by
    export of such product shall also be taken into account
    while determining the rate of duty credit under the scheme.     G

    4.42 Utilization of DEPB credit.

    The credit under DEPB shall be utilized for payment of
    customs duty on any item which is freely importable.
                                                                    H
    704       SUPREME COURT REPORTS                   [2012] 4 S.C.R.


A                  Export and Import Policy, 1997-2002

          7.14 For exporters not desirous of going through the
          licensing route, an optional facility is given under DEPB.
          The objective of Duty Entitlement Passbook Scheme is to
          neutralize the incidence of Customs duty on the import
B
          content of the export product. The neutralization shall be
          provided by way of grant of duty credit against the export
          product.

          Under the Duty Entitlement Passbook Scheme (DEPB),
c         an exporter may supply for credit, as a specified
          percentage of FOB value of exports, made in freely
          convertible currency. The credit shall be available against
          such export products and at such rates as may be
          specified by the Director General of Foreign Trade by way
D         of public notice issued in this behalf, for import of raw
          materials, intermediates, components, parts packing
          material etc.

          The holder of Duty Entitlement Passbook Scheme (DEPB)
          shall have the option to pay additional customs duty, if any,
E
          in cash as well.

          Validity 7.15. The DEPB shall be valid for a period of 12
          months from the date of issue.

F         7.16 The DEPB and/or the items imported against it are
          freely transferable. The transfer of DEPB shall however be
          for import at the port specified in the DEPB which shall
          be the port from where exports have been made. However,
          imports from a port other than the port of export shall be
G         allowed under TRA facility as per the terms and conditions
          of the notification issued by Department of Revenue.

          7.38 (i) An application for grant of credit under DEPB may
          be made to the licensing authority concerned in the form
          given in Appendix-11 C alongwith the documents
H         prescribed therein. The provisions of paragraphs 7.2 shall
  M/S TOPMAN EXPORTS v. COMMISSIONER OF                       705
     INCOME TAX, MUMBAI [A.K. PATNAIK, J.]
     be applicable for DEPB also. The FOB value in free              A
     foreign exchange shall be converted into Indian rupees as
     per the authorized dealer's TIT buying rate, prevalent on
     the date of negotiation/purchase/collection of document.
     The DEPB rate of credit shall be applied on the FOB value
     so arrived. In case of advance payment, the FOB value in        B
     free foreign exchange shall be converted into Indian
     rupees as per the authorized dealer's TIT buying rate,
     prevalent on the date of receipt of advance payment.

     (ii) The DEPB shall be initially issued with non transferable   C
     endorsement in such cases where realization has not
     taken place to enable the exporter to effect import for his
     own use. However, upon receipt of realization, the DEPB
     shall be endorsed transferable. In such cases where the
     applicant applies for DEPB after realization, the DEPB
     shall be issued with transferable endorsement."                 D

On a reading of the aforesaid paragraphs of the Hand Book
on DEPB and the Export and Import Policy of the Government
of India, 1997-2002, it is clear that the objective of DEPB
scheme is to neutralize the incidence of customs duty on the         E
import content of the export products. Hence, it has direct nexus
with the cost of the imports made by an exporter for
manufacturing the export products. The neutralization of the cost
of customs duty under the DEPB scheme, however, is by
granting a duty credit against the export product and this credit    F
can be utilized for paying customs duty on any item which is
freely importable. DEPB is issued against the exports to the
exporter and is transferable by the exporter.

      11. We may now consider the relevant provisions of
Section 28 for determining whether DEPB will fall under clause       G
(iiib) or under clause (iiid) of Section 28. The relevant
provisions of Section 28 of the Act are reproduced hereunder:

    Section 28. Profits and Gains of Business or
    Profession.-The following income shall be chargeable to          H
    706       SUPREME COURT REPORTS                            [2012] 4 S.C.R.

A         income-tax under the head "Profits and gains of business
          or profession",--



          (iiia) profits on sale of a licence granted under the Imports
B         (Control) Order, 1955, made under the Imports and
          Exports (Control)Act, 1947 (18 of 1947);

          (iiib) cash assistance (by whatever name called) received
          or receivable by any person against exports under any
c         scheme of the Government of India;]

          (iiic) ................................................................. .

          (iiid) any profit on the transfer of the Duty Entitlement Pass
          Book Scheme, being the Duty Remission Scheme under
D         the export and import policy formulated and announced
          under section 5 of the Foreign Trade (Development and
          Regulation) Act, 1992 (22 of 1992)

          (iiie) any profit on the transfer of the Duty Free
          Replenishment Certificate, being the Duty Remission
E
          Scheme under the export and import policy formulated and
          announced under section 5 of the Foreign Trade
          (Development and Regulation) Act, 1992 (22 of 1992)."

       12. It will be clear from the aforesaid provisions of Section
F 28 that under clause (iiib) cash assistance (by whatever name
  called) received or receivable by any person against exports
  under any scheme of the Government of India is by itself income
  chargeable to income tax under the head "Profits and Gains
  of Business or Profession". DEPB is a kind of assistance
G given by the Government of India to an exporter to pay customs
  duty on its imports and it is receivable once exports are made
  and an application is made by the exporter for DEPB. We have,
  therefore, no doubt that DEPB is "cash assistance" receivable
  by a person against exports under the scheme of the
H Government of India and falls under clause (iiib) of Section 28
  MIS TOPMAN EXPORTS v. COMMISSIONER OF                      707
     INCOME TAX, MUMBAI [A.K. PATNAIK, J.]
and is chargeable to income tax under the head "Profits and          A
Gains of Business or Profession" even before it is transferred
by the assessee.

     13. Under clause (iiid) of Section 28, any profit on transfer
of DEPB is chargeable to income tax under the head "Profits          B
and Gains of Business or Profession" as an item separate from
cash assistance under clause (iiib). The word "profit" means
the gross proceeds of a business transaction less the costs of
the transaction. To quote from Black's Law Dictionary (Fifth
Edition):
                                                                     c
     "Profit. Most commonly, the gross proceeds of a business
     transaction less the costs of the transaction, i.e. net
     proceeds. Excess of revenues over expenses for a
     transaction; sometimes used synonymously with net
     income for the period. Gain realized from business or           D
     investment over and above expenditures."

This Court in E.D. Sassoon & Company Ltd. and Others v.
Commissioner of Income-Tax, Bombay City (1954) 26 ITR 27
(SC) has quoted the following observations of Lord Justice           E
Fletcher Moulton in The Spanish Prospecting Company Limited
[(1911) I Ch. 92] on the meaning of the word "profits":

    " .... 'Profits' implies a comparison between the state of a
    business at two specific dates usually separated by an
    interval of a year. The fundamental meaning is the amount        F
    of gain made by the business during the year. This can
    only be ascertained by a comparison of the assets of the
    business at the two dates."

'Profits', therefore, imply a comparison of the value of an asset    G
when the asset is acquired with the value of the asset when the
asset is transferred and the difference between the two values
is the amount of profit or gain made by a person. As DEPB
has direct nexus with the cost of imports for manufacturing an
export product, any amount realized by the assessees over and        H
    708      SUPREME COURT REPORTS                    [2012] 4 S.C.R.


A   above the DEPB on transfer of the DEPB would represent profit
    on the transfer of DEPB.

        14. We are, thus, of the considered opinion that while the
  face value of the DEPB will fall under clause (iiib) of Section
  28 of the Act, the difference between the sale value and the
8
  face value of the DEPB will fall under clause (iiid) of Section
  28 of the Act and the High Court was not right in taking the view
  in the impugned judgment that the entire sale proceeds of the
  DEPB realized on transfer of the DEPB and not just the
  difference between the sale value and the face value of the
C DEPB represent profit on transfer of the DEPB.

           15. We may now point out the errors in the impugned
    judgment of the High Court. The first reason given by the High
    Court is that clause (iiia) of Section 28 treats profits on the sale
D   of an import license as income chargeable to tax and when the
    license is sold, the entire amount is treated as profits of
    business under clause (iiia) of Section 28 and thus there is no
    justification to treat the amount which is received by an exporter
    on the transfer of the DEPB any differently than the profits which
E   are made on the sale of an import license under clause (iiia)
    of Section 28 of the Act. In taking the view that when the import
    license is sold the entire amount is treated as profits of
    business, the High Court has visualized a situation where the
    cost of acquiring the import license is nil. The cost of acquiring
F   DEPB, on the other hand, is not nil because the person
    acquires it by paying customs duty on the import content of the
    export product and the DEPB which accrues to a person
    against exports has a cost element in it. Accordingly, when
    DEPB is sold by a person, his profit on transfer of DEPB would
G   be the sale value of the DEPB less the face value of DEPB
    which represents the cost of the DEPB. The second reason
    given by the High Court in the impugned judgment is that under
    the DEPB scheme, DEPB is given at a percentage of the FOB
    value of the exports so as to neutralize the incidence of customs
    duty on the import content of the export products, but the
H   exporter may not himself utilize the DEPB for paying customs
   MIS TOPMAN EXPORTS v. COMMISSIONER OF                      709
       INCOME TAX, MUMBAI [A.K. PATNAIK, J.]
duty but may transfer it to someone else and therefore the entire     A
sum received on transfer of DEPB would be covered under
clause (iiid) of Section 28. The High Court has failed to
appreciate that DEPB represents part of the cost incurred by
a person for manufacture of the export product and hence even
where the DEPB is not utilized by the exporter but is transferred     B
to another person, the DEPB continues to remain as a cost to
the exporter. When, therefore, DEPB is transferred by a person,
the entire sum received by him on such transfer does not
become his profits. It is only the amount that he receives in
excess of the DEPB which represents his profits on transfer of        c
the DEPB.

      16. The High Court has sought to meet the argument of
double taxation made on behalf of the assessees by holding
that where the face value of the DEPB was offered to tax in
the year in which the credit accrued to the assessee as               D
business profits, then any further profit arising on transfer of
DEPB would be taxed as profits of business under Section
28(iiid) in the year in which the transfer of DEPB took place.
This view of the High Court, in our considered opinion, is
contrary to the language of Section 28 of the Act under which         E
"cash assistance" received or receivable by any person against
exports such as the DEPB and "profit on transfer of the DEPB"
are treated as two separate items of income under clauses (iiib)
and (iiid) of Section 28. If accrual of DEPB and profit on transfer
of DEPB are treated as two separate items of income                   F
chargeable to tax under clauses (iiib) and (iiid) of Section 28
of the Act, then DEPB will be chargeable as income under
clause (iiib) of Section 28 in the year in which the person
applies for DEPB credit against the exports and the profit on
transfer of the DEPB by that person will be chargeable as             G
income under clause (iiid) of Section 28 in his hands in the year
in which he makes the transfer. Accordingly, if in the same
previous year the DEPB accrues to a person and he also earns
profit on transfer o( the DEPB, the DEPB will be business
profits under clause (iiib) and the difference between the sale       H
    710      SUPREME COURT REPORTS                [2012] 4 S.C.R.


A   value and the DEPB (face value) would be the profits on the
    transfer of DEPB under clause (iiid) for the same assessment
    year. Where, however, the DEPB accrues to a person in one
    previous year and the transfer of DEPB takes place in a
    subsequent previous year, then the DEPB will be chargeable
s   as income of the person for the first assessment year
    chargeable under clause (iiib) of Section 28 and the difference
    between the DEPB credit and the sale value of the DEPB
    credit would be income in his hands for the subsequent
    assessment year chargeable under clause (iiid) of Section 28.
c   The interpretation suggested by us, therefore, does not lead to
    double taxation of the same income, which the legislature must
    be presumed to have avoided.

       17. The High Court has held that as the assessees had
  an export turnover exceeding Rs.10 crores and did not fulfill the
D conditions set out in the third proviso to Section 80HHC(3) of
  the Act, the assessees were not entitled to a deduction under
  Section 80HHC on the amount received on transfer of DEPB
  and to get over this difficulty the assessees have contended
  that the profits on transfer of DEPB in Section 28(iiid) would
E not include the face value of the DEPB so that the assessees
  get a deduction under Section 80HHC on the face value of the
  DEPB. This finding of the High Court is not based on an
  accurate understanding of the scheme of Section 80HHC of the
  Act.
F
         18. The relevant provisions of Section 80HHC are quoted
    hereinbelow:

          "Section SOHHC- Deduction in respect of profits
          retained for export business.-- [(1) Where an assessee,
G         being an Indian company or a person (other than a
          company) resident in India, is engaged in the business of
          export out of India of any goods or merchandise to which
          this section applies, there shall, in accordance with and
          subject to the provisions of this section, be allowed, in
H         computing the total income of the assessee, [a deduction
M/S TOPMAN EXPORTS v. COMMISSIONER OF                    711
   INCOME TAX, MUMBAI [A.K. PATNAIK, J.]
 to the extent of profits, referred to in sub-section (1 B),]   A
 derived by the assessee from the export of such goods
 or merchandise:



 (1 B) For the purposes of sub-sections (1) and (1A), the       B
 extent of deduction of the profits shall be an amount equal
 to-

  (i)     eighty per cent thereof for an assessment year
          beginning on the 1st day of April, 2001;              c
  (ii)    seventy per cent thereof for an assessment year
          beginning on the 1st day of April, 2002;

  (iii)   fifty per cent thereof for an assessment year
          beginning on the 1st day of April, 2003;              o
  (iv)    thirty per cent thereof for an assessment year
          beginning on the 1st day of April, 2004,]

 and no deduction shall be allowed in respect of the
 assessment year beginning on the 1st day of April, 2005        E
 and any subsequent assessment year.]



 (3) For the purposes of sub-section (1 ),-
                                                                F
 (a) where the export out of India is of goods or
 merchandise manufactured [or processed] by the
 assessee, the profits derived from such export shall be the
 amount which bears to the profits of the business, the same
 proportion as the export turnover in respect of such goods     G
 bears to the total turnover of the business carried on by
 the assessee;



 Provided that the profits computed under clause (a) or         H
    712           SUPREME COURT REPORTS                [2012] 4 S.C.R.


A         clause (b) or clause (c) of this sub-section shall be further
          increased by the amount which bears to ninety per cent of
          any sum referred to in clause (iiia) (not being profits on
          sale of a licence acquired from any other person), and
          clauses (iiib) and (iiic) of section 28, the same proportion
B         as the export turnover bears to the total turnover of the
          business carried on by the assessee :

           Provided further that in the case of an asseesee having
           export turnover not exceeding rupees ten crores during the
           previous year, the profits computed under clause (a) or
c          clause (b) or clause (c) of this sub-section or after giving
           effect to the first proviso, as the case may be, shall be
           further increased by the amount which bears to ninety per
          .cent of any sum referred to in clause (iiid) or clause (iiie),
           as the case may be, of section 28, the same proportion
D          as the export turnover bears to the total turnover of the
           business carried on by the assessee;

          Provided also that in the case of an assessee having
          export turnover exceeding rupees ten crores during the
E         previous year, the profits computed under clause (a) or
          clause (b) or clause (c) of this sub-section or after giving
          effect to the first proviso, as the case may be, shall be
          further increased by the amount which bears to ninety per
          cent of any sum referred to in clause (iiid) of section 28,
          the same proportion as the export turnover bears to the
F
          total turnover of the business carried on by the assessee,
          if the assessee has necessary and sufficient evidence to
          prove that,-

            (a)     he had an option to choose either the duty
G                   drawback or the Duty Entitlement Pass Book
                    Scheme, being the Duty Remission Scheme; and
            (b)     the rate of drawback credit attributable to the
                    customs duty was higher than the rate of credit
                    allowable under the Dutv Entitlement Pass Book
H
M/S TOPMAN EXPORTS v. COMMISSIONER OF                         713
   INCOME TAX, MUMBAI [A.K. PATNAIK, J.]
         Scheme, being the Duty Remission Scheme.                     A
 Provided also that in the case of an assessee having
 export turnover exceeding rupees ten crores during the
 previous year, the profits computed under clause (a) or
 clause (b) or clause (c) of this sub-section or after giving
 effect to the first proviso, as the case may be, shall be            8
 further increased by the amount which bears to ninety per
 cent of any sum referred to in clause (iiie) of section 28,
 the same proportion as the export turnover bears to the
 total turnover of the business carried on by the assessee,
 if the assessee has necessary and sufficient evidence to             C
 prove that-
  (a)    he had an option to choose either the duty
         drawback or the Duty Free Replenishment
         Certificate, being the Duty Remission Scheme; and            D
  (b)    the rate of drawback credit attributable to the
         customs duty was higher than the rate of credit
         allowable under the Duty Free Replenishment
         Certificate, being the Duty Remission Scheme.
 Explanation.-For the purposes of this clause, 'rate of credit        E
 allowable' means the rate of credit allowable under the Duty
 Free Replenishment Certificate, being the Duty Remission
 Scheme calculated in the manner as may be notified by
 the Central Government:]
                                                                      F

 Explanation:- For the purposes of this section,-
 (baa) 'profits of the business' means the profits of the
 business as computed under the head 'Profits and gains
 of bu.siness or profession' as reduced by-                           G
 (1) ninety per cent of any sum referred to in clauses (iiia),
 (iiib), (iiic), (iiid) and (iiie) of Section 28 or of any receipts
 by way of brokerage, commission, interest, rent, charges
 or any other receipt of a similar nature included in such            H
    714      SUPREME COURT REPORTS                   (2012] 4 S.C.R.

A         profits; and
          (2) the profits of any branch, office, warehouse or any other
          establishment of the assessee situate outside India"
           19. Sub-section (1) of Section 80HHC quoted above
8    makes it clear that an assessee engaged in the business of
    .export out of India of any goods or merchandise to which this
     Section applies shall be allowed, in computing his total income,
     a deduction to the extent of profits referred to in sub-section
     (1 B), derived by him from the export of such goods or
C    merchandise. Sub-section (1 B) of Section 80HHC gives the
     percentages of deduction of the profits allowable for the
     different assessment years from the assessment years 2001-
     2002 to 2004-2005. Sub-section (3)(a) of Section 80HHC
     provides that where the export out of India is of goods or
     merchandise manufactured or processed by the assessee, the
D    profits derived from such exports shall be the amount which
     bears to the profits of the business, the same proportion as the
     export turnover in respect of such goods bears to the total
     turnover of the business carried on by the assessee. In
     Commissioner of Income- Tax v. K. Ravindranathan Nair
E    (2007) 295 ITR 228 (SC), the formula in sub-section (3)(a) of
     Section 80HHC was stated by this Court to be as follows:
     Profits derived     = Profits of the business x Export Turnover
     from exports           Total Turnover
F       20. Explanation (baa) under Section 80HHC states that
  "profits of the business" in the aforesaid formula means the
  profits of the business as computed under the head "Profits and
  Gains of Business or Profession" as reduced by (1) ninety per
  cent of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid)
G and (iiie) of Section 28 or of any receipts by way of brokerage,
  commission, interest, rent, charges or any other receipt of
  similar nature including any such receipts and (2) the profits of
  any branch, office, warehouse or any other establishment of the
  assessee situated outside India. Thus, ninety per cent of the
H
   MIS TOPMAN EXPORTS v. COMMISSIONER OF                      715
      INCOME TAX, MUMBAI [A.K. PATNAIK, J.]
 DEPB which is "cash assistance" against exports and is              A
covered under clause (iiib) of Section 28 will get excluded from
the "profits of the business" of the assessee if such DEPB has
accrued to the assessee during the previous year. Similarly, if
during the same previous year, the assessee has transferred
the DEPB and the sale value of such DEPB is more than the            B
face value of the DEPB, the difference between the sale value
of the DEPB and the face value of the DEPB will represent the
profit on transfer of DEPB covered under clause (iiid) of
Section 28 and ninety per cent of such profit on transfer of
DEPB certificate will get excluded from "profits of the business".   c
 But, where the DEPB accrues to the assessee in the first
previous year and the assessee transfers the DEPB certificate
in the second previous year, as appears to have happened in
the present batch of cases, only ninety per cent of the profits
on transfer of DEPB covered under clause (iiid) and not ninety
                                                                     0
per cent of the entire sale value including the face value of the
DEPB will get excluded from the "profits of the business". Thus,
where the ninety per cent of the face value of the DEPB does
not get excluded from "profits of the business" under
explanation (baa) and only ninety per cent of the difference         E
between the face value of the DEPB and the sale value of the
DEPB gets excluded from "profits of the business", the
assessee gets a bigger figure of "profits of the business" and
this is possible when the DEPB accrues to the assessee in one
previous year and transfer of the DEPB takes place in the
subsequent previous year. The result in such case is that a          F
higher figure of "profits of the business"' becomes the multiplier
in the aforesaid formula under sub-section (3)(a) of Section
80HHC for arriving at the figure of profits derived from exports.
     21. To the figure of profits derived from exports worked out    G
as per the aforesaid formula under sub-section (3)(a) of Section
80HHC, the additions as mentioned in first, second, third and
fourth proviso under sub-section (3) are made to profits derived
from exports. Under the first proviso, nirtety per cent of the sum
referred to in clauses (iiia), (iiib) and (iiic) of Section 28 are   H
    716      SUPREME COURT REPORTS                    [2012] 4 S.C.R.


A   added in the same proportion as export turnover bears to the
    total turnover of the business carried on by the assessee. In this
    first proviso, there is no addition of any sum referred to in clause
    (iiid) or clause (iiie). Hence, profit on transfer of DEPB or DFRC
    are not to be added under the first proviso. Where therefore in
B   the previous year no DEPB or DFRC accrues to the assessee,
    he would not be entitled to the benefit of the first proviso to sub-
    section (3) of Section 80HHC because he would not have any
    sum referred to in clause (iiib) of Section 28 of the Act. The
    second proviso to sub-section (3) of Section 80HHC states that
C   in case of an assessee having export turnover not exceeding
    Rs.10 crores during the previous year, after giving effect to the
    first proviso, the export profits are to be increased further by
    the amount which bears to ninety per cent of any sum referred
    to in clauses (iiid) and (iiie) of Section 28, the same proportion
D   as the export turnover bears to the total turnover of the business
    carried on by the assessee. The third proviso to sub-section
    (3) states that in case of an assessee having export turnover
    exceeding Rs.10 crores, similar addition of ninety per cent of
    the sums referred to in clause (iiid) of Section 28 only if the
    assessee has the necessary and sufficient evidence to prove
E   that (a) he had an option to choose either the duty drawback
    or the Duty Entitlement Pass Book Scheme, being the Duty
    Remission Scheme; and (b) the rate of drawback credit
    attributable to the customs duty was higher than the rate of
    credit allowable under the Duty Entitlement Pass Book Scheme,
F   being the Duty Remission Scheme. Therefore, if the assessee
    having export turnover of more than Rs.10 crores does not
    satisfy these two conditions, he will not be entitled to the
    addition of profit on transfer of DEPB under the third proviso
    to sub-section (3) of Section 80HHC.
G
          22. The aforesaid discussion would show that where an
    assessee has an export turnover exceeding Rs.10 crores and
    has made profits on transfer of DEPB under clause (d) of
    Section 28, he would not get the benefit of addition to export
    profits under third or fourth proviso to sub-section (3) of Section
H
    M/S TOPMAN EXPORTS v. COMMISSIONER OF                     717
       INCOME TAX, MUMBAI [A.K. PATNAIK, J.]
80HHC, but he would get the benefit of exclusion of a smaller         A
figure from "profits of the business" under explanation (baa) to
Section 80HHC of the Act and there is nothing in explanation
(baa) to Section 80HHC to show that this benefit of exclusion
of a smaller figure from "profits of the business" will not be
available to an assessee having an export turnover exceeding          B
Rs.10 crores. In other words, where the export turnover of an
assessee exceeds Rs.10 crores, he does not get the benefit
of addition of ninety per cent of export incentive under clause
(iiid) of Section 28 to his export profits, .but he gets a higher
figure of profits of the business, which ultimately results in        c
computation of a bigger export profit. The High Court, therefore,
was not right in coming to the conclusion that as the assessee
did have the export turnover exceeding Rs.10 crores and as
the assessee did not fulfill the conditions set out in the third
proviso to Section 80HHC (iii), the assessee was not entitled         0
to a deduction under Section 80HHC on the amount received
on transfer of DEPB and with a view to get over this difficulty
the assessee was contending that the profits on transfer of
DEPB under Section 28 (iiid) would not include the face value
of the DEPB. It is a well-settled principle of statutory
interpretation of a taxing statute that a subject will be liable to   E
tax and will be entitled to exemption from tax according to the
strict language of the taxing statute and if as per the words used
in explanation (baa) to Section 80HHC read with the words
used in clauses (iiid) and (iiie) of Section 28, the assessee was
entitled to a deduction under Section 80HHC on export profits,        F
the benefit of such deduction cannot be denied to the assessee.
      23. The impugned judgment and orders of the Bombay
High Court are accordingly set-aside. The appeals are allowed
to the extent indicated in this judgment. The Assessing Officer       G
is directed to compute the deduction under Section 80HHC in
the case of the appellants in accordance with this judgment.
There shall be no order as to costs.
B.B.B.                                     Appeals disposed of.
                                                                      H