ACIT vs. S. K. International (Export) Co (ITAT Mumbai)

DATE: January 13, 2015 (Date of pronouncement)
DATE: January 19, 2015 (Date of publication)
AY: 2007-08
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S. 10B(4): The argument that s. 10B(4) lays down a computational formula and that all business profits (including DEPB receipts) should be eligible for deduction irrespective of the effective source is not acceptable

We are unable to subscribe to the view expressed per the decisions relied upon by the assessee, i.e., that in view of computational formula of section 10B(4), the entire profits of the business of the undertaking, irrespective of their immediate source, shall comprise the qualifying profits. The words “profits of the business of the undertaking”, occurring in section 10B(4), have to be accorded a contextual meaning and, therefore, are circumscribed by the qualifying condition of section 10B(1). As explained earlier, implicit in the proportionate formula (of section 10B(4)) is the condition that the profits being allocated thus are derived from such business of the eligible undertaking. It is only where they are so that the further restriction, i.e., to that derived from the relevant exports, could be derived or arrived at. All that was therefore required, i.e., if the entire profits of the eligible undertaking or its business, are to be considered, as held in the said decisions, was to define the same as the ‘profits of the eligible undertaking as computed under Chapter IV-D’ or ‘under the head of income profits and gains of business or profession’, as in fact done at several places in the statute. As explained by the apex court in, among others, CIT vs. Tara Agencies [2007] 292 ITR 444 (SC), the intention of the Legislature has to be gathered from the language used in the statute, and which means that attention should be paid to what has been said as also to what has not been said. Further, that it is the bounden duty and obligation of the court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute which the Legislature in its wisdom has deliberately not incorporated. Continuing further, the decision in the case of Motorola India Electronics (P.) Ltd. is based on the finding of a direct nexus between the income under reference and the business of the eligible undertaking. The same, thus, does not contradict what stands stated by us in this order, and a different decision in the said case, i.e., vis-à-vis that in the instant case, is due to the difference in the facts, so that the said decision is in fact supportive and distinguishable on the facts at the same time.

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