Per Ch. G. Krishnamurthy, President - In all these matters the principal appeal is by M/s International Research Park Laboratories Ltd., 4. Community Centre, New Friends Colony, New Delhi, while in all the other cases their representatives appeared as interveners to assist us to arrive at a proper interpretation of section 80HHC as to how it should be operated to resolve practical problems that arose or arise in the course of its Implementation. This matter has not rested res integra. Several Benches of the Tribunal have already had occasions to deal with this matter. The views taken by them have not been uniform. The Constitution of the Special Bench is, therefore, an attempt to arrive at a proper meaning of section 80HHC having due regard to its object, and philosophy behind its enactment. This section has been on the Statute book from the assessment year 1983-84. The object of introduction of conferring this benefit on exports is primarily to give greatest amount of fillip to the promotion of exports and thereby earn for the country much needed foreign exchange. The object is to provide incentives to accelerate exports by granting exemption on the exports related profits. The basis for working out this deduction was being changed over years. Sometimes it was related to a portion of the turnover plus a portion of the export earnings brought into India but only in convertible foreign exchange and sometimes it was related to a percentage of the profits derived from the export related profits. Eventually a stage has come when further boosting of the export be-came necessary and cent per cent exemption was granted. That was how section 80HHC has undergone several changes and modifications by way of amendments. We shall refer to the history of these amendments a little later. The introduction of this benefit to the exporters, has brought in its wake certain difficulties in its implementation. While certain targeted groups were not getting the intended benefit, the other groups were securing the unintended benefit by manipulations and camouflaging. The attempt of the Legislature has been to identify these manipulations, difficulties and problems to provide measures to prevent the repetition of these mischiefs and to channelise the benefit to the intended quarters. According to one section among the learned counsels appeared before us, the present section presented lot more problems than it solved. While it granted 100% exemption to exclusive exporters on their profits, it diluted the benefit of such exports, if he has to have domestic trade also. The provision directing the aggregation of both export and domestic turnovers for the purpose of apportioning export profits is, therefore, unitended and went directly against the intent and purpose of the legislation. Since the draftsman has failed to carry out the objects of the Parliament, such interpretation must be placed on the crucial words used in section 80HHC as to promote the object of exempting in toto the profits on export turnover irrespective of the fact that such an exporter has domestic business also. To Illustrate; if a person has business of exporting leather goods exclusively, the entire profits on such exports would be eligible for exemption but if he has domestic silver business, the turnover of leather goods should have to be aggregated with the turnover of silver-ware even though they are two different commodities. This aggregation has the result of diluting the export profit. Therefore, the use of the expression "exclusively" in section 80HHC(3)(a) should be given its plain meaning so that it pertains only to the export turnover and the aggregation of turnover contemplated by clause (b) of that sub-section must operate only when there is domestic turnover in the same leather goods. If this is the meaning of the word "exclusively" used in section 80HHC(3)(a), then the question of aggregating the turnover of leather goods with the turnover of silver will not arise and intended profit of 100% on export of leather goods will be available to the exporter without dilution. This is supposed to be the object of enactment of section 80HHC and its various amendments from time to time. The other section of the legal luminaries has been emphatic in pressing hard their view point that the expression "total turnover" used in clause (b) of sub-section (3) negatived the meaning to be given to the word "exclusively" and further it meant that turnover anywhere. whether on exports or domestic, irrespective of commodities dealt in, must have to be aggregated. If in the process of aggregation export profits got diluted. It is the consequence of the legislative policy just as If the local business turns out to be more than export business, by the same process of turnover based apportionment, a slice of domestic profits would get exempted too. These distortions should be taken as intended by the Parliament while enacting the sub-section but these distortions, which were described assiduously before us as absurdities should not be taken as a guide for the interpretation of section 80HHC. If the attention is riveted on the object of section 80HHC, it would be seen that it is to promote exports more than over local business. The circulars issued by the C.B.D.T. explaining the provisions of section 80HHC and providing guidelines as to how it should be implemented was relied upon by this section to show that there need not be profits on exports provided there is export turnover. In such a case local profits will get exemption on the basis of apportionment.

2. While the other section refuting this point of view submitted that if the circulars of C.B.D.T. were not in consonance with the legislative intention, they should not be and need not be followed. Several authorities for this view were cited.

3. In short and in essence this is how the competing views were presented to us these four days of continuous hearing of these appeals by the teamed Advocates and Chartered Accountants appearing for the assessee, the department being ably assisted by Shri B.B. Ahuja, the learned Senior Advocate.

4. Now we think we should present the history of section 80HHC. The original section was inserted by the Finance Act of 1983 with effect from 1-4-1983, which provided for the deduction in respect of export turnover as deduction equal to 1% of the export turnover of the goods or merchandise exported outside India increased by a further amount equal to 5% of the amount by which the export turnover of such goods or merchandise during the immediately preceding year which is called in the income-tax and business parlance as incremental turnover. This benefit is deliberately withdrawn in respect of export of mineral oils, minerals and ores. agricultural primary commodities not being produce of plantations and such other goods or merchandise as the Central Government may by notification in the Official Gazette specify in this behalf. Original section as inserted by the Finance Act of 1983 with effect from 1-4-1983:

"80HHC. Deduction in respect of export turnover.—

(1) Where the assessee, being an Indian Company or a person (other than a company) who is resident in India, exports out of India during the previous year relevant to an assessment year 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 computing the total income of the assessee, the following deductions, namely.—

(a)a deduction of an amount equal to one per cent of the export turnover of such goods or merchandise during the previous year, and

(b)a deduction of an amount equal to five percent of the amount by which the export turnover of such goods or merchandise during the previous year exceeds the export turnover of such goods or merchandise during the immediately preceding year.

2(a) This section applies to all goods or merchandise other than those specified in clause (b) if the sale proceeds of such goods or merchandise exported out of India are receivable by the assessee in convertible foreign exchange.

(b) The goods or merchandise referred to in clause (a) are the following, namely :—

(i)agricultural primary commodities, not being produce or plantations;

(ii)mineral oil;

(iii)minerals and ores; and

(iv)such other goods or merchandise as the Central Government may, by notification in the Official Gazette, specify in this behalf.

(3) No deduction under clause (b) of sub-section (1) shall be allowed unless the assessee had during the Immediately preceding previous year, exported out of India goods or merchandise to which this section applies—

Explanation: For the purposes of this section—

(a)‘convertible foreign exchange’ means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder;

(b)‘export turnover’ means the sale proceeds of any goods or merchandise exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962);"

The next Important change introduced in the section was by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 with effect from 1-4-1987:

"(1) Where an assessee, 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 computing the total income of the assessee, a deduction equal to the aggregate of—

(a)four per cent of the net foreign exchange realisation; and

(b)fifty per cent of so much of the profits derived by the assessee from the export of such goods or merchandise as exceeds the amount referred to in clause (a) :

Provided that the deduction under this sub-section shall not exceed the profits derived by the assessee from the export of such goods or merchandise :

Provided further that an amount equal to the amount of the deduction claimed under this sub-section is debited to the profits and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account to be utilised for the purposes of the business of the assessee."

Certain minor changes were made thereafter and the section as it finally stood in the assessment year 1990-91. which is relevant for our present purpose is as under:

"80HHC(1). Where an assessee, 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 computing the total income of the assessee, a deduction of the profits derived by the assessee from the export of such goods or merchandise:

Provided that if the assessee, being a holder of an Export House Certificate or a Trading House Certificate (hereafter in this section referred to as an Export House or a Trading House, as the case may be), issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of the export turnover specified therein. the deduction under this sub- section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount which bears to the total profits of the export business of the assessee the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee.

(1A) Where the assessee, being a supporting manufacturer, has during the previous year, sold goods or merchandise to any Export House or Trading House in respect of which the Export House or Trading House has issued a certificate under the proviso to sub-section (1), there shall in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of the profits derived by the assessee from the sale of goods or merchandise to the Export House or Trading House in respect of which the certificate has been issued by the Export House or Trading House.

(2)(a) This section applies to all goods or merchandise other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of India are receivable by the assessee other than the supporting manufacturer in convertible foreign exchange. within a period of six months from the end of the previous year. or, where the Chief Commissioner or Commissioner is satisfied for reasons to be recorded in writing that the assessee is, for reasons beyond his control unable to do so within the said period of six months, within such further period as the Chief Commissioner or Commissioner may allow in this behalf.

(b) This section does not apply to the following goods or merchandise. namely:—

(i)mineral oil, and

(ii)minerals and ores.

(3) For the purposes of sub-section (1); profits derived from the export of goods or merchandise out of India shall be,—

(a)In a case where the business carried on by the assessee consists exclusively of the export out of India of the goods or merchandise to which this section applies, the profits of the business as computed under the head ‘Profits and gains of business or profession’.

(b)In a case where the business carried on by the assessee does not consist exclusively of the export out of India of the goods or merchandise to which this section applies, the amount which bears to the profits of the business (as computed under the, head ‘Profits and gains of business or profession) the proportion as the export turnover bears to the total turnover " of the business carried on by the assessee.

(3A) For the purposes of sub-section (1A), profits derived by a supporting manufacturer from the sale of goods or merchandise shall be—

(a)In a case where the-business carried on by the supporting manufacturer consists exclusively of sale of goods or merchandise to one or more Export Houses or Trading Houses. the profits of the business as computed under the head ‘Profits and gains of business or profession’.

(b)In a case where the business carried on by the supporting manufacturer does not consist exclusively of sale of goods or merchandise to one or more Export Houses or Trading Houses, the amount which bears to the profits of the business (as computed under the head ‘Profits and gains of business or profession’ the same proportion as the turnover in respect of sale to the respective Export House or Trading House bears to the total turnover of the business carried on by the assessee.

(4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed on the basis of the amount of export turnover."

But for the assessment year 1991-92 another change was introduced in sub-section (3) of section 80HHC by combining the effect of both clauses (a) and (b) and the combined section as was refrained stood as under:

"(3) For the purposes of sub-section (1), profits derived from the export of goods or merchandise out of India shall be the amount which bears to the profits of the business (as computed under the head ‘Profits and gains of business or profession), the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee."

We are not reproducing here the other portions of the section as we are not concerned with those portions in these appeals but they remain more or less same without any change but the major change was brought about with effect from 1-4-1992 by introducing certain radical changes in the section with effect from 1-4-1992. The major changes with which we are concerned is the addition of clause (baa) in the Explanation added to sub- section (4A) by the Finance Act. 1991 with effect from 1-4-1992 providing for the meaning of the expression "profits of the business". It says:

(baa) "profits of the business" 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) and

(iiic)of section 28 of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and

(2)the profits of any branch, office, warehouse or any other establishment or the assessee situate outside India.

We are not to take into consideration the entire section but took into consideration only those portions as are relevant to us with a view to bestow our attention on the portions relevant to our present purpose of the appeals.

5. Now the controversy as we have mentioned was with regard to the meaning to be ascribed to clauses (a) and (b) of sub-section (3) as it stood relevant for the assessment year 1991-92 seen in the light of the amendments brought about with effect from 1-4-1992, whether there was at all any light to be allowed to fall to illumine the provisions in operation during assessment years 1990-91 and 1991-92 so as to read them as retrospective in operation. One argument is that when sub-section (1) of section 80HHC provided for total exemption of the profits derived by the assessee from the export of goods out of India and when clause (a) of sub- section (3) provided that in the case of an assessee dealing exclusively in the export of goods, such exemption was total. could it be reduced or allowed to be diluted by the process of apportionment of such profits on the basis of the total profits with reference to the turnovers. The second question is whether there should be any profit at all in the export business in order that any exemption can be granted. The argument is that If there is no profit, the question of ascertaining that profit and apportioning it with reference to the turnover does not arise. So the proponents of this argument lay emphasis on the existence of the profits on export business as a prime condition and argued that there is no profit in export turnover. the whole exercise of apportionment should stop there and according to them clause (b) of sub-section (3) does not apply and does not come into operation. Whereas the argument in opposition to this view was that profits in export business was never contemplated provided there is total profit in the business conducted by the assessee both in export and domestic business. They say that when the legislative mandate in clause (b) is to compute the profits and gains of the business as a whole under the head "Profits and gains of the business or profession" and then apportion the same as the export turnover bears to the total turnover of the business carried on, the question of splitting the profits and gains of business to find out whether there is any profit in export or not does not come in or fit in. They further argue that for clause (a) of sub-section (3) to apply, the business in export must be exclusive when the legislative mandate is the profits of the business in exports which are exclusively have to be computed under the head "Profits and gains of the business or profession" and the total amount so arrived at must be exempted from tax by way of deduction, in case such exporters do not deal exclusively in export and have domestic business also either of manufacture or of trading, then the profits of such business must be computed in the manner in which the profits under the head "Profits and gains of the business or profession" have to be computed and then apportioned on the basis of turnover and a portion of profit is deemed to be attributable to export turnover and that amount should be exempted from tax. There is, therefore, no intention of the Legislature nor one can be spelt out either from the language or intendment that there should be profit in the export business but if the total business ends in loss, only then nothing can be allowed not only because of section 80HHC but also because, of the provisions of section 80AB of the Act.

6. Shri O.P. Vaish appearing for the main assessee in these appeals urged the following propositions :—

"(1)As per sub-section (1) the deduction is of the profits derived by the assessee from the export of such goods or merchandise. The expression ‘profits derived from the export of goods or merchandise out of India’ is defined in sub-section (3). In view of the statutory definition of the expression the meaning assigned by the courts to the expression ‘profits derived’ which was in the context of other provisions of the Act is irrelevant and extraneous to the provisions of section 80HHC.

(2)The assessee who had exported goods or merchandise out of India is eligible for deduction under section 80HHC of the Act, the quantum of deduction is determined by sub-section (3). There is therefore no basis for the proposition that sub-section (1) is a charging provision and sub- section (3) is a machinery provision.

(3)There is no basis for the proposition that the base for the deduction under section 80HHCis the profits in exports computed as per the books of account of the assessee treating the export business as a separate business or undertaking like deductions provided in other sections of this Chapter. sections 80HH 80HHA, 80HHB. 80-I 80J or 80JJ of the Act.

(4)In all these provisions the profits and gains derived by the assessee are required to be computed with reference to the books of account of the assessee but such a provision is absent in section 80HHC. The requirement here is unlike in other sections, a report of an accountant certifying that the deduction has been correctly claimed on the basis of the amount of export turnover to be given in Form No. 10CCAC as prescribed under Rule 18BBA(3).

(5)Any other meaning to be ascribed would mean redrafting section 80HHC, which is not permissible.

(6)Since the base for the deduction is profits of the business of the assessee as computed under the head ‘Profits and gains of business or profession’, the expression ‘Profits of the business as computed under the head Profits and business or profession must mean the profits of the business of the assessee as a whole, a portion of which has to be apportioned to export turnover and that was based on turnovers’. The profits of the business should therefore include the profits of export business as well as any other business carried on by the assessee and all other receipts which have a direct bearing to the carrying on of the business or engagement in business. That was also how the CBDT understood these provisions and clarified them so in their Circular No. 564 issued on 5- 7-1990. These circulars are binding on the Revenue authorities and they should not therefore be permitted to ignore the circulars and it is the duty of the Court to direct the authorities to make the assessments in accordance with the circulars of the CBDT and not to permit them to make assessments de hors the circulars."

7. Shri G.C. Sharma, the learned Senior Advocate, Supreme Court, appearing as an intervener for and on behalf of Charti international (P.) Ltd., which appeal we are not disposing of except for the assistance provided to appreciate the meaning of section 80HHC, submitted that this section needed interpretation because the meaning of the words used in the section are not plain and are capable of more than one meaning and therefore the principles of interpretation applicable to such situations should be kept in view. He posed a question as to whether the Legislature intended to vary the quantum of exemption depending upon the turnover relatable to domestic business, i.e., non-export turnover or local turnover either in trading or in manufacturing operations. His pointed reference was to the proposition that where the profits on export business carried on exclusively by an assessee is capable of being precisely ascertained and segregated from the other profits on the basis of duly audited accounts, full deduction, under section 80HHC should be allowed without being affected by the profits or losses in other non-export business. He submitted that when the construction of a Statute raises controversies owing to the defective language employed, the Courts are entitled to, with a view to arrive at the correct and true meaning of the section, take assistance from the legislative history, the object behind the enactment, marginal heading and even speeches made in the Parliament by the movers of the Bills. The Legislature is never to be attributed with irrationalities or absurdities as a consequence of the legislation. Always wisdom has to be attributed to the legislation and therefore such interpretation has to be placed upon the meaning of the words used in the legislation as to avoid absurdities, irrationalities and distortion and to promote the object of the legislation. Even if necessary by doing violence to the language by supplying words to make the meaning unambiguous and one need not go by literal construction or the plain construction. He submitted that Legislature by enacting section 80HHC created a distinct business called export business. when the Legislature granted exemption only in respect of profits arising from the business of exports. The Legislature also created a category of goods the export of which goods are not entitled to exemption. Therefore whether the assessee derives income from carrying on any other business or not is wholly extraneous to the scheme of granting the deduction under this section. If therefore an assessee is engaged in export business as well as non- export business, the profits on export business must be entitled to total exemption and the question of aggregating the turnover would arise only if there is local turnover in such goods. It is only in case where the assessee was engaged in the export of qualifying goods and also deals with them locally making or rendering it is not feasible to ascertain precisely the profits from export turnover, the situation contemplated in clause (b) of sub-section (3) will come into operation. If an assessee therefore maintains separate set of accounts in respect of export business, from which the profits or losses earned in the business are clearly ascertainable, it is immaterial what other goods he is selling in India. Any attempt of applying the provisions of sub-section (3)(b) to such a case will negate the very object behind the enactment of section 80HHC because this will involve reducing the quantum of profits which will go against the legislative will of granting total exemption on such profits. It is not the legislative ill, he argued, that in order to earn full exemption on the export profits he should stop local business to avoid dilution or curtailment. Such a kind of interpretation cannot be brought to bear upon this section and such interpretation should therefore be avoided. The sum and substance of his argument is that provisions of clause (b) of apportionment of profits would arise only when there is complete identity in the goods exported and also sold in India. He therefore wanted us to read clause (b) of sub-section (3) in the following manner because of the ambiguity in the words used by the Legislature:—

"The same proportion as the export turnover of the qualified goods bears to the total turnover of the same qualified goods in the business carried on by the assessee."

He says it is permissible for the Courts to interpret the section in such a way as to bring about the meaning and object of the Legislature and therefore the supply of the word "qualified" does not do any violence to the section but at the same time harmonises it with clause (a) and remove the absurdities that will arise in working out this rule. He has given some examples of absurdities, which would show that in cases where the turnover of other goods are aggregated with the export turnover and the total profit was apportioned on the basis of such turnover. the exemption on export profit would be so distorted as to show more than actual profits from the exports as they are otherwise ascertainable and in some cases far less than the export profit. These absurdities can never be attributed to the Legislature and these absurdities he emphasised are removed if the interpretation as suggested by him is accepted, namely, the aggregation of turnover to be adopted only when the export turnover and the domestic turnover happen to be in the same goods and not in any different kinds of goods. He referred to some authorities on rules of interpretation, which we think are not essential to quote here now. He says this is the meaning that proceeds from the term "exclusively" used in sub-clause (a) of sub-section (3).

8. Shri R. Ganesan intervening for and on behalf of U.K. Paints (I) (P.) Ltd. submitted on the peculiar facts of that case that the interpretation placed by Shri G.C. Sharma alone should be accepted as the proper and correct interpretation of section 80HHC(3)(b) and not the interpretation sought to be placed upon it by Shri O.P. Vaish or the Revenue. in other words these two interveners, Shri G.C. Sharma and Shri R. Ganesan, opposed the interpretation placed by Shri O.P. Vaish. Shri Ganesan after narrating briefly the facts obtaining in M/s. U.K. Paints (I) (P.) Ltd., submitted that since the assessee was maintaining separate books of account for the activities of exports and activities in India, the activities of exports must be regarded as separate and distinct from the activities in India more so because for the activities in exports, the assessee has prepared even separate Balance Sheet. In this case the assessee secured order from U.S.S.R. On the basis of the technology supplied by U.S.S.R. party. the assessee has to manufacture paints in its factory and export the same besides the assessee also exported detergent goods, tooth pastes, toilet soaps, etc. The assessee also manufactured paints on the basis of the technology from U.S.A. The U.S. Collaborators obliged the assessee to market the paints manufactured by the assessee in India. The claim of his assessee was that the deduction under section 80HHC in respect of the profit as ascertained by the separate accounts maintained for export activities should be exempted in toto but the authorities have exempted only a portion of the profit by reducing it by applying the formula provided for in section 80HHC(3)(b). With these facts the learned Chartered Accountant vehemently argued supporting the arguments of Shri G.C. Sharma, the learned Advocate, that the aggregation of turnover with the other turnovers was never contemplated. He went to the extent of saying that by this process of aggregation of turnover violence is done to the legislative intent of granting full exemption to the export profits. but deliberately diluting them by placing an interpretation which is queer and unintended. To support his argument, he took the aid of section 80AB of the Income-tax Act. By tracing its history of introduction, he submitted that under that section, each activity must be regarded as separate for the purposes of deductions to be allowed under Chapter VI-A, which includes section 80HHC. When the Legislature by enacting clauses (a) and (b) of sub-section (3) created a distinction between export activities and domestic activities, the export activities cannot be merged with the domestic activities to form one integrated whole. By this process the availability of deduction of profit on exports was reduced. By submitting that section 80AB is a controlling section, the learned Chartered Accountant submitted the following propositions, which according to him are of considerable significance:

(1) The computation of profits under section 80HHC is to be done in accordance with the provisions of the Act, i.e., Chapter VI.

(2) The said section is prescribing computation for a sum which is before any deduction under Chapter VI-A.

(3) The said section contains non obstante clause for the computation of income and consequently the, provisions of section 80AB, which is a controlling section to allow deductions with reference to the incomes included in the gross total income of the assessee under Chapter VI-A and therefore that is a controlling section.

(4) This controlling section deems every activity as a separate activity, entitled to deduction under the respective sections as separate activity.

(5) When section 80HHC contained two activities, one of exclusive export and the other of mixed export, both of them cannot be seen as one single activity. Seen as two activities, the effort must be to arrive at the export profit. If export profits are otherwise available by means of maintenance of separate accounts, that profit alone must be taken as the basis subject to such allowances or deductions as are admissible in computing the income of that activity as income under the head "Profits and gains of the business".

9. Any conflict that may be noticed between sections 80HHC and 80AB must give way to the provisions of section 80AB as contained in the non obstante provision. He drew support from a large number of decided cases both by the High Courts arid the Supreme Court for his views and reliance in this context was particularly placed upon the following decisions:—

i.CIT v. Canara Workshops (P.) Ltd. [1986] 161 ITR 320 (SC) on the interpretation of section 80AB

ii.CIT v. Agency Marketing Co-operative Society Ltd. [1993] 201 ITR 881 (Ori.)

iiiCIT v. H.M.T. Ltd. (No.1) [1993] 203 ITR 811 (Kar.).

In elucidation of the same proposition that each activity is a separate activity on the analogy of section 80AB, reference was made to the decision of the Supreme Court in the case of H.H. Sir Rama Varma v. CIT [1994] 205 ITR 433 and reference was also made to the case of Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585 (SC) and M/S Continental Construction Ltd. v. Commissioner Of Income Tax, Central-I. [1992] 195 ITR 81 (SC). The decision in the case of Surat Vankar Sahakari Sangh Ltd. v. CIT [1971] 79 ITR 722 (Guj.) was particularly referred to say that If under section 80AB a larger benefit becomes available that must prevail.

10. Dr. S. Narayanan, the learned Advocate intervening at this point for and on behalf of Pearl Polymers Ltd. which was also engaged in the export of readymade garments to various countries besides having the Indian business of manufacture and sale of plastic bottles and containers and trading in plastic, chemicals, submitted pursuing the same line of thought as that of his predecessors, Shri G.C. Sharma. the learned Advocate and Shri R. Ganesan, the learned Chartered Accountant, that whenever there is ambiguity in the language used by the Legislature. various modes of interpretations are available and when the language is plain, simple and unambiguous, literal construction otherwise known as Golden rule should be preferred to ascertain the legislative intention. Sometimes even contextual interpretation is preferable as ruled by the Supreme Court in several cases, the central idea being to find out the intention of the Parliament. Beneficial legislation, which is intended to confer benefits with a view to gain an advantage for the Nation becomes a legislation in National interest. Such legislation should not narrowly be interpreted as to result in denial or curtailment of benefits, which are otherwise available on the plain reading of the section. In the income-tax Appellate Tribunal two Benches have differently interpreted the meaning of section 80HHC. This shows that there was some complexity and ambiguity about interpretation of section 80HHC. In such a situation literal interpretation must give way to contextual interpretation. Commenting upon the examples given by Shri G.C. Sharma. the learned Advocate, Dr. S. Narayanan submitted that they are only distortions and not absurdities and yet the interpretation upon this section must be to avoid even these distortions. The result to be achieved by contextual interpretation, i.e., purposive approach is to be adopted as mentioned by the Rajasthan High Court in the case of Commissioner Of Income-Tax v. Shrishakti Trading Co. [1994] 74 Taxman 590 (Jp.) and earlier in Ajit Investment Company (P.) Ltd. v. K.G Malvadkar* [1974] 95 ITR 546 (Bom.) if it does not lead to unreasonable and ridiculous results. Relying upon the Supreme Court decision in the case of CIT v. B.N. Bhattachargee [1979] 118 ITR 451 and the commentary made by Sampath Iyengar, Edition VIII, Volume 3 at page 3220 and pressing into service the ruling of the Calcutta High Court in the case of Commissioner Of Income-Tax v. Indian Products Ltd. [1994] 207 ITR 647 , the learned Advocate Dr. Narayanan submitted that in certain circumstances even the heading of the section assumes importance and becomes relevant as an aid to interpretation. The expression used in section 80HHC is "profits derived". According to Dr. Narayanan, the word "derived" is very important and held the key for the resolution of the controversy. The. expression. "derived" came up for interpretation before the Madhya Pradesh High Court in the case of Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. CIT [1983] 143 ITR 590 where the Hon’ble High Court held that there should be an enquiry to find out the geneological tree from which the profits are immediately "derived" as contrasted from "attributable". He relied upon AIR 1970 SC 1880 and the decision of the Calcutta High Court in the case of CIT v. Sutna Stone & Lime Co. Ltd. [1982] 138 ITR 37 to explain the meaning of the word "derived". He then submitted that if enquiry is made into the geneological tree of the business, it would at once become clear that the profits of business contemplated in sub-section (3) of section 80HHC are the profits dealt in the goods of the same nature and there was no possibility even remotely of considering the export turnover in chemicals and non-chemicals to be aggregated with the export of readymade garments. Anything done contrary to this, according to him. would lead to distortion, which must be totally forsaken. He also commended the approach of Shri R. Ganesan. the learned Chartered Accountant, based upon the theory of applying the provisions of section 80AB as decided by a Single Member Bench of the income-tax Appellate Tribunal in Asstt. CIT v. Doshi Exports [1993] 45 ITD 417 (Bom.). To put it short the contention of Dr. S. Narayanan is that a person carrying on exclusively export business without having any domestic sales, the entire profits of the business to be computed under the head "Profits and gains of the business" should relate exports and is entitled to total exemption but if he does not so exclusively deal in exports and if he has got local turnover, that local turnover must be of the same identity as that of exports and only then it could be said that he was not exclusively dealing in exports and therefore only in such cases both the export and domestic turnovers could be aggregated as provided for in clause (b) of sub-section (3) but if the domestic turnover is of a different variety or of a different specie or derived in a different manner not from the same geneological tree, then the aggregation of turnovers as was sought to be done by the Revenue was not to be resorted to as if permitted by clause (b) of sub-section (3) of section 80HHC of the Income-tax Act.

11. Shri V.U. Eradi, the learned Advocate, who intervened on behalf of Ashwani Kumar Consultants (P.) Ltd. and whose client was exporting sports goods. fashion garments without having any local sales but who has income from commission on assignment of export orders and was also realising lease rent of cylinders and consultancy fees by providing security services struck the same line of argument as that of his predecessors Shri G.C. Sharma, Shri R. Ganesan and Dr. S. Narayanan and sought to support his argument by reference to the memorandum explaining the provisions of the Finance Bill and passed by the Parliament and acquired legislative sanction and should be considered as an Important aid in construing the section and in finding out the legislative intention. He referred us to 152 ITR Statutes 155 at page 163 where. It was pointed out in the Memorandum in para 29 that the object of section 80HHC was to benefit the economy as a whole. Economy cannot be benefited unless the export profits are totally exempted without being diluted in the manner done by the department by applying the provisions of clause (b) of sub- section (3) of section 80HHC. He submitted as Dr. Narayanan that the word "derived" should not be seen in isolation, Tracing the legislative history of section 80HHC he submitted that the commission received on assignment of export orders was considered as profits derived from export business and was not seen or understood by the Legislature as different from export business or de hors export business although no turnover was involved in it. In a case where an export order is assigned to another exporter on commission basis, the first exporter, who got the order, will only receive commission. The actual export is done by another exporter. The commission paid is allowed as a deduction while computing the income of the executing exporter and as the income of the first exporter who obtained the order. The profit that was ultimately exempted seen from the assessments of both the actual exporter and the exporter who received the order is the net profit derived in the export business. The Legislature thought that the commission received on assignment of export orders and such other items like brokerage, interest, rent. charges and items mentioned in section 28(iiia), (iiib) and (iiic ), namely, profits on sale of licences, cash assistance and duty draw back receivable are not to be treated in toto as profits of the business relatable to exports and only 10% thereof should be considered as the profit of the business and the balance of 90% should not be included in the profits. This result was achieved by amending section 80HHC. This amendment having come with effect from 1-4-1992 relevant for the assessment year 1992-93 onwards does show that other items referred to above are to be regarded as part of export profits in the relevant assessment years 1990-91 and 1991-92. In view of the amendment, the argument that they should not be considered as profits derived from exports even in assessment years 1990-91 and 1991-92 is untenable and should not be accepted. It is against the spirit of section 80HHC and also against the letter of the law. He submitted that these amendments introduced with effect from 1-4-1992 by adding clause (baa) in the Explanation at the end of sub-section (4A) to section 80HHC cannot be construed by any stretch of imagination as retrospective in nature much less as clarificatory. It is a deliberate legislative intention to exclude a greater portion of these receipts from the profits of the export business from a specified date all with a view to see that such receipts, which have no export turnover. should not get the benefit. There are no words in that amendment to suggest any retrospectively or clarification nor is there any suggestion to this effect in the Memorandum explaining the introduction of these provisions. He, therefore, asked how then can it be construed as retrospective in operation.

12. He then submitted that sub-section (3) of section 80HHC was a definition section. This being so even if its meaning is different from the other meanings, the definition meaning must prevail. Even if the definition clause is capable of giving more than one meaning, the meaning beneficial to the assessee must be preferred. However, this definition clause was not capable of two meanings. He then referred us to the meaning of the word "business" as given in the commentary by Kanga and Palkhiwala Volume I, Eighth Edition at page 464. He then struck a different line of argument from his predecessors by stating that if turnover has to be aggregated, If an assessee falls in clause (b) of sub-section (3) of section 80HHC, the entire turnover no matter what he is selling, must be aggregated, and not segregated. That was the meaning of the expression "total turnover" used in sub-section 3(b) and that must be kept in view and that was the intention of the Legislature and also the intention of the circulars of the CBDT. He then pointed out that if any income or receipt is credited to the profit and loss account in export business. that should not be excluded under any circumstances, if it is otherwise includible, under the head "profits and gains of the business". The language of sub-section (3) of section 80HHC, according to him did not present any difficulty and therefore there is no need to discard the literal interpretation. Then he took us to the Memorandum explaining the Finance Bill of 1991 as stated in 190 ITR Statutes 270 and pointed out that the Government was aware about the various anomalies and its abuse. It was to remove these anomalies that the Parliament was approached by the Government to amend the section. Since the Government were aware of anomalies and the amendments were made to remove the anomalies, the presence of anomalies should not present any compelling reasons to interpret the law differently. He then submitted that section 80AB does not help in understanding section 80HHC. Here he struck a note different from that of Shri R Ganesan. When the letter of law is clear, the spirit should not cause any difficulty. He wound up his argument by referring us to the recent decision of the Supreme Court in the case of Bharat Hari Singhania v. CWT [1990] 207 ITR 1 stating this settled the law in so far as the fiscal Statutes are concerned and submitted by stressing the point once again that the turnover, no matter in what kinds of goods, must be aggregated when they are both in exports and domestic trade by including in the profit and loss account all the receipts including commission, which have a nexus directly with the export business.

13. Shri Ajay Vohra, the learned Chartered Accountant appearing for M/s. B.M.G. Enterprises Ltd. which has business in fisheries, marine exports with no local sales and leasing and other engineering job works, submitted that section 80HHC never spoke of or contemplated profits in export trade but only contemplated aggregate profits. When the object is to provide fiscal incentive to promote exports, it can only be a concession in the payment of income-tax. Such being the case it deliberately adopted a formula of aggregating turnover of exports with the local turnover so that in case of need the local profits will also become part of the export profits to be exempted. That being the object of Legislature. this cannot be seen as an absurdity as propounded by Shri G. C. Sharma and other proponents of that theory. When the law said that export profits and local profits must be aggregated and apportioned on the basis of turnover, the Assessing Officer while granting the exemption arrived at export profits by allocating the expenses in proportion to turnover. which was never even in the contemplation of the Legislature. This is wholly against the provisions of section 80HHC(3) and is wholly untenable and unjustified and illegal also. The mandate of section 80HHC(3) was deliberately flouted. The Commissioner of income-tax (A) has gone a step further by putting his approval by even enhancing it. The intention is to bring foreign exchange by providing fiscal incentive. That fiscal incentive should not be diluted in any manner. To point out the intention, he referred us to 149 ITR Statute 29,152 ITR Statute 82. and 190 ITR Statute 299. This object of earning foreign exchange for the country is sought to be achieved even by sacrificing a part of the tax on local profits by this process. He then submitted by referring us to section 36(1)(iii) of the Income-tax Act that there cannot be a separate business in each article dealt with and the word ‘business’ means the aggregate result of all the businesses carried on by the assessee and that was why it was mentioned in section 36(1)(iii) that the money borrowed for the purpose of business was for the comprehensive business and not for any separate business. That the expression "the business" used in section 36(1)(iii) referred to any business carried on the assessee treating all those activities as one business, he referred us to a long series of decisions starting from Commissioner Of Income Tax, Madras v. Prithvi Insurance Co. Ltd. [1967] 63 ITR 632 (SC), Produce Exchange Corpn. Ltd. v. CIT [1970] 77 ITR 739 (SC), Prem Spg. & Wvg. Mills Co. Ltd. v. CIT [1975] 98 ITR 20 (All.), Commissioner Of Income-Tax v. Shah Theatres (P.) Ltd. [1988] 169 ITR 499 (Raj.), CIT v. Hindustan Machine Tools Ltd. (No.1) [1988] 175 ITR 212 (Kar.), Kanhiram Ramgopal v. Commissioner Of Income-Tax. [1988] 170 ITR 41 (MP), Kesoram industries & Cotton Mills Ltd. v. CIT [1992] 196 ITR 845 (Cal.). The CBDT also. which is the authority at the apex, understood this provision of aggregate turnover as including the turnover of both the export and domestic and directed the Assessing officer throughout the country to apply this formula in this manner by giving specific examples. No one can understand, according to him, the law better than the CBDT because it was the sponsor of the law having been the fountain head of authority to express views on the law and give directions to the Assessing Officers throughout the country in the field. Merely because there are some aberrations here and there, that is no consideration for taking a diametrically opposite view to the one contemplated by the plain meaning of section 80HHC. He referred to us the manner in which the export profits have to be arrived at and to be certified by a Chartered Accountant in the form prescribed under the rules, which has the statutory force, no other meaning than the meaning of aggregating the export and domestic turnover is possible from this form, which is Form No. 1OCCAC. This form contemplated computation of profits from the business as a whole and there was no mention that the profits of exports have to be separately computed. Therefore, the question whether there is loss or profit in export business becomes immaterial. That is how his argument proceeded all to say that the manner in which his client had understood the section and computed the profits to be exempted under section 80HHC should be accepted.

14. Shri B.B. Ahuja, Special Counsel engaged by the Department to appear before us in these matters, submitted his views in his methodical way refuting point by point the arguments raised by the main appellant and the interveners and also by citing authority after authority. Mainly. his submissions can be divided into four parts. The first part is about the principles of interpretation as to when the Golden rule of interpretation should he adopted and as to when the contextual rule of interpretation should be adopted and as to when the subsequent amendments made could or should be seen as declaratory, clarificatory or retrospective in nature. He cited several authorities in support of each of the propositions. The second part of his argument was whether sub-section (3) of section 80HHC is to be taken as a definition section as enunciating a formula for the proposes of computing the profits on or attributable to the export turnover. The third part was whether in arriving at the export profits, either when they were dealt with exclusively or associated with domestic sales for the same variety or a different variety, trading or manufacture, the commission received on assignment of export orders should or should not be taken as part of export profits. The fourth and the last part was whether in applying the above formula, the export turnover and domestic turnover should be aggregated irrespective of the nature of commodities dealt in or they should be segregated and aggregated only when the export and domestic turnovers happened to be of the same commodity.

15. Explaining the first part, his submission was that the meaning of section 80HHC was so plain, unambiguous that there was no need to call for any rule of interpretation or external aid to interpret it. The policy of the Government was to promote exports thereby to earn foreign exchange. incentive is therefore provided to exempt a portion of the profits relatable to export turnover. If this principle is borne in mind and if rule of sub- section (3) is read as it stood at the relevant time, it would become apparent that the Legislature wanted to grant exemption on exports. if that is exclusive business but if the business is so combined with domestic turnover, then the profit attributable to the export turnover was to be arrived at by applying the formula which meant taking the total turnover of both exports and domestic turnover. This being the plain meaning, there was no need to go to any aid of interpretation. Sub-sections (1) and (3) of section 80HHC are machinery sections. They must be interpreted to advance the object of computation of income from exports keeping in mind the legislative intention and not to over stretch it by granting unintended benefit or curtailing intended benefit. Being machinery sections, they should always be interpreted so as to advance the object of computation of income and not scuttle it.

16. Dealing with the second part of his argument. he submitted that sub- sections (1) and (3) of section 80HHC are machinery sections and not definition sections and as mentioned above, they should be interpreted in any case not liberally. The sections must be read as a whole. word by word. clause by clause including punctuation’s. No sub-section should be avoided nor read in isolation and in a manner as to avoid absurdities. The Legislature never intended to give benefit of any item without reference to the export turnover. There has to be "turnovers" before there is any benefit to be conferred.

17. Dealing with the third part of his argument. he submitted that since the object of the Legislature is to confer a benefit on profits accruing with reference to export turnover, there ought to be turnover and since commission received on assignment of export orders did not involve any turnover. such commission should be totally excluded. That this is the object of the Legislature according to him, is seen by the subsequent amendment brought with effect from 1-4-1992 whereby 90 per cent of such commissions are to be excluded from the profits derived from the export. When the Legislature made it clear by this amendment that 90 per cent of the commission etc. Is not to be regarded as profit derived from exports and when the Memorandum explaining the Finance Bill as introduced in the Parliament mentioned that this was being done with a view to see that the benefit unassociated with export turnovers should not be taken and the grant of such benefit was a misuse of the section, it meant and shall be deemed to have always meant that such commission was never to form part of the profits derived from export. Such being the case. the commission should not be included under-any circumstances as part of the export profits. In support of this contention he referred to us several decisions of the Supreme Court where the Supreme Court has to declare as to when a subsequent legislation is deemed as declaratory, clarificatory and retrospective.

18. The last part of the argument of Shri B.B. Ahuja was as he was pitted against six interveners and since all of them did not speak with one voice but advanced opposing views, he agreed with and supported that view whereby the entire turnover both export and domestic should be aggregated. In other words he did not agree with the arguments advanced that the expression "total turnover" used in clause (b) of sub-section (3) of section 80HHC related to and necessarily confined to the turnover of a particular variety of goods both exported and sold locally. He agreed and commended for our acceptance the view that in a case where an exporter does not exclusively deal in export of goods or merchandise out of India but has some domestic turnover, whatever may be its nature. "total turnover" meant the entire turnover both of exports and domestic sales and must be clubbed. This legislative direction is implicit in the section by the use of such expressions as the profits of the business as computed under the head "Profits and gains of business or profession" and "total turnover" and business carried on by the assessee". When sub-section (3) required the profits of the business to be computed under the head "Profits and gains of business or profession", it is not possible to hold that each variety of goods dealt in for the purposes of exports is a separate and distinct business from the other. "Business" means the entire business taken as whole including all the goods dealt in or all the manufacturing processes. They cannot be seen one diverse from the other for the purpose of the head "Profits and gains of business or profession". This is fortified by the use of the word "total turnover" of the business. The expression "business" here is the entire business carried on by the assessee and not limited or confined to the export business. Similarly the "total turnover" refers to entire turnover and not the turnover of the variety of goods involving exports and local. After referring us to these arguments and vivifying them with great detail and supported by authorities, he gave certain examples to show how the interpretation sought to be placed by his adversaries on the working of section 80HHC(3) led to absurdities and such an interpretation which led to absurdities should be avoided. According to his examples, unintended benefit will be conferred upon the exporters If the interpretation placed by the opposite side is accepted. He reiterated that commission received on assignment of contracts cannot form part of the formula mentioned in sub-section (3) for the simple reason that it does not spring from the export turnover much less any turnover. Even if the assessee is an exclusive dealer in export, the commission is not includible as part of his business. The memorandum explaining the amendments introduced with effect from 1-4-1992 used the word "clarified". It should therefore be construed that these amendments are only clarificatory In nature and if so the question of regarding the commission as export profits does not simply arise. He took us to the decision of the Supreme Court in S. Sundaram Pillai v. V.R. Pattabiraman AIR 1985 SC 582 where the Supreme Court had occasion to explain the meaning of and the difference between ‘proviso’ and ‘Explanation ’. He then referred us to clause (baa) in the Explanation under sub-section (4A) of section 80HHC whereby profits of business was defined and submitted that the retrospective operation of clarificatory nature was given only to this sub-clause and not to the entire section.

19. Again in his bid to explain that the Explanation added with effect from 1-4-1992 was in truth and in effect clarificatory in nature though in the legislative language it was said it came into effect from 1-4-1992. He then referred us to the circulars issued by the CBDT to support his argument that they also referred only to the export turnover and not to the total turnover. He dealt in particular to the arguments advanced based upon section 80AB and then submitted that If the argument had been that each commodity has to be treated as distinct business or undertaking of an assessee, that kind of interpretation should only be stated to be rejected because such a thing was never contemplated under the Income-tax Act much less under section 80HHC. At one stage he went to the extent of saying, relying upon the decision of the Supreme Court in the case of State Bank Of Travancore v. Commissioner Of Income Tax, Kerala [1986] 158 ITR 102 that even the circulars of the CBDT are not binding upon the judicial authorities, if they went against the plain meaning of the section and the request was to ignore the circulars, if they are against the plain meaning of the section. Referring to the anomalies pointed out by Shri G.C. Sharma, he submitted that they were not real but were imaginary and speculative and therefore not normal and should not be considered as absurdities. He then wound up his arguments by giving us the following propositions of law:

1. The object of granting deductions under section 80HHC is to promote exports of qualified goods and augment foreign exchange resources of the country.

2. The interpretation of section 80HHC ought to be in consonance with this object. legislative history. scheme of the Act and in the context of all the provisions of this section.

3. Under section 80HHC(1), deduction of profits derived by an assessee from exports only (of qualified goods) is to be allowed while computing his total income.

4. Section 80HHC(3), is a machinery clause providing for a mechanism to determine the quantum of profits derived from exports which are eligible for deduction. It is not a deeming fiction.

5. The expression "profits of the business" in sub-sections (3) and (3A) has to be understood as profits of business relating to trading transactions of which the source is the turnover of assessee’s business. The expression "total turnover" means aggregate of sale prices received or receivable for the sale of goods both exports and in domestic market.

6. Section 80HHC(3)(a) lays down the formula for determining of profits derived from exports where the business carried on by the assessee consisted exclusively of exports out of India of qualified goods. Under it the profits derived from exports would be the profits of the business as computed under the head ‘profits and gains of a business or profession’, the only business being the trading transactions of exports.

7. Section 80HHC(3)(b) dealt with a case where the assessee’s business did not consist exclusively of the export out of India of qualified goods and the assessee dealt with the sales of other goods also whether in the domestic market or export. In order to determine the profits derived from export of qualified goods, the profits of the business relating to trading transactions by the assessee (whether inside India or export out of India) shall be apportioned in the same ratio as the export turnover of the assessee of qualified goods bears to the total turnover (of goods). In this sub-clause also the expression "profits of the business" has to be construed as profits of the business of trading transactions only of which the source is total turnover.

8. By Finance Act, 1990, sub-section (3) has been amended to provide that profits derived from export of goods out of India shall be the amount which ears to the profits of the business the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. This means that profit derived from the exports out of India is to be arrived at by apportioning the total profit of all trading transactions of the assessee in the same ratio as the export turnover bears to the total turnover (the trading turnover).

9. The above interpretation suggested on behalf of the Respondent is in harmony with the other provisions of section 80HHC, i.e., sub-section (1), its proviso relating to profits derived by the supporting manufacturers. sub-sections (1A). (3A), (4A) and is in consonance with the object, the legislative history and avoids absurdities, not intended by the Legislature.

10. The interpretation suggested on behalf of the assessee in the above appeals will lead to absurdities not intended by the Legislature as also it will be in conflict with other clauses and provisions in the same section 80HHC.

11. The legislative history shows that there was never any intention to give concessions or deductions to any income/profits. other than the profits derived from exports.

12. Income/profits derived from sources like commission, consultancy fee, brokerage, etc., by an assessee who may be engaged in export business also, were never intended to be given exemption from payment of income-tax.

13. The above position has been made clear by the Explanation ( baa) inserted by Finance (No. 2) Act, 1992 (1991), explaining the expression "profits of the business" for the purpose of section 80HHC. This Explanation has been inserted by way of clarification and is declaratory in nature. it was meant to clarify the ambiguity resulting from the use of this expression in section 80HHC(3) and (3A) and has to be given effect to for past assessment years also. The fact that the Explanation has been inserted with effect from 1-4-1992, with a view to clarify cannot lead to the inference that the expression "profits of the business" for the earlier assessment years did not mean what is provided in the Explanation now by way of clarification. The Legislature cannot be Imputed with the intention to have restricted the incentive for exports now by inserting the Explanation.

14. While determining the profits derived from exports, receipts like commission, consultancy fees, brokerage, etc., (even if assessable under the head ‘business’) if included in the profit and loss account, have to be excluded as the source of these receipts is not trading transactions, these are income receipts in the first instance.

15. The Legislature never intended to treat the business in each commodity as a separate source for determination of profits derived from exports as contended by some of the interveners. The Legislature has classified the goods in two categories, one covered by section 80HHC(2)(a) and the other covered by section 80HHC(2)(b). There is no warrant for the proposition that each commodity exported should be treated as a distinct business or a source. Some of other sections of Chapter VIA, like sections 80HHA, 80-I 80J, etc., referred in this respect have no bearing as their object and language is materially different.

16. We have considered very carefully the above contentions, arguments and the excerpts of the authorities relied upon in support of the propositions advanced. To our mind there was no such ambiguity in the language of section 80HHC(3) as to call in aid any particular rule of interpretation nor did we find any omission to be supplied by us by taking advantage of the judicial liberty permitted in extreme cases by the Supreme Court where causus omissus if found or any rough edges require to be Ironed out as Lord Dinning has put it and quoted with approval by the Supreme Court, we could embark upon such exercise. The cardinal rule for the construction of Acts of Parliament is that they should be construed according to the intention expressed in the Acts themselves. If the words of the statute are themselves precise and unambiguous plain, then no more can it be necessary than to expound those words in their ordinary and natural sense. The words themselves alone do in such a case best declare the intention of the law giver. The Tribunal that has to construe an Act of a Legislature, or indeed any other document, has to determine the intention as expressed by the words used. And in order to understand these words it is natural to inquire what is the subject-matter with respect to which they are used and the object in view. In Barnes v. Jarvix [1953] 1 WLR 649 (D. C.) Lord Goddard, CJ. said : "A certain amount of common sense must be applied in construing statutes. The object of the Act has to be considered". Where the language of an Act is clear and explicit, we must give effect to it. whatever may be the consequences, for in that case the words of the statute speak the intention of the Legislature in Gluchowska v. Tottenham Borough Council [1954] 1 QB 439 (DC) (natural meaning). The meaning which the words are to bear is not to be ascertained by any process akin to speculation. The primary duty of the court is to find the natural meaning of the words used in the context in which they occur. That context included any other phrases under the Act which may throw light on the sense in which the makers of the Act used the words in dispute. Though the rule of causus omissus is advocated. we do not propose to apply it because we are not able to find any omission. We do not therefore think it proper to create an omission and supply the omission. In other words the consequence of this rule of supplying casual omission etc. In the statutory provision. Is to extend the meaning of the section to meet the cases for which a provision is not clearly and undoubtedly made. This conclusion of ours obviates the necessity to discuss in detail the various authorities cited.

20. Section 80HHC(3) is a beneficial section. It was intended to provide incentives to promote exports to cam foreign exchange for the country. The incentive provided is to exempt the profits relatable to exports. Since it is not possible to conceive of an exclusive exporter without having domestic business and it is often found impracticable to ascertain profits of export exclusively and since there is a possibility of mixing up of either overheads or costs of export with domestic or vice versa and this differentiation is likely to lead to litigation as to which part of expenses should form part of the exports and which part not and since common expenditure like fixed overheads. depreciation, interest. rent etc., is difficult to apportion without giving rise to dispute the Legislature thought that the most convenient method freed from litigation to ascertain export profits is by the method of apportioning the total profits of the business on the basis of turnovers. Apportionment of profits on the basis of turnover is an accepted method of arriving at the profit. In Excess Profits Tax Act this was the method adopted and also in Business Profits Tax Act, which Acts are not now in force. This method of apportionment of profits on the basis of turnover is resorted to in the following circumstances and this was not uncommon amongst business people or Accountants in the world:

i.When the accounts are not closed at the end of the year but are continued thereafter either for two years or more, the apportionment of profit for each year would always be done on the basis of turnover for each year. The total profits at the end of each year is not possible to ascertain because the closing stock is never ascertained at the end of each year and unless the closing stock is ascertained at the end of each year. It is not possible to ascertain the profits correctly and accurately. In case where accounts of the business are continued for more than one year and stock is ascertained only at the time when the books are closed to profit and loss account, the profit for the entire period is ascertained and then apportioned on the basis of turnover for each year. The presumption in this case is that the profits accrued evenly in proportion to the turnover.

ii.The second circumstance is when partners retire or die and the firms are to be closed in the middle of the accounting year or over a period of years. Here again the above procedure is followed and the profits are apportioned on the basis of turnover. Sometimes the same procedure is also followed in the case of amalgamation of companies and in winding up.

It is therefore not uncommon method of apportionment of profits on the basis of turnover. This is an accepted method of apportionment of profit. The Supreme Court had recently an occasion to deal with Rule 1D of the Wealth-tax Rules in the case of Bharat Hari Singhania ( supra). The question there was whether Rule 1D which provided for valuation of unquoted equity shares was ultra vires, the Act and whether any other method should be adopted. While construing Rule 1D as intra vires, the Supreme Court observed at page 14 of the Report:

"It is thus left to the rule-making authority to prescribe an appropriate method for the purpose. There may be several methods of valuing an asset or for that matter an unquoted equity share. The rule-making authority cannot prescribe all of them together: it has to choose one of them which according to it is more appropriate. The rule-making authority has in rule 1D chosen the break up method, which is undoubtedly one of the recognised methods of valuing unquoted equity shares. Even if it is assumed that there was another method available which was more appropriate still the method chosen cannot be faulted so long as the method chosen is one of the recognised methods, though less popular."

The Supreme Court thus approved that if there were more than one method available for the purpose of achieving the object of the Legislature, it can follow any one method if it is a recognised method though less popular. In this case ascertainment of profit on the basis of turnover is a well recognised method. If in the working of that method some discrepancies arise or in the extreme some distortion takes place, which can be multiplied depending upon the ingenuity of the contemplating person, that method cannot be faulted or said to be a method which is ambiguous and not plain as to give room to abandon it by the process of interpretation. As we have mentioned earlier since in the opinion of the Legislature it is possible for an assessee to carry on both export and local business, not only in the same commodity or goods but in a diverse variety of goods not only in trading but also in the manufacture and with a view to avoid litigation the Legislature, deliberately provided that the profit of the entire business including exports must be ascertained irrespective of the fact whether separate accounts were. maintained for export or not, computing them by applying those rules as are applicable for the computation of income under the head "Profits and gains of business or profession" and then apportioning those profits on the basis of turnover of export bearing to the total turnover. The expression "total turnover" used in section 80HHC(3)(b) is therefore unambiguously refers to the total turnover of the entire business and not to the total turnover of the export business. There is nothing in the language to suggest that it is limited to total export turn- over. The "business" includes not only the turnover of exports but also the domestic turnover. The expression "total turnover" cannot therefore mean the turnover of one variety of goods namely exports to the exclusion of the other. While clause (a) of such-section (3) referred to a situation where an exporter has exclusive business of export and not having any local business, clause (b) referred to the situation, where an assessee has both exports and local turnover. If an assessee has therefore local turnover and export turnover there is no escape from the application of the formula provided in clause (b) of sub-section (3). Those profits are computed under the head "profits and gains of business" and only such profits as are attributable to exports turnover by apportionment thereof are entitled to the exemption. Thus, when a person has exports as well as local business, the entire profits are to be computed in the manner laid down in that sub- section, namely, under the head profits and gains of business or profession" and only a part of that amalgamated profits or the result of the computation has to be apportioned on the basis of the turnover. We see no words in sub-section (3) as to limit this apportionment of profit on the basis of turnover in exports and the apportionment has to be resorted to only when the same kind of goods exported are also dealt with locally. We find no support for this view in the, language used by the Legislature. To our mind the Legislature has contemplated the ascertainment of total profits in the entire business and then apportion it on the basis of turnover. This is how the CBDT also understood this provision and explained it in its circulars for the benefit and also for the uniform application of this provision throughout the country by all the Assessing Officers. To bring the intention of the Board more clearly to the Assessing Officers, they have given examples and those examples do not suggest that if there is export turnover and local turnover, either the local turnover must be excluded or the aggregation is to be made only when the goods exported outside India happened to be the same as were dealt in India. So much was said before us about the circulars. One extreme view canvassed was the circulars must be totally abandoned as it does not conform to the legislative intention on the ground that the Board is not an authority constituted under the Law to interpret the law and in any case the interpretation placed by it on any provision of law if it does not conform to the real and true meaning of the law, such interpretation is not binding on the courts. In this case it was pointed out by a section of the Advocates that the Board’s circulars went against the will of the Parliament. The other extreme view was that the circulars of the Board very correctly understood the provision of the law and whenever there was an attempt by the Field Officers to avoid the application of the circulars, they should be punished as committing contempt of the Board and forced to obey the circulars. In support of both the views various authorities were quoted. We are deliberately avoiding reference to them though we have gone through them all because we are of the clear opinion that the circulars issued by the Board do conform to the real exposition of law and therefore they are not such circulars as are to be abandoned. The Officers are therefore bound to obey them and implement them. A chaotic condition will prevail if the circulars given by the Board are not allowed to be implemented by the Officers. This will also go against the spirit and letter of section 119 of the Income-tax Act where under it was clearly provided that the circulars issued by the Board are binding on all the authorities employed under the Income-tax Act subject to the exclusions and restrictions provided under that section. section 119 of the Income-tax Act provided that the Board may from time to time issue orders, directions and instructions to other income-tax authorities as it may deem fit for the proper administration of these Acts and such authorities and all other persons employed in the execution of the Act shall observe and follow such orders. instructions and directions of the Board. It is therefore clear from the section that what the Board gives or can give is only an order, instruction or a direction for the proper administration of the Income-tax Act, which in its opinion is fit for issuing of such orders, instructions or directions. So an order, instruction or direction given by the Board, if it remains within its confines has to be observed and followed by all the authorities employed in the execution of the Income-tax Act but if they traverse beyond their jurisdiction, namely, interpretation of the Act, then a controversy may arise. In this case there is no such interpretation. Under sub-section (1) of section 119 the Board can issue a general or a special order in respect of any class of income or cases setting forth directions or instructions not being prejudicial to the assessees as to the guidelines, principles or procedures to be followed by the other income-tax authorities in the working relating to assessments or collection of revenue. The instructions given in this case fall under this nature. They cannot therefore be perceived as the interpretation of the Statute. In any case the Board performs a sovereign executive power of the Government of India and that cannot be faulted merely on the ground that in some cases certain unintended hardship have arisen or likely to arise. We, therefore, think it unnecessary to refer to the various authorities quoted both for and against the view that the circulars of the Board should not be taken as binding on the Tribunal. We do concede that the view expressed by the Board on the legal point may not be binding on the Tribunal in the sense as if the Tribunal is an income-tax authority employed for the execution of the Income-tax Act but if the view expressed by the Board is in conformity with the legal principles and interpretation of law, there should be no difficulty in adopting it. We do not say follow but we say it is entitled to respect.

21. When sub-section (3) of section 80HHC referred to sub-section (1) and then said that for that purpose the profits derived from the export of goods or merchandise outside India shall have to be ascertained in the manner provided thereafter, one has to see what that sub-section (1) contained. It says if an assessee is engaged in the business of export out of India any goods or merchandise, there shall be in accordance with and subject to the provisions of that section. allowed in computing the total income a deduction of profits derived by the assessee from the export of such goods or merchandise. The object of sub-section (3) is. therefore, to arrive at the profits derived by the assessee from the export of goods or merchandise for the purposes of deduction. Since it is possible for an assessee to carry on the business exclusively in export, then clause (a) of sub-section (3) provided that the profits of the business as a whole as computed under the head "Profits and gains of business or professional be deemed to be the profits derived from the export of goods or merchandise and should be allowed as a deduction. Clause (a) of sub-section (3) did not contemplate a situation where an assessee dealing in export is in a position to ascertain or identify the profits relatable to such exports. The condition is that the person must deal exclusively in the business of exporting goods outside India. Nowhere it said that if such a person had dealings both in export and local but if export profits are easily identifiable then only clause (a) would apply. This is reading something into the section which it did not provide. The object of clause (a) of sub-section (3) is clearly not to identify the export profits. The object of clause (a) of sub-section (3) is to find out whether the business carried on by the assessee consisted exclusively of export of goods outside India. Carrying on an exclusive business out of India without domestic turnover will disclose only the profits in such exclusive export business. That does not mean that the purpose of clause (a) is to find out whether the profits in export are easily identifiable even in a case where the business carried on does not consist exclusively of exports outside India of the goods or merchandise. If in addition to the export, there are dealings in India then clause (b) will automatically take over the position. With a view not to deny the benefit of exemption to persons having domestic turnover and with a view to avoid litigation, the Legislature has provided a formula to arrive at the profits in such situations where the business carried on by the assessee does not consist exclusively of the export of goods outside India. So the test for the purpose of sub-section (3) of section 80HHC is whether the assessee is carrying on business of exclusive export or exports and domestic business also. If it is the former clause (a) would apply and if it is latter clause (b) would apply. If clause (a) applies, the entire profit computed in the manner in which the profits under the head "Profits and gains of business or profession" are to be computed and the whole of it is entitled to deduction. But if clause (b) of sub-section (3) of section 80HHC applies the profits of the entire business has first to be ascertained and then apportioned in proportion the export turnover bears to the total turnover to arrive at the profits derived from the export of goods or merchandise. Therefore, it provided that the profits of the business meaning the entire profit as computed under the head "Profits and gains of business or profession" has to be ascertained and that profit should be apportioned on the basis of the total turnover of the business carried on by the assessee. Here the reference to the business is not to export business but to the business which consists both of the export out of India of the goods or merchandise or domestic sales. Since this is according to us the meaning of section 80HHC. we are unable to subscribe to the view canvassed by Shri G.C. Sharma, Shri R. Ganesan and Dr. S. Narayanan. No doubt, there is any amount of substance and equity in what they have been urging for. If the Legislature wanted to provide total exemption on exports and if that profit is clearly ascertainable. such profit could not further be reduced by the process of apportionment. If this is the real object of the legislation, then first the language would have been totally different. In cases where the export turnover is small and export profit is small, but the local turnover is many times more and so the profit, the local profit will also get apportioned and would earn the exemption. Under the process of apportionment two extremities are. Therefore, possible, but this must be considered as envisaged by the Legislature and is thus the legislative policy and is deliberately adopted with a view to provide incentives for export and not to curtail it by denying it to persons having local turnover. This would amount to deprivation of domestic business and a restraint on trade. which will in its wake lead to further legal complications. Therefore, when encouragement is given both for export and local business, though it is very desirable to hold in clear terms that if export profits are otherwise clearly identifiable, the whole of it should be exempted, the Legislature thought that since this method of granting exemption is fraught with litigation, it was sought to be avoided by providing this omnibus method of apportionment of profits on the basis of turnover, which is a recognised method.

22. Shri R. Ganeshan. the learned Chartered Accountant has argued by introducing section 80AB, which we have referred to earlier in great detail- We are of opinion that even this argument does not appear to us to be proper. What section 80AB provided is where any deduction is required to be allowed under any sections of Chapter VIA, in respect of any income of the nature specified in that section, which is included in the gross total income, then notwithstanding anything contained in that section for the purpose of computing the deduction under that section, the amount of income of that nature has to be computed in accordance with the provisions of the Income-tax Act before making any deduction under Chapter VIA shall alone be deemed to be the amount of that nature which is derived or received by the assessee and included in the gross total income. In other words. section 80AB prescribes that if any particular income referred to in any of the sections of Chapter VIA are to be allowed as a deduction, then that income has to be computed in the manner provided under the Income-tax Act and that income alone shall be deemed to be the income for deduction. in other words, the net income. Thus section 80AB basically enjoins deductions to arrive at the income to be excluded by way of deduction specifying that it shall not be the gross income but only net income. This is the import of the words "for the purposes of computing the deduction under that section" used in section 80AB. Thus section 80AB postulates only the computation of deduction by permitting the Revenue to reduce it by the possible expenditure incurred to earn that income. But that is not the purpose of section 80HHC. Section 80HHC deals with a different nature of income as to whether the income is relatable to a business exclusively consisting of export or exports and other local business. Then two sets of formulae were given. One is for total exemption of the income in case it happens to be the former and in other case a proportionate income on the basis of apportionment of turnover. Therefore it is a complete code by itself. Nowhere else in the IT Act one has to look to and no other provision in that Act has to be followed except applying those rules contained in the provisions of section 80HHC which are applicable to compute the income from profits and gains of business.

Shri R. Ganeshan introduced section 80AB to buttress the proposition that business in each article must be taken as a separate undertaking. If that is so, exclusive export must be taken as a separate undertaking and non- exclusive export business must be taken as a different undertaking. This is not possible because the business is one. Section 80HHC uses the words "business carried on by the assessee" and not undertaking. An assessee may have the business of carrying more than one undertaking. All the undertakings put together constitute one single business coming under one single head, ‘profits and gains of business or profession’. This is now a settled law that whatever may be the kind of business carried on by an assessee and wherever carried on in whatever fashion it would all constitute one business and not different businesses. The concept of different businesses in the concept of each undertaking taken as a different business is alien to the Income-tax Act. What was mentioned in sub-section (3) is only a type of business that an assessee was carrying on to be able to earn exemption. It is therefore difficult to see that the export business is a different business or an undertaking distinct from the local business or even a combined business. Mr. Ganesan says each activity must be taken as separate business. This is not possible to accept.

23. We are also unable to agree with the interpretation sought to be placed by Dr. S. Narayanan, based upon purposive interpretation or contextual interpretation. As we have mentioned in the beginning if the language of the section is plain, there was no need to go into the process of any interpretation on the basis of supposed difficulties. Since the language according to us is plain, unambiguous giving out clearly the legislative intention. we find no need to go either to purposive interpretation or contextual interpretation as was held by some of the Benches of the income-tax Appellate Tribunal while deciding this issue. That would in our opinion amount to re-writing the section to suit particular needs of their assessees and not to bring out the legislative intention.

24. We are, however, agreeable with the view canvassed by Shri 0.P. Vaish, Shri Ajay Vohra and as admitted to by Shri B.B. Ahuja appearing for the Revenue that if the business does not consist exclusively of exports, irrespective of whether the profits on export business are ascertainable or not. if there is domestic turnover, it is clause (b) of sub-section (3) that would become operational and according to clause (b) the entire turnover of the entire business must be aggregated and then only apportioned. According to us any other interpretation would be unintended interpretation and would lead to absurdities. We are deliberately not discussing the examples given to us at the time of hearing because while they are intended to bring out their view-points. we feel that the points highlighted were only distortions but not absurdities. Secondly. in the hands of a more intelligent person than us some more possibilities of examples may arise because the examples given are not exhaustive. For these reasons we hold that if the assessee has a business which does not consist exclusively of export of goods or merchandise outside India, then it is clause (b) that would apply and according to that clause the turnover of the entire business including export must be aggregated and the net profits of the business must be ascertained in the same manner in which the profits under the head "Profits and gains of business or profession" are to be computed, and that profit must be apportioned in proportion the export turnover bears to the total turnover and the resultant amount alone shall be deemed to be the profit derived from export turnover although the profit derived from export by other means may be found to be more than this amount. The same result is arrived at by the rules provided to arrive at export profits.

25. Although reading sections 80HH, 80HHB, 80-I 80J, 80JJ appearing in the same Chapter VIA, it will be found that the basis for deduction is on the profits computed separately for the specified business or specific type of industrial undertaking, to which that particular section applied, section 80HHC is related to the nature of activity, totally unrelated to the type of goods. Another important departure of section 80HHC compared to other sections is that profits and gains of export business are not required to be computed as per the books of account of the assessee but as provided for in Rule 18BBA in the prescribed Form No. 10CCAC. Rule 18BBA provided that the report of the Accountant, which is required to be furnished by an assessee under sub-section (4) or (4A) shall be in the form above mentioned, namely. 10CCAC. This Form No. 10CCAC provides in clause (2) as under:-

"We certify that the deduction to be claimed by the assessee under sub- section (1) of section 80HHC of the Income-tax Act, 1961. in respect of the assessment year...is Rs....which has been determined on the basis of the sale proceeds received by the assessee in convertible foreign exchange. The said amount has been worked out on the basis of the details in Annexure A to this form."

This shows that the profits is to be ascertained on the basis of the sale proceeds received in convertible foreign exchange in the manner provided in Annexure ‘A’ which we shall refer to little later and not necessarily with reference to the profits ascertained as per books even though separately maintained exclusively for export business. This annexure ‘A’ has got 10 items and we think it is very essential to reproduce it in order to bring out our thinking more clearly and vividly:

"1.Name of the assessee.

2.Assessment year.

3.Total turnover of the business.

4.Total export turnover.

5.The amount of profit under the head "Profits and gains of business or profession".

6.Profit derived by the assessee from the export of goods or merchandise to which section 80HHC applies, computed under sub-section (3) of section 80HHC.

7.Export turnover, deduction in respect of which will be claimed by a supporting manufacturer in accordance with proviso to sub-section (1) of section 80HHC.

8.Profits from the export turnover mentioned in item 7 above, calculated in accordance with proviso to sub-section (1)of section 80HHC.

9.Deduction under section 80HHC to which the assessee is entitled (item 6 minus 8),

10.Remarks, if any."

It will be seen from the above that what is prescribed by the Legislature to arrive at the profits derived from export business in the case of combined business of export and domestic business is total turnover of the business and total export turnover and total profit under the head "Profits and gains of business". Then it requires in item 6 the profit derived by the assessee from export of goods computed under sub-section (3), which clearly shows with demonstrative proof that what is contemplated for the purpose of relief under section 80HHC was the total turnover of the business and export turnover and not as contended for on behalf of a section of the interveners the turnover in the particular type of goods both by export and domestically. Same is the position brought out by the circulars of the Board. The Board’s circular No. 564, dated 5-7-1990 states how the deduction under section 80HHC of the Income-tax Act is to be computed. In para 2 it states :

"2. The essential ingredients of section 80HHC are as follows :

(i)the assessee should be an Indian company or a person (other than a company) resident in India,

(ii)The should be engaged in the business of export out of India of any goods or merchandise (other than mineral of is, minerals and ores),

(iii)the deduction is also available to a supporting manufacturer who has sold his goods or merchandise to an export house/trading house provided the export house/trading house has issued a disclaimer certificate in respect of the "export turnover" in Form No. 10CCAB. The term "supporting manufacturer" shall, with effect from the assessment year 1991-92, include a processor of goods. Thus a seafood processor, for example, or any other processing unit exporting goods or merchandise through an export house/trading house, will now be eligible to claim deduction under section 80HHC on the condition that he obtains a disclaimer certificate from the export house/trading house,

(iv)under the existing provisions deduction under section 80HHC is allowed if the sale proceeds are receivable in convertible foreign exchange. With effect from the assessment year 1991-92, the deduction under this section shall be allowed only if the sale proceeds are received in or brought into India within a period of six months from the end of the relevant previous year. However. in case of genuine hardship, the Chief Commissioner or the Commissioner may allow further time for the remittance of foreign exchange if he is satisfied that the assessee was unable to bring the foreign exchange within the period of six months for reasons beyond his control. While allowing further period in this regard, the Chief Commissioner or the Commissioner shall record reasons for the same in writing,

(v)the deduction shall be of the profits derived by the assessee from the export of goods or merchandise. What constitutes "Profits" derived from the export of goods or merchandise out of India, has been defined in sub-section (3) of section 80HHC. This sub-section (3) lays down that the profits derived from the export of goods or merchandise shall be the amount which bears to the profits of the assessee (as computed under the head ‘Profits and gains of business or profession") the same proportion as the ‘export turnover" bears to the ‘total turnover’ of the business carried on by the assessee."

In para 3 it states that several doubts were expressed about how the deduction under section 80HHC is to be allowed. Representations received by the Board show that there is lack of uniformity amongst authorities in respect of allowing the aforesaid deduction. This shows that different authorities are interpreting the section differently. It therefore become necessary for the Board to clarify. In para 4 it clarified that :

"4. Sub-section (3) of section 80HHC statutorily fixes the quantum of deduction on the basis of a proportion of the profits of business under the head "Profits and gains of business or profession" irrespective of what could strictly be described as ‘profits derived from the export of goods or merchandise out of India’. The deduction is computed in the following manner:-

This clearly shows that where there are profits on export of goods or merchandise out of India or not, the entire profit of the business has to be ascertained and then apportioned in the manner in which the export turnover bears to the total turnover. Then in para 9 it gave examples, which also are very relevant and we quote below:

"9. Thus, in the case of an assessee who is doing export business exclusively ‘export turnover’ and ‘total turnover’ would be identical. If the entire sale proceeds are brought into India in convertible foreign exchange within the prescribed time limit. In that case, the entire profit under the head ‘Profits and gains of business or profession’ (which will include the three export incentives) will be deductible under section 80HHC. However, in order to arrive at the amount deductible under section 80HHC in the case of an assessee doing export business as well as some other domestic business. the fraction of export turnover to ‘total turnover’. will be applied to his profits computed under the head "Profits and gains of business or profession’ (which again will include the three export incentives). The operation of section 80HHC read with section 28. as amended by the Finance Act, 1990. can be illustrated by way of the following examples:

This circular leaves no doubt both by the clarification and examples given in para 9 that what was contemplated and intended was not the profit relatable to the export of goods exclusively pertained to those goods but the profit of the entire business including export turnover and domestic turnover, irrespective of the source from which the domestic turnover was derived provided it is in respect of profits and gains of business. The legislative mandate is therefore to compute the profit of the entire business and not to segregate exports or compute the profits of export separately and if they are identifiable adopt them to the entire exclusion of the operation of the provisions of clause (b) of sub-section (3). We therefore find ourselves unable to agree that the clause (b) of sub-section (3) applies only when the same nature of goods are dealt in both in exports and locally.

26. So much about the arguments advanced to us by the interveners on behalf of their clients and our considered opinion thereon.

27. In this process we have not adverted to the various decisions cited before us or comment upon them case by case, though we have read all the excerpts given to us from those decisions for our guidance. Non- reference to them in this order should not therefore be construed as if they are not considered.

28. Since we are not deciding the appeals filed by the interveners, it is open to the respective Benches before whom those appeals come up for regular hearing to dispose of those appeals, keeping the opinion in view.

Coming to the facts of the present appellant before us, i.e., M/s International Research Park Laboratories Ltd., New Delhi. two issues are involved. One is whether the Commissioner (Appeals) erred on facts and in law in declining to direct the allowance of deduction under section 80HHC on the amount of commission received. The second point is whether the Commissioner (Appeals) was justified in disallowing Rs. 65,000 on account of interest payable by the assessee on the ground that the interest pertained to loans utilised for payment of income-tax and therefore not borrowed for the purpose of the assessee’s business. The third point appears to be consequential. namely, deletion of interest levied under sections 234B and 234C of the Income-tax Act.

29. The assessee is a public limited company engaged inter alia in the business of export of cosmetic goods and other products. For the previous year ended 31-3-1990 relevant to the assessment year 1990-91, the assessee filed a return declaring an income of Rs. 1.01 crores. But the assessment was completed on an income of Rs. 2.04 crores. One of the points was about the correct computation of the relief under section 80HHC. The assessee during the year had an export turnover of Rs. 2.19 crores and received export fees of Rs. 2.04 crores. This export fee was received on assignment of certain export orders to another exporter M/s Hindustan Lever Ltd. in the return filed by the assessee deduction under section 80HHC was claimed treating the commission received from M/s Hindustan Lever Ltd. as profits derived from export business eligible for apportionment on the basis of export turnover to the total turnover. This is how the assessee made the claim:

The Assessing Officer, however, declined to accept the assessee’s method of computation of the relief due under section 80HHC. According to him, the assessee’s export turnover was only Rs. 2.19 crores against which the cost of exports was Rs. 2.21 crores. The assessee therefore incurred a loss of Rs. 2.32 lacs on export turnover and therefore the assessee was not entitled to any deduction. According to him, there should be profit attributable to the export turnover in order that that profit is available for apportionment. When there is no profit. no question of apportionment and therefore no relief at all. He declined to accept that the commission received from M/s Hindustan Lever Ltd. was also the profit derived from exports. The Assessing Officer went on to argue that sub-section (1) is a substantive section, which requires the existence of profit in export turnover and if there is no profit, the substantive section would not apply and therefore the question of invoking sub-section (3) would not arise. He placed reliance on the decision of the Gujarat High Court in the case of Ahmedabad Mfg. & Calico Printing Co. Ltd. v. CIT [1982] 137 ITR 616 wherein it Was held that the primary and first requirement to claim deduction is that there should be profit from export of goods. The Assessing Officer has given examples whereby it will be seen that if an exporter, who exports all his goods with even a small turnover of Rs. 5, the entire profit received in Indian currency in respect of local transaction would be eligible for deduction under section 80HHC and this is not the intention of the Legislature but this would be distortion of the intention. In the assessee’s case there were no domestic sales and therefore no relief is due to the assessee. Another point made out by the Assessing Officer was that the deduction claimed under section 80HHC was more than the total turnover and the profits and gains of business were almost equal to the export sales in the assessment year 1990-91 and more than that in the assessment year 1991-92.

30. On appeal. the Commissioner (A) confirmed the view of the Assessing officer relying mostly upon the orders of the Tribunal, one given by the Madras Bench in the case of Jeyar Consultants and investment (P.) Ltd. [1993] 46 ITD 71 and. that of Delhi Benches in the case of Ashwani Kumar Consultants P. Ltd. [1993] 47 ITD 1.

31. In our opinion the view taken by the learned Commissioner (A) does not conform to the provisions of the Income-tax Act or the circulars given by the Board referred to above or the requirements of the rules 18BBA and Form No. 10CCAC. We have endeavoured to point out above there is no need for any profit to be in existence in export business so as to confer this benefit. The circular of the Board makes it abundantly clear and also the Form No. 10CCAC, which has the sanction of the law. So the submission hat there should be a profit, is not acceptable as not in conformity with the provisions of section 80HHC. Secondly. the commission received on the assessment of export orders cannot be seen divorced from or de hors to the export turnover. It is directly linked to the export business and has a direct nexus with the export. Because the assessee was engaged in export business. he could obtain the export orders and owing to his inability to execute all those orders. he gave some orders for execution to others on commission basis. So, the commission sprang directly from the execution of the export orders and is not different from the export business. Had the assessee not been engaged in the export business and satisfied the conditions required under the relevant law, he would not have been able to procure the export orders at all. Therefore, the engagement of the assessee in export business had got direct nexus to the procurement of orders and so the profit or loss realised on the execution of the orders is a profit or loss springing directly from the engagement in export business. Therefore, the word "engaged" used in section 80HHC(1) is very important and holds the key to this problem. That was why the Board also had categorically stated in the circular that irrespective of what could strictly be described as profits derived from the export of goods or merchandise out of India meaning thereby that there need not be any profit or loss in the export of goods outside India and what is needed is export of goods. Therefore, what is more important is export turnover rather than profit in export. We are therefore unable to accept the view advanced by the Revenue and on its behalf that there should be profit in the export business in order that apportionment is permissible, nor can we see section 80HHC as a substantive section or sub-section (3) as a machinery section giving effect to the substantive provision. Section 80HHC is a beneficial section containing a benefit to be conferred on assessees by way of deduction of cent per cent profit in case the exporter has exclusively carried on export business and a portion of the profit in case he is not exclusively carrying on export business.

32. 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 to the goose is also sauce to 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 1-4-1992 where under as we have pointed out above by adding clause (baa) to the Explanation at the end of sub-section (4A) with effect from 1-4-1992, 90% 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.

33. We are unable to accept this contention either. There is no indication or suggestion in this amendment that it was intended to be declaratory, clarificatory or retrospective in operation. There might have been instances in interpreting the sections of other enactments whereby the Courts were pleased to hold that subsequent legislation could be a guide to interpret the earlier sections or subsequent legislation could be deemed to be declaratory in nature covering the earlier position also. But the most important thing that is necessary in this regard is the presence of the words to justify such a conclusion. He referred us to the decisions given by the Supreme Court in sales-tax matters, rent control matters and also particularly the decision of the Supreme Court in S. Sundaram Pillai’s case (supra) where the meaning of the ‘provision’ and the ‘Explanation’ was given by the Supreme Court. But in all these cases there were circumstances and words to suggest that such an interpretation was called for. Here from the clause as we have quoted above, nothing is discernible to give it an interpretation to cover the earlier period than 1-4-1992. Secondly, if the Legislature’s intention is only to treat 10% of the commission etc. as profit derived from export business and if it is held to be retrospective or clarificatory covering the present assessment years also, which are 1990-91 and 1991-92 earlier to 1-4-1992, from which date the amendment was made operative, how can that be retrospective. How can 10% of the commission is attributable to profits in export and the balance not. It will create practical problems in respect of hundreds of completed assessments. Apart from the practical difficulty, the circular given by the Board bearing No. 621, dated 19-12-1991 reported in 195 ITR (Statutes) states in para 32.7 as under :

"32.7 The tax concession under section 80HHC is intended to compensate an exporter for the comparative disadvantage faced by him in the international market. With a view to ensuring that the tax concession is not misused, sub-section (3) of section 80HHC of the Income-tax Act has been amended."

In para 32.10 it was pointed out that the existing formula often gives a distorted figure of export profits when receipts like interest. commission etc. which do not have element of turnover are included in the profit and loss account. By clarifying this position. what the Legislature thought was that though the commission and interest spring from export, yet as they do not involve any element of turnover and merely for the reason that they were included in the profit and loss account, they were becoming eligible for exemption. In order to remove this distortion, it became necessary to clarify what was meant by the ‘profits of the business’ for the purpose of section 80HHC. That was why it was provided in para 32, 11 as under:

"32.11 it has. therefore, been clarified that "profits of the business" for the purpose of section 80HHC will not include receipts by way of brokerage, commission, interest, rent. charges or any other receipt of a similar nature. As some expenditure might be incurred in earning these incomes, which in the generality of cases is part of common expenses, ad hoc 10 per cent deduction from such incomes is provided to account for these expenses."

In para 32.15 it was clearly pointed out:

"32.15 These amendments will take effect from 1st April 1992. and will, accordingly, apply in relation to assessment year 1992-93 and subsequent assessment years."

In view of this categorical statement contained in circular, which contained the explanatory note given on the provisions relating to Direct Taxes shows that these amendments are only prospective in nature and it would apply only in relation to the assessment year 1992-93 and subsequent assessment years and there was no mention that it would apply retrospectively or was of a clarificatory nature as to provide a basis for the argument that they could be applied for the earlier assessment years also. The word "clarified" used in para 32, 11 cannot therefore be regarded as giving a retrospective effect to these amendments, so as to cover the assessment years under appeal. This clarification is prospective legislative intention to set right the distortion in the application of the formula and therefore, intended to be prospective in nature. When this formula was introduced, the Legislature never regarded this situation to emerge. Having seen it emerged and having found it to be conferring unintended benefits and with a view to rectify this, this amendment was brought in and it was that that was clarified. Therefore, the subsequent amendment on which greatest stress was laid by Shri B.B. Ahuja and greatest energy was set in store would not come to his rescue in view of the categorical statement of law that it would apply prospectively from 1992-93 assessment and onwards. as we have referred to above. We are therefore of the opinion that for the assessment years under appeal 1990-91 and 1991-92 the commission receipt is a part of the export profits and therefore it is eligible to be included in the ‘profits of the business’ for the purpose of calculating the relief under. section 80HHC and it is not necessary for the profits to exist in export business. Further, the commission received from M/s Hindustan Lever Ltd. whether received in convertible foreign exchange or not becomes irrelevant for the purpose of sub-section (3) if it is relatable to export business. The receipt of export sale proceeds in convertible foreign exchange is relevant only for the purpose of computing "Export turnover", as is clear from its definition that "Sales proceeds received by the assessee in convertible foreign exchange...". The export turnover is relevant for applying the formula mentioned in sub-section (3)(b). Non receipt of sale proceeds in convertible foreign exchange will only mean that turnover is not Export Turnover and will not therefore stand in the way of the assessee to get benefit of sub-section (3). So long as there is export turnover within the meaning of definition clause (b) of the Explanation referred to above, the assessee is entitled to the benefit. In the instant case the entire sale proceeds are received in convertible foreign exchange. Therefore the entire export turnover will be eligible for inclusion in the formula. The commission as we have said is part of profit derived from export business and for the application of formula, such commission need not be received in convertible foreign exchange. The formula applied by the assessee is the one stipulated in clause (b) of sub-section (3). The department negatived the claim of the assessee not for the reason that in principle clause (b) of sub-section (3) does not apply, but for the reason that the commission amount was not received in convertible foreign exchange, and secondly there was no profit in export turnover. As regards the first objection is concerned, as we have shown, there is no requirement that the profit in export should be received in convertible foreign exchange but such requirement is only for computing export turnover, which was satisfied in this case. For clause (b) to apply, there should be local turnover. If there is no local turnover, the export turnover itself will constitute total turnover. Thus, looked at from any angle, the conclusion is inescapable that the formula mentioned in clause (b) of sub-section (3) of section 80HHC would have to be applied to the facts of the case of the assessee and appropriate relief to be given. We direct accordingly.

34. Another question that arises in its wake is when there is no local turnover and when the export turnover is fixed, how do we arrive at the total turnover to apply the formula. The answer is simple. In such a case the export turnover would become the total turnover to whatever result that it might lead to. We are therefore of the opinion that the assessee is entitled to the claim it made and the department was not right in rejecting it. It is also significant that the assessee put up its claim under clause (b). We are not embarking upon a discussion about the rightness or the wrongness of the decisions given by the Tribunal relied upon by the Commissioner (A) or pressed into service before us because we thought that we should apply our minds to the facts of the case before us uninfluenced by those views and independently forming our own opinion and then compare our opinion with the opinions already expressed. So comparing those orders of the Tribunal with our view, we would consider that those decisions which conform to our view have properly appreciated the law.

35. As regards the other point of interest, Shri B.B. Ahuja at the time of hearing pinpointed the nexus between the borrowal and the payment of advance tax, which clearly demonstrated that - these borrowers were made only for the payment of advance tax. Such being the position, we are of the opinion that the assessee’s case has no legs to stand and that the disallowance must be held to have been rightly made. Although it was contended that as per the repeated decisions of the Calcutta High Court in Alkali & Chemical Corpn. of India Ltd. v. CIT [1986] 161 ITR 820 , Woolcombers Of India Ltd. v. Commissioner Of Income-Tax (Central), Calcutta. [1982] 134 ITR 219 and Indian Explosives Ltd. v. CIT [1984] 147 ITR 392. the assessee was entitled to the claim, we are of the view that those decisions would not be of much help to the assessee because the establishment of such a direct nexus with the borrowals was not made in those cases. Therefore in those cases a presumption was raised that if all the sale proceeds and the receipts of the business and other moneys were put only in one bank account and if moneys were drawn from such an amalgamated bank account for payment of taxes and if there are profits at the end of the year, it could be presumed that the taxes were paid not out of borrowed funds but out of profits. Here such not being the case, we are unable to accede to the view canvassed on behalf of the assessee. We therefore confirm the disallowance.

36. The third ground of levy of interest under sections 234B and 234C are consequential and we direct the department to give such relief as the assessee is entitled to after giving effect to our order.

37. In the end we wish to perform a duty which is pleasant and which we think it is necessary, namely, to express our grateful thanks to all the interveners, who have taken extraordinary pains to explain to us the provisions of section 80HHC with its hidden intricacies, Shri G.C. Sharma. learned Senior Advocate, Supreme Court, Dr. S. Narayanan, learned Advocate, Shri R. Ganesan, learned Senior Chartered Accountant, Shri. V.U. Eradi. learned Advocate and last but not the least Shri Ajay Vohra, learned Chartered Accountant, whose performance with full of facts, legal conundrums was very refreshing and pleasant. Shri B.B. Ahuja, learned Advocate for the Department had made assiduous study of the points raised and involved. We are thankful to each one of them and place on record our appreciation.

38. In the result, the appeals are allowed in part.

Per Shri T.V. Rajagopola Rao, Vice President - I went through the order proposed by the learned President. I entirely agree with the conclusions reached. However, I intend to add some more reasons which justify our important conclusions.

2. The learned Advocates and counsels appearing for the interveners as well as Shri B.B. Ahuja, the learned Standing Counsel for the Revenue argued before us and also gave propositions in writing in which they contended that deduction under section 80HHC(3)(a) and (b) cannot be allowed if the following conditions are not fulfilled:

(a)The export business carried on by the assessee should result in a profit. If it results in a loss deduction is not available.

(b)Exports and domestic business should be carried on in the same goods.

(c)Profits should be derived on the turnover of the goods sold. Commission received on assignment of export orders to others, though yields profits, they do not partake the character of turnover and hence the commission amount is not entitled to deduction.

(d)If separate accounts are maintained for export business and if the profits derived in the export business are clearly identifiable, then deduction can be given on those profits irrespective of the fact whether the assessee is engaged in other local business either in the same goods or any other goods.

(e)The maximum deduction to which the assessee is entitled to is the one which is worked out under sub-section (3)(a). What is worked out as deduction under sub-section (3)(a) is the outer limit within which the deduction under sub-section (3)(b) is allowable. The deduction allowable under sub-section (3)(b) should not exceed the said maximum limit.

3. Clause (b ) of sub-section (3) of section 80HHC provides the manner of arriving at the profits relating to export business. where the assessee carries on domestic trade of goods or merchandise. in addition to the export of goods or merchandise. For applying clause (b) of sub-section (3), the domestic turnover is necessary and domestic turnover would exist only on sale of goods or merchandise but not otherwise. In a case where the domestic income was from commission. consultancy, interest. etc., there was no income because of there being no sale of goods or merchandise and hence the assessee is not entitled to deduction.

4. The learned Advocates, counsels as well as the standing counsel for the Revenue felts that unless the words "a deduction of profits derived by the assessee from export of such goods or merchandise" are interpreted and their true meaning found out, it is not possible to have a key to the whole section.

5. It would appear they held the view that a literal, ordinary. equitable, rational and common sense point of view of interpretation which the above words bear would signify their true meaning. For instance, they thought that once deduction depends upon profits derived by the assessee from export of goods or merchandise. How can an assessee who sustained loss in the export of goods be allowed deduction?

6. When the intendment of Legislature is to encourage exports, the justifiable way in which sub-section (3)(b) should be understood is to lay down that unless the exports as well as domestic business are carried on in the same goods, deduction cannot be claimed. They felt that otherwise the apportionment between the total turnover and export turnover would become impossible. According to them, total turnover should be in the same goods in which the export turnover is obtained. The goods exported and the goods in which domestic business is carried on should be of the same species. Similarly, they felt that unless there is a sale of goods and merchandise and turnover of such goods and merchandise obtained in domestic business also a division or effecting a proportion between export turnover and total turnover would not be justifiable. It was also felt that when deduction is primarily granted on the basis of export business. the maximum of deduction allowable should also be fixed with reference to such business. Even a fraction of domestic business in other goods which are not similar to the goods exported should not be permitted to have the benefits of deduction.

7. The above interpretations sought to be put by them as to the meaning of the words "a deduction of profits derived by the assessee from the export of such goods and merchandise" ignores the special meaning given to those words in sub-section (3). The opening words of sub-section (3) themselves show the special meaning given to the words which occur at the last of sub-section (1) and they are the following:

"For the purposes of sub-section (1) profits derived from the export of goods or merchandise out of India shall be..."

C.B.D.T. Circular No. 564, dated 5-7-1990 para No. 4 is to the following effect :—

"4. Sub-section (3) of section 80HHC statutorily fixes the quantum of deduction on the basis of a proportion of the profits of business under the head "Profits and gains of business or profession" irrespective of what could strictly be described as "profits derived from the export of goods or merchandise out of India". The deduction is computed in the following manner:-

Thus the above discloses that irrespective of the fact that what could strictly be described as "profits derived from the export of goods or merchandise out of India", the deduction is to be worked out by applying the formula provided in that para of the C.B.D.T Circular. The special meaning carried by those words was thus emphasised even by the C.B.D.T.

8. Shri Vohra, one of the Advocates for the interveners argued that sub- section (3) of section 80HHC provides a straight jacket formula for determination of profits from exports in. order not to leave that determination to the subjective satisfaction of the assessee or the assessing authority and to steer clear of any litigation on this aspect. It appears to us to be correct understanding of the provision.

9. The words "profits derived by the assessee from the export of such goods or merchandise" carry a special meaning and in our view a fictional meaning. That meaning is to be given while interpreting sub-section (3) and, therefore, the ordinary meaning which the said words "profits derived from the export of such goods or merchandise" should not be adopted. Now if a fictional meaning is given by the statute. we have to take that fiction till the end and we should not mind the consequence of taking it to the end. We. should not boggle our minds in the middle. In fact, the principle how to appreciate legal fiction is authoritatively given by the Hon’ble Supreme Court in Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum [1981] 129 ITR 440 . The question that cropped up for consideration before the Supreme Court was about the interpretation of Explanation 1 to section 6 of the Hindu Succession Act, 1956 (30 of 1956). According to that. provision, when a Hindu male dies after the commencement of the Act having at the time of his death an interest in a mitakshara coparcenary property, his interest in the property shall devolve by survivorship upon the surviving members of the coparcenary and not in accordance with the Act. However, in a case inter alia where the deceased leaves behind a female relative specified in Class-I of the Schedule then the interest of the deceased shall devolve by testamentary or intestate succession as the case may be and not by survivorship under Explanation 1 the interest of a Hindu Mitakshara coparcener shall be deemed to be the share in the property that would have been allotted to him if a partition of the property had taken place immediately before his death, irrespective of whether he was entitled to claim partition or not. So it is clear that Explanation - 1 to section 6 of the Hindu Succession Act raises a deeming fiction. The question before the Hon’ble Supreme Court in that case was whether the plaintiff who was the widow of the deceased coparcener is entitled to 1/6th share or 1/24th share. If a family partition prior to the death of the deceased is presumed or deemed or taken for granted the plaintiff is entitled to 1/6th share but if the fiction is ignored and only actual state of affairs were taken into consideration the plaintiff is entitled to 1/24th share. In that connection, the Supreme Court at page 447 of the reported decision held the following:—

"What is, therefore, required to be assumed is that a partition had in fact taken place between the deceased and his coparceners immediately before his death. That assumption, once made, is irrevocable. In other words. the assumption having been made once for the purpose of ascertaining the share of the deceased in the coparcenary property, one cannot go back on that assumption and ascertain the share of the heirs without reference to it. The assumption which the statute requires to be made that a partition had in fact taken place must permeate the entire process of ascertainment of the ultimate share of the heirs. through all its stages. To make the assumption at the initial stage for the limited purpose of ascertaining the share of the deceased and then to ignore it for calculating the quantum of the share of the heirs is truly to permit one’s imagination to boggle. All the consequences which flow from a real partition have to be logically worked out, which means that the share of the heirs must be ascertained on the basis that they had separated from one another and had received a share in the partition which had taken place during the lifetime of the deceased."

In the appeals before us also the special meaning given to the words "profits derived by the assessee from the export of such goods or merchandise" should be carried all through and permeate all the stages of assessment. The special meaning cannot be given at a particular stage and should be left out at another particular stage or for another purpose. What we have to see is whether there were profits of business. Any sort of receipt which ultimately gives rise to business profits - whether such profits were derived from domestic business or receipt which is of a profit nature from the beginning, would constitute the base figure from which the deduction is to be worked out by applying the proportion of export turnover to the total turnover. So in a case where the assessee is an exporter as well as a person carrying on domestic business either in the same goods, merchandise or in different goods or only earns profits even way of commission, he is entitled for deduction proportionately from out of the profits of the business. The deduction must be worked out from out of the total profits at the same proportion as the export turnover bears to he total turnover of the business carried on by the assessee.

10. A fair reading of sub-sections (3)(a) and (3)(b ) of section 80HHC would show that there is no difficulty in understanding the language of the section or its meaning. The words of the section and their meaning are clear and unambiguous and they do not require any interpretation. If the assessee carries on exclusive export business and earns income, he is entitled for deduction under sub-section (3)(a) provided he exports goods or merchandise which do not come under prohibited category under sub section (2)(b). In case he maintains books of account for the export business and the profits and gains derived from his export business is ascertainable, then his export turnover as well as the total turnover would be the same figure and he is entitled to deduction under sub-section (3)(a). But in case the assessee besides being an exporter of goods or merchandise to countries outside India also has got domestic business of either the same goods which are quite unconnected with his export trade of even in a case where he does not have any turnover in his domestic trade but merely gets profits and he maintains common books of account both for his export business as well as for his-business in India. then his case is to be dealt with under sub-section (3)(b) and is entitled to proportionate deduction derived which is to be worked out on the following basis, namely:

In a case where the assessee does not carry any trade as such in India but only earns profits like commission, just like in the case before us. the export turnover as well as the total turnover would remain one and the same and he does not lose the deduction by virtue of the fact that he does not carry on any business in India but merely earns profits on commission. We have already seen that 90% of the commission, brokerage etc. were excluded from the profits of business only from 1-4-1992 by means of an amendment brought about by Finance (No. 2) Act, 1991. The fact that it is not a retrospective amendment is also borne out by Memorandum explaining the provisions of the Statute in the Parliament which is entitled for great weight. The said prospective amendment as well as the Memorandom explaining the provisions at the introducing of the Bill in the Parliament would inferentially suggest that for the assessment years with which we are concerned namely 1990-91 and 1991-92, hundred per cent commission and brokerage should be considered as part of the profits of the business. Further, the C.B.D.T. by virtue of its circulars No. 564, dated 5-7-1990 and No. 621, dated 12-12-1991, which were already adverted to earlier in the orders proposed by the learned President, had clearly explained the provisions of section 80HHC.

11. Having regard to all the above, we are of the opinion that there is no warrant to hold that for getting deduction the assessee has to export the goods or merchandise out of India and also do domestic business in the same goods or merchandise. We hold that the assessee can deal in altogether different goods than the goods exported but yet entitled for deduction under section 80HHC. Further, simply because the assessee does not have any domestic business turnover but only gets profits like commission, he does not lose the deduction under section 80HHC(3)(b). We also hold that the view expressed that the maximum deduction is conditioned by the allowable deduction under sub-section (3)(a) cannot be stated to be correct in law.

12. I concur with the learned President in all the reasons given by him in his orders and also the conclusions reached by him.