Law:

Section:

Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters - Assessment year 1990-91 - Whether where assessee was carrying on business of export of his own products and was also procuring export contracts for other exporters on commission basis, income derived by assessee towards commission/brokerage for procuring orders of export for others would be eligible to exemption from tax under section 80HHC - Held, yes - Whether amendment to section 80HHC by the Finance (No. 2) Act, 1991, were prospective in nature - Held, yes Circular and Notifications - Circular No. 621, dated 19-12-1991 FACTS The assessee was carrying on business of export of his own products and was also procuring export contracts for the other exporters on commission basis. In the assessment year 1990-91, the assessee derived income by way of commission whereas as an exporter of goods he incurred a loss. The assessee claimed deduction in respect of the income derived towards commission/brokerage for procuring orders of export for others under section 80HHC. The Assessing Officer disallowed the exemption claimed under section 80HHC on the ground that the assessee had incurred a loss in respect of the export business. On appeal, the Commissioner (Appeals) rejected the claim of the assessee. On further appeal, the Tribunal held that commission and brokerage for procuring export contracts for other exporters was exempted under section 80HHC on the ground that the same formed part of export profits. On reference, the High Court held that the income derived by the assessee towards the commission/brokerage for procuring the export contracts for the other exporters was not eligible to exemption from tax under section 80HHC. Referring to the Circular No. 621, dated 19-12-1991 issued by the CBDT, the High Court further held that although the provision of section 80HHC was amended by the Finance (No. 2) Act, 1991 with effect from 1-4-1992 by inserting an Explanation whereby and whereunder the profit derived out of such commission/brokerage was confined to 10 per cent of the income, the same being clarificatory in nature, would have retrospective effect. On appeal to the Supreme Court : HELD On a…

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