Judgment :- Radhakrishnan, Ag. C.J. Whether turnover on sales to Export House undertaken by the assessee as a supporting manufacturer be included in the “export turnover” for the purpose of computation of deduction under the proviso to sub-section (3) of Section 80 HHC of the Incometax Act, 1961, is the question that has come up for consideration in this case. 2. Assessee is a cashew exporter who had made direct and indirect exports for the assessment year 1992-93 and claimed total deduction of an amount of Rs.97,54,515/- under Section 80 HHC (1) and (1A) of the Income tax Act, 1961. The assessing officer granted separate deductions under Section 80 HHC(1) and 80 HHC (1A) in respect of both direct and indirect exports totaling an amount of RS.91,10,306/- as against the claim of Rs.97,54,515/- while granting deduction under the proviso to Section 80 HHC (3) the assessing officer excluded sales to export houses from “Export turnover” and reworked relief at Rs.12,63,532/-. Aggrieved by the said order, assessee took up the matter before the Commissioner of Income tax (Appeals). The Commissioner (Appeals) upheld the order of the assessing officer on the ground that export turnover for the purpose of the proviso to sub-section (3) includes only direct export since sub-section (3) deals with the quantification of deduction in the case of direct exports and the quantum of deduction can be computed only on the basis of the direct export turnover. He also took note of the deduction separately granted on indirect exports under Section 80HHC (1A) of the Act. Assessee took up the matter before the Tribunal. Tribunal following the decision of the Delhi Bench of the Tribunal in the case of Eastern Leather Products Pvt. Ltd. (68 ITD 358) directed the assessing officer to recompute the income of the assessee and to allow whatever benefits that would have been allowed to the export house had they not issued the disclaimer certificate. Commissioner of Incometax is aggrieved by that order and has come up with this appeal. 3. Senior Standing Counsel for the Income tax Department Sri. P.K. Ravindranatha Menon submits that the Tribunal has committed an error in granting benefits to supporting manufacturer since the export turnover for the purpose of the proviso to sub-section (3) includes only direct export. Commissioner of Incometax is aggrieved by that order and has come up with this appeal. 3. Senior Standing Counsel for the Income tax Department Sri. P.K. Ravindranatha Menon submits that the Tribunal has committed an error in granting benefits to supporting manufacturer since the export turnover for the purpose of the proviso to sub-section (3) includes only direct export. Sub-section (3) deals with the quantification of deduction in the case of a direct exporter and the quantum of deduction can be computed only on the basis of the export turnover. Counsel submitted that the Tribunal has not properly understood the scope of Section 80 HHC and the provisions thereunder. Counsel appearing for the respondent assessee Sri. P. Balachandran on the other hand contended that under sub-section (1) of Section 802 HHC if an export house or trading house issues a certificate in respect of export turnover specified therein deduction under the said sub-section is to be allowed to a supporting manufacturer. Counsel submitted that supporting manufacturer is eligible for all deductions as calculated under sub-section (3) including its proviso. Counsel further submitted that when export house had issued a disclaimer certificate, the export house was prohibited from claiming any deduction in respect of the turnover mentioned in the disclaimer certificate ad the supporting manufacturer should get the full benefit. Counsel submitted that Section 80 HHC is a beneficial one and be interpreted liberally. 4. Assessee, as we have already indicated, had made direct and indirect exports during the assessment year 1992-93. Assessee had directly exported cashew kernels and also sold some quantity to export house who in turn exported the same. Assessee as a supporting manufacturer effected sales to ITC Limited, Calcutta and Britannia Industries Limited, Bangalore. Assesee had claimed deduction under sub-section (1A) of Section 80 HHC. Form No.10 CCAB issued by the export houses was produced to show that they had exported the goods or merchandise manufactured and sold to them by the assessee during the relevant assessment year. Assessee had therefore claimed deduction both under Section 80 HHC (1) being an exporter and under sub-section (1A) in the capacity of a supporting manufacturer. Since assessee had sold kernels locally computation of deduction under sub-section (1) has to be made as provided under clause (c) of sub-section (3) and also the provisos thereunder. Assessee had therefore claimed deduction both under Section 80 HHC (1) being an exporter and under sub-section (1A) in the capacity of a supporting manufacturer. Since assessee had sold kernels locally computation of deduction under sub-section (1) has to be made as provided under clause (c) of sub-section (3) and also the provisos thereunder. Under the proviso assessee is entitled to 90% of any sum referred to in clause (iii-a) and clauses (iii-b) and (iii-c) of Section 28, same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. We may in this connection extract Section 80 HHC for easy reference.80 HHC. Deduction in respect of profits retained for export business. (1) Where an assesee, 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. xx xx xx xx xx xx xx (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 assesee 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 received in, or brought into, India 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 (other than processed minerals and ores specified in the Twelfth Schedule)Explanation 1.The sale proceeds referred to in clause (a) shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assesee with any bank outside India with the approval of the Reserve Bank of India.Explanation 2.For the removal of doubts, it is hereby declared that where any goods or merchandise are transferred by an assessee to a branch, office, warehouse or any other establishment of the assesee situate outside India and such goods or merchandise are sold from such branch, office, warehouse or establishment, then, such transfer shall be deemed to be export out of India of such goods and merchandise declared in the shipping bill or bill of export as referred to in sub-section (1) of Section 50 of the Customs Act, 1962 (52 of 1962) shall, for the purposes of this section, be deemed to be the sale proceeds thereof. xx xx xx xx (3) For the purposes of sub-section (1)- (a) Where the export out of India is of goods or merchandise (manufactured or processed by the assessee,) the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee;(b) where the export out of India is of trading goods, the profits derived from such export shall be the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export;(c) where the export out of India is of goods or merchandise (manufactured or processed by the assessee) and of trading goods, the profits derived from such export shall, -(i) in respect of the goods or merchandise (manufactured or processed by the assesee) be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee; and(ii) in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods: xx xx xx xx xx xx xx Explanation – For the purposes of this sub-section,-(a) “adjusted export turnover” means the export turnover as reduced by the export turnover in respect of trading goods;(b) “Adjusted profits of the business” means the profits of the business as reduced by the profits derived from the business of export out of India of trading goods as computed in the manner provided in clause (b) of sub-section (3). xx xx xx xx xx xx xx (f) “trading goods” means goods which are not manufactured or processed by the assessee. xx xx xx xx xx xx xx (f) “trading goods” means goods which are not manufactured or processed by the assessee. xx xx xx xx xx xx xx (3A) For the purpose 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.(b) in a case where the business carried on by the supporting manufacturer does not consists 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 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 assesse. xx xx xx xx xx xx xx (4) The deduction under sub-section (1) shall not be admissible unless the assesee 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 in accordance with the provisions of this section.(4A) The deduction under sub-section (1A) shall not be admissible unless the supporting manufacturer furnishes in the prescribed form along with his return of income,-(a) 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 profits of the supporting manufacturer in respect of his sale of goods or merchandise to the Export House or Trading House; and (b) a certificate from the Export House or Trading House containing such particulars as may be prescribed and verified in the manner prescribed that in respect of the export turnover mentioned in the certificate, the Export House or Trading House has not claimed the deduction under this section:Provided that the certificate specified in clause (b) shall be duly certified by the auditor auditing the accounts of the Export House or Trading House under the provisions of this Act or under any other law.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;(aa) “export out of India” shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962 (52 of 1962).(b) “export turnover” means the sale proceeds received in, or brought into India by the assessee in convertible foreign exchange in accordance with clause (a) of sub-section (2) of any goods or merchandise to which this section applies and which are exported out of India, but does not include right or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act. 1962.(ba) “total turnover shall 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)Provided that in relation to any assessment year commencing on or after the 1st day of April, 1991 the expression total turnover shall have effect as if it also excluded any sum referred to in clauses (iiia), (iiib) and (iiic) of Section 28. xx xx xx xx xx xx xx (c) “Export House Certificate” or “Trading House Certificate” means a valid Export House Certificate or Trading House Certificate, as the case may be, issued by the Chief Controller of imports and Exports, Government of India.(d) “supporting manufacturer” means a person being an Indian company or a person (other than a company) resident in India, manufacturing including proceeding goods or merchandise and selling such goods or merchandise to an Export House or a Trading House for the purposes of export.”Assessing officer computed deduction under the proviso to sub-section (3) at Rs.12,63,532/- applying the following formula. Export incentive x Export turnover --------------------------------- Total turnover ------ and calculated as follows: 23,18,874 x 6,37,05,238 = 12,63,532 ----------------------- 11,69,13,807Rs. 23, 18, 874/- represents 90% of the sums referred to in clause (iii-a), (iii-b) and (iii-c) of Section 28 and Rs.11,69,13,807/- being the total turnover. Dispute is with regard to the figure of Rs.6,37,05,238/- in the numerator adopted by the assessing officer as export turnover. We have already pointed out, the assessee wanted to include sum of Rs.3,19,47,436/- being the indirect exports also in the export turnover. Assessee’s contention is that this is the sum representing the goods sold to the export houses and is in the nature of indirect exports made by the assessee as a supporting manufacturer. Further contention of the assessee is that the export houses had issued disclaimer certificate in respect of indirect exports and therefore assessee would be entitled to deduction under sub-section (1) in respect of that turnover. 5. We are of the view, Tribunal has misunderstood the scope and ambit of Section 80 HHC and the benefit that are separately made available to direct exports and indirect exports, i.e. sales to export houses by the supporting manufacturer. We have already indicated that under sub-section (1) of Section 80 HHC assessee is entitled to deduction in respect of profits derived from export of any goods or merchandise. We have already indicated that under sub-section (1) of Section 80 HHC assessee is entitled to deduction in respect of profits derived from export of any goods or merchandise. Relief is also available under sub-section (1A) to assessee being a supporting manufacturer which sold goods or merchandise to any export house or trading house in respect of which the export houses or trading house and issued a disclaimer certificate. Similarly the quantum of deduction in the case of supporting manufacturer is to be computed in the manner provided under sub-section (3A). We have already indicated that under the proviso to sub-section (3) assessee would be entitled to deduction in respect of any sum referred to in clauses (iii-a), (iii-b) and (iii-c) of Section 28 which in fact is granted. However, the dispute in this case is as to whether sales to export houses by the assessee should be treated as export turnover for computing relief under the said proviso. Export turnover for the purpose of the proviso to sub-section (3) includes only direct export since sub section (3) deals with the quantification of deduction in the case of an exporter. The term export turnover has been defined in Explanation (b) below Section 80 HHC. The definition of “export turnover” means the sale proceeds received in or brought into India by the assessee in convertible foreign exchange in accordance with clause (a) of sub-section (2) of Section 80 HHC of any goods or merchandise to which Section 80 HHC applies and which are 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. Sub-section (1A) of Section 80 HHC provides that the supporting manufacturer who has sold goods or merchandise to any export house shall be allowed a deduction of the profits derived from the sale of goods or merchandise to the export house or trading house. Method of computing the profit is prescribed in sub-section (3A) which deals with the deduction allowable to supporting manufacturer Sub-section (3) deals only with the case of a direct exporter and hence the quantum of deduction can be computed only on the basis of the export turnover. So far as the sales by the appellant to the export or trading house is concerned, it cannot be treated as an export at all. So far as the sales by the appellant to the export or trading house is concerned, it cannot be treated as an export at all. The mere fact that the export or trading house exports the goods sold by the appellant does not make the appellant’s sales to them as “export turnover”. 6. We may incidentally refer to the Bench decision of this Court in C.I.T. v. Smt. T.C. Usha (2004) (266) ITR 497) wherein the Division Bench of this court held that Section 80 HHC of the Act is a special provision which provides for a deduction in respect of profits retained for export business and sub-section (1) provides that the deduction shall be allowed in accordance with and subject to the provisions of the Section. The above decision came up for consideration before the apex court in IPCA Laboratory Ltd v. Dy. Commissioner of Incometax (2004(266) ITR 521) and the apex court overruled the decision of this court in T.C. Usha’s case, supra (2004 (266) ITR 497). The apex court held. “Undoubtedly section 80 HHC has been incorporated with a view to providing incentive to export houses. Even though a liberal interpretation has to be given to such a provision the interpretation has to be as per the wording of this section. If the wordings of the Section are clear then benefits, which are not available under the Section, cannot be conferred by ignoring or misinterpreting words in the section.” We are of the view that the benefits available to exporter and supporting manufacturer have to be separately computed in accordance with the specific provisions of the Act. While Section 80 HHC (1) read with Section 80 HHC (3) provides for computation and deduction of profit on direct exports, 80 HHC (1A) read with Section 80 HHC (3A) provides for computation and deduction of export profit for a supporting manufacturer. Since sales turnover of sales made by the appellant to the export houses do not answer the description of “export turnover” provided that the definition clause noted by us above, the assessing officer rightly excluded such turnover from export turnover while computing relief available to the appellant under the proviso to Section 80 HHC (3) of the Act. Since sales turnover of sales made by the appellant to the export houses do not answer the description of “export turnover” provided that the definition clause noted by us above, the assessing officer rightly excluded such turnover from export turnover while computing relief available to the appellant under the proviso to Section 80 HHC (3) of the Act. The decision of the Delhi Tribunal relied on by the Incometax Appellate Tribunal in this case is a case of total disallowance of export incentives and the question whether sales to export houses constitute “export turnover” or not for computation of relief under the proviso to Section 80 HHC (3) did not arise nor was it decided in that case. The decision of the Tribunal is therefore not sustainable and we therefore allow the appeal filed by the Department by setting aside the order of the Tribunal and restoring the order of the Commissioner of Incometax (Appeals).