Consignment-wise Bank Realization Certificate sufficient for S.80HHC Deductions on Export Profits: Punjab and Haryana HC [Read Order]

The Punjab &Haryana High Court recently clarified that consignment-wise Bank Realisation Certificates (BRC) are sufficient for exporters to prove their eligibility to avail deductions under Section 80HHC of the Income Tax Act, 1961 pertaining to profits from export.

The observation was made by the High Court while adjudicating an Income Tax Appeal filed by D.D. International Pvt. Ltd. against the Commissioner of Income Tax, Bathinda.

D.D. International Pvt. Ltd. is an exporter of goods that are eligible for Duty Entitlement Passbook (DEPB) benefits under the Foreign Trade (Development and Regulation) Act 1992. The appellant had filed its returns for the Assessment Year 2003-04 and claimed deductions on profits from exports under Section 80HHC of the Act.

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However, the Assessing Officer (AO) found fault with the claim, that the appellant had not furnished Bank Realisation Certificates for a portion of its exports to the tune of ₹201 crores. The AO accordingly held that without proof of foreign-exchange realization through BRCs, the assessee was not entitled to claim the corresponding portion of deduction.

The assessee consequently pursued unsuccessful litigation before the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT), which upheld the disallowance.

It is against this order by the ITAT that the appellant has approached the Punjab & Haryana High Court.

At the outset, the counsel for both parties were ad idem that the question of applicability of Section 80HHC(3) on exporters having export turnover of more than ₹10 crores stood settled in favour of the assessee by Supreme Court decision in C.I.T. -5 &Anr. Vs. M/s Avani Exports & Anr.

Pankaj Jain and Divya Suri appearing for the appellant contended before the High Court that the appellant had submitted consignment-wise BRC with the Directorate General of Foreign Trade and the Income Tax Authorities, and that there was no provision for a consolidated BRC.

Vaibhav Gupta, Standing Counsel for the Revenue prayed that the matter be remanded to the AO to verify the authenticity of the BRC as the ITAT had not adverted to the question of BRC.

The Division Bench comprising Justice Jagmohan Bansal and Justice Amarinder Singh Grewal observed that the substantive issue regarding the entitlement of large exporters to deduction under Section 80HHC(3) was already resolved by the Supreme Court. In terms of whether the BRC was submitted, the Bench noted that there are all possibilities of the BRC being submitted by the appellant with the DGFT and Customs.

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It was accordingly held that the appellant cannot be denied benefit of deduction on the ground that it has not submitted consolidated BRC.

In disposal, the Court directed the AO to re-examine its record for the consignment-wise BRC; if the certificates had not yet been furnished, the assessee could submit them before the appellate authority which would be verified and the deduction granted accordingly.

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