Apex court set aside the Bombay High court orders=the Bombay High Court holding that the entire amount received by an assessee on sale of the Duty Entitlement Pass Book (for short `the DEPB') represents profit on transfer of DEPB under Section 28(iiid) of the Income Tax Act, 1961 (for short `the Act') for the purpose of the computation of deduction in respect of profits retained for export business under Section 80HHC of the Act. =It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in explanation (baa) to Section 80HHC read with the words used in clauses (iiid) and (iiie) of Section 28, the assessee was entitled to a deduction under Section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee. 23. The impugned judgment and orders of the Bombay High Court are accordingly set-aside. The appeals are allowed to the extent indicated in this judgment. The Assessing Officer is directed to compute the deduction

Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No. 1699 OF 2012 (Arising out of SLP (C) NO. 26558 OF 2010) M/s Topman Exports ... Appellant Versus Commissioner of Income Tax, Mumbai ... Respondent WITH CIVIL APPEAL No. 1700 OF 2012 (Arising out of SLP (C) No. 27418 of 2010), CIVIL APPEAL No. 1701 OF 2012 (Arising out of SLP (C) No.27552 of 2010), CIVIL APPEAL No. 1704 OF 2012 (Arising out of SLP (C) No.27583 of 2010), CIVIL APPEAL No. 1705 OF 2012 (Arising out of SLP (C) No. 27608 of 2010), CIVIL APPEAL No. 1706 OF 2012 (Arising out of SLP (C) No.27994 of 2010), CIVIL APPEAL No. 1707 OF 2012 (Arising out of SLP (C) No.28036 of 2010), CIVIL APPEAL No. 1708 OF 2012 (Arising out of SLP (C) No.28044; of 2010), CIVIL APPEAL No. 1709 OF 2012 (Arising out of SLP (C) No.28131 of 2010), 2 CIVIL APPEAL No. 1710 OF 2012 (Arising out of SLP (C) No.28167 of 2010), CIVIL APPEAL No. 1711 OF 2012 (Arising out of SLP (C) No.28173 of 2010), CIVIL APPEAL No. 1728 OF 2012 (Arising out of SLP (C) No.27952 of 2010), CIVIL APPEAL No. 1729 OF 2012 (Arising out of SLP (C) No.28365 of 2010), CIVIL APPEAL No. 1730 OF 2012 (Arising out of SLP (C) No.29290 of 2010), CIVIL APPEAL No. 1731 OF 2012 (Arising out of SLP (C) No.29314 of 2010), CIVIL APPEAL No. 1732 OF 2012 (Arising out of SLP (C) No.29596 of 2010), CIVIL APPEAL No. 1733 OF 2012 (Arising out of SLP (C) No.30461 of 2010), CIVIL APPEAL No. 1734 OF 2012 (Arising out of SLP (C) No.30462 of 2010), CIVIL APPEAL No. 1735 OF 2012 (Arising out of SLP (C) No.30011 of 2010), CIVIL APPEAL No. 1736 OF 2012 (Arising out of SLP (C) No.30018 of 2010), CIVIL APPEAL No. 1737 OF 2012 (Arising out of SLP (C) No.30020 of 2010), CIVIL APPEAL No. 1738 OF 2012 (Arising out of SLP (C) No.30023 of 2010), CIVIL APPEAL No. 1739 OF 2012 (Arising out of SLP (C) No.30100 of 2010), 3 CIVIL APPEAL No. 1740 OF 2012 (Arising out of SLP (C) No.30281 of 2010), CIVIL APPEAL No. 1741 OF 2012 (Arising out of SLP (C) No.30283 of 2010), CIVIL APPEAL Nos. 1712 OF 2012 (Arising out of SLP (C) No.30289 of 2010), CIVIL APPEAL No. 1713 OF 2012 (Arising out of SLP (C) No.30306 of 2010), CIVIL APPEAL No. 1714 OF 2012 (Arising out of SLP (C) No.30345 of 2010), CIVIL APPEAL No. 1715 OF 2012 (Arising out of SLP (C) No.30374 of 2010), CIVIL APPEAL No. 1716 OF 2012 (Arising out of SLP (C) No.30375 of 2010), CIVIL APPEAL No. 1717 OF 2012 (Arising out of SLP (C) No.30379 of 2010), CIVIL APPEAL No. 1718 OF 2012 (Arising out of SLP (C) No.30381 of 2010), CIVIL APPEAL No. 1719 OF 2012 (Arising out of SLP (C) No.30393 of 2010), CIVIL APPEAL No. 1720 OF 2012 (Arising out of SLP (C) No.30411 of 2010), CIVIL APPEAL No. 1721 OF 2012 (Arising out of SLP (C) No.30426 of 2010), CIVIL APPEAL No. 1722 OF 2012 (Arising out of SLP (C) No.30468 of 2010), 4 CIVIL APPEAL Nos. 1723-1724 OF 2012 (Arising out of SLP (C) No.30521-30522 of 2010), CIVIL APPEAL No. 1725 OF 2012 (Arising out of SLP (C) No.30549 of 2010), CIVIL APPEAL Nos. 1726-1727 OF 2012 (Arising out of SLP (C) Nos.29853-29854 of 2010), CIVIL APPEAL No. 1742 OF 2012 (Arising out of SLP (C) No.30215 of 2010), CIVIL APPEAL No. 1743 OF 2012 (Arising out of SLP (C) No.30378 of 2010), CIVIL APPEAL No. 1744 OF 2012 (Arising out of SLP (C) No.30380 of 2010), CIVIL APPEAL No. 1745 OF 2012 (Arising out of SLP (C) No.30388 of 2010), CIVIL APPEAL No. 1746 OF 2012 (Arising out of SLP (C) No.30390 of 2010), CIVIL APPEAL No. 1747 OF 2012 (Arising out of SLP (C) No.30543 of 2010), CIVIL APPEAL No. 1748 OF 2012 (Arising out of SLP (C) No.30546 of 2010), CIVIL APPEAL No. 1749 OF 2012 (Arising out of SLP (C) No.30572 of 2010), CIVIL APPEAL No. 1750 OF 2012 (Arising out of SLP (C) No.30574 of 2010), CIVIL APPEAL No. 1754 OF 2012 (Arising out of SLP (C) No.30657 of 2010), CIVIL APPEAL No. 1755 OF 2012 (Arising out of SLP (C) No.30569 of 2010), 5 CIVIL APPEAL No. 1756 OF 2012 (Arising out of SLP (C) No.32066 of 2010), CIVIL APPEAL No. 1757 OF 2012 (Arising out of SLP (C) No.32069 of 2010), CIVIL APPEAL Nos. 1758-1759 OF 2012 (Arising out of SLP (C) Nos.30733-30734 of 2010), CIVIL APPEAL No. 1760 OF 2012 (Arising out of SLP (C) No.30597 of 2010), CIVIL APPEAL No. 1761 OF 2012 (Arising out of SLP (C) No.30626 of 2010), CIVIL APPEAL No. 1762 OF 2012 (Arising out of SLP (C) No.30634 of 2010), CIVIL APPEAL No. 1763 OF 2012 (Arising out of SLP (C) No.30644 of 2010), CIVIL APPEAL No. 1764 OF 2012 (Arising out of SLP (C) No.30665 of 2010), CIVIL APPEAL No. 1765 OF 2012 (Arising out of SLP (C) No.30671 of 2010), CIVIL APPEAL No. 1766 OF 2012 (Arising out of SLP (C) No.30680 of 2010), CIVIL APPEAL No. 1767 OF 2012 (Arising out of SLP (C) No.30684 of 2010), CIVIL APPEAL No. 1768 OF 2012 (Arising out of SLP (C) No.30689 of 2010), CIVIL APPEAL No. 1769 OF 2012 (Arising out of SLP (C) No.30721 of 2010), CIVIL APPEAL No. 1770 OF 2012 6 (Arising out of SLP (C) No.30902 of 2010), CIVIL APPEAL No. 1771 OF 2012 (Arising out of SLP (C) No.31085 of 2010), CIVIL APPEAL No. 1772 OF 2012 (Arising out of SLP (C) No.31107 of 2010), CIVIL APPEAL No. 1773 OF 2012 (Arising out of SLP (C) No.31131 of 2010), CIVIL APPEAL No. 1774 OF 2012 (Arising out of SLP (C) No.31134 of 2010), CIVIL APPEAL No. 1775 OF 2012 (Arising out of SLP (C) No.31304 of 2010), CIVIL APPEAL No. 1776 OF 2012 (Arising out of SLP (C) No.31385 of 2010), CIVIL APPEAL No. 1777 OF 2012 (Arising out of SLP (C) No.31450 of 2010), CIVIL APPEAL No. 1778 OF 2012 (Arising out of SLP (C) No.31849 of 2010), CIVIL APPEAL No. 1779 OF 2012 (Arising out of SLP (C) No.32531 of 2010), CIVIL APPEAL No. 1780 OF 2012 (Arising out of SLP (C) No.30628 of 2010), CIVIL APPEAL No. 1781 OF 2012 (Arising out of SLP (C) No.30635 of 2010), CIVIL APPEAL No. 1782 OF 2012 (Arising out of SLP (C) No.30646 of 2010), CIVIL APPEAL No. 1783 OF 2012 (Arising out of SLP (C) No.32532 of 2010), 7 CIVIL APPEAL No. 1784 OF 2012 (Arising out of SLP (C) No.30647 of 2010), CIVIL APPEAL No. 1785 OF 2012 (Arising out of SLP (C) No.32533 of 2010), CIVIL APPEAL No. 1786 OF 2012 (Arising out of SLP (C) No.30653 of 2010), CIVIL APPEAL No. 1787 OF 2012 (Arising out of SLP (C) No.30673 of 2010), CIVIL APPEAL No. 1788 OF 2012 (Arising out of SLP (C) No.30674 of 2010), CIVIL APPEAL No. 1789 OF 2012 (Arising out of SLP (C) No.30675 of 2010), CIVIL APPEAL No. 1790 OF 2012 (Arising out of SLP (C) No.30677 of 2010), CIVIL APPEAL No. 1791 OF 2012 (Arising out of SLP (C) No.30686 of 2010), CIVIL APPEAL No. 1792 OF 2012 (Arising out of SLP (C) No.30708 of 2010), CIVIL APPEAL No. 1793 OF 2012 (Arising out of SLP (C) No.32534 of 2010), CIVIL APPEAL No. 1794 OF 2012 (Arising out of SLP (C) No.30906 of 2010), CIVIL APPEAL No. 1795 OF 2012 (Arising out of SLP (C) No.33218 of 2010), CIVIL APPEAL Nos. 1796-1799 OF 2012 (Arising out of SLP (C) Nos.34081-34084 of 2010), CIVIL APPEAL No. 1800 OF 2012 (Arising out of SLP (C) No.34078 of 2010), 8 CIVIL APPEAL No. 1801 OF 2012 (Arising out of SLP (C) No.32228 of 2010), CIVIL APPEAL No. 1802 OF 2012 (Arising out of SLP (C) No.32256 of 2010), CIVIL APPEAL No. 1803 OF 2012 (Arising out of SLP (C) No.33925 of 2010), CIVIL APPEAL No. 1804 OF 2012 (Arising out of SLP (C) No.32308 of 2010), CIVIL APPEAL No. 1805 OF 2012 (Arising out of SLP (C) No.32339 of 2010), CIVIL APPEAL No. 1806 OF 2012 (Arising out of SLP (C) No.32384 of 2010), CIVIL APPEAL No. 1807 OF 2012 (Arising out of SLP (C) No.34046 of 2010), CIVIL APPEAL No. 1808 OF 2012 (Arising out of SLP (C) No.34047 of 2010), CIVIL APPEAL No. 1809 OF 2012 (Arising out of SLP (C) No.32946 of 2010), CIVIL APPEAL No. 1810 OF 2012 (Arising out of SLP (C) No.33708 of 2010), CIVIL APPEAL No. 1811 OF 2012 (Arising out of SLP (C) No.33692 of 2010), CIVIL APPEAL No. 1812 OF 2012 (Arising out of SLP (C) No.33084 of 2010), CIVIL APPEAL No. 1813 OF 2012 (Arising out of SLP (C) No.33157 of 2010), CIVIL APPEAL No. 1814 OF 2012 9 (Arising out of SLP (C) No.33265 of 2010), CIVIL APPEAL No. 1815 OF 2012 (Arising out of SLP (C) No.33504 of 2010), CIVIL APPEAL No. 1816 OF 2012 (Arising out of SLP (C) No.35013 of 2010), CIVIL APPEAL No. 1817 OF 2012 (Arising out of SLP (C) No.35016 of 2010), CIVIL APPEAL No. 1818 OF 2012 (Arising out of SLP (C) No.35028 of 2010), CIVIL APPEAL No. 1819 OF 2012 (Arising out of SLP (C) No.35029 of 2010), CIVIL APPEAL No. 1820 OF 2012 (Arising out of SLP (C) No.35030 of 2010), CIVIL APPEAL No. 1821 OF 2012 (Arising out of SLP (C) No.35031 of 2010), CIVIL APPEAL No. 1822 OF 2012 (Arising out of SLP (C) No.35032 of 2010), CIVIL APPEAL No. 1823 OF 2012 (Arising out of SLP (C) No.35129 of 2010), CIVIL APPEAL No. 1824 OF 2012 (Arising out of SLP (C) No.35865 of 2010), CIVIL APPEAL No. 1825 OF 2012 (Arising out of SLP (C) No.35866 of 2010), CIVIL APPEAL No. 1826 OF 2012 (Arising out of SLP (C) No.35867 of 2010), CIVIL APPEAL No. 1827 OF 2012 (Arising out of SLP (C) No.35868 of 2010), 10 CIVIL APPEAL No. 1828 OF 2012 (Arising out of SLP (C) No.33644 of 2010), CIVIL APPEAL No. 1829 OF 2012 (Arising out of SLP (C) No.57 of 2011), CIVIL APPEAL No. 1830 OF 2012 (Arising out of SLP (C) No.136 of 2011), CIVIL APPEAL No. 1831 OF 2012 (Arising out of SLP (C) No.138 of 2011), CIVIL APPEAL No. 1832 OF 2012 (Arising out of SLP (C) No.131 of 2011), CIVIL APPEAL No. 1833 OF 2012 (Arising out of SLP (C) No.132 of 2011), CIVIL APPEAL No. 1834 OF 2012 (Arising out of SLP (C) No.376 of 2011), CIVIL APPEAL No. 1835 OF 2012 (Arising out of SLP (C) No.302 of 2011), CIVIL APPEAL No. 1836 OF 2012 (Arising out of SLP (C) No.428 of 2011), CIVIL APPEAL No. 1837 OF 2012 (Arising out of SLP (C) No.2755 of 2011), CIVIL APPEAL No. 1838 OF 2012 (Arising out of SLP (C) No.2756 of 2011), CIVIL APPEAL No. 1839 OF 2012 (Arising out of SLP (C) No.2757 of 2011), CIVIL APPEAL No. 1840 OF 2012 (Arising out of SLP (C) No.2759 of 2011), CIVIL APPEAL No. 1841 OF 2012 (Arising out of SLP (C) No. 2388 of 2011, CIVIL APPEAL No. 1842 OF 2012 (Arising out of SLP (C) No.2585 of 2011), 11 CIVIL APPEAL No. 1843 OF 2012 (Arising out of SLP (C) No.2588 of 2011), CIVIL APPEAL No. 1844 OF 2012 (Arising out of SLP (C) No.2626 of 2011), CIVIL APPEAL No. 1845 OF 2012 (Arising out of SLP (C) No.2689 of 2011), CIVIL APPEAL No. 1846 OF 2012 (Arising out of SLP (C) No.2932 of 2011), CIVIL APPEAL No. 1847 OF 2012 (Arising out of SLP (C) No.2953 of 2011), CIVIL APPEAL No. 1848 OF 2012 (Arising out of SLP (C) No.2742 of 2011), CIVIL APPEAL No. 1850 OF 2012 (Arising out of SLP (C) No.2693 of 2011), CIVIL APPEAL No. 1851 OF 2012 (Arising out of SLP (C) No.5377 of 2011), CIVIL APPEAL No. 1852 OF 2012 (Arising out of SLP (C) No.5379 of 2011), CIVIL APPEAL No. 1853 OF 2012 (Arising out of SLP (C) No.5972 of 2011), CIVIL APPEAL No. 1854 OF 2012 (Arising out of SLP (C) No.7859 of 2011), CIVIL APPEAL Nos. 1855-1856 OF 2012 (Arising out of SLP (C) Nos.7868-7869 of 2011), CIVIL APPEAL No. 1858 OF 2012 (Arising out of SLP (C) No.8786 of 2011), CIVIL APPEAL No. 1859 OF 2012 (Arising out of SLP (C) No.9547 of 2011), CIVIL APPEAL No. 1860 OF 2012 (Arising out of SLP (C) No.9548 of 2011), CIVIL APPEAL No. 1861 OF 2012 (Arising out of SLP (C) No.9549 of 2011), CIVIL APPEAL No. 1862 OF 2012 12 (Arising out of SLP (C) No.9550 of 2011), CIVIL APPEAL No. 1863 OF 2012 (Arising out of SLP (C) No.9551 of 2011), CIVIL APPEAL No. 1864 OF 2012 (Arising out of SLP (C) No.7795 of 2011), CIVIL APPEAL No. 1865 OF 2012 (Arising out of SLP (C) No.9552 of 2011), CIVIL APPEAL No. 1866 OF 2012 (Arising out of SLP (C) No.9553 of 2011), CIVIL APPEAL No. 1867 OF 2012 (Arising out of SLP (C) No.11029 of 2011), CIVIL APPEAL No. 1868 OF 2012 (Arising out of SLP (C) No.10958 of 2011), CIVIL APPEAL No. 1869 OF 2012 (Arising out of SLP (C) No.13774 of 2011), CIVIL APPEAL No. 1870 OF 2012 (Arising out of SLP (C) No.11716 of 2011), CIVIL APPEAL Nos. 1871-1872 OF 2012 (Arising out of SLP (C) Nos.14068-14069 of 2011), CIVIL APPEAL No. 1873 OF 2012 (Arising out of SLP (C) No.14070 of 2011), CIVIL APPEAL No. 1874 OF 2012 (Arising out of SLP (C) No.14071 of 2011), CIVIL APPEAL No. 1875 OF 2012 (Arising out of SLP (C) No.14072 of 2011), CIVIL APPEAL No. 1876 OF 2012 (Arising out of SLP (C) No.14073 of 2011), CIVIL APPEAL No. 1877 OF 2012 (Arising out of SLP (C) No.14074 of 2011), CIVIL APPEAL No. 1878 OF 2012 (Arising out of SLP (C) No.14075 of 2011), CIVIL APPEAL No. 1879 OF 2012 (Arising out of SLP (C) No.14076 of 2011), 13 CIVIL APPEAL Nos. 1880-1881 OF 2012 (Arising out of SLP (C) Nos.14077-14078 of 2011), CIVIL APPEAL Nos. 1882-1883 OF 2012 (Arising out of SLP (C) Nos.14079-14080 of 2011), CIVIL APPEAL Nos. 1884-1885 OF 2012 (Arising out of SLP (C) Nos.16937-16938 of 2011), CIVIL APPEAL No. 1886 OF 2012 (Arising out of SLP (C) No.16821 of 2011), CIVIL APPEAL No. 1887 OF 2012 (Arising out of SLP (C) No.16822 of 2011), CIVIL APPEAL No. 1888 OF 2012 (Arising out of SLP (C) No.16823 of 2011), CIVIL APPEAL No. 1889 OF 2012 (Arising out of SLP (C) No.16824 of 2011), CIVIL APPEAL No. 1890 OF 2012 (Arising out of SLP (C) No.16825 of 2011), CIVIL APPEAL No. 1891 OF 2012 (Arising out of SLP (C) No.15474 of 2011), CIVIL APPEAL No. 1892 OF 2012 (Arising out of SLP (C) No.16968 of 2011), CIVIL APPEAL No. 1893 OF 2012 (Arising out of SLP (C) No.16969 of 2011), CIVIL APPEAL No. 1894 OF 2012 (Arising out of SLP (C) No.17643 of 2011), CIVIL APPEAL No. 1895 OF 2012 (Arising out of SLP (C) No.16505 of 2011), CIVIL APPEAL No. 1896 OF 2012 (Arising out of SLP (C) No.17645 of 2011), CIVIL APPEAL No. 1897 OF 2012 (Arising out of SLP (C) No.17644 of 2011), CIVIL APPEAL No. 1898 OF 2012 (Arising out of SLP (C) No.16695 of 2011) CIVIL APPEAL No. 1899 OF 2012 (Arising out of SLP (C) No.22460 of 2011), 14 CIVIL APPEAL No. 1900 OF 2012 (Arising out of SLP (C) No.22180 of 2011), CIVIL APPEAL No. 1901 OF 2012 (Arising out of SLP (C) No.22446 of 2011), CIVIL APPEAL No. 1902 OF 2012 (Arising out of SLP (C) No.22449 of 2011), CIVIL APPEAL No. 1903 OF 2012 (Arising out of SLP (C) No.22447 of 2011), CIVIL APPEAL No. 1904 OF 2012 (Arising out of SLP (C) No.22772 of 2011), CIVIL APPEAL No. 1905 OF 2012 (Arising out of SLP (C) No.26556 of 2011), CIVIL APPEAL No. 1906 OF 2012 (Arising out of SLP (C) No.27677 of 2011), CIVIL APPEAL No. 1907 OF 2012 (Arising out of SLP (C) No.28775 of 2011), CIVIL APPEAL No. 1908 OF 2012 (Arising out of SLP (C) No.27044 of 2011), CIVIL APPEAL No. 1909 OF 2012 (Arising out of SLP (C) No.27048 of 2011), CIVIL APPEAL No. 1910 OF 2012 (Arising out of SLP (C) No.28776 of 2011), CIVIL APPEAL No. 1911 OF 2012 (Arising out of SLP (C) No.28067 of 2011), CIVIL APPEAL No. 1912 OF 2012 (Arising out of SLP (C) No.28607 of 2011) AND CIVIL APPEAL No. 1913 OF 2012 (Arising out of SLP (C) No.29542 of 2011) 15 J U D G M E N T A. K. PATNAIK, J. Delay condoned. Leave granted in Special Leave Petitions. 2. These are appeals by way of special leave under Article 136 of the Constitution against the judgment and orders of the Bombay High Court holding that the entire amount received by an assessee on sale of the Duty Entitlement Pass Book (for short `the DEPB') represents profit on transfer of DEPB under Section 28(iiid) of the Income Tax Act, 1961 (for short `the Act') for the purpose of the computation of deduction in respect of profits retained for export business under Section 80HHC of the Act. 3. For appreciating the controversy between the parties, we will state the facts of only the lead case of M/s Topman Exports (hereinafter referred to as `the assessee'). The assessee is a manufacturer and exporter of fabrics and garments. During the previous year relevant to the assessment year 2002-2003, the assessee sold the DEPB and DFRC (Duty Free Replenishment Certificate) which had accrued to the 16 assessee on export of its products. The assessee filed a return for the assessment year 2002-2003 claiming a deduction of Rs.83,69,303/- under Section 80HHC of the Act. The Assessing Officer held that if the profit on transfer of the export incentives was deducted from the profits of the assessee, the figure would be a loss and there will be no positive income of the assessee from its export business and the assessee will not be entitled to any deduction under Section 80HHC of the Act as has been held by this Court in IPCA Laboratories Ltd. v. Deputy C.I.T. (2004) 266 ITR 521 (SC). Aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) and contended that the profits on the transfer of DEPB and DFRC were not the sale proceeds of DEPB and DFRC amounting to Rs.2,06,84,841/- and Rs.1,65,616/- respectively, but the difference between the sale value and face value of DEPB and DFRC amounting to Rs.14,35,097/- and Rs.19,902/- respectively and if these figures of profits on transfer of DEPB and DFRC are taken, the income of assessee would be positive 17 and the assessee would be entitled to the deduction under Section 80HHC of the Act. The Commissioner of Income Tax (Appeals) rejected this contention of the assessee and held that the assessee had received an amount of Rs.2,06,84,841/- on sale of DEPB and an amount of Rs.1,65,612/- on sale of DFRC and the costs of acquisition of the DEPB and DFRC are to be taken as nil and hence the entire sale proceeds of DEPB and DFRC realized by the assessee are to be treated as profits on transfer of DEPB and DFRC for working out the deduction under section 80HHC of the Act and directed the Assessing Officer to work out the deduction under Section 80HHC of the Act accordingly. 4. Aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal (for short `the Tribunal'). A Special Bench of the Tribunal heard the appeal and held that there was a direct relation between the entitlement under the DEPB Scheme and the custom duty component in the cost of imports used in the manufacture of the export product. The 18 Tribunal further held that DEPB accrues to the exporter soon after export is made and application is filed for DEPB and DEPB is a "cash assistance" receivable by the assessee and is covered under clause (iiib) of Section 28 of the Act, whereas profit on the transfer of DEPB takes place on a subsequent date when the DEPB is sold by the assessee and is covered under clause (iiid) of Section 28 of the Act. The Tribunal compared the language of Section 28(iiib) of the Act in which the expression "cash assistance" is used, with the language of Section 28(iiia), (iiid) and (iiie) of the Act in which the expression "profit" is used and held that the words "profit on transfer" in Section 28 (iiid) and (iiie) of the Act would not represent the entire sale value of DEPB but the sale value of DEPB less the face value of the DEPB. With these reasons, the Tribunal set aside the orders of the Assessing Officer and the Commissioner of Income Tax (Appeals) and directed the Assessing Officer to compute the deduction under Section 80HHC of the Act accordingly. 19 5. This judgment of the Special Bench of the Tribunal was followed by the Tribunal in all the cases in appeal before us. Against the judgment and orders of the Tribunal, the Commissioner of Income Tax, Mumbai filed appeals in all the cases under Section 260A of the Act before the High Court and by the impugned orders the High Court disposed of the appeals in terms of the judgment delivered in Commissioner of the Income Tax vs. Kalpataru Colours and Chemicals (ITA(L) 2887 of 2009). In Commissioner of the Income Tax vs. Kalpataru Colours and Chemicals (supra), the High Court formulated the following two substantial questions of law: "(a) Whether the Tribunal is justified in holding that the entire amount received on the sale of the Duty Entitlement Passbook does not represent profits chargeable under Section 28(iiid) of the Income Tax Act, 1961 and that the face value of the Duty Entitlement Passbook shall be deducted from the sale proceeds; (b) Whether the Tribunal is justified in holding that the face value of the Duty Entitlement Passbook is chargeable to tax under Section 28(iiib) at the time of accrual of income i.e. when the application for Duty Entitlement Passbook is filed with the competent authority pursuant to the exports 20 made and that the profits on the sale of Duty Entitlement Passbook representing the excess of the sale proceeds over the face value is liable to be considered under Section 28(iiid) at the time of sale." In its judgment, on the first question of law formulated under (a), the High Court held that the Tribunal was not justified in holding that the entire amount received on the sale of the DEPB does not represent profits chargeable under Section 28(iiid) of the Act and in holding that the face value of the DEPB shall be deducted from the sale proceeds of the DEPB. On the second question of law formulated under (b), the High Court in its judgment did not agree with the Tribunal that the face value of DEPB is chargeable to tax as income of the assessee under Section 28(iiib) of the Act and instead held that the entirety of sale consideration for transfer of DEPB would fall within the purview of Section 28(iiid) of the Act. In some of the cases, the appellants filed review petitions before the High Court, but the High Court dismissed the review petitions. 6. Learned counsel for the appellants submitted, relying on the provisions of the DEPB Scheme, that the Tribunal was right in coming to the conclusion that DEPB was cash 21 assistance receivable by a person against exports and accrued to the exporter as soon as he files an application for DEPB. They submitted that DEPB was therefore chargeable to income tax under the head "Profits and Gains of Business or Profession" under clause (iiib) of Section 28 of the Act. They submitted that the contention of the Revenue that DEPB would be income chargeable to tax only on transfer and would be covered under clause (iiid) of Section 28 of the Act is not correct. They submitted that it will be clear from different provisions of the DEPB Scheme that the object of granting DEPB to an exporter is to neutralize the incidence of custom duties which has been incurred on the import component of the export product and this neutralization is achieved by grant of duty credit of the amount specified in the DEPB Scheme. They submitted that the Tribunal, therefore, was right in coming to the conclusion that there was a direct relation between the DEPB and the cost of inputs imported for manufacture of the export product. 7. Learned counsel for the appellants submitted that since DEPB was cash assistance receivable by a person against exports and was covered under clause (iiib) of 22 Section 28 of the Act and it has a direct relation with the costs of the inputs imported by an exporter from manufacturer of the export product, the DEPB cannot form part of the profits on transfer of DEPB under Section 28(iiid) of the Act. They argued that as and when DEPB is transferred and the sale value realized on such transfer of DEPB is more than the face value of the DEPB, the difference between the sale value and face value of the DEPB will constitute profit on transfer of DEPB and would be covered under clause (iiid) of Section 28 of the Act. They argued that if the intention of the legislature was to cover the entire sale proceeds arising on transfer of DEPB under clause (iiid) of Section 28 of the Act then they would have used the expression "sale proceeds" instead of profit on transfer of DEPB in clause (iiid) of Section 28 of the Act. 8. Learned counsel for the appellants argued that if the entire sale proceeds of the DEPB is treated as profits arising on transfer of DEPB for the purpose of clause (iiid) of Section 28 as contended by the Revenue, then the assessee will be taxed twice for the same income, once as cash assistance under clause (iiib) of Section 28 equivalent to the 23 face value of the DEPB and for the second time as profit on transfer of DEPB under clause (iiid) of Section 28, the face value of the DEPB being part of the sale proceeds of the DEPB on transfer. They submitted that as the legislature could not have intended such double taxation of the same income, the interpretation suggested by the Revenue should not be accepted by the Court. They submitted that in the present batch of cases, DEPB accrued to the assessees in the first year when the assessees made the export and applied for DEPB and the assessee sold the DEPB in subsequent year and the Revenue has taken a stand that in the subsequent year, the entire sale proceeds comprising both the face value of the DEPB and the profits on transfer of DEPB are covered under Section 28(iiid) of the Act and this stand of the Revenue has been accepted by the High Court in the impugned orders on an incorrect interpretation of the DEPB scheme and the provisions of Section 28 of the Act and 80HHC of the Act. 9. Learned counsel for the Revenue, on the other hand, supported the impugned judgment and orders of the High Court and submitted that profit on transfer of DEPB would 24 represent the entire sale value realized by the assessee on transfer of the DEPB. He submitted that the High Court has rightly held that the assessee does not incur any cost in obtaining the DEPB. He argued that DEPB is an export incentive granted by the Government under DEPB Scheme and it has no direct relation with the cost of purchases made by the assessee and therefore the assessee is not entitled to deduct the face value of the DEPB from the sale proceeds for determining the profit arising on transfer of DEPB and the entire sale proceeds of the DEPB represent the profits earned by the assessee on transfer of the DEPB. He argued that the findings of the Tribunal that there is a direct relation between DEPB and the costs incurred by the assessee for importing inputs for manufacture of export products is, therefore, not correct and the High Court was right in setting aside the findings of the Tribunal and in coming to the conclusion that the entire sale proceeds of DEPB represent the profits on transfer of DEPB within the meaning of clause (iiid) of Section 28 of the Act. 10. For appreciating the nature of the DEPB, paragraphs 4.37 and 4.42 of the Hand Book on DEPB issued by the 25 Government of India and paragraphs 7.14, 7.15, 7.16 and 7.38 of the Export and Import Policy, 1997-2002 as notified by the Central Government in the Notification No.1(RE-99)/ 1997-2202 dated 31st March, 2000 are extracted hereinbelow: Hand Book on DEPB "4.37 Duty Entitlement Passbook Scheme (DEPB) The Policy relating to Duty Entitlement Passbook (DEPB) Scheme is given in Chapter- 4 of the Policy. The duty credit under the scheme shall be calculated by taking into account the deemed import content of the said export product as per SION and the basic custom duty payable on such deemed imports. The value addition achieved by export of such product shall also be taken into account while determining the rate of duty credit under the scheme. 4.42 Utilization of DEPB credit. The credit under DEPB shall be utilized for payment of customs duty on any item which is freely importable. Export and Import Policy, 1997-2002 7.14 For exporters not desirous of going through the licensing route, an optional facility is given under DEPB. The objective of Duty Entitlement Passbook Scheme is to neutralize the incidence of Customs duty on 26 the import content of the export product. The neutralization shall be provided by way of grant of duty credit against the export product. Under the Duty Entitlement Passbook Scheme (DEPB), an exporter may supply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency. The credit shall be available against such export products and at such rates as may be specified by the Director General of Foreign Trade by way of public notice issued in this behalf, for import of raw materials, intermediates, components, parts packing material etc. The holder of Duty Entitlement Passbook Scheme (DEPB) shall have the option to pay additional customs duty, if any, in cash as well. Validity 7.15. The DEPB shall be valid for a period of 12 months from the date of issue. 7.16 The DEPB and/or the items imported against it are freely transferable. The transfer of DEPB shall however be for import at the port specified in the DEPB which shall be the port from where exports have been made. However, imports from a port other than the port of export shall be allowed under TRA facility as per the terms and conditions of the notification issued by Department of Revenue. 7.38 (i) An application for grant of credit under DEPB may be made to the licensing authority concerned in the form given in Appendix-11C alongwith the documents prescribed therein. The provisions of paragraphs 7.2 shall be applicable for DEPB 27 also. The FOB value in free foreign exchange shall be converted into Indian rupees as per the authorized dealer's T/T buying rate, prevalent on the date of negotiation/purchase/collection of document. The DEPB rate of credit shall be applied on the FOB value so arrived. In case of advance payment, the FOB value in free foreign exchange shall be converted into Indian rupees as per the authorized dealer's T/T buying rate, prevalent on the date of receipt of advance payment. (ii) The DEPB shall be initially issued with non transferable endorsement in such cases where realization has not taken place to enable the exporter to effect import for his own use. However, upon receipt of realization, the DEPB shall be endorsed transferable. In such cases where the applicant applies for DEPB after realization, the DEPB shall be issued with transferable endorsement." On a reading of the aforesaid paragraphs of the Hand Book on DEPB and the Export and Import Policy of the Government of India, 1997-2002, it is clear that the objective of DEPB scheme is to neutralize the incidence of customs duty on the import content of the export products. Hence, it has direct nexus with the cost of the imports made by an exporter for manufacturing the export products. The neutralization of the cost of customs duty under the DEPB scheme, however, is by granting a duty credit against the 28 export product and this credit can be utilized for paying customs duty on any item which is freely importable. DEPB is issued against the exports to the exporter and is transferable by the exporter. 11. We may now consider the relevant provisions of Section 28 for determining whether DEPB will fall under clause (iiib) or under clause (iiid) of Section 28. The relevant provisions of Section 28 of the Act are reproduced hereunder: Section 28. Profits and Gains of Business or Profession.--The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession",-- ......................................................................... (iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control)Act, 1947 (18 of 1947); (iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India;] (iiic) .................................................................. (iiid) any profit on the transfer of the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 29 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) (iiie) any profit on the transfer of the Duty Free Replenishment Certificate, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992)." 12. It will be clear from the aforesaid provisions of Section 28 that under clause (iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India is by itself income chargeable to income tax under the head "Profits and Gains of Business or Profession". DEPB is a kind of assistance given by the Government of India to an exporter to pay customs duty on its imports and it is receivable once exports are made and an application is made by the exporter for DEPB. We have, therefore, no doubt that DEPB is "cash assistance" receivable by a person against exports under the scheme of the Government of India and falls under clause (iiib) of Section 28 and is chargeable to income tax under the head "Profits and Gains 30 of Business or Profession" even before it is transferred by the assessee. 13. Under clause (iiid) of Section 28, any profit on transfer of DEPB is chargeable to income tax under the head "Profits and Gains of Business or Profession" as an item separate from cash assistance under clause (iiib). The word "profit" means the gross proceeds of a business transaction less the costs of the transaction. To quote from Black's Law Dictionary (Fifth Edition): "Profit. Most commonly, the gross proceeds of a business transaction less the costs of the transaction, i.e. net proceeds. Excess of revenues over expenses for a transaction; sometimes used synonymously with net income for the period. Gain realized from business or investment over and above expenditures." This Court in E.D. Sassoon & Company Ltd. and Others v. Commissioner of Income-Tax, Bombay City (1954) 26 ITR 27 (SC) has quoted the following observations of Lord Justice Fletcher Moulton in The Spanish Prospecting Company Limited [(1911) I Ch. 92] on the meaning of the word "profits": 31 ".... `Profits' implies a comparison between the state of a business at two specific dates usually separated by an interval of a year. The fundamental meaning is the amount of gain made by the business during the year. This can only be ascertained by a comparison of the assets of the business at the two dates." `Profits', therefore, imply a comparison of the value of an asset when the asset is acquired with the value of the asset when the asset is transferred and the difference between the two values is the amount of profit or gain made by a person. As DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB. 14. We are, thus, of the considered opinion that while the face value of the DEPB will fall under clause (iiib) of Section 28 of the Act, the difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28 of the Act and the High Court was not right in taking the view in the impugned judgment that the entire sale proceeds of the DEPB realized on transfer of the DEPB and 32 not just the difference between the sale value and the face value of the DEPB represent profit on transfer of the DEPB. 15. We may now point out the errors in the impugned judgment of the High Court. The first reason given by the High Court is that clause (iiia) of Section 28 treats profits on the sale of an import license as income chargeable to tax and when the license is sold, the entire amount is treated as profits of business under clause (iiia) of Section 28 and thus there is no justification to treat the amount which is received by an exporter on the transfer of the DEPB any differently than the profits which are made on the sale of an import license under clause (iiia) of Section 28 of the Act. In taking the view that when the import license is sold the entire amount is treated as profits of business, the High Court has visualized a situation where the cost of acquiring the import license is nil. The cost of acquiring DEPB, on the other hand, is not nil because the person acquires it by paying customs duty on the import content of the export product and the DEPB which accrues to a person against exports has a cost element in it. Accordingly, when DEPB is sold by a person, his profit on transfer of DEPB would be 33 the sale value of the DEPB less the face value of DEPB which represents the cost of the DEPB. The second reason given by the High Court in the impugned judgment is that under the DEPB scheme, DEPB is given at a percentage of the FOB value of the exports so as to neutralize the incidence of customs duty on the import content of the export products, but the exporter may not himself utilize the DEPB for paying customs duty but may transfer it to someone else and therefore the entire sum received on transfer of DEPB would be covered under clause (iiid) of Section 28. The High Court has failed to appreciate that DEPB represents part of the cost incurred by a person for manufacture of the export product and hence even where the DEPB is not utilized by the exporter but is transferred to another person, the DEPB continues to remain as a cost to the exporter. When, therefore, DEPB is transferred by a person, the entire sum received by him on such transfer does not become his profits. It is only the amount that he receives in excess of the DEPB which represents his profits on transfer of the DEPB. 34 16. The High Court has sought to meet the argument of double taxation made on behalf of the assessees by holding that where the face value of the DEPB was offered to tax in the year in which the credit accrued to the assessee as business profits, then any further profit arising on transfer of DEPB would be taxed as profits of business under Section 28(iiid) in the year in which the transfer of DEPB took place. This view of the High Court, in our considered opinion, is contrary to the language of Section 28 of the Act under which "cash assistance" received or receivable by any person against exports such as the DEPB and "profit on transfer of the DEPB" are treated as two separate items of income under clauses (iiib) and (iiid) of Section 28. If accrual of DEPB and profit on transfer of DEPB are treated as two separate items of income chargeable to tax under clauses (iiib) and (iiid) of Section 28 of the Act, then DEPB will be chargeable as income under clause (iiib) of Section 28 in the year in which the person applies for DEPB credit against the exports and the profit on transfer of the DEPB by that person will be chargeable as income under clause (iiid) of Section 28 in his hands in the year in which he 35 makes the transfer. Accordingly, if in the same previous year the DEPB accrues to a person and he also earns profit on transfer of the DEPB, the DEPB will be business profits under clause (iiib) and the difference between the sale value and the DEPB (face value) would be the profits on the transfer of DEPB under clause (iiid) for the same assessment year. Where, however, the DEPB accrues to a person in one previous year and the transfer of DEPB takes place in a subsequent previous year, then the DEPB will be chargeable as income of the person for the first assessment year chargeable under clause (iiib) of Section 28 and the difference between the DEPB credit and the sale value of the DEPB credit would be income in his hands for the subsequent assessment year chargeable under clause (iiid) of Section 28. The interpretation suggested by us, therefore, does not lead to double taxation of the same income, which the legislature must be presumed to have avoided. 17. The High Court has held that as the assessees had an export turnover exceeding Rs.10 crores and did not fulfill the conditions set out in the third proviso to Section 80HHC(3) of the Act, the assessees were not entitled to a 36 deduction under Section 80HHC on the amount received on transfer of DEPB and to get over this difficulty the assessees have contended that the profits on transfer of DEPB in Section 28(iiid) would not include the face value of the DEPB so that the assessees get a deduction under Section 80HHC on the face value of the DEPB. This finding of the High Court is not based on an accurate understanding scheme of Section 80HHC of the Act. 18. The relevant provisions of Section 80HHC are quoted hereinbelow: "Section 80HHC- Deduction in respect of profits retained for export business.-- [(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 to the extent of profits, referred to in sub-section (1B),] derived by the assessee from the export of such goods or merchandise: ......................................................................... (1B) For the purposes of sub-sections (1) and (1A), the extent of deduction of the profits shall be an amount equal to-- 37 (i) eighty per cent thereof for an assessment year beginning on the 1st day of April, 2001; (ii) seventy per cent thereof for an assessment year beginning on the 1st day of April, 2002; (iii) fifty per cent thereof for an assessment year beginning on the 1st day of April, 2003; (iv) thirty per cent thereof for an assessment year beginning on the 1st day of April, 2004,] and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 2005 and any subsequent assessment year.] ......................................................................... (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; ......................................................................... Provided that the profits computed under clause (a) or clause (b) or clause (c) of this sub-section shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiia) (not being profits on sale of a licence acquired from any other person), and clauses (iiib) and (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee : 38 Provided further that in the case of an asseesee having export turnover not exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiid) or clause (iiie), as the case may be, of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee; Provided also that in the case of an assessee having export turnover exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiid) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee, if the assessee has necessary and sufficient evidence to prove that,-- (a) he had an option to choose either the duty drawback or the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme. Provided also that in the case of an assessee having export turnover exceeding rupees ten crores during the previous year, the profits 39 computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiie) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee, if the assessee has necessary and sufficient evidence to prove that-- (a) he had an option to choose either the duty drawback or the Duty Free Replenishment Certificate, being the Duty Remission Scheme; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Free Replenishment Certificate, being the Duty Remission Scheme. Explanation.--For the purposes of this clause, `rate of credit allowable' means the rate of credit allowable under the Duty Free Replenishment Certificate, being the Duty Remission Scheme calculated in the manner as may be notified by the Central Government:] ......................................................................... Explanation:- For the purposes of this section,- (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), (iiic), (iiid) and (iiie) of Section 28 or of any receipts by way of brokerage, commission, interest, rent, 40 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 of the assessee situate outside India" 19. Sub-section (1) of Section 80HHC quoted above makes it clear that an assessee engaged in the business of export out of India of any goods or merchandise to which this Section applies shall be allowed, in computing his total income, a deduction to the extent of profits referred to in sub-section (1B), derived by him from the export of such goods or merchandise. Sub-section (1B) of Section 80HHC gives the percentages of deduction of the profits allowable for the different assessment years from the assessment years 2001-2002 to 2004-2005. Sub-section (3)(a) of Section 80HHC provides that where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such exports 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. In Commissioner of Income-Tax v. K. 41 Ravindranathan Nair (2007) 295 ITR 228 (SC), the formula in sub-section (3)(a) of Section 80HHC was stated by this Court to be as follows: Profits derived = Profits of the business x Export Turnover from exports Total Turnover 20. Explanation (baa) under Section 80HHC states that "profits of the business" in the aforesaid formula 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), (iiic), (iiid) and (iiie) of Section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of similar nature including any such receipts and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situated outside India. Thus, ninety per cent of the DEPB which is "cash assistance" against exports and is covered under clause (iiib) of Section 28 will get excluded from the "profits of the business" of the assessee if such DEPB has accrued to the assessee during the previous year. Similarly, if during the same previous year, the assessee has transferred the DEPB and the sale 42 value of such DEPB is more than the face value of the DEPB, the difference between the sale value of the DEPB and the face value of the DEPB will represent the profit on transfer of DEPB covered under clause (iiid) of Section 28 and ninety per cent of such profit on transfer of DEPB certificate will get excluded from "profits of the business". But, where the DEPB accrues to the assessee in the first previous year and the assessee transfers the DEPB certificate in the second previous year, as appears to have happened in the present batch of cases, only ninety per cent of the profits on transfer of DEPB covered under clause (iiid) and not ninety per cent of the entire sale value including the face value of the DEPB will get excluded from the "profits of the business". Thus, where the ninety per cent of the face value of the DEPB does not get excluded from "profits of the business" under explanation (baa) and only ninety per cent of the difference between the face value of the DEPB and the sale value of the DEPB gets excluded from "profits of the business", the assessee gets a bigger figure of "profits of the business" and this is possible when the DEPB accrues to the assessee in one previous year and transfer of the DEPB 43 takes place in the subsequent previous year. The result in such case is that a higher figure of "profits of the business'" becomes the multiplier in the aforesaid formula under sub- section (3)(a) of Section 80HHC for arriving at the figure of profits derived from exports. 21. To the figure of profits derived from exports worked out as per the aforesaid formula under sub-section (3)(a) of Section 80HHC, the additions as mentioned in first, second, third and fourth proviso under sub-section (3) are made to profits derived from exports. Under the first proviso, ninety per cent of the sum referred to in clauses (iiia), (iiib) and (iiic) of Section 28 are added in the same proportion as export turnover bears to the total turnover of the business carried on by the assessee. In this first proviso, there is no addition of any sum referred to in clause (iiid) or clause (iiie). Hence, profit on transfer of DEPB or DFRC are not to be added under the first proviso. Where therefore in the previous year no DEPB or DFRC accrues to the assessee, he would not be entitled to the benefit of the first proviso to sub-section (3) of Section 80HHC because he would not have any sum referred to in clause (iiib) of Section 28 of the 44 Act. The second proviso to sub-section (3) of Section 80HHC states that in case of an assessee having export turnover not exceeding Rs.10 crores during the previous year, after giving effect to the first proviso, the export profits are to be increased further by the amount which bears to ninety per cent of any sum referred to in clauses (iiid) and (iiie) of Section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. The third proviso to sub-section (3) states that in case of an assessee having export turnover exceeding Rs.10 crores, similar addition of ninety per cent of the sums referred to in clause (iiid) of Section 28 only if the assessee has the necessary and sufficient evidence to prove that (a) he had an option to choose either the duty drawback or the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme. Therefore, if the assessee having export turnover of more than Rs.10 crores does not satisfy these two conditions, he 45 will not be entitled to the addition of profit on transfer of DEPB under the third proviso to sub-section (3) of Section 80HHC. 22. The aforesaid discussion would show that where an assessee has an export turnover exceeding Rs.10 crores and has made profits on transfer of DEPB under clause (d) of Section 28, he would not get the benefit of addition to export profits under third or fourth proviso to sub-section (3) of Section 80HHC, but he would get the benefit of exclusion of a smaller figure from "profits of the business" under explanation (baa) to Section 80HHC of the Act and there is nothing in explanation (baa) to Section 80HHC to show that this benefit of exclusion of a smaller figure from "profits of the business" will not be available to an assessee having an export turnover exceeding Rs.10 crores. In other words, where the export turnover of an assessee exceeds Rs.10 crores, he does not get the benefit of addition of ninety per cent of export incentive under clause (iiid) of Section 28 to his export profits, but he gets a higher figure of profits of the business, which ultimately results in computation of a bigger export profit. The High Court, therefore, was not 46 right in coming to the conclusion that as the assessee did not have the export turnover exceeding Rs.10 crores and as the assessee did not fulfill the conditions set out in the third proviso to Section 80HHC (iii), the assessee was not entitled to a deduction under Section 80HHC on the amount received on transfer of DEPB and with a view to get over this difficulty the assessee was contending that the profits on transfer of DEPB under Section 28 (iiid) would not include the face value of the DEPB. It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in explanation (baa) to Section 80HHC read with the words used in clauses (iiid) and (iiie) of Section 28, the assessee was entitled to a deduction under Section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee. 23. The impugned judgment and orders of the Bombay High Court are accordingly set-aside. The appeals are allowed to the extent indicated in this judgment. The Assessing Officer is directed to compute the deduction 47 under Section 80HHC in the case of the appellants in accordance with this judgment. There shall be no order as to costs. ..........................CJI. (S.H. Kapadia) .............................J. (A. K. Patnaik) .............................J. (Swatanter Kumar) New Delhi, February 08, 2012.

Building Labour problems – contempt of court =most of the states have not complied with the directions issued by this Court. They had failed to discharge their statutory duties under the provisions of the Building & Other Construction Worker (Regulations of Employment & Conditions of Service) Act, 1996 (for short, `the Act’) and the Building and Other Construction Workers Welfare Cess Act, 1996 (for short `the Cess Act’), thus, they should be punished for violating the orders of this Court. = audit by the Comptroller and Auditor General (CAG) has not been conducted of the funds placed at the disposal of the concerned authority. We may also notice that large funds are lying with the said Welfare Boards/authorities, but have not been disbursed. The possibility of these amounts being diverted by the state authority for other heads of expenditure in the respective states/union territories cannot be ruled out. Resultantly, while reiterating our earlier orders, we also issue the following directions for their immediate compliance: a) All the State Welfare Boards shall be subjected to audit by the CAG within two months from today. All the States, Union Territories and the State Boards to initiate the process and ensure its completion under the provisions of Section 27 of the Act. [8]

IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION INTERLOCUTORY APPLICATION NO.6 IN WRIT PETITION (CIVIL) NO.318 OF 2006 National Campaign Committee for Central Legislation on Construction Labour ... Petitioner Versus Union of India & Ors. ... Respondents WITH Contempt Petition (C) Nos.41/2011 in WP (C) No.318/2006 Contempt Petition (C) Nos.42/2011 in WP (C) No.318/2006 Contempt Petition (C) Nos.43/2011 in WP (C) No.318/2006 Contempt Petition (C) Nos.44/2011 in WP (C) No.318/2006 O R D E R This order is in continuation to the all the previous orders passed by this Court, more particularly, the orders dated 18th January, 2011, 15th March, 2011, 25th April, 2011 and 28th November, 2011. Vide Order dated 15th March, 2011, this Court - [1] dealt with Contempt Petition Nos.41 - 44 of 2011 filed by the petitioner and passed certain directions including that the Labour Secretary of the concerned States should be present in the Court on the next date of hearing. Thereafter, vide Order dated 25th April, 2011, the States of Nagaland, Rajasthan, Meghalaya, Uttar Pradesh, Maharashtra, Goa and Uttarakhand, Union Territories of Lakshadweep and Chandigarh and Union of India were required to comply with certain directions as well as to file affidavits of compliance. The petitioner in Contempt Petition Nos. 41 - 44 of 2011 had contended that most of the states have not complied with the directions issued by this Court. They had failed to discharge their statutory duties under the provisions of the Building & Other Construction Worker (Regulations of Employment & Conditions of Service) Act, 1996 (for short, `the Act') and the Building and Other Construction Workers Welfare Cess Act, 1996 (for short `the Cess Act'), thus, they should be punished for violating the orders of this Court. However, after passing of the above orders, most of the states have filed affidavits, showing status of compliance with the [2] directions issued by this Court as well as performance of their statutory duties. In view of the persistent defaults and unacceptable conduct of the officers of the concerned states, we passed the following order on 28th November, 2011:- "Since almost every State is in contempt, we have no option but to take further steps in the matter. However, in order to give opportunity to the States, the matter is being adjourned to the last week of December, 2011, to enable each defaulting State to file it's reply as to why contempt action should not be taken against the concerned officers." Still, a few States have neither filed affidavits nor have they placed on record any documentation to demonstrate that they have fully complied with the directions of this Court and have completely discharged their statutory obligations under the provisions of the Act. Keeping in view the fact that, despite our order dated 28th November, 2011, these states have failed to show obedience to the orders of this Court, the matter was again placed before this Court on 16th December, 2011, on which date we had reserved the contempt petitions for orders. [3] Category - I - Under Category-I, we will be dealing with the States of Andhra Pradesh, Chhattisgarh, Punjab and Tamil Nadu. All these states had filed their respective affidavits in the years 2010 and 2009 respectively. Thereafter, they have not even cared to file further affidavits as directed by the orders of this Court. Though, all the above States have constituted Welfare Boards, have registered workers and establishments in accordance with the provisions of the Act, notified the prescribed authorities for collection and disbursement of cess under the Cess Act and have collected some cess, however, they have not collected the required quantum of cess and have also not distributed the amount to the registered applicants in furtherance to implementation of the scheme framed. The petitioner has also placed on record material to show that these states are defaulting in this regard. Before we take any action against the officers responsible for enforcing the schemes and proper collection and disbursement of cess, we would grant a last and final opportunity to these states to file affidavits of compliance within four weeks from today, subject to payment of Rs.10,000/- [4] each, as costs. The cost shall be payable to the Supreme Court Legal Services Committee. Category - II Under Category-II, we would pass directions in relation to the states which have constituted Welfare Boards, notified the statutory authorities responsible and have even collected the cess, however, they have not disbursed the cess amounts to the registered applicants for the reason that the competent authority in the State Government has not approved the welfare schemes or the welfare fund has not been constituted. Another reason for such non- disbursal of cess amount is that no applicants have approached the Welfare Board/notified authority, for payment under the provisions of the Act and the Cess Act. The States of Andhra Pradesh, Arunachal Pradesh, Goa, Jammu and Kashmir, Meghalaya, Maharashtra, Mizoram, Nagaland, Punjab, Sikkim and Tamil Nadu and Union Territories of Andaman and Nicobar, Dadra and Nagar Haveli, Daman and Diu and Lakshadweep fall under this category. [5] Having perused the affidavits of these states/union territories and the records before us, we issue the following directions:- a) The governments of the above-referred states/union territories are hereby directed to ensure that the welfare fund is created and welfare schemes are formulated and notified in accordance with the provisions of the Act and the Cess Act within four weeks from today. b) The welfare schemes framed by the respective states/union territories shall be given due publicity and be brought to the notice of the concerned workmen and eligible applicants by the District Authority/Sub- Committee responsible. We may clarify that there are certain schemes where the workmen are entitled to disbursement of the amounts across-the-board, like education schemes, etc. Every effort should be made to implement these schemes without any further delay. c) Affidavit shall be filed by the Secretary (Labour) of the respective states/union territories within six weeks from today reporting to this Court the complete compliance [6] with these directions. The affidavit shall also give the up-to-date status - d) of collection of cess, disbursement of amounts and implementation of schemes. Category-III The States of Kerala, Punjab, Nagaland and Himachal Pradesh and the Union Territory of Lakshadweep are the states/union territory which have not given any details of the schemes framed, reasons for its non-implementation and consequent non- disbursement of the cess amounts. It is a statutory obligation upon these states/union territory and the authorities in-charge of the concerned departments that they ensure implementation of the schemes and disbursement of the cess amounts. Let now the schemes be publicized and cess amounts be disbursed to the eligible applicants in accordance with the provisions of the Act and the Cess Act within a period of six weeks from today and affidavit of compliance of the Secretary (Labour) of the states/union territory be filed within two weeks thereafter. General Directions [7] It is clear from the affidavits filed on behalf of most of the states and union territories that they are not holding meetings of the Welfare Board as required, i.e., at least once in two months, to discharge their statutory functions. Further, it is also apparent that audit by the Comptroller and Auditor General (CAG) has not been conducted of the funds placed at the disposal of the concerned authority. We may also notice that large funds are lying with the said Welfare Boards/authorities, but have not been disbursed. The possibility of these amounts being diverted by the state authority for other heads of expenditure in the respective states/union territories cannot be ruled out. Resultantly, while reiterating our earlier orders, we also issue the following directions for their immediate compliance: a) All the State Welfare Boards shall be subjected to audit by the CAG within two months from today. All the States, Union Territories and the State Boards to initiate the process and ensure its completion under the provisions of Section 27 of the Act. [8] b) Every Welfare Board shall, without fail, hold its meetings at least once in two months and submit its Minutes, as well as the action taken and progress reports in regard to the framing and implementation of the schemes and disbursement of funds to the eligible applicants, to the Secretary (Labour) of that Government quarterly. c) The funds available with the Welfare Boards which have not been disbursed or are not likely to be disbursed within a short period should be properly invested with the nationalized banks only. Funds available with the Welfare Boards shall not be utilized by the State for any other head of expenditure of the State Government, etc. d) Union of India has filed an affidavit. It is stated in the affidavit that they have taken various steps, including steps for amendment of the Act and the Rules framed thereunder. Union of India is directed to expedite this process. We also direct the Union of India to discharge its various statutory functions under the Act with [9] particular reference to Sections 24 to 27. It shall also issue appropriate directions under Section 60 of the Act to all the State Governments to fully implement the provisions of the Act as well as the Cess Act. The above directions should be complied with by all concerned without fail and within the time afore-stipulated. We make it clear that in the event of any default committed by any officer/official/authority, we will be compelled to take action against the officer/official/authority concerned under the provisions of the Contempt of Courts Act, 1971 without any further notice. With these directions, we dispose of these four contempt petitions & I.A.6, but make it clear that in the event of default, the petitioner would be at liberty to file fresh contempt petitions before this Court, in view of the above order. Let a copy of this order be sent to each Chief Secretary and Secretary (Labour) of the respective states or union territories. .................................CJI. (S.H. Kapadia) [10] ...................................J. (A.K. Patnaik) ...................................J. (Swatanter Kumar) New Delhi; February 7, 2012 [11]

CODE OF CIVIL PROCEDURE, 1908: Or. 22,r.4 - Abatement of appeal -Inordinate delay in filing application for bringing legal heirs on record and for setting aside abatement - High Court passed a conditional order giving final opportunity to do the needful, failing which the appeal was to stand dismissed-Order not complied with-Subsequently, High Court allowed all applications condoning 3703 days delay in filing the application to bring the legal heirs on record and 883 days delay in filing petition to set aside the dismissal order-Held: Whilst considering applications for condonation of delay u/s 5 of the Limitation Act, the courts do not enjoy unlimited and unbridled discretionary powers- All discretionary powers, especially judicial powers, have to be exercised within reasonable bounds, known to the law-The discretion has to be exercised in a systematic manner informed by reason-Whims or fancies, prejudices or predilections can not and should not form the basis of exercising discretionary powers-High Court, having recorded its conclusions and findings on the unacceptable explanation for delay, should not have condoned unconscionable delay-Judgment of High Court is unsustainable either in law or in equity and is set aside-Limitation Act, 1963-s. 5. ADMINISTRATION OF JUSTICE: Remarks in judgment of High Court on performance of government pleaders - Appeal filed by State Government, before High court-Inordinate delay on the part of Government pleaders in taking steps to bring heirs and legal representative of the respondent on record-Remarks made by High Court against Government pleaders-Held: High Court has, rather sarcastically, dubbed the government pleaders as without merit and ability-The approach adopted by the High Court tends to show the absence of judicial balance and restraint, which a Judge is required to maintain whilst adjudicating any lis between the parties-The High Court not being satisfied with the use of mere intemperate language, resorted to blatant sarcasms-The use of unduly strong intemperate or extravagant language in a judgment has been repeatedly disapproved by this Court in a number of cases-The order of the High Court is based purely on the personal perceptions and predilections of the Judges on the bench-The latent anger and hostility ingrained in the expressions employed in the judgment have denuded the judgment of impartiality-In its desire to castigate the government pleaders and the Court staff, the High Court has sacrificed the "justice oriented approach", the bedrock of which is fairness and impartiality-The caustic remarks made by the High Court, against the government pleaders and the Court staff clearly exhibit a departure from settled principles- The judgment of the High Court is unsustainable either in law or in equity and, as such, is set aside- Code of Civil Procedure, 1908-Or. 22, r.4 - Strictures - Judicial restraint. During the pendency of the appeal before the High Court against judgment and decree in a suit for declaration of title and permanent injunction, the plaintiff-respondent died on 25.2.1990 and his counsel filed a memo before the High Court giving the said intimation after notice to the advocate for the appellants. When the appeal came up for hearing on 24.4.1997, the counsel for the plaintiff-respondent again brought to the notice of the High Court the factum of death of his client. Since, inspite of the directions of the High Court, no steps were taken to bring the legal heirs and representatives of the plaintiff-respondent on record, on 6.2.1998, it gave one week's time for compliance failing which the appeal would stand dismissed. As the order was not complied with, the appeal stood dismissed in terms of the order dated 6.2.1998. In the year 2000, an application was filed by the judgment-debtors before the High Court seeking condonation of 883 days delay in filing the petition to set aside the dismissal order dated 6.2.1998. On 17.8.2000 another application was filed seeking to condone 3703 days delay to bring the legal representatives on record. It was accompanied by an application under Order 22 , Rule 4, CPC. After several adjournments at the instance of the judgment- debtors, the appeal was listed for hearing on 19.8.2003 on which date the High Court allowed all the applications and restored the appeal and posted it for hearing. Aggrieved, the heirs and legal representatives of the plaintiff filed the appeals.

Allowing the appeals, the Court HELD: 1.1. This Court while issuing notice in the SLP had directed proceedings in the appeal pending in the High Court to remain stayed meanwhile. Therefore, it is evident that the situation as on date is as it was when the order was passed on 06.02.1998 i.e. , appeal filed by respondent Nos. 1 and 2 stood abated and, as such, dismissed. [Para 16] [229-C] 1.2. Generally speaking, the courts including this Court, adopt a liberal approach in considering the application for condonation of delay on the ground of sufficient cause u/s 5 of the Limitation Act. [para 19] [230-C] Balwant Singh (dead) Vs. Jagdish Singh, 2010 (8) SCR597= (2010) 8 SCC 685; N. Balakrishnan Vs. M. Krishnamurthy 1998 (1) Suppl. SCR 403= (1998) 7 SCC 123; Mithailal Dalsangar Singh & Ors. Vs. Annabai Devram Kini & Ors. (2003) 10 SCC 691; and Sardar Amarjit Singh Kalra (dead) by LRs Vs. Pramod Gupta (dead) by LRs. 2002 (5) Suppl. SCR350= (2003) 3 SCC 272; and Collector, Land Acquisition, Anantnag & Ors. Vs. Katiji & Ors. 1987 (2) SCR 387= (1987) 2 SCC 107 - referred to. 1.3. Whilst considering applications for condonation of delay u/s 5 of the Limitation Act, 1963, the courts do not enjoy unlimited and unbridled discretionary powers. All discretionary powers, especially judicial powers, have to be exercised within reasonable bounds, known to the law. The discretion has to be exercised in a systematic manner informed by reason. Whims or fancies, prejudices or predilections can not and should not form the basis of exercising discretionary powers. [para 26] [234-G-H; 235-A] 1.4. The High Court, in the instant case, graphically narrated the clear dereliction of duty by the government pleaders concerned in not pursuing the appeal before it diligently, and set out the different stages at which the government pleaders had exhibited almost culpable negligence in performance of their duties. It found the justification given by the government pleaders to be unacceptable. Having recorded such conclusions, inexplicably, the High Court proceeds to condone the unconscionable delay. Such a course was not open to the High Court, given the pathetic explanation offered by the respondents in the application seeking condonation of delay. There does not seem to be any logic or rationale, which could have impelled the High Court to condone the delay after holding the same to be unjustifiable. The concepts such as "liberal approach", "justice oriented approach", "substantial justice" cannot be employed to jettison the substantial law of limitation. Especially, in cases where the court concludes that there is no justification for the delay. [para 24, 25-26] [234-B-C; 235-F; 234-D] 2.1. In the opening paragraph of the impugned order the High Court has, rather sarcastically, dubbed the government pleaders as without merit and ability. The approach adopted by the High Court tends to show the absence of judicial balance and restraint, which a Judge is required to maintain whilst adjudicating any lis between the parties. The High Court, not being satisfied with the use of mere intemperate language, resorted to blatant sarcasms. The use of unduly strong intemperate or extravagant language in a judgment has been repeatedly disapproved by this Court in a number of cases. [para 25-26] [233-G; 234-F] 2.2. The order of the High Court is based purely on the personal perceptions and predilections of the Judges on the bench. The latent anger and hostility ingrained in the expressions employed in the judgment have denuded the judgment of impartiality. In its desire to castigate the government pleaders and the Court staff, the High Court has sacrificed the "justice oriented approach", the bedrock of which is fairness and impartiality. It is also well known that anger deprives a human being of his ability to reason. Judges being human are not immune to such disability. It is of utmost importance that in expressing their opinions, Judges and Magistrates be guided only by the considerations of doing justice. The caustic remarks made by the High Court, against the government pleaders and the Court staff clearly exhibit a departure from the well established principles. [para 27-28] [235-B-D; 236-D] State of U.P. Vs. Mohammad Naim (1964)2 SCR 363 - relied on. 3. The judgment of the High Court is unsustainable either in law or in equity and, as such, is set aside. [para 29] [236-E] Case Law Reference: 2010 (8) SCR597 referred to para 18 1998 ( 1 ) Suppl. SCR 403 referred to para 18 (2003) 10 SCC 691 referred to para 18 2002 (5 ) Suppl. SCR350 referred to para 18 1987 ( 2 ) SCR 387 referred to para 19 (1964)2 SCR 363 relied on para 27 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2909-2913 of 2005. From the Judgment & Order dated 19.08.2003 of the High Court Judicature Andhra Pradesh at Hyderabad in CMP Nos. 21114-21118 of 2003. P.S. Narasimha and R. Sundaravardan, M. Srinivas R. Rao, K. Parameshwar, Sudhu Gupta, G.N. Reddy, V. Pattabhi Ram, C.K. Sucharita and V. Mohana for the appearing parties. REPORTABL E IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2909-2913 OF 2005 Lanka Venkateswarlu (D) by LRs. .. Appellants VERSUS State of A.P. & Ors ..Respondents J U D G M E N T SURINDER SINGH NIJJAR, J. 1. These appeals are directed against the order passed by a Division Bench of the High Court of Judicature of Andhra Pradesh at Hyderabad in CMP Nos. 21114, 21115, 21116, 21117 and 21118 of 2003 dated 19th August, 2003. By the aforesaid order, the High Court has allowed all the petitions/applications. 2. In the applications/petitions, respondent No.3, herein, had sought the following directions:- " CMP No. 21114/2003: Petition under Order 22 Rule 4 of the CPC praying that in the circumstances stated in the affidavit titled therewith, the High Court will be pleased to permit the petitioners to bring the above stated persons as legal representatives of the deceased sole respondent in Appeal No. 8 of 1985 on the file of the High Court. CMP No. 21115/2003: Petition U/s praying that the High Court may be pleased to set aside the dismissal Order dated 6.2.98 in AS No.8 of 1985 and to restore the appeal to file. CMP No. 21116/2003: Petition Under Order 9 Rule 9 read with section 151 CPC, praying that the High Court may be pleased to set aside the abatement caused due to the death of sole respondent i.e. Lanka Venkateswarlu. CMP No. 21117/2003: Between Sri D.E.V Apparao ...Petitioner/impleaded Petitioner in AS No.8 of 1985 on the file of High Court And: 1. The State of A.P. rep. by District Collector, Visakhapatnam. 2. The Tahsildar, Visakhpatnam ...Respondent/Appellants 3. Lanka Venkateswarlu (died) ...Respondent 2 Petition under Order 1 Rule 10 CPC, prays this Hon'ble Court may be pleased to permit the petitioners society to be impleaded as appellant No.3 along with the appellants No. 1 and 2 in AS. 8 of 1985 on the file of the Hon'ble Court to prosecute the appeal. CMP No. 21118/2003: Petition U/s 5 of Limitation Act praying the High Court may be pleased to condone the delay of 883 days in filing the petition seeking to set aside the dismissal order dated 6.2.1998. These petitions coming on for hearing, upon perusing the petition and the affidavit filed in support thereof and upon hearing the arguments of Govt. pleader for Appeal for Petitioners in CMP Nos. 21114, 21115, 21116, 21118 of 2003 and of Mr. K. Sarva Bhouma Rao, Advocate for petitioner in CMP No. 21117 of 2003 and of Mr. M.S.R. Subramanyam, Advocate for the respondents in CMP Nos. 21114, 21115, 21116, 21118 of 2003 and G.P. for Appeal for the respondents in CMP No. 21117 of 2003." 3. We may now briefly notice the relevant facts as stated in the pleadings of the parties and the impugned order of the High Court. The predecessor of the appellants, i.e., Shri Lanka Venkateswarlu, (hereinafter referred to as `original plaintiff'), brought a suit O.S. No. 72 of 1979 before the subordinate judge Visakhapatnam 3 for the declaration of his title as the absolute owner of the suit schedule property and for permanent injunction restraining respondents Nos. 1 and 2 from interfering with his peaceful possession. The suit schedule property, to the extent of 2 acres was, according to the original plaintiff, covered by survey No. 73/12 in Thokada village. He had purchased the suit schedule property by a registered sale deed dated 15th July, 1961 from one Gonna Appanna son of Venkataswamy of China Gantyda village. The original plaintiff was constrained to file the aforesaid suit on coming to know that respondent Nos. 1 and 2 were claiming the suit schedule land to be "banjar land" which vested in the Government. He had also learned that the land was in imminent danger of being illegally alienated by the respondent Nos. 1 and 2. They were claiming that the land was required to issue Pattas to weaker sections of society. 4. Respondent Nos. 1 and 2 were impleaded as the defendants to the suit. Subsequently, the suit was 4 transferred to the Court of IVth Additional District Judge, Visakhapatnam and renumbered as O.S. No. 83 of 1981. 5. The aforesaid averments of the original plaintiffs were controverted by the respondent Nos. 1 and 2. It was claimed that the plaint schedule property was not covered by old survey No. 73/12 of the original village of Thokada. The boundaries as well as survey number were stated to be fictitious, forged and imaginary. Even the ownership of the ancestors of the vendor of the original plaintiff of the suit schedule land was denied. Further, the alleged sale deed dated 15th July, 1961 between the original plaintiff and the vendor was denied. It was also stated that the original plaintiff was not in possession and enjoyment of the plaint schedule property. 6. On the pleadings of the parties, the trial court framed six issues. Issue No. 1 pertains to the title of the original plaintiff to the schedule property. Issues No.2 & 3 were with regard to, whether the original plaintiff was 5 entitled to relief of declaration and injunction as prayed for. Issue No.4 was whether the suit is not maintainable. A perusal of the judgment of the trial court shows that the suit was hotly contested on each and every issue. Issues 1, 2, 3, 4 and 6 were decided in favour of the original plaintiff and against the defendants, i.e., respondent Nos. 1 and 2. Issue No.5 with regard to valuation of the suit was not pressed by the government pleader. The suit was decreed by judgment dated 24th September, 1982. 7. The respondents challenged the aforesaid judgment and decree by filing an appeal before the High Court of Andhra Pradesh being A.S. No. 8 of 1985. The sole respondent, i.e., original plaintiff died on 25th February, 1990. Therefore, the Advocate appearing for the deceased original plaintiff being the `sole respondent' in the appeal filed a memo before the High Court giving intimation about the death of his client. The memo was filed after giving notice to the advocate for respondent 6 Nos. 1 and 2, who were appellants in the aforesaid appeals. In spite of such intimation, respondent Nos. 1 and 2 failed to bring the legal representatives of the deceased original plaintiff on record. 8. From the judgment of the High Court it is apparent that the appeal came up for hearing on 24th April, 1997. At that stage, the counsel for the appellants again brought to the notice of the Court that his client has passed away on 25th February, 1990. The High Court directed the government pleader to take steps to bring on the record the legal representatives of the original plaintiff and posted the matter for hearing on 16th June, 1997. It appears that no actions were taken by the respondents to comply with the order passed by the High Court on 24th April, 1997. Therefore, on 6th February, 1998, Justice V. Rajagopala Reddy, J. passed the following order:- "Appeal under Section 96 CPC against the order of the Court of the IV Addl. District Judge, Visakhapatnam dt.24.09.1982 in O.S. No. 83/81. 7 This appeal coming on for orders under Rule 64 of the Appellate Side Rules of the High Court on the failure of the Appellant herein. 1. To take steps to bring on record the LRs. of the deceased sole respondent. In the presence of G./P. for Excise for the Appellant and of Mr. M.S.R. Subramanyam, Advocate for the respondent No.1. It is ordered as follows: 1. That the Appellant do within one week from the date of this order comply with the requisitions of the Office referred to above and; 2. That in default of compliance with the said requisitions within the time prescribed in clause 1 supra, the Appeal shall stand dismissed as against the sole respondent herein." 9. The aforesaid order was admittedly not complied with. Consequently, the appeal stood abated in terms of the order dated 6th February, 1998. It appears that thereafter CMPSR No. 49656 of 2000 was moved by respondent Nos. 1 and 2 seeking condonation of 883 days delay in filing the petition to set aside the dismissal order dated 6th February, 1998. The application was 8 accompanied by an affidavit where it is candidly admitted by respondent No.2 that the order dated 6th February, 1998 was not complied with. It was further admitted that as the order dated 6th February, 1998 was not complied with, the default order came into force and the appeal stood dismissed. 10. In this affidavit, the explanation given is that the predecessors of the officer, who affirmed the affidavit dated 11th July, 2000 came to know about the dismissal of the appeal during the course of investigation in original O.S. No. 6 of 2000 which had been filed by the widow and the children of the deceased original plaintiff, i.e., sole respondent in the appeal. It is also admitted that thereafter, an application was filed for setting aside the order of abatement dated 6th February, 1998, but, without any application seeking condonation of delay of 883 days in filing the petition. To cover the foresaid lapse, CMP No. 21118 of 2003 was filed seeking condonation of delay of 883 days in filing the petition. 9 11. Thereafter CMPSR No. 58644 of 2000 was filed on 17th August, 2000 with a prayer to condone the delay of 3703 days to bring the legal representatives on record. CMPSR No. 58646 of 2000 was filed to bring the legal representatives of the deceased original plaintiff on record and CMPSR No. 58645 of 2000 to set aside the order of dismissal in AS No. 8 of 1985 dated 6th February, 1998 was filed. These applications were subsequently numbered as noted in the heading of the impugned judgment. 12. It appears from the impugned order of the High Court and CMPSR No. 58644 of 2000 was numbered as CMP no. 17186 of 2000 on 17th August, 2000 and listed before the Court on 27th September, 2000. The High Court granted two weeks time for filing the counter. The aforesaid CMP was posted for hearing before the bench on 16th October, 2000 (Venkatanarayan,J.). At that time, counsel for the deceased original plaintiff submitted that 1 his client had died in 1990 and he had no instructions. Therefore, the Court directed to issue notice to the parties on the petition. Even at that stage the government pleader did not bring to the notice of the Court that the applications filed by respondent Nos. 1 and 2 to set aside the order of dismissal and to bring the legal representatives on record were pending consideration. 13. Thereafter it appears the matter was adjourned on a number of occasions from 27th June, 2001 to 9th April, 2002. Surprisingly, on 3rd June, 2002 the government pleader again took time from the Court to verify whether any separate application was filed for restoration of the appeal and whether any such application was pending or not. Thereafter the matter was not pursued by the government pleader. 14. In the meantime, the alleged beneficiaries to whom Pattas had been granted by the Government Poramboke 1 in the year 1979 filed CMP No. 21705 of 2000, seeking permission of the Court to come on record as the third appellant in the appeal. In the impugned order, it is also pointed out that the pendency of the applications had come to the notice of the Court intermittently. It appears that the application to condone the delay in filing the petition for setting aside the order of dismissal was filed, when the lapse was pointed by the Court. 15. Thereafter, it seems that without the adjudication of any of the applications on merits, the appeal was listed for hearing before the Bench, which culminated into passing the judgment and order dated 19th August, 2003, subject matter of the present appeal. By the aforesaid judgment, the High Court has allowed all the applications restored the appeal posted it for hearing on 25th August, 2003. 16. This Court while issuing notice in the SLP on 15th December, 2003 directed that "in the meantime, 1 proceedings in the appeal pending in the High Court shall remain stayed". Therefore, it is evident that the situation today is as it was when the order was passed on 6th February, 1998, i.e., appeal filed by the respondent Nos. 1 and 2 stood abated and hence dismissed. 17. We have heard the learned counsel for parties. Mr. P.S. Narasimha, senior advocate, appearing for the appellant submitted that the impugned order of the High Court cannot be justified on any legal ground. He submits that the High Court having itself recorded the utter negligence of the respondents in pursuing the appeal at every stage, without any justification, condoned the delay. The learned senior counsel pointed out that there was no explanation, much less any plausible explanation to justify the delay of 3703 days in filing the application for bringing on record the LRs. of the sole respondent or for the delay in filing the application for setting aside the order dated 6th February, 1998. It was further submitted that there was no justification to 1 permit the respondent No.3 to be impleaded as a party in the appeal. Learned counsel relied on the judgment of this Court in the case of Balwant Singh (dead) Vs. Jagdish Singh1 in support of the submission that the law of limitation has to be enforced in its proper prospective. Even though the Courts have power to condone the delay, it can not be condoned without any justification. Such an approach would result in rendering the provisions contained in the Limitation Act redundant and inoperative. 18. On the other hand, learned counsel for the respondents relied on the judgments of this Court in the case of N. Balakrishnan Vs. M. Krishnamurthy2 , Mithailal Dalsangar Singh & Ors. Vs. Annabai Devram Kini & Ors.3 and Sardar Amarjit Singh Kalra (dead) by LRs Vs. Pramod Gupta (dead) by LRs.4 and submitted 1 (2010)8 SCC 685 2 (1998) 7 SCC 123 3 (2003) 10 SCC 691 4 (2003) 3 SCC 272 1 that the High Court in condoning the delay has merely advanced the cause of substantial justice. 19. We have considered the submissions made by the learned counsel. At the outset, it needs to be stated that generally speaking, the courts in this country, including this Court, adopt a liberal approach in considering the application for condonation of delay on the ground of sufficient cause under Section 5 of the Limitation Act. This principle is well settled and has been set out succinctly in the case of Collector, Land Acquisition, Anantnag & Ors. Vs. Katiji & Ors.5 20. In the case of M. Balakrishnan (supra), this Court again reiterated the principle that rules of limitation are not meant to destroy the rights of parties. They are meant to see that the parties do not resort to dilatory tactics, but seek their remedy promptly. 5 (1987) 2 SCC 107 1 21. In the case of Sardar Amarjit Singh Kalra (supra), this Court again emphasized that provisions contained in the Order 22 CPC were devised to ensure continuation and culmination in an effective adjudication and not to retard further progress of the proceedings. The provisions contained in the Order 22 are not to be construed as a rigid matter of principle, but must ever be viewed as a flexible tool of convenience in the administration of justice. It was further observed that laws of procedure are meant to regulate effectively, assist and aid the object of doing a substantial and real justice and not to foreclose even adjudication on merits of substantial rights of citizen under personal, property and other laws. In the case of Mithailal Dalsangar Singh and Ors. Vs. Annabai Devram Kini & Ors, (Supra), this Court again reiterated that in as much as abatement results in denial of hearing on the merits of the case, the provision of an abatement has to be construed strictly. On the other hand, the prayer of setting aside abatement and the 1 dismissal consequent upon abatement had to be considered liberally. It was further observed as follows:- "The Courts have to adopt a justice oriented approach dictated by the uppermost consideration that ordinarily a litigant ought not to be denied an opportunity of having a lis determined on merits unless he has, by gross negligence, deliberate inaction or something akin to misconduct, disentitled himself from seeking the indulgence of the court." 22. The concepts of liberal approach and reasonableness in exercise of the discretion by the Courts in condoning delay, have been again stated by this Court in the case of Balwant Singh (supra), as follows:- "25. We may state that even if the term "sufficient cause" has to receive liberal construction, it must squarely fall within the concept of reasonable time and proper conduct of the party concerned. The purpose of introducing liberal construction normally is to introduce the concept of "reasonableness" as it is understood in its general connotation." "26. The law of limitation is a substantive law and has definite consequences on the right and obligation of party to arise. These principles should be adhered to and applied appropriately depending on the facts and circumstances of a given case. Once a valuable right has accrued in favour of one party as a result of the failure of the other party to explain the delay by showing sufficient 1 cause and its own conduct, it will be unreasonable to take away that right on the mere asking of the applicant, particularly when the delay is directly a result of negligence, default or inaction of that party. Justice must be done to both parties equally. Then alone the ends of justice can be achieved. If a party has been thoroughly negligent in implementing its rights and remedies, it will be equally unfair to deprive the other party of a valuable right that has accrued to it in law as a result of his acting vigilantly." 23. Let us now examine as to whether the High Court was justified in condoning the delay in the peculiar facts of the presence case. The High Court in its judgment records the following conclusions:- "(1) The Government Pleader having filed the appeal on 18.2.1983 has taken three long years to get the appeal numbered. (2) The sole respondent died in 1990. The learned counsel for the respondent submits that he served a letter on the learned Government Pleader bringing to his notice about the death of his client in 1990 itself. Since the letter is not traced we are not giving much importance to that fact. But at the same time this fact was brought to the notice of the Government Pleader on 24.2.1997 when the appeal was listed for hearing. (3) Even though the Court gave sufficient time the Government Pleader has not taken any steps to bring LRs. on record. 1 (4) After one year the Court passed a Conditional Order on 6.2.1998 and the appeal was dismissed for not bringing the LRs. on record. (5) After two more years the concerned officials of the Government and the Government Pleader in office at the relevant point of time, filed some applications, which are not in order. (6) Even then they have not bestowed any attention either to comply with the defects in filing the application or in getting the orders are passed on these applications. But at the same time they went on taking time without knowing for what purpose they were taking time. In the result an appeal which would have been disposed of in 1997 remained pending all these years mainly due to the negligence on the part of the Government Pleader in office. Thereafter at the two stages, the High Court records that:- "In the normal course we would have thrown out these applications without having second thought in the matter.............." "We have already observed that in the normal course we would have dismissed the applications for severe latches on the part of the appellants and their counsel." 1 24. Having recorded the aforesaid conclusions, the High Court proceeded to condone the delay. In our opinion, such a course was not open to the High Court, given the pathetic explanation offered by the respondents in the application seeking condonation of delay. 25. This is especially so in view of the remarks made by the High Court about the delay being caused by the inefficiency and ineptitude of the government pleaders. The displeasure of the Court is patently apparent from the impugned order itself. In the opening paragraph of the impugned order the High Court has, rather sarcastically, dubbed the government pleaders as without merit and ability. Such an insinuation is clearly discernable from the observation that "This is a classic case, how the learned government pleaders appointed on the basis of merit and ability (emphasis supplied) are discharging their function protecting the interest of their clients". Having said so, the High Court, graphically narrated the clear dereliction of duty by the concerned 2 government pleaders in not pursuing the appeal before the High Court diligently. The High Court has set out the different stages at which the government pleaders had exhibited almost culpable negligence in performance of their duties. The High Court found the justification given by the government pleaders to be unacceptable. Twice in the impugned order, it was recorded that in the normal course, the applications would have been thrown out without having a second thought in the matter. Having recorded such conclusions, inexplicably, the High Court proceeds to condone the unconscionable delay. 26. We are at a loss to fathom any logic or rationale, which could have impelled the High Court to condone the delay after holding the same to be unjustifiable. The concepts such as "liberal approach", "justice oriented approach", "substantial justice" can not be employed to jettison the substantial law of limitation. Especially, in cases where the Court concludes that there is no justification for the delay. In our opinion, the approach 2 adopted by the High Court tends to show the absence of judicial balance and restraint, which a Judge is required to maintain whilst adjudicating any lis between the parties. We are rather pained to notice that in this case, not being satisfied with the use of mere intemperate language, the High Court resorted to blatant sarcasms. The use of unduly strong intemperate or extravagant language in a judgment has been repeatedly disapproved by this Court in a number of cases. Whilst considering applications for condonation of delay under Section 5 of the Limitation Act, the Courts do not enjoy unlimited and unbridled discretionary powers. All discretionary powers, especially judicial powers, have to be exercised within reasonable bounds, known to the law. The discretion has to be exercised in a systematic manner informed by reason. Whims or fancies; prejudices or predilections can not and should not form the basis of exercising discretionary powers. 2 27. The order of the High Court, in our opinion, is based purely on the personal perceptions and predilections of the Judges on the bench. The latent anger and hostility ingrained in the expressions employed in the judgment have denuded the judgment of impartiality. In its desire to castigate the government pleaders and the Court staff, the High Court has sacrificed the "justice oriented approach", the bedrock of which is fairness and impartiality. Judges at all levels in this country subscribe to an oath when entering upon office of Judgeship, to do justice without fear or favour, ill will or malice. This commitment in form of a solemn oath is to ensure that Judges base their opinions on objectivity and impartiality. The first casualty of prejudice is objectivity and impartiality. It is also well known that anger deprives a human being of his ability to reason. Judges being human are not immune to such disability. It is of utmost importance that in expressing their opinions, Judges and Magistrates be guided only by the considerations of doing justice. We may notice here 2 the observations made by a Constitution Bench of this Court in the case of State of U.P. Vs. Mohammad Naim 6 , which are of some relevance in the present context. In Paragraph 11 of the judgment, it was observed as follows:- "If there is one principle of cardinal importance in the administration of justice, it is this: the proper freedom and independence of Judges and Magistrates must be maintained and they must be allowed to perform their functions freely and fearlessly and without undue interference by any body, even by this Court. At the same time it is equally necessary that in expressing their opinions Judges and Magistrates must be guided by considerations of justice, fair-play and restraint. It is not infrequent that sweeping generalisations defeat the very purpose for which they are made. It has been judicially recognised that in the matter of making disparaging remarks against persons or authorities whose conduct comes into consideration before courts of law in cases to be decided by them, it is relevant to consider (a) whether the party whose conduct is in question is before the court or has an opportunity of explaining or defending himself; (b) whether there is evidence on record bearing on that conduct, justifying the remarks; and (c) whether it is necessary for the decision of the case, as an integral part thereof, to animadvert on that conduct. It has also been recognised that judicial pronouncements must be judicial in nature, and should not normally depart from sobriety, moderation and reserve." 6 (1964) 2 SCR 363 2 28. We are of the considered opinion that the caustic remarks made by the High Court, against the government pleaders and the Court staff clearly exhibits a departure from the principles quoted above. 29. We are of the considered opinion that the judgment of the High Court is unsustainable either in law or in equity. Consequently, the appeals are allowed. The impugned judgment of the High Court is set aside with no order as to costs. ...................................J. [B.Sudershan Reddy] ...................................J. [Surinder Singh Nijjar] New Delhi; February 24, 2011. 2