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HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE

Commissioner of Income-Tax, Thiruvananthapuram v. M/s Baby Marine Exports, Kollam

Civil Appeal No. 6146 of 2005 / Civil Appeal Nos. 281-284 of 2006 / Civil Appeal No. 286 of 2006
[2007] 4 SCR 628 ·
80HHC(1A) · 80HHC(2A) · 80HHC(1) · 80HHC(4A) · 80HHC Explanation (baa)

Reasoned final decisionAssessee supporting manufacturers
Download AKHB noteFive-part research note
Sources & disclosures includedDownload original judgment / order

Two-judge bench · Ashok Bhan, J. · Dalveer Bhandari, J.

Assessment years: 1992-93, 1993-94, 1994-95

01 · Facts of the case

Baby Marine sold marine products domestically and exported both directly and through export houses. Under the relevant contracts, the supporting manufacturer received the full FOB value plus a premium of 2.25% of FOB value net of overseas commission. It treated that premium as sale consideration. The officer treated it as commission or service charges; the Commissioner (Appeals) sustained the 90% exclusion from business profits, while separately correcting the treatment of indirect export turnover. The Tribunal allowed inclusion of the premium and the High Court upheld that conclusion. The Revenue appealed (printed SCR pp. 629-635).

Source: reported judgment / paragraphs Unnumbered facts, procedural history and parties’ submissions; SCR pp. 629-635 / PDF pages 2, 3, 4, 5, 6, 7, 8 / judicial text

02 · Discussion by the Hon’ble Court

The Court distinguished the supporting manufacturer’s section 80HHC(1A) claim, arising from sales to an export house, from the export house’s section 80HHC(1) claim. The respondent satisfied the definition of supporting manufacturer, and the export house had issued the requisite certificate. On the contract and the Tribunal’s accepted findings, the 2.25% premium was an integral part of the sale price rather than commission or brokerage for a separate service (pp. 637-639).

Payment in Indian currency did not defeat this supporting-manufacturer claim: the Court relied on section 80HHC(2A) for the inapplicability of the foreign-exchange-realisation requirement to that claim. The contractual premium arose from the assessee’s sale operations and was includible in business profits. Although the Court also referred to the incentive objective and liberal interpretation, its operative reasoning expressly rested on the plain construction of section 80HHC(1A) and the established character of this payment (pp. 637-639).

Source: reported judgment / paragraphs Statutory reproduction and Court’s reasoning; SCR pp. 636-639 / PDF pages 9, 10, 11, 12 / judicial text

03 · Judicial decision

The Revenue’s lead appeal was dismissed. The companion appeals were disposed of in the same terms, with all parties bearing their respective costs. Inclusion of this contractual sale-price premium was upheld (pp. 639-640).

Source: reported judgment / paragraphs Closing merits paragraph and companion disposition; SCR pp. 639-640 / PDF pages 12, 13 / judicial text

04 · Outcome / in whose favour

In whose favour: Assessee supporting manufacturers

Lead Revenue appeal dismissed; companion appeals disposed of in its terms; parties to bear their respective costs

Final inclusion of the identified contractual premium in business profits for the supporting-manufacturer deduction

No general parity between supporting manufacturers and direct exporters for statutory DEPB/duty-drawback incentives; no entitlement merely because a receipt is described as an incentive; no independently quantified deduction.

Source: reported judgment / paragraphs Closing disposition and costs / PDF pages 12, 13 / judicial text

05 · AKHB REVIEW POINT

Examine the actual sale agreement, certificate and commercial character of the payment. The success here rested on a premium that formed part of the consideration payable for the manufacturer’s own goods, rather than remuneration for a separate service. Do not equate that premium with every government export incentive.

Carpet India (2019) expressly distinguished Baby Marine on that basis and overruled the separate 12 September 2012 decision in Civil Appeal No. 6437 of 2012. Ramnath (2020) separately said Baby Marine’s result followed plain construction, while rejecting its generalised liberal-interpretation observations as a sound statement of the eligibility rule. Neither checked passage declares Baby Marine’s sale-price-premium result overruled.

Source: reported judgment / paragraphs Plain construction and sale-price character; SCR pp. 638-639 / PDF pages 11, 12 / judicial text; official signed judgment / paragraphs 4-8; specifically paragraph 6 distinguishes Baby Marine and overrules the different CA 6437/2012 / PDF pages 8, 9, 10, 11 / judicial text; reported judgment / paragraphs 16-16.3; 18-21 / PDF pages 49, 50, 51, 57, 58 / judicial text

Additional statutory context, not separate holdings

80HHC(1B): extent of the deduction in the statutory text reproduced; 28(iiia)-(iiic): Revenue’s classification argument; CBDT Circular No. 621 dated 19 December 1991: cited in counsel’s submissions, not an independent new ruling on every receipt; Income-tax Act, 1922, section 15-C: Bajaj Tempo analogy only

Judicial authorship and separate opinions

Dalveer Bhandari, J.

Act identified in the reviewed source

Income-tax Act, 1961

Verified relationships between specified judgments

  • earlier case id
    sc-2007-03-30-baby-marine-exports
    later case id
    sc-2019-08-27-carpet-india
    relationship
    distinguished, not overruled
    finding
    Baby Marine concerned the sale-price premium. Carpet India denied general parity for incentive deductions and overruled the separate CA 6437/2012 decision of 12 September 2012. That decision’s party name varies within Carpet India; the exact appeal/date identifies it.
    evidence
    • source url
      Open cited source
      pdf pages
      8; 9; 10; 11
      paragraphs
      4-8; specifically paragraph 6 distinguishes Baby Marine and overrules the different CA 6437/2012
      source role
      judicial text
  • earlier case id
    sc-2007-03-30-baby-marine-exports
    later case id
    sc-2020-06-05-ramnath
    relationship
    plain-construction result distinguished from qualified general interpretative observations
    finding
    Ramnath explains that Baby Marine’s result rested on plain construction; it rejects the generalised liberal-interpretation observations for eligibility, in light of Dilip Kumar, while distinguishing post-eligibility formal or directory requirements.
    evidence
    • source url
      Open cited source
      pdf pages
      49; 50; 51; 57; 58
      paragraphs
      16-16.3; 18-21
      source role
      judicial text

Source & verification

Download original judgment / order · Open cited source rendition

Identified source rendition: 13 PDF pages; SHA-256 aa9c50ff293cc17459012a79a1b2a4a15fd3d49fcc4ec0c17d5f4d12ff8ce0a3. Original bytes preserved. Cover/headnote and jurisdiction on physical page 1; appearances and judgment start on page 2; complete unnumbered judicial text through page 13, printed SCR pages 629-640. No adjacent judgment.

  • The judgment describes the years involved as 1992-93 to 1994-95 (physical page 6), without allocating each year to a separate appeal.
  • Primary source is the preserved reported rendition, not a separately retrieved signed original.; This rendition does not print paragraph numbers in the judicial text; other judgments quote it with differing paragraph identifiers. Physical-PDF and printed-SCR page pins are used.; Counsel’s request concerning KRN Marine Exports and reliance on Bangalore Clothing/Board Circular are not promoted into an express overruling or universal holding by this Court.; The contract is between the assessee and export house; an apparent party-description slip in the concluding text is not replicated as a Revenue-assessee contract.

Statutory scope

Historical provisions and assessment years only; no automatic mapping to the Income-tax Act, 2025.

Later treatment

Source checked 2026-10-04. No comprehensive later-treatment or current-law audit. Any particular relationship checked from a later judgment is identified separately.

Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.

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