TMI Blog1992 (8) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions, the Sales Officer of the assessee named P. Gopal Rao allowed C. Selvaraj, Proprietor of Kohinoor Plastics and B. Abdul Majid, Proprietor of Oriental Plastics to purchase goods of the value of Rs. 8,20,107 in different names at a small figures on credit. Thereafter, when they defaulted, the assessee had to pay the value of the goods to IPCL according to the indemnity undertaken while pursuing remedies for recoveries from these persons. When confronted, these persons admitted that the transactions had been effected in contravention of the instructions given to the staff and promised to make good the amount. However, the cheques issued by them bounced. The assessee gave a criminal complaint on 25-3-1982 and thereafter a suit also was filed on 10-10-1984. In the meeting of the Board of Directors held on 28-6-1982, the Managing Director explained the situation and the Board decided to pursue the legal proceedings. However, in the meeting held on 30-7-1985 the Board approved the decision of the Managing Director to write off this amount. It is stated that this was on the basis of a detailed note showing that there was no possibility of recovering any amount from these persons. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not a bona fide decision. The revenue pointed out the fact that the assessee had filed a suit only on 10-10-1984 and, therefore, it was too early for the assessee to have written off the debt on 31-3-1985. But as pointed out by the Bombay High Court in the case of Jethabhai Hirji and Jethabhai Ramdas v. CIT [1979] 120 ITR 792 the mere fact that legal proceedings continued does not necessarily lead to the conclusion that the write off was improper or lacked bona fides. The other point stressed by the revenue was that the assessee was having a tax advantage in writing off the debt this year. We do not see anything wrong with this because a prudent and commercial decision would also include as a relevant fact possibility of tax mitigation. It is after all a notorious fact that civil suits take decades to be decided and it may not be wise decision on the part of any one to await the outcome of the civil litigation for writing off a bad debt. On the other hand, the revenue has nothing to lose because as and when any amount is recovered, it will have to be shown as income and in the case of the assessee, which is a company, the tax rate being the same year after year, there would not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is office machines in the Eleventh Schedule, says that the expression " office machines and apparatus " includes all machines and apparatus used in offices for doing office work, data processing and transmission and reception of messages. In the circumstances, it is difficult to say that the computer purchased by the assessee is not an office machine since it has been used for data processing. It is to be noted that Eleventh Schedule itself refers to section 32A. Moreover, even if it is regarded as a machinery or plant, it was to be denied the allowance if it is installed in the office premises. Since the computer was admittedly installed in the office premises, the assessee cannot claim investment allowance on this computer. 12. The next item for this assessment year relates to the computation of relief admissible to the assessee under section 80HHC. The assessee has a branch at Calcutta which was exclusively engaged in the export of goods. The assessee had computed a profit in that export business at Rs. 6,92,486 on a turnover of Rs. 28,30,930. The assessee claimed 50 per cent of that profit as deduction under section 80HHC and created a reserve for that amount for fulfil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the business of the Calcutta branch consisted exclusively of export out of India and therefore that should be regarded as business unit failing within the scope of sub-section (a). The case of the revenue is that the business carried on by the assessee is the entire business of the company, the Calcutta unit being only a branch and, therefore, sub-section (b) should be applied. In order to understand the purpose of this provision, we may refer to the speech of the Finance Minister. In his Budget Speech for 1985-86 (152 ITR St. 76 at 82) the Finance Minister said : " It is necessary to provide our exporters with requisite resources for modernisation, technological upgradation, product development and other activities with a view to raising their efficiency and productivity not only in the export sector but also in the economy as a whole. In view of these considerations, I propose to replace the tax concession under section 80HHC of the Income-tax Act by a new provision. Under the new provision, exporters will be entitled to a deduction of an amount, not exceeding 50 per cent of their export profits, carried to a reserve account to be utilised for the purposes of their business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefrom for relief under that section, the export business is to be identified as a separate unit for the purpose of section 80HHC also as it is only a method of ascertaining the profits of that particular business to which a relief is to be given. These sections are welfare measures intended to be carried out in full and not to be curtailed by restrictive construction. We are satisfied that the assessee falls within the scope of sub-section (3)(a) because the turnover and profit is easily ascertainable and consequently it is not the case where recourse had to be made under sub-section (3)(b) for the purpose of granting relief. 14. The revenue pointed out that the computation of the profit by the assessee has not taken into account any proportion of the over-head expenditure incurred in the head office and therefore the relief may have to be recomputed. This is a point which has not been taken at the earlier stages and, therefore, there is nothing on record to find out whether when there was a separate staff for the export business and except for the existence of a Head office, its contribution to the export activity is unknown. We, therefore, leave it to the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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