TMI Blog2012 (8) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... g at the allowable deduction has to be made on the proportion of export turnover over of tea to the total turnover of tea. There can be no distinction between tea produced in two different units - what is applicable would be sub-section (3)(b) and that too the total turnover will be entire business turnover - against assessee. Computation of relief u/s 32AB - Tribunal's finding that interest income cannot be treated as "profit" for the purpose of computation of relief - Held that:- As decided in Parry Agro Industries Limited Versus CIT [2006 (7) TMI 128 - KERALA HIGH COURT] the assessee was not entitled to include interest income as profits of eligible business or profession for computing the deduction under Section 32AB - against assessee. Computation of depreciation while computing deduction under Section 32AB - assessee contested to take period of 32 months - Held that:- Under Section 32AB eligible profits are arrived at after deducting depreciation computed in accordance with the provisions of Section 32(1) - The amount that had been computed u/s 32(1) for the relevant assessment year with respect to the previous year comprising of 21 months is the depreciation for a peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alai, South India and Deckiajuli in the State of Assam. The assessee has been assessed for income of the business carried on at both these places by the respondent. For the year 1989-90 while completing the assessment under Section 143(2), the assessing officer made some disallowances. We are concerned only with the disallowances referred to above under Section 80HHC, Section 32AB and Section 37(3) of the Act. The major disallowance was with respect to the claim under Section 80HHC. 4. Section 80HHC provides for a deduction of the profits derived on export by an assessee, being an Indian company or person resident in India engaged in the business of export out of India of any goods or merchandise. In computing the said profits, taking into account that, there might be cases where the assessee's business consists exclusively of the export out of India and otherwise, sub-section (3) was provided specifically with the intention to provide guidance on such computation. Sub-section (3) provided that when the business of an assessee was exclusively of the export out of India of the goods or merchandise then what was available for deduction as profits is the profits of the business as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was not an expenditure incurred on guest house, but a reimbursement of expenses which was incurred by the Estate Manager to accommodate visiting employees in the house provided for the Estate Manager. With respect to the issue of Section 32AB; interest having been found to be business income, was directed to be allowed as a deduction under Section 32AB. The computation of profits entitled to deduction under Section 80HHC as done by the assessing officer was confirmed, as was the deduction of depreciation for 21 months. 9. The assessee was in appeal before the Tribunal against the computation of export profits under Section 80HHC as also the deduction of depreciation for 21 months. The Revenue was in appeal before the Tribunal against treating interest as a deduction allowable under Section 32AB and the expenditure incurred for accommodation of touring employees being allowed as not being covered under Section 37(3). The Revenue's appeals with respect to the above issues were allowed. In the assessee's appeal, the issue of deduction of depreciation for 21 months while was upheld, the computation of Section 80HHC was remanded to the assessing officer to consider whether the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the said year, viz., I.T.A.Nos.128 of 2000 and 175 of 2000 are the questions 1 to 6 raised above. Question No.7 arises only for the assessment year 1989-90. For the year 1991-92, question Nos.1 to 3 and 5 and 6 are raised in I.T.A.No.207 of 2000. We proceed to deal with the questions of law rather than each of these appeals. 11. The first three questions raised by the assessee is with respect to the computation of export profit allowable for deduction under Section 80HHC. As noticed above, the claim of the assessee is that the denominator in the formula being Export Turnover / Total Turnover X Business Profits = Available Deduction; is the turnover for the Assam estate alone. Hence the contention is that in calculating the deduction under Section 80HHC and specifically in computation of the export profits entitled to deduction, the Assam unit should be taken as a separate unit and the proportion of export turnover of that unit to the total turnover of that unit should be applied to the total business profits of the assessee; being that disclosed under the head "profits and gains of business or profession". The assessee urges for that proportion of its entire profits to be gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits of the business (as computed under the head "Profits and gains of business or profession"), the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee". 12. The counsel for the assessee would strenuously urge before us that the estate at Assam was independently carried out without any connection with the other operations of the company and that it would even be possible to continue the business operations in the Assam estate if the other operations of the company were closed. Separate books of accounts were maintained for the Assam estate and its income was also computed separately as it was subject to agricultural income tax of that State. The tea produced in the South Indian estates were not subject to exports and what was subject to exports was the tea manufactured from the Assam estate alone. True, the tea manufactured at the Assam estate was also involved in local sales and hence the proportion of the export turnover with respect to the total turnover of the Assam unit has to be arrived at for computing the allowable deductions under Section 80HHC. The said proportion, it is contended, has to be applied to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that it can only be: ".... business relating to the goods to which the section applies and the thrust is on the word "exclusively". The sub-section considers a situation where the assessee's business is of exports and the assessee's business is not that of export alone. However, one thing is certain that the business has to be only in respect of the goods or merchandise to which the section applies". Hence, with special emphasis on the exemption being available to the goods or merchandise; it was held that: "The business contemplated in the section would be restricted to only the goods to which the section applies and, therefore, by necessary implication even the total turnover of the business would be the total turnover of the goods to which the section applies". In such circumstances, the contention of a lower denominator being applied to the formula was accepted by the Madras High Court, thus excluding the turnover of the business from other sources in computing the total turnover. 14. We are unable to understand how the said decision would be applicable to the facts of the instant case. The appellant herein, being engaged in the business of tea, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case as noticed above. 16. In this context, the learned Standing Counsel for the Department pointed out that for the very same assessment year 1989-90 against the very same order of the Tribunal the Revenue was before this Court and the said appeal, numbered as I.T.A.103 of 1999, was disposed of answering the question raised by the Revenue in favour of the Revenue and against the assessee by the decision reported in Commissioner of Income-tax v. Parry Agro Industries Ltd. [(2002) 257 ITR 41] . In the said decision, we notice the provisions under sub-section (3) relevant for the assessment year was correctly noticed and clause (a) related to exclusive business in export and clause (b) related to business not exclusively of export. 17. The counsel for the assessee would draw a distinction in so far as the assessee's contention in that appeal filed by the Revenue was that there was no requirement for going into sub-section (3) and the deduction of the assessee under Section 80HHC can be decided by virtue of the provisions under sub-section (1) itself. In so far as the present appeal filed by the assessee is concerned, the learned counsel would contend that the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90 and 1990-91. The order of remand of the Tribunal, in our opinion, was not correct since it directs the Assessing Officer to verify whether the assessee is entitled under sub-clause (a) or (b). Factually, on assessee's admission, even the Assam unit is not exclusively export-oriented and there is no question of assessee being covered under sub-clause (a). For the assessment years 1989-90 and 1990-91, sub-clause (b) of sub-section (3) of Section 80HHC will be applicable to the assessee, as held in the assessee's own case. For the year 1991-92 the provision is as substituted by Finance Act, 1990 with effect from 1.4.1991. The earlier distinction of exclusive export and business consisting other than that of export in clause (a) and clause (b) was substituted. The legislature might have noticed that sub-clause (a) of sub-section (3) was redundant in so far as it states the obvious. The substituted provision distinguished between manufactured or processed goods and trading goods. Then for the assessment year 1991-92 what would be applicable is sub-clause (a) of sub-section (3) which also refers to the proportion in respect of export of goods based on the total turnover of the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed in accordance with the provision of sub-section (1) of Section 32. The amount that had been computed under Section 32(1) of the Act for the relevant assessment year with respect to the previous year comprising of 21 months is the depreciation for a period of 21 months. In such circumstance, the depreciation for the purpose of Section 32AB cannot be limited to 12 months. The assessee's contention is that depreciation allowable under Section 32(1) is to be to the depreciation determined for 21 months. However, in computation of Section32AB, the same shall be limited to 12 months. The contention is only to be rejected. Hence, question No.7 raised for the assessment year 1989-90 is also answered in favour of the Revenue and against the assessee. 21. Question Nos.5 and 6 arising for all the years is the disallowance with respect to the expenditure incurred to accommodate touring employees. The facts with respect to the three years are not similar. In the years 1989-90 and 1990-91 the assessee claimed that they were not maintaining a separate guest house, but had been accommodating such touring employees in the house of the Estate Manager itself. The expenses were claimed as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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