TMI Blog2013 (6) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... d depreciation allowance was there, that should be first given effect to. There can be a situation where the amount which qualifies for deduction under section 80HHC of the Act may be more than the available profits of the assessee and in view of section 80A(2) of the Act that has to be limited to the available profits, but if the method suggested by Sri Shankar, learned counsel for the appellant, is to be employed, even in such situation if the depreciation is excluded and as was sought to be done, deduction under section 80HHC of the Act is first done, the amount left over may not be sufficient to give a set off against unabsorbed depreciation of earlier years, in which event, it only amounts that the assessee is being given a benefit much more than the ceiling contemplated under section 80A of the Act. If that is so, it is an indirect way of defeating the purpose and object of section 80A(2) of the Act and, therefore, also we cannot accept the argument as the argument if accepted, it runs contrary to section 80A(2) of the Act and can defeat the very purpose of section 80A(2) of the Act. - Decided against the assessee. - ITA No. 1360 of 2006 - - - Dated:- 26-2-2013 - SHYLEN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er against the assessee in I. T. A. No. 1105 of 2006, decided on February 19, 2013-Since reported in J. K. Industries Ltd. v. Asst. CIT [2013] 351 ITR 434 (Karn). These two questions are answered accordingly. In so far as the question relating to the computation of deduction under section 80HHC of the Act, i.e., the second question, is concerned, Sri Shankar has contended that though the question of allowing depreciation of earlier years' against the profits of the assessee for the year before computing the profits for the purpose of section 80HHC has also been answered against the assessee, there is a flaw in the computation of the actual profits of the assessee attributable to export turnover. In support of his submission, Sri Shankar has placed reliance on the decisions in CIT v. Madras Motors (P.) Ltd. [1984] 150 ITR 150 (Mad) and CIT v. Millipore India P. Ltd. [2012] 341 ITR 219 (Karn). Specific submission, placing reliance on these two decisions, is that the figure which is the amount attributable to profits of the business for the purpose of section 80HHC of the Act, which is to be multiplied by the fraction of export turnover divided by the total turnover for arriving a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputed in accordance with the provisions contained in sections 30 to 43D." What is pointed out is that the computation is as per the provisions of sections 30 to 43D of the Act also figuring in Chapter IV, whereas the deduction of unabsorbed depreciation of earlier years is to be found only in section 72(2) of the Act, figuring in Chapter VI and, therefore, a deduction as per section 72 is not contemplated while computing the profits and gains of business in terms of Chapter IV of the Act. On this aspect, Sri E. R. Indra Kumar, learned senior counsel appearing for the respondent-Revenue, has brought to our attention the provisions of section 80A of the Act, figuring in Chapter VI, and has submitted that in the wake of the deduction permitted under Chapter VI-A, deduction permitted under sections 80C to 80U are to be allowed from the gross total income of an assessee and that the deduction so permitted cannot exceed the gross total income of the assessee. It is also brought to our notice the distinction of gross total income in terms of section 80B(5) of the Act, indicating that it is nothing but the very total income computed in accordance with the provisions of this Act, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into, as either matter has to be remanded or the question has to be answered here. The figures claimed by the assessee though did not find as part of the record originally, a copy of such claim through a chartered accountant is independently produced and the figures claimed are as under: BExport incentive for the year ending 31-3-1998 Rs. Premium on sale Exim scrips 49,30,679 Excise duty on finished goods exported 29,23,37,736 Duty on duty free imports 5,28,93,279 Concessional rate of interest on export credit 27,35,947 Central sales tax on finished goods exported 2,94,48,195 38,23,45,836 Sri Shankar submits that this is being referred to at page 27 of the paper book filed in this appeal, which is part of the assessment year, the same has not been taken for examination. On this aspect, Sri Shankar has placed reliance on the decisions in Topman Exports v. CIT [2012] 342 ITR 49 (SC) ; [2012] 247 CTR 353 (SC) and Asst. CIT v. Pratibha Syntex Ltd. [1999] 63 TTJ 409 (Ahmedabad). The reasons given by the Tribunal in the latter case is adopted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 150 (Mad), to which Sri Shankar has drawn our attention, there is a distinction made relating to deductions permitted in Chapter VI-A and it is indicated therein that the total income has to be computed in accordance with the provisions of the Act before giving deductions under Chapter VI-A and the deductions even contemplated under section 72 of the Act is also dealt with and it is very clearly spelt out therein that section 72 has to be applied before the total income of an assessee is determined before permitting deduction under Chapter VI-A and this is so because of section 80B(5) of the Act. In support of the first contention urged, Sri A. Shankar, learned counsel for the appellant has also placed reliance on the judgment of the Bombay High Court in the case of Synco Industries Ltd. v. Assessing Officer of Income-tax reported in [2002] 254 ITR 608 (SC). The submission is that though the Bombay High Court was examining the question arising out of the understanding and interpretation of the provisions of section 80-I of the Act, it has been very clearly pointed out that for computing the benefit under this section and section 80-I(1) provides that it shall be 20 per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and gains of the business" and the further indication as indicated in the two situations to be made out of this amount. That means, even for the purpose of section 80HHC of the Act, while profits of the business is as computed otherwise under the Act, further deduction as contemplated therein are to be made. That means, while the profits of business as computed in general including the factoring the adjustment towards unabsorbed depreciation of earlier years, has to be made, for the purpose of section 80HHC from out of this figure further deduction as indicated in the two situations of the Explanation clause (baa) is to be applied. We do not find either any duplication in the deduction in the brought forward unabsorbed depreciation of the earlier years, as contended by Sri Shankar. On the other hand, as pointed out by Sri Indra Kumar, learned senior counsel appearing for the Revenue, the discussion on this aspect by the Madras High Court in the case of Madras Motors (P.) Ltd. [1984] 150 ITR 150 (Mad), viz., that in arriving at the total income deduction or incentives under Chapter VI-A can be claimed only from out of the gross total income, computation of which is computation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant that in both cases, it is in computation of total income, deduction is contemplated, the controversy was even before arriving at that total income before making deduction under Chapter VI-A which is otherwise indicated therein as gross total income, the carried forward losses incurred by the assessee's another priority unit should be set off which only means that there is reduction in the profits of the assessee and the amount available for claiming deduction under Chapter VI-A necessarily gets reduced in view of the ceiling. But the argument of Sri Shankar, learned counsel for the appellant, that for the purpose of applying the formula, i.e., for computation under section 80HHC(3) of the Act, the phrases as defined in the Explanations and particularly in this case, Explanation (baa) to section 80HHC of the Act has to be kept in mind and it is here we notice that in the wake of the language of Explanation (baa) to section 80HHC of the Act, certain further deductions are contemplated from out of the profits of the business as otherwise computed under the head "Profits and gains of business or profession". The first deduction contemplated is 90 per cent. of any sum re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent situation. This exercise is not because of any provisions of Chapter VI-A, but by the operation of the provisions of the Act itself. Section 72(2) of the Act also contemplates that allowance which are brought forward shall be first given effect to, i.e., whatever brought forward unabsorbed depreciation allowance was there, that should be first given effect to. The argument of Sri Shankar cannot also be accepted for another reason, namely, even as the Supreme Court has ruled the deductions or benefit permitted under Chapter VI-A of the Act can be availed of only against positive profits and positive profit of an assessee is that profit which the assessee can really claim to have made a profit after factoring the unabsorbed depreciation allowance and carried forward losses of the earlier years. This aspect we have already discussed in the context of while answering the other question which we have said is covered by the earlier decision and there is no need to repeat the same. One another reason why this argument cannot be accepted is that there can be a situation where the amount which qualifies for deduction under section 80HHC of the Act may be more than the available profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 28 and the argument on this aspect is that because of the expression used in clauses (iiib) and (iiic), viz., received or receivable by any person against exports under the scheme of the Government of India and any duty of customs or excise repaid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971, and, therefore, even without showing the actual amount received, the claim can be put forth on the basis of the receivable or repayable amount, as the case may be. We notice that for such amounts to qualify for computation under section 80HHC(3) of the Act, it should be factually so and not on a notional basis. They should be actually received or receivable and not on a notional basis. So also repaid or repayable as drawback. While the first proviso to sub-section (3) of section 80HHC of the Act does provide for adding this amount, i.e., as is provided in the proviso, the profit of business as defined in Explanation (baa) to section 80HHC of the Act expressly provides for reducing the very amounts from the profits of business, as otherwise computed under the Act for the purpose section 80HHC of the Act. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HHC of the Act, these amounts have to be factored for reduction from out of the profits of the business of the assessee as otherwise computed in terms of the provisions of the Act. The assessee not having factored computation in terms of Explanation (baa) to section 80HHC of the Act itself which can only indicate that there are no amounts attributable to deduction, we also find no foundation laid for the amount mentioned and we cannot on hypothetical basis accept the submissions either on facts or in law. While it may be possible to describe the sum of the amount sought to be claimed as in the nature of cash assistance, the same cannot be extended for assuming that because the assessee claims that the deductions claimed for such purpose is in the nature of cash assistance, it has actually been made good by the assessee. We are satisfied that the authorities below were justified in denying the additional benefits attributable to the situations of clauses (iiib) and (iiic) of section 28 of the Act, as these claims are not made good by the assessee on an actual basis, but on the other hand the claim being sought to be justified on a notional basis even as per question No. 5 sought f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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