TMI Blog2016 (9) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... n and the expression to be redefined which is not permissible. In the circumstances, the first question of law is answered in affirmative in favour of the appellant. - Income Tax Appeal No. 408 of 2007 (O&M) - - - Dated:- 2-9-2016 - Mr. S.J.VAZIFDAR AND MR. DEEPAK SIBAL, JJ. For The Appellant : Ms. Radhika Suri, Senior Advocate with Ms. Rinku Dahiya, Advocate, For The Respondent : Mr. Rajesh Katoch, Advocate S.J.VAZIFDAR, CHIEF JUSTICE This is an appeal against the order of the Income Tax Appellate Tribunal in respect of the assessment year 1996-97. By an order dated 14.12.2007, the appeal was admitted on the following substantial questions of law:- i) Whether on a true and correct interpretation of Section 80 HHC of the Income Tax Act, 1961, the Tribunal has erred in law in holding that the export turnover of the unit whose profits are exempt under section 10B of the Income Tax Act, 1961 is not to be included in the export turnover for the purposes of calculating the deduction under section 80HHC of the Income Tax Act, 1961? ii) Whether the Tribunal was right in law in not considering, dealing with the decision of a co-ordinate Bench on the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; ( b ) where the export out of India is of trading goods, the profits derived from such export shall be the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export; ( c ) where the export out of India is of goods or merchandise manufactured [or processed] by the assessee and of trading goods, the profits derived from such export shall,- ( i ) in respect of the goods or merchandise manufactured [or processed] by the assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee; and ( ii ) in respect of trading goods, be the export turnover in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Profits of the business of the undertaking Export turnover in respect of the articles or things or computer software Total turnover of the business carried on by the undertaking. The assessee manufactures the goods or merchandises exported by it and, therefore, clause 8 of sub section (3) of section 80 HHC of the Act applies to this case. The proviso to definition of total turnover in explanation (ba) does not refer to. It excludes from the expression total turnover sums referred to in Sections 28(iiia) (iiib) and (iiic) but not section 10B. A plain language of the definition of the expression total turnover does not warrant the exclusion of any benefit under section 10B of the Act. 5. Sub section 4 (iii) of section 10B of the Act provides that in computing the total income of the assessee, no deductions shall be allowed under the section mentioned therein in relation to the profits and gains of the undertaking. Section 80 HHC is not one of those sections. What is more important is the fact that section 80HHC does not preclude the assessee from availing deductions thereunder in the event of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for deduction under section 80HHC and that section 10B was enacted to provide such undertakings a further incentive for earning foreign exchange. 7. Mr. Katoch, learned counsel appearing on behalf of the respondent-department contended that section 80HHC is a self contained code as are sections 10A and 10B. None of the sections refer to other sections. He relied upon section 80HHC(4)(C)(b) of the Act. 8. Firstly, sub section 4(C) was inserted by the Finance Act, 2003 w.e.f. 01.04.2004. It, therefore, does not apply to the assessment year in question i.e. 1996-97. In any event, it would make no difference. Sub section 4(C)(b) provides that the provisions of section applies to the assesssee who owns any undertaking which manufactures or produces goods or merchandise anywhere in India (outside any special economic zone) and sells the same to any undertaking situated in a special economic zone which is eligible for deduction under section 10A and that such sale shall be deemed to be export out of India for the purposes of this section. He contended that the words of any goods or merchandise to which this section applies indicate that the goods and merchandise which are the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 1989-90 in respect of a case under section 10A of the Act. The assessee had claimed deduction under section 80HHC and while doing so included the export turnover of its unit in the Export Promotion Zone (EPZ). The Tribunal accepted the assessee s contention that for the purpose of computation of profits derived from the export turnover, it was the total export turnover which had to be considered for arriving at the amount of export turnover as well as the amount of total turnover. It was contended on behalf of the revenue that once the income from the unit in EPZ was included from scope and ambit of total income, it could not be reintroduced for the sake of making a deduction under section 80HHC as profits and gains of the business. Delhi High Court held as under:- 10. Having considered the arguments advanced by the counsel for the parties, while we agree with what the learned counsel for the revenue states that the provisions of Section 10(A)(4)(iii) would not be applicable for the present assessment year, i.e., 1989-90, we would still not be in a position to agree with his submissions that the export turnover of the unit in the free trade zone is to be excluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB in relation to the profits and gains of the undertaking; and 5. The very statutory provision prescribing a prohibition in respect of the deductions in relation to the profits and gains itself, has not specifically included Section 80HHC. Apparently, it therefore would only mean that there was no prohibition for claiming any deduction under Section 80HHC while applying the benefits provided under Section 10A of the Act. If that is the statutory prescription, by which the assessee was entitled to claim a benefit under Section 80HHC in relation to the profits and gains while invoking Section 10A, it will have to be concluded that the assessment order in having allowed such a deduction of the remaining 10% of the profits earned by the assessee, was not erroneous. In any event, having regard to such a statutory prescription available for the assessee to claim the benefit under Section 80HHC in respect of the profits earned from Section 10A of the Act, there is absolutely no scope for the Assessing Authority to have invoked Section 154 of the Act, in order to state that, that can be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction from sub-section (1) of the statutory provision as it then stood is when an assessee being an Indian Company exports out of India during the previous year relevant to assessment year any goods or merchandise, then there shall be and in accordance with the provisions so also subject to the section, from the total income of the assessee, a deduction of an amount equal to the aggregate of 4% of the net foreign exchange realization and 50% of the profits derived by the assessee from the export of such goods or merchandise as exceeds the amount referred to in clause (a) of sub-section (1) of Section 80HHC of the Income Tax Act,1961. The Tribunal held that sub-section (1) only stipulates that the assessee should be an Indian Company, resident in India and engaged in the business of export out of India of any goods or merchandise to which the section applied. Four percent of the net foreign exchange realization referred to, is not restricted to the exports out of India. There is nothing in the language of this provision which enables the Tribunal to uphold the view of the Assessing Officer. The Tribunal also found that this provision does not speak of any other claim and exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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