TMI Blog1993 (8) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal was correct in law in considering the item of export of goods or merchandise, viz., coffee export, which was not exported by the assessee in the preceding accounting year, for the purpose of eligibility of relief under section 80HHC(1)(b) of the Act ? 4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the assessee was entitled to relief under section 80HHC(1)(b) of the Act on the 'export of coffee' ?" The assessee-company is engaged in the business of dealing in jute goods, coffee, tea, etc. This reference relates to the financial year ending March 31, 1983, corresponding to the assessment year 1984-85. During the relevant previous year, Mr. R. J. Shah and his wife, Mrs. M. M. Shah, both directors of the assessee-company went abroad on a tour and an aggregate sum of Rs. 1,31,462 was spent by way of foreign travelling expenses. The Income-tax Officer found that although Mrs. Shah was one of the directors of the company, she was not being paid any remuneration. The Income-tax Officer was, therefore, of the view that Mrs. Shah did not take much active part in the affairs of the company. He alleged that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1961, on the said sum of Rs. 25,000 representing foreign travelling expenses which was originally disallowed by the Income-tax Officer. The first two questions raised in this reference arise out of the aforesaid facts. It appears that the Income-tax Officer has nowhere held that the foreign tour of Mr. and Mrs. Shah was not a business tour. Out of the total foreign travelling expenses of Rs. 1,31,468, the Income-tax Officer had himself estimated Rs. 65,734, being 50 per cent. of Rs. 1,31,468 as the expenditure pertaining to the foreign travel of Mrs. Shah. Out of the said sum of Rs. 65,734, the Income-tax Officer has himself allowed Rs. 40,734 as business expenditure and disallowed only Rs. 25,000 on estimate alleging it to be attributable towards the personal expenses of Mrs. Shah. In other words, Rs. 40,734 being a portion of the foreign travelling expenses of Mrs. Shah was allowed as business expenditure even by the Income-tax Officer. This only goes to show that the foreign travel of Mrs. Shah was also a business tour, otherwise no portion of Rs. 65,734 being the foreign travel expenses attributable to Mrs. Shah could have been allowed by the Income-tax Officer as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -84. The Commissioner (Appeals) confirmed the aforesaid action of the Income-tax Officer. On second appeal before the Tribunal by the assessee, it was, inter alia, contended that both the Income-tax Officer as well as the Commissioner (Appeals) erred in law in denying the benefit of deduction under clause (b) of sub-section (1) of section 80HHC in respect of export of coffee made by the assessee-company during the relevant previous year. It was contended on behalf of the assessee that clause (b) of sub-section (1) of section 80HHC did not require the various articles exported by any assessee during the relevant previous year to be classified separately. All that was required was to find out whether the export turnover, during the particular previous year, of eligible goods exceeded the aggregate export turnover of the immediately preceding year and if it was so, the assessee was entitled to claim deduction equal to 5 per cent. of the amount by which the export turnover of eligible goods or merchandise during the relevant previous year exceeded the export turnover of the assessee for the immediately preceding previous year. The Tribunal accepted the contentions of the assessee-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year. Since the Income-tax Officer found that the assessee-company admittedly did not export any coffee in the immediately preceding previous year relevant to the assessment year 1983-84, it was not entitled to any deduction under clause (b) in respect of export of coffee effected only during the previous year relevant to the year under reference. Sub-section (1) of section 80HHC grants relief in respect of export of "any goods or merchandise to which this section applies". Clause (a) of sub-section (2) of section 80HHC makes it quite clear that this section applies to all goods or merchandise other than those specified in clause (b) of sub-section (2), if the sale proceeds of such goods or merchandise exported out of India are receivable by the assessee in convertible foreign exchange. In other words sub-section (1) of section 80HHC grants deduction on export of all goods or merchandise other than those specifically excluded by clause (b) of sub-section (2) thereof. The expression "such goods or merchandise" appearing in both clauses (a) and (b) of sub-section (1) of section 80HHC, in our view, referred to the expression "any goods or merchandise to which this section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an export in the preceding year as well. This approach is not logical. On a plain reading of the provisions, for subsection (1)(b) the first requisite is that there must be export turnover in past year, second, the instant year's export turnover must be in excess of export turnover of last year and the merchandise exported should not be any item excluded by sub-section (2). We hold that the export turnover referred to in the different clauses of the section cannot but be computed as a single overall quantum and not as itemised separate quanta. In our view, a deduction under both clause (a) and clause (b) of subsection (1) is permissible in respect of the export turnover of the qualifying goods or merchandise other than those specifically excluded by clause (b) of sub-section (2). Under clause (a), the deduction shall be equal to one per cent. of the export turnover of the qualifying goods or merchandise during the relevant previous year and under clause (b) a deduction of an amount equal to five per cent. of the amount by which the export turnover of the qualifying goods or merchandise during the previous year exceeds the export turnover of such qualifying goods or merchandise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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