TMI Blog2021 (8) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and circumstances of the case on hand. - Decided against revenue. Addition u/s 40A(3) - cash payments made towards the purchase of shrimp feed - HELD THAT:- Commissioner of Income Tax (Appeals) considered the legal issue and found that, what was purchased was undoubtedly a fish or fish product, which will fall within the scope of Rule 6DD(f)(iii) and if it is so, no disallowance under Clause (a) of Sub-Section (3) of Section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under Clause (b) of Sub-Section (3) of Section 40A. This aspect has been factually brought out by the Commissioner of Income Tax (Appeals) as well as the Tribunal. - Decided against revenue. - T.C.A. No.438 of 2010 - - - Dated:- 2-8-2021 - Hon'ble Mr. Justice T.S. Sivagnanam And Hon'ble Mr. Justice Sathi Kumar Sukumara Kurup For the Appellant : Mrs.R.Hemalatha Senior Standing Counsel For the Respondent : Mr.M.P.Senthil Kumar JUDGMENT T.S. SIVAGNANAM, J. This appeal by the Revenue, filed under Section 260-A of the Income Tax Act, 1961 ( the Act ), is directed against the order passed by the Income Tax Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 80HHC of the Act and disallowance of 20% was made with regard to the cash payments. 5.Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-III, Chennai. The appeal was allowed by order dated 10.09.2008 on both grounds. Aggrieved by the same, the Revenue preferred an appeal before the Tribunal, which has been dismissed by the impugned order. 6.Though three substantial questions of law have been framed, substantial questions of law 1 and 2 are interconnected. The case of the Revenue rests upon the decision of the Hon'ble Apex Court in the case of Ipca Laboratories Ltd. v. Deputy Commissioner of Income Tax, Mumbai reported in (2004) 12 SCC 742 , wherein, it was held that, in case of export of both types of goods, namely, self manufactured goods as well as trading goods, the loss from export of trading goods exceeded the profit of the total exports, then, disclaimer by the exporter-assessee in favour of supporting manufacturer in terms of the proviso to Section 80-HHC(1) would not have such effect as to entitle the exporter to deduction. The case of the assessee is by placing reliance on the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (3)(c) deals with the cases where the export is of both self-manufactured goods as well as trading goods. The only condition that governs the grant of relief under section 80HHC is that the assessee having positive profit alone would be entitled to have the deduction under section 80HHC. In other words, if there is a loss then no deductions could be claimed under the provisions of section 80HHC in arriving at the positive profit. The apex court held that profits and loss of the business have to be considered in arriving at the gross total income, and income from various units have to be calculated and if one of the units indicated a loss, then going by the said provisions available, the gross total income will have to be arrived at and ultimately if the net figure is also a loss, the claim of the assessee for deductions would be rejected. The apex court further pointed out that section 80HHC(3) provides for working out the computation of total income and for the purpose of such computation, both profits and loss have to be taken into account. Thus, section 80HHC, both in sub-section (1) and in sub-section (3), means a positive profit worked out after taking into considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the assessee are profit-making units and the gross total income was computed in the manner as given under the Act and that there was a positive income of profit. Going by the decisions referred to above and the same when applied to the facts of the case herein, the assessee would be entitled to deduction under Chapter VI-A. In the light of this fact, we do not find any justification in the view of the Tribunal, rejecting the plea of the assessee for deduction under Chapter VI-A. 21. A reading of the order of the Tribunal shows that it misconstrued the decision of the apex court reported in IPCA Laboratory Ltd. case (supra), to reject the case of the assessee. Applying the said decision and the decision Synco Industries Ltd.'s case (supra), to the facts herein that the assessee had profit and the decisions of this court cited supra, viz., Macmillan India Ltd.'s (supra), Rathore Brothers (supra), Suresh B. Mehta (supra) and M. Gani and Co.'s case (supra), as regards the grant of 100 per cent. relief to the unit engaged in export activity and the books of account maintained by the assessee for the export unit to other units are independent, we have no h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the trading division, has not been disputed by the Assessing Officer. In such circumstances, the decision in the case of Chamundi Textiles (Silk Mills) Ltd. would clearly apply to the facts and circumstances of the case on hand. Therefore, the substantial questions of law 1 and 2 are to be answered against the Revenue. 9.With regard to the third substantial question of law, on facts, the Commissioner of Income Tax (Appeals) and the Tribunal held that the assessee had purchased shrimp products from a supplier at Nellore and the explanation given by them at the first instance before the Assessing Officer is that they are doing shrimp feed trading business and they have purchased shrimp feed from a company at Chennai and the invoice is directly raised locally at Chennai and they have sold the shrimp feed at Nellore and Ongole Districts of Andhra Pradesh and they have sold the feed to the shrimps farmers and deposited the cash directly to M/s.C.P.Aquaculture (India) Pvt. Ltd.'s Bank account. Further, it is stated that it is an usual procedure that all the dealers/farmers use to deposit the amount into the Bank account of M/s.C.P.Aquaculture (India) Pvt. Ltd. and fax the d ..... 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