Kerala High Court
Commissioner Of Income-Tax vs Abad Fisheries on 28 August, 2002
Equivalent citations: [2002]258ITR641(KER)
Author: K. Padmanabhan Nair
Bench: K. Padmanabhan Nair
JUDGMENT S. Sankarasubban, J.
1. Income-tax Appeal No. 91 of 1999 is filed by the Revenue while I. T. A, No. 150 of 2000 is filed by the assessee. Both these appeals are filed challenging the order passed by the Income-tax Appellate Tribunal, Cochin Bench, in I. T. A. No. 607/Coch. of 1995. The relevant assessment year is 1991-92. The facts of the case are as follows :
The assessee is a partnership firm engaged in export of marine products. The assessee filed a return of income for the assessment year 1991-92 on March 27, 1992, declaring taxable income of Rs. 19,800 which was processed under Section 143(1)(a) of the Income-tax Act (hereinafter referred to as "the Act"). Thereafter, the Assessing Officer issued notice under Section 148 of the Act and the assessment was completed under Section 143(3) determining the total income of Rs. 17,58,230.
2. While working out the deduction under Section 80HHC, the assessee has included export bills amounting to Rs. 11,10,377 which have not been realised before six months from the end of the assessment year. The Chief Commissioner of Income-tax has permitted the assessee to bring the sale proceeds to India in convertible foreign exchange up to December 31, 1993. Since this amount was not been brought into India till date, the Assessing Officer found that the profit included in the above sale proceeds is not eligible for deduction under Section 80HHC of the Act. The assessee received Rs. 15,23,037 as interest from fixed deposits with various banks and others. The Assessing Officer found that these deposits were made not during the course of business. Since the assessee is having surplus funds, those amounts were deposited and interest was earned by the firm. Hence, he took the view that the deposit cannot be included in the present profit. Thus, the assessment was made and the income from the business was determined at Rs. 5,69,05,619.
3. Against the above order, the assessee took up the matter in appeal. The contention before the appellate authority was that since under Section 143(1)(a) of the Act, return has been processed, there was assessment and since no order was passed under Section 143(3) of the Act, notice under Section 148 of the Act cannot be issued. This contention was negatived. So also, the appellate authority negatived the contention with regard to two amounts which were decided by the Assessing Officer. Against the order of the appellate authority, the assessee preferred appeal before the Income-tax Appellate Tribunal. The preliminary- objection to the assessment was rejected. So also, the Appellate Tribunal rejected the contention regarding the two amounts, namely, Rs. 11,10,377 and Rs. 15,23,037. The Tribunal accepted the two other contentions of the assessee. The first contention was that the Assessing Officer was not correct in denying proportionate deduction under Section 80HHC of the Act on Rs. 11,10,377. The next ground raised before the Tribunal was that as the appellant was not able to realise the export proceeds of Rs. 11,10,377, the entire amount should have been allowed as deduction in the computation of the total income. The Tribunal gave a direction to the Assessing Officer to exclude the amount while computing the income under the head "Business". The other ground addressed to the Tribunal was with regard to interest. The Tribunal held that in a case of regular assessment the interest is from the date of such assessment. Thus, the appeal was disposed of.
4. In the appeal filed by the Revenue, the only question of law raised is whether, on the facts and in the circumstances of the case, and in computing the deduction under Section 80HHC of the Income-tax Act, the sum of Rs. 11,10,377 included in the total turnover has to be excluded for the purpose of taking the denominator of total turnover ? In the appeal filed by the assessee eight questions of law are raised. But according to us, the following questions of law are relevant here :
"(1) Whether, on the facts and in the circumstances of the case, was the Tribunal right in holding that the reopening of the assessment is valid, in a case where the assessment has been reopened under Section 147 since the time to issue a notice under Section 143(2) was over ?
(2) Was the appellant entitled to benefit of Section 80HHC(2)(a) of the Act as regards extension of time limit for bringing into India, the foreign exchange earned by the appellant ?"
5. The first question for consideration is whether the assessment was valid. The contention taken by the assessee is as follows : Section 143(1)(a) of the Act provides the procedure regarding assessment. Under Section 143(1)(a) of the Act, the officer can, after being satisfied about the return, send an intimation. This intimation shall be deemed to be a notice of demand issued under Section 156. The intimation may be either that the amount is due as per the return filed by the assessee or that refund is due to the assessee. In this case there was no proceeding under Section 143(2) or (3). The return was processed under Section 143(1)(a) of the Act. Then notice was issued under Section 148 and finally, the order was passed under Section 143(3) of the Act. The contention of the assessee is that since no order was passed under Section 143(3) of the Act before the notice was issued under Section 148, the procedure under Section 148 of the Act is invalid. We are not able to appreciate the contention of learned counsel for the assessee.
6. Even though many decisions were cited before us, it is not necessary for us to refer to all those decisions. We refer to the decision in Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT [2000] 246 ITR 173 (Delhi). In that decision, the Division Bench of the Delhi High Court held as follows (headnote) :
"The intimation under Section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. The intimation under Section 143(1)(a) was deemed to be a notice of demand under Section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery of the amount indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision.
So long as the ingredients of Section 147 are fulfilled, the Assessing Officer is free to initiate proceedings under Section 147 and failure to take steps under Section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under Section 143(1) had been issued."
7. We agree with the above reasoning and hold that the assessment is valid.
8. The next question for consideration is whether the amount derived as interest of Rs. 15,23,037 is to be treated as business income or not. The Tribunal held that it cannot be included as business income or profit under Section 80HHC of the Act. Deduction is allowable only on the profit derived by the assessee from the export of specified goods and merchandise. Income from deposits cannot be deemed to be profit of exports. In CIT v. Jose Thomas [2002] 253 ITR 553 (Ker), it has been held that interest on bank deposits does not constitute business income for the purpose of Section 80HHC of the Act. We agree with the above decision and hold that the amount is not deductible. Another amount for which deduction was sought was an amount of Rs. 11,10,377. This represents export sale proceeds which could not be brought into India in convertible foreign exchange. Here, as rightly held by the Tribunal, the amount was not brought into India within six months.
9. In view of the above, we agree with the Tribunal and answer the point against the assessee. These are points which arise from the appeals filed by the assessee. So far as the appeal filed by the Department is concerned, the question of law that is raised is whether, the Tribunal was correct in excluding Rs. 11,10,377 for the purpose of denominator of the total turnover. While dealing with the case of the assessee, it will be noticed that the amount was claimed as for deduction. But this could not be deducted because it was not brought into India within six months. This amount was not deducted from the profits. At the same time this amount was included in the total turnover as the denominator. Regarding this contention, the Tribunal held that since this does not form part of the profit, it cannot form part of the turnover also. According to us, since the amount could not be included in the profits, the same cannot also be included in the total turnover. We agree with the Tribunal.
10. In the above view of the matter, both the income-tax appeals are dismissed.