Punjab-Haryana High Court
Cit vs Bawa Skin Company on 26 July, 2007
Author: Ajay Kumar Mittal
Bench: Ajay Kumar Mittal
JUDGMENT Ajay Kumar Mittal, J.
1. This reference under Section 256(1) of the 1 Income Tax Act, 1961 (for short "the Act") has been made to this Court at the instance of the revenue by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, (for brevity "the Tribunal") arising out of its order dated December 1, 1997, in I. T. A. No. 794 (ASR)/1991 relating to the assessment year 1989-90 for determining the following question of law:
Whether, on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal is right in law in disrnissing the appeal of the Reventie against the order of the learned Commissioner (Appeals), holding that the assessee is justified in claiming deduction under Section 80HHC of the Income Tax Act, 1961, of such profits as determined by the assessing officer and that there is no infirmity in the order of the learned Commissioner (Appeals) in direcring to allow such deduction, with regard to the amount of addition of Rs. 2,50,000 made in the trading account while finalising the assessment for the assessment year 1989-90 ?
2. The facts are that the assessee filed a return declaring total income of Rs. 1,86,920 from October 30, 1989, accompanied by a report of the char-tered accountant within the meaning of Section 80HHC of the Act claiming deduction at Rs. 54,091 in relation to the exports made during the year under reference. The assessee has declared the gross profits at Rs. 2,44,24,055 including duty drawn back of Rs. 14,52,622 on sales/exports of Rs. 19,51,51,000 (including exports of Rs. 5,71,06,630), G. P. rate works out to a little less than 12 per cent. against 9.37 per cent. during the last year. The assessee was requested to file a separate trading account for purchase and sale of leather and shoe uppers to know the G.P. rate to these two items separately and the assessee, vide its reply dated January 30,1990, showed its inability to prepare separate trading account as it was maintaining one set of books of account for all these transactions. The assessee also failed to furnish the details of value of the grinders used on each pair of shoe uppers and the details of consumable stores. The accounts of the assessee-firm were rejected under Section 145 of the Act. Accordingly, on the basis of the order dated February 28, 1990, passed by the assessing officer under Section 143(3) of the Act whereby an addition of Rs. 2,50,000 in the trading account of the assessee was made, the Deputy Commissioner of Income-tax, Special Range, Jalandhar served a notice of dernand upon the assessee on March 9,1990. On appeal, the Commissioner (Appeals), vide order dated March 4, 1991, allowed certain relief including deduction under Section 80HHC of the Act in relation to the addition of Rs. 2,50,000 made in the trading account. Accordingly, the total income of the assessee-firm stood reduced to Rs. 6,50,394 after allowing further deduction under Section 80HHC of the Act at Rs. 45,280. Feeling dissatisfied with the order dated Méirch 4, 1991, passed by the Commissioner (Appeals), the revenue filed second appeal before the Tribunal. The Tribunal, vide order dated December 1, 1997, dismissed the appeal of the revenue and affirmed the order passed by the Commissioner (Appeals).
3. We have heard learned Counsel for the revenue.
4. As noticed above, the Commissioner (Appeals) while deciding the appeal held that the addition of Rs. 2,50,000 which had been made by the assessing officer to the trading account would be entitled to deduction under Section 80HHC of the Act. On appeal by the revenue , the Tribunal affirmed the view of the Commissioner (Appeals) and held that the addition to the trading account forms part of the profit of the concern and if the profits determined by the assessing officer are related to the business of the assessee which is engaged in the export out of India of any goods or merchandise to which the provisions of Section 80HHC of the Act are applicable, then the assessee was entitled to claim deduction under Section 80HHC of the Act out of the profits as determined by the assessing officer. The observations of the Tribunal in paragraph 10 which are relevant reads thus:
The assessing officer made an addition of Rs. 2,50,000 to the trading account and this amount of Rs. 2,50,000 forms part of the profits of the concern.
80HHC.(1) where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the "profits" derived by the assessee from the export of such goods or merchandise:
Provided that if the assessee, being a holder of an Export House Certificate or a Trading House Certificate, (hereafter in this section referred to as an Export House or a Trading House, as the case may be), issues a certificate referred to in Clause (b) of Sub-section (4A) that in respect of the amount of the export turnover specified therein, the deduction under this sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount which bears to the total profits of the export business of the assessee the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee.
The relevant ingredients of the section are that at the time of computing the total income of the assessee, the assessing officer has to allow a deduction of the profit derived by the assessee from the export of such goods or, Section 80HHC provides that the assessee may arrive at his own profits relatable to the relief under Section 80HHC and duly certified by accredited auditor. Nevertheless, the assessing officer will also arrive at the profits earned by the appellant. If the profits so arrived at by the assessing officer are related to the business of the assessee which is engaged in the business of export out of India of any goods or merchandise to which Section 80HHC is applicable, then the appellant is completely justified to make the claim of deduction of such profits as determined by the assessing officer. We, therefore, find no infirmity in the order of the Commissioner (Appeals) and the appeal of the revenue is dismissed.
5. Learned Counsel for the revenue could not point out any illegality or infirmity in the above noted conclusion drawn by the Tribunal.
6. In view of the above, the question of law is answered against the revenue and in favour of the assessee.