Gujarat High Court
Shri Balaji Yarn Traders Pvt. Ltd vs A.C.I.T.....Opponent(S) on 1 December, 2014
Author: Ks Jhaveri
Bench: Ks Jhaveri
O/TAXAP/423/2003 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 423 of 2003
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE K.J.THAKER
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1 Whether Reporters of Local Papers may be allowed to see
the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India, 1950 or any
order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
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SHRI BALAJI YARN TRADERS PVT. LTD.....Appellant(s)
Versus
A.C.I.T.....Opponent(s)
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Appearance:
MR DEEPAK VYAS, ADVOCATE for the Appellant(s) No. 1
MR JP SHAH, ADVOCATE for the Appellant(s) No. 1
MR SUDHIR M MEHTA, ADVOCATE for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE KS JHAVERI
and
Page 1 of 6
O/TAXAP/423/2003 JUDGMENT
HONOURABLE MR.JUSTICE K.J.THAKER
Date : 01/12/2014
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE KS JHAVERI)
1. This appeal u/s.260A of the Income Tax Act, 1961 is filed against the judgment and order dated 02.07.2003 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench in ITA No.1366/AHD/2000.
2. Briefly stated, the facts are that the assessee is a Private Limited Company engaged in the business of manufacture of clothes for local sale as well as export sale. The assessee filed its return of income for the A.Y. 1996-97 on 30.11.1996 declaring 'Nil' income. Assessment scrutiny was undertaken and ultimately, the Assessing Officer passed the order of assessment u/s.143(3) of the Act on 31.03.1998.
3. Being aggrieved by the order of Assessing Officer, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal vide order dated 29.02.2000. Against the order of CIT(A), the assessee filed appeal before the Appellate Tribunal. The Appellate Tribunal disposed of the appeal filed by the assessed vide impugned judgment and order dated 02.07.2003.
Page 2 of 6O/TAXAP/423/2003 JUDGMENT Hence, this appeal.
4. Mr. JP Shah learned counsel appearing for the assessee submitted that the Appellate Tribunal seriously erred in holding that even when there are two separate manufacturing divisions, viz. one for export and other for local sales and having separate books of accounts, by which the export profits could be determined, even then on account of the provision of Section 80HHC of the Act, this actual figure is to be substituted by a theoretical figure of exports arrived at by clubbing the turnover of both the divisions and apportioning the profit of both the divisions according to the turnover of each division.
4.1 Learned counsel for the assessee has placed reliance upon the following decisions in support of his submissions;
(i) Commissioner of Income-tax v. Vegetable Products Ltd., [1973] 088 ITR 0192.
(ii) Commissioner of Income-tax v. M. Gani & Co. (Madras High Court), [2008] 301 ITR 0381.
(iii) Commissioner of Income-tax v. Suresh B. Mehta (Madras High Court), [2007] 291 ITR 0462.
(iv) Commissioner of Income-tax v.
Page 3 of 6O/TAXAP/423/2003 JUDGMENT Rathore Brothers (Madras High Court), [2002] 254 ITR 0656.
5. Learned Standing Counsel appearing for the Revenue drew our attention to a decision of the Delhi High Court in the case of Commissioner of Income-tax v. Padmini Technologies Ltd., [2013] 33 taxmann.com 668 (Del) and submitted that the decision relied upon by the Appellate Tribunal in the case of IPCA Laboratory Ltd. v. Dy. CIT, [2004] 266 ITR 521 has been duly considered by the Delhi High Court in the above decision.
6. The appeal has been admitted on the following substantial question of law;
"Whether, on the facts and in the circumstances of the case, when actual profits from export turnover is the known and agreed figure, is it necessary u/s.80HHC of the Income-tax Act, 1961, to brush aside this actual figure of profit of export division and substitute in its place theoretical figure arrived at by adding to profit and turnover of export division profit and turnover of local division and apportioning such total profits in proportion to turnover of two divisions u/s.80HHC(3)(a) in spite of both the divisions being identifiable separate divisions having their actual separate profits?"
7. We have heard learned counsel for the respective parties. Having considered the facts of the case, in our view, the question raised in Page 4 of 6 O/TAXAP/423/2003 JUDGMENT this appeal is already concluded by the decision rendered by the Delhi High Court in the case of Commissioner of Income-tax v. Padmini Technologies Ltd. (supra). In that case, the assessee ran and managed two units, ie. multimedia unit and domestic unit. Insofar as the multimedia unit was concerned, the assessee had carried out exports as well. Domestic unit was engaged in the manufacture of PET jars unit. The Assessing Officer held that in calculating the deduction u/s.80HHC, the turnover of the entire business, ie. the multimedia unit and the domestic unit would be included. The Tribunal held that in calculating the deduction u/s.80HHC, turnover of domestic unit could not be included. On these facts, the Delhi High Court held that insofar as the two businesses were concerned, they were carried on in two separate undertakings and the assessee maintained separate books of account and also prepared separate profit & loss account and balance sheets. Further, the total turnover of business would only mean total turnover of business of goods to which the section applies and therefore, the impugned order of the Tribunal was to be upheld.
8. Considering the facts of this case and the decision rendered by the Delhi High Court in the above-referred case, we are of the opinion that the Appellate Tribunal seriously erred in passing the impugned judgment since the assessee was Page 5 of 6 O/TAXAP/423/2003 JUDGMENT carrying on two separate undertakings and was also maintaining separate books of accounts and therefore, the turnover of domestic unit could not have been included in calculating deduction u/s.80HHC.
9. Learned Standing Counsel appearing for the Revenue was not in a position to dispute the above proposition of law. Accordingly, we answer the question in favour of the assessee and against the Revenue. Since we are following the judgment rendered by the Delhi High Court, no elaborate reasons are being assigned while disposing of this appeal. Consequently, the appeal stands disposed of.
(K.S.JHAVERI, J.) (K.J.THAKER, J) Pravin/* Page 6 of 6