Kerala High Court
Commissioner Of Income-Tax vs Parry Agro Industries Ltd. (Formerly ... on 13 March, 2002
Equivalent citations: [2002]257ITR41(KER)
Author: K.K. Denesan
Bench: K.K. Denesan
JUDGMENT V. P. Mohan Kumar, J.
1. The appeal is against the order passed in I. T. A. No. 680/Coch of 1994 by the Income-tax Appellate Tribunal, Cochin Bench. The assessment relates to the year 1989-90. The assessee admittedly is a company substantially interested and is deriving income from plantations. It holds tea estates at Anamalai in South India as also Deckiajuli in the State of Assam. It claimed deduction under Section 80HHC of the Income-tax Act for the relevant assessment year 1989-90. The contention was that as the export profit is clearly detectable from the accounts maintained by the assessee, the procedure laid down under Section 80HHC(3) need not be followed. The Assessing Officer was of the view that for the computation of the relief, the only basis should be to follow the rule in Section 80HHC(3) after fixing the export turnover out of the total turnover, i.e. the turnover of tea from all the estates, including the estates in South India. On that basis the assessment was made and annexure A is the assessment order. The matter was taken up in appeal by the assessee before the Commissioner of Income-tax (Appeals) and the Commissioner (Appeals) held that the computation of the Assessing Officer was in accordance with the provisions of Section 80HHC and that the appeal be partly allowed. Annexure "B" is the order. The assessee took up the matter in further appeal. The Tribunal set aside the orders and called upon the Assessing Officer to re-examine whether the business in Assam tea consists exclusively of export and in that case compute the profit under Section 80HHC(3)(a) and if it is not exclusively out of export trade, to apply Section 80HHC(3)(b). It held that in computing the deduction under Section 80HHC the total turnover of the entire business including the Assam tea estates should be considered and the Tribunal restricted the turnover only to the Assam tea estate, if the entire sales are export oriented from the said unit.
2. Aggrieved by the said order the Revenue has come up in appeal. The following substantial questions of law have been framed for consideration of this court :
" 1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the profit derived from export is to be computed for the purpose of the relief under Section 80HHC in accordance with Clause (a) of Sub-section (3) on Assam tea without taking into account the turnover of tea from other estates, provided the business there is exclusively of export of tea ?
2. Whether, on the facts and in the circumstances of the case and on an interpretation of Section 80HHC of the Income-tax Act, should not the Tribunal have taken the total turnover of the entire business including the Assam Tea Estate since as regards the tea business is concerned, the business as a whole in respect of all tea estates has to be taken together and is not the direction to the assessing authority accordingly wrong and unwarranted ?"
3. We have heard Mr. P.K.R. Menon, learned counsel for the Revenue, and Mr. Jayasanker, learned counsel for the assessee.
4. The material part of Section 80HHC(3) as it stood then reads as under :
"For the purposes of Sub-section (1), profits derived from the export of goods or merchandise out of India shall be,--
(a) in a case where the business carried on by the assessee consists exclusively of the export out of India of the goods or merchandise to which this section applies, the profits of the business as computed under the head 'Profits and gains of business or profession';
(b) In a case were the business carried on by the assessee does not consist exclusively of the export out of India of the goods or merchandise to which this section applies, the amount which bears to the profits of the business (as computed under the head 'Profits and gains of business or profession') the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee."
5. What Section 80HHC provides is that in a case where the assessee is engaged wholly in the business of export out of India of any goods, the deduction granted should be in accordance with Section 80HHC(1). The stress under Sub-section (1) is that it is attracted only if the profits are derived by the assessee exclusively from exports and not by indulging in any domestic trade. As such Sub-section (1) is confined to and specifically relates to export trade. Sub-section (3) thereof indicates the manner of computation of the profits derived from the export of goods out of India where the assessee indulges in domestic trade as well. Clause (a) may not be applied here as admittedly the assessee is carrying on domestic trade as also export. The procedure in Clause (b) would take when there is export as well as domestic trade.
6. The argument of Mr. Jayasanker is that in this case where the profit derived by the assessee by export business is separately maintained and separately ascertained there is no need to have recourse to Section 80HHC(3)(a) and (b). In such a situation Section 80HHC(1) can be applied in exclusion of Sub-section (3). Therefore, there was no need for invoking Sub-section (3)(b) for finding out what should be the deduction under Section 80HHC. Per contra, Mr. Menon, learned counsel for the Revenue, submits that this is the only provision that is provided under Section 80HHC(1) of the Act. The mode of calculation pleaded by the assessee is not contemplated or provided by the statute.
7.We notice from Sub-section (3) that it points by words "for the purposes of Sub-section (1), profits derived from the export of goods or merchandise out of India shall be ...". It means that the section wholly and completely applies to Section 80HHC(1). What is mentioned in Sub-section (1) is "where an asses-see ... is engaged in the business of export out of India of any goods or merchandise to which the said section applies, there shall, in accordance with and subject to the provisions of the said section, be allowed, a deduction of the profits derived by the assessee from the export of such goods or merchandise."
8. This section disables the permutation of the profits irrespective of the fact whether the assessee maintains exclusively an account with respect to export business while he carries on business which is a mixture of export as also domestic trade. There is no category of persons who have separate export business even when trading in domestic business. If we are to understand the argument of Mr. Jayasanker and hold that cases where the profits derived by the assessee from the export carried on by him can be separately grouped and in such case one need not have recourse to either Clause (a) or (b) of subsection (3) then it would amount to redrawing the Act by adding certain words to Sub-section (3). Then Sub-section (1) will have to be rewritten as under :
"where an assessee is engaged in the business of export out of India of any goods or merchandise to which the said section applies and it is ascertainable the income from such export trade then . . .".
9. We are not empowered to rewrite Sub-section (3) as contended by learned counsel. We cannot apply our own interpretation which is not contemplated under the statute. The manner as to how to ascertain the profit from export of goods is only as indicated in Sub-section (3); we cannot, by means of interpretation introduce a third category. Besides this is not a case where learned counsel would argue that it is impossible to utilise Sub-section (3)(b) and ascertain the profits. On the contrary, the argument of counsel is that the exercise of invoking Sub-section (3) is not necessary as strait-jacket method is possible in this case.
10. We notice from Sub-section (3)(b) that the formula for ascertainment would be that "the entire business including profits of the entire business multiplied by export turnover divided by entire business turnover including export and non-export."
11. This is the formula utilised for the assessment to be made. If this be so, the order of the Appellate Tribunal requires to be modified and fresh assessment order has to be made by the Assessing Officer employing the above formula. The order is accordingly modified.