Madras High Court
The Commissioner Of Income-Tax vs M/S.Bannari Amman Sugars Limited on 3 November, 2009
Author: K.Raviraja Pandian
Bench: K.Raviraja Pandian, M.M.Sundresh
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 3.11.2009 Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN and THE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal) Nos.1091 and 1092 of 2009 and M.P.No.1 of 2009 The Commissioner of Income-tax Coimbatore Appellant in both T.Cs Vs. M/s.Bannari Amman Sugars Limited 252, Mettupalayam Road Coimbatore 641 043. Respondent in both T.Cs Tax Case (Appeals) in T.C.A.Nos.1091 and 1092 of 2009 are preferred under Section 260A of the Income-tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'D' Bench, dated 28.7.2005 in ITA.No.1079/Mds/2002 and C.O.No.50/Mds/ 2002 in I.T.A.NO.1079/Mds/2002 respectively. For appellant : Mr.T.Ravikumar in both T.Cs For Respondent : Mr.R.Venkata Narayanan for both T.Cs. Mr.Subbarayama Aiyar JUDGMENT
(Judgment of the Court was delivered by K.RAVIRAJA PANDIAN, J.) The appeals are filed against the order of the Income Tax Appellate Tribunal, Madras 'D' Bench, dated 28.7.2005 in ITA.No.1079/Mds/2002 and C.O.No.50/Mds/ 2002 in I.T.A.NO.1079/Mds/2002 respectively relating to the assessment year 1998-99 by formulating the following questions of law:
T.C.A.No.1091 of 2009:
"Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal is right in law in holding that, the Additional Price received for sale of free sugar is a capital receipt and cannot be included in the total income?"
T.C.A.No.1092 of 2009:
"Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was right in law in holding that, the Excise Duty and Sales-tax Collection are to be excluded from the total turn over for the purpose of computing the Income under Section 80HHC of the Income-tax Act, 1961?"
2. The facts of the case in T.C.A.No.1091 of 2009 are as follows:
The assessee is a manufacturer of sugar, granite alcohol, etc. For the assessment year 1998-99, the assessee claimed additional sales receipts realized on the sale of free sugar as a capital receipt on the premise that free sale was permitted under the Scheme formulated for the purpose of repayment of the amount spent on capital goods. The assessing officer on the view that the incentives received by the assessee could only be treated as revenue receipts rejected the claim of the assessee. Against that order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals), who allowed the claim of the assessee. Against that order, the Department preferred appeal before the Income-tax Appellate Tribunal and the Tribunal held in favour of the assessee on the ground that this Court in the assessee's own case for the assessment year 1987-88 and 1989-90 in T.C.NOs.582 and 583 of 1995 dated 15.10.23001 answered the question in favour of the assessee. Against that order, the Department preferred a Special Leave Petition in C.C.Nos.1776 and 1777, which stands dismissed by the Supreme Court on 21.2.2003 owing to the delay in filing. Aggrieved by the said order, the appellant filed the appeal in T.C.A.No.1091 of 2009.
3. In the other Tax Case Appeal in T.C.A.No.1092 of 2009, it is the case of the revenue that for the assessment year 1997-98, the assessee has not included the excise duty and sales tax as part of total turn over of business. The assessing Officer included the sales-tax and excise duty as form part of the turn over in computing the income under Section 80HHC of the Income-tax Act. Against that order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), who confirmed the order of the assessing officer. Against that order, the assessee preferred an appeal before the Income-tax Appellate Tribunal and the Tribunal following the decision of this Court in the case of Commissioner of Income-tax Vs. M/s.Sundaram Fasteners Limited 272 ITR 652 and allowed the appeal. Aggrieved by this order, the revenue filed the appeal.
4. Both the issues are now settled by the Supreme Court. in respect of the question of law in T.C.A.No.1091 of 2009, the Supreme Court in the case of COMMISSIONER OF INCOME-TAX VS. PONNI SUGARS AND CHEMICALS LIMITED reported in (2008) 306 ITR 392 has held that "the character of the receipt of a subsidy in the hands of the assessee under a Scheme has to be determined with respect to the purpose for which the subsidy was granted. In other words, one has to apply the purpose test. The point of time at which the subsidy was paid is not relevant. The source is immaterial. If the object of the subsidy is to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme is to enable the assessee to set up a new unit or to expand an existing unit then the receipt of the subsidy would be on capital account." By observing so, the Supreme Court approved the decision of this Court in the case of COMMISSIONER OF INCOME-TAX VS. PONNI SUGARS AND CHEMICALS LIMITED reported in 260 ITR 605.
5. The question of law involved in T.C.A.No.1092 of 2009 is also no more res integra and it has been finally decided by the Supreme Court against the revenue in the case of COMMISSIONER OF INCOME TAX VS. LAKSHMI MACHINE WORKS reported in 290 ITR 667, wherein the Supreme Court has held that "Section 80HHC of the Income-tax Act, 1961, is a beneficial section. It was intended to provide incentive to promote exports. The intention was to exempt profits relatable to exports. Just as commission received by the assessee is relatable to exports and yet it cannot form part of turnover for the purposes of section 80HHC, excise duty and sales tax also cannot form part of turnover. Just as interest, commission, etc., do not emanate from the turnover so also excise duty and sales tax do not emanate from such turnover. Since excise duty and sales tax did not involve any such turnover such taxes had to be excluded. Commission, interest, rent, etc., do yield profits, but they do not partake of the character of turnover and therefore they are not includible in the total turnover. If so, excise duty and sales tax also cannot form part of the total turnover under section 80HHC(3)."
6. Therefore, following the above said judgments of the Supreme Court, the appeals are dismissed as the questions of law formulated in these appeals have already been decided against the Revenue. Consequently, M.P.No.1 of 2009 is also dismissed.
(K.R.P.,J.) (M.M.S.,J.) 3.11.2009 Index:Yes Internet:Yes usk To 1.The Assistant Registrar Income-tax Appellate Tribunal D Bench Rajaji Bhavan, Besant Nagar, Chennai-90. 2. The Secretary, Central Board of Direct Taxes, New Delhi. 3.The Joint Commissioner of Income-tax Special Range-I Coimbatore. 4.The Commissioner of Income-tax (Appeals)-I, Coimbatore K.RAVIRAJA PANDIAN, J. and M.M.SUNDRESH, J. usk T.C. (A) Nos.1091 and 1092 of 2009 3.11.2009