Punjab-Haryana High Court
Commissioner Of Income Tax vs Eveline International on 16 November, 1999
Equivalent citations: [2000]243ITR493(P&H)
Author: N.K. Sud
Bench: N.K. Sud
JUDGMENT N.K. Sud, J.
1. This is an application under s. 256(2) of the IT Act, 1961 (for short "the Act") seeking a direction to the Tribunal, Chandigarh Bench (for short "the Tribunal") to draw up a statement of the case and refer the following questions of law arising out of its order, dt. 7th December, 1995, to this Court :
"1. Whether, the Tribunal was right in law in admitting additional ground on the issue which was not adjudicated by the first appellate authority and not even taken originally before the Tribunal ?"
"2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in admitting assessee's appeal regarding deduction under s. 32AB from the profits the assessee having already conceded the issue before the CIT(A)".
"3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that deduction under s. 32AB was not required to be made from the profits while working out deduction under s. 80HHC ?"
2. The assessee had filed its return of income for the asst. yr. 1987-88 on 30th June, 1987 declaring an income of Rs. 20,79,206. The assessment was, however, framed at an income of Rs. 21,21,037 vide order, dt. 31st March, 1989 passed under s. 143(3) of the Act. In the return the assessee had claimed deduction under s. 80HHC at Rs. 45,94,000 on the basis of the calculations made by the auditors in their report as prescribed under the Act. This is an admitted fact that while framing assessment under s. 143(3) the AO had not examined these calculations and had accepted the same as such. Subsequently the AO issued a notice under s. 154 on the ground that the deduction under s. 80HHC had been wrongly computed in following respects :
(i) deduction claimed under s. 32AB had not been deducted out of the export profits while calculating the deduction under s. 80HHC.
(ii) the total turnover of the assessee was Rs. 2,89,93,277 against which the export turnover was Rs. 2,88,82,355 and as such the deduction under s. 80HHC had to be computed on proportionate basis under cl. (b) of sub-s. (3) of s. 80HHC against the computation made under cl. (a) of the said provision.
3. In response to the above notice the assessee furnished a reply justifying the calculation made by the auditor and thereby submitting that there was no mistake apparent from the record which could be rectified under s. 154 of the Act. The explanation of the assessee, however, was rejected and the AO vide order under s. 154 of the Act, dt. 29th January, 1990 reduced the deduction under s. 80HHC from Rs. 45,94,000 to Rs. 37,68,101.
4. Aggrieved by the above order of the AO, the assessee filed an appeal before the CIT(A), Ludhiana. During the course of arguments before the CIT(A) the assessee conceded that it had no objection to the computation of profits after deduction of allowance under s. 32AB. However, it contested the other issue on the ground that out of the total turn-over of Rs. 2,89,93,277 a paltry sale of Rs. 1,10,924 was in India which was mostly of the goods rejected by the foreign buyers and as such the entire turn-over should be considered as export turn-over for the purposes of s. 80HHC. The assessee, therefore, justified the computation under cl. (a) of sub-s. (3) of s. 80HHC. The assessee also contended that the mistake, if any, could not be considered to be a mistake apparent from the record as the matter needed a long drawn discussion and arguments. The contention of the assessee did not find favour with the CIT(A) who dismissed its appeal vide order dt. 21st May, 1990.
5. Not satisfied, the assessee preferred a further appeal before the Tribunal. Before the Tribunal the assessee moved an additional ground of appal challenging the very initiation of proceedings under s. 154 of the Act. This ground was admitted by the Tribunal as the validity of the action taken by the AO under s. 154 was already a subject-matter of challenge as per ground No. 2 and also in view of the decision of the apex Court in case of Jute Corporation of India Ltd. vs. CIT & Anr. (1991) 187 ITR 688 (SC) : TC 7R.343 and the decisions of the Bombay High Court in Ahmedabad Electricity Co. Ltd. vs. CIT (1993) 199 ITR 351 (Bom)(FB) : TC 8R.803 and in Ashok Vardhan Birla vs. CWT (1994) 208 ITR 958 (Bom)(FB) : TC 67R.683.
6. Before the Tribunal, the assessee did not press the ground relating to the calculation of deduction under s. 80HHC by treating the entire turnover as export turnover. However, on the other issue, the assessee referred to the decision of the Tribunal dt. 31st August, 1994, in the case of Munjal Steel wherein a deduction under s. 80-I was ordered to be allowed on profits before setting off the brought forward losses as well as allowance under s. 32AB. In the aforesaid case the Tribunal had relied on one of its earlier orders and also on the decision of the Orissa High Court in case of CIT vs. Tarun Udyog (1991) 191 ITR 688 (Ori) : TC 25R.223. The assessee, therefore, justified the calculation made by the auditor for claiming the said deduction. It was further argued that at any rate the issue was of a highly debatable nature on which two views were clearly possible and as such it could not be said to be a mistake apparent from the record which could be rectified under s. 154 of the Act. Reliance in this behalf was placed on the decision of Supreme Court in T. S. Balaram, ITO vs. Volkart Bros. & Ors. (1971) 82 ITR 50 (SC) : TC 53R.165. The Tribunal, vide order, dt. 7th December, 1995, accepted the contention of the assessee that the issue whether the export profits for the purpose of calculation of deduction under s. 80HHC was to be calculated before or after the allowance of deduction under s. 32AB was a contentious issue and as such fell beyond the purview of being a mistake apparent from the record. The Tribunal allowed the appeal of the assessee on this ground only and did not go into the merits of the claim.
7. The Revenue thereafter filed a reference application under s. 256(1) of the Act before the Tribunal seeking reference on the three questions of law as already detailed above. This application was rejected by the Tribunal vide order dt. 31st January, 1997, against which the present application under s. 256(2) has been filed.
8. Shri R. P. Sawhney, standing counsel for the Department has strenuously argued that the three questions of law did not (sic) arise out of the order of the Tribunal and ought to have been referred to the High Court. He specifically stressed on the concession before the CIT(A) wherein it has given its no objection to the computation of profits after deducting allowance under s. 32AB. According to him, the assessee was debarred from disputing the same before the Tribunal.
9. Shri B. S. Gupta, Senior Advocate, appearing for the assessee argued that additional ground was purely a legal ground not requiring any inquiry into the facts of the case and as such could be validly raised before the Tribunal. For this purpose he relied on the decision of the Supreme Court in case of Jute Corporation of India (supra). Thus, according to him, the question No. 1 being an issue covered by the decision of the apex Court was not a referable question of law. He further pointed out that although the assessee had given no objection before the CIT(A) to computation of export profits after deduction of allowance under s. 32AB, it could validly agitate the same before the Tribunal as there can possibly be no concession on a point of law. It was further, argued that the question No. 3 did not arise out of the order of the Tribunal at all as the Tribunal had not recorded any finding that deduction under s. 32AB was not required to be made from the profits while working out deduction under s. 80HHC.
10. We have heard the counsel for the parties and perused the order. Question No. 1 is squarely covered by the decision of the Supreme Court in the case of Jute Corporation of India (supra) and as such no useful purpose will be served to allow a reference on this question.
11. We are also in agreement with the counsel for the assessee that there can be no concession on an issue of law. Even though the assessee had not objected to the computation of profits under s. 80HHC after deduction under s. 32AB, yet this being a purely legal issue could be agitated before the Tribunal. A similar issue stands decided by this Court in case of Vijay Kumar Jain vs. CIT (1975) 99 ITR 349 (P&H) : TC 51R.463. In the said case the assessee had not pressed the ground about the validity of proceedings under s. 147 before the first appellate authority. When the same was raised again in the second appeal before the Tribunal, it was not entertained on the ground that the assessee had not pressed it before the first appellate authority. The High Court reversed the order of the Tribunal and held that issue being a purely legal issue going to the very root of the controversy could be raised before the Tribunal. Thus, in view of the settled position, question No. 2 also requires no reference.
12. The question No. 3, as has been correctly pointed out by the learned counsel of the assessee, does not arise out of the order of Tribunal at all. The Tribunal has nowhere given a finding that the deduction under s. 32AB was not required to be deducted from the profits while working out deduction under s. 80HHC. All that the Tribunal has held is that this issue was a contentious issue and as such fell beyond the scope of a mistake apparent from the record which could be rectified under s. 154. No fault can be found with this finding of the Tribunal also. The Tribunal while deciding this issue has relied on some of its earlier decisions as also on a decision of the Orissa High Court taking a view in favour of the assessee. In such circumstances, it could not possibly be contended that the said view was not a possible view. Once it is found that there could be more than one view on a particular issue, the matter cannot be rectified under s. 154 as held by the apex Court in the case of Volkart Bros. (supra).
13. Accordingly, the application under s. 256(2) is dismissed.