Delhi High Court
N. K. Rajgarhia vs Deputy Commissioner Of Income Tax. on 10 August, 1994
Equivalent citations: (1995)52TTJ(DEL)631
ORDER
N. S. CHOPRA, A. M. :
The assessed is in appeal against order dt. 5th Nov., 1993 of the learned CIT(A).
2. First ground of appeal is that the learned CIT(A) erred in confirming disallowance of commission of Rs. 22,50,000 and Rs. 46,65,000 paid to M/s. Giriraj Fertilizers & Chemicals (P) Ltd., Shikohabad (M/s. GFC, for short) and M/s. Anand Praty abhut Vit Nigam Ltd. (APVN, for short) respectively. The relevant facts are that the assessed is an individual. He is doing business in the name and style of M/s. Texcomash Exports. For the relevant previous year the assesseds sources of his business income are export of spare parts to Russia (Rs. 34,29,130) and also commission aggregating to Rs. 1,34,60,308 received from the following parties :
Rs.
(i) M/s. Kelvinator India Ltd. For export of 80,000 pieces of compressors of USSR 22,58,520
(ii) Commission from M/s. Nirma Ltd. for export of detergents to USSR 43,20,000
(iii) Commission received from M/s. Nirma Ltd. for export of detergents to USSR 30,00,000
(iv) Commission received for import of textile machinery from USSR 27,85,000
(v) Commission received for import of textile machinery from USSR 10,96,788 Total 1,34,60,308 Against his receipts from commission the assessed claimed deduction of Rs. 90,45,600 as business expenditure being commission paid, inter alia, to :
Rs.
(i) M/s. Multi-Tech International Ltd. for export of compressors 18,00,000
(ii) M/s. GFC for export of Nirma detergents 22,50,000
(iii) M/s. APVN on textile machinery imported from Russia 46,65,600 2.1 The Assessing Officer disallowed assesseds claim on account of commission paid to all the three above parties, but in appeal the learned CIT(A) allowed assesseds claim with regard to first party, namely, M/s. Multi Tech International Ltd. (Rs. 18,00,000). The Revenue is not in appeal on this account.
2.2 With regard to commission paid to M/s. GFC the Assessing Officer noted that the assessed had got commission of Rs. 43,20,000 from M/s. Nirma Ltd. for arranging exports of detergents while it claimed to have paid Rs. 22,50,000 to M/s. GFC. The Assessing Officer called upon the assessed to justify the payment claimed. The assessed explained that he was negotiating for export of detergent powder to USSR in which M/s. GFC was also interested and were negotiating for export of detergents to USSR and they came in contact with each other accordingly and got introduced in the Russian Trade Office. It was explained that an understanding was reached between the assessed and M/s. GFC through its managing director, Shri S. K. Maheshwari, who agreed to assist the assessed through his contacts in the Russian Trade Office in having assesseds sample cleared and in persuading the Russians to buy machine mixed powder as against their interest in purchasing spray dried detergent powder. It was explained that M/s. GFC also helped the assessed in obtaining better price. In this process the assessed explained that it was felt that it was beneficial in the interest of both the assessed and M/s. GFC not to compete with each other and allow the assessed to bag the order and accordingly memorandum of understanding was reached with M/s. GFC specifying the terms of understanding and commission was paid by the assessed to GFC in accordance with the terms of memorandum of understanding. The Assessing Officer issued summons under S. 131 to M/s. GFC but found no response from them. He also called upon the assessed to produce M/s. GFC but again it was not done. The Assessing Officer made enquiries from M/s. Nirma Ltd. when the statement of Shri C. S. Shah, Director of Nirma was recorded under S. 131 who categorically stated that the export had been arranged only through the assessed. The Assessing Officer also made enquiries from Shri S. K. Maheshwari, Managing Director of M/s. GFC but found that he was unable to give any satisfactory reply regarding work done by him personally or by his company in this regard, inasmuch as, he was unable to give the name of the Russian party to whom the export was made. The Assessing Officer further noted that GFC was declaring huge losses and in the process was, thus, able to set off the payment received from the assessed when it had rendered no specific services to earn the commission. In these circumstances, the Assessing Officer called upon the assessed to explain as to why the claim made on account of commission paid to M/s. GFC be not disallowed, when the assessed made his submissions in his letters dt. 15th Feb., 1993 and 5th March, 1993. The assessed also furnished copy of letter dt. 18th Feb., 1993 from M/s. Novo Export of Moscow confirming the involvement of Shri S. K. Maheshwari as also the assessed with regard to export of detergents. The Assessing Officer took the view that the letter from Novo Export was merely an after thought and could not be relied upon as necessary evidence regarding the assesseds claim when M/s. GFC had played no role in the export of detergents to USSR. The Assessing Officer accordingly disallowed the claim of Rs. 22,50,000 being not related to the business expenditure of the assessed. The Assessing Officer also noted that the object of payment was to ensure freedom from competition and, therefore, the payment represented capital expenditure, as was held by the Hon'ble Madras High Court in the case of Chelpark Co. Ltd. vs. CIT (1991) 191 ITR 249 (Mad).
2.3 The assessed went in appeal before the learned CIT(A) who on a consideration of relevant facts and circumstances, as also on an appraisal of correspondence exchanged between the assessed and M/s. GFC observed that the genuineness of the payment has not been challenged by the Assessing Officer. The learned CIT(A), however, agreed with the finding of the Assessing Officer that the payment represented capital expenditure, the same having been incurred for eliminating competition with GFC. The assessed is in appeal.
2.4 As regards payment to M/s. APVN (Rs. 46,65,600) the Assessing Officer noted that the assessed had received commission of Rs. 38,81,988 for sale of textile machinery imported from USSR. The Assessing Officer called upon the assessed to justify the claim made when it was explained that M/s. APVN had introduced the assessed to M/s. Prakash Cotton Mills Ltd., who were interested in purchasing textile machinery and the assessed was able to persuade M/s. Prakash Cotton Mills to buy textile machinery from Russia and in the process he paid commission of Rs. 46,65,600 to M/s. APVN for the conclusion of the contract. The Assessing Officer issued summons under S. 131 to M/s. APVN but found no such party existed at the address furnished by the assesseds authorised representative. The Assessing Officer accordingly called upon the assessed to produce this party but it was not done either. The Assessing Officer also noted that APVN had not filed the return of its income for the asst. yr. 1990-91 in spite of having received the amount from the assessed. The Assessing Officer also noted that there was no written agreement for payment of commission on the part of the assessed either. The Assessing Officer in these circumstances concluded that "the assessed had manipulated his affairs in such a way as to evade payment of taxes. He has claimed to have paid commission to parties who are declaring huge losses in their returns of income and have been able to offset their income receipts from the assessed". The Assessing Officer accordingly disallowed assesseds claim for payment of commission to APVN also.
2.5 In appeal the learned CIT(A) also noted that this party "had not filed its return of income for asst. yr. 1989-90 onwards and the Dy. Commr. of Police (Crime & Railways) had informed the ITO that all the account books of the said concern were seized and could not be handed over to the IT Department till the decision of the High Court. Thus, the alleged commission payment of Rs. 46,65,600 was not verifiable from the records of the recipient company". The learned CIT(A) on verification of assessment file and the correspondence with the Police department noted that APVN is a company which indulged in illegal activities and its managing director and his wife syphoned all the money and all the documents relating to this company were seized by the Police (Crime & Railways) and the alleged payment was not verifiable. She also noted that it was not possible to determine as to what services were rendered by this company to the assessed. In these circumstances, the disallowance made was sustained by the learned CIT(A) also. The assessed is in appeal.
3. According to the learned authorised representative, the authorities below mis read and misconstrued the facts and, therefore, reached erroneous conclusion. Shri Dinodia submitted that the authorities below have been unduly influenced by the quantum of deduction claimed by the assessed overlooking the quantum of assesseds receipt from commission. Shri Dinodia submitted that this is the second year when the assessed has earned income from commission. In the immediately preceding assessment year (of 22 months) such commission income aggregated to Rs. 87,77,747 against which the assessed paid commission of Rs. 51,26,680 and the claim made by the assessed was duly allowed by the Revenue. He submitted that the assessed because of his expertise developed good relations with Russian trade representative and has been able to obtain very substantial orders from Russia for various Indian parties which have exported their products, including detergent powder (Nirma) and in the process the assessed was able to make substantial earnings as commission. He submitted that before he could get orders for export of detergent by Nirma, he had to take the help of M/s. GFC which were known to the Russian party and which helped the assessed in getting his sample approved and persuading the Russian buyers to go in for machine mixed detergent as against their original requirement of spray dried detergent, as also in obtaining higher price and helped him in getting the contract directly from the Russian party. In this connection, Shri Dinodia referred to page 87 of his paper book, which is a copy of letter dt. 8th Feb., 1989 from the assessed to M/s. GFC; page 88 of the paper book which is a copy of letter dt. 20th April, 1989 from M/s. GFC to the assessed, as also page 92, which is copy of letter dt. 16th May, 1989 from GFC to the assessed intimating the conclusion of a contract for supply of 6000 MT of detergent powder between M/s. Nirma Pvt. Ltd. and M/s. Novo Export @ Rs. 11,400 per MT FOR Kandla Port, wherein M/s. GFC has also intimated the assessed that they have been able to negotiate with the Russian for higher sale price by Rs. 400 per MT. The learned authorised representative has also referred to letter dt. 19th Oct., 1989 from GFC to the assessed (page 96 of the paper book) intimating the amount the assessed was liable to pay as service charges as also various other terms and conditions as agreed between the two. This was followed by a regular memorandum of understanding signed between the two parties on 26th Oct., 1989 (page 98 of the paper book). The learned authorised representative invited our attention to this MOU and submitted that the arrangement entered into between the assessed and M/s. GFC was only for the present contract for supply of 6000 tonnes of detergents to USSR and "does not extend to any similar or repeat contracts for supply of any detergent goods or commodities in future to USSR or any other party, and both the parties under this deed are free to compete in the manner best suitable to them". The learned authorised representative also referred to certificate dt. 18th Feb., 1993 issued by M/s. Novo Export (Russian party) certifying that both the assessed, namely, M/s. Texcomash Export, Prop. Shri N. K. Rajgarhia and M/s. GFC through Shri S. K. Maheshwari were negotiating for export of detergents to USSR and for that purpose had been visiting the Russian Trade Office at New Delhi. It also states that Shri S. K. Maheshwari of GFC guided them with necessary technical specifications of the economics achieved and better results obtained with the use of machine mixed detergent powder and ultimately they entered into an agreement with M/s. Nirma. He submitted that his certificate has been termed an after thought by the Assessing Officer even though it was filed during the course of assessment proceedings. The learned authorised representative submitted that it is not denied that the transaction between the assessed and M/s. GFC is genuine and the payments have been made by account payee cheques. It was, thus, urged that the payment made is only for the particular contract and both the parties are free to compete with each other after the conclusion of that contract and, therefore, the payment is made for the purpose of business in obtaining services of M/s. GFC, as detailed above. The learned authorised representative submitted that the ratio of Madras High Court in the case of Chelpark (supra) is not applicable to the facts and circumstances of the case. The learned authorised representative submitted that the commission paid to M/s. GFC is a one time payment relating to this particular order only and there has been no further payment when the assessed was able to obtain renewed orders for export of Nirma. In this connection, Shri Dinodia invited our attention to the remand report dt. 21st Oct., 1993 of the Assessing Officer accepting that no commission payment has been shown made to M/s. GFC after asst. yr. 1990-91 and GFC is an existing assessed, as also the details of payments made are verifiable from the copy of bank account of the assessed where these amounts have been debited. He submitted that the assessed is entitled to the claim made under S. 37 of the IT Act. He also placed reliance on Hon'ble Supreme Court judgment in the case of Empire Jute Co. Ltd. vs. CIT (1980) 124 ITR 1 (SC).
4. As regards commission to M/s. APVN the learned authorised representative submitted that the disallowance is wholly unjustified and is arbitrary. He submitted that the amount was paid as commission for negotiation, placement and consultancy of order for textile machinery with M/s. Prakash Cotton Mills Ltd., the value of contract being Rs. 7,77,60,000, on which the assessed was to receive commission of Rs. 2,52,10,177. While a part of the same was received during the relevant previous year, the balance was being received in the subsequent assessment years and as a matter of fact the Assessing Officer has reported that a sum of Rs. 61,10,644 had already been received when he made his remand report dt. 21st Oct., 1993 while the balance of Rs. 1,90,99,532 is receivable as per terms of agreement of the Government of India with Russian Government. The learned authorised representative submitted that the commission paid to M/s. APVN is 18.5% of the total commission to which the assessed is entitled and the commission was paid by account payee cheques, as has been verified by the Assessing Officer for himself and is also supported by certificate issued by UCO Bank. The Assessing Officer also went through the details of correspondence between the assessed and APVN. The learned authorised representative also referred to bank certificate dt. 20th Jan., 1993 issued by UCO Bank, defense Colony to the Assessing Officer in response to notice under S. 133(6). Advancing his arguments further the learned authorised representative invited our attention to the written submissions made before the learned CIT(A), as also various documents in support of the claim including correspondence between the assessed and M/s. APVN. He submitted that the assessed gave all possible evidence in support of his claim. It was, thus, urged that the Revenue erred in disallowing the claim.
5. On the other hand, the learned Departmental Representative strongly defended the orders of the authorities below and submitted that full and proper opportunity was given to the assessed to substantiate the claim made and services rendered by the two parties and merely because the payments were made by cheques did not entitle the assessed to succeed. The Departmental Representative also submitted that it is all an arranged affair by the assessed to reduce his tax liability.
6. We have heard the learned representatives of the parties at length and have also perused the relevant record, including the paper book filed by the learned authorised representative. With regard to assesseds claim of commission paid to M/s. GFC the learned CIT(A) has observed that "the genuineness of the payment had not been challenged by the Assessing Officer" (page 11 of the order of the learned CIT(A). However, the learned CIT(A) upheld the disallowance agreeing with the finding recorded by the Assessing Officer that the ratio in Chelpark case (supra) was applicable to the case of the assessed. In the case of Chelpark Co. Ltd. (supra) the managing director of the company, which was engaged in the manufacture and sale of ink, after retirement, constituted a partnership consisting of his wife and two daughters for the purpose of manufacture and sale of writing ink. Chelpark Co. Ltd. entered into an agreement with the said partnership, under which it paid a sum of Rs. 1 lac as compensation to its erstwhile managing director on his undertaking to discontinue and recommence at any time within a period of five years, the manufacture of writing ink and sale thereof or any other business similar or competitive to the business carried on by Chelpark and certain other incidental action. After receipt of the said amount of Rs. 1 lac the partnership was dissolved. Chelpark Co. claimed that the sum of Rs. 1 lac paid was an item of revenue expenditure. This was disallowed by the ITO and ultimately confirmed by the Tribunal. On reference the Hon'ble Madras High Court held :
"that though, under the agreement, the benefit of the restrictive covenant was for a period of five years, from the terms of the dissolution deed as well as from the facts stated in the Tribunals order that the partnership which was a potential competitor to the assessed had vanished and that the ex-managing director had also left India, it was clear that the assessed paid the amount to the partnership in order to ward off demanding competition from a potential competitor, resulting in the acquisition by the assessed of a right as well as protection to carry on its business activities as a whole for so long as the assessed carried on such business. consequently, the payment by the assessed was in the nature of a capital expenditure and not revenue expenditure."
7. We, however, find that facts of the case are distinguishable from the facts as prevailed in the case of Chelpark Co. Ltd. As per memorandum of understanding between the assessed and M/s. GFC (page 97 and 98 of the paper book), the assessed is to pay commission only in respect of supply of quantity of 6000 MT of detergent powder under contract to USSR and the arrangement "does not extend to any similar or repeat contracts for supply of any detergent goods or commodities in future to USSR or any other party and both the parties under this deed are free to compete in the manner best suitable to them". It is a matter of record that the assessed received repeat orders for supply of detergent on which he earned commission but no amount was paid to M/s. GFC on that account. The amount has been paid by the assessed only in respect of contract for 6000 MT and is not in respect of any other contract for supply of detergent goods or commodities to USSR or any other party. Both are free to compete with each other in the manner best suitable to them. As is manifest, the assessed has not eliminated M/s. GFC from carrying on its business activities, inasmuch as, both are free to compete with each other in the manner best suitable to them but for the contract of 6000 MT. The assessed admittedly received further commission on supply of detergents by Nirma subsequent to this contract of 6000 MT but did not pay any commission to M/s. GFC. M/s. GFC are not shown to have been ceased from business activities either as a result of payments made by the assessed. The ratio of Chelpark Co. Ltd. is, therefore, distinguishable on facts of the case. The amount was paid by the assessed to facilitate his business operations more profitably. We cannot overlook the background leading to conclusion of memorandum of understanding between the assessed and GFC, i.e., the specific services rendered by M/s. GFC to the assessed as also corroborated by M/s. Novo Export of Russia. The payment made by the assessed to GFC is essentially for services rendered. The claim is, thus, clearly revenue in nature allowable under S. 37 of the IT Act, as has been rightly argued by the learned authorised representative. The assessed gets relief of Rs. 22,50,000.
8. With regard to commission claimed as paid to M/s. APVN we are of the view that no valid ground existed for the impugned disallowance and the same has been made merely because the party had not filed the return of its income for asst. yr. 1989-90 onwards. We note that there has been exchange of regular correspondence between the assessed and M/s. APVN, as is apparent from pages 58 to 85 of the paper book, which are copies of letters written by the assessed to M/s. APVN as also replies received fro APVN with regard to order for looms and textile machines placed by M/s. Prakash Cotton Mills Ltd. and the role played by M/s. APVN in helping the assessed with regard to this transaction. M/s. APVN have also confirmed to have received their commission from the assessed as per letter dt. 14th June, 1989 (paper book page 77) followed by further letters dt. 20th June, 1989 and 28th June, 1989 reminding the assessed to release their balance of commission. We also note that the payments involved have been made by the assessed either by account payee cheques or by account payee bankers cheques (pay order) and enquiries made by the Revenue from the UCO Bank, defense Colony confirmed these transactions by debit to account of the assessed as also the ultimate destination of the payments involved. We find that the learned Assessing Officer in his remand report dt. 21st Oct., 1993 addressed to the learned CIT(A) has also intimated that in asst. yr. 1989-90 the assessed had shown execution of orders for sale of Russian textile machinery to various parties, including National Textile Corporation and Anglo French Textile against which he had claimed payment of commission to two different parties. The Assessing Officer also communicated that "In asst. yr. 1990-91 the execution of contract for sale of Russian textile machinery to M/s. Prakash Cotton Mills at FOB value of Rs. 7,77,60,000 has been shown. The assessed is entitled to receive commission of Rs. 2,52,10,177, it is stated that Rs. 61,10,644 had already been received and the balance of Rs. 1,90,99,532 is recoverable as per terms of agreement of the Govt. of India with Russia Govt. On this amount the share of M/s. Anand Pratyabhut is stated to be Rs. 46,65,000 amounting to Rs. 18.5% of the total commission receipts and the entire amount is shown paid, against the debit notes raised by M/s. Anand Pratyabhoot vide cheques as detailed on p. 33 and 34 of the submissions. The relevant cheques are seen debited to assesseds bank account. Details of correspondence with M/s. Anand Pratyabhoot which apparently arranged for opening of LC and bank guarantee by M/s. Prakash Cotton Mills and copies of its debit notes, of cheques paid forwarding letters had been filed".
The learned Assessing Officer also forwarded a copy of letter received from the bank manager, UCO Bank, defense Colony with his remand report and submitted that as per letter of the bank manager and details therein it appears that the cheques/pay orders in the name of M/s. APVN were collected by UCO Bank, Karol Bagh branch. We also find on record copy of letter dt. 20th Jan., 1993 addressed by UCO Bank to the Assessing Officer furnishing of information under S. 133(6) wherein the bank had given details of payments made to M/s. APVN by debit to assesseds bank account and these payments are found to have been made either by account payee cheques or account payee bankers cheque (pay order), as also the particulars of bank through which the cheques were cleared. On the basis of evidence on record, there is no doubt that M/s. APVN have been instrumental in procurement of order by the assessed from Russian party for supply of textile machinery to M/s. Prakash Cotton Mills, Bombay. This is also verified that the assessed, in fact, made payment to M/s. APVN. The mere fact that M/s. APVN did not file return of its income after asst. yr. 1989-90 would not, in our view, vitiate in any manner the claim of the assessed. Admittedly M/s. APVN is an independent entity and very mush in existence when it is found to have filed its return prior to asst. yr. 1989-90 and its records taken by police in its custody, as is apparent from the order of the learned CIT(A). It is also not the case of the Revenue that the amount paid to M/s. APVN has come back to the assessed. The assessed is seen to have done whatever was within his reach when the Revenue simply rejected the claim made by the assessed merely because M/s. APVN had not filed its return for the relevant assessment year. We are unable to approve of this approach in the light of evidence on record, as already referred to with regard to genuineness of payments made and services rendered by M/s. APVN. We, therefore, find no justification for the impugned addition. It is deleted.
9. The next grievance of the assessed is against disallowance/confirmation of disallowances of various expenses as under :
(a) Rs. 41,872 out of entertainment expenses under S. 37(2A);
(b) Rs. 9,440 out of rent;
(c) Rs. 11,732 out of telephone expenses; and
(d) Rs. 31,559 out of legal expenses.
9.1 We have heard the learned representative of the parties and have also gone through the relevant record, including the order of assessment as also the order of the learned CIT(A). With regard to disallowance of Rs. 41,872 the amount includes expenditure on entertainment of Russian party at Agra, Khajuraho and Goa (Rs. 26,739) and a sum of Rs. 20,133 was spent on business promotion considered entertainment, or Rs. 46,872. The Assessing Officer allowed admissible deduction of Rs. 5,000 and disallowed the balance. The learned CIT(A) upheld the finding of the Assessing Officer after going through the relevant details. We find ourselves in agreement with the reasoning of the learned CIT(A) and, therefore, uphold her order.
9.2 With regard to (b), i.e., Rs. 9,440 out of rent, the issue involved is same as is pending in assesseds appeal before the Tribunal for the immediately preceding assessment year. We accordingly hold that the view taken by the Tribunal on that appeal will be equally applicable to the claim of the assessed for this assessment year.
9.3 Ground No. (c) with regard to telephone expenses is not pressed.
9.4 As regards claim for legal expenses, we note that the same was incurred by the assessed in defending a suit filed in the High Court at Calcutta by Sunil Kumar Rajgarhia also claiming partnership in assesseds business M/s. Texcomash Export and ultimately in terms of settlement plaintiff Sunil Kumar Rajgarhia admitted, acknowledged and confirmed that the firm of Texcomash Export is the sole proprietary business of the assessed and he also admitted and acknowledged that the assessed is entitled to carry on his said proprietary business without any manner of interference or obstruction by the plaintiff. There are other terms of settlement also between the assessed and the plaintiff. In nutshell, therefore, the assessed had to incur the impugned expenditure to defend his business interests and, therefore, we are of the view that he is entitled to the claim made. Our view finds support from the judgment of Hon'ble Madras High Court in the case of CIT vs. O. P. N. Arunachala Nadar (1983) 141 ITR 620 (Mad) wherein it has been held that "any legal expenditure incurred by an assessed to protect the source of his income or the title to his business or to preserve or maintain his business assets must be regarded as expenditure incurred wholly and exclusively for the purposes of his business and, therefore, allowable as a deduction for the purpose of computing the profits for income-tax purposes". We accordingly allow the assessed relief of Rs. 31,559.
9.5 In the result, this ground of appeal is partly allowed.
10. The next ground of appeal is that the learned CIT(A) erred in directing the relief under S. 80HHC be allowed at Rs. 6,80,867 only as per audit report. The claim of the assessed that relief under S. 80HHC is to be computed and allowed on the profits and gains of business as finally determined in accordance with law was negatived by the Revenue. The learned authorised representative submitted that the view taken by the Revenue is not justified when the deduction is with reference to income computed. Shri Dinodia also invited our attention to the Special Bench order of Tribunal International Research Park Laboratories Ltd. vs. Asstt. CIT as reported in (1994) 50 TTJ (Del) (SB) 661 : (1994) 50 ITD 37 (Del) (SB) wherein the Tribunal have held the following formula to determine the deduction under S. 80HHC, i.e., Profit & Gain of business x Export turnover Total turnover The learned authorised representative invited our attention to page 90 of the order of the Tribunal (supra) wherein it has been held "in a case where the assessed does not carry any trade as such in India but only earned profits like commission, just like in the case before us, the export turnover as well as the total turnover would remain one and the same and it does not lose the deduction by virtue of the fact that it does not carry on business in India but merely earned profits on commission". Advancing his arguments further Shri Dinodia submitted that in terms of the provisions of S. 80HHC the assessed would be entitled to deduction in terms of the formula laid down by the Special Bench in their order (supra) as under :
Profit & Gain of business x Export turnover Total Turnover On the other hand, the learned Departmental Representative supported the orders of the authorities below.
10.1 We have heard the learned representatives and have also perused the relevant record. The business carried on by the assessed consists exclusively of the export out of India and, therefore, deduction under S. 80HHC is governed in accordance with the provisions of sub-cl. (a) of sub-s. (3) of S. 80HHC, which defines profits derived from the export of goods out of India for the purposes of deduction under sub-s. (1). We, therefore, find merit in the submission made by the learned authorised representative for the assessed and the claim made by the assessed is also in accordance with the order of the Special Bench of the Tribunal. Respectfully following the Special Bench order we direct recomputation of deduction under S. 80HHC, for which the Assessing Officer may, if necessary, give an opportunity of being heard to the assessed also.
11. In the result, the appeal is allowed in part, as indicated above.