Income Tax Appellate Tribunal - Hyderabad
National Mineral Development Co.Rpn. ... vs Deputy Commissioner Of Income Tax on 17 September, 1997
Equivalent citations: (1999)63TTJ(HYD)353
ORDER
S. ANANDA REDDY, J.M.:
This appeal by the assessee is directed against the order of the CIT(A), dt. 1 lth Aug., 1994, for the asst. yr. 1993-94.
2. The assessee, a Government owned corporation, was carrying on business in mining and exporting ore through export/trading house. During the relevant previous year the assessee exported iron through M.M.T.C. ITD. According to the assessee, it earned a total profits of Rs. 94,32,39,258 on an export turnover of Rs. 154,14,64,784 and a total turnover of Rs. 2,71,94,40,653. Accordingly, the assessee computed the benefit under s. 80HHC of the IT Act in a sum of Rs. 53,46,57,779. The return filed by the assessee was processed under s. 143(1)(a) of the IT Act by the AO. While processing the same the AO however, made some adjustments regarding the computation of the benefit under s. 80HHC of the IT Act. According to the AO, the premium in REP licences should not be included in the total and export turnover. As per s. 80HHC(4A) (baa) 90 per cent of the sums referred to in cls. (iiia), (iiib) and (1c) of s. 28 of the IT Act should be excluded. Therefore, the AO recomputed the deductions under s. 80HHC and in the process reduced the deduction claimed by the assessee by a sum of Rs. 7,64,07,140. Objecting to the said recomputation of the relief under s. 80HHQ the. assessee filed an application under s. 154 of the IT Act. According to the assessee, the assessee is not an export/trading house and, therefore, it is not entitled for REP licences. It was also the assessee's contentions that the benefit of REP licences received by the assessee were part of the sale consideration in terms of the agreement made between the assessee and the export house MATC ITD. Therefore, there is no case for disallowance by way of prima lacie adjustments. The AO, however, did not agree with the assessee and, hence, rejected the application filed under s. 154 of the IT Act.
3. The assessee carried the matter in appeal to the CIT(A) contesting the prima facie adjustments made by the AO. The assessee advanced the following contentions before the CIT(A) :
(i) The first contention is that the power of the AO is very limited under s. 143(1)(a), it is cotenninous with the scope of his power under s. 154 and where there could be conceivably two opinions or where the matter is not free from doubt, the prima facie adjustment under s. 143(1)(a) is not permissible. The decision of the Supreme Court in the case of T.S. Balram, ITO vs. Volkart Brothers (1971) 82 ITR 50 (S0 has been cited.
(ii) The second ground is that the appellant as a supporting manufacturer is not entitled to REP licence and, therefore, what an amount it has received on this account will become the component of the sale price as it formed a part of the pricing arrangement with the export house.
(iii) The third ground is that claim under s. 80HHC has been made in accordance with the export legal opinion and in accordance with the certificate issued by the Accountant qualified under s. 288. This certificate issued by the Accountant as per sub-s. (4) of s. 80HHC is not in the nature of a report as for example under s. 44AB and the certified amount is, therefore, to be taken as the amount of the certificate, it would also show that any departure could not be a matter of prima lacie adjustment since such departure from the certificate would make the matter, ipso lacto, debatable.
Lastly, it was argued that the Bombay High Court in the case of Tanna Exports & Anr. vs. M. G. Kamath & Anr. (1992) 108 CTR (B m) 213.. (1992) 202 ITR 219 (Bom.) has held that re-ca/culation of adjustment under s. 80HHC is not permissible under s, 143(l)(a) of the IT Act, 1961 ?
The CIT(A) after considering the contentions and relying upon the provisions of s. 80HI1C, (1A), (M), (4A) and cl. (baa) in the Expln. to s. 80HHC held that the AO was right in making the prima facie adjustments. According to the CIT(A) the provisions are clear and there is no ambiguity and, hence, the AO was justified in making the prima facie adjustment while processing the return under s. 143(1)(a) of the IT Act.
4. The assessee being aggrieved is in appeal. The learned counsel for the assessee contended that the CIT(A) is not justified in upholding the prima facie adjustments made by the AO while processing the return under s. 143(1)(a). It was contended that the assessee was only a supporting manufacturer and whatever amount received in respect of REP licences they were in terms of agreement between the assessee and MMTC and as per which the said relief is part of the sale consideration and, therefore, there is no case for exclusion of the said amount from out of the total turnover as well as export. turnover. It was also contended that the assessee has acted upon as per the opinion of exports, therefore, the computation made by the assessee while claiming the benefit under s. 80HHC cannot be considered for prima facie adjustment. The learned counsel for the assessee also relied upon the decision of the Bombay High Court in the case of Tanna Exports & Anr. vs. M.G. Kamat & Anr. (1992) 108 CTR (Bom.) 213 : (1992) 202 1TR 219 (Bom.), where it was held that while processing the return under s. 143(1)(a) of the IT Act, the AO is precluded from recomputing the deduction under s. 80HW The learned counsel for the assessee also relied upon certain other decisions rendered by other High Courts as well as the decisions rendered by this Tribunal with reference to the processing of the return under s. 143(1)(a). The learned counsel for the assessee also relied upon the Circular, dt. 24th Aug., 1994 in support of his contention that the AO has precluded from making the prima lacle adjustments while processing the return under s. 143(1)(a). The learned counsel for the assessee also relied upon the clarification issued by the CBDT with reference to the prima lacie adjustment which was reported at p. 630 of the Direct Tax Circulars. In that circular an example was also given by the Board, if the audit report specified under s. 80HHC which is required to be filed along with the return of income is not so filed, the deduction claimed under that section can be disallowed as a prima facle adjustment. Basing on the said circular it was contended that on the said example the AO has no power to recompute the income by way of prima lacie adjustments to interpolate with the computation of the relief claimed under s. 80HHC of the IT Act.
5. The learned Departmental Representative, on the other hand, supported the order of the CIT(A). The learned Departmental Representative vehemently contended that the provisions of s. 80HHC is very clear insofar as the computation of the relief under s. 80HHC is concerned with reference to the exports sales. The learned Departmental Representative also took us through the provisions of s. 80HHQ (1A), (M), (4A) and cl. (baa) of the Explanation provided in s. 80HI1C. Basing on the above provisions it was contended that the provisions are clear with regard to the export as well as the total turnover and, therefore, the AO was within his jurisdiction in recomputing the relief under s. 80HHC of the IT Act. The learned Departmental Representative contended that the decisions relied upon by the assessee's counsel are rendered with reference to the direct exporters and the said decision would not apply to the present case. Hence, it was contended that there is no error in the order of the CIT(A) warranting interference.
6. We have considered the rival submissions and considered the material on record. The dispute relates to the prima lacie adjustments with reference to the deduction claimed under s. 80HHC. Admittedly, the assessee is a supporting manufacturer who was exporting its manufactured good through a trading or a export house. According to the assessee, the transactions between the assessee and the trading house, namely M= are governed by the terms of the agreement between them. Therefore, in respect of the exports effected by the assessee through the said MMTC, it claimed deduction under the provisions of s. 80HHC in a total sum of Rs. 53,46,57,779. But the AO while processing the return recomputed the said amount. According to the AO, the amount received representing the value of REP licences should be excluded while computing the export as well as the total turnover. After recomputation, the AO reduced the claim of the assessee under s. 80HHC by a sum of Rs. 7,64,07,134. Whereupon, the assessee filed an application under s. 154 seeking rectification of the intimation contending that there was no justification for the recomputation of the relief under s. 80HHC. It was also the assessee's contention that the AO has no power to make such adjustments while processing the return under s. 143(1)(a). The said claim was not accepted. Hence, the assessee preferred appeal to the CIT(A) unsuccessfully.
7. Now the contention of the assessee before us is that the view taken by the AO as well as the CIT(A) is erroneous and unsustainable. In support of the said contention the assessee relied upon the decision of the Bombay High Court apart from the circular issued by the CBDT as well as clarifications. A perusal of the said decision rendered by the Bombay High Court in the case of Tanna Exports & Anr. vs. M. G. Kamat & Anr (supra), shows that it was a direct case relating to the deduction under s. 80HHC. In a writ petition filed by the assessee against the recomputation made by the AG while processing the return under s. 143(1)(a), it was held that the AO has no power to reca/culate the deduction under s. 80HHC while processing the return under s. 143(1)(a) of the IT Act. The Hon'ble Bombay High Court relied upon its own order in the case of Khatau Jankar ITD. & Anr. vs. K.S. Pathania, Dy. CIT & Ani. (1992) 102 CTR (Bom.) 194: (1992) 196 1M 55 (Bom.) and allowed the Writ petition quashing the prima facie adjustments effected by the AO. Further, the clarification issued with reference to the prima lacie adjustments by the Board itself shows that with reference to the relief under s. 80HHQ the relief can be denied only if the audit report specified under that section is not filed along with the return of income, but not otherwise. This also clearly shows that while processing the return under s. 143(1)(a) the AO is precluded from making recomputation of the relief under s. 80HHC.
8. Apart from the above legal position it was the assessee's contention that whatever benefits with reference to REP licences received by the assessee, were part of the sale consideration and, therefore, it would not be treated as a separate benefit like the one conferred on the direct exporters. This contention of course requires a detailed enquiry with reference to the terms of the agreement and, therefore, it is not possible for the AO to decide whether the claim made by the assessee is proper or otherwise. In the light of the direct decision of' the Bombay High Court as well as various decisions rendered by this Tribunal, the action of the AO in making prima facie adjustments regarding the relief claimed under s. 80HHC is erroneous and unsustainable. We therefore, set-aside the order of the CIT (A) and direct the AO to rectify the intimation deleting the addition made as a result of the re-computation of the benefit under s. 80HHC of the IT Act. Consequently, the additional tax levied under s. 143(1)(a) of the IT Act is also deleted in respect of the said adjustment.
9. In the result, the appeal of the assessee is allowed.