Income Tax Appellate Tribunal - Delhi
Fabindia Overseas Ltd. vs Dy. Cit on 8 September, 2006
ORDER
K.G. Bansal, Accountant Member
1. In this case, the appeal of the assessee was decided by the Hon'ble ITAT, Delhi Bench 'B', New Delhi on 5-12-2002. The assessee moved a Miscellaneous Application (M.A.) in respect of that order, which was disposed of vide order dated 28-2-2006. As per paragraph 3 of that order, ground Nos. 4 and 5 of the appeal were recalled for adjudication, as no order thereon was passed. That is how, this appeal before us.
2. Ground Nos. 4 and 5 are reproduced, below for the sake of ready reference :
4. That the learned CIT (Appeals) has erred in upholding the exclusion made by the DCIT (Assessment) of the exchange rate fluctuation proceeds amounting to Rs. 3,89,964 from the total turnover, whereas the same was received by the assessee within the period stipulated under the Sub section (2)(ii) of Section 80HHC of the Income Tax Act, 1961.
5. That the learned CIT (Appeals) has erred in not directing deletion of interest under Sections 234B and 234C of the Income Tax Act.
3.1 The assessee claimed deduction under Section 80HHC on a sum of Rs. 3,89,964, representing extra sale proceeds of the export turnover of last year received in this year, due to fluctuation in the rate of foreign exchange. In this connection, the learned CIT (Appeals) pointed out that the impugned receipt relates to the exports made in the previous year relevant to the assessment year 1991 -92. Therefore, the impugned amount was not the turnover of the assessment year under consideration.
3.2 Before us, the learned counsel for the assessee pointed out that provisions of Sub-section (2) of Section 80HHC were amended by the Finance Act, 1990, with effect from 1-4-1991, by which the word "receivable" was replaced by the words "received in, or brought into, India". Therefore, his case was that since a portion of export sales proceeds of last year was received in or brought into India in this year, the assessee was entitled to get deduction on this amount in this year. For this purpose, he relied on paragraph 25 of the Explanatory Notes to the Finance Act, 1990. In this paragraph, it has been clarified that one of the conditions for allowing of deduction under Section 80HHC and under Section 80HHD is that the receipts should be in convertible foreign exchange. However, the deduction is allowable even if the foreign exchange is not brought into India. In the absence of such a condition, one of the main purposes of p allowing such concession, namely, to augment the foreign exchange earnings of the country is being defeated. It has, therefore, been proposed that for obtaining the deduction under these sections, the taxpayer will be required to bring into India the sale proceeds within a period of six months from the end of the previous year or within such extended period as the Chief Commissioner of Income-tax may allow on being satisfied with the taxpayer and was prevented from complying with this requirement for reasons beyond his control. The learned counsel further pointed out that the books of account were maintained taking into account Rule 115 of the IT Rules, 1962, which provides that the rate of foreign exchange for calculation of value in rupees of any income accruing or arising or deemed to accrue or arise to the assessee in foreign currency received or deemed to be received by him on his behalf in foreign currency shall be made at telegraphic transfer buying rate of such currency as on the specified date. He was of the view that if there is some conflict between this rule and Sub-section (2) of Section 80HHC, then, the interpretation beneficial to the assessee should be adopted. It was also agitated that law should ignore trifles. Thus, it was agitated that the assessee is entitled to deduction on extra receipt arising in this year on account of realization of export proceeds of last year due to fluctuation in rate of foreign exchange.
3.3 On the other hand, the leaned DR dealt at length on the issue of interpretation of the statutes, and in this connection, he made three prepositions, namely, (i) If there is some wilful omission in the statute, the court cannot supply words to fill the omission, (ii) If there is a loop-hole in the statute, it is for the Legislature to plug that loop-hole, and (Hi) If the language of the statute is unambiguous, then, the courts cannot be supply any words for interpreting the statute. In the case of CIT v. Madan Parnami Family Trust ', the Hon'ble Rajasthan High Court, Jaipur-Bench, held that the golden rule of interpretation of statute is to go by the plain language if there is no ambiguity in the language. In the case of CIT v. A.K. Ghosh , the Hon'ble Madhya Pradesh High Court, at page 550, pointed out that a taxing statute has to be construed stricto sensu. The concept of pragmatism or any kind of expediency is, in our considered view, alien to it. To import the said conceptions would not only pave the path of uncertainty but also create an atmosphere of an incurable anomaly.
3.4 We have considered the facts of the case and rival submissions. Sub section (2) contains the conditions precedent for grant of deduction under Section 80HHC. Two preconditions have been described, namely, that (i) the section applies to all goods and merchandise other than those specified in Clause (b) of the sub-section, and (ii) the sale proceeds of such goods or merchandise exported out of India are received in, or brought into India, by the assessee within six months from the end of the previous year or within such further period as may be allowed by the competent authority in this behalf. This sub-section does not deal with the quantification of the deduction to be allowed under Section 80HHC, which is also clear from paragraph 25 of the Explanatory Notes of the Finance Act, relied upon by the learned counsel, in which it was stated that the purpose of amendment was to ensure the avowed objective behind the section, namely, that it should achieve the purpose of augmenting the foreign exchange earnings of India. The quantification of deduction has to be made in accordance with Sub-section (3) or Sub-section (3A), as the case A may be. Thus, Sub-section (3) deals with the computation of profits, derived from the business of export of goods or merchandise. It will invariably happen that some amount of the export proceeds will remain outstanding at the time of the: close of the previous year. Rule 115 of the IT Rules, deals with computation of profits in such a case for the purpose of conversion of outstanding foreign currency receivable into the Indian rupees and it has been provided that such conversion shall be made at telegraphic transfer buying rate of the foreign currency. Thus, once the foreign currency receivable is so converted into Indian rupees for the purpose of taxation, nothing further remains to be done, at the tiime of subsequent receipt of the currency and actual amount realized in Indian currency in respect thereof. Thus, we are of the view that the profits from export business had been properly calculated in the books for the assessment year 1990-91 in respect of the foreign currency receivable, on which deduction under Section 80HHC had been allowed and therefore, q nothing remains to be done in this matter in the current assessment year.
3.5 In the result, the ground No. 4 of the appeal of the assessee is dismissed.
4.1 Ground No. 5 is against the finding of the learned CIT (Appeals) that the interest under Sections 234B and 234C was rightly charged by the assessing officer. Before him, it was represented that objection raised for charging of interest was consequential in nature. Therefore, he directed the assessing officer to modify the amount of interest while giving effect d to his order, if so necessitated.
4.2 Before us, the learned counsel referred to the decision of the Hon'ble ITAT, Delhi Bench (Special Bench), in the case of Motorola Inc. v. Dy. CIT (2005) 95 ITD 269. The Tribunal laid down a number of propositions regarding charging of interest under Sections 234A and 234B; (i) interest is mandatory in the sense that it cannot be reduced or waived by any Income-tax Authorities, (ii) in case of default attracting aforesaid provisions, the assessee becomes automatically liable to pay interest, (Hi) if attracting for charging of interest is not mentioned in the assessment order, but the same: is charged under ITNS 150, which is duly signed by the assessing officer who signed the assessment order, the charging of interest is proper, and (iv) the interest has to be calculated on the basis of regular assessment and not on the basis of income declared in the return of income.
4.3 The learned DR pointed out that the ratio of the aforesaid case is in F favour of the revenue.
4.4 We have considered the facts of the case and the rival submissions. We find that all the facts regarding the charging of interest are not mentioned in the order of the assessing officer or the order of the learned CIT (Appeals). Therefore, we think it fit to restore this matter to the file of the assessing officer with a direction that he will consider the: facts of the case and decide the matter after hearing the assessee in the light of the decision in the case of Motorola Inc. (supra).
4.5 Thus, this ground is treated as allowed for statistical purpose, as indicated above.
5. In the result, the appeal of the assessee is partly allowed.