Income Tax Appellate Tribunal - Delhi
Mid East Shipping Co. (P.) Ltd. vs Asstt. Commissioner Of Income-Tax on 27 May, 1991
Equivalent citations: [1992]40ITD611(DELHI)
ORDER
D.N. Sharma, Judicial Member
1. This appeal is directed against the order dated 20-3-1990 passed by the Commissioner of Income-tax under Section 263 of the IT Act, 1961.
2. For the A.Y. 1985-86 original return was filed by the assessee on 29-11-85 declaring a loss of Rs. 95,210. A revised return was filed on 20-10-1987 declaring a loss of Rs. 1,63,360 and assessment under Section 143(3) was completed by the ITO on 30-12-87 on a total income of Rs. 56,121. The ITO allowed relief to the assessee under Clauses (a) and (b) of Sub-section (1) of Section 80HHC.
3. On a perusal of the assessment record pertaining to A.Y. 1985-86 the CIT noticed that in the immediately preceding asst. year 1984-85, there was actually no 'export turnover' for the purpose of Section 80HHC(1)(b). He was, therefore, of the view that the assessee was not entitled to relief at 5 per cent of incremental export turnover. He further noticed that export turnover of Rs. 30,90,692 for the asst. year under consideration was taken to be the incremental turnover also and relief at 1 per cent as also at 5 per cent under both Clauses (a) and (b) was allowed with reference to the said turnover without examining the facts and material available on the point. The assessment framed by the ITO was accordingly considered erroneous insofar as it was prejudicial to the interests of the revenue. Proceedings under Section 263 were initiated and a show-cause notice was issued to the assessee.
4. The assessee filed a written reply. It was pointed out that in the immediately preceding assessment year, the assessee had exported goods worth Rs. 10,02,319. The goods were not accepted by the original consignee and as such the amount in question was excluded from the turnover for the accounting period relating to the A.Y. 1984-85. Subsequently, on 23-11-1983,theassessee was able to conclude the sale to another foreign buyer and accordingly the amount in question was included in the turnover for the year ending 30-10-1984 relevant to the assessment year under consideration. It was further urged that there was no error in computing the deduction under Section 80HHC in the assessment.
5. The CIT found that though the assessee had issued invoices of the sale in the immediately preceding assessment year but since the buyer had refused to buy the goods, there was no transfer of goods, as such no sale took place in the preceding asst. year and there was thus no export turnover in the immediately preceding assessment year which was accordingly nil. The CIT further expressed the view that in view of Sub-section (3) of Section 80HHC, the assessee was not entitled to deduction at 5 per cent of the incremental turnover. The Commissioner accordingly set aside the assessment order for the limited purpose of computing deduction under Section 80HHC with reference to the export turnover of the goods during the previous year as per Clause (a) to Section 80HHC(1). The relief allowed under Clause (b) with reference to the incremental export turnover was withdrawn.
6. Shri C.S. Agarwal, learned counsel for the assessee submitted before me that in the immediately preceding asst. year, the assessee had, in fact exported goods though in that year there was no export turnover for the simple reason that sale proceeds were received in the subsequent year i.e. the asst. year under consideration. It was contended that the requirement of Sub-section (3)of Section 80HHC was accordingly fulfilled. It was further submitted that under Clause (b) of Section 80HHC(1) the deduction of an amount equal to 5 per cent of the amount by which export turnover of goods during the previous year exceeded the export turnover during the immediately preceding year was allowable even if in the immediately preceding assessment year, the export turnover was nil. It was further submitted that the assessec could not be denied the benefit of Clause (b) simply on the ground that in the immediately preceding asst. year there was no export turnover or in other words, the export turnover in that year was nil. It was further submitted that the issue was a debatable one and where there could be conceivably two opinions then in view of the decision of the Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192, the view favorable to the assessee should be adopted. It was thus contended that the assessment order on the point was neither erroneous nor prejudicial to the interest of the revenue and, therefore, the CIT was in error in revising the assessment order on the point.
7. The learned D.R., on the other hand, fully supported the order of the CIT. It was contended that since there was no export turnover in the immediately preceding previous year, the ITO was in error in allowing deduction at 5 per cent of incremental turnover under Clause (b) of Section 80HHC(1). It was further contended that the deduction under Clause (b) was permissible only if in the immediately preceding asst. year there was the some export turnover and if in the year under consideration export turnover is an excess of the export turnover of the immediately preceding assessment year.
8. I have considered the rival submissions as also the facts on record. Section 80HHC has been introduced by the Finance Act, 1983 w.e.f. 1-4-1983. It was intended to provide fillip to Indian exporters, (a) to start export in goods outside the country so as to earn foreign exchange and (b) to increase volume of such exports from year to year. The deduction provided is two-fold, namely, (i) of an amount equal to 1 per cent of the eligible turnover during the previous year and (b) of an amount equal to 5 per cent of the amount by which such turnover during the previous year exceeds that during the immediately preceding asst. year. Sub-section (3) provides that no deduction under Clause (b) of Sub-section (1) shall beallowed unless the assessec had during the immediately preceding asst. year exported goods. There is no dispute that during the immediately preceding asst. year the assessee did export goods though in respect of those goods sale proceeds were realised during the previous year relating the assessment year under consideration and further that for the immediately preceding year export turnover as defined under Clause (b) of Explanation to Sub-section (3) was nil. Export turnover under Clause (b) is defined to mean sale proceeds of any goods or merchandise exported out of India but does not include freight or insurance attributable to transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962.
9. In the instant case, though there was export in the immediately preceding previous year but there was no export turnover in that year. Therefore, the assessee would be entitled to deduction of 5 per cent of the entire eligible turnover during the previous year under Clause (b) of Section 80HHC(1) on the basis that such turnover in the immediately preceding previous year was nil. At this stage, it would be pertinent to refer to the Budget Speech of the Finance Minister while presenting the Finance Bill, 1983 before the Parliament. It was stated by the Finance Minister that under the new scheme all increments in export turnover will be entitled to relief at 5 per cent of the incremental turnover in computing the taxable income (see 140 ITR Statute 29). In the Memorandum explaining the provisions in the Finance Bill, 1983, it was stated that the tax concession will consist of a deduction in computation of taxable income of 5 per cent of the amount by which the export turnover of the accounting year exceeds the export turnover of the immediately preceding assessment year. Keeping in view the object for introduction of Section 80HHC, the speech of the Finance Minister as also the Memorandum explaining the provisions contained in the Finance Bill, 1983,I am of the opinion that a proper interpretation of Clause (b) of Section 80HHC would be that in a case where the export turnover in the immediately preceding previous year is nil, the asscssee would be entitled under Clause (b) to a deduction of 5 per cent of the entire eligible turnover during the previous year as that would represent the incremental turnover of the year in addition to the deduction of 1 per cent of the eligible turnover under Clause(b). In this view of the matter, I hold that the order of the Income-tax Officer on the point is neither erroneous nor prejudicial to the interests of revenue and, therefore, the CIT was not justified in revising the order on the point and withdrawing the deduction allowed by the ITO under Clause (b) of Section 80HHC(1). In this view of the matter, I cancel the order of the CIT passed under Section 263.
10. The appeal is allowed.