Karnataka High Court
M/S.Corvine Chemicals And ... vs The Dy.Commissioner Of Income Circle-1 on 2 November, 2010
Bench: N.Kumar, Subhash B Adi
IN THE HIGH COURT OF KARNATAKA. CIRCUIT BENCH
AT GULBARGA
DATED THIS TH 1+: 2N" DAY 0;: NovEM131<:R«'2.Q'j:flj' ~ V.
THE HON'BLE MR.JUsTi'c2E:'N_§'KU1\&gi§~. ~. "
PRESENT I _
THE HON'BLE 'BA. Abl
.
BETWEEN M/ s. CO:VEv"Vi1'1_'(3~C£'1L"~'V1,TV"=,'¥:,_C'VEL1,S PhannaCe_tica}s Z_.tCl.v '=, _ Plot No.13E3E .
Kolhar Ir1dus'i;1fia'1 Afegl S ' ' BIDAR' " _ '~ ,_Repfé§;er;1;éd « ..... 14 v Maneiging 'Dirc:.c1or sr;..1\2:ahipa1% Raddy Agad :1beu't. fyears Son or Sri.£\'1VLLj'g'e:=1ka1 Raddy ...AppeHam.
(By Sr1'.S.Parthasara1.hi, Adv.) V' " QgND:-
'I'}'{<". Eh". (Vw:m%a9i:>::r=s" mi"
H11/.:U1.i.1L.' i.<|A._ L,1'1\ia'---1 Aayakar E3havan Sedam Road, Gulbarga -- 585 '1 05. ...Respoi1de..nt [By.Sri.Ameet Kumar Deshpande ~ Adv?) The ITA U/ S 260A of the Income Tax A(':'f,' V' l';~:prayi.;Itg * , that this Hon'ble Court. may be pleased to'set,'..asi;deth_e order of the Income Tax appellant etribunal d.td.20_l.=i.2--QO9 'heart-z1ug=:.I--TA No.755/BANG/2009 for the assessment yea-:~ 20013«04. ~. V This Appeal coming on forHHie's1*i.hg J., delivered the following: V The lfisselisseellillfias "'prleferi'ed"'ihdis appeal, challenging the orders pvV'a.sse._(:i end the other two authorities, holding thaltlthev anaooht 'oi?llVdeductior1 allowable under Section IVh(:orii'e'7Ea_x«iAct [for short hereinafter referred to as 'th.e~t'.o"b_e reduced from the profits derived from export 'ssectilonx SQ}-1.}-lC of the Income Tax Act. btisiriiess purposes of computation of deduction under i
2. The relevarlt. assessment year is 2003-04?"-oj The assessment under Section 143(3) was co111p1et_ed_".aur1:i*Vi. the deduction under Section 801B and SOHHC allowed. Thereafter, the proceedi:zig§~.e.re1°e& Section 147 for reassessment. VThe u reassessment was the restrictio11.:Vir11posed (9) of' Section 80--1A. It was Section 80-1B in 1'esti~ictjng cieddciiiiho-r1"* SOHCC to the extent of deductiéoifi __und:e'r not considered.
though the deductions under Sectionggx on the same business profit. T herefore."«tiEj1Le View that there was excessive ailowajaceof ded-::Af:t1'eii under Chapter VIA of the Act. assessee'V entered appearance. filed detailed V'*i.statefiie1*1i:v.:_'o{i°ohjc--ctions and opposed the claim for the said 1'eassessmer'1t:§j_
4. After hearing the assessee, the Assess.ing Ofiioerejheid as undc-:1":
"It is an admitted fact that on the profitzs, the assessee claimed, both,' V under Section 8043 and soHf:{e. 4promis'i.onsV::Qi' 7 Section 80«IA(9} have been importedvio tohe,l;oroo'islionLsl."
of Section 80-18(18). pv?om:':;~he language: j'oj""'s'¢}étio}i 80-IA(9), it is clear that" t'he__ded1_u:{i_on to ihe_Ae2VcAieni of profits and gains ii§nde<r_ S:eCiion 80~IA shall not be allowed under l'vprooisioVrtsf.fof_'Chapi'er VIA under the4";;(/'Q Djleclvtsetiio-nsl respect of certain inborriesff. Theilaw eno--islobr1es'l't'hefact: that the dotible"fli€*CiLtciio'n sl1o'uld allowed under the Income' toh.lfieL:oompLtiing the income from the sanie._bu.sine'ss ";.1fQf;iis.._m'fnerefore, when an assessee £16., eniilt'l'«3'¢.l to bothll"'l:h,e deductions under Section and 30:18. the deduction under Section A 8QH}1'C:'tI2ill be available on profits derived from V ll afier dedttctiing the amount of l"ded_Ltc'tioni::allowed under Section 8048. "
V in coi'ni11g' f;ow"t:he said conclusion. the Assessing Officer has "S.l*--1féi'erred 16-'v211'i()L1s judglnents of the 'I'ribur1a1. Agggrieved by the said order, the assessee preferred an appeal the Commissioxaer 01' Income Tax (Appeals). The Appellai..el'Ati has affirmed the order of the Assessing Ofi'icer;«l.__hoidih"gthat; amount of deduction liable under Section"80p_--IB isttol 1feduce'd from the profits derived from the exportlhusinesso for pLir,posles_V of computation under Section..__:8'QI"IIrIC the' appeai. Aggrieved by the same"; lltiielit"assessee~..preferred an appeal before the Tribunalll.s='Fll'ie note of the judgment: of thevTifib.1_inal:"'of Bench of the Delhi T1*ibun§a.}., under Section 1-41»? has beefr Assessing Officer and heid the deductioniqloe other provisions of Chapter VI A o'%"the Income Tax Act, 1961 with the heading "C" is to be reclticed theramouhltwot' deduction allowed under Section 80» 'V113 of the Act. Aggrieved by this concurrent finding re_e~orde:dlby three authorities, the assessee has preferred
- '~___ihis appe.a_l'bei'ore this Court.
5. appeal was admitted to consider the fol}---Qwir1g substantial queslion ofiawz "Whether ihefinding Qf the Tribunal that under Sections 8OHHC and} 80-18 »f;ar1_Vr;1l(§lz*':. claimed independently from the if':-£_om_é' held by the Tribunal, is con1r_a.ry i:O.ldw?"
6. In Order to 21IV.1.':3v\}-*:r this; qL1e.st§,d1'2._ it is necessary to refer to the I'€l€VaI'll_ statutory._pV1'0Vis;.Q1'1s';'. * réspeé: of profits and gdins. ' undertakings or enterprises'-. ll ":er:vg4'd§l_édl. in infrastructure deVvelolf>'m_ént.,V "ere; V' :
~{,1).';,.. _ amount of prqflts and gains of an '5".__l:.:1bier_l;_a_lcii.jg".or Qf an enterprise in the case of an A claimed and allowed under this section for tiny assessment. year, deduction to the extent of AA '*~._su.ch prqfils and gains shall not be allowed under 1 l any other provisions Qf l'l'iis Chapter under the heading "C.--Declnci.ions in respect' of ce.n_'ain"'~«.V"".,A incomes". and shall in no case exceed :_.
and gains of such eligible business of und.erlv_a~.k.ing:j_i.:Or.'_ enterprise, as the case may be. "
"80-IB. Deduction in rjespeet profits" V gains from certain ii1.(it2.s_triaI"
other than infrastrtiéttzie detveleprfaent undertakings. K it {1} . . . . . ..
sili3~secfie-nsr.fflillio .sec'tion 80~IA shall, so far as niay be, --~tfie«.eiligible business under this section)», * 2 80]-ILAI-IC. Deduction in respect of profits retained for t " ?:X,J2oft'l~b'1§iness. " « lllll .. » u(V assessee, being an Indian company tolr at {other than a company) resident in islerigaged in the business Qf export out of AA _ Iricivia' Qf any goods or merchandise to which this §;Vj:L/ section applies. there shall. in accordance wii:h;"'---- and subject to the provisions of this section. allowed, in computing the total income assessee. ta dedu.ction to the extent Qf__'1o:tofiist,"~ I referred t.o in sub--sect1'.on {EB}/""'d-e.riue'd A assessee from th.e export of s:ttth.'iV g'o.od~s_" or merchandise: "
Provided that tf the assessee;.._t5etng ofivan Export House CeVrt§ficateoVrt'or" lfradtngh '"Ho't"tse Certificate (hereaft'er"in ;;¢e;:t5;;tt;r1;:,gjer;~ed to as an Export House orAa..'!:.'rading :.Hottse,"'§gs"'t!1e case may be.) :ss'ug,é-- a cert?;j'tc*ate'vreferrggtfto in clause
(b). of" that in respect of the arni3_tint:<_oj" the ~expor.t_.Vt'ttrnaver spectf ted therein, the deduction ttrthcterathiB«"Sub-section is to be allowed to supporting"manufactttrer. then the amount' of V-'.i..dedtiction tn thecase of the assessee shalt be .red1:tced.<._h'y such amount which bears to the [total "'t"._pro/its~.de~rii:éd by the assessee from the export of A »..44t.radtt11gtQ'--oods, the same proportion as the amount;
of. export" turnover spectfted in the said certificate ' bears to the total export turnover of the assessee V' ' - in respect of such trading goods. 13/ r [3} For the purposes ofsub~section( I ),--
(a) where the export. out of India is of or merchandise manuf::tctured or proces_sed 5;;
the assessee, the profits derived _fr3ri1__fs1tc.¥fi export shall be the amount. ftuhicfr bears' "the profits of the business. the ElainetproportVion_::ts"
the export turnover in respect"-.oj'A Sucn bears to the total ttirncxgei' of ifiettihtsiness carried on by i,he:"assessee;"
Explanation (baa) to See-tior':i"V8tb)§9iHC:tVreactstiius:
"(baa) "profii's}o];thebiisiness"._means='the profits of the business as'eonipi;t-feed..tt;ftder the head "Profits and gains"'qf.«.biisines's..._or profession" as reduced by ' "{1} nin.et.yh any sum referred to in "clauses (i'iia}: {iiib} Jiiic). (iiid) and {iiie} qf AsectioI'i*~----28 or of any receipts by way of commission, interest. rent", or any other receipt of a similar ;-naittre included in such profits: and IO (2) the profits of any branch.
warehouse or any other est:'at)iist1rr__1e}'1'I.< 'T ;. é the assessee situate outside Ir1d.ia.""*,V L" M
7. Interpretixag these provisions, }i')"iV_isioi't2 the High Court: of Madhya Pracies'h_Vir1 the case ; PRODUCTS (P) LTD. -vs- coMn/£issm1vER"oi«f'iNCfoME TAX reported in (1 998) 229 1T1§jt'-1_2;?_ Ex-astheld as under:
"6. Sub-s.[9} prior to insertion gj"3.Q1;1 Fi;riahce« tNé_:2,1 1980 w.e.f. Is! Ap'fit,'fl~._I ihciitded only s.8OJ.
in respect of the profits estabtished industrial Ltniji€t'IO.ktngs hotel business in certain cases' not provision for reduction of the totat by the amount' of deduction acirnissibte to theiassessee under s. 8OHH. It was ".iarnendmer1t of the said s. 8OJ that the '--..¢proVUis".iont:=.of reducing gross total income by the 7arnoitrzeoj' deciuctiori under s. 80 HH of the Act by Ihrvictnce {No.2} Act'. 1977 w.e.f. .15? April 1978 was ,j,'tnserZ'€d. Sec. 801 was insertted in its present jorrn "tot; Finance {No.2} Act. .1980 itxef. 1*'? Aprit .1981 and 11 by the same Finance Act, s. 8OHH {9} was amended and the words 80-1 or" were inserted to make the said provision applciable to s. 804 as iigettfz However, no provision was made in s. {3tO;I,toJ; provide for deduction of the gross total deduction allowed under s. 8OI'IliJbr the"piz.rj§ose'V.of-- _ allowing deduction under s. 80;;l. lt:A4wotitti.'i seen that when s. 8OJ already ins.i,ib'--s.«. V of s. SOHH, an an1endn1e'nt"'~:bas rnade. inns.' the year 197? but no sLicfr:.._fiprovision-- rnade insofar as s. 80% was rconceine"d..._ ctearty contra-indicates that by itself meant that d_edu.cii.0n.d§tow--ed:_undver"'s.," 'SO!-{H is to 'gross income for granting the-_benefii' that matter, of s. 80-I. It was 'provided lfifs; itself by later amendment siicifprovistion was made in s. 80-1 even .tho;_agh..ignserltedonva later date. The provision of law _.is,..V_vthei*efoVre, clear that insojar as the benefit of s. concérried, it has to be granted on the gross A »..aVt:otat.in'co'rtrie and not on the income reduced by the atnoilnt allowed under s. SOHH.
V' "f7!,'1ie'lsaic1 jadgtilexat. has been elllhrrlied by the Apex Court. 12
8. The Apex Court. in the case of JOINT OF INCOME TAX --vs- MANDIDEEP ENG. 32. PKG,_A4_I!\fDi.i.:(P)_ LTD.., xi reported in (2007) 292 ITR 1 (SC)he'1if;ia;S"':i1n':C1e;=i: "
"Sections SOHH and 801.' are i.nCiependeni'V'A~ofVieoch; other and th.ere_fore, a I1€LL'3""3'1f'li§i!e£St',Tl'Cl['~ r.,ir1'iioean":.;laiin deduction under both the §3.e--ef;ionS"--»o_n. the 'gvrOsS'§i'oi'al income independei1i'£y;" _ 1 Division Bench Court. in the case of DEPUTY COMMXSSIOKERV OE ixics-o'1'\;_1E TAX --vs-- CHOLA TEXTILES (P) LT1).V,z_€¢%,z'jor.teci mi' (zoos) i304 ITR 256 and in the case of SCM in Ckezfiroiés ASSISTANT COMMISSIONER OF INCOME Tzix'-ife;§o::-:7éd.V.:r~i.i'(2'bo8) 304 ITR 319 has held that, relief under V iv _ Section"-1 8f).~'IA :Sh()u1d moi. be dedileied from profits and gains of
-A ioiiisinessvbefore Cornputing relief under Section SOHHC.
E3
10. i?ro:m the aforesaid statutory provisions and the decisions. it is clear that. while coniputing the dedti.c_'t--i_oi'--1V in respect of profits and gains from certain indtistriai:---unydertakings.b other than infrastructure deVeio_pme'_r_1t ;ind"en'.ai;1'i';gs,. -thee' assessee is entitled to a deduction from an amount equal to such percleritagelland for assessment: years as specified computing the total income of the [9] of Section 80~ IA, which is read int.o Secti--on_ subsection [13], makes it ui's"allowed under Section 80~IB, of profits and gains shall not be aliowed undei' any:'othei3"provisions of this Chapter under the heading "C.-"Detiuct'ioris._ in~~--respect' Q,f'ce.rte:tin incomes", and shall ~.in no_'°eas.e exceed"tip----pi'ofit.s and gains of such eligible business Vu'i1dert.aki'ng"*or enterprise, as the case may be. What the sub lseotioyn is, there cannot. be any double deduction granting~..V:dovu'ble benefit. The Act: also provides for a benefit. . aaitder Section 80}--it-IC. In order to get the benefit under Section l'80i:i1~:l.C. first. one has to calcu.lat.e the profits of business from s E 14 the export business. For that. 21 formula is prescribed under Section SOHPIC sub~seetio'n (3)[a) i.e., profits of business multiplied by export turnover divided by total t.urnove;j;"--._whieh gives the profits and gains from the €Xp0rt"'4:
Explanation {baa} to Section SOHHC shows, should not be taken into considerat:ion""'in.ca1r;u1stli1§4the.tjroVfitsl ' f it of the business. It is only those vtfhieli. excluded in calculating the profiisV_Aof bVusiIiess'-._1in;d'er~SectionS SOHHC. The deductionfunderxSeetiOn~~..80-lBl"isnot one such receipt, which is to be at the profits of business Computing the profits of business under should not be confused to the dedueiions under"Seeiion SOHHC. What sL1b--seot_irm {9} double deduction of profits. It does not refer to or do I in,o.o1np'uting the profits and gains under Section 'l.l'i~€:S'C4:l:8A(.lluCl',iO1'1 under Section 80-iA should be excluded 3u"'««___l'iTro111 theVV;Ai'rol'its of business. It is in this context, the Supreme '"CA<:i,_ib1~f"A_aI1d various High Courts have taken a View that Section 80?'i'Ii-1C and 80-lA and II?» are independent provisions. The VCl'y lo 15 VVOl'CliI1g of s1ib--seCtion [9] makes it clear. that. when declagtttions are given under 'ooth these provisions. care should be't.a_"l<:e"n to see that in no case it shall exceed the profits eligible business. In other words. a11.o.»ss_esse'e 1ss'eh:t»it1e:1l_'to the ~ to a benefit of deduction under both these should not exceed the p1*ofi_ts"'~~§ind "gairis suehm eligible "
business.
11. Therefore, the ;:("3'.fCl€i1" authofities holding that, in quantification of un~cle1*».:_Sefetion 801-IHC viz., the profits of"'the .c1¢.c1uctio:n under Section 80--IB is to be exeltv:_1eldltfz"on1 t.ot:tl'ineome is erroneous and therefore, the said osfindiriggslealnnot be sustained. Hence; we pass the afhpéal is allowed.
{2)"*--V%1'lii'c:"orders passed by all the three autlloriiies are , .t i it "hereby sets aside.
I6 (3) The si.ibstaniial question Qf law is ariswerecifirijkiijoiir of the assessee and againsi the revenue. {4} The assessee is en.ii!.ied ioftiie 'd:ed1ic1ior2sV:'ses_ clainied by him and accordingly,V".__II:1'eioriginat.ord--er..VVVqffV assessmeni is restOred.is_"sei.iir1g iheworder of ' assess meni passed under 147'. Qf. fl-flKg..}'"1C(~/ Parties to bear theifiswn i' V ' Sdfi Tudga Sd/~ JUDGE 'Is jKNM/fitehfi