N.K. Saini, Accountant Member
1. This is an appeal by the assessee against the order of the ld CUT (A)-1. Ludhiana dated 21.3. 2002
2. Ground No. 1 raised in this appeal read as under:
1 a) The CIT(A)-1 on facts of the case as well as in law and erred in holding that for the purposes of computation of deduction under Section 80 HHC. 90% of interest income as to be reduced from the profits or gains of the business by adopting interest income at Rs. 283.64 lac instead of interest income of Rs. 688.40 lac.
b) The ld CIT (A) has failed to appreciate that amount of interest of Rs. 404.76, which is the difference of interest income of Rs. 668.40 lac as against Rs. 283.64 lac as considered of the assessee in us return of income, represented the interest received from customers on belated payments and also from suppliers on advance payments made to them, is part of business income of the assessee.
3. As regards to the above around, it was a common contention of both the parties that the issue is covered by the order dated 22.12. of the Hon'ble Jurisdictional High Court in TA No 94 of 2006 in the case of CIT Ludhiana v. Malwa Cotton Spinning Mills Ltd. Ludhiana
3.1 After considering the submissions of both the parties we are of the view that the issue is against the assessee and it favour of the department as per the judgment of Hon'ble Jurisdictional High Court in the afore referred to case. In the said case, the Hon'ble Jurisdictional High Court dismissed the provisions of Section 80 HHC and thereafter observed as under:
Reference to the above provisions shows that the assessee is entitled to deduction to the extent of profits derived from export. Explanation (baa) appeneed to Clause 4 of Section 80 HHC of the Act defines the term "profits of the business" as profits and gains of business or profession reduced, inter-alia, by 90% of sun referred to in Clauses (ma) (iiib) (iiic), (iiid) and (iiie) of Section 28 of the Act or receipts of brokerage, commission, interest, rent charges or any other receipt of similar nature included in such profits
Clause (baa) as referred to above, talks of procedures, as to how profits of business are to be computed It provides that in case, : incomes of kind including interest are included in the profits of business 90% thereof shall be reduced therefrom It does not make any distinction between the interest earned from Source 'A" or source ''B". Interest from wherever it is earned retains the character of interest Be it an interest from the customer on delayed payment of dues. it is not in dispute in the present case that interest income from the customer on delayed payment of dues is included in the business income and assessed as such.
What has been held in Guvinder Choudhary's case (supra) is that in the case of a contractor, interest received on delayed payment is a business in come and not income from other sources. Same view was taken by the Hon'ble Supreme Court in CIT v. B.N. Agarwala & Co. . In the present case also, interest received by
the assessee on delayed payment by the customer has been assessed as business income. It is at the time of determination of profits of business for the purpose of Clause (baa) as referred above, that the interest component added therein is to be excluded to give effect to the provisions in its true letter and spirit.
Accordingly, the substantial question of law referred to above is answered in favour of the revenue and against the assessee and it is held that even the interest which is received from the customer on account of delay in payment, even if assessed as business incomes but will have to be reduced therefrom for the purpose of calculation (or profits of business to calculate the relief admissible under Section 80 HHC of the Act
3.2 in view of the above, the issue raised by the department vide ground No. 1 is decided against the assessee and in favour of the department.
4. Ground no 2 of the appeal reads as under.
2a) The ld CIT (A) on facts and in law has erred in directing that or the purposes of working out the deduction under Section 80HHC excise Giles tax are to be excluded from the total turnover.
2b) The ld CIT (A) has tailed to appreciate that the excise duty gets attracted at the time when the goods are manufactured, and is a part of the total sale consideration reflected by the assessee in its sale bills and, therefore, should not be directed to be excluded from the total turnover
2c) The ld CIT (A) has ailed to appreciate that keeping in view the decision of the Hon'ble Supreme Court in the case of Chowringhes Sales Bureau Ltd. v. CIT 87 ITR 542, sales tax is a part of trading receipts and, therefore, should be directed to be excluded from the total turnover.
4.1 As regards to this ground, it was common contention of both the parties that the issue is covered in favour of the assessee and against the department by the judgment of the Hon'ble Jurisdictional High Court in the case of CIT v. Vardhman Polytex Ltd. reported at (2006) 203 CTR (P&H) 397. Considering the contention of both the parties, it is noticed that the issue had been avour of the assessee and against the department in the afore referred to case of Vardhman Polytex Ltd. In the said case, the Hon'ble Jurisdictional High Court has held as under:
As regards the contention of the counsel for the Revenue that even under the sales tax laws, the turnover has been held to include amount of sales tax as well as excise duty, it will not be the right course to adopt interpretation given to a term under a different statute enacted for a different object. Keeping in view the principles for interpretation of statutes the term "total turnover" used Section 80 HHC needs to be interpreted vis a vis the definition of "export turnover" with reference to other definitions as given in various clauses of Section 80 HHC. The interpretation under the If law need to be contextual and should not be with reference to the interpretation given to it under the sales tax law while interpreting the word 'total turnover under Section 80 HHC, Different High Courts interpretation involved in the present case is of a statute, having application throughout the country, there is no good reason to differ from the views taken by excluding the amount of sale tax and excise duty from the total turnovoer of the purposes of computation of deduction under Section 80 HHC.
5. The next issue vide ground No. 3 agitated by the department is whether the turnover of the unit whose; income is exempt under, Section 10B of the I.T. Act is to be included in the total turnover for the purposes of calculating the deduction under Section 80 HHC of the I.T. Act
5.1 Brief facts relating to this issue are that 'the assessee claimed deduction under Section 80HHC in respect of export turnover of its. various units including 100% Export Or ented Unit (EQU) in respect of which income had beer claimed as exempt under Section 10B. According to the Assessing Officer, the action of the assessee resulted into double deduction. Firstly, the entire income of the said unit form export sales had been claimed exempt under Section 10B Secondly, again the said export had been included in the total export turnover of the assessee for the purposes of Section 80HHC and these deductions had been claimed at a higher figure than actually admissible under Section 80HHC. The Assessing Officer asked the assessee to justify its clam of deduction under Section 80HHC and 10B of the I.T Act. The assessee submitted that Section 10B and 80HHC are two different sections intended to give different benefits to the eligible assesseess It was further stated that 100% export oriented undertakings were eligible only for deduction out of export profits under Section 80HHC and with a view of providing further incentive for earning foreign exchange, a new Section 10B had been inserted by the Finance Act, 1988 so as to secure that the income of 100% EQU shall be exempt from tax for a period of five consecutive assessment years falling within the block of eight assessment years. A reference was made to the departmental Circular No. 528 dated 16.12.1988. It was submitted that Section 10B provided for the exemption of profits of 100% EQU on their fulfilling the conditions mentioned in the said sections and did not restrict the deduction available to assessee under Section 80HHC. It was accordingly submitted that the exemption under Section 10B was an additional advantage being given to 100k EQU which could go against the assessee also in case the 100% EQU was having losses as those losses were not allowed to be set off against the profits of the assessee and were permanent loss as the income of 100% EQU, whether profit or loss, did not form part of total income of assessee it was contended that if assessee was not allowed even deduction under Section 80HHC in respect of export turnover of 100% EQU, then he would have suffered two times, once when loss of 100% EQU were not allowed to be set off and secondly. when the assesee was not allowed, deduction under Section 80HHC in respect of export turnover of 100% EQU and that could never be the intention of the legislature as it was not allowing additional benefit to the assessee but it was depriving him of the existing benefits available in form of deduction under Section 80HHC. It was also stated that expert turnover means the sales proceeds (received in or brought into India) by the assessee in convertible foreign exchange of any goods or merchandise to which this section apply and. which were exported out of India but did not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in Customs Act, 1962.
The reliance was placed on the decision of the ITAT, Delhi Bench in the case of Jindal Export Pvt. Ltd. v. CIT wherein issue was decided by placing reliance ion the judgment of the Hon'ble Supreme Court in the case of CIT v. Vegetable Products Limited reported at 88 ITR 192 (SC) and it was held that even if two reasonable constructions of the relevant provisions wore possible that construction which favours the assessee must be adopted. it was also held that deduction under Section 80HHC could not be denied to the assessee simply because it enjoyed tax holiday under Section 10A of the I.T. Act.
5.2 The Assessing Officer after considering the submissions of the assessee observed that the contention could not be accepted as valid and correct. He further observed that it could not have been the intention of the legislature to allow double benefit on the same amount of export turnover. According to him, 'When the entire income of 100% EQU had been claimed to be exempt under Section 10B, it was not eligible to claim any other deduction or allowance under any provision of the act, specially under Chapter VI-A.
According to the Assessing Officer, if the claim of the assessee was accepted in respect of Section 80HHC, then the assessee could also make claim under Section 80-1/80-IA as both are on the same footing. However, the assessee had not made any such claim under Section 80-I/80-IA in respect of units covered under Section 10B. The Assessing Officer held that if the income of any particular unit was totally exempt and not included in the total gross income, then no further benefits or deduction should have been allowed in respect of said income or its turnover which was a part of its total income.
The Assessing Officer also referred to the provisions contained in Section 80AB of the I.T. Act and the departmental Circular No. 684 dated 10.6 94 On the basis of above circular, the Assessing Officer opined that deduction under Section 80 HHC, was available only to such units which were not able to avail benefit of Section 10B of the I T. Act He was of the view that the income from the eligible 100% EQU was fully exempt, and it therefore, did not enter the computation of the gross total income, once it did not ante" the computation of gross total income, there was no question of allowing any deduction under Section 80HHC in respect of assessee's export turnover from the said 100% EQU in view of the provisions of Section 80AB of the I.T. Act. The Assessing Officer accordingly rejected the claim of the assessee in respect of 'deduction under Section 80HHC for the 100% EQU, named as Anant-I & Anant-II which were covered under Section 108 and computed the deduction under Section 80HHC by excluding the export turnover and total turnover of these units from the export turnover and total turnover of the assessee respectively.
5.3 The assessee carried the matter to the ld CIT (A) and submitted that Section 10B and Section 80HHC are two different sections intended to give different benefit to the eligible assessees on fulfilling., the conditions prescribed under those sections. It was further stated hat both those sections could not be considered as Substitute of each other as Section 10B was introduced to give further incentive to the assessee as had been explained in the memorandum explaining provisions of Finance Bill 1998 and also in Circular No 528 dated 16-12-1988 issued by CBDT. It was stated that there was no restriction anywhere in the Apt that the assessee can not even benefit under Section 100 and under Section 80HHC simultaneously It was further slated that wherever the intention of the legislature was to restrict the benefit in any manner the same was being specifically provided in me Act. It was contended that the deduction under Section 80HHC was available to the assessee as a whole and not to us industrial undertaking(s) in respect of its export turnover, the term which had been defined in Explanation to Section 80HHC, it was pointed out that in the said definition no exclusion of export turnover of 100 % EQU had been proved which the Assessing Officer was presuming on his own it was further stated that Section 80HHC. did not refer to the inclusion of any income of particular nature (i.e. actual export profits) in the gross total income as pre condition for allowance of deduction but referred to deduction being allowed on the basis of percentage of "Export Turnover" to "Total Turnover of the assessee with reference to profits of business being computed in accordance with the provisions of Section 80HHC it was emphasized that as the term "Export Turnover" Total Turnover" and "Profits of Business" had been clearly defined in Section 80HHC, there was no scope for any inclusion; or exclusion therein except for those provided in the definition themselves It was also stated that Section 80HHC is not controlled by Section 80AB. The reliance was placed on the following cases:
CIT v. Shrike Construction Equipment Ltd. 112 Taxman 311 (Bom.);
CIT v. Arvind Mills Ltd. 171 CTR 362 (Guj.);
Jindal Exports Pvt. Ltd. v. ACIT 31 ITD 217 (ITAT Delhi Bench 'A ).
It was contended that if the deduction under Section 80-IA and 80HHC were available to the assessee together, then there was no reason that benefit under Section 10B and, under Section 80HHC stood differently. It was further contended that the benefit under Section 10A, 10B, 80HH, 80HHA, 80-I and 80-IA stands on the same looting as the benefits under all these sections are given with reference to the profit derived by the industrial undertaking to which these sections apply and also they have similarity with reference to fulfilment of certain conditions before be coming eligible for claiming benefits under the said sections, that was the reason that the benefit under Section 80HH, 80HHA, 80J, 80-1, 80-IA & 80-IB have been denied to the industrial undertaking availing benefit under Section 10A or 10B as per the provisions of Section 10A(4)/10B (4) of the I.T. Act.
It was pointed out that Section 80 HHC had come into force with effect from 1.4.83 but the same did not find any place in Section 10A(4)/10B (4) till date whereas the said section had been suitably amended from time to time to include Section 80-IA and 80-IB in its ambit much after the introduction of Section 80HHC.
As regards to the Circular No 684 dated 10.6.94 on which reliance was placed by the Assessing officer, it was submitted that the said circular simply provided that the industrial undertakings which were not achieving export turnover atleast 75% of their total turnover would not be allowed exemption under Section 10B but they could a ail of the normal 100% deduction under Section 80HHC The industrial undertakings become eligible to claim exemption under Section 10B on fulfilment of various conditions inter-alia including a condition to achieve atleast an export turnover of 75% of their total turnover, in case the unit was not in a position to fulfil any of the conditions making it eligible for exemption under Section 10B then the assessee could not claim the additional incentive available under Section 10B but it could always claim the deduction available under Section 80HHC. It was stated that the golden rule is that word(s) of a statute must prima facie be given their ordinary meaning and when the words of a statute are clear, plain and unambiguous then effect should be give to that meaning respective of the sections as it is said that the words the selves best declare the intention of the law giver. The reliance was placed on the following case laws
CST v. Modi Sugar Mills Ltd. 12 STC 182 (SC);
Mangalore Chemicals & Fertilizers Ltd. v. DYCC Sup. 91 SC 621;
Oswal Fats & Oils v. State of Punjab in CWP No. 5726 of 2000 (P&H)
Hansraj Goverdan Dass v. H.S. Dave .
It was further stated that the order of the ITAT, Delhi Bench in the case of Jindal Exports Pvt. Ltd. v. ACIT 31 ITD 217 was on identical, factual and legal position and that order had attained the finality, so the lower authorities were required to accept that order as guiding principle. It was submitted that the decision of the ITAT had attained the finality, so it was not open for the department to accept decision in case of one assessee and raise controversy on the same issue in the case of another assessee. The reliance was placed on the following case laws:
UOI and Ors. v. S.P. Bharucha, N. Santosh Hegde and Y.K. Sabharwal, JJ 249 ITR 219 (SC);
UOI v. Satish Panalai Shah 249 ITR 221 (SC)
5.4 The Assessing Officer was also present before the ld CIT (A) who relied upon the order of his predecessor and submitted that since the income of 100% EQU had been exempted under Section 10B, the turnover of the said unit should not have been considered for the computation of deduction under Section 80HHC in view of Section 80 AB of the I.T. Act, a reference was made to the Circular No. 684 dated 10.6,94 issued by the CBDT. It was pointed out that in the assessment order, it was mentioned that the judgment of the ITAT Delhi Bench 'A' on the same issue in the case of Jindal Exports Pvt. v. ACIT 31 ITD 217 was not binding upon the Assessing Officer working outside that jurisdiction of the said Bench as it could not be treated as law of the land.
5.5 The ld CIT (A) after considering the submissions of both the parties observed that the Circular No. 684 dated 10.6.1994 as relied by me Assessing Officer was clarificatory in nature which explained the position that the EQU exporting less than 75% of their turnover would not be allowed exemption under Section 10B but they could avail deduction under Section 80HHC in that case. The ld CIT (A) was of the view that the circular nowhere suggested that exemption under Section 10B and deduction under Section 80HHC were to be allowed alternatively and mutually exclusive. According to him, the circular as well as Section 10B and Section 80HHC gave a conclusion that exemption under Section 10B was a separate and distinct incentive given to the assesses over and above the deduction under Section 80HHC and that both the sections could not be treated as alternate to each other as both the sections intended to give different benefits to the assessee on fulfilling the conditions of both the sections separately. He observed that the language of Section 10B and Section 80HHC also did not provide for any kind of restriction so as not to consider the export turnover of 100% EQU for computation of deduction under Section 80HHC. According to the ld CIT (A), the definition of "Export Turnover" to be considered for Section 80HHC was the sale proceeds received in or brought into India by assessed and it could not be presumed that the export turnover of an ECU owned by an assesses was to be excluded for the purposes of computation of deduction under Section 80HHC. The ld CIT (A) observed that the assesses had rightly pointed out the case of 100% deduction available under Section 30-1A to an industrial undertaking settled in the backward state and operating in the relevant assessment year, the undertaking in such a case was eligible to claim deduction under Section 80HHC in respect of export turnover of industrial under taking whose 100% profit had been allowed as deduction under Section 80-IA separately, The ld CIT (A) opined that the presumption of the Assessing Officer that the export turnover of an EQU whose profits were exempt under Section 10B of the Act must have been considered for determining the export turnover eligible for deduction under Section 80HHC was not having any legal base in the absence of any specific restriction in this regard.
Regarding the applicability of Section 80 AB with respect to Section 80HHC, the ld CIT (A) observed that Section 80HHC is self contained code in itself and is not subject to any other section. The reliance was placed on the following case laws:
CIT v. Shrike Construction Equipment Ltd. 112 Texman 31 1 (Bom);
CIT v. Arvind Mills Ltd. 171 CTR 362 (Guj.)
As regards to he contention of the assessee that the decision of the ITAT' Delhi Bench in the case of Jindal Exports Pvt. Ltd. v. ACIT was the only decision and that was to followed the id CIT (A) observed that no rebuttal had been received from the Assessing Officer of the aforesaid contention of the assessee the ld CIT (A) allowed the appeal of the assessee on this issue and directed the Assessing Officer 10 allow deduction under Section 80HHC by including the turnover of the units on which exemption under Section 10B had been claimed
The reliance was place a on the following decision
CIT v. Shrike Construction Equipment Ltd. 112 Taxman 311 (Bom)
CIT v. Arvind Mills Ltd. 171 CTR 362 (Guj.)
Jindal Exports Pvt. Ltd. v. ACIT 31 LTD 217 (ITAT Delhi Bench A')
Now, the department is in appeal
6. Ld. DR. for the revenue, strongly supported the Order of Assessing Officer and further submitted that me turn over of the unit who was claiming deduction Under Section 10B of IT Act, could not be mixed with another turn over to claim another benefit He submitted that it can not be the intention of the legislature to allow double benefit on the same amount of export turn over it was contended when the entire income of 100% EQU had been claimed as exempt Under Section 10B, it was not eligible to claim any other deduction or allowance under any other provision of IT Act specially under Chapter VIA. of IT Act. He referred to the provisions of Section 80 A B of IT Act and stated that the said provisions clearly states that the deduction under Chapter VI-A are to be made with reference to income included in the gross total income and if me income of any unit was not includes in gross total income men no deduction under this Chapter under the head "C-Deduction in or certain income would be allowed. He retied on the judgment of Hon'ble Supreme Court in the case of IPCA labourty Ltd. v. DCIT He further submitted that the L.d. CIT (A) has passed a non speaking order since he has not discussed how the various case laws relied on by me assessee were applicable to the facts of the instant case particularly the facts of the cases of CIT v. Shirke Construction Equipment Ltd. and Jindal Export Pvt. Ltd. (supra).
6.1 Ld. Sr D.R for the revenue suornmuo that CBDT issued circular No. 684 dated 10.6. 1994 had directed by keeping in view and to ensure that only those 100% EQUS should avail the tax exemption where me exports are substantial therefore Section 10B had been amended restricting the five year holiday to 100% EQUs which export at least 75% of their turn over and the units which are having export less than 75% of their turn over will not be allowed exemption Under Section 10B in respect of that preceding year. He submitted that the circular had made it clear that education Under Section 80 HHC was available only to such 100% EQUs which were not availing benefit Under Section 10B. He further submitted that once the profit had been excluded it was not to be considered again and in me present case since the deduction Under Section 10B had been claimed on the total profit relating to turn over of i00% EQUs so. mat turn over could not have been considered again to claim deduction Under Section 80 HHC of IT Act. He contended that objective of Sections 10B and 80 HHC are different so the turn over can not be clubbed for claiming deduction under the respective sections since the deduction is available under that section which is applicable He further stated that the profit responds upon the turn over and it the total profit was exempt as Under Section 10 B. the turn over to which the profit was related could not have been included in that turn over which was to be considered but deduction Under Section 80 HHC He pointed out that the definition of the turn over has been given in explanation (b) below Section 80 HHC of IT Act and submitted that the sale on which the deduction had been claimed Under Section 10B could not be treated as export sale for the purpose of deduction Under Section 80 HHC Therefore, the Assessing Officer was justified in excluding such turn over from the export turn over while computing relief available to me assessee Under Section 80 HHC Reliance was placed on the judgment of Hon'ble Kerala High Court in the case of CIT v. janatha Ceshew Exporting Co. . He further submitted that in selecting out different interpretations, that interpretation should be adopted which is just reasonable sensible rather than that which is none of those things it was argued that deduction Under Section 80 HHC could not be allowed in respect of profit which was exempt Under Section 10B and did not form part of the total income of the assessee Reliance was placed on the decision of ITAT Delhi bench 'B' in the case of Samtex Fashions Ltd. v. ACIT reported at (2005) 92 ITD 535 (Delhi) It was stated that a strict interpretation was required in cases of exempt ion Reliance was also placed on me following, case laws:
Lahaul Potato Growers Co. op. Marketing Processing Society Ltd. v. CIT
Novopan India Ltd. v. Collector of Central Excise
Dr (Mrs) Renuka Datla v. CIT
CIT v. N.C. Budhiraja & Co.
South Arcot District Co-op Supply & Marketing. Society Ltd. v. CIT
CIT v. Kisan Co-op Rice Mills Ltd.
CIT v. Mahasamund Kissan Co-op Rice Mill & Marketing Society Ltd.
Keshkal Co-op Marketing Society Ltd. v. CIT
CIT v. Ken la State Co-op Marketing Federation Ltd.
Dudhganga Vedganga S.S.K. Ltd. v. DCIT (1995) 54 ITD 97 (Pune)
6.2 It was further submitted that me Assessing Officer rightly took the view that the turn over relating to the profit for which deduction was claimed Under Section 10B was not to be considered in the turn over while calculating deduction Under Section 80 HHC and the Ld CIT(A) without assigning any cogent reason and without appreciating so true spirit of the legislature, arbitrarily allowed deduction to the assesses by including the turn over relating to profit claimed as exempt Under Section 10B. He therefore. prayed to set aside the order of ld CIT(a) Reliance was placed on the following case laws
Samtex fashions Ltd. v. ACIT (2005) 92 ITD 535 (Delhi)
Morinda Co-op Sugar Mills Ltd. v. DECIT (2001) 7b ITD 189 (Chandigarh)
CIT v. Janatha Cashew Exporting Co.
Raja Malwinder Singh v. Union of India and Anr.
7. In his rival submissions. Ld Counsel for the assesses reiterated the submissions made before the authorities below He further stated that the export turn over as a whole of the unit was to be considered while calculating the deduction Under Section 80 HHC, He explained that two units of the assessee namely Anant I and Anant claimed Reduction Under Section 10B of IT Act Ho further stated that Sections 10B, 80HHC are two different sections intending to give different benefit to the eligible assessee under the it Act it was contended that the scheme of Section 80HHC can not be considered as Substitute of Section 10B or vice versa It was submitted that Section 10B was inserted by Finance Bill No 88 w.e.f. 1.4.89 since in the existing provisions of Section 10A of IT Act. five year tax holiday was allowed to enable the undertaking manufacturing or producing articles or things in a free trade zone subject to certain conditions But similar benefit was not available to the 100% EQUs so, the amendment was brought to the statute with a view to provide incentive for earning foreign exchange and the units were allowed to claim exemption from tax for a -: consecutive period of 5 years. Therefore the intention Of the legislature was to give further incentive other than those already available to the assessee who were earning foreign exchange for the country and that incentive was over and above the deduction Under Section 80 HHC to the exporters and did not restrict the deduction available to the assessee Under Section 80 HHC. it was argued that under Section 80 HHC a separate deduction is available to the assessee as a whole to its industrial undertakings and not unitwise as in the case of exemption Under Section 10B it was submitted that turn over was to be taken into consideration for the purposes of deduction Under Section 80 HHC was the turn over of the business of whole of the units of the assessee and since the Assessing Officer has taken the aggregate of business income then the turn over should also have been take in respect of an the units of the business He referred to Section 80 H.H.E (5) of IT Act and submitted that what had not been covered in Section 10B, had been covered by Section 80 H.H.E(5) out there was no converse in Section 80 HHC of IT Act no submitted trial deduction Under Section 80 HHC was to be worked out on the basis of total turn over of me assessee and not considering the turn over which excluded export turn over for which deduction Under Section 100 was claimed Ho pointed out that as per Section 80 HHE (5) of IT Act. the deduction which has been claimed Under Section 80 H.H.E(1) that was not to be considered under any other provisions of IT Act for the same or any other Assessment year out it was not the condition Under Section 80 HHC He vehemently argued that there was no bar that the turn over of unit claiming deduction Under Section 10B was to be excluded from the total turn over of the assessee while calculating the deduction Under Section 60 HHC of IT Act He pointed out that Section 80 A.B also does not come into picture as mere was no dispute regarding profit earning ana deduction claimed bonafidely Under Section 10B as well as under Section 80 HHC. He also pointed out that the profit of the EQUs exempted Under Section 10B had not been considered as part of the profits of the business for the purpose of computing deduction Under Section 80 HHC since total income for the purpose of computing deduction Under Section 80 H.H C should not included the profits and gains of 100% EOus as per the provisions of Section 10B of IT Act However, deduction Under Section 80 HHC was available to the assessee as a whole and not to its industrial undertaking in respect of us export turn over which has been defined in explanation to Section 80 HHC. It was pointed out that in the said definition no exclusion of tax turn over of 100% EQUs has been provided He also submitted that the belief of the Assessing Officer that double deduction was allowed while granting deduction Under Section 10B and Section 8C HHC misplaced for the reason that if the deductions Under Section 80H.H.E & 80 HHC were available to the assessee together. then there was no reason that the benefits Under Sections 10A. 10B. 80HH, 80HHA, 80-I and 80-IA stood differently According to him the benefits Under Section 10/, 10B. 80HH, 80HHA, 80 IA and 80IB stood on the same footing as the benefits under all those sections were given with reference to the profits derived by the industrial undertaking to which those sections applied and also they have similarity with reference to fulfillment of certain conditions before becoming eligible for claiming benefits under the said sections That is why the benefit Under Sections 80HH, 80HHA. 80-J, 80IA, 80IB had been denied to the industrial undertakings availing benefits Under Section 10A, 10B as provisions of Section 10A(4)/10B(4) of IT Act It was submitted that Section 80 HHC which came into force w.e.f. 1. 4. 63 did not find any place in Section 10B(4) till date whereas the said-section has been suitably amended from time to time to enable Section 80 IA, 8C IB in its ambit much after introduction of Section 80 HHC Therefore, deduction Under Section 80HHC and 10B can be claimed separately in respect of same unit. Reliance was placed on the following case laws:
CIT v. Shirek Construction Equipments Ltd. 112 Taxman 311 (Bom)
CIT v. Arvind Mills Ltd. 171 CTR 312 (Guj)
Jindal Export Pvt. Ltd. v. ACIT 31 ITD 217 (Delhi)
CST v. Modi Sugar Mills Ltd. 12 SIC 182 (SC) Baidyanatn -Ayurved Bhawan (Pvt.) Ltd. v. Excise Commissioner 28 CR 590
Manglore Chemicats & Fertilizers Ltd. v. DYCCT Supp 91 SC 621
Hasraj Goverdan Dassa v. H.S. Dave
Gujarat Stale fertilizers Co. v. Collector of Central Excise
Union of India and Ors. v. S/P Bharucha N Santosh Hegde and Y.K. Sabharwal J.J 249 ITR 219 (S C)
Union of India v. Satish Panalal Shan 249 ITR 221 (S.C)
International Research Park Laboratories Ltd. v. ACIT (1994) 50 ITD 37 (Delhi) (SB)
P.R. Parbhakar v. CIT
Peart Potymers Ltd. v. DCIT (2002) 80 ITD 1 [Delhi)(SB)
CIT v. Vadital Lallubhai Vikrant Tyres Ltd. v.
8. We have considered the rival contentions and carefully gone through me material available on record. In the present case the only controversy relates to deduction Under Section 80 HHC and the relevant question to be adjudicated is whether - turn over of an ECU for which deduction Under Section 10 IB has been claimed, can be included in the turnover for claiming deduction Under Section 80 HHC, 8.1 Hon'ble Apex Court in the case of Saibaba (D) v. Bar Council of India has observed as under:
In selecting out of different interpretations the court will adopt that which is just, reasonable and sensible rather than that which is none of those things' as it may be presumed that the Legislature should have used the work in that interpretation which least offends our sense of justice.
The courts strongly lean against a construction which reduces the statute to a futility A statute or any enacting provision therein must be so construed as to make it effective and operative on the principle expressed in the maxim (sic) res (sic) valeat quam parat
If the language used is capable of bearing more than one construction, in selecting the true meaning regard must be had to me consequences resulting from adopting the alternative constructions A construction that results, in hardship. serious inconvenience, injustice absurdity or anomaly or which leads to inconsistency or uncertainty and friction in the system which the statute purports to regulate has to be rejected and preference should be given to that construction which avoids such results.
In view of the above observation of Hon'ble Supreme Court, it is required that a statute or any enacting provision therein must be so construed as to make it effective and operative Therefore, to overcome me present controversy which is subject matter or our consideration, it is necessary to discuss the provisions contained in Section 80HHC. which deals with export business and read as under:
80 HHC - 80HHC. [(1) Where an assessee being an Indian company or a person (other than a company) resident in India is engaged in the business of export out of India of any goods or merchandise to which this section applies. there shall, in accordance with and subject to the provisions of this section be allowed in computing the total income of the assessee, [a deduction to the extern of profits, referred to in Sub-section (1B) derived by the assessee from the export of such goods or merchandise:
From the above provisions it is clear that the deduction Under Section 80 HHC is to be allowed to the pro its which has been derived by me assessee from the export of such goods or merchandise Therefore, the export turn over which is to be considered while working out deduction Under Section 80 HHC is that turn over which is only and only relevant for earning me profit / income from export it has been admitted by too assessee that the profit for which deduction Under Section 10B has been claimed was not included in the profit to claim deduction Under Section 30 HHC. Therefore the turn over which was related to the profit eligible or deduction Under Section 10B. can also not be included in the turn over considered for the purpose of deduction Under Section 80 HHC.
8.1 Hon'ble Kerala High Court in the case of CIT v. Janatna Cashew Exporting Co. (Supra) has Hold that -
since the sales turn over of sales made by the assessee to the export house did not answer thy description of export turnover the Assessing Officer rightly excluded such turn over from export turnover while computing relief available to me assessee under the proviso 10 Section 80 HHC(3).
In the instant case also the turn over of sales made by the assessee for which deduction Under Section 10B has been claimed did not answer me description of turnover eligible for deduction Under Section 80 HHC. therefore. the Assessing Officer right excluded such turn over from export turnover while computing relief available to me assesses Under Section 80 HHC of IT Act
8.2 It is also relevant to point out that as our Clause (iii) of Sub-section (6) of Section 10B no deduction shall be allowed Under Section 80HH or 80HHA, 80IB of 80 IA in relation to the profits and gains of the undertaking who claimed deduction Under Section 10B of IT Act Therefore, to ensure that no assessee should claim any benefit over and above the benefits Under Section 10B in respect of same industrial undertaking the said provision has indicated separately and exclusively to clear that double deduction should not be claimed for the same income Moreover for claiming the deduction under the said sections condition to make the export is not mandatory while claiming the deduction Under Section 10B and 80 HHC of IT Act it is mandatory that the income to be derived from export. In our opinion, non mentioning Section 60 HHC in the aforesaid Clause (iii) of Sub-section (6) of Section 10B will not entitle the assessee to claim deduction Under Section 80 HHC for the reason that the deduction Under Section 80 HHC is otherwise also not available to the units claiming exemption Under Section 100, because the profits of the unit claiming deduction Under Section 10B is not to be included with the profits eligible for deduction Under Section 80 HHC and since in such type of industrial undertaking no eligible profit can be derived without having export turnover, therefore export turnover which earned profit eligible for deduction Under Section 10B should also not be-included in the turnover to claim deduction Under Section 80 HHC of IT Act.
8.3 In view of the above discussion, we set aside the order of Ld. CIT (A on this issue and restore that of the Assessing Officer.
9. In the result, the appeal of the department is partly allowed.
(Order announced in the open Court on 27.4.2007)