High Court Of Bombay
Karimjee (P) Ltd. vs. DCIT & Anr.
Sections 80HHC, 260A
Asst. Year 1987-88
S.H. Kapadia & A.P. Shah, JJ.
IT Appeal No. 218 of 1999
14th February, 2000
J.D. Mistry i/b Harshad & Co., for the Appellant : R.V. Desai with J.P. Deodhar, for the Respondents
BY THE COURT :
This appeal has been filed by the assessee seeking to challenge the order of the Tribunal dt. 28th May, 1999, in IT Appeal No. 2915/Bom of 1991, in respect of the asst. yr. 1987-88.
2. The facts giving rise to this appeal are as follows : In the accounting year 1986-87, the assessee exported goods out of India. It was entitled to deduction under s. 80HHC. It was also required to create a reserve to the extent of deduction claimed under the said section. The assessee created a reserve of Rs. 60,90,000 and claimed deduction thereof. However, due to increase in the total income computed by the AO, the amount of profit also increased and deduction was computed and allowed at a higher amount of Rs. 70,08,819. On scrutiny of the records, the CIT issued notice that deduction of Rs. 70,08,819 was higher than the reserve created of Rs. 60,90,000 and the assessee could not have been allowed deduction of more than the amount of Rs. 60,90,000. Accordingly, the CIT issued a notice to the assessee for revision under s. 263 of the Act. The assessee objected to the exercise of powers under s. 263 of the Act by the CIT. By the said objection, it was urged on behalf of the assessee that under s. 80HHC nothing prevented the assessee to create extra reserve in case of deficiency under the abovecircumstances. It was urged that when the P&L a/c is prepared, the assessee cannot visualise to what extent the profit would increase and in that circumstance, the assessee was entitled to create this extra reserve. This argument was rejected by the Tribunal on the ground that on the facts of the present case it is clear that the assessee was given ample opportunity to create the extra reserve but it did not avail of the said opportunity to do so. On the facts, the Tribunal found that when the AO increased the amount of deduction, the assessee could have created the extra reserve. Secondly, when notice under s. 263 was given to the assessee by the CIT, such extra reserve could have been created. However, the appellant failed to do so. Under the above circumstances, on facts, without going into the question of the different phraseology used in s. 80HHC and other sections in the Act with regard to the expressions “amount claimed” and “amount allowed”, we are satisfied that in this appeal, on facts, no substantial question of law arises.
3. Before, concluding, we may mention that learned counsel for the assessee-appellant next contended that in view of the judgment of the Supreme Court in the case of Shri Shubhlaxmi Mills Ltd. vs. Addl. CIT (1989) 77 CTR (SC) 33 : (1989) 177 ITR 193 (SC) : TC 28R.524, it was not permissible to create extra reserve after the P&L a/c is finally drawn up. We do not find any merit in the said contention. All throughout it has been contended by the assessee in the present matter that s. 80HHC does not prevent the assessee from creating extra reserve in the above circumstances and that natural justice warranted that an opportunity be given to create extra reserve. The Tribunal found, on the facts, that this opportunity was available to the assessee but it did not avail of the said opportunity which is a pure finding of fact, as stated above. Secondly, the judgment of the Supreme Court in the case of Shri Shubhlaxmi Mills Ltd. vs. Addl. (supra), was in the context of development rebate and not under s. 80HHC and, therefore, it has no application to the facts of the present case. Under the above circumstances, the appeal stands dismissed. No order as to costs.
[Citation : 246 ITR 545]