High Court Of Delhi
CIT vs. General Sales Ltd.
Section 80HHC
Asst. Year 1992-93
Madan B. Lokur & Vipin Sanghi, JJ.
IT Appeal No. 231 of 2005
7th September, 2006
Counsel Appeared :
R.D. Jolly with Rajeev Awasthy, for the Appellant : V.P. Gupta with Basant Kumar, for the Respondent
ORDER
By the court :
The Revenue is aggrieved by an order dt. 12th June, 2003 passed by the Tribunal, Delhi Bench ‘A’ in ITA No. 519/Del/1997 relevant for the asst. yr. 1992-93. Along with this appeal, the Tribunal also heard ITA No. 2640/Del/1997 and disposed of both of them by a common order but we are concerned, for the present, with ITA No. 519/Del/1997.
2. The only question that has arisen in this case is with regard to short deduction of the assessee’s claim under s. 80HHC of the IT Act.
3. According to the assessee, it was carrying on the business of export of goods as a trading activity. In addition to this it also claims that it had some other incomes, such as, from receipt of dividends, foreign profits, miscellaneous receipts, receipt from local sales and hotel division. It appears that the turnover of the assessee was about Rs. 39 crores from exports and from local sales in its trading activity. The local sales from trading activity were to the extent of Rs. 5,000 only and the export turnover out of the total turnover was 99.98 per cent. Of course, this does not include the income that the assessee claimed from its other activities.
4. The assessee also claims that it maintained separate books of account in respect of the export activities and also maintained separate books of account in respect of direct cost and indirect cost relating to the export activities as well as to the other activities.
5. It appears that the AO did not take the other activities of the assessee into consideration and found that the direct cost and indirect cost claimed by the assessee in respect of its local sales were disproportionately high. According to him the assessee was loading the indirect costs pertaining to the export business on the business for local sales with a view to claim higher deduction under s. 80HHC of the Act. He, therefore, disallowed the deduction as claimed by the assessee under s. 80HHC of the Act.
6. In appeal, the CIT(A) rejected the contentions of the assessee which led the assessee to file an appeal before the Tribunal.
7. The Tribunal considered the entire facts of the case and recorded the statement made at the Bar by learned counsel for the assessee that the assessee was maintaining separate books of account in respect of its export trade. The Tribunal then held that the expenses attributable to the export business would be identifiable and only such expenses could be taken into consideration for determining the direct cost and the indirect cost incurred by the assessee towards its export activities for calculating the deduction under s. 80HHC of the Act. The Tribunal also considered the alternative situation that in the event the assessee is not maintaining separate books of account, then the expenses would have to be taken in the same ratio in which the export turnover was made by the assessee. Since the facts did not appear to be clear, the Tribunal set aside the order of the CIT(A) and remanded the matter back to the AO to determine the factual position regarding the maintenance of separate books of account in respect of the export activities and thereafter, depending on the finding, proceed to apply the law as laid down under s. 80HHC of the Act to determine as to what extent the assessee’s claim of deduction is made out.
8. We are of the view that this direction given by the Tribunal is unexceptionable. The AO has to first determine whether the assessee is maintaining separate books of account or not, and depending upon his conclusion, the AO would then have to apply the law as laid down under s. 80HHC of the Act. Obviously, the AO will evaluate the books of account and determine how much of the expenditure, direct and indirect, is attributable to the export activities of the assessee.
9. We are of the view that the conclusion of the Tribunal does not raise any substantial question of law which merits our consideration. Accordingly the appeal is dismissed.
[Citation : 288 ITR 486]
