High Court Of Kerala
CIT vs. Parry Agro Industries Ltd.
Section 80HHC(3)
Asst. Year 1989-90
V.P. Mohan Kumar & K.K. Denesan, JJ.
IT Appeal No. 103 of 1999
13th March, 2002
Counsel Appeared
P.K.R. Menon, for the Appellant : Jayasanker, Antony Dominic & Anil D. Nair, for the Respondent
JUDGMENT
V.P. MOHAN KUMAR, J. :
The appeal is against the order passed in ITA No. 680/Coch/1994, by the Tribunal, Cochin Bench. The assessment relates to the year 1989-90. The assessee admittedly is a company substantially interested and is deriving income from plantations. It holds tea estates at Anamalai in South India as also Deckiajuli in the State of Assam. It claimed deduction under s. 80HHC of the IT Act for the relevant asst. yr. 1989-90. The contention was that as the export profit is clearly detectable from the accounts maintained by the assessee, the procedure laid down under s. 80HHC(3) need not be followed. The AO was of the view that for the computation of the relief, the only basis should be to follow the rule in s. 80HHC(3) after fixing the export turnover out of the total turnover, i.e., the turnover of tea from all the estates, including the estates in South India. On that basis the assessment was made and annexure A is the assessment order. The matter was taken up in appeal by the assessee before the CIT(A) and the CIT(A) held that the computation of the AO was in accordance with the provisions of s. 80HHC and that the appeal be partly allowed. Annexure “B” is the order. The assessee took up the matter in further appeal. The Tribunal set aside the orders and called upon the AO to reexamine whether the business in Assam tea consists exclusively of export and in that case compute the profit under s. 80HHC(3)(a) and if it is not exclusively out of export trade, to apply s. 80HHC(3)(b). It held that in computing the deduction under s. 80HHC the total turnover of the entire business including the Assam tea estates should be considered and the Tribunal restricted the turnover only to the Assam tea estate, if the entire sales are export oriented from the said unit.
2. Aggrieved by the said order the Revenue has come up in appeal. The following substantial questions of law have been framed for consideration of this Court :
“1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the profit derived from export is to be computed for the purpose of the relief under s. 80HHC in accordance with cl. (a) of sub-s. (3) on Assam tea without taking into account the turnover of tea from other estates, provided the business there is exclusively of export of tea?
Whether, on the facts and in the circumstances of the case and on an interpretation of s. 80HHC of the IT Act, should not the Tribunal have taken the total turnover of the entire business including the Assam Tea Estate since as regards the tea business is concerned, the business as a whole in respect of all tea estates has to be taken together and is not the direction to the assessing authority accordingly wrong and unwarranted ?
We have heard Mr. P.K.R. Menon, learned counsel for the Revenue, and Mr. Jayasanker, learned counsel for the assessee.
The material part of s. 80HHC(3) as it stood then reads as under : “For the purposes of sub-s. (1), profits derived from the export of goods or merchandise out of India shall be,— (a) in a case where the business carried on by the assessee consists exclusively of the export out of India of the goods or merchandise to which this section applies, the profits of the business as computed under the head ‘Profits and gains of business or profession’; (b) in a case where the business carried on by the assessee does not consist exclusively of the export out of India of the goods or merchandise to which this section applies, the amount which bears to the profits of the business (as computed under the head ‘Profits and gains of business or profession’) the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee.” What s. 80HHC provides is that in a case where the assessee is engaged wholly in the business of export out of India of any goods, the deduction granted should be in accordance with s. 80HHC (1). The stress under sub-s. (1) is that it is attracted only if the profits are derived by the assessee exclusively from exports and not by indulging in any domestic trade. As such sub-s. (1) is confined to and specifically relates to export trade. Sub-s. (3) thereof indicates the manner of computation of the profits derived from the export of goods out of India where the assessee indulges in domestic trade as well. Clause (a) may not be applied here as admittedly the assessee is carrying on domestic trade as also export. The procedure in cl. (b) would take when there is export as well as domestic trade.
The argument of Mr. Jayasanker is that in this case where the profit derived by the assessee by export business is separately maintained and separately ascertained there is no need to have recourse to s. 80HHC(3)(a) and (b). In such a situation s. 8OHHC(1) can be applied in exclusion of sub- s. (3). Therefore, there was no need for invoking sub-s. (3)(b) for finding out what should be the deduction under s. 80HHC. Per contra, Mr. Menon, learned counsel for the Revenue, submits that this is the only provision that is provided under s. 80HHC(1) of the Act. The mode of calculation pleaded by the assessee is not contemplated or provided by the statute.
We notice from sub-s. (3) that it points by words “for the purposes of sub-s. (1), profits derived from the export of goods or merchandise out of India shall be . . . . . .”. It means that the section wholly and completely applies to s. 80HHC(1). What is mentioned in sub-s. (1) is “where an assessee … is engaged in the business of export out of India of any goods or merchandise to which the said section applies, there shall, in accordance with and subject to the provisions of the said section, be allowed, a deduction of the profits derived by the assessee from the export of such goods or merchandise.”
8. This section disables the permutation of the profits irrespective of the fact whether the assessee maintains exclusively an account with respect to export business while he carries on business which is a mixture of export as also domestic trade. There is no category of persons who have separate export business even when trading in domestic business. If we are to understand the argument of Mr. Jayasanker and hold that cases where the profits derived by the assessee from the export carried on by him can be separately grouped and in such case one need not have recourse to either cl. (a) or (b) of subs. (3) then it would amount to redrawing the Act by adding certain words to sub-s. (3). Then sub-s. (1) will have to be rewritten as under : “where an assessee is engaged in the business of export out of India of any goods or merchandise to which the said section applies and it is ascertainable the income from such export trade then . . .”.
9. We are not empowered to rewrite sub-s. (3) as contended by learned counsel. We cannot apply our own interpretation which is not contemplated under the statute. The manner as to how to ascertain the profit from export of goods is only as indicated in sub-s. (3) ; we cannot, by means of interpretation introduce a third category. Besides this is not a case where learned counsel would argue that it is impossible to utilise sub-s. (3)(b) and ascertain the profits. On the contrary, the argument of counsel is that the exercise of invoking sub-s. (3) is not necessary as straitjacket method is possible in this case. We notice from sub-s. (3)(b) that the formula for ascertainment would be that “the entire business including profits of the entire business multiplied by export turnover divided by entire business turnover including export and non-export.” This is the formula utilised for the assessment to be made. If this be so, the order of the Tribunal requires to be modified and fresh assessment order has to be made by the AO employing the above formula. The order is accordingly modified.
[Citation : 257 ITR 41]
