High Court Of Kerala
CIT vs. ABAD Fisheries
Sections 80HHC, 147, 148
Asst. Year 1991-92
S. Sankarasubban & K. Padmanabhan Nair, JJ.
IT Appeal Nos. 91 of 1999 & 150 of 2000
28th August, 2002
Counsel Appeared
P.K.R. Menon & George K. George, for the Appellant : P. Balakrishnan, for the Respondent
JUDGMENT
S. SANKARASUBBAN, J. :
ITA No. 91 of 1999 is filed by the Revenue while ITA No. 150 of 2000 is filed by the assessee. Both these appeals are filed challenging the order passed by the Tribunal, Cochin Bench in ITA No. 607/Coch/1995. The relevant assessment year is 1991-92. The facts of the case are as follows:
2. The assessee is a partnership firm engaged in export of marine products. The assessee filed return of income for the asst. yr. 1991-92 on 27th March, 1992, declaring taxable income of Rs. 19,800 which was processed under s. 143(1)(a) of the IT Act (hereinafter referred to as ‘the Act’). Thereafter, the AO issued notice under s. 148 of the Act and the assessment was completed under s. 143(3) determining the total income of Rs. 17,58,230. While working out the deduction under s. 80HHC, the assessee has included export bills amounting to Rs. 11,10,377 which have not been realised before six months from the end of the assessment year. The Chief CIT has permitted the assessee to bring the sale proceeds to India is convertible foreign exchange upto 31st Dec., 1993. Since this amount was not been brought to India till date, the AO found that the profit included in the above sale proceeds is not eligible for deduction under s. 80HHC of the Act. The assessee received Rs. 15,23,037 as interest from fixed deposits with various banks and others The AO found that these deposits were made not during the course of business. Since the assessee is having surplus funds, those amounts were deposited and interest was earned by the firm. Hence, it took the view that the deposit cannot be included in the present profit. Thus, the assessment was made and the income from the business was determined at Rs. 5,69,05,619.
Against the above order, the assessee took up the matter in appeal. The contention before the appellate authority was that since under s. 143(1)(a) of the Act, return has been processed, there was assessment and since no order was passed under s. 143(3) of the Act, notice under s. 148 of the Act cannot be issued. This contention was negatived. So also, the appellate authority negatived the contention with regard to two amounts which were decided by the AO. Against the order of the appellate authority, the assessee preferred appeal before the Tribunal. The preliminary objection of the assessment was rejected. So also, the Tribunal rejected the contention regarding the two amounts, namely, Rs. 11,10,377 and Rs. 15,23,037. The Tribunal accepted the two other contentions of the assessee. First contention was that the AO was not correct in denying proportionate deduction under s. 80HHC of the Act on Rs. 11,10,377. The next ground raised before the Tribunal was that as the appellant was not able to realise the export proceeds of Rs. 11,10,377, the entire amount should have been allowed as deduction in the computation of the total income. The Tribunal gave a direction to the AO to exclude the amount while computing the income under the head ‘business’. The other ground addressed to the Tribunal was with regard to interest. The Tribunal held that in a case of regular assessment the interest is from the date of such assessment. Thus, the appeal was disposed of. In the appeal filed by the Revenue, the only question of law raised is whether on the facts and in
the circumstances of the case, and in computing the deduction under s. 80HHC of the IT Act, the sum of Rs.
11,10,377 including in the total turnover has to be excluded for the purpose of taking the denominator of total turnover ? In the appeal filed by the assessee eight questions of law are raised. But according to us, the following questions of law are relevant here : “(1) Whether, on the facts and in the circumstances of the case, was the Tribunal right in holding that the reopening of the assessment is valid, in a case where the assessment has been reopened under s. 147 since the time to issue a notice under s. 143(2) was over ? (2) Was the appellant entitled to benefit of s. 80HHC(2)(a) of the Act as regards extension of time-limit for bringing into India, the foreign exchange earned by the appellant ?”
The first question for consideration is whether the assessment was valid. The contention taken by the assessee is as follows : Sec. 143(1)(a) of the Act provides the procedure regarding assessment. Under s. 143(1)(a) of the Act, the officer can, after being satisfied about the return, send an intimation. This intimation shall be deemed to be a notice of demand issued under s. 156. The intimation may be either that the amount is due as per the return filed by the assessee or that refund is due to the assessee. In this case there was no proceeding under s. 143(2) or (3). The return was processed under s. 143(1)(a) of the Act. Then notice was issued under s. 148 and finally, the order was passed under s. 143(3) of the Act. The contention of the assessee is that since no order was passed under s. 143(3) of the Act before the notice was issued under s. 148, the procedure under s. 148 of the Act is invalid. We are not able to appreciate the contention of the learned counsel for the assessee.
6. Even though many decisions were cited before us, it is not necessary for us to refer to all those decisions. We refer to the decision in Mahanagar Telephone Nigam Ltd. vs. Chairman, CBDT & Anr. (2000) 162 CTR (Del) 554 : (2000) 246 ITR 173 (Del). In that decision, the Division Bench of the Delhi High Court held as follows : “The intimation under s. 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. The intimation under s. 143(1)(a) was deemed to be a notice of demand under s. 156 for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery of the amount indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. So long as the ingredients of s. 147 are fulfilled, the AO is free to initiate proceedings under s. 147 and failure to take steps under s. 143(3) will not render the AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had been issued.” We agree with the above reasoning and hold that the assessment is valid.
The next question for consideration is whether the amount derived as interest of Rs. 15,23,037 is to be treated as business income or not. The Tribunal held that it cannot be included as business income or profit under s. 80HHC of the Act. Deduction is allowable only on the profit derived by the assessee from the export of specified goods and merchandise. Income from deposits cannot be deemed to be profit of exports. In CIT vs. Jose Thomas (2002) 173 CTR (Ker) 336 : (2002) 253 ITR 553 (Ker), it has been held that interest on bank deposits does not constitute business income for the purpose of s. 80HHC of the Act. We agree with the above decision and hold that the amount is not deductible. Another amount for which deduction was sought was an amount of Rs. 11,10,377. This represents export sale proceeds which could not be brought to India in convertible foreign exchange. Here, as rightly held by the Tribunal, the amount was not brought to India within six months. In view of the above, we agree with the Tribunal and answer the point against the assessee. These are points which arise from the appeals filed by the assessee. So far as the appeal filed by the Department is concerned, the question of law that is raised is whether the Tribunal was correct in excluding Rs. 11,10,377 for the purpose of denominator of the total turnover. While dealing with the case of the assessee, it will be noticed that the amount was claimed as for deduction. But this could not be deducted because it was not brought to India within six months. This amount was not deducted from the profits. At the same time this amount was included in the total turnover as the denominator. Regarding this contention, the Tribunal held that since this does not form part of the profit, it cannot form part of the turnover also. According to us, since the amount could not be included in the profits, the same cannot also be included in the total turnover. We agree with the Tribunal. In the above view of the matter, both the IT Appeals are dismissed.
[Citation : 258 ITR 641]
