High Court Of Madras
Universal Cold Storage Ltd. vs. DCIT
Section 3(a), 3(b), 80HHC(1)
Asst. Year 2000-01
K. Raviraja Pandian & M.M. Sundresh, JJ.
Tax Case (Appeal) No. 1504 of 2008
6th April, 2009
Counsel appeared :
J. Balachandran, for the Appellant : Mrs. Pushya Sitaraman, for the Respondent
JUDGMENT
K. Raviraja Pandian, J. :
The correctness of the order of the Tribunal dt. 22nd Feb., 2006, is put in issue in this appeal by the assessee by formulating the questions of law as follows :
“1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the appellant is not entitled to deduction under s. 80HHC without giving an opportunity to the appellant ?
2. Whether the Tribunal is correct in confirming the order of the respondent with reference to the computation of deduction under s. 80HHC even though the appellant had exported directly and also exported through certain export houses falling within the ambit of sub-s. (3A) of the Act ?”
2. The assessee is a company incorporated under the Companies Act. The assessee is engaged in the business of sea foods export. The relevant assessment year is 2000-01 and the corresponding previous year ended is as on 31st March, 2000. For the above assessment year, the assessee filed a return admitting “nil” income after claiming deduction under s. 80HHC. The return was processed under s. 143(1) and subsequently it was taken up for scrutiny assessment. While completing the assessment, the AO held that the assessee is not eligible for claiming deduction under s. 80HHC. According to him, after setting off the loss as computed under cl. (a) of sub-s. (3) against the profits computed under the proviso to sub-s. (3), has resulted in a negative figure and as such the deduction under s. 80HHC was withdrawn. On appeal before the CIT(A), it was submitted that the loss computed under cl. (a) of sub-s. (3) has to be ignored and the deduction under s. 80HHC has to be granted in its entirety on the profits computed under the proviso to sub-s. (3). Accepting the same, the CIT(A) allowed the appeal by holding that while computing deduction under s. 80HHC the loss has to be ignored. Aggrieved over the same, the Revenue has preferred a second appeal before the Tribunal by contending that as per Expln. (baa), 90 per cent of export incentives has to be excluded, if that is done, the profits would result in a negative figure and as such the assessee would not be eligible for deduction under s. 80HHC. The Tribunal decided the matter in favour of the Revenue. The correctness is canvassed in this appeal by formulating the above questions of law. Learned counsel for the appellant strenuously argued that the assessee was not given an opportunity to put forth his case before the Tribunal and the matter requires to be remitted to the AO so as to recompute the deduction. He further contended that there is no loss, if deduction is properly computed. It is only a profit earning concern and as such he is entitled to the benefit under s. 80HHC. On the contrary, learned counsel for the Revenue has submitted that as seen from the orders of the lower authorities, the profit is only a negative figure and in such circumstance, the decision of the Supreme Court would definitely come into play.
We have heard the contentions of both sides and perused the materials available on record. We are of the view that it would be useful to extract the relevant portion of the order of the CIT(A) which reads as follows : “3.1 The next ground is regarding computation of deduction under s. 80HHC. The AO found that the appellant has claimed deduction under s. 80HHC as under : Provident fund disallowed 4,92,707 Export duty payable 35,19,382 Donation and Pooja Expenses 3,14,698 Gratuity provision 2,27,865 45,54,652 132,22,722 Less : 90 per cent of other income included in profit and 895,05,435 loss account Profit under the head “Profits and gains from business 762,82,713 (- and profession” 80HHC on direct export turnover 80HHC on indirect export turnover 80HHC on DEPB income (8.69.84026 x 43.12.77.378/79.80.93.324) 470,04,832 The profit of the business as per Expln. (baa) to s. 80HHC for the year comes to Rs. (-) 7,62,82,713. The appellant ignored this negative figure and treated it as nil and claimed deduction under s. 80HHC on DEPB income at Rs. 4,70,04,832.” Before the Tribunal, the solitary issue raised was that the CIT(A) erred in holding that the relief under s. 80HHC should be allowed to the assessee by ignoring the loss in the export business and that the relief under s. 80HHC should be allowed on export incentives only. It is true that the appellant was not heard while passing the order by the Tribunal but it is not the mistake of the Tribunal. The Tribunal has recorded a finding that despite the notice issued, none was present on behalf of the assessee. From that finding, it is clear that it is the assessee who had not availed of the opportunity. The Tribunal thereafter proceeded to adjudicate the matter on the merits, after hearing the Department and on that basis, the matter was decided by the Tribunal on the merits, as the issue is squarely covered by the decision of the Supreme Court in IPCA Laboratory Ltd. vs. Dy. CIT (2004) 187 CTR (SC) 513 : (2004) 266 ITR 521 (SC) wherein after considering the provision of s. 80HHC of the IT Act the Supreme Court held that undoubtedly s. 80HHC has been incorporated in the IT Act, 1961, with a view to providing incentive for earning foreign exchange. Even though a liberal interpretation has to be given to such a provision the interpretation has to be as per the wording of the section. If the wording of the section is clear, then benefits which are not available cannot be conferred by ignoring or misinterpreting the words in the section.
A plain reading of s. 80HHC makes it clear that in arriving at profits earned from export of both self-manufactured goods and trading goods, the profits and losses in both trades have to be taken into consideration. If after such adjustments there is a positive profit the assessee would be entitled to deduction under s. 80HHC(1). If there is a loss the assessee would not be entitled to deduction. The word “profit” in sub-ss. (1) and (3)(a) and (b) of s. 80HHC means a positive profit. In other words, if there is a loss then no deduction would be available under sub-s. (1) or sub-s. (3)(a) or sub-s. (3)(b). In arriving at the figure of positive profit, both the profits and the losses will have to be considered. If the net figure is a positive profit then the assessee will be entitled to deduction; if the net figure is a loss then the assessee will not be entitled to deduction. Circular No. 636, dt. 31st Aug., 1992 [(1992) 107 CTR (St) 1] of the central board nowhere provides for negative profits. It also shows that only positive profits can be considered for purposes of deduction under s. 80HHC. In view of the above, we do not find any merit in this appeal. The tax case appeal is dismissed. No costs.
[Citation : 326 ITR 533]
