High Court Of Madras
CIT vs. Tractors And Farm Equipment Ltd.
Section 80HHC Expn. (baa)
Asst. Year 1991-92
K. Raviraja Pandian & Mrs. Chitra Venkataraman, JJ.
Tax Case (Appeal) No. 73 of 2004
27th August, 2007
Counsel appeared :
J. Narayanasamy, for the Appellant : R. Venkatnarayan for M/s Subbaraya Aiyar for the Respondent
JUDGMENT
K. Raviraja Pandian, J. :
This appeal is filed against the order of the Tribunal Madras “C” Bench made in IT Appeal No. 467/Mad/1995, dt. 30th April, 2003.
2. The material facts of the case are as follows :
3. The relevant asst. yr. is 1991-92. The assessee for the said assessment year filed its return and the AO, inter alia, disallowed the claim of the assessee pertaining to expenditure on farm, building tax, voluntary retirement scheme.The AO restricted the depreciation claim on machinery purchased from IDBI and also recomputed the deduction under s. 80HHC by excluding the cash compensatory support from the business profit. Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A), who allowed the appeal. Aggrieved by the order of the CIT(A), the Revenue filed an appeal before the Tribunal and the Tribunal dismissed the appeal.
4. We heard learned counsel on either side and perused the materials on record.
5. Learned counsel for the Revenue submitted that though three questions of law are formulated in the grounds of appeal, the one and only question of law required consideration by this Court is the third question of law. The other two questions of law are formulated as such but they are factual in nature, which require no consideration by this Court. The third question of law framed runs as under :
“Whether, on the facts and circumstances of the case, the Tribunal was right in observing that other receipts other than cash compensatory support have to be excluded from the business profit for the purpose of deduction under s. 80HHC ?”
6. With reference to the substantial question of law framed as above, both the CIT(A) as well as the Tribunal erred in relying on Expln. (baa) introduced to sub-s. (4C) of s. 80HHC which came to be inserted w.e.f. 1st April, 1992, under the Finance (No. 2) Act, 1991. It is apparent that Expln. (baa) so inserted w.e.f. 1st April, 1992, cannot be made applicable to the assessment year in question, which is 1991-92. Even the reasoning given by the Tribunal also would not go along with the first part of the reason. The reason reads as follows :
“Explanation (baa) to s. 80HHC of the Act, effective for the assessment year under appeal, states that 90 per cent, of the cash compensatory support would have to be deducted from the profits for working out the export profits. The net amount so determined would be the profit of the business which would have to be apportioned in the ratio of export turnover to the total turnover. This amount would then be added by 90 per cent, of the cash compensatory support. The sum total of these two figures would be the export profit for which deduction under s. 80HHC of the Act is available. The AO would recalculate the same on the above basis.”
7. In view of the inconsistent reason given and also applying a provision, which was not obtaining during the relevant period, we are of the view that the order of the Tribunal has to be set aside and the matter should be remitted back to the Tribunal for reconsideration of the issue in accordance with the statutory provision which was available during the relevant assessment period. Hence, by allowing the tax case appeal, the order of the Tribunal is hereby set aside and the matter is remitted back to the Tribunal to reconsider the issue as stated above.
[Citation : 326 ITR 313]
