High Court Of Madras
CIT vs. Macmillan India Ltd.
Section 32AB, 80HHC(3)(a)/(b)
Asst. Year 1989-90
P.D. Dinakaran & Mrs. Chitra Venkataraman, JJ.
Tax Case (Appeal) No. 194 of 2003
6th February, 2007
Counsel Appeared :
Mrs. Pushya Sitaraman, for the Appellant : R. Venkatanarayanan for M/s Subbaraya Iyer, for the Respondent
JUDGMENT
P.D. DINAKARAN, J. :
The above tax case appeal is directed against the order of the Tribunal in ITA No. 2299/Mad/2001 dt. 4th Oct., 2001, raising the following substantial questions of law :
“1. Whether, on the facts and circumstances of the case, the Tribunal was justified in law in directing relief under s. 80HHC(3)(a) instead of s. 80HHC(3)(b) of the IT Act, 1961 ?
2. Whether the Tribunal is justified in the facts and circumstances of the case in directing relief under s. 32AB even in respect of interest income which is different from business income ?”
The Revenue is the appellant. The assessment year involved in this appeal is 1989-90. The assessee is a company carrying on the business of printing and publication of books in India. It claimed the relief under s. 80HHC for the asst. yr. 1989-90. The AO noted that the company was having two units, one at Madras for local business and another at Bangalore for export business and, therefore computed the relief as per s. 80HHC(3)(b) and rejected the claim for calculation of the relief under s. 80HHC(3)(a). The assessee claimed the relief under s. 32AB including therein the interest income which is not part of business income. The AO excluded the interest income from the computation of relief under s. 32AB. On appeal at the instance of the assessee, the CIT(A) dismissed the appeal by his order dt. 31st July, 1992. However, on further appeal by the assessee, the Tribunal allowed the appeal holding that the Bangalore unit was a 100 per cent export-oriented unit and there was no need to bring in the ratio of export turnover to domestic turnover. Hence, the present appeal raising the above substantial questions of law.
The first question of law was decided in favour of the assessee and against the Revenue by this Court in CIT vs. Rathore Brothers (2002) 175 CTR (Mad) 60 : (2002) 254 ITR 656 (Mad), where the assessee had maintained separate accounts and maintained its trading receipts and P&L a/cs separately for export sales and domestic sales and produced sufficient material in support of all the necessary documents to show that the deduction claimed was entirely due to export, it was held that there was no warrant for disallowing any portion of the export earnings pro rata by invoking cl. (b) of sub-s. (3) of s. 80HHC of the IT Act, 1961, and the purpose of the clause was to disallow a part of the allowance under that section only when the entire deduction claimed could not be regarded as being relatable to exports.
4. With regard to the second question of law, it is settled that the calculations required to be made for the purpose of s. 32AB of the IT Act, 1961, are to commence with the figure representing the profits of the eligible business as computed in accordance with the requirements of Parts II and III of Sch. VI to the Companies Act, 1956. From that figure the amount equal to the depreciation computed in accordance with s. 32(1) of the IT Act, 1961, is to be deducted. After such deduction, that amount is to be increased by the aggregate of the amounts set out in cls. (i) to (vii) of s. 32AB (3). A sum equal to 20 per cent of that amount is to be allowed as a deduction under s. 32AB(1) (ii). The determination of the profit required to be made in accordance with Parts II and III of Sch. VI to the Companies Act is required to be made after taking into account all the activities of the assessee governed by the Companies Act, as the P&L a/c required to be drawn up by a company must necessarily reflect all the income and all the expenditures incurred by the company in that year. Sec. 32AB does not require the profit for the purpose of s. 32AB(1) to be calculated in accordance with the provisions of the IT Act. All that it provides is that the calculations should first be made in accordance with the Companies Act and the requirements more specifically required of Parts II and III of Sch. VI to the Companies Act. There is, therefore, no scope at all for importing the concept of different heads of income found in the IT Act, into the calculation of profit required to be made, vide Carborundum Universal Ltd. vs. CIT (2004) 187 CTR (Mad) 48 : (2004) 265 ITR 372 (Mad).
5. Applying the ratio laid down in the decisions referred to supra, we dismiss the appeal and decide the above substantial questions of law in favour of the assessee and against the Revenue. No costs.
[Citation : 295 ITR 67]
