2015 (12) TMI 973 - HC - Income Tax

High Court affirms Tribunal's decision, denies deductions under Section 80HHC,

The High Court upheld the Tribunal's decision in the case, dismissing the appeal and ruling against the assessee on all issues. The Tribunal's findings ... Excess wastage claimed - Tribunal had disallowed 50% of the wastage claimed by the assessee - Held that:- It is a question of fact adjudicated by the Tribunal which is a plausible view. In such circumstances, no interference is called for with the findings recorded by the Tribunal as held that we are in agreement with the stand of the CIT(A), still since the survey was made on 5.3.2004 and assessee made the claim of 22689.656 kg. as wastage the daily wastage, on average comes to 66.734 kgs. whereas during the impugned period (25 days) assessee showed the wastage of 8897.267 klgs. meaning thereby average daily wastage of 355.89 kgs. This increase is not supported by any commensurate increase in the production by the assessee. At the same time, the claim of the assessee also simply cannot be brushed aside, therefore, keeping in view the overall facts and circumstances, we reduce the addition to 50% of the total i.e. ₹ 10,06,000/- in place of ₹ 20,12,092/- made by the learned Assessing Officer, because firstly, upto 5.3.2004 no disallowance was made by the learned Assessing Officer himself, and secondly the steep increase in the wastage is not supported by any evidence like consequential increase in production etc. Lastly,if not the least, the Assessing Officer has not made blind addition and before 5.3.2004 it was allowed - Decided against assessee Deduction under Section 80HHC - Held that:- Deduction under Section 80HHC of the Act is available only on showing fulfilment of conditions specified therein and there could be no presumption that surrender made on account of unexplained stocks represented export income. The assessee was unable to give any explanation. There could be no presumption that additional amount surrendered represented income from exports. Deduction under Section 80HHC of the Act can be claimed only on showing facts which made the assessee eligible for the deduction. The burden to prove these facts was on the assessee and not on the Revenue. - Decided against assesseee Deduction on account of interest received on FDRs under Section 80HHC - Held that:- Tribunal while rejecting the aforesaid contention recorded as on the plea that in the impugned order on the ground that the learned CIT(A) erred in not allowing the deduction as claimed under section 80HHC of the Act. The claim of the assessee is that the deduction of ₹ 1,07,941/- under Section 80HHC has been wrongly worked out because the Assessing officer included 90% of the interest receipts and also reduced 90% of ₹ 20 lakhs being the sum surrendered at the time of survey from the profits of the business for computing the deduction. On appeal, the submission of the assessee is that the interest was received by the assessee on FDRs which was maintained for the purpose of taking limits from the bank. For the amounts surrendered by the assessee, it was claimed that it was also a part of business income. - Decided against assesseee Issues Involved:1. Partial relief on account of wastage.2. Deduction under Section 80HHC on the surrendered amount.3. Deduction under Section 80HHC on interest received on FDRs.Detailed Analysis:1. Partial Relief on Account of Wastage:The appellant-assessee contested the partial relief granted by the ITAT, which confirmed 50% of the addition deleted by the CIT(A) on account of wastage. The Tribunal noted a significant discrepancy in the wastage reported by the assessee, where the average wastage per day for the first 340 days was 66.734 kgs, but it surged to 355.89 kgs per day in the last 25 days of the financial year. The Tribunal found no satisfactory explanation for this increase and concluded that the excess wastage was not supported by any commensurate increase in production. The Tribunal reduced the addition to 50% of the total, considering the facts and circumstances of the case. The High Court upheld this view, stating that it was a plausible finding of fact by the Tribunal and did not warrant interference.2. Deduction under Section 80HHC on the Surrendered Amount:The assessee claimed a deduction under Section 80HHC of the Act on the surrendered amount of Rs. 20 lakhs, arguing it was utilized for business purposes. However, the Tribunal found that the surrendered amount was not assessed under the head 'income from business or profession' and thus was not available for computing the deduction under Section 80HHC. The Tribunal's decision was supported by precedents, including the case of National Legguard Works, where it was held that there could be no presumption that surrendered amounts represented export income. The High Court agreed with the Tribunal, noting that the burden of proof was on the assessee to show eligibility for the deduction, which was not met.3. Deduction under Section 80HHC on Interest Received on FDRs:The assessee also claimed a deduction under Section 80HHC on interest income received on FDRs maintained for business purposes. The Tribunal rejected this claim, stating that the interest income was not directly related to the export business and thus could not be included for deduction under Section 80HHC. The High Court found no illegality or perversity in the Tribunal's finding and upheld the decision.Conclusion:The High Court dismissed the appeal, answering all questions against the assessee. The Tribunal's findings on the issues of wastage, surrendered amount, and interest income were upheld, confirming that no deduction under Section 80HHC was permissible in the circumstances presented by the assessee.