TaxTMI 
TaxTMI 
2007 (4) TMI 295
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....e to them, is part of business income of the assessee. 3. As regards to the above around, it was a common contention of both the parties that the issue is covered by the order dated 22.12. of the Hon'ble Jurisdictional High Court in TA No 94 of 2006 in the case of CIT Ludhiana v. Malwa Cotton Spinning Mills Ltd. Ludhiana 3.1 After considering the submissions of both the parties we are of the view that the issue is against the assessee and it favour of the department as per the judgment of Hon'ble Jurisdictional High Court in the afore referred to case. In the said case, the Hon'ble Jurisdictional High Court dismissed the provisions of Section 80 HHC and thereafter observed as under: Reference to the above provisions shows that the assessee is entitled to deduction to the extent of profits derived from export. Explanation (baa) appeneed to Clause 4 of Section 80 HHC of the Act defines the term "profits of the business" as profits and gains of business or profession reduced, inter-alia, by 90% of sun referred to in Clauses (ma) (iiib) (iiic), (iiid) and (iiie) of Section 28 of the Act or receipts of brokerage, commission, interest, rent charges or any other receipt of....
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....e, should not be directed to be excluded from the total turnover 2c) The ld CIT (A) has ailed to appreciate that keeping in view the decision of the Hon'ble Supreme Court in the case of Chowringhes Sales Bureau Ltd. v. CIT 87 ITR 542, sales tax is a part of trading receipts and, therefore, should be directed to be excluded from the total turnover. 4.1 As regards to this ground, it was common contention of both the parties that the issue is covered in favour of the assessee and against the department by the judgment of the Hon'ble Jurisdictional High Court in the case of CIT v. Vardhman Polytex Ltd. [2006] 154 Taxman 254 (Punj. & Har.). Considering the contention of both the parties, it is noticed that the issue had been in favour of the assessee and against the department in the afore referred case of Vardhman Polytex Ltd. In the said case, the Hon'ble Jurisdictional High Court has held as under: "As regards the contention of the counsel for the revenue that even under the sales tax laws, the turnover has been held to include amount of sales tax as well as excise duty, it will not be the right course to adopt interpretation given to a term under a different statute....
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....1988 so as to secure that the income of 100 per cent EOU shall be exempt from tax for a period of five consecutive assessment years falling with the block of eight assessment years. A reference was made to the departmental Circular No. 528, dated 16-12-1988. It was submitted that section 10B provided for the exemption of profits of 100 per cent EOU on their fulfilling the conditions mentioned in the said sections and did not restrict the deduction available to assessee under section 80HHC. It was accordingly submitted that the exemption under section 10B was an additional advantage being given to 100 per cent EOU which could go against the assessee also in case the 100 per cent EOU was having losses as those losses were not allowed to be set off against the profits of the assessee and were permanent loss as the income of 100 per cent EOU, whether profit or loss did not form part of total income of assessee. It was contended that if assessee was not allowed even deduction under section 80HHC in respect of export turnover of 100 per cent EOU, then he would have suffered two times, once when loss of 100 per cent EOU were not allowed to be set off and secondly, when the assessee was no....
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....d income or its turnover which was a part of its total income. The Assessing Officer also referred to the provisions contained in section 80AB of the Income-tax Act and the departmental Circular No. 684, dated 10-6-1994. On the basis of above circular, the Assessing Officer opined that deduction under section 80HHC was available only to such units which were not able to avail benefit of section 10B of the Income-tax Act. He was of the view that the income from the eligible 100 per cent EOU was fully exempt, and it therefore, did not enter the computation of the gross total income, once it did not enter the computation of gross total income, there was no question of allowing any deduction under section 80HHC in respect of assessee's export turnover from the said 100 per cent EOU in view of the provisions of section 80AB of the Income-tax Act. The Assessing Officer accordingly rejected the claim of the assessee in respect of deduction under section 80HHC for the 100 per cent EOU, named as Anant-I & Anant-II which were covered under section 10B and computed the deduction under section 80HHC by excluding the export turnover and total turnover of these units from the export turnove....
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....the deduction under sections 80-IA and 80HHC were available to the assessee together, then there was no reason that benefit under section 10B and under section 80HHC stood differently. It was further contended that the benefit under sections 10A, 10B, 80HH, 80HHA, 80-I and 80-IA stands on the same footing as the benefits under all these sections are given with reference to the profit derived by the industrial undertaking to which these sections apply and also they have similarly with reference to fulfilment of certain conditions before becoming eligible for claiming benefits under the said sections, that was the reason that the benefit under sections 80HH, 80HHA, 80J, 80-I, 80-IA and 80-IB have been denied to the industrial undertaking availing benefit under section 10A or 10B as per the provisions of section 10A(4)/10B(4) of the Income-tax Act. It was pointed out that section 80HHC had come into force with effect from 1-4-1983 but the same did not find any place in section 10A(4)/10B(4) till date whereas the said section had been suitably amended from time to time to include sections 80-IA and 80-IB in its ambit much after the introduction of section 80HHC. As regards to the Cir....
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....as also present before the ld. CIT(A) who relied upon the order of his predecessor and submitted that since the income of 100 per cent EOU had been exempted under section 10B, the turnover of the said unit should not have been considered for the computation of deduction under section 80HHC in view of section 80AB of the Income-tax Act, a reference was made to the Circular No. 684, dated 10-6-1994 issued by the CBDT. It was pointed out that in the assessment order, it was mentioned that the judgment of the ITAT, Delhi Bench 'A' on the same issue in the case of Jindal Exports (P.) Ltd. was not binding upon the Assessing Officer working outside that jurisdiction of the said Bench as it could not be treated as law of the land. 5.5 The ld. CIT(A) after considering the submissions of both the parties observed that the Circular No. 684, dated 10-6-1994 as relied by the Assessing Officer was clarificatory in nature which explained the position that the EOU exporting less than 75 per cent of their turnover would not be allowed exemption under section 10B but they could avail deduction under section 80HHC in that case. The ld. CIT(A) was of the view that the circular nowhere suggest....
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....ch in the case of Jindal Exports (P.) Ltd. was the only decision and that was to be followed, the ld. CIT(A) observed that no rebuttal had been received from the Assessing Officer of the aforesaid contention of the assessee. The ld. CIT(A) allowed the appeal of the assessee on this issue and directed the Assessing Officer to allow deduction under section 80HHC by including the turnover of the units on which exemption under section 10B had been claimed. The reliance was placed on the following decisions: Shrike Construction Equipment Ltd.'s case; Arvind Mills Ltd.'s case; Jindal Exports (P.) Ltd.'s case; Now, the department is in appeal. 6. Ld. DR for the revenue, strongly supported the order of Assessing Officer and further submitted that the turnover of the unit who was claiming deduction under section 10B of IT Act could not be mixed with another turnover to claim another benefit. He submitted that it cannot be the intention of the Legislature to allow double benefit on the same amount of export turnover. It was contended when the entire income of 100 per cent EOU had been claimed as exempt under section 10B, it was not eligible to claim any other deduction o....
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....t was related could not have been included in that turnover which was to be considered for deduction under section 80HHC. He pointed out that the definition of the turnover has been given in Explanation (b) below section 80HHC of the Income-tax Act and submitted that the sale on which the deduction had been claimed under section 10B could not be treated as export sale for the purpose of deduction under section 80HHC. Therefore, the Assessing Officer was justified in excluding such turnover from the export turnover while computing relief available to the assessee under section 80HHC. Reliance was placed on the judgment of Hon'ble Kerala High Court in the case of CIT v. Janatha Cashew Exporting Co. [2005] 278 ITR 327. He further submitted that in selecting out different interpretations, that interpretation should be adopted which is just reasonable sensible rather than that which is none of those things, it was argued that deduction under section 80HHC could not be allowed in respect of profit which was exempt under section 10B and did not form part of the total income of the assessee. Reliance was placed on the decision of ITAT, Delhi Bench 'B' in the case of Samtex Fash....
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....te of section 10B or vice versa. It was submitted that section 10B was inserted by Finance Bill No. 88 with effect from 1-4-1989 since in the existing provisions of section 10A of the Income-tax Act, five-year tax holiday was allowed to enable the undertaking manufacturing or producing articles or things in a free trade zone subject to certain conditions. But similar benefit was not available to the 100 per cent EOUs so, the amendment was brought to statute with a view to provide incentive for earning foreign exchange and the units were allowed to claim exemption from tax for a consecutive period of 5 years therefore the intention of the Legislature was to give turnover incentive other than those already available to the assessee who were earning foreign exchange for the country and that incentive was over and above the deduction under section 80HHC to the exporters and did not restrict the deduction available to the assessee under section 80HHC. It was argued that under section 80HHC a separate deduction is available to the assessee as a whole to its industrial undertakings and not unit wise as in the case of exemption under section 10B. It was submitted that turnover was to be ta....
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....hat if the deductions under sections 80HHE and 80HHC were available to the assessee together, then there was no reason that the benefits under sections 10A, 10B, 80HH, 80HHA, 80-I and 80-IA stood differently. According to him the benefits under sections 10A, 10B, 80HH, 80HHA, 80-IA and 80-IB stood on the same footing as the benefits under all those sections were given with reference to the profits derived by the industrial undertaking to which those sections applied and also they have similarity with reference to fulfilment of certain conditions before becoming eligible for claiming benefits under the said sections. That is why the benefit under sections 80HH, 80HHA, 80J, 80-IA and 80-IB had been denied to the industrial undertakings availing benefits under sections 10A and 10B as provisions of section 10A(4)/10B(4) of the Income-tax Act. It was submitted that section 80HHC which came into force with effect from 1-4-1983 did not find any place in section 10B(4) till date whereas the said section has been suitably amended from time to time to enable sections 80-IA and 80-IB in its ambit much after introduction of section 80HHC. Therefore, deduction under sections 80HHC and 10B can b....
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....f the above observation of Hon'ble Supreme Court, it is required that a statute or any enacting provision therein must be so construed as to make it effective and operative. Therefore, to overcome the present controversy which is subject-matter of our consideration it is necessary to discuss the provisions contained in section 80HHC, which deals with export business and reads as under: "Section 80HHC/80HHC.- (1) Where an assessee being an Indian company or a person (other than a company) resident in India is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed. In computing the total income of the assessee, [a deduction to the extent of profits, referred to in sub-section (1B)] derived by the assessee from the export of such goods or merchandise." From the above provisions, it is clear that the deduction under section 80HHC is to be allowed to the profits which has been derived by the assessee from the export of such goods or merchandise. Therefore, the export turnover which is to be considered while working out deduction under secti....