TaxTMI 
TaxTMI 
2012 (8) TMI 460
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....er referred to as "the Act"), (ii) the inclusion of interest received from Fixed Deposits as "business income" entitled to be deducted under Section 32AB and (iii) the disallowance under Section 37(3) of the income claimed as expenditure to accommodate touring employees of the Company. One solitary question also arises for the year 1989-90, which we shall refer to shortly. 3. The assessee is a Company, mainly engaged in manufacture and sale of tea. It owns tea estates at Anamalai, South India and Deckiajuli in the State of Assam. The assessee has been assessed for income of the business carried on at both these places by the respondent. For the year 1989-90 while completing the assessment under Section 143(2), the assessing officer made some disallowances. We are concerned only with the disallowances referred to above under Section 80HHC, Section 32AB and Section 37(3) of the Act. The major disallowance was with respect to the claim under Section 80HHC. 4. Section 80HHC provides for a deduction of the profits derived on export by an assessee, being an Indian company or person resident in India engaged in the business of export out of India of any goods or merchandise. In computin....
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.... employees and others on tour, in providing them food and accommodation was disallowed as an expenditure clearly coming within the purview of Section 37(3) of the Act. 8. On appeal by the assessee, the first appellate authority allowed the expenditure incurred for accommodation of touring employees having found the same to be not an expenditure covered under Section 37(3). The finding of the first appellate authority was to the effect that the expenditure claimed by the assessee was not an expenditure incurred on guest house, but a reimbursement of expenses which was incurred by the Estate Manager to accommodate visiting employees in the house provided for the Estate Manager. With respect to the issue of Section 32AB; interest having been found to be business income, was directed to be allowed as a deduction under Section 32AB. The computation of profits entitled to deduction under Section 80HHC as done by the assessing officer was confirmed, as was the deduction of depreciation for 21 months. 9. The assessee was in appeal before the Tribunal against the computation of export profits under Section 80HHC as also the deduction of depreciation for 21 months. The Revenue was in appea....
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....he Income Tax Act even if such a depreciation is on the guest house? (7) Whether on the facts and circumstances of the case was the Tribunal justified in deducting depreciation for 21 months in the computation of profit of the eligible business under Section 32AB of the Income Tax Act instead of deducting depreciation for 12 months for the said purpose as done by the appellant? 10. For the years 1990-91 also, the questions of law raised by the assessee in the two appeals for the said year, viz., I.T.A.Nos.128 of 2000 and 175 of 2000 are the questions 1 to 6 raised above. Question No.7 arises only for the assessment year 1989-90. For the year 1991-92, question Nos.1 to 3 and 5 and 6 are raised in I.T.A.No.207 of 2000. We proceed to deal with the questions of law rather than each of these appeals. 11. The first three questions raised by the assessee is with respect to the computation of export profit allowable for deduction under Section 80HHC. As noticed above, the claim of the assessee is that the denominator in the formula being Export Turnover / Total Turnover X Business Profits = Available Deduction; is the turnover for the Assam estate alone. Hence the contention is that in ....
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....e business (as computed under the head "Profits and gains of business or profession") the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee". Section 80HHC(3), as substituted by Finance Act, 1990, which came into effect from 1.4.1991: "(3) For the purposes of sub-section (1), profits derived from the export of goods or merchandise out of India shall be the amount which bears to the profits of the business (as computed under the head "Profits and gains of business or profession"), the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee". 12. The counsel for the assessee would strenuously urge before us that the estate at Assam was independently carried out without any connection with the other operations of the company and that it would even be possible to continue the business operations in the Assam estate if the other operations of the company were closed. Separate books of accounts were maintained for the Assam estate and its income was also computed separately as it was subject to agricultural income tax of that State. The tea produced in the South Indian ....
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....assessee in convertible foreign exchange. Clause (a) of sub-section (3) would apply only when the assessee's business is exclusively of export sales. In the facts of the said case, since the business in forgings of the assessee extended to both export and local sales, in computing the profits; it was held that sub-section (3)(b) of Section 80HHC would be applicable. However, giving the plain meaning to the word "business" employed in the section, it was held that it can only be: ".... business relating to the goods to which the section applies and the thrust is on the word "exclusively". The sub-section considers a situation where the assessee's business is of exports and the assessee's business is not that of export alone. However, one thing is certain that the business has to be only in respect of the goods or merchandise to which the section applies". Hence, with special emphasis on the exemption being available to the goods or merchandise; it was held that: "The business contemplated in the section would be restricted to only the goods to which the section applies and, therefore, by necessary implication even the total turnover of the business would be the total turnover o....
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....xclusively dealing with multimedia and PET jars. But what weighed with the Court and prompted the Court to follow the Madras decision was the rationale that the word "business" which follows the expression "total turnover" would have to be confined only to those goods which are exported and to which the section applies. We are of the firm opinion that the decision cited by the learned counsel does not at all apply to the facts of the instant case as noticed above. 16. In this context, the learned Standing Counsel for the Department pointed out that for the very same assessment year 1989-90 against the very same order of the Tribunal the Revenue was before this Court and the said appeal, numbered as I.T.A.103 of 1999, was disposed of answering the question raised by the Revenue in favour of the Revenue and against the assessee by the decision reported in Commissioner of Income-tax v. Parry Agro Industries Ltd. [(2002) 257 ITR 41]. In the said decision, we notice the provisions under sub-section (3) relevant for the assessment year was correctly noticed and clause (a) related to exclusive business in export and clause (b) related to business not exclusively of export. 17. The couns....
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....o different units. It is not so contemplated in the provision; nor does it fall for such an interpretation from the two decisions cited by the learned counsel. Hence, we respectfully follow the Division Bench decision of this Court and answer the question against the assessee and in favour of the Revenue. 18. We are conscious that the provision as interpreted by the division Bench was applicable for the assessment years 1989-90 and 1990-91. The order of remand of the Tribunal, in our opinion, was not correct since it directs the Assessing Officer to verify whether the assessee is entitled under sub-clause (a) or (b). Factually, on assessee's admission, even the Assam unit is not exclusively export-oriented and there is no question of assessee being covered under sub-clause (a). For the assessment years 1989-90 and 1990-91, sub-clause (b) of sub-section (3) of Section 80HHC will be applicable to the assessee, as held in the assessee's own case. For the year 1991-92 the provision is as substituted by Finance Act, 1990 with effect from 1.4.1991. The earlier distinction of exclusive export and business consisting other than that of export in clause (a) and clause (b) was substituted. ....
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....of deduction under Section 32AB. The assessee's contention is that only the depreciation for the 12 months should have been taken into account for computation. Under Section 32AB, eligible profits are arrived at after deducting depreciation computed in accordance with the provisions of Section 32(1). Sub-section (3) of Section 32AB is clear that eligible profit would be arrived at after deducting an amount equal to depreciation computed in accordance with the provision of sub-section (1) of Section 32. The amount that had been computed under Section 32(1) of the Act for the relevant assessment year with respect to the previous year comprising of 21 months is the depreciation for a period of 21 months. In such circumstance, the depreciation for the purpose of Section 32AB cannot be limited to 12 months. The assessee's contention is that depreciation allowable under Section 32(1) is to be to the depreciation determined for 21 months. However, in computation of Section32AB, the same shall be limited to 12 months. The contention is only to be rejected. Hence, question No.7 raised for the assessment year 1989-90 is also answered in favour of the Revenue and against the assessee. ....