TaxTMI 
TaxTMI 
TaxTMI 
2010 (9) TMI 1083
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....eclaring a total income of Rs. 285,628,902 and claiming deduction under section 10B of the Act in respect of its profits from EOU unit and under section 80HHC of the Act amounting to Rs. 41,930,669 in respect of the profits of non-EOU business. Subsequently, the assessee filed revised return of income on 12-1-2005 declaring total income of Rs. 254,119,786 and revising its claim for deduction on account of deduction under section 80HHC of the Act to Rs. 33,439,785. 4. The total turnover considered for the purpose of calculation of deduction under section 80HHC of the Act in Form No. 10CCAC filed along with revised return of income was Rs. 2,386,361,638 and the total turnover as per Profit and Loss Account of the assessee for the year ended 31-3-2004 was Rs. 3,511,673,574. The difference in the amount of the total turnover stated in the Profit and Loss Account and that considered for the purpose of deduction under section 80HHC of the Act was on account of reduction of turnover of EOU unit from the total turnover, since the same was considered for the purpose of computation of deduction under section 10B of the Act. The basis of computation of 'export turnover' and 'total turnover' ....
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....ness of manufacture and sale of solar cells, photovoltaic modules and systems. It has a 100 per cent Export-Oriented Unit (EOU) manufacturing solar cells, photovoltaic modules and systems. Section 10B makes special provisions in respect of newly established 100 per cent EOUs. Sub-section (1) of section 10B provides that a deduction of such profits and gains as are derived by a 100 per cent EOU from the export of article or things or computer software for a period of 10 years beginning with the assessment year relevant to P.Y. in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee. Sub-section (4) of section 10B provides that for the purposes of sub-section (1) of section 10B, the profits derived from the export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried by the undertaking. Clause (iii) of Explanation 2 below section 10B defines "Exp....
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....customs station as defined in the Customs Act, 1962 (52 of 1962). "Total Turnover" has been defined by Explanation (ba) to section 80HHC not to include freight or insurance attributable to transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962). 9. The Total Turnover of Non-EOU was arrived at by the assessee as follows : Total sales (turnover) as per Profit and Loss Account was Rs. 351,16,73,574. From the Total turnover the assessee reduced Rs. 134,19,91,724 which was export turnover of the EOU and arrived at a figure of Rs. 216,96,81,850. To the above figure the assessee added sale of scrap and transfer from DTA to EOU of Rs. 31,08,583 and Rs. 21,35,71,205 respectively and arrived at the total turnover of Rs. 238,63,61,638. Export Turnover was arrived at by the assessee as follows : The total turnover as per Profit and Loss Account was Rs. 351,16,73,574. Out of the above a sum of Rs. 222,05,69,230 was Export turnover. Out of the above Export turnover, the export turnover of the EOU was Rs. 134,19,91,724. There were Rupee export of Rs. 2,84,50,842 and unrealized exports of Rs. 90,15,774. All the above were reduced from ....
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.... was claimed with respect to profits derived from EOU business. It was further submitted that formula for computing deduction under section 80HHC of the Act has to be read in its entirety and accordingly the term 'export turnover' and 'total turnover' and profits of the business are interlinked. Thus, export turnover and total turnover should be considered in respect of that business whose profits can be claimed deduction under section 80HHC of the Act. Attention was invited to the provisions of section 80HHC(4B) of the Act which provides that for the purposes of computing the total income under section 80HHC(1) or section 80HHC(1A) of the Act, any income not charged to tax under the Act, shall be excluded. Accordingly, if the profits of the EOU unit is not to be considered for the purpose of deduction under section 80HHC of the Act then correspondingly its turnover can also not be considered for the purpose of computing 'export turnover' and 'total turnover' under section 80HHC of the Act. Otherwise, the formula would become unworkable and may result incongruent results. The assessee also placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT v. Lakshmi Ma....
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....he Act. Attention was invited to the decision wherein in the context of deduction under section 80HHC of the Act it has been held that if a particular item is to be included in denominator (total turnover) then on like to like basis, the same should also form part of the numerator (export turnover), other there would be distortion of eligible profits. 14. The CIT issued another show-cause notice under section 263 of the Act, dated 18-7-2008. In this show-cause notice the CIT was of the view that the claim of depreciation made by the assessee at 80 per cent on some of the machineries purchased during the previous year (which were used for less than 180 days and therefore depreciation at 40 per cent was claimed by the assessee) on the ground that they were renewal energy devises was erroneous and prejudicial to the interest of the revenue. According to the CIT, the machineries were not renewal energy devises and therefore depreciation admissible was 25 per cent and therefore the Assessing Officer ought to have allowed only 12.5 per cent because the said machineries were used for less than 180 days. The details of the machineries and their purchase price was as follows: Sl. No. Dat....
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....on of the Hon'ble Apex Court in the case of CIT v. Lakshmi Machine Works (supra). I find that the issue involved in the said case was materially different from the issue in the present case. In the said case, the issue involved was as to whether excise duty and sales tax can form part of "total turnover" for the purposes of deduction under section 80HHC. It was held by the Hon'ble Court that since excise duty and sales tax do not emanate from "turnover" in the same was as interest, commission etc. which are excluded from the definition of the "total turnover", the excise duty and sales tax also cannot form part of the "total turnover" under section 80HHC(3) of the Act. The assessee has quoted certain observations of the Court from the aforesaid decision which has no relevance to the issue involved in the present case. The assessee has also relied upon the observations of the Hon'ble High Court in the case of CIT v. Sudarshan Chemical Industries Ltd. ( 245 ITR 769 ) which again is a decision related to the definition of "total turnover" including or excluding sales tax and excise duty. None of the authorities cited are directly on the issue raised in the notice under section 263 of ....
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....Turnover' for the purpose of deduction under section 80HHC of the Act, the learned CIT ought to have held that the profits relatable to the said turnover should also be included while computing the 'profits of the business' for the purpose of deduction under section 80HHC of the Act. Without prejudice to the above, having held that turnover of the EOU be included while computing 'Total Turnover' for the purpose of deduction under section 80HHC of the Act, the learned CIT ought to have held that export turnover of EOU should also be included for the purpose of deduction under section 80HHC of the Act. It was submitted that the learned CIT erred in law and on facts in holding that your appellant's claim of depreciation at the rate of 80 per cent on renewable energy devices is erroneous. It was submitted that the CIT erred in holding that order under section 143(3) of the Act passed by Assessing Officer allowing depreciation at the rate of 80 per cent in respect of aforesaid items was erroneous and prejudicial to the interest of the revenue on the ground that said depreciation was allowed without application of mind and without obtaining the opinion of technical expert. 21. The follo....
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....be excluded from the export turnover as well as the total turnover of the assessee. The CIT(A) accepted the plea of the assessee and further appeal by the revenue the Tribunal held as follows : "Deduction under section 80HHC is to be allowed to the profits which have been derived by the assessee from the export of goods or merchandise. Therefore, the export turnover which is to be considered while working out deduction under section 80HHC is that turnover which is only and only relevant for earning the profit/income from export. It has been admitted by the assessee that the profit for which deduction under section 10B has been claimed was not included in the profit to claim deduction under section 80HHC. Therefore, the turnover which was related to the profit eligible for deduction under section 10B can also not be included in the turnover considered for the purpose of deduction under section 80HHC. The turnover of sales made by the assessee for which deduction under section 10B has been claimed did not answer the description of turnover eligible for deduction under section 80HHC. Therefore, the Assessing Officer rightly excluded such turnover from export turnover while computing....
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.... in the event of the total turnover being considered to include the turnover of 10B unit then the turnover of the 10B unit should also be added to the export turnover while computing deduction under section 80HHC of the Act. In this regard ld. counsel for the assessee placed reliance on the decision of the Special Bench of ITAT Chennai in the case of ITO v. Sak Soft Ltd. [2009] 30 SOT 55 and the following other decisions : (1)Asstt. CIT v. South India Produce Co. [2003] 262 ITR 20 1 (Ker.). (2)CIT v. Sudarshan Chemicals Industries Ltd. [2000] 112 Taxman 1 (Bom.). (3)Dy. CIT v. Lotus Trans Travels (P.) Ltd. [2006] 98 ITD 115 (Delhi). (4)Patni Telecom (P.) Ltd. v. ITO [2009] 120 ITD 105 (Hyd.). (5)Chloride India Ltd. v. Dy. CIT [1995] 53 ITD 180 (Cal.). (6)Tata Elxsi Ltd. v. Asstt. CIT [2008] 115 TTJ (Bang.) 423. (7)CIT v. Bharat Earth Movers Ltd. [2004] 137 Taxman 421 (Kar.). (8)Godavari Drugs Ltd. v. Jt. CIT [2004] 89 ITD 326 (Hyd.). (9)Dy. CIT v. Dimexon Diamonds Ltd. [2008] 20 SOT 31 (Mum.). 24. It was further submitted that the profit of the business considered for computation under section 80HHC of the Act should a....
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....ign exchange in providing technical services outside India were not part of the turnover, whether export or total turnover of the assessee. Thus the issue considered by the Special Bench was also in respect of items which did not have an element of profit embedded in them. The other decisions referred to by the learned counsel for the assessee for the above reason are also not relevant to decide the dispute in the present appeal. 26. With regard to the decision in the case of Mahavir Spg. Mills Ltd. (supra) it was submitted by him that the Assessing Officer in the said case himself did not include the turnover of EOU in the total turnover for computation of deduction under section 80HHC of the Act. In fact the correctness of such treatment is the issue raised in the impugned order of CIT under section 263 in this appeal. Thus the Tribunal in the case of Mahavir Spg. Mills Ltd. (supra) never had any occasion to express any opinion on this issue. It was submitted that the said decision and the other two decisions cannot therefore be said to be authority for the proposition that total turnover need not include turnover of section 10B unit while computing deduction under section 80HHC....
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....ot have relevance to the issue in the present appeal. We have already seen the provisions of section 80HHC(3)(a) of the Act, which refers to profits derived from export of goods manufactured then the profit derived from such export shall be the amount which bears to the profits of the business the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. The expression "such" before the expression 'Export turnover' only means that the export turnover referred to is the turnover of the goods manufactured whose profits are being computed under section 80HHC(3)(a). We cannot therefore ignore the intention of the Legislature expressed in such clear terms. 29. With regard to the submission of the ld. counsel for the assessee that the profits of business should be increased by adding profits of 10B units also, we are of the view that the profits of 10B unit fall under Chapter-III of the Act under the head 'Income' which do not form part of the total income. Therefore, the profits of 10B unit will not enter the computation of total income at all. The said profits cannot therefore form part of the profits under ....
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....ssessing Officer fails to make enquiries which were required to be made in the given facts and circumstances of the case, then that would by itself render his order erroneous and prejudicial to the interest of the revenue. Thus according to him the principle laid down by the Hon'ble Supreme Court is that if it is shown that there was failure to make enquiries which were warranted in the given facts and circumstances of the case then that would be sufficient to invoke the powers under section 263 of the Act. 32. We have considered the rival submissions. Admittedly while completing the assessment proceedings the Assessing Officer did not raise any specific query regarding the claim for depreciation at 80 per cent on certain items of machinery which were claimed as renewable energy devices. As rightly held by the CIT in the order under section 263 it was not possible for the Assessing Officer to conclude as to whether a device is an energy device or a particular item of plant and machinery used in making renewable energy devices, without proper enquiry or submission by the assessee. In any event he ought to have been called for details from the assessee. Not doing so was a failure on....