TaxTMI 
TaxTMI 
2005 (8) TMI 80
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....section (9) of section 80HH?" The brief facts of the case are as follows: The assessee/opposite party (hereinafter referred to as "the assessee") is a public limited company engaged in the manufacture and sale of various items such as hair oil, toothpaste, shaving cream, perfumes, etc. The main buyer of the product was Dabur India Limited who have sold them under their own brand name. The assessing authority found that there was a steep fall in the sale from Rs. 27.87 crores in the previous preceding year to Rs. 16.76 crores and gross profit from Rs. 4,49,26,484 to Rs. 1,23,40,225 and gross profit rate from 20.9 per cent, to 9.52 per cent. The assessee was asked to explain about the fall in the gross profit. The reason for the fall in the G.P. has been given as follows: (i) Fall due to lowering of prices Rs. 48.98 lakhs (ii) Increase in manufacturing and operational expenses Rs.31.37 lakhs (iii) Increase in materials cost (out of this a sum of Rs. 29.22 lakhs is on account of increase in the rates of GN oil, mineral oil and til oil). Rs.62.25 lakhs Total Rs. 142.60 lakhs The assessing authority accepted the reasons given at serial Nos. 2 and 3, but did n....
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....rs started supplying at a lower rate does not hold for want of details and prudency in conducting the business. The appellant-company had not brought out any fact indicating that a new competitor offering lower rates had entered into the supply sphere of the appellant. Considering the above facts, the only conclusion which could be drawn is that the lowering of prices by the appellant-company was not for the purpose of business or the business expenditure required such cut in rates but for some extraneous consideration. The Assessing Officer was, therefore, correct in making addition of Rs. 48,98,000 which represented the fall in sale receipts due to lowering of prices by the appellant-company. The addition of Rs. 48,98,000 is, therefore, confirmed." The assessee as well as the Revenue went in appeal before the Tribunal. The Tribunal allowed the appeal of the assessee and deleted the addition of Rs. 48,98,000 and also upheld the view of the Commissioner of Income-tax (Appeals) in respect of the allowance of deduction under section 80-I of the Act on the total gross income. The Tribunal held as follows: "We find considerable force in the submissions of Shri Ganeshan that inferenc....
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....goods on specific rates. The assessee, therefore, had a limited choice either to supply goods as per orders or close its business. Even the Excise Department approved the sale rates of the assessee. This was done as per order placed by Dabur India Limited as is clear from approval of excise authorities placed before the Assessing Officer wherein order dated August 24, 1991, is specifically mentioned. In the above circumstances, if the assessee revised its sale rates in respect of goods sold to Dabur, it cannot be said that it was done for non-business considerations. No plausible reason is available as to why the assessee and its management would pass on its profit to M/s. Dabur India Limited, a concern much bigger than the assessee. The ratio laid down in the case of Patiala Manufacturer P. Ltd. is fully applicable to the facts of the case and there is no justification to tax income which would have accrued to the assessee in case it had not sold the goods at cheaper rates. The said income had already been shown and assessed in the hands of Dabur India Limited and cannot be taxed twice. The Assessing Officer had thoroughly examined the records of Dabur India Limited and disallowed....
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....ion No. 2 is concerned, learned standing counsel submitted that in view of sub-section (9) of section 80HH of the Act, the deduction under section 80-I of the Act should be allowed only after reducing the deduction under section 80HH of the Act on the balance amount. We do not agree with the submission of learned standing counsel. Subsections (1) and (9) of section 80HH of the Act reads as follows: "80HH.(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, 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 from such profits and gains of an amount equal to twenty per cent, thereof ... (9) In a case where the assessee is entitled also to the deduction under section 80-I or section 80-J in relation to the profits and gains of an industrial undertaking or the business of a hotel to which this section applies, effect shall first be given to the provisions of this section." Section 80-I of the Act reads as follows: "(1) Where the gross total income of an assessee i....