TaxTMI 
TaxTMI 
2002 (11) TMI 254
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....assessment year 1992-93 allowed the appeal of the assessee by observing as under: "It is claimed that the Assessing Officer has ignored to consider that for the purpose of computation of deduction under section 80HHC only the profit on traded and manufactured goods are to be taken into account and if there was any loss, the same had to be ignored. This issue is fully covered by the appellate order for the earlier assessment year in the case of the assessee as noted therein even when the ITAT in the case of the assessee for the assessment year 1992-93 has not examined the computation of profit under sub-section (3) of section 80HHC as read with sub-section (1) of section 80HHC as appears to be the intention of the Legislature, following the decision of the ITAT in the case of the assessee for the assessment year 1992-93, it is directed that if any loss is computed in respect of trading export or manufacturing export, the same should be ignored while working out deduction allowable to the assessee." 3.1 Being aggrieved, the Revenue has come in appeal before us. The learned D.R. vehemently contended that this issue is covered in favour of the Revenue by the judgment of Hon'ble B....
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....t stage. And the court was only required to give answer to such aggregation method possible under clause (c) of section 80HHC(3). The net result of aggregation arrived at is further required to be increased by proportionate incentives. The issue whether in further so increasing the deduction, such loss needs to be adjusted or ignored was not before the Bombay High Court in IPCA Laboratories Ltd.'s case and, thus this has no application in the loss scenario where the deduction claim is made with reference to proportionate incentive income. With due respect to the Bombay High Court, it is submitted that the provisions of clause (b) of sub-section (4A) of the section 80HHC provide for disclaimer of the export turnover in favour of the supporting manufacturer and not disclaimed of the profits computed under sub section (3). Sub-clause (4A) reads as under; "(4A) the deduction under sub-section (1A) shall not be admissible unless the supporting manufacturer furnishes in the prescribed form along with his return of income,-- (a) The report of an account, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has correctly claimed on the bas....
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....no elaboration. The word 'further' as prefixed to the word 'increased' implies 'over and above', i.e., supplementing the profit as computed under sub-clauses (a), (b) and (c) under sub-section (3). In the Black's Law Dictionary the word 'further' reads as: '....'additional', and is equivalent to 'moreover, or furthermore, something beyond what has been said or likewise, or also...' From a perusal of the literal meaning of this word, it is evident that the proviso is meant to supplement the benefit envisaged under section 80HHC and not meant for the purpose of aggregation or set off. The proviso to sub-section (3) using the words 'further increased' is meant to provide more or extra benefit and, therefore, must be read independently of clauses (a), (b) and (c) in sub-section (3) of section 80HHC. This is the plain and undoubted effect of the proviso to sub section (3) of section 80HHC. Any attempt to set off the loss arrived at under the main sub-section (3) against the additional relief admissible under the proviso thereto would defeat, the purpose and legislative intent of the proviso. The proviso to sub-section (3) here operates as a substantive provision and says in unmist....
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....r religious or charitable purposes. In India there are a variety of trusts wherein there is no complete dedication of the property but only a partial dedication. A property may be dedicated entirely to a religious or charitable institution or to a deity. This is an instance of complete dedication. A property may be dedicated to a deity, subject to a charge that a part of the income shall be given to the grantor's heirs. A property may be given to an individual subject to, or burdened with, a charge in favour of an idol or a religious institution or for charitable purposes. An owner of property may retain the property for himself but carve out a beneficial interest therefrom in favour of the public by way of easement or otherwise. There may be many other instances where though there is a trust, it involves only a partial dedication of the property held under trust in the sense that only a part of the income of the property is utilized for religious or charitable purposes. The dichotomy between the two expressions 'wholly' and 'in part' is not based the dedication of the whole or a fractional part of the property, but between the dedication of the said property wholly for religious o....
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....pt to limit the scope of the proviso in sub-section (3) would render the same meaningless. 2. The order of the Hon'ble I.T.A.T., Chandigarh Bench, Chandigarh, which is on identical facts, is binding on the subordinate Authorities, The ITAT, Hyderabad 'B' Bench in the decision reported in [1993] 45 TTJ 282 in the case of Prasad & Co. v. Deputy Commissioner of Income Tax, relying on the Supreme Court judgment in the case of Union of India v. Kanwlakshi Finance Corp. Limited [1991] 53 ELT 433, held as under:-- "Judicial propriety demands that the order of the Tribunal should not only be respected but it should be followed by a lower authority. If the authority subordinate to the Tribunal is allowed to pick up holes, gaps or some infirmities or is of the view that different line of thinking is possible, then there will be judicial chaos and there will not be any finality to litigation. This process, if permitted, will lead to unnecessary harassment to the tax payer which is not envisaged by the statue nor permitted by law. The CIT(A) is duty bound to follow the decision of the Tribunal. It is well settled that the decision of the higher authorities is binding on a lower Authority....
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....rmula laid down in sub-clause (i) and the other figure would be arrived at by employing formula laid down in sub-clause (ii). The word "and" is not used to convey the idea of adjustment of losses calculated under one sub-clause against profits calculated under the other sub-clause. In fact it is not even stated that the amount arrived at under sub-clause (i) shall be added to the amount arrived at under sub-clause (ii) and the aggregate would be the profits derived from export. What is expressly conveyed is that there would be two independent figures of "profit derived from export" in a clause where the export is of two kinds of goods namely (i) goods manufactured and processed by the assessee and (ii) trading goods, and each positive figure would qualify for deduction and negative figure would be liable to be ignored. If these two figures were intended to be aggregated by algebraic method it would have been clearly stated. Similarly if negative figure was to be adjusted against positive figure that would also have been clearly stated. In the absence of any such mention, the negative figure is to be ignored or to be taken as nil and positive figure is to be treated as "profit deriv....
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....nbsp; Rs. 27,40,610 (ii) Duty drawback Rs. 2,76,90,824 (iii) Rubber Subsidy Rs. 44,402 (iv) IPRS 2,71,83,296 Less: IPRS treated as income from other sources. 21,56,135 Rs. 2,50,27,161 &nbs....
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....nbsp; C Rs. 1,07,38,753 -------------- Rs. 12,48,956 &n....
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....ing nature of the decisions of a High Court on different Benches of the same court may be summed up as follows: (i) A single judge of a High Court is bound by the decision of another single judge or a Division Bench of the same High Court. It would be judicial impropriety to ignore that decision. Judicial comity demands that a binding decision to which his attention had been drawn should neither be ignored nor overlooked. If he does not find himself in agreement with the same, the proper procedure is to refer the binding decision and direct the papers to be placed before the Chief Justice to enable him to constitute a larger Bench to examine the question. (ii) A Division Bench of a High Court should follow the decision of another Division Bench of equal strength or a Full Bench of the same High Court. If one Division Bench differs from another Division Bench of the same High Court, it should refer the case to a larger Bench. (iii) Where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decisions is to be preferred if reached after full consideration of the earlier decisions. (d) The decision of one High Court is neither binding precedent f....
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....der:-- Loss from goods manufactured by supporting manufacturers Rs. 6.86 Cr. Profit from export of self manufactured goods Rs. 3.78 Cr. 4.3 The assessee contended that since it had disclaimed the entire trading exports is favour of supporting manufacturers, therefore it claimed deduction under section 80HHC for Rs. 3.78 Cr. The loss incurred could not be set off against the profit from the export of self manufacturing goods. The Assessing Officer held that the assessee could disclaim the export benefits in favour of the supporting manufacturer under the proviso to section 80HHC(1) only when the assessee had profits from the export activities because the proviso talks of profits and not income which may include loss. Therefore, the Assessing Officer held that the proviso to section 80HHC(1) was not applicable to the present case and did not grant the benefit under section 80HHC to the assessee. The Commissioner of Income-tax (Appeals) held that if sub-section (1) of section 80HHC was not applicable for want of profits, then the proviso also would not app....
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....ess u/s 80HHC(3)(c). The observations made in a judgment not relating to the issue before the court do not have any binding effect and it can take the character of obiter dictum J. Bhagwati in Addl. District Magistrate, Jabalpur v. Shivakant Shukla AIR 1976 SC 1207, 1378, said obiter observations would undoubtedly be entitled to great weight, but 'an obiter cannot take the place of the ratio. Judges are not oracles'. 4.5 Hon'ble Supreme Court in the case of CIT v. Sun Engg. Works (P.) Ltd. [1982] 198 ITR 297 at page 320 has laid down the preposition how to interpret a judgment in the following manner:-- "It is neither desirable nor permissible to pick out a word or a 'sentence from the judgment of this court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this court. A decision of this court takes the colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the courts must carefully try to asce....
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....such trading goods. (1A) Where the assessee, being a supporting manufacturer, has during the previous year, sold goods or merchandise to any Export House or Trading House in respect of which the Export House or Trading House has issued a certificate under the proviso to sub-section (1), there shall, in accordance with the subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of the profits derived by the assessee from the sale of goods or merchandise to the Export House or Trading House in respect of which the certificate has been issued by the Export House or Trading House. (2)(a) This section applies to all goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out in India are received in, or brought into, India by the assessee (other than the supporting manufacturer) is convertible foreign exchange within a period of six months from the end of the previous year or where the Chief Commissioner or Commissioner is satisfied (for reasons to be recorded in writing) that the assessee is, for reasons beyond his control, unable to do so within the said pe....
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....y the assessee; and (ii) in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods: Provided that the profits computed under clause (a) or clause (b) or clause (c) of this sub-section shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiia) (not being profits on sale of a licence acquired from any other person), and clauses (iiib) and (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. Explanation.--For the purposes of this sub-section,-- (a) 'adjusted export turnover' means the export turnover as reduced by the export turnover in respect of trading goods; (b) 'adjusted profits of the business' means the profits of the business as reduced by the profits derived from the business of export out of India of trading goods as computed in the manner provided in clause (b) of sub-section (3); (c) 'adjusted total turnover' means the total turnover of the business as reduced by the export turnover in respect of trading go....
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....lar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India;] [(c)] 'Export House Certificate' or 'Trading House Certificate' means a valid Export House Certificate or Trading House Certificate, as the case may be, issued by the Chief Controller of Imports and Exports, Government of India, [(a)] 'supporting manufacturer' means a person being an Indian company or a person (other than a company) resident in India, [manufacturing (including processing) goods] or merchandise and selling such goods or merchandise to an Export House or a Trading House for the purposes of export.] 4.8 From the plain reading of the aforesaid provisions of section 80HHC, it is clear that section 80HHC for computing deduction, this section lays down three stages for computation of profits derived from exports:-- (1) Firstly 'profits of the business' are to be computed as per Explanation (baa) appended below section 80HHC(4B), i.e. Profits and gains of business as computed under the head "business income" minus 90% of any sum under clauses (iiia), (iiib) and (iiic) of section 28 or any receipt by way ....
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....case, there is a loss the deduction shall be limited to the 90% of the export incentive X export turnover/total turnover, and with that objective a theoretical method of computation of deduction under section 80HHC has been laid down, so that the assessee should be entitled for deduction in respect of 90% of the export incentive in case the assessee does not derive income from the export business. We find that section 80HHC(1) allows a deduction to the assessee of the profits derived from the export business. The profit from the export business have to be ascertained as per section 80HHC(3) which gives a formula. Section 80HHC(3) laid down following proposition:-- (i) In sub-section (a) the export profits are to be computed when the assessee is engaged in the business of export of goods, merchandise, manufacture or processed by him. (ii) In sub-clause (b), export profits are to be computed when the assessee is engaged in the business of export of trading goods only. (iii) In sub-clause (c), the export profits are to be computed when the assessee is engaged in the business of export of goods, manufacture or processed by him and of trading goods. 4.11 Therefore, firstly t....
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....g of the word "further increased by", it is evident that the proviso is meant to supplement the benefit envisaged under section 80HHC and not meant for the purpose of aggregation or set off. The proviso to subsection (3) using the words 'further increased' is meant to provide more or extra benefit and, therefore, has to be read independently of clauses (a), (b) and (c) in sub-section (3) of section 80HHC. This is the plain and undoubted effect of the proviso to sub-section (3) of section 80HHC. 4.13 Explanation (baa) below section 80HHC(4B) which defines the expression 'profits of the business' used in section 80HHC(3) also strengthens our view. This explanation stipulates that profits of the business as computed under the head "profits and gains of business or profession" as reduced by ninety per cent of export incentives, and receipts like brokerage, commission, interest etc. The words 'as reduced by' clearly implies that quantum of reduction is to be limited to the figure of profits which is to be reduced. While considering the meaning of the word "reduced" in section 225(3) of the Income-tax Act, it has been held by the Hon'ble Apex Court in Mohan Wahi v. CIT [2001] 248 ITR ....
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....would be further increased by the amount to be calculated as per the proviso. Thus the Legislature has clearly made a departure from the normal restrictive function of a proviso and intended the proviso to further enlarge the scope of the main provision. The express legislative intention which is manifestly clear from the unambiguous language used while drafting the proviso cannot be ignored merely on the basis of certain rules or interpretation regarding normal function of proviso. 4.16 From a plain reading of the above section, it is clear that under section 80HHC(1), it has been expressly provided that where an assessee is engaged in the business of exports to which the section applies then, in computing the total income of the assessee, a deduction of the profits derived from export activity as computed under section 80HHC(3) is given. In other words, from the gross total income of the assessee, deduction under section 80HHC is given in order to arrive at the total income/taxable income of the assessee. Section 80HHC is a section which comes under Chapter VIA of the Income-tax Act. The said Chapter provides for special deductions from gross total income. One such deduction i....
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....ntical facts of the case, this Tribunal cannot take a conclusion contrary to the conclusion reached by this Tribunal in the case of the assessee relating to the assessment year 1992-93. In this regard, following quotes from the decision of CIT v. L.G. Ramamurthi [1977] 110 ITR 453 (Mad.) read as under:-- "No Tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another bench of the same Tribunal on the same facts. It may be that the members who constituted the Tribunal and decided on the earlier occasion were different from the members who decided the case on the present occasion. But what is relevant is not the personality of the officers presiding over the Tribunal or participating in the hearing but the Tribunal as an institution. If it is to be conceded that simply because of the change in the personnel of the officers who manned the Tribunal, it is open to the new officers to come to a conclusion totally contradictory to the conclusion which had been reached by the earlier officers manning the same Tribunal on the same set of facts, it will not only shake the confidence of the public in judicial procedure as such, but....