Commissioner Of Income Tax Delhi-Iv v. Inertia Industries Ltd.through:none

$~R-63 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 356/2005 COMMISSIONER OF INCOME TAX DELHI-IV .... AppellantThrough:Mr. Puneet Rai, Standing Counselfor the Revenue versus INERTIA INDUSTRIES LTD.Through:None ..... Respondent CORAM:JUSTICE S.MURALIDHARJUSTICE PRATHIBA M. SINGH O R D E R%23.08.2017 1. This appeal by the Revenue is directed against an order dated 25[th]November, 2004 passed by the Income Tax Appellate Tribunal (‘ITAT’) inITA No.3807/Del/1999 for the Assessment Year (‘AY’) 1995-96. 2. While admitting this Appeal on 24[th]March, 2006, the following questionof law was framed for consideration: “Whether, on the facts and circumstances of the case, theTribunal was right in its conclusion that the total turnoverin Section 80 HHC of the Income-tax Act, 1961 is onlythe turnover relating to the export business of theassessee and not a turn over relating to other businessesof the assessee?” 3. The facts in brief are that the Assessee was running two units. Thebrewery unit was located at Daruhera and the garments export unit at Delhi.It claimed deduction under Section 80 HHC of the Income Tax Act, 1961 ITA No.356/2005 (‘the Act’) in its return in the sum of Rs.61,94,977/-. The question beforethe Assessing Officer (AO) was whether the gross total income of the entirebusiness i.e. of both units, and not just that of the export unit, had to beconsidered for the purposes of allowing deduction under Section 80 HHC ofthe Act? The AO took the total turnover of both units into consideration andby the assessment order dated 12[th]March, 1998 under Section 143(3) of theActheldthattheAssesseewasentitledtobroughtforwardlosses/depreciation amounting to Rs.1,76,90,248/- only. After adjustment ofthe said sum, the Assessee was held entitled to deduction under Section80HHC in the sum of Rs.8,25,694/- only. 4. The Assessee's appeal was allowed by the Commissioner of Income Tax(Appeals) [CIT (A)] by order dated 25[th]June, 1999. It was held that the twoexport divisions had to be treated separately for computation of turnover forthe purpose of Section 80HHC. Accordingly, the CIT (A) allowed the entirededuction as claimed by the Assessee under Section 80 HHC of the Act. 5. The Revenue then went in appeal before the ITAT. In the impugnedorder, the ITAT held that the Assessee would be entitled to deduction underSection 80 HHC only if after the setting off brought forward losses andunabsorbed depreciation, the Assessee was left with any income. However,the ITAT found force in the contention of the Assessee that the deductionunder Section 80 HHC should be worked out on the basis of the turnover ofthe garments division only and the Assessee should be allowed deductionunder Section 80 HHC in so far it did not exceed the gross total income ofthe Assessee from all business put together. The order of the CIT(A) was setaside on this point and the AO was directed to work out the deduction under ITA No.356/2005Page 2 of 3 Section 80 HHC on the basis indicated in the order. 6. Learned counsel for the Revenue has drawn the attention of this Court tothe judgment of the Supreme Court in IPCA Laboratories vs. Dy.Commissioner of Income Tax, Mumbai, (2004) 266 ITR 521 (SC) where ithas been categorically held that “a plain reading of Section 80-HHC makesit clear that in arriving at profits earned from export of both self-manufactured goods and trading goods, the profits and losses in both thetrades have to be taken into consideration. If after such adjustments there isa positive profit the assessee would be entitled to deduction under Section80-HHC (1)”. 7. In view of the above categorical pronouncement of the Supreme Court,the question framed is answered in the negative, i.e. in favour of theRevenue and against the Assessee. 8. The appeal is accordingly allowed. S. MURALIDHAR, J. AUGUST 23, 2017pk PRATHIBA M. SINGH, J. ITA No.356/2005