Commissioner Of Income Tax-I, Ludhiana v. M/S Abhishek Industries Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH **** Date of Decision:06.02.2013 1. I.T.A. .No.60 of 2012 (O&M) Commissioner of Income Tax-I, Ludhiana Vs. .....Appellant M/s Abhishek Industries Ltd. .....Respondent 2. I.T.A. .No.61 of 2012 (O&M) Commissioner of Income Tax-I, Ludhiana Vs. .....Appellant M/s Abhishek Industries Ltd. .....Respondent CORAM:- HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MS. JUSTICE RITU BAHRI Present:-Mr. Rajesh Katoch, Advocate for the appellant. **** HEMANT GUPTA, J.(Oral) This order shall dispose of two income tax appeals bearingI.T.A. No.60 of 2012 and I.T.A. No.61 of 2012 arising out of an order dated27.9.2011 passed by the Income Tax Appellate Tribunal, Chandigarh Bench`A', Chandigarh. The revenue has claimed the following substantialquestions of law in I.T.A. No.60 of 2012:- (i)Whether on the facts and circumstances of the case, theHon'ble Income Tax Appellate Tribunal is justified inconsidering the Software expenses amounting toRs.58,82,239/- as revenue expenditure instead of capitalexpenditure by ignoring the decision of Hon'ble Gujrat HighHon'ble Income Tax Appellate Tribunal is justified inconsidering the Software expenses amounting toRs.58,82,239/- as revenue expenditure instead of capitalexpenditure by ignoring the decision of Hon'ble Gujrat High I.T.A. No.60 of 2012 (O&M) &I.T.A. No.61 of 2012 (O&M) Court reported at 96 ITR 672? (ii)Whether on the facts and circumstances of the case, theHon'ble Income Tax Appellate Tribunal is justified inconsidering the Software expenses amounting toRs.58,82,239/- as revenue expenditure instead of capitalexpenditure whereas the concern is not involved in thebusiness of development and selling computer software andcomputer software is only use for overall improvement andfunctioning of the concern and whether the acquisition of thesaid computer software is to be treated in the same way asdevelopment and customization of any machinery helping inthe production process?' (iii)Whether on the facts and circumstances of the case, theHon'ble Income Tax Appellate Tribunal is justified indismissing the appeal of revenue on the issue of Softwareexpenses by relying upon the decision of Hon'ble P & H HighCourt in the case of CIT Vs. Varinder Agro Chemicals Ltd.reported at 309 ITR 272, whereas the department has filedappeal against this order before the Hon'ble Supreme Courtwhich is still pending?” (iv)Whether on the facts and circumstances of the case, theHon'ble Income Tax Appellate Tribunal is justified in holdingthat sales tax subsidy amounting to Rs.6,80,61,977/- is to betreated as “business income” but at the same time 90% ofsuch receipt is to be excluding from the profits of business?”(v)Without prejudice to above, whether on the facts andcircumstances of the case, the Hon'ble Income Tax AppellateTribunal is justified in directing the A.O not to exclude 90%of the amount of sales tax subsidy from “profits of business”for the purpose of computing deduction u/s 80HHC of the Actby ignoring the decision of Hon'ble Supreme Court in the caseof K. Ravindranathan Nair reported at 295 ITR 228(SC), asthe Sales Tax Subsidy is an independent income of theassessee not related to export income and, hence, 90% of thesame has to be excluded by considering it as “any other I.T.A. No.60 of 2012 (O&M) & I.T.A. No.61 of 2012 (O&M) receipt of a similar nature included in such profit” in clause(baa) to Section 80HHC?”(baa) to Section 80HHC?” I.T.A. No.60 of 2012 (O&M) & I.T.A. No.61 of 2012 (O&M) receipt of a similar nature included in such profit” in clause(baa) to Section 80HHC?”(baa) to Section 80HHC?” (vi)Whether on the facts and circumstances of the case, theHon'ble Income Tax Appellate Tribunal is justified inupholding the decision of CIT(A) in directing to reduce only90% of discount received from customers from profits ofbusiness for computation of deduction u/s 80HHC as thesereceipts are of similar nature to receipts such as brokerage,commission etc. as per explanation (baa) to section (4C) ofsection 80HHC?Hon'ble Income Tax Appellate Tribunal is justified inupholding the decision of CIT(A) in directing to reduce only90% of discount received from customers from profits ofbusiness for computation of deduction u/s 80HHC as thesereceipts are of similar nature to receipts such as brokerage,commission etc. as per explanation (baa) to section (4C) ofsection 80HHC? The revenue has claimed the following substantial questions of law in I.T.A. No.61 of 2012:- (i)Whether on the facts and circumstances of the case, theHon'ble Income Tax Appellate Tribunal is justified inrestoring back the matter to the file of the A.O regarding priorperiod expenses whereas the A.O had passed a well reasonedorder and the assessee had been accorded due opportunity torepresent itself on this issue during the assessmentproceedings?Hon'ble Income Tax Appellate Tribunal is justified inrestoring back the matter to the file of the A.O regarding priorperiod expenses whereas the A.O had passed a well reasonedorder and the assessee had been accorded due opportunity torepresent itself on this issue during the assessmentproceedings? (ii)Whether on the facts and circumstances of the case, theHon'ble Income Tax Appellate Tribunal is justified indirecting the A.O not to exclude 90% of the amount of salestax subsidy from “profits of business” for the purpose ofcomputing deduction u/s 80HHC of the Act by ignoring thedecision of Hon'ble Supreme Court in the case of K.Ravindranathan Nair reported at 295 ITR 228(SC), as theSales Tax Subsidy is an independent income of the assesseenot related to export income and, hence, 90% of the same hasto be excluded by considering it as “any other receipt of asimilar nature included in such profit” in clause (baa) toSection 80HHC?”Hon'ble Income Tax Appellate Tribunal is justified indirecting the A.O not to exclude 90% of the amount of salestax subsidy from “profits of business” for the purpose ofcomputing deduction u/s 80HHC of the Act by ignoring thedecision of Hon'ble Supreme Court in the case of K.Ravindranathan Nair reported at 295 ITR 228(SC), as theSales Tax Subsidy is an independent income of the assesseenot related to export income and, hence, 90% of the same hasto be excluded by considering it as “any other receipt of asimilar nature included in such profit” in clause (baa) toSection 80HHC?” Learned counsel for the revenue has pressed Question Nos.(iii),(v) and (vi) in I.T.A. No.60 of 2012 and Question No.(i) in I.T.A. No.61 of I.T.A. No.60 of 2012 (O&M) &I.T.A. No.61 of 2012 (O&M) 2012. In respect of Question No.(iii), the same stands answeredagainst the revenue by a judgment of this Court reported as 309 ITR 272 –CIT v. Varinder Agro Chemicals Ltd. The argument of the learned counselfor the Appellant is that the revenue's appeal against the order passed by thiscourt is pending before the Supreme Court. We don't find any merit in the said argument. As far as thiscourt is concerned, the matter has attained finality. The question of lawstands answered against the revenue by this court. We do not find that suchquestion of law arises for consideration in the present appeal. I.T.A. No.60 of 2012 (O&M) &I.T.A. No.61 of 2012 (O&M) 2012. In respect of Question No.(iii), the same stands answeredagainst the revenue by a judgment of this Court reported as 309 ITR 272 –CIT v. Varinder Agro Chemicals Ltd. The argument of the learned counselfor the Appellant is that the revenue's appeal against the order passed by thiscourt is pending before the Supreme Court. We don't find any merit in the said argument. As far as thiscourt is concerned, the matter has attained finality. The question of lawstands answered against the revenue by this court. We do not find that suchquestion of law arises for consideration in the present appeal. Question No.(v) relates to sales tax subsidy received by theassessee and Question No.(vi) relates to discounts received by the assesseefrom customer. The assessee has received sales tax subsidy ofRs.6,80,61,977/- and the discount of Rs.31,92,077/-. Such questions relatesto interpretation of Section 80HHC (4C)(baa) of the Act, which deals withthe deductions from profits earned from export businesses. The relevantclause reads as under:- “(baa) `profits of the business' means the profits of the business ascomputed under the head “Profits and gains of business orprofession” as reduced by--computed under the head “Profits and gains of business orprofession” as reduced by-- (1)ninety per cent of any sum referred to in cls. (iiia), (iiib) and(iiic) of s.28 or of any receipts by way of brokerage,commission, interest, rent charges or any other receipt of asimilar nature included in such profits; and (iiic) of s.28 or of any receipts by way of brokerage,commission, interest, rent charges or any other receipt of asimilar nature included in such profits; and (2)the profits of any branch, office, warehouse or any otherestablishment of the assessee situate outside India.”establishment of the assessee situate outside India.” I.T.A. No.60 of 2012 (O&M) &I.T.A. No.61 of 2012 (O&M) -5- Learned counsel for the appellant relies upon the SupremeCourt judgment reported as 295 ITR 228 – Commissioner of Income Tax v.K. Ravindranathan Nair,to contend that the 90% of the amount of eligibleprofits has to be deducted for the purposes of Section 80HHC. In K. Ravindranthan Nair's case (supra),the amount which wasreduced from the profits was the processing charges incurred by theassessee for processing of cashew nuts grown in his farm. The assessee wasan exporter and also a job worker when he processed cashew nuts on jobbasis. Clause (1) of Explanation (baa) permits deduction of profit by 90%for the purposes of Section 80HHC if the profits relates to receipts by wayof brokerage, commission, interest, rent, charges or any other receipt ofsimilar nature. The sales tax subsidy cannot be said to be either brokerage,commission, interest, rent or charges. Nor it is anyway similar to suchexpression. The expression “similar nature” has to be interpreted ejusdemgeneris to the brokerage, commission, interest, rent or charges. It does notinclude income totally unrelated to such expressions. Therefore, neither thesales tax subsidy nor the profits from discounts on early payments is ofsimilar nature to brokerage, commission, interest, rent or charges, whichmay allow the revenue to deduct profit to the extent of the 90% of such sumfor the purposes of Section 80HHC. The judgment in Ravindranathan Nair'scase (supra), relates to processing charges, which will fall within theexpression “charges” which are to be reduced by 90% for the purposes ofcalculating the export income. Therefore, the aforesaid judgment has noapplicability to the issue raised in the present case. In view of the above, we do not find any substantial question of I.T.A. No.60 of 2012 (O&M) &I.T.A. No.61 of 2012 (O&M) -6- law arises for consideration in I.T.A. No.60 of 2012. The same is dismissed. In view of the above, we do not find any substantial question of I.T.A. No.60 of 2012 (O&M) &I.T.A. No.61 of 2012 (O&M) -6- law arises for consideration in I.T.A. No.60 of 2012. The same is dismissed. Questions No.(i), which has been raised for consideration inI.T.A. No.61 of 2012, is again does not arise. The Tribunal has remanded thematter to the Assessing Officer to decide the issue afresh keeping in viewthe directions and guidelines issued by the Tribunal in the assessee's owncase, relating to assessment year 2002-03 and 2003-04 in its order dated31.3.2008. Since the matter has been remanded, there is no finding whichmay give rise to any substantial question of law. Consequently, we do not find any question of law arises in thepresent appeals and the same are dismissed. ( HEMANT GUPTA ) JUDGE February 06, 2013renu/Vimal ( RITU BAHRI ) JUDGE