Commissioner Of Income-Tax-I, Ludhiana v. M/S. Punjab Wool Combers Ltd., Ludhiana

-1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH. ITA No. 6 of 2004 Date of Decision: 9.9.2010 Commissioner of Income-Tax-I, Ludhiana. Versus M/s. Punjab Wool Combers Ltd., Ludhiana ...Appellant. ...Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- PRESENT: Mr. Rajesh Katoch, Advocatefor the appellant-Revenue --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act,1961 (for short “the Act’”) has been filed by the Revenue against theorder dated 10.1.2003, passed by the Income Tax Appellate Tribunal,Chandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”) in Income-tax Appeal No. 1057/CHANDI/96, in respect of assessment year 1992-93. Briefly stated the facts of the case are that the respondent-assessee filed return of income for the assessment year 1992-93declaring net income at Rs. 2,87,69,420/-. The return was processedunder Section 143(1)(a) of the Act at an income of Rs. 2,88,83,900/- and during that processing, an adjustment on account of disallowanceon rent paid for the Guest House under Section 37(4) and by reductionof 90% interest income as per explanation (baa) of Section 80HHC wasmade. The assessing officer vide order dated 10.3.1995 (Annexure A-1) made assessment under Section 143(3) on total income at Rs.2,98,15,254/- by disallowing the following: i-Disallowance u/s 80-IRs. 13,64,370/- ii-While computing the deduction u/s 80HHC the assessingofficer included CST and ST in the total turnover amountingto Rs. 8,71,080/-This resulted in reduction of deduction u/s80HHC.officer included CST and ST in the total turnover amountingto Rs. 8,71,080/-This resulted in reduction of deduction u/s80HHC. iii-Disallowance of Rs. 9061/- on account of telephoneexpenses provided at the residence of the Directorexpenses provided at the residence of the Director iv-Disallowance on premium on redemption of debenture.The assessee filed appeal against the order of theassessing officer. The Commissioner of Income-tax (Appeals)(Central), Ludhiana {in short “CIT(A)”} confirmed the order of theassessing officer vide order dated 17.7.1996 (Annexure A-II). Theassessee preferred appeal before the Tribunal. The Tribunal by orderdated 10.1.2003 (Annexure A-III) disposed of the appeal of theassessee with certain observations and directions. The Tribunaldirected the assessing officer to adjust profits to the extent of .0261% aswas allowed by the Tribunal in the assessment year 1991-92 and it wasfurther directed that in case the difference was more than 0.0261%, therelief to the assessee under Section 80-I should be reduced by thedifference in excess of .0261%. The Tribunal also directed that item like CST and ST etc. were not to be included in the total turnover whilegiving deduction u/s 80HHC and directed the A.O. to re-compute thededuction u/s 80HHC. The Tribunal deleted the addition of Rs. 9,061/-on account of telephone expenses. The Tribunal confirmed the findingof the CIT(A) that the assessee should be allowed only deduction inrespect of premium payable on redemption of debenture onproportionate basis. This is how the Revenue has preferred this appealchallenging the order of the Tribunal on the grounds enumerated in thegrounds of appeal and pleading that the following substantial questionsof law arise in this appeal for determination by this Court: i)Whether in the facts and the circumstances of the case, theHon’ble Income-tax Appellate Tribunal was justified inreversing the order of the Commissioner of Income-tax(Appeals) in which CIT(A) upheld the action of theAssessing Officer restricting the deduction under Section80-I from Rs. 83,91,322/- to Rs. 70,26,952/- claimed by theassessee in the light of the provisions of sub-sections 8and 9 of Section 80-I? ii) This is how the Revenue has preferred this appealchallenging the order of the Tribunal on the grounds enumerated in thegrounds of appeal and pleading that the following substantial questionsof law arise in this appeal for determination by this Court: i)Whether in the facts and the circumstances of the case, theHon’ble Income-tax Appellate Tribunal was justified inreversing the order of the Commissioner of Income-tax(Appeals) in which CIT(A) upheld the action of theAssessing Officer restricting the deduction under Section80-I from Rs. 83,91,322/- to Rs. 70,26,952/- claimed by theassessee in the light of the provisions of sub-sections 8and 9 of Section 80-I? ii) Whether on the facts and circumstances of the case, theHon’ble Income-tax Appellate Tribunal was not justified indirecting the assessing officer that item like CST and STare not to be included in the total turnover while givingdeduction u/s 80HHC? iii) Whether in the facts and circumstances of the case, theHon’ble Income-tax Appellate Tribunal was justified in directing the Assessing Officer to allow relief/proportionatededuction of premium payable on redemption ofdebenture? We have heard learned counsel for the appellant-Revenue and have gone through the record. Reg. Question (i) The Tribunal while adjudicating the issue regardingdisallowance in terms of provisions of Section 80I(8) and (9) had reliedupon its earlier decision in the case of the assessee relating toassessment year 1990-91. In ITR No. 168 of 1996 relating toassessment year 1990-91, similar question raised by the revenue hasbeen answered against it. In view thereof, question No.(i) proposed bythe revenue is answered against the revenue. Reg. Question (ii) Learned counsel for the revenue very fairly accepted thatthe aforesaid question stands concluded against the revenue byjudgment of Division Bench of this Court reported in Commissioner ofIncome Tax v. Avery Cycle Industries Ltd., (2008) 298 ITR 239(P&H), wherein it has been held that for computation of specialdeduction under Section 80HHC of the Act, Sales Tax and CentralSales Tax are to be excluded from total turnover. Accordingly, the proposed question (ii) is also answeredagainst the revenue. Reg. Question (iii) The Tribunal relied upon decision of the Apex Court inMadras Industrial Investment Corporation Ltd. v. Commissioner of ITA No. 6 of 2004 Income Tax, (1997) 225 ITR 802 (SC) holding that proportionatededuction of premium payable on redemption of debentures isadmissible during the year. Nothing could be shown that this judgmentis not applicable to the facts of the present case. Accordingly, it is heldthat this is not a substantial question of law. In view of the above, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE September 09, 2010rkmalik/gbs (ADARSH KUMAR GOEL) JUDGE