Commissioner Of Income Tax v. Atul Products Limited

O/ITR/9/2003 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE NO. 9 of 2003 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ COMMISSIONER OF INCOME TAX....Applicant(s)VersusATUL PRODUCTS LIMITED.....Respondent(s) ================================================================ Appearance: MR NITIN K MEHTA, ADVOCATE for the Applicant(s) No. 1MR MANISH J SHAH, ADVOCATE for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIand HONOURABLE MR.JUSTICE K.J.THAKER Date : 02/12/2014ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE K.J.THAKER) 1. By way of this Reference, the ITAT, Bench ‘A’, Ahmedabad (for short, ‘the Tribunal’), has referred question No.4 posed before it in R.A. No.658/Ahd/1998, which was preferred by the Revenue against the order of the order of the Tribunal in ITA No.3671/Ahd/1992, for the consideration and opinion of this Court. 2.The brief facts of the case are that the assessee-respondent, herein, filed its return of income for the A.Y. 1989-90 on 28.12.1989, declaring its total income at Rs.78,42,420/-. Then, on 09.02.1990, the assessee filed the revised return in order to amend certain errors, which had crept while filing the first return. However, the total income shown by him in the earlier return, remained the same. Pursuant thereto, certain additions and disallowances came to be made by the concerned AO. Being aggrieved with the same, the assessee approached the learned CIT(A), which partly allowed the appeal of the assessee. Since, the Revenue was not satisfied with the same, it carried the matter before the learned Tribunal, which, partly allowed its appeal vide order dated 28.05.1998. However, the Revenue was not satisfied with the same, it, hence, filed R.A. No.658/Ahd/1998 before the Tribunal, praying it to refer the questions raised by it for consideration and opinion of this Court. Before the Tribunal, in all, there were four questions for its consideration. The Tribunal heard the parties at O/ITR/9/2003 JUDGMENT length and came to the conclusion that out of four questions posed by the Revenue, only one question requires to be referred to this Court for its consideration and opinion. Hence, the present Reference. 3.The question referred by the Tribunal for the consideration of this Court, reads as under; “4. Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income-tax(Appeals) in directing the Assessing Officer to reduce the profit from export out of the book profits while invoking the provisions of section 115-J of the Act? O/ITR/9/2003 JUDGMENT length and came to the conclusion that out of four questions posed by the Revenue, only one question requires to be referred to this Court for its consideration and opinion. Hence, the present Reference. 3.The question referred by the Tribunal for the consideration of this Court, reads as under; “4. Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income-tax(Appeals) in directing the Assessing Officer to reduce the profit from export out of the book profits while invoking the provisions of section 115-J of the Act? 4.At the very outset, Mr. Shah, learned Counsel for the Respondent, invited our attention to a decision of the Division Bench of this Court in Tax Appeal No. 78 of 2000, Dated : 18.09.2012, wherein, in the case of the very assessee, this Court has considered this very aspect and has answered that question in favour of the assessee, by observing and holding as under in Paras 3 to 6; “3. Insofar as question no.1 is concerned, same arises out of the order of Assessing Officer to reduce the profit of the assessee from exports out of book profit O/ITR/9/2003 JUDGMENT while invoking provisions of section 115J of the Income Tax Act,1961(“the Act” for short). The assessee had made exports and made deduction under section 80HHC of the Act. Such amount was reduced for working profit under section 115Jof the Act. 4. Though facts noted above do not clearly emerge from the impugned judgement of the Tribunal or that of Commissioner(Appeals), we have perused the earlier judgement of the Tribunal in case of this very assessee in ITA No.3671/Ahd/1992 dated 28.5.1998. 5. As pointed out by the counsel for the assessee that identical issue was examined by the Supreme Court in case of Commissioner of Income-tax v. Bhari Information Tech. Sys.P.Ltd reported in (2012) 340 ITR 593(SC). The Supreme Court held and observed as under : “In the present case, we are concerned with section 80HHE which is referred to in the Explanation to section 115JA, clause(ix). In our view, the judgment of the Special Bench of the Tribunal in Syncome Formulations squarely applies to the present case. Following the view taken by the Special Bench in Syncome Formulations, the Tribunal in the present case came to the conclusion that deduction claimed by the assessee under section 80HHE has to be worked out on the basis of adjusted book profit under section 115JA and not on the basis of the profits computed under regular provisions of law applicable to computation of profits and gains of business. The judgment of the Tribunal has been upheld by the High Court. We see no reason to interfere with the impugned judgment. We agree with taken by the Special Bench of the Tribunal in the case of Syncome O/ITR/9/2003 JUDGMENT Formulations vide para 61 of the judgment. Accordingly, the special leave petition filed by the Department stands dismissed with no order as to costs.”6. Question no.1 is therefore, answered in favour of the assessee and against the Revenue.” 5.The findings of the Tribunal, according to the referring Court, was an interpretation of Section 115J, and therefore, only that question is referred to this Court for consideration and the other questions did not find favour with the Reference Court. O/ITR/9/2003 JUDGMENT Formulations vide para 61 of the judgment. Accordingly, the special leave petition filed by the Department stands dismissed with no order as to costs.”6. Question no.1 is therefore, answered in favour of the assessee and against the Revenue.” 5.The findings of the Tribunal, according to the referring Court, was an interpretation of Section 115J, and therefore, only that question is referred to this Court for consideration and the other questions did not find favour with the Reference Court. 6.In support of his submissions, Mr. Shah, placed reliance on a decision of the Apex Court in “CIT VS. BHARI INFORMATION TECH. SYS. P. LTD.”, [2012] 340 ITR 593 (SC), wherein, the Apex Court held that the deduction under section 80HHE of the Income-tax Act, 1961, in the case of export of computer software has got to be worked out on the basis of adjusted book profits under section 115JA and not on the basis computed under the regular provisions of law applicable to the computation of profits and gains of business. 7.While arguing the Reference, Mr. Mehta, learned Counsel for the appellant-Revenue, submitted that the decision relied on by the respondent, i.e. in “CIT VS. BHARI INFORMATION O/ITR/9/2003 JUDGMENT TECH. SYS. P. LTD.” (Supra), will not apply to the facts of the present case and instead the decision of the Apex Court in “AJANTA PHARMA LTD. VS. CIT”, [2010] 327 ITR 305 (SC), would apply to this case, which is the correct law on the point. In “AJANTA PHARMA LTD. VS. CIT” (Supra), the Apex Court, while reversing the decision of the High Court has held as under; “(i) section 115JA was a self-contained code and applied notwithstanding any provision in the Act. Section 115BJ is the successor section to section 115JA. Section 115JB continues to remain a self-contained code. (ii) That all assessable entities were not eligible for deduction under section 80HHC(1B). Similarly, only eligible goods were entitled to such specialdeductionundersection 80HHC(1). Section 80HHC(3)was geared to the exports, whereas the levy under section 115JB was on the deemed income. The idea was to exclude “export profits” from the computation of book profits under section 115JB. (iii) That if the dichotomy between “eligibility”ofprofitsand “deductibility” of profits was not kept in mind section 115JB would cease to be a self-contained code. (iv)That, therefore, the Appellate Tribunal was right in holding that 100 per cent of the export profits earned by the assessee as computed under section 80HHC(3) was eligible for reduction under clause (iv) of the Explanation to section 115JB.” 8. Mr. Mehta, therefore, submitted that the case of the assessee, herein, would fall under Section 115J and not either under Section 115JA or Section 115JB, and thereby, he tried to Section 115J and not either under Section 115JA or Section 115JB, and thereby, he tried to distinguish the decision of the Apex Court in “CIT VS. BHARI INFORMATION TECH. SYS. P. LTD.” (Supra). (iv)That, therefore, the Appellate Tribunal was right in holding that 100 per cent of the export profits earned by the assessee as computed under section 80HHC(3) was eligible for reduction under clause (iv) of the Explanation to section 115JB.” 8. Mr. Mehta, therefore, submitted that the case of the assessee, herein, would fall under Section 115J and not either under Section 115JA or Section 115JB, and thereby, he tried to Section 115J and not either under Section 115JA or Section 115JB, and thereby, he tried to distinguish the decision of the Apex Court in “CIT VS. BHARI INFORMATION TECH. SYS. P. LTD.” (Supra). 9.Having heard learned Counsels for the parties and having gone through the factual scenario as it emerges from the record, it is an admitted position that the assessee is engaged in the manufacture and sale of various dyes and deductions claimed by it would be permissible and the Tribunal in its decision has given elaborate reasons and the Tribunal did not find favour with the submissions made by the Representative of the Department, i.e. Revenue. Likewise, we also do not find any illegality committed by the Tribunal. More so, though, learned Counsel for the appellant tried to distinguish the decision of this Court in the matter of the very assessee, same would govern the present case, as well. The ground raised by the Revenue was, therefore, rightly rejected and the interpretation is accepted that the export profits of this year would also be subject to compulsory tax, as envisaged under Section 115J of the Act, which goes against the scheme and the circular of the Board and also against the scheme of Section 80HHC, providing full exemption of tax. 10.Having given our anxious thought and consideration to the question raised in this reference, in view of the above discussion, same is answered AGAINST the revenue and IN FAVOUR of the assessee. We are supported in our view by the decision of the Apex Court in “CIT VS. BHARI INFORMATION TECH. SYS. P. LTD.” (Supra) and the decision of this Court in the case of assessee, himself, in Tax Appeal No. 78 of 2000. 11.The question is answered in the affirmative and we hold that the tribunal was right in confirming the order passed by the Commissioner of Income-tax(Appeals) in directing the Assessing Officer to reduced the profit from export out of the book profits, while invoking the provisions of section 115-J of the Act. The question is answered in the 12.The reference is answered and DISPOSED OF, accordingly. No order as to costs. (K.S.JHAVERI, J.) (K.J.THAKER, J)