Commissioner Of Income Tax,Chennai v. Sical Logistics Ltd.,Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE P.D.DINAKARAN THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN Commissioner of Income Tax,Chennai....Appellant -vs- SICAL LOGISTICS Ltd.,Chennai....Respondent (Name of the respondent substitutedvide order dated 31.01.2007) Appeals against the orders dated 25.02.2003, made in ITANos.2519/Mds/95 & 510/Mds/96, on the file of Income Tax AppellateTribunal, Madras 'C' Bench.(ITA Nos. 175/95-96, dated 20.2.96 on thefile of the Commissioner of Income Tax Appeals-II Madras againstPAN/GIR No.47-069-CZ-2997 dt.29.11.95 on the of AssistantCommissioner of Income Tax, Central Circle II (5) Madras-34. (Judgment of the Court was delivered by CHITRA VENKATARAMAN,J.) These appeals are by the Revenue, against the order of theTribunal, relating to the assessment year 1991-92. 2. The substantial questions of law raised in these appealsare as follows : https://hcservices.ecourts.gov.in/hcservices/ 1.Whether in the facts and circumstances ofthe case, the Tribunal was right in holding thatthe warehouse receipts, service charges, interest,financial charges, lease rents etc. do not formpart of the total turnover for the purpose ofdeduction under Section 80 HHC ? 2.Whether in the facts and circumstances ofthe case, the Tribunal was right in holding thatthe amounts received out of local sales do notform part of the total turnover for the purpose ofdeduction under Section 80 HHC ? 3. The assessment of the assessee company was revised underSection 263 of the Income Tax Act, directing the assessing authorityfor recalculating the benefit under Section 80 HHC, after includingthe warehouse receipts, service charges, interest, financial charges,lease rents etc., in the total turnover. Accordingly, by an orderdated 29.11.1995, assessment was re-done. Aggrieved of this, theassessee filed an appeal before the Commissioner of Income Tax(Appeals) -II. However, the same was dismissedin limine,considering the fact that the appeal itself was against the order ofrevision made by the Commissioner of Income Tax and, as such, itcould not be adjudicated upon. Aggrieved, the assessee preferred anappeal before the Tribunal. 4. It may be noted that the assessee preferred two appeals,one against the order passed by the CIT under Section 263 of the Actand the other against the order rejecting the appeal in limine, filedagainst the order of the assessing authority, directing the CIT togive effect to the order under Section 263 of the Act. 5. The Tribunal allowed the appeals of the assessee,directing the assessee to work out the export profits alone inaccordance with the decision of this Court in CIT v. Madras MotorsLtd., (2002) 257 ITR 60. 6. Learned Standing Counsel for the Revenue submitted thatthe Tribunal erred in excluding the warehouse receipts, servicecharges, interest, financial charges, lease rents etc. from the totalturnover, to work out the profits under Section 80 HHC. 7. It is submitted that the explanation clause (baa) of theexplanation was inserted by Finance (No.2) Act,1991 with effect fromthe assessment year 1992-93, defining the term 'profits and gains ofbusiness'. Such clause provides that profits and gains of a businessare to be reduced by 90% and the brokerage cover, interest, rentcharges or any other receipt of the similar nature are to be included in such profit. Hence, interest, rent etc., earned during the courseof a business activity in respect of an assesement year prior toinsertion, shall be deducted under this section. 8. Learned Standing Counsel for the Revenue fairly broughtto the attention of this Court the decision reported in CIT v.Madras Motors Ltd., (2002) 257 ITR 60, where, under similarcircumstances, this Court rejected the plea of the Revenue. in such profit. Hence, interest, rent etc., earned during the courseof a business activity in respect of an assesement year prior toinsertion, shall be deducted under this section. 8. Learned Standing Counsel for the Revenue fairly broughtto the attention of this Court the decision reported in CIT v.Madras Motors Ltd., (2002) 257 ITR 60, where, under similarcircumstances, this Court rejected the plea of the Revenue. 9. Taking note of the fact that the domestic sales are to beexcluded, the Tribunal directed for the deduction to be worked outwith reference to the export profits in accordance with the decisionreferred to above. 10. In the light of the said direction, which is inaccordance with the decision of this Court, we do not find any meritin the second question. As regards the first question as well,having regard to the amendment brought in with effect from01.04.1992, these appeals fail. 11. Appeals are dismissed. No costs. Sd/Asst.Registrar /true copy/ dixitTo Sub Asst.Registrar 1. THE ASSISTANT REGISTRAR,INCOME TAX APPELLATE TRIBUNAL,RAJAJI BHAVAN, BESANT NAGAR,CHENNAI. 2. THE COMMISSIONER OFINCOME TAX (APPEALS-II) MADRAS. 3. THE ASSISTANT COMMISSIONEROF INCOME TAX,CENTRAL CIRCLE II (5) ,MADRAS-34. https://hcservices.ecourts.gov.in/hcservices/ 4. THE COMMISSIONER OF INCOMETAX, CHENNAI. +1cc to Mr.R.Vijayaraghavan,Advocate Sr 5590+1cc to Mrs. Pushya Sitaraman, Advocate Sr 6172 AKM (CO)km/22.3. T.C.(A) Nos.87 & 88 OF 2003