Ita v. Commissioner Of Income Tax, Cochin

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.M.JOSEPH &THE HONOURABLE MR.JUSTICE K.HARILAL WEDNESDAY, THE 3RD DAY OF OCTOBER 2012/11TH ASWINA 1934` ITA.No. 5 of 2005 --------------------- ITA.181/COCH/2002 OF INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH APPELLANT(S)/RESPONDENT :-------------------------- CHACKOLAS SPINNING AND WEAVING MILLS LTD., KALAMASERY. BY ADVS.SRI.E.K.NANDAKUMAR SRI.A.K.JAYASANKAR NAMBIAR SMT.PRIYA MAHESH RESPONDENT(S)/APPELLANT :------------------------------- COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03-10-2012, ALONG WITH ITA. 6/2005, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: APPENDIX APPELLANT'S EXHIBITS:- ANNEXURE-A: TRUE COPY OF THE ASSESSMENT ORDER FOR 1998-99 ISSUED BY THEJOINT COMMISSIONER OF INCOME-TAX (ASSMT) DATED 22-6-2000 TOTHE APPELLANT.JOINT COMMISSIONER OF INCOME-TAX (ASSMT) DATED 22-6-2000 TOTHE APPELLANT. ANNEXURE-B: TRUE COPY OF THE ORDER ISSUED BY the COMMISSIONER OFINCOMETAX (APPEALS) TO THE APPELLANT DATED 21-2-2002TAX (APPEALS) TO THE APPELLANT DATED 21-2-2002 ANNEXURE-C: TRUE COPY OF THE TRIBUNAL ORDER DATED 29-10-2004 TO THEAPPELLANT.APPELLANT. K. M. JOSEPH & K. HARILAL, JJ. =~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~= I.T.A. Nos. 5 and 6 of 2005 =~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~= Dated this the 3[rd] day of October, 2012 JUDGMENT Joseph, J. The following substantial questions of law are raised in these appeals:- i) Whether the Honourable Tribunal was righton facts and in law in holding that negativeprofit has to be set off against the positiveprofit, if any while including the benefit of therelief under section 80HHC of the Income TaxAct?on facts and in law in holding that negativeprofit has to be set off against the positiveprofit, if any while including the benefit of therelief under section 80HHC of the Income TaxAct? ii) Whether the Honourable Appellate Tribunalwas correct in law and on the fats in allowingthe appeals preferred by the Department forthe assessment year 1998-99 and 1995-96especially when the Department had notpreferred any appeal for the earlierassessment year 1992-93 against an orderpassed in favour of the assessee on the sameissue of relief under section 80HHC of theIncome Tax Act?” was correct in law and on the fats in allowingthe appeals preferred by the Department forthe assessment year 1998-99 and 1995-96especially when the Department had notpreferred any appeal for the earlierassessment year 1992-93 against an orderpassed in favour of the assessee on the sameissue of relief under section 80HHC of theIncome Tax Act?” 2. These two appeals are being filed by the very same assessee and the reliefs sought for are based on the very ITA 5/2005 & con. case. same questions of law. Hence, the appeals are disposed ofby a common judgment. 2. These two appeals are being filed by the very same assessee and the reliefs sought for are based on the very ITA 5/2005 & con. case. same questions of law. Hence, the appeals are disposed ofby a common judgment. 3. I.T.A.No.6 of 2005 is filed against the order of theTribunal for the assessment year 1995-'96 while I.T.A. No.5of 2005 is filed against the order of the Tribunal for theassessment year 1998-'99. The appellant-assessee isengaged in the manufacture and sale of cotton yarn, staplefibre yarn, cotton fabrics and staple fibre fabrics. Theappellant exported substantial quantities of theaforementioned goods and had claimed the benefit ofdeduction under section 80HHC of the Income-tax Act.While computing the benefit, the appellant ignored thenegative figure representing the profits of the business andbased its calculation of the relief under section 80HHC onlyon the positive figure of export incentives/draw backreceived by it. The Assessing Officer accepted thecalculation. Later, the orders were rectified under section154 of the Income-tax Act. The appeal filed by the assesseewas successful. Against the same, the department filed ITA 5/2005 & con. case. appeals before the Tribunal. 4. The Tribunal relying on the decision of the ApexCourt found that section 80AB of the Income-tax Act hasbeen given an over riding effect over all other sections. TheApex Court made it clear that the profit has to be computedafter giving set off all other provisions of the Income-tax Act and the negative profit has to set off against the positiveprofit. By a common order the Tribunal allowed the appealsand set aside the order of the Commissioner of Income-tax(Appeals). Aggrieved by the above, the assessee haspreferred the appeals 5. Heard the learned counsel for the appellant and thelearned counsel for the revenue. 6. The only argument which is addressed before usby the learned counsel for the appellant that for theassessment year 1992-'93 the Tribunal had accepted thecontrary position in the case of the assessee and found thatin fact computation of profits under section 80HHC can bebased on the positive profit.Therefore, it is submitted that ITA 5/2005 & con. case. 4 the Revenue cannot be permitted to urge to the contrary inthe other assessment years, including 1995-96 and1998-'99. The learned counsel submits that the Revenue isestopped. 7. Per contra, the learned counsel for the Revenuesubmits that actually the assessee has not raised the issuebefore the Tribunal namely, the revenue was estopped fromchallenging the order of the Commissioner in view of thedecision of the Tribunal for the assessment year 1992-'93.Still further more the learned counsel for the Revenue drewour attention a decision of the Apex Court reported in-C.K.Gangadharan and another V. Commissioner of Incometax(2008) 304 ITR 61 (SC) wherein the Apex Court interalia held as follows: 12. If the assessee takes the stand that theRevenue acted mala fide in not preferringappeal in one case and filing the appeal in othercase, it has to establish mala fides. As a matterof fact, as rightly contended by the learnedcounsel for the revenue, there may be certain cases where because of the small amount ofrevenue involved, no appeal is filed. Policydecisions have been taken not to prefer appealwhere the revenue involved is below a certainamount. Similarly, where the effect of thedecision is revenue neutral there may not be anyneed for preferring the appeal. All thesecertainly provide the foundation for making adeparture. In answering the reference, we hold thatmerely because in some cases the Revenue hasnot preferred appeal that does not operate as abar for the Revenue to prefer an appeal inanother case where there is just cause for doingso or it is in public interest to do so or for apronouncement by the higher court whendivergent views are expressed by the Tribunalsor the High Courts.” cases where because of the small amount ofrevenue involved, no appeal is filed. Policydecisions have been taken not to prefer appealwhere the revenue involved is below a certainamount. Similarly, where the effect of thedecision is revenue neutral there may not be anyneed for preferring the appeal. All thesecertainly provide the foundation for making adeparture. In answering the reference, we hold thatmerely because in some cases the Revenue hasnot preferred appeal that does not operate as abar for the Revenue to prefer an appeal inanother case where there is just cause for doingso or it is in public interest to do so or for apronouncement by the higher court whendivergent views are expressed by the Tribunalsor the High Courts.” 8. It is pointed out that tax effect as far as the present appeals are concerned is as follows:- For the assessmentyear 1995-'96 the demand is `20,28,950/- and for theassessment year 1998-'99 it is `9,09,731/-. 9. It is submitted by the learned counsel for the ITA 5/2005 & con. case. Revenue that probably for 1992-'93 the period ofrectification available under section 154 of the Income-taxAct might have been expired. More importantly, we noticethat there is substantial tax involved in these two appeals.The principle of res judicata is not applicable. We may alsonotice that the impugned order does not reflect any attempton the part of the appellant-assessee to bring to the noticeof the Tribunal that the Tribunal should not interfere withthe order of the Commissioner in view of the earlier orderof the Tribunal for the assessment year 1992-'93. 10. We also notice the submission of the Revenue thatno appeal was preferred against the order of the Tribunalfor the assessment year 1992-'93, in view of the monetarylimit. 11. As far as assessment years 1995-'96 and 1998-'99are concerned, the tax involved in these appeals issubstantial and therefore the order which is in favour of theassessee for the assessment year 1992-'93 cannot be set upas a bar. ITA 5/2005 & con. case. 12. In such circumstances, we answer both thequestions against assessee and in favour of the Revenue.The appeals are accordingly dismissed. K. M. JOSEPH, JUDGE K. HARILAL, JUDGE mn.