Itxa/115/2003 Of Raitan P.ltd v. Dy.commissioner Of Income Taxspl.range-28

JPP IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 115 OF 2003 M/s. Raitan Pvt. Ltd.having its registered office at HagueBuilding, Sprott Road, Ballard Estate,Mumbai – 400 038 … Appellant V/s. Deputy Commissioner of Income TaxSpecial Range – 28, R. No. 621, 6th Floor,Aayakar Bhavan, M.K. Road, Mumbai – 400 020... Respondent Mr. Ashok Patil i/b. Ms. Jyoti N. Dialani for the Appellant Mr. Suresh Kumar for the Respondent CORAM : NITIN JAMDAR & N.R. BORKAR, JJ. DATE: 08 JUNE 2022 Oral Judgment (Per Nitin Jamdar, J.) : This Income Tax Appeal filed by the Appellant –Assessee challenges the judgment and order passed by the IncomeTax Appellate Tribunal dated 7 June 2002, allowing the Income TaxAppeal No. 7168 of 1994 filed by the Respondent – Revenue. 3.The Appellant – Assessee, is a private limited companytrading in wattle extracts. The Appellant filed its return of incomefor the Assessment Year 1991-92 on 31 January 1992, disclosing atotal income of Rs.22,18,060/-. According to the Assessee, the totalturnover was Rs.8,16,49,397/-, out of which export turnover wasRs.5,78,02,396/-. The Assessee showed a profit of Rs.48,71,622/-.The Assessee claimed deduction under Section 80HHC of theIncome Tax Act to the extent of Rs.4,1,13,844/-. The AssessingOfficer noticed from the profit and loss account of the Assessee thatthe income includes Rs.60,71,414/- as commission income, and theprofit before taxation was Rs.61,51,622/-. Having opined that samewas due to commission income and there was no export profit andthat the claim of deduction under Section 80HHC was notadmissible, a notice was issued to the Assessee on 21 January 1994to explain why deduction under Section 80HHC should bedisallowed. The Assessee replied by the letter dated 3 February1994, stating that the deduction claimed by the Assessee is inaccordance with Section 80HHC(3) and was rightly claimed. TheAssessing Officer did not accept the explanation of the Assessee anddisallowed the deduction claimed by the Appellant–Assessee underSection 80HHC. The Assessee filed an Appeal before theCommissioner of Income Tax (Appeals). The Commissioner ofIncome Tax (Appeals) analyzed the provisions of Section 80HHC and observed that the commission is relatable to export and cannotbe excluded from profit and gains business for working out thededuction under Section 80HHC. The Commissioner (Appeals)held that there is no need for any profit to be in existence in theexport business for benefit under Section 80HHC. Accordingly, theappeal filed by the Assessee was allowed by the Commissioner ofIncome Tax (Appeals) by order dated 14 January 1994. 4.The Respondent – Revenue filed an appeal bearing No.ITA No. 7168 of 1994 in the Income Tax Appellate Tribunal,Mumbai, challenging the order passed by the CIT (Appeals) TheTribunal observed that a receipt which has nothing to do with theexport activity of the Assessee would have to be excluded both fromthe business profit as well as total turnover in respect of Section80HHC. The Tribunal observed that Clause (b) and (baa) in theexplanation to Section 80HHC inserted by Finance Act, 1991, whichwas brought into force on 1 April 1992, was retrospective in natureand was applicable to the concerned Assessment Year and, therefore,the commission income will stand excluded from the business profit.The Tribunal held that once it is excluded, there can be no profitfrom the export business to enable the Assessee to claim thededuction under Section 80HHC. The Appeal of the Revenue wasaccordingly allowed by order dated 7 June 2002. 5.Being aggrieved, the present appeal is filed by theAppellant – Assessee. The Appeal was admitted by order dated 7October 2004 on the following question:- 5.Being aggrieved, the present appeal is filed by theAppellant – Assessee. The Appeal was admitted by order dated 7October 2004 on the following question:- “Whether on the facts of the case and in lawthe Appellate Tribunal was justified inreversing the order of the CIT(A) allowing theclaim of deduction of Rs.41,13,844/- u/s.80HHC to the Appellant ?” 6.Having heard the learned Counsel for the parties, wefind that the issues raised in the Appeal and dealt with by theTribunal have been answered in favour of the Assessee by thesubsequent decision of the Hon’ble Supreme Court. 7.The first issue held against the Appellant–Assessee bythe Tribunal is the retrospective applicability of the amendment ofthe year 1991 by the Finance Act of 1991. The Tribunal has heldthat the amendment was retrospective in nature, and on that basis,commission was not eligible for exemption of tax under Section80HHC. In the case of P.R. Prabhakar v/s. Commissioner of IncomeTax[1], the Supreme Court considered the question as to whether theamendment of the year 1991 was prospective or retrospective. TheSupreme Court observed that the amendment of the year 1991 wasprospective in nature. In the light of decision P.R. Prabhakar, theview taken by the Tribunal that the amendment is retrospective in1(2006) 284 ITR 548 (SC) 58. ITXA 115.03.Judt.doc nature and therefore, the commission would not entitle theAppellant – Assessee for exemption does not survive. In fact, thisfinding of the Tribunal was the foundation of its decision. In the caseof P.R. Prabhakar, the Supreme Court also observed that since theamendment to Section 80HHC of the year 1991 was prospective, thecommission for export constituted export profits and the assesseewould be entitled to deduction under Section 80HHC for theAssessment Year 1991 that is prior to the amendment. The SupremeCourt has settled these two questions in its decision. Both groundson which the Tribunal passes the impugned order therefore do notsurvive. 8.The learned Counsel for the Respondent – Revenuesought to contend that though it is true that the decision in the caseof P.R. Prabhakar would cover these two issues as above, it is not thatevery kind of commission that would lead to claim under Section80HHC. The learned Counsel submitted that in the decision of P.R.Prabhakar, the commission therein was for procuring export contractfor other exporters on commission and it is this type of commissionthat is contemplated.The learned Counsel for the Appellant –Assessee submitted that the Respondent never raised this issue andall authorities have proceeded on the ground that the commissionwas related to export activities. 9.We have perused the orders of the Assessing Officer,Commissioner of Income Tax (Appeals) and the Tribunal. Therewas no debate that the commission claimed by the Appellant –Assessee was not related to export. In fact, the authorities haveobserved that, in law the Appellant – Assessee was not entitled toclaim commission, of any kind, in respect of claim under Section80HHC and there was no differentiation made as regards the type ofcommission. Even otherwise, the learned Counsel for the Appellant– Revenue has placed on record the audited account by way ofpraecipe wherein it is shown that the commission was received bythe Appellant – Assessee in foreign exchange and was relatable toexport. 10.This being the position wherein the questions of lawframed in this Appeal having been answered in favour of theAppellant – Assessee by the decision of the Supreme Court as above,the Appeal will have to be allowed and the question framed will haveto be answered accordingly. 11.The learned Counsel for the Respondent – Revenuestates that the matter will have to be sent to the concerned AssessingOfficer for further calculations. 8. ITXA 115.03.Judt.doc 10.This being the position wherein the questions of lawframed in this Appeal having been answered in favour of theAppellant – Assessee by the decision of the Supreme Court as above,the Appeal will have to be allowed and the question framed will haveto be answered accordingly. 11.The learned Counsel for the Respondent – Revenuestates that the matter will have to be sent to the concerned AssessingOfficer for further calculations. 8. ITXA 115.03.Judt.doc 12.As a result, the question of law as above is answered infavour of the Appellant – Assessee. The impugned order passed bythe Income Tax Tribunal is quashed and set aside. The concernedAssessing Officer will carry out the calculations in the light of what isobserved in this judgment and proceed further as per law. N.R. BORKAR, J. NITIN JAMDAR, J. Digitally signedby JYOTIJYOTIPRAKASHPRAKASHPAWARPAWARDate:2022.06.1811:31:44 +0530