M/S Teeknits v. Commissioner Of Income Tax, Ludhiana

ITA No. 284 of 2004 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH M/s Teeknits Versus Commissioner of Income Tax, Ludhiana ITA No. 284 of 2004 Date of Decision: 7.10.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Pankaj Jain, Advocate for the appellant. Mr. Rajesh Katoch, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 284 and 285 of 2004as common question of law and facts are involved therein. For brevity,the facts are being taken from ITA No. 284 of 2004. 2.This Court vide order dated 24.3.2005 admitted the appeal,for determination of the following substantial question of law:- “Whether the Tribunal was justified in law in holdingthat the issue raised was covered by the decision ofthe Supreme Court in IPCA Laboratories Ltd. Vs.DCIT (2004) 266 ITR 521 and a net loss undersection 80HH(3) and A, B and C has to be adjustedagainst export incentive?” 3.Facts necessary for adjudication as narrated in the appealmay be noticed. The assessee filed its return for assessment year1998-99 on 23.10.1998 declaring nil income. During the course ofassessment proceedings, it was noticed that assessee had made substantial export sales and after claiming deduction under Section80HHC of the Income Tax Act, 1961 (in short “the Act”), the net profit ofRs.20,80,937/- was reduced to nil after taking benefit of deductionunder Section 80HHC. The assessee claimed that the loss underSection 80HHC (iiia), (iiib) and (iiic) be ignored and the benefit only inrespect of the incentives be given and claimed deduction ofRs.28,91,946/- under Section 80HHC. The Assessing Authority videassessment order dated 22.12.2000 allowed the claim of deductionunder Section 80HHC to the extent of Rs.20,13,378/-. Feelingaggrieved, the assessee filed an appeal before the Commissioner ofIncome Tax (Appeals) [in short “the CIT(A)”] who vide order dated20.4.2001 allowed the claim of the assessee in the appeal. Feelingdissatisfied, the revenue took the matter in appeal before the Tribunal,who vide order dated 19.4.2004 set aside the order of the CIT (A) onthe issue in question and restored that of the Assessing Officer. Hence,the present appeal by the assessee. 4.We have heard learned counsel for the parties and perused the record. 5.The Assessing Officer while dealing with the aforesaidissue had allowed the deduction under Section 80HHC of the Act to the assessee. The Assessing Officer had computed the income as under:- “Total TurnoverTotal export turnoverProportion of export turnover to total turnover. Rs.61126238/-Rs.52486157/-Rs.85.86% 90% of export incentives (3742232) Rs.3368068/- ITA No. 284 of 2004 -3- Business profits (2342955-3366008) (-)Rs.1023053/-Export profits (3368008x85.86/100 (-)Rs.2013378/-1023053 x 85.86/100)” 7.The primary question raised by the assessee was that theloss which was incurred by the assessee was not liable to be excludedfrom export profits. However, the said stance has been negatived bythe Tribunal in view of the decision of Hon'ble Supreme Court in IPCALaboratories Ltd. v. DCIT [2004] 266 ITR 521. The said view wasfollowed by this Court in Commissioner of Income-Tax v. AvonCycles Ltd., [2008] 303 ITR 345 (P&H). Further an amendment byTaxation Laws (Amendment) Act, 2005 has been made retrospectivelyw.e.f. Ist April, 1992 whereby fifth proviso has been inserted which is tothe following effect:- “Provided also that in case the computation under cl.(a) or cl. (b) or cl. (c) of this sub-section is a loss,such loss shall be set off against the amount whichbears to ninety per cent of- (a)any sum referred to in cl. (iiia) or cl. (iiib) or cl.(iiic), as the case may be, or “Provided also that in case the computation under cl.(a) or cl. (b) or cl. (c) of this sub-section is a loss,such loss shall be set off against the amount whichbears to ninety per cent of- (a)any sum referred to in cl. (iiia) or cl. (iiib) or cl.(iiic), as the case may be, or (b)any sum referred to in cl. (iiid) or cl. (iiie), asthe case may be, of s. 28, as applicable in the caseof an assessee referred to in the second or the thirdor the fourth proviso, as the case may be, the same proportion as the export turnover bears tothe total turnover of the business carried on by theassessee.” The said provision came up for consideration before the ITA No. 284 of 2004 Calcutta High Court in Rashtra Udyog Ltd. v. Commissioner ofIncome Tax, [2009] 23 DTR (Cal) 383, wherein it has been held thatthe profit referred in Section 80HHC(3)(a) included losses anddeduction under the said Section had to be allowed after adjustinglosses against the amount computed under the proviso containedtherein. 9.Further, learned counsel for the assessee was unable topinpoint any error in the deduction which has been allowed by theAssessing Officer as noticed above. 10.In view of the above, there is no merit in these appeals andthe same are hereby dismissed. (AJAY KUMAR MITTAL) JUDGE October 7, 2010gbs (ADARSH KUMAR GOEL)JUDGE ITA No. 284 of 2004 -5- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH M/s Teeknits Versus Commissioner of Income Tax, Ludhiana ITA No. 285 of 2004 Date of Decision: 7.10.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Pankaj Jain, Advocate for the appellant. Mr. Rajesh Katoch, Advocate for the respondent. AJAY KUMAR MITTAL, J. This appeal is dismissed. For orders, see ITA No. 284 of 2004 (M/s Teeknits v. Commissioner of Income Tax, Ludhiana). (AJAY KUMAR MITTAL) JUDGE October 7, 2010gbs (ADARSH KUMAR GOEL)JUDGE