The Commissioner Of Income Tax-I Chennai v. M/S Tagros Chemicals Of India Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 13.04.2009 CORAM: THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANANDTHE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case(Appeal) No.405 of 2007 The Commissioner of Income Tax-IChennai.. Appellant /Appellant -vs- M/s Tagros Chemicals of India Ltd.,72, Thavar CentreRaja Anamalai BuildingMarshalls RoadChennai 8... Respondent /Respondent TAX CASE filed under Section 260 A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal, MADRAS 'B'Bench, Chennai dated 22.09.2006 passed in ITA.No.829/Mds/2006 againstthe order of the Commissioner of Income Tax (Appeals) inI.T.A.Tr.330/2003-04/ITA No.290/04-05 dated 25.11.05 against theorder of the Assistant Commissioner of Income Tax Company Circle III(1), Chennai - 34. For Appellant : Mrs.Pushya SitaramanFor Respondent: Mr.V.Ramachandran, Senior Counsel for Dr.Anitha Sumanth J U D G M E N T (Judgment of the Court was delivered by K.RAVIRAJA PANDIAN,J) The revenue on appeal against the order of the Income TaxAppellate Tribunal dated 22.09.2006 passed in ITA.No.829/Mds/2006relating to the assessment years 2001-02. 2. The material facts culled out from the statement of factsstated in the memorandum of appeal are as follows:- The assessee Company is engaged in the manufacture and export ofpesticides. The assessee company filed its return for the assessmentyear 2002-03. A notice u/s 143(2) was issued and assessment wascompleted by allowing the MAT credit u/s 115JAA after levying theinterest u/s 234B and 234 C. The assessee had also excluded exciseduty and sale tax from the total turnover for the purpose ofhttps://hcservices.ecourts.gov.in/hcservices/deduction u/s 80HHC. The Assessing Officer while working out thetotal turnover for the computation of deduction u/s 80HHC includedthe sales tax and excise duty collections and brought the same to tax. On appeal, the Commissioner of Income Tax (Appeals), allowedthe appeal in favour of the assessee on the two issues. The revenuefiled an appeal before the Income Tax Appellate Tribunal and theTribunal dismissed the appeal in favour of the assessee by excludingexcise duty and sales tax from the total turnover for the purpose ofdeduction u/s 80HHC by following the decision of this Court in thecase of CIT vs. Wheels India Limited reported in 275 ITR 319. Withregard to MAT credit also, the Tribunal upheld the orders of the CIT(A) by following its own earlier order in the case of ChemplastSanmar Limited. The correctness of the same is canvassed before thisCourt in this appeal by formulating the following questions of law:-"1. Whether in the facts and circumstances ofthe case, the Tribunal was right in holding that,Sales tax and Excise Duty do not form part ofturnover for the purpose of calculation ofdeduction u/s 80HHC of the Income Tax Act, 1961?" 2. Whether in the facts and circumstances ofthe case, the Tribunal was right in holding thatMAT credit is to be set off from the tax payablebefore levying interest under section 234B and 234Cof the Income Tax Act, 1961?". 3. We have heard the argument of the learned counsel on either side. 4. Upon hearing, it is admitted by the counsel on either sidethat the first question of law is covered against the revenue by thedecision of the Supreme Court in the case of Commissioner of IncomeTax vs. Lakshmi Machine 2007 (290 ITR 667) wherein it has been heldas follows : 2. Whether in the facts and circumstances ofthe case, the Tribunal was right in holding thatMAT credit is to be set off from the tax payablebefore levying interest under section 234B and 234Cof the Income Tax Act, 1961?". 3. We have heard the argument of the learned counsel on either side. 4. Upon hearing, it is admitted by the counsel on either sidethat the first question of law is covered against the revenue by thedecision of the Supreme Court in the case of Commissioner of IncomeTax vs. Lakshmi Machine 2007 (290 ITR 667) wherein it has been heldas follows : Section 80HHC of the Income Tax Act, 1961, is abeneficial section : it was intended to provideincentive to promote exports. The intention was toexempt profits relatable to exports. Just ascommission received by the assessee is relatable toexports and yet it cannot form part of 'turnover' forthe purposes of section 80HHC, excise duty and salestax also cannot form part of 'turnover'. Just asinterest, commission, etc., do not emanate from the'turnover' so also excise duty and sales tax do notemanate from such turnover. Since excise duty andsales tax did not involve any such turnover suchtaxes had to be excluded. Commission, interest,rent, etc., do yield profits, but they do not partakeof the character of turnover and therefore they arenot includible in the 'total turnover'. If so,excise duty and sales tax also cannot form part ofthe 'total turnover' under section 80HHC(3)". 5. In view of the enunciation of law by the Supreme Court, thefirst question of law now raised has been decided against thehttps://hcservices.ecourts.gov.in/hcservices/revenue, in favour of the assessee. 6. With regard to the second question of law, the MAT credit isto be set off from the tax payable before levying interest underSection 234B and 234 C, a Division Bench of this Court in the case ofTHE COMMISSIONER OF INCOME TAX, CHENNAI VS. M/S.CHEMPLAST SANMARLIMITED, CHENNAI (T.C.No.887 of 2005 etc., batch), by judgmentdated 9.4.2009 to which one of us (K.Raviraja Pandian,j.) was aparty, after considering various provisions viz., Sections 115JAA,234A, 234B and 234C and 295 of Income-tax Act and Rule 12(1)(a) ofthe Income-tax Rules, 1962, held thus: "18. In the present case, the intention of thelegislature is to give tax credit to tax and notto the tax and interest. Once the intention isclear, the revenue cannot rely on the Form-I to saythat the MAT credit under Section 115JAA should begiven only after tax and interest. Further wehave answered the first question of law in favourof the assessee i.e. the MAT credit under Section115JAA should be given effect to before chargingthe interest under Section 234B and 234C. Rule 12(1)(a) and Form-I cannot go beyond the provisionsof the Act. Form-I cannot lay down the order ofpriority of adjustment of TDS, advance Tax, MATcredit under Section 115JAA which is contrary tothe provisions of the Act. The order passed by theTribunal is in accordance with law and we do notfind any error or illegality in the order of theTribunal so as to warrant interference.Accordingly, we answer the questions 2 and 3 alsoin favour of the assessee and as against theRevenue." 7. Hence, both the questions of law has to be necessarilyanswered in affirmative in favour of the assessee, against therevenue and as such it is answered. The appeal is dismissed. rg 1. The Secretary, Income Tax Appellate Tribunal, "B" Bench, Chennai 2. The Commissioner of Income Tax-I, Chennaihttps://hcservices.ecourts.gov.in/hcservices/ 3.The Commissioner of Income Taxes(Appeals)XI.121, Mahatma Gandhi Salai, Chennai - 34.121, Mahatma Gandhi Salai, Chennai - 34. 4.The Assistant Commissioner of Income TaxCompany Circle III(1), Chennai - 34Company Circle III(1), Chennai - 34 Tax Case(Appeal) No.405 of 2007 BV(CO)SRA(22/4/2009)