The Commissioner Of Income Tax-Ichennai v. M/S.tractors & Farm Equipment Ltd.,Chennai

In the High Court of Judicature at Madras Dated:- 27.8.2007 Coram :- The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mrs.Justice CHITRA VENKATARAMAN Tax Case (Appeal) No. 73 of 2004 The Commissioner of Income Tax-IChennai. Vs .. Appellant M/s.Tractors & Farm Equipment Ltd.,Chennai. .. Respondent TAX CASE (APPEAL) under Section 260A of the Income Tax Act againstthe order of the Income Tax Appellate Tribunal Madras 'C' Bench dated30.4.2003 made in I.T.A.No.467/Mds/1995 for the assessment year 1991-92against the order of the Commissioner of Income tax Appelas, Madras inITA.No. 19/94-95 dated 7.123.1994 against the order of the DeputyCommissioner of Income Tax Special Range-I Madras dated 28/2/94 and madein PAN/GIR 47-004-CT 7442/I-T. For Appellant : Mr.J.Narayanasamy For Respondent: Mr.R.Venkatnarayan for M/s.Subbaraya Aiyar JUDGMENT JUDGMENT OF THE COURT WAS DELIVERED BY K.RAVIRAJA PANDIAN,J This appeal is filed against the order of the Income Tax AppellateTribunal Madras 'C' Bench made in I.T.A.No.467/Mds/1995 dated 30.4.2003. 2. The material facts of the case are as follows:- The relevant assessment year is 1991-92. The assessee for the saidassessment year filed its return and the assessing officer inter aliadisallowed the claim of the assessee pertaining to expenditure on Farm,building tax, Voluntary Retirement scheme. The assessing officerrestricted the depreciation claim on machinery purchased from IDBI andalso recomputed the deduction under section 80HHC by excluding the cash compensatory support from the business profit. Aggrieved by the order ofthe assessing officer, the assessee filed an appeal before theCommissioner of Income Tax (Appeals), who allowed the appeal. Aggrievedby the order of the Commissioner of Income Tax (Appeals), the Revenuefiled an appeal before the Tribunal and the Tribunal dismissed theappeal. 3. We heard the learned counsel on either side and perused thematerials on record. 4. Learned counsel for the revenue submitted that though threequestions of law are formulated in the grounds of appeal, the one and onlyquestion of law required consideration by this Court is the thirdquestion of law. The other two questions of law are formulated as suchbut they are factual in nature, which require no consideration by thisCourt. The third question of law framed runs as under: "Whether in the facts and circumstances ofthe case, the Tribunal was right in observingthat other receipts other than cash compensatorysupport has to be excluded from the businessprofit for the purpose of deduction under Section80 HHC? 5. With reference to the substantial question of law framed asabove, both the Commissioner of Income Tax (Appeals) as well as theTribunal erred in relying on explanation (baa) introduced to sub-section(4C) of Section 80HHC which came to be inserted with effect from 1.4.1992under the Finance (No.2) Act 1992. It is apparent that the explanation(baa) so inserted with effect from 1.4.1992 cannot be made applicable tothe assessment year in question, which is 1991-92. Even the reasoninggiven by the Tribunal also would not go along with the first part of thereason. The reason reads as follows:- "The explanation (baa) to Section 80HHC of theAct, effective for the assessment year under appeal,states that 90% of the cash compensatory supportwould have to be deducted from the profits forworking out the export profits. The net amount sodetermined would be the profit of the business whichwould have to be apportioned in the ratio of exportturnover to total turnover. This amount would then beadded by 90% of the cash compensatory support. The sumtotal of these two figures would be the export profitfor which deduction u/s 80HHC of the Act isavailable. The A.O. Would recalculate the same on theabove basis." "The explanation (baa) to Section 80HHC of theAct, effective for the assessment year under appeal,states that 90% of the cash compensatory supportwould have to be deducted from the profits forworking out the export profits. The net amount sodetermined would be the profit of the business whichwould have to be apportioned in the ratio of exportturnover to total turnover. This amount would then beadded by 90% of the cash compensatory support. The sumtotal of these two figures would be the export profitfor which deduction u/s 80HHC of the Act isavailable. The A.O. Would recalculate the same on theabove basis." In view of the inconsistent reason given and also applying a provision,which was not obtaining during the relevant period, we are of the viewthat the order of the Tribunal has to be set aside and the matter shouldbe remitted back to the Tribunal for reconsideration of the issue inaccordance with the statutory provision which was available during therelevant assessment period. Hence, by allowing the tax case appeal, theorder of the Tribunal is hereby set aside and the matter is remitted backto the Tribunal to reconsider the issue as stated above. krr Sd/Asst. Registrar /true copy/ To Sub Asst.Registrar 1.The Assistant Registrar, Income-Tax Appellate Tribunal, III Floor, Rajaji Bhavan, Besant Nagar, Madras 90.2.The Commissioner of Income Tax appeals V Chennai.3. The Deputy Commissioner of Income Tax, Special Range -I, Madras4. The Commissioner of Income Tax-I Chennai.+ One cc to M/s Pusya Sitaraman, Advocate sR 53446LA (co)sg 17/9/07Tax Case (Appeal) No. 73 of 2004Dt. 27.8.2007