The Commissioner Of Income Tax-Iii,Ludhiana v. M/S. Nahar Exports Ltd., 376-Indl.area-A, Ludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CM No.18197-CII of 2007 andITA No.382 of 2007Date of decision: 22.1.2008 The Commissioner of Income Tax-III,Ludhiana ......Appellant Versus M/s. Nahar Exports Ltd., 376-Indl.Area-A, Ludhiana ......Respondent CORAM:-HON'BLE MR.JUSTICE SATISH KUMAR MITTALHON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present:Mr. Sanjiv Bansal, Advocate for the appellant. * * * Rakesh Kumar Garg, J . CM No.18197-CII of 2007 For the reasons mentioned in the application, delay of 144days in refiling the appeal is condoned. CM stands disposed of. ITA No.382 of 2007 1.The revenue has filed the present appeal against the order ofthe Income Tax Appellate Tribunal, Chandigarh Bench ‘B’ Chandigarhpassed in ITA No.371/Chandi/2005 dated 31.7.2006 for the assessmentyear 2001-02 on the following substantial question of law:- “Whether on the facts and the circumstances of thecase, the Hon’ble ITAT was right in law in holding thatSales Tax, and Central Sales Tax be excluded from thetotal turnover of the assessee while computing deduction u/s 80HHC.” 2.The respondent is a Limited company which derives incomefrom manufacturing and trading of cotton yarn fabrics and garments. Theassessee-Company filed its return of income for the assessment year2001-2002 showing income of Rs.6,77,14,160/- on 31.10.2001. Theassessment was framed by the ACIT, CC-V, Ludhiana on 5.5.2003 at anincome of Rs.12,28,82,539/-. 3.While completing assessment AO had included Sales Tax andCentral Sales Tax amounting to Rs.81,01,622/- in the total turn over whilecomputing deductions under Section 80HHC. The learned CIT(Appeals)-1,Ludhiana vide his order dated 7.12.2004 has partly allowed the appeal onthis issue in favour of the assessee wherein it has been held that theCentral and State Sales Tax (Rs.81,01,622/-) has no profit element and isnot to be included in the total turn over. Against this the revenue preferredan appeal before the Income Tax Appellate Tribunal and the Income TaxAppellate Tribunal decided the issued in favour of the assessee relyingupon its own decision given in the case of M/s Nahar Spinning Mills Ltd. inITA No.198/Chandi/2001 for assessment year 1995-96. Similar issue wasinvolved in the assessee’s own case for the assessment year 1992-93 inITA No.1130/Chandi/95 decided on 23.4.2004. 4.Feeling aggrieved against the said order of the Tribunal, therevenue has filed the present appeal under Section 260(A) before thisCourt on the following substantial question of law as stated in para No.1 ofthe judgement. 5.At the very outset, Sh. Sanjiv Bansal, counsel for the revenuehas very fairly stated that the above referred substantial question of lawarising out of the Tribunal’s order is squarely covered by a judgement ofthis Court in the case of Commissioner of Income-Tax v. Vardhman Polytex Ltd.(2008)296 ITR 382 (P&H) wherein the similar question of lawhas been answered in favour of the assessee and against the revenue,and it has been held as under:- “While computing the deduction under section 80HCC ofthe Income-tax Act, 1961, it is only the actual sale pricewhich is relevant. Anything charged by the assesseeby way of excise duty and sales tax cannot be taken intoaccount as it does not have any element of profit. Evenaccording to accounting principles such levies do notform part of the profit and loss account. In fact, they areshown as liability in the balance sheet.” 6.In view of above settled proposition of law, the present appealhas no merit and no substantial question of law arises for the determinationof this Court in the present case. Hence, the appeal is dismissed. (RAKESH KUMAR GARG) JUDGE January 22, 2008ps (SATISH KUMAR MITTAL) JUDGE