The Commissioner Of Income Tax-Vi v. M/S. Cebon Apparels Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO. O. C. J.INCOME TAX APPEAL (LODG.) NO.1241 OF 2008 The Commissioner of Income Tax-VIVs. ..Appellant. M/s. Cebon Apparels Pvt. Ltd. ..Respondent. .... Mr. Suresh Kumar for the Appellant. Mr. Nishant Thakkar with Mr. Atul K. Jasani for the Respondent. .....CORAM : DR. D.Y.CHANDRACHUD & J.P. DEVADHAR, JJ. P.C.: 22 April, 2010. 1.The office objections are waived and the registry is directed to register the appeal. 2.nAdmit. 3.The following questions of law are raised by the Revenue in this appeal under Section 260-A of the Income Tax Act : “(a)Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in setting aside the issue as to whether interest income of Rs.11,56,965/- is business income or income from other sources without giving further direction that in case it is held to be business income, 90% of the same should be excluded from the profits of business for the purpose of calculation of deduction u/s. 80HHC in view of explanation (baa) to section 80HHC of the Income Tax Act; (b)Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in directing the Assessing Officer not to exclude 90% of sale of Quota Licence amounting to Rs.3,01,897/-, exchange difference amounting to Rs.47,06,807/- and incentive against freight amounting to Rs.11,743/- from the profits of business for the purpose of computation of deduction u/s. 80HHC of the Income Tax Act even though the 90% of the same is deductible in view of clause (baa) to explanation below section 80HHC of the Income Tax Act; (c)Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the order of CIT(A) in directing the Assessing Officer not to exclude job work charges amounting to Rs.3,10,76,191/- from profits of business for the purpose of computation of deduction u/s. 80HHC of the Income Tax Act even though 90% of the same are to be excluded in view of Explanation (baa) to section 80HHC of the Income Tax Act in view of recent decision of Hon’ble Supreme Court in the case of CIT v. K. Ravindranathan Nair (295 ITR 228). (d)Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in directing the Assessing Officer not to exclude excess provision written back amounting to Rs.1,17,602/-, sundry balances written back amounting to Rs.29,699-, delivery charges amounting to Rs.57,965/- discount from supplier amounting to Rs.8,45,428/- from profits of business for the purpose of computation of deduction u/s. 80HHC of the Income Tax Act even though 90% of these amounts is to be excluded in view of Explanation (baa) to section 80HHC of the Income Tax Act;” 4.Insofar as question (a) is concerned, the Tribunal has restored the issue to the Assessing Officer. We only clarify that in determining the issue upon remand, the Assessing Officer shall determine the issue in accordance with law and after taking due cognizance of the relevant judgments holding the field, particularly the judgments of this Court in Commissioner of Income Tax v. Asian Star Company Ltd. (ITA 200 of 2009 decided on 18/19 March 2010) and Commissioner of Income Tax v. Swani Spice Mills Pvt. Ltd. (ITA 1019 of 2007 decided on 19 April 2010). 5.Insofar as question (b) is concerned, it basically relates to three issues viz. (i) sale of quota licence; (ii) exchange difference; and (iii) incentive against freight, for the purpose of deduction under Section 80HHC. The first issue is covered against the assessee by the judgment of the Supreme Court in Commissioner of Income Tax v. K. Ravindranathan Nair[1], the second issue is covered against the assessee by the judgment of this Court Commissioner of Income Tax v. Shah Originals (ITA 431 of 2008 decided on 22 April 2010) and 1(2007) 295 ITR 228 (SC). the judgments of this Court in Commissioner of Income Tax v. Asian Star Company Ltd. (ITA 200 of 2009 decided on 18/19 March 2010) and Commissioner of Income Tax v. Swani Spice Mills Pvt. Ltd. (ITA 1019 of 2007 decided on 19 April 2010). 5.Insofar as question (b) is concerned, it basically relates to three issues viz. (i) sale of quota licence; (ii) exchange difference; and (iii) incentive against freight, for the purpose of deduction under Section 80HHC. The first issue is covered against the assessee by the judgment of the Supreme Court in Commissioner of Income Tax v. K. Ravindranathan Nair[1], the second issue is covered against the assessee by the judgment of this Court Commissioner of Income Tax v. Shah Originals (ITA 431 of 2008 decided on 22 April 2010) and 1(2007) 295 ITR 228 (SC). the third issue is covered against the assessee by the judgment of this Court in Commissioner of Income Tax v. Dresser Rand India Pvt. Ltd. (ITA 2186 of 2009 decided on 8[th] April 2010). The questions are accordingly answered in favour of the Revenue and against the assessee. 6.Insofar as question (c) is concerned, the issue raised therein is covered in favour of the Revenue by the judgment of this Court in Commissioner of Income Tax v. Dresser Rand India Pvt. Ltd. (ITA 2186 of 2009 decided on 8 April 2010). This Court has held following the judgment of the Supreme Court in Ravindranathan Nair (supra) that independent incomes unrelated to exports are liable to be excluded in the computation of business profits by virtue of explanation (baa) to section 80HHC. In the circumstances, question (c) would stand covered in favour of the Revenue on merits. However, it has been urged on behalf of the assessee that the Tribunal has in paragraph 18 of its order, relied on the circumstance that the issue was decided in favour of the assessee for Assessment Year 1997-98. Learned counsel submitted that since the Revenue has accepted the decision, it ought not to be permitted to raise the issue in these proceedings. Reliance was placed on an order passed by the Supreme Court in Southern Sea Foods Ltd. v. Jt. CIT (Special Leave Petition (Civil) No.17150 of 2008 decided on 2[nd] March, 2009). In paragraph 4 of the order passed by the Supreme Court it has been observed that on the question as to whether the assessee was entitled to a deduction under Section 80HHC in respect of the processing / fabrication charges on goods which were ultimately exported by other exporters for whom processing was undertaken by the assessee, the High Court had relied upon its earlier decision. In that decision, the High Court had held that processing charges would form part of one of the components of business profits. Before the Supreme Court in Southern Foods (supra) counsel appearing on behalf of the Revenue stated that the earlier decision of the High Court had attained finality. In these circumstances, the Supreme Court declined to entertain the Special Leave Petition. Apart from the fact that the order of 2 March 2009 passed by the Supreme Court proceeds on the basis of a concession made by counsel appearing on behalf of the Revenue, it is also clear from a reading of the order that the Supreme Court has declined to exercise its jurisdiction in a special leave petition under Article 136 of the Constitution. In these circumstances, particularly in view of the fact that the aforesaid question viz. questions (c) is covered by the judgment of this Court in Dresser Rand (supra) which in turn follows the judgment of the Supreme Court in Ravindranathan Nair (supra), the submission which has been urged on behalf of the assessee cannot be accepted. Questions (c) is accordingly answered in favour of the Revenue and against the assessee. concession made by counsel appearing on behalf of the Revenue, it is also clear from a reading of the order that the Supreme Court has declined to exercise its jurisdiction in a special leave petition under Article 136 of the Constitution. In these circumstances, particularly in view of the fact that the aforesaid question viz. questions (c) is covered by the judgment of this Court in Dresser Rand (supra) which in turn follows the judgment of the Supreme Court in Ravindranathan Nair (supra), the submission which has been urged on behalf of the assessee cannot be accepted. Questions (c) is accordingly answered in favour of the Revenue and against the assessee. 7.Insofar as question (d) is concerned, the submission which has been urged on behalf of the assessee is that an excess provision written back from the profits of business does not constitute a receipt for the purposes of explanation (baa) to Section 80HHC. On a perusal of the record, it is common ground between the learned counsel that this issue has not been enquired into by the authorities below. In the circumstances, it would be appropriate for this Court to remand the proceedings back to the Tribunal for a fresh determination of the question. For the reasons indicated earlier, the judgment of the Tribunal on this issue is set aside and the Tribunal is directed to decide the issue afresh. 8.For the reasons indicated, the appeal shall accordingly stand disposed of in the aforesaid terms and the questions of law are answered accordingly. There shall be no order as to costs. (Dr. D.Y.Chandrachud, J.) (J.P. Devadhar, J.)